Tap Into Y Combinator’s Contrarian Thinking

source: www.inc.com - author: Garry Tan - image credit: porschelinn/Flickr

Tap Into Y Combinator’s Contrarian Thinking

As an investor, I’ve learned some fascinating lessons from some of the world’s fastest growing marketplaces. Take a page from Airbnb, Tutorspree, and FlightCar.

To create something entirely new–something that the world has not seen before–requires contrarian thinking.

Peter Thiel, a co-founder of Paypal who’s now one of the world’s best-known venture capital investors, says you know you’re on the right track when you can explain what you’re trying to by saying: “Most people believe in X. But the truth is “not X.”

When Brian Chesky, Joe Gebbia, and Nate Blecharczyk at Airbnb set out to build their company, the world was a different place. The generally accepted truth was that normal people would never be willing to rent out their place–or a single room in their place–to strangers. Nor would they be willing to stay with people they didn’t know when they’re travelling to other cities.

But the founders of Airbnb believed “not X,” and then built the service to prove it. Thus was born a multi-billion-dollar business that is one of the most meaningful new start-ups to emerge in the past decade.

We’ve seen hundreds of proposals for marketplaces of all kinds at the start-up incubator at which I’m a partner, Y Combinator. They are pointed a broad range of industries, types of services, and price points. The commonality, however, is their contrarian nature. Two companies in particular we’ve seen in the last few years that nail this sort of contrarian thinking are Tutorspree and FlightCar. Let’s take a closer look at the innovation in each idea.

Tutorspree: More Software Doesn’t Always Mean Less Friction

Tutorspree came through Y Combinator in our Winter 2011 batch. Initially, the company’s proposal was simple: expose a hard-to-find supply (tutors) to demand (parents of students who need tutoring). Install messaging and payments, sit back, and watch.

To some extent, the team saw success there as parents sought tutoring for their kids. However, as they analyzed messages between parents and potential tutors, they saw communication frequently break down during the early phases of interaction. The right pieces of information simply weren’t getting through.

Common wisdom among marketplaces is that by building software, you can make things scale quicker, and that people will be able to work together better. But in this case, software was getting in the way. Software helps connect people, but right at the moment of booking a tutor, there’s no substitute for having a real live person get in touch.

So that’s what the team did. It’s all software up until the point someone wants to book a tutor, at which point a Tutorspree rep gets on the phone and walks people through the next steps. It makes sense–hiring a tutor is a big commitment for a parent!

Having a human being on the other end radically reduced the time needed to set up tutoring, and quintupled the average sale for the start-up. It may not have been code, but some problems for Web start-ups paradoxically cannot be solved with code alone.

FlightCar: Cease and Persist

FlightCar joined the most recent Y Combinator Winter 2013 batch, and when the founders touched down in Silicon Valley, they set out to do what nobody had done before: give people free airport parking by renting their cars out while they’re away.

Travelers get a free car wash, and don’t have to pay $18/day for airport parking. People who want rental cars can get higher quality cars for less money than Hertz or Avis. And both renters and parkers get direct curbside pickup and dropoff with no waits for shuttles or vans. Anyone who travels knows avoiding that wait at the end of a long plane journey is a godsend.

Initially they were mired in the permitting process of local government–they needed a parking lot to store cars while travellers were away. But it turns out they could just rent spaces from existing licensed lots, so that’s what they did.

The company got up and running in February, and were giving customers incredible door-to-door service, picking up and dropping off passengers curbside. New obstacles emerged immediately. When San Francisco International Airport sent them a cease-and-desist for being unlicensed, they ended up hiring black car limosines to shuttle customers back and forth instead, both persisting and bringing the service to a new level of luxury.

The FlightCar idea itself is a very profound “not X” that is proving itself to be true right now. As you read this, FlightCar has just opened its second location in Boston, at Logan Airport. Just as at SFO, there will be a huge swath of new obstacles in their path. The team pursues it no matter the obstacle because this is an Airbnb-sized contrarian idea–so much so that Brian Chesky, CEO and co-founder of Airbnb, decided to invest in FlightCar. The story continues to unfold, but these 19 year old founders are doing the right things.

Airbnb, Tutorspree, and FlightCar have all shown that a contrarian nature is necessary to succeed. Marketplace companies face real resistance, both at the idea level (will it work?) and at implementation (will the “powers-that-be” let me do it?). But it is through implementing and building software and getting customers that they overcome the resistance of what the world believes and show that rather than X, it is “not X”.

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