So...to me this article illustrates the dramatic differences in objective and mentality between bootstrappers and VCs.<p>This VC looks at this idea, figures out that in order to own the market and make $fuckton, they'd have to spend > $fuckton. Decides to bail.<p>As a bootstrapper of businesses, I look at this case study and go "well yeah of course it'll take $fuckton because you're haven't focused on a narrow enough niche". Which of course they haven't because you can only make $shittons from niches, not $fucktons (where $fuckton is up to an order of magnitude larger than $shitton).<p>It's a very different set of expectations. $idea might not be investable as a VC, but if you can really define a specific niche, get a toehold, and patiently build from there, $idea <i>might</i> have merit for a bootstrapper.<p>(All that said I don't think this particular idea has legs based on the reasons identified in the "Regarding competition" section and also from my own limited experience in the music space).
So these guys have to read up on some articles about multisided marketplaces which what they were testing. Starting a matching platform between consumers and teachers is not a feasible plan because this is a longer term relationship and a platform is easily cut out. A platform like uber works because nobody has a regular cab driver. Supply and demand matching is also terrible for dog walking platforms. Don't spend time testing all kind of startup ideas with complicated technique when you don't know what multisided marketplaces are and network effects.
This might come off as awfully naive, but this doesn’t sit right with me:<p>> XYLO's mobile music lesson technology is the easiest way to learn new music, right from the comfort of your home. Our platform can teach your child any instrument on any schedule, and let them replay
lessons forever.<p>As far as I understand, this is... a complete lie? You just made some crap up to see if you can make people click?
This is very useful insight that I want to apply to my own planned side-projects (like 30-something domains registered as ideas...) Too often I've thought "that's a great idea" and then focused on the tech of implementation rather than the viability.<p>At that point it's just a hobby, or skill-sharpening exercise.<p>Regarding the example shown, I would think that "uber for" ideas (meaning facilitate a connection between service provider X with service need-er Y, take a commission on the transaction) sound as though possibilities are unlimited. However the reality may be that not everything can be disrupted in this way.
A wall of text intended as smart content marketing to get some awareness for a rather unknown investment firm or incubator--Crunchbase didn't show any raised funds, so I don't call them VC. The long, over-polite text, the fake landing, the ad test weren't required in the first place.<p><i>Why:</i><p>The immediate answer every experienced VC would give is a simple 'no, this isn't a VC case' without all this fuzz and waste of time.<p>This market is useless for VCs because it's prone to disintermediation. Once people form a long-term business relationship, it's easy and reasonable to kick-out the middlemen (eg Homejoy). Marketplaces without long-term relationships don't face this problem (eg Airbnb, Uber).<p>Disintermediation is a hard problem nobody solved. 101 of investing.<p><i>Edit: Just saw another user posted the same. What is interesting, PSL didn't answer to that user's thread which could be interpreted as approval. So, PSL's post shows well that most investors are not per se smarter because they invest money. They're just humans like all of us trying to get free reach for a day with 'random' blog posts.</i>
Can someone explain to me how this is legal? False advertising laws exist and this is literally marketing a non-existent product.<p>And even if it’s not illegal, I don’t understand how you can just be okay with lying to people.<p>Everyone in this thread seems to just be totally okay with this and I’m super confused about it.
I love this, I follow a similar method. One thing that immediately stood out is the Instagram ad creative is poor. The copy is overly technical and there’s no call to action. The image is a basic stock photo.<p>Spending 5 minutes in Biteable [1] or a similar service would kick out much better ad creative that would likely have yielded substantially better results.<p>Another point of contention is around the revenue model. Sure you could pay 4x to drive initial growth, but if you keep those customers longer than a month, the LTV could outpace the CAC.<p>Finally, all those efforts work together. Spend $20K on google ads and referrals will go up, you can test conversion funnels since you have traffic, back links will appear that will help your organic SEO in the long term, audiences for retargeting on Facebook will fill up, etc.<p>However, the conclusion of the author is one I agree with in the long term. Tech will solve for this. Hololens and Quest are close, the next generation will probably solve it across multiple platforms.<p>[1] I work for Biteable.
