New Foundlands & Better Mouse Traps

All startups can be divided into 2 buckets: new foundlands and better mousetraps. A new foundland is a startup that creates a new category (think AirBnB, Uber, and Netflix) while a better mousetrap startup improves upon an existing solution via better capabilities, lowering costs, etc. (think Google, Facebook, Zoom, and Spotify).

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New Foundlands are More Exciting

More often than not, first-time founders opt to choose new foundlands, believing that innovation solely means completely new products and categories. Sure, it’s way more exciting to create something completely new, and it’s easier to buy into the notion of a white space where there are no existing competitions.

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Creating a new space on the surface will seem like a much bigger accomplishment than refining a product in an existing one, leading to higher energy and velocity, which are critical to success. From a business standpoint, a new foundland also often seems to have the potential for greater reward. It can mean a grander vision, bigger market opportunity, and less competitive headwinds. It can seem like an endless white space with endless growth potential.

New foundlands are inherently riskier.

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New Foundlands also Have Greater Risks.

Your challenge would be to prove the use case viability (and therefore the REAL market size), which is a HUGE risk. The creation of a new market means a big leap of faith. There is less evidence and fewer metrics to gauge the pain point, the solution's viability, the rate of adoption, and the willingness to pay.

It’s incredibly difficult to figure out customers’ true appetite for a new product or service, and so you’ll need to spend lots of time and resources to prove it, often going through months or years of conflicting signals (or even worse, negative results).

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Moreover, you shouldn’t assume that by the time you are able to prove the market opportunity, you will automatically be in the best position to reap the rewards thanks to first mover advantage. History is full of examples of first movers who invested years just to pave the way for followers to eat their lunch (see Google, Facebook, Spotify, and examples above). Which leads us to the benefits of better mousetraps.

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Better Mousetraps are the Opposite Mirror

A better mouse trap doesn’t sound so exciting, but taking existing ideas and improving them by a large multiple is also innovation. Perhaps even more innovative.

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It’s also less risky. The leap of faith is much smaller as the market already exists. It’s much easier to plan and execute, and there’s lots of evidence, data, and existing clients to go after.

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Sure, some investors may be skeptical given the crowded space, but there should be enough investor interest if you can demonstrate how you provide 10X value.

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Another issue to work through is the assumption that since the category is matured (or maturing), the reward will be smaller. You have to disprove this by showing your solution's potential to take over the market by being 10X better or cheaper and thus become the long-term winner in an already proven and large market (again, see the examples above).

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What does it mean for you?

Market conditions (bear vs. bull markets) will sway investors' preferences in different directions. In a bear market, investors tend to be more risk-averse and prefer startups that offer clear value, proven markets, and less of a leap of faith. On the flip side, during a bull market, investors tend to be much more open and excited about new ventures.

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But, and that’s my main point, whatever path you choose, it’s going to be a long journey, filled with ups and downs. My best (and simplest) advice for first-time founders is to choose a problem that you truly connect with and can stay engaged with for the long run. Passion and conviction in the opportunity are critical and irreplaceable and are key to success down the road.

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Good luck!

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