No Natural Predators

When I was a kid, my brother and I subscribed to Zoobooks.  I read every word of every issue for the entire year. The animals that impressed me most were those which have “no natural predators.”

I think this is a great way to think about startups. Can you fit into an ecosystem and make it work better, without picking any fights with existing organizations? If so, you may have a winning formula. If not, you may end up like the peer-to-peer lending industry.

As Melody at Transcapitalist has chronicled, the SEC has repeatedly forced these companies to spend millions on “compliance” just to get started. It’s been so bad that a new regulatory body – something that would send shivers down the spine of any just about any lender – was actually welcomed by the P2P players.

Jay and I have been committed to developing a business with no natural predators since before we were We explored many more radical versions of our business, including an online-only mortgage brokerage staffed by a network of graduate students who would provide something closer to ‘customer service’ than ‘sales’, but we ultimately decided against it. Not only are capital requirements prohibitive for first-time entrepreneurs, but I have watched Redfin long enough to imagine what nasty things would have been said about that company.

Instead, we decided to focus on identifying people whose interests are naturally aligned and connecting them in a comfortable medium. We empower both the companies and the consumers we deal with, we threaten nobody, and at least for now there is no Federal Bureau of Introductions.


2 thoughts on “No Natural Predators

  1. i buy this analysis to a certain extent–certainly, some of the most compelling start-ups are those that immediately fit into a crowded landscape and make life easier for all players, no matter where they are on the food-chain.

    two realities that might not jive with this:
    1. a hallmark of attractive start-up is clear, definable exit strategy; one of the most concrete and reliable exits is acquisition, and start-ups that present logical points of acquisition from loaded “predators” along their growth timeline are desirable. think “Paypal”–it was obvious that if their model worked, they would immediately become such a threat to the existing order that controlling them became immensely valuable to the predators ruled the e-commerce arena.

    2. “disruptive” (in the textbook sense, not the buzzworded “business school synonym for exciting” sense) companies are by definition a threat to entrenched players. it is roundly agreed that disruptive companies are potentially great bets for start-up. toyota certainly had threatened natural predators; it just ended up consuming them.

  2. I appreciate your points, LMM, so I’ll try to refine my definition of predators.

    I see two major groups of predators: (1) powerful institutions that want to see a start-up fail conceptually (ie – banks hate the idea of P2P lending), and (2) companies that could easily “crush” the start-up by copying the product (as Twitter has done to a variety of apps on its platform) and thus don’t need to acquire.

    The Toyota / Big Three struggle was a bit simpler than these cases: Toyota had a better version of the same product, and the Big Three couldn’t match their standard for years.

    PayPal is a tougher case for me to evaluate. It’s clear that credit card companies didn’t want PayPal to dominate the online payments space, but they certainly weren’t threatened by the mere concept and have since found their own footing online. I wonder if PayPal could have survived outside of eBay…

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