Looking for (more of) a new kind of startup…

[Credit where due: this is James Cham’s spark. I’m just the typist.]

There’s a new and important kind of startup that’s become wildly successful the last few years. These startups, for which we still lack a good name, look to their customers like a direct replacement to some large, familiar incumbent, but uses technology to provide a strictly superior offering.

Bonus points if you get the reference.

Think of, as examples of this kind of startup: Compass (a real estate broker), Flexport (a freight forwarder), Doma (a real estate title company), Newfront (an insurance brokerage), Campuswire (a soon-to-come community college), Clover Health (a Medicare provider), Periscope and Empathy (home builders), etc.

What makes these startups different? Like the more general “full-stack” startup, they don’t sell software — they sell some product or service that their customers are used to buying. That said, many full-stack startups force their customers to adapt to some new way of doing things (think Warby Parker before they had stores or even Tesla).

This new kind of startup:
> Competes directly with a valuable incumbent in an industry
> Offers a “strictly superior” product to the incumbent’s (i.e., it is at least as good on every important dimension to the customer and better at least at one very important dimension) — the main reason for customers not to buy from them is fear that a startup might not deliver
> Avoids asking its customers to change their behaviors much, if at all (e.g., doesn’t ask customers to switch to buying in (Read more...)