Avoid These Tempting "Tar Pit" Startup Ideas, According to Y Combinator

Video Summary

In this video, Michael Seibel and Dalton Caldwell of Y Combinator discuss the types of startup ideas that founders should avoid, which they refer to as "tar pit ideas".

Key Points:

• Tar pit ideas are consumer-focused ideas that seem appealing but have incredibly high bars for success, often requiring users to become obsessed with the product.
• Timing is crucial - some consumer ideas were easier to build in the past when there was less competition, but now the bar is much higher.
• The presenters provide a framework of thinking about startup ideas in terms of supply (of founders) and demand (from customers) - the best ideas have a lower supply of founders working on them but high demand from customers.
• Beyond consumer apps, the presenters also caution against other popular "tar pit" ideas like stock trading platforms and Web3 projects, emphasizing the need for deep industry understanding.
• The key is to avoid the temptation of "tar pit" ideas and instead focus on opportunities with lower supply of founders but higher customer demand.

Avoid These Tempting "Tar Pit" Startup Ideas

Are you an aspiring startup founder looking for the next big idea? Be wary of the so-called "tar pit" ideas that may seem tempting, but often lead founders down a dangerous path.

In a recent discussion, Michael Seibel and Dalton Caldwell, partners at renowned startup accelerator Y Combinator, shed light on the common startup ideas that founders should avoid. These "tar pit" ideas are often consumer-focused products that appear to fill an unmet need, but have incredibly high bars for success.

Seibel and Caldwell used the analogy of a tar pit - a seemingly innocuous pool of water that lures in unsuspecting animals, only to trap and kill them. Similarly, certain startup ideas can seem like easy wins, but quickly ensnare founders who struggle to gain traction and escape the tar pit.

One prime example is the idea of an app to "discover new things" - whether that's discovering new restaurants, events, music, or other content. Seibel and Caldwell explained that while this problem may seem obvious and the solution self-evident, the reality is much more challenging.

"The magical place doesn't exist," Seibel said. "There is a finite number of restaurants that are open tonight; that's it. And you wanting there to be a better option doesn't mean that a better option exists."

The same holds true for other consumer-focused discovery ideas. While people may express a desire for better discovery tools, the underlying demand may not be as high as founders assume. Seibel and Caldwell pointed to examples like Facebook and Google, which gained massive traction not through flashy features, but by building products so essential and addictive that users could not help but evangelize them.

Timing is another key factor that can make or break a consumer startup idea. Seibel and Caldwell noted that the 2000s and early 2010s were eras of explosive growth for consumer tech, as people gained access to broadband internet and smartphones. This created a perfect environment for companies like Facebook and Google to thrive.

"There wasn't big incumbents. Myspace was there, but Myspace was nowhere close to as powerful as NBC or CBS or Fox was on television," Seibel explained. "The bar was quite low in historical perspectives because people wanted to do stuff with their iPhone."

However, those windows of opportunity have largely closed, with intensely competitive markets in most consumer app categories. Founders now face a much higher bar to build a product that can truly captivate users.

Beyond consumer apps, Seibel and Caldwell also cautioned against other popular "tar pit" ideas, such as stock trading platforms and Web3 projects. While these spaces may seem ripe for innovation, the duo emphasized that founders need to bring a deep understanding of the industry and customer needs, rather than relying on surface-level trends.

The key, according to Seibel and Caldwell, is to think carefully about the supply of founders interested in a particular idea versus the actual demand from customers. The best startup ideas often have a lower supply of founders working on them, but higher demand from the target market.

"If you continue to walk that path away from the tar pit, even if you start with a tar pit idea, great," Caldwell said. "Know what the bar is, think about the supply and demand thing, and give yourself the best odds for success."

By heeding this advice and avoiding the temptation of "tar pit" ideas, aspiring founders can put themselves in the best position to build truly successful and innovative companies.