Last week on Die Höhle der Löwen, a startup called Drive Dressy pitched their product - custom designed seat covers for cars. The idea is to let you put the metaphorical lipstick on those otherwise boring seat covers to give them a more personalised and unique look.
Providing value (and making money)
In my (slightly old school) mind, a business means providing some sort of value to someone in exchange for money. More often than not, this "value" means solving a particular problem that they're facing. This is the lens I use whenever I want to form some thoughts about a given company. So far, how a company looks like through this lens has correlated well with how good the said company does in the market, so I find this model quite useful.
Interestingly though, this is not the only reason to start a business. In the past decade or so, there have been a whole lot of startups coming up for a variety of reasons, "providing value for money" not being one of them.
Startups with the sole business model of "advertising" fall under this category. They don't (usually) charge money from their users, hence building up a user base of people who like having things for free. And since we all like having things for free, eventually this user base is the "value" that the company provides, which it sells in some way or the other to advertisers. So to be fair, these companies certainly do exchange value for money, just not with their users.
There's a market for that
Another reason why people start companies is that sometimes they see that there's a market, and irrespective of whether or not the market represents an actual problem, decide to ride the train by building a product that serves that specific market.
The good thing about this is that there's a well-defined market, so the product would obviously sell and the company is guaranteed to make at least some money.
The bad thing is that the product is still not solving any useful problem, and might just be encouraging certain (for the lack of a better phrase) "unnecessary wants" that people in that market have, or think they have. This is based on the hypothesis that the said market exists because some people want it to exist.
And the worst thing about this is that building products for this market is just taking away resources from our planet which could have been used for something a lot more useful. Given the state of our planet right now, this is something that bothers me a lot.
Drive Dressy
As far as I can tell, Drive Dressy seems to fit this description.
I, for one, certainly don't see people around me complaining about how their seat covers don't represent their personalities. So it's hard for me to say whether this is an actual problem.
In their pitch, the founders mentioned that they have their target audience very well defined (I can't recall what it was, just that it exists), so there clearly is a market for this. Good for them, because this means that the company would make at least some amount of money. But then again, is the product really solving something useful? Or is it just encouraging people to spend money on something that they don't really need?
To be fair, I don't want to demean Drive Dressy. The founders seem like well-meaning people who clearly care about the work they do. While they were unable to raise money on the show, there's a company around the product, and the founders have invested a lot of time and money into it and assembled a team, so there's at least some traction.
But after watching this episode (and in particular that pitch), I still can't help but think about the ethics of the whole situation.
Is "there's a market for it" a good enough reason to build a product (and eventually a company around it)? Is that enough for us to obsess day and night over a single idea, and invest a few hundred thousand euros to turn it into a reality?
Different people would answer that question differently. This is not to draw a clear line between good and bad (because that's extremely difficult), but instead to point to the fact that there are ethical grey zones in the startup world which we should be aware of.
And given the romanticism that has developed around startups in the last 5-10 years, this is probably one of the most important questions that we should ask ourselves before we consider starting a company.