Why Startups have the Edge over most Big Company Competitors

One question that it seems almost every VC or investor asks a startup founder: what happens if random FAANGS (Facebook, Amazon, Apple, Netflix, Google, Salesforce + Microsoft) will come into this space?

I understand why this question is asked: FAANGS have a brand, money and a lot of resources/power. And in the case of Amazon & Facebook, incredibly ruthless & competitive leaders.

But I would hazard that it’s not as much of an issue as investors or founders think it is. And as someone who has worked in Startups, Big Tech Co & was an investor i can say this with a good level of confidence.

Big Companies just operate on completely different & SLOOOOOWER time-scale. They are established and have running business already so they also have a limited sense of urgency. Additionally, they are locked into specific product road maps and usually very inflexible, with staff already allocated to these projects.

Or more likely have feature bloat due to building more and more things into the product as they go after different markets. This is to the point that this complexity chokes themselves out.

I remember having a conversation with a friend who was a senior exec at a public traded tech company in the USA. He told me that 80+% of their engineers were working on KTL ie. Keep the Lights on. So most of the staff were focused on maintaining and making sure their present infrastructure did not die. Which means only a small amount of people were working on new innovations.

This reminded me of what happened at Yahoo!, we stalled out in 2010 because almost all of our engineers were put into redoing our entire back end infrastructure. We literally lost a full year where there were almost NO new products released on the consumer side.

On top of this, in a Big established company, the organization is quite large and complex, it requires very high level executive managers and specialists. These are the people who help you scale. Unfortunately these folks tend to be very risk-averse. If you were entrepreneurial would you join a big company or would you even last long?. But these executives also tend to be very political creatures who are trained to fight for resources or prioritization of their business group/product line versus other executives. I recall the investor Charlie Songhurst saying in an interview, “that the best run Big companies are ones where the executives spend ONLY 25% of their time politicking” :). Sounds about right to me.

Contrast all of this with a startup, where you can be nimble, focused & where politics is at minimum because you are pretty much almost in crisis or near death of all the time. This situation tends to tamp down on stupid politics and focuses the mind. You have zero legacy and when something is not working, you have the flexibility to change your product, your customer or Go to Market. To be successful you have NO choice but to do this. But this is also how you get major breakthroughs in the market.

This is why most innovations come from startups, not big companies. And it’s why you as a startup founder may have more of an edge than you think. So keep on pushing.

If you are interested in getting more thoughts on startups and tech, please sign up for my weekly newsletters at https://hardfork.substack.com

Ever curious: Tsundoku, Reader, Aspiring Shokunin, World traveller, Investor & Tech/Media exec interested in almost everything! www.marvinliao.com

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