This startup also faces a fatal problem when users find a great music teacher, and then they just cut out the startup for future dealings with the teacher. They lose both the parents and the best teachers. Similar to those startups that pair you with a maid.
My major takeaway was how cheaply they tested this idea. Waiting for someone to sell this as a provider-as-a-service to VCs, so they can quickly get a real world estimate of TAM.<p>For $1k in spend and a day's work, they had a nice data point that tested TAM assumptions.<p>* Landing page is a template, figure 4-8 hours to put together the couple hundred words of content and configuring assets<p>* FB Spend = $509.23<p>* Estimate Google spend around the same (numbers not specified)
This is a very dangerous idea. It seems logical until you go and try it. The potential market is too small so you pass. Only to see the market blow up into billions of dollars that gets harvested by someone else. Do you think electric cars were that big an idea in July 2003 when Martin Eberhard and Marc Tarpenning started Tesla?<p>It also doesn't factor when you commit to an idea you become an expert. Often that knowledge forces you to pivot and become successful. Would the founders of Justin.tv ever have founded Twitch if they'd never started?
I wouldn't use Keyword Planner for keyword research data. The keywords that appear there are only being actively bid on. So keywords that have more search volume and no ads won't be included.
Neat article. It's definitely a good idea to get actual numbers to estimate total addressable market, CTR, and CPC. However I want to call attention to this bit:<p>> First off, there are a ton of enabled small businesses competing in this space and I'm not sure there needs to be a middle man. For example, I get 4 ads from businesses in Seattle offering lessons for guitar on Google. Thus, they know how to market and get customers, they are offering free first lessons, and have availability. So I am unsure/doubt there is any real consumer problem.<p>If your idea doesn't solve real consumer problems, kill it. It doesn't matter if the total market, CPC, and LTV are all amazing, this is sufficient. Even if you succeed, all you'll have done is shuffle some money around. Go make things that actually help people.
I think this part is really key to their analysis:<p>"First off, there are a ton of enabled small businesses competing in this space and I'm not sure there needs to be a middle man. For example, I get 4 ads from businesses in Seattle offering lessons for guitar on Google. Thus, they know how to market and get customers, they are offering free first lessons, and have availability. So I am unsure/doubt there is any real consumer problem."<p>The realization that this is not a big enough problem consumers are having.<p>I would guess that the musicians who want to sell their time would gladdly sign up to this platform. But the customers looking for these services, would most likely be very costly to reach.
I read one of the conclusion: "Lastly, I can't imagine that tech won't win here with non-human based teaching. It's affordable, convenient, and scalable to any genre, language, right from home on many platforms."<p>I strongly disagree with that one. The pie is big enough for different type of teaching, including real-life classes.<p>If what he predicts turn out true, and we all get plugged behind screens to learn new things... what a sad world it would be...
A "startup studio" and a "venture capital fund" ???<p>no conflict there !!<p>Like, great, please send us your detailed startup plan and then come pitch and answer our questions, and then.... well, its not a good match and we pass 99% of the time, but hey, look at this back office studio we got going here, trying out new ideas we have never heard of before.
It's crazy how markets saturate quickly online. You really need a large marketing budget and/or network effect to triumph nowadays, product quality is not differentiating enough. I am scared for the future, this will inevitably lead in harder-to-break monopolies.<p>I worked for an entire year on a next-gen comparison engine (picked.cc if you want to check it out), and even with exciting user feedback and crazy conversion rates, it probably will never scale because of those reasons.
As a musician myself, who has also been taught by music instructors over the years, I find this idea strange. Musicians are artists. They are also not beholden to market trends. Music instructors tend to be picky about who they accept when they choose their students.<p>Music is also a person to person thing. Those who are truly serious about learning will choose a person to person connection.<p>This is an interesting case of trying to quantify a subjective subject. Music is an art. It's hard to quantify. Musicians (mostly instructors in this case, then a bit later the students) will most likely shy away from this form of making a commodity of something that is inherently personal and expressive.<p>This model is mostly likely going to fail not because of the numbers, but because of the subject at hand.<p>This is an interesting case study. And it makes sense, the numbers prove that it's not viable. The fact that it's not viable isn't the numbers, however.<p>It's something to consider.
