🗑 One man's trash is another man's treasure

💡 The Idea

  • Here's a common pattern: a big company acquires a popular service only to shut it down shortly afterward.
  • Big companies place many small bets and naturally, most of them simply don't work out.
  • But only because it doesn't make sense for a big company to continue operating a service, doesn't mean there's no demand for it or some other fatal flaw.
  • A bet needs to succeed in a spectacular way to be considered a success for a companies with billions in yearly revenue.
  • A business that plateaus at, say, $200k yearly revenue certainly does not move the needle for Google or Amazon.
  • Similarly, many VC-funded startups get shut down simply because they did not grow fast enough.
  • Many of these businesses that get shut down could be healthy "lifestyle" businesses.
  • As the saying goes: one man's trash is another man's treasure.
  • Side note: if you ever wondered why so many startups within big companies fail, read this case study.

👀 Example

  • Delicious was a social bookmarking web service for storing, sharing, and discovering web bookmarks.
  • In 2005 it was acquired by Yahoo for somewhere between $15 million and $30 million.
  • 2010 an internal slide from a Yahoo meeting leaked, indicating that Delicious would be "sunsetted", i.e. would be shut down.
  • Naturally, this news resulted in Delicious users looking for alternative sites to store and organize their bookmarks.
  • While Delicious had no strategic value to a big company like Yahoo, a robust social bookmarking web service could very much make for a profitable lifestyle business.
  • This was proven by Maciej Cegłowski who with Pinboard perfectly filled the gap left by Delicious.
  • The service has plateaued around $200k in yearly revenue.
  • So while this number is obviously merely a splash in the ocean for a company like Yahoo, it is more than enough to pay for Maciej's living expenses.
  • A fun sidenote in this story is that Pinboard eventually acquired Delicious for $35,000.

🔮 Opportunities

  • Amazon just announced that they will shut down Alexa (the research tool, not the virtual assistant) on May 1, 2022.
  • Alexa was acquired by Amazon in 1999 for $250 million in stock, three years after it was founded.
  • For the past two decades it was one of the go-to resources for content research, competitive analysis, and keyword research.
  • The Alexa Rank is one of the first metrics people look at to understand how much traffic a site is getting.
  • So unsurprisingly many users reacted with "WTF! Why?",  followed by the question "Is there an alternative?".
  • Interestingly, Amazon didn't share any reason why they suddenly decided to shut down the service.
  • According to Alexa, Alexa is still a top-5000 site, so demand definitely is not an issue.
  • An affordable service that provides reliable traffic estimates (while far from easy to build) seems like a great opportunity right now.
  • Initially, Alexa calculated their estimates by monitoring the traffic of users of the Alexa toolbar and then extrapolated from there.
  • Later, as fewer people used the toolbar, they moved on to more broad data sources like purchasing data from ISPs.
  • Alexa's main competitor is Similar Web which, however, is far less accessible ("Talk to a product expert") and also has a much, much smaller index.
  • In 2020 Kenneth Cassel made over $27,000 from his interactive vim course.
  • He then had the idea to make the technology he built for the course available to other course creators.
  • The result was a course marketplace called Slip that makes it easy to build and sell interactive programming courses.
  • In the first month since launching, over 1300 developers signed up to be course creators.
  • With these strong signs of traction, he was accepted in the Y Combinator S21 batch.
  • It surprised everyone when he announced this week that he's sunsetting Slip.
  • The reason is that Kenneth now wants to build a web3 company. (The short-term plan is to offer "free interactive web3 tutorials with crypto rewards, like NFT's and cryptocurrencies themselves".)
  • Given the reactions to his announcement, it seems safe to assume that Slip was doing good. (In his own words: "Sometimes you gotta trade a good opportunity for a great one.")
  • However, good is not good enough for a venture-backed company.
  • The moment he got accepted into YC his vision had to change from lifestyle business to something much larger.
  • So while the original vision for Slip was not a good fit for the venture capital playbook, it seems likely that it would make sense for a lifestyle business.
  • To find dozens of similar opportunities, simply head over to Google News and search for phrases like "is shutting down" or "is sunsetting".
  • For example, Reddit is shutting down Dubsmash, a social video-sharing app that's still downloaded 80,000 times per month according to Sensortower.
  • Another example: Epic recently shut down Houseparty after paying $35 million for it in 2019.
  • The Graveyard that Nico Cerdeira curates at Failory is also a goldmine.
  • As illustrated by Kenneth Cassel's story outlined above, it can also make sense to look at the pivots by YC startups.
  • Venture-backed startups and startups acquired by big companies must fit a very narrow set of criteria that leave lots of gold behind for savvy bootstrappers.

I hope you enjoyed this report. If you have a minute, please respond and let me know what you think.

Thanks,

Jakob

Please do share with your friends. I spent 5+ hours on this so it would be nice if a few people read it.

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