# Garry's Channel: Billion dollar startups are better, faster, or cheaper

**Author:** Garry Tan
**Type:** Video
**URL:** https://www.ycombinator.com/library/Jn-garry-s-channel-billion-dollar-startups-are-better-faster-or-cheaper
**YouTube ID:** opkHJLVAM4A

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Facebook wasn't the first social network. So maybe being first doesn't matter. But, being better, faster, or cheaper?
That matters a lot.

In this video we’ll look at what we can learn from Airbnb, Amazon, Robinhood, Coinbase, Instacart, Uber, Lyft, Discord,
Flexport and Shopify.

## Transcript

- So, should you work on a
startup idea that already exists? Well, Snapchat wasn't
the first messaging app, Facebook wasn't the first social network and Discord wasn't the first chat app. You don't have to be first, but you do need to be different. Being better, faster and cheaper matters. In fact, it matters a lot. It matters so much that
if you don't have that, you can't succeed, your startup will die and neither you or I want that to happen. So let's talk about it. Let's get started.

(soft instrumental music) (upbeat music) When we started my startup
Posterous back in 2008, it was definitely not the
first blog or social network. However, it was better
in one specific way: we supported post by email, in a way that was really easy to remember. If you knew how to send an email, well, you could post something online. And that was enough. That's the thing, you don't have to be the first.

WordPress today runs some crazy percentage of the world's websites, but it was first released in 2003. Posterous was late by five years, but we still grew fast and had as good a shot as
anyone to build something great. It's often a disadvantage
to actually be first. Before Instacart, there was the flaming
disaster that was Webvan. Before Facebook, there was Friendster and Six Degrees. If being first is
sometimes a disadvantage, why do people still look
for things that are so new? Here's the thing, investors do love novel approaches.

If you are trying to start something, it's an important bias to be aware of, and it's going to be
hard to fight against it, so don't even try. You just have to take it into account, people who get a lot of startup pitches, will use this as a filter
right out of the gate. Is it fair? Not always. There's a reason for this, brand new business
models are usually driven by just a few things. New technologies, new online behaviors, new needs, changes in society's demographics, new capabilities and new regulation.

But not everyone will be lucky enough to find one of these brand
new blue ocean spaces. Sometimes you have to
wade into a red ocean: a space with lots of competitors. And if that is you, then there's one thing
I need you to have clear in your head. Is it better, faster or
cheaper than alternatives? (water whooshing) Let's take these three things in turn. First off, being better. Here's some great
examples of top startups,

that got there just by being that. Google was just clearly
better than AltaVista and all the other search engines. PageRank was an incredible advantage, it just gave you better results. It was clear they had
better engineering talent and thus that talent could
build a better product that could give a better experience. They got there through
technical excellence. Dropbox, when it first came
out was just clearly better than a USB drive. Again, technical excellence. It was a breakthrough
experience that just worked. Discord, when it first came
out, focused on gamers.

They had low CPU requirements, which meant their initial
users wouldn't get bogged down, and they could still play
their high frame rate games. That was enough to get
Discord their first users and put them on the map. Airbnb started with an audience
that had no alternatives. They were focused on conference goers, when there were no hotels available. What else could you do? Actually, nothing. You basically wouldn't
go to the conference. Having a place to stay
was just clearly better. That was a great first set of customers.

Coinbase is a great example
of being better as well. I was one of the first
investors in Coinbase. And for me, it was because it was
clearly better than Mt. Gox, one of the first places
you could buy Bitcoin. Back then, you had to wire
money using Western Union to an overseas bank, and it somehow appeared on this kind of sketchy looking
website that sold Bitcoin, that was originally built to trade Magic The
Gathering trading cards. That's the entire reason why it was even called Mt. Gox. Today, Coinbase is worth over $8 billion, because they focused on
a fringe and new crowd,

early believers in cryptocurrency. Remember, this was 2013. So being better is pretty obviously great. And we just ran through a
bunch of tried and true ways, to be better. You could get there through
pure technical excellence, like Google or Dropbox. Or you could pick a particular customer or situation that's underserved like gaming for Discord, conference goers for Airbnb, or fringe groups like
crypto in 2013 for Coinbase. (gentle music)