This makes some strong assumptions about the validity of the google and Facebook data that underpins this theory. As the case for the prevalence of ad fraud and questionable practices by these platforms mounts, it’s hard to believe any data around CTR and purported conversion vs actual legit human traffic and cash in hand conversions.
One project I've been working on is a competing (or now no longer competing :P) platform called <a href="https://classalog.org" rel="nofollow">https://classalog.org</a> (marketplace of in-person classes). Found the same thing: buying paid ads does not make sense for a platform – you need to do this with free traffic and referrals.<p>I think the kind of math above is useful, but it doesn't replace making something people want. Maybe to get a rough idea of the metrics, sure – but airbnb etc wouldn't have started either if they'd done the math above.
This may strike some as silly, but before the iPhone was invented, there were ZERO searches for the term "iPhone". (I assume, ha!) By all means, do market analysis, but remember that demand is not static—it can be shaped by what you offer. I co-founded a firm 13 years ago that now employees 50 people that most certainly would have been killed by this type of analysis.
I think they missed the opportunity to add some value to the market, by doing some kind of background checks to ensure the teachers are safe to let into your kids home.<p>Trust is an element people always look for above all else.
FWIW, my company, TrueFire, is one of the industry leaders in music education. We were bootstrapped, focused on a niche of the market first (intermediate to advanced video lessons for blues, jazz, etc = older men with expendable income), and have grown steadily since then. We were just acquired by a private equity firm and merged with another big competitor in the space (JamPlay) to form a new company dedicated to dominating this space. So... it is possible to not go the VC route and be (very) successful, albeit not $Bs.
I’ve always been annoyed with the fail fast model. The only group that benefits from fail fast are VCs looking for a big score. They push entrepreneurs to invalidate instead of teaching/helping them how to build a business. It’s all ass backwards.<p>But for the VC, if they see a hundred good ideas invalidated by bootstrapping founders, they save time and money.<p>The founders are the suckers if they listen to this bull crap. You still need to validate. But do it by actually trying to make the vision work, not by giving up at the first sign of trouble.
@treblig any advice on usually how much percent increase you see once you move up funnel with fb advertising (optimize)? I'm guessing the cpc you got are based on bottom funnel and highly targeted hence the high cpc. I find really difficult to estimate costs with fb, because it takes me a fairly long time (1-month+) to build the content and ad strategy to lower costs. But I'm wondering at what point do you know if its a bad business idea vs bad ad strategy?
Seems like some of this analysis could have been done before building anything. I also wouldn’t model it as ongoing CPC costs indefinitely. If the product is good it should develop word of mouth and use other marketing channels.<p>I would love to see a similar analysis that was greenlit because CPC looked so profitable. (Maybe it exists, I don’t know.)
This reminds me of the book "Will It Fly?" His approach wasn't targeted to SV startups, but the concepts are similar.<p><a href="https://www.amazon.com/Will-Fly-Business-Waste-Money-ebook/dp/B01BCLPPAK" rel="nofollow">https://www.amazon.com/Will-Fly-Business-Waste-Money-ebook/d...</a>
> Lastly, I can't imagine that tech won't win here with non-human based teaching. It's affordable, convenient, and scalable to any genre, language, right from home on many platforms.<p>That's just sad, even if probably true I'd still hope teachers remain. I'd rather have a human mentor when it comes to art.
Just a dumb question, but in the testing phase, what was actually happening here? Are the adverts for an effectively 'fake company'? What happens to users who sign up, do they get an e-mail saying 'thanks for your interest, but at this stage we are only gauging interest'?
This model seems to ignore ideas that could be big if you could find a cheaper distribution strategy other than ads, ie social, virality, etc. It also ignores ideas that don't have demand yet.<p>By this analysis you guys would have likely killed AirBnb and Dropbox.
Wow, didn't realize adwords and FB ads are so expensive. How do small businesses compete? are there any alternatives for those with smaller ad budgets?
Fantastic. Thanks for sharing. Two questions:<p>1. How much data did you gather before extrapolating to the numbers in your post?<p>2. What tooling did you use to estimate traffic?