Being a contrarian in the startup world

As an entrepreneur, it’s tempting to ride a wave — Web3, AI, or whatever the current trend may be — but this only works if you’re in early, with a solid understanding of the underlying technology. VCs tend to chase after non-contrarian ideas, especially when driven by a technological shift. If it’s an asymmetric bet, where the potential return far outweighs the initial investment, then it might be worth diving in. This was made clear during the NFT craze, where some early adopters made substantial profits before the market eventually collapsed. I’ve seen influencers capitalise by converting basic photos into NFTs and making a handsome profit from over-enthusiastic buyers.

However, if you’re simply part of the crowd, with no unique advantage, you’re likely competing with thousands of others chasing the same gold rush. In this case, your chances of being the breakout success are slim. Without something exceptional to set you apart, whether it’s your execution or a deep technical expertise, the odds of failure are stacked against you. And in the startup world, “going with the flow” often means getting swept away by the current.

When Being a Contrarian Hurts

Being a contrarian can be dangerous when it’s done for its own sake, or if you’re too early in pursuing an idea that’s not yet feasible. It’s important to avoid contrarianism that leads you into territory everyone else has wisely avoided. The myth that good startup ideas are untouched and undiscovered is exactly that—a myth. You’ll often hear the concern, “But there’s already a player in this space.” However, having competition is a form of validation; it signals that there is a need for your solution. Besides, even if you were to stumble upon a completely untouched problem, someone can easily steal your idea once it’s validated and start competing with you.

Even with the right idea, execution at the wrong time can be disastrous. Startups often rely on the broader ecosystem — investors, suppliers, customers — to function. If the market isn’t ready or the surrounding ecosystem is immature, a brilliant idea can fail simply because it was too early to market. Think of Google Glass or early VR devices — great concepts, but they struggled initially because the market wasn’t ready.

The Trap of Tarpit Ideas

Y-Combinator partners Dalton Caldwell and Michael Seibel often talk about the dangers of “tarpit ideas.” These are ideas that seem enticing on the surface: they appear to have high demand, they seem obvious, and they look easy to execute. Yet, for some reason, no one seems able to build a sustainable business out of them. Like diving into a pool of clear water, you soon find yourself stuck in the sticky, futile struggle of a tarpit. The allure comes from the mistaken belief that these ideas should work, but they don’t, because the market is oversaturated or the problem is too shallow.

But why do people keep jumping in? It’s partly because technology changes. New advancements may suggest the time is right, or consumer behaviour might shift in such a way that makes the tarpit idea seem more viable.

I’ll admit, when I first heard about tarpit ideas, I cringed. I had spent a good amount of time working on a restaurant discovery app, born out of my own frustration one evening when I spent 45 minutes deciding what to eat for dinner. 

We’ve all been there. Staring at a menu or scrolling through apps, wondering whether to get McDonald’s or try a new pasta place. Or maybe you’re out with friends, debating where the best Spanish or Peranakan place is, each of you suggesting different restaurants you’ve heard of or visited. So much of our decision-making today is based on Instagram or food review sites, but these sources are often unreliable, plagued by sponsored content.

It seemed like a great idea to build an app that could give unfiltered recommendations based on personal experiences, much like we rely on word-of-mouth or social media for advice from friends. But there was a problem: while this was a pleasant, convenient idea, it was also more of a “vitamin” than a “painkiller.” It wasn’t solving a critical problem, just offering a nice-to-have feature that people could live without.

Common Tarpit Ideas

Other examples of tarpit ideas include:

– Travel apps: There are countless apps promising to help you discover new experiences, events, or activities around you. Yet, few manage to break through and create lasting value.

– Networking apps: Many founders have tried to crack the code for apps that connect people with shared interests in a meaningful, scalable way, but success has been elusive.

Navigating the Tarpit

So, how do you avoid tarpit ideas? The first step is to keep questioning why this idea hasn’t been cracked yet. If it’s so obvious to you, why hasn’t someone already built a viable startup around it? If the answer lies in a recent technological advancement, then there might be a real opportunity. However, if you can’t pinpoint a clear reason, dig deeper into the unit economics. Consider how much you, personally, would be willing to pay for this solution. Can you quantify the value it offers?

It’s also crucial to validate your idea with paying users, not just by interviewing potential customers using frameworks like the “Mom Test.” That’s easy; people love to tell you what they think you want to hear. Getting users to part with their money is a much more robust test of your idea’s value. This is harder, of course, because it requires more investment up front, but it’s the only way to truly validate whether your idea has legs to stand on.

Final Thoughts

Being a contrarian isn’t about going against the grain just for the sake of it. It’s about identifying overlooked opportunities that others might miss, but only when the conditions are right. The allure of waves and trends will always be there, but jumping in without a solid foundation is more likely to drown you than carry you to success. Similarly, tarpit ideas might seem like low-hanging fruit, but they often turn out to be a sticky mess. The key is to stay cautious, question everything, and always be prepared to put your ideas to the ultimate test: real-world, paying customers.


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