Immediately build differentiating technology
If a startup delays building differentiating technology, the perceived progress is low and the startup eventually dies.
TL;DR
It’s tempting to use existing technology as the foundation for new technology
But, leveraging existing technology risks low to no perceived progress
No perceived progress = death for a startup
Introduction
It can be tempting to use existing technology as the foundation of a new technology to “receive years of R&D for free” and “leverage existing users/customers.” Over the past two years, I have learned that leveraging existing technology can lead to a trap of no perceivable progress that can kill a startup.
If you are a startup founder or work for a startup that needs to prove the feasibility of a new technology, I encourage you to:
Figure out what your differentiating technology is.
Ignore/drop existing technology and assumptions that are incompatible with the differentiating technology.
Otherwise, your startup could fall into the trap of no perceived progress.
An example with two startups that build reusable rockets
Imagine two startups, A and B. Both set out to build reusable rockets that fly to the moon. Incumbent companies already produce one-way rockets that fly to the moon. Hence, Startups A and B’s differentiating technology is the reusability of rockets —the key to substantially reducing the costs of space travel.
Both startups have a choice: Do they modify existing rockets that fly to the moon to be reusable, or do they start from scratch? Both startups know it will take around eight years to fully develop a reusable rocket. Yet, despite having the same goal, their strategies diverge dramatically.
Startup A chooses to modify existing rockets that can fly one way to the moon. They assume that leveraging existing technology (rockets) with decades of research and development behind them is a fast way to achieve reusable rockets.
Startup B takes a different path. Rather than starting with an established rocket, they begin by building a small prototype—a mini-rocket that can fly just 100 meters, land, and fly again. They focus on proving the reusability concept early, in small steps.
Which path is better? The path that leads to higher perceived progress.
Perceivable progress
When asked about progress two years later, Startup A explains that they’ve made internal changes to prepare for reusability, but their rocket still isn’t reusable. The rocket is no different in capabilities from the incumbent’s rockets and their own rocket two years earlier. Startup A has a problem. Their progress is hard to perceive.
Meanwhile, Startup B’s progress is obvious. Their mini-rocket now flies 1,000 meters, ten times farther than it did two years ago. In contrast to Startup A, their rocket might be laughable and people doubt that their concept will work for moon missions, but their progress is perceivable.
The cycle repeats in year 4. Startup A's progress is not perceivable compared to the incumbents', while Startup B’s progress is perceivable. At this point ask yourself:
Which startup would you rather work for?
Which startup will get more press?
Which startup will investors invest in?
Accidentally creating new markets
Not only is Startup B making perceivable progress, but its approach likely creates new markets. As its reusable rockets reach higher altitudes, it catches the eye of an imaginary company that doesn’t need rockets to fly to the moon. Instead, this company wants a low-cost, reusable rocket to launch satellites into lower orbit.
Wait, what? Someone wants a reusable rocket that flies to lower orbit? Surprise, surprise. While both startups target(ed) the moon, the new technology of Startup B is already usable for a less demanding use case. A use case Startup B likely did not anticipate, nor did a market for it exist at its founding (see latent demand).
As the story continues, Startup A will likely die. Startup A has little to no perceivable progress, which will dry up hiring, team motivation, and money. The thought of using existing technology with decades of R&D behind it seemed promising; the path ended in a death trap with little perceivable progress.
Conclusion
You want to be Startup B.
Immediately build the differentiating technology to have perceivable progress
If that means dropping compatibility with an existing technology, that’s what you have to do
