Build a movement, not a product
Last month, something weird happened. I asked a customer, who had told me how much he loves using our product, if he could recommend us to his friends in the industry. He replied:
“I’m really sorry, I can’t - it would be bad for business”.
The product was an AI tool for freight forwarders. Freight forwarders, very simply, make deals between “manufacturers” and “carriers” to move cargo across the world.
In VC terms, this is a fantastic market:
Huge - $300Bn globally, so plenty of space for unicorns
Antiquated - lots of opportunity for AI automation
So why did this counter-intuitive exchange happen? Why would a customer not champion our product, despite loving the experience?
The issue is that the customer is playing a zero-sum game. Our product gives him a unique advantage over his competition, an advantage that he has no incentive to give away.
Freight forwarding is zero-sum because it’s a stagnant industry. These forwarding companies do the same thing today that they were doing in the 1890s: coordinating the movement of cargo from point A to point B quickly and cheaply. It’s a race to the bottom on speed and price so the market is full of undifferentiated businesses, all fighting to get the same clients.
There has been no “revolution” in this industry1. Sure, over time, physical bills and mail got replaced with PDFs and email - but this is the same in every other industry. An AI product for freight forwarders would be another solid efficiency gain, but it doesn’t change the core nature of the industry.
Now consider the opposite: differentiated customers in an industry going through rapid change.
My friend Amaan is building a brilliant startup for microschools. These are a fringe community of educators who are bridging the gap between homeschools and traditional education.
For a microschool, the other microschools are:
serving different customers in different geographies
not a threat compared to the traditional schooling systems
part of the same movement: a paradigm shift in how society operates.
This creates amazing growth dynamics. Microschools are happy to recommend the product to others. Microschooling associations share the product to all their members. The product is now ingrained in the movement.
A common strategy when starting a VC-backed company is to find a “big market”. I think, instead, we should look for a big movement.
Startups thrive when they’re the driving engine behind a movement.
The likes of Ryan Petersen (Flexport) and Dan Lewis (Convoy) would love you to believe that the revolution is imminent. I’d recommend Anthony Miller’s blog to see the counterargument.