Second, being faster. At Initialized, I funded Flexport, which speeds air freight by
as much as two to three days, compared to other methods
of shipping cargo. Because they replaced traditional
methods with software, their freight insurance can
actually be six times faster to resolve a claim. So then those are both things that shippers care a lot about. It's just clearly faster for them. Uber, when it came out, was just significantly
faster to find a car. They focused on matching
supply and demand, and built teams to increase
supply very quickly,

city by city. And finally, Facebook was just significantly
faster than Friendster. Friendster early on was sort of notorious for using Java Server Pages
and unoptimized MySQL. It was often impossible to even log in, and Facebook in contrast,
remained fast throughout. Speed matters a lot especially
for consumer scenarios. Look, there's a whole
internet of other things to occupy someone's time, if that particular website is slow. Speed matters. So those are a few ways to think

about how you could make
your product or service, faster for your customers. First, if you're using software, you're beating paper and pencil, and that makes things a
lot faster by default. That is Flexport story to be sure. It's easy to be faster
than your competitors, when your competitors are
literally using paper and pencil. Second, delivering more
supply liquidity like Uber. They managed to use software to scale one of the world's
largest mobile workforces. More drivers meant faster response times. There you go, faster.

Finally, technical excellence
yet again comes out when you're looking at what
Facebook managed to do, to scale their website, especially as the hockey stick
graph went up into the right. Faster is a great way to go. (gentle music) Finally, don't forget about cheaper. If you can get the same or
better product or service, for much less money, customers are smart, they're rational and they will vote with their feet. Shopify is a great
example of this early on.

They were significantly cheaper than running your own Magento Server, and all you had to do is pay
a flat fee of $29 a month. Shopify enabled a new
generation of brand and store, that just couldn't have existed
without them previously. Lyft is another great example
of being much cheaper. They were the first to come
citizen-based ride sharing. Uber was new, but at the
time only black cars. Lyft was originally called Zimride and they were already doing car sharing over much longer distances.

When they saw Uber they said, "Why don't we, we try to do that, "but instead of using taxis or black cars, "why don't we use "the community we already
built for Zimride?" And that resulted in a
service that was far cheaper. Uber in fact had to fast
follow them pretty quickly because they realized
UberX needed to exist. Otherwise, Lyft was just
going to run away with it. So cost matters a lot. Instacart was grocery
delivery but asset light. People had tried to do traditional
grocery delivery before, but they had to buy warehouses and buy huge fleets of cars.

Being able to do this
almost entirely in software, with a workforce that was
deployed by mobile phone, meant that the cost to deploy
the service came down a lot. And as a result,
Instacart is now available to more than 85% of people
in the United States. That's crazy. Amazon of course is famous for saying, their margin is our opportunity, especially when it came to retailers. And retailers had 10 to
a hundred percent margin. Margin they needed to
cover physical stores. Amazon said we don't have that, so why don't we pass
it on to our consumers?

And that's a powerful
way to get customers. Robinhood did something very similar when they brought fees
to zero for trading. And they decided to make
money in a different way, they sell data about retail
investors to hedge funds. Making your product or
service cheaper matters a lot. You could take advantage of major shifts in technology cost curves like what was enabled by cloud computing and SaaS businesses like Shopify, or you could look for
emergent new behavior, like applying the business model of Uber's early Black Car Service, powered by a mobile workforce, deployed by software to your own space,

whether it is grocery
delivery with Instacart or the first citizen
ride sharing with Lyft. Finally, you can just lower prices in a way that cuts the margin
for the whole business, but gives you massive market share, the way Amazon and Robinhood did it. (gentle music) So that's it, I wanted to walk you
through what better, faster and cheaper looks like when it works. At the end of the day, great startups just clearly solve a need. It might be a brand new need,

that people don't even
know they had, like Google or a replacement for an
old and antiquated industry that should have run in
technology years ago, like Uber or Flexport, either way you have to be
better, faster or cheaper than the alternatives, no matter how old or new
those alternatives are. And if you aren't, then you should find a way to become that. Or you need to find a new idea. I want to see you succeed as a startup. Better, faster, cheaper. You can do this. (gentle music) If you like this video,

please click subscribe click the bell icon and leave a comment. I'm still trying to reply
to pretty much every comment and I read them all. So I really appreciate you watching this and thinking about starting a business, and maybe a startup. I'll catch you next time. (soft instrumental music)
