Startups shouldn’t solve technically hard problems (InvertedPassion)
1/ Startups get funded when they’re expected to be valuable, and they’re valuable when they can generate a continuous stream of profits for its investors.
2/ With this view, the value of a startup comes mostly from its expected moat, i.e. how well can it defend its business from competitors once they take notice of the market.
3/ Startups that solve technically hard problems are often in an economically disadvantaged position because solving technical problems is hard, but once a solution is found, it’s not as hard to understand or replicate it.
4/ And if the solution is the major value-driver of a startup but is easy to replicate, the value of the startup is diminished irrespective of how important a problem it is solving or how hard it was to solve that problem.
5/ The usual tool for business defense for such startups is a patent. But patents (outside of pharma) aren’t worth much. Patents are easy to work around and even if they’re not, a startup cannot afford the multi-year, million-dollar patent litigation fighting others.No wonder, probably >95% of patents are worthless.
6/ One major exception to all that...
