Advice for Building a Startup Inside Someone Else’s Ecosystem: Don’t

“The cave is collapsing!” — Leia Organa

“This is no cave.” — Han Solo

Here’s a composite of a three discussions I’ve had with whip-smart founders over the past couple of months about building companies on the backs of existing ecosystems like YouTube and Facebook.

“Jason, I’m building a startup around the @Youtube ecosystem — which I know from your writing that you’ve got some issues with — we want you to invest!” said the founder.

“That’s an awesome set of tools you’ve built there. Clever indeed. However, if any of them work, you know YouTube is going to copy them and make them free, right?” I replied.

“But YouTube is going to be 10x bigger than it is in the next five years… and you said if it was a stand-alone company it would be worth $50b!” he replied.

“I did say that, and that’s even more reason for you to be worried. As they get bigger and more powerful, they will have even more resources and rationale to rebuild your ideas — and they will have an even bigger firehouse to spit it out to customers,” I said.

“But look at all the examples of huge companies built off of large ecosystems: Norton Antivirus on Windows is a Fortune 500 company, Hootsuite exploded on the back of Twitter and it has a $1b valuation, Buddy Media rocked Facebook and sold for $800M,” he said.

“You left out PayPal… built off the back of Ebay for billions and now the most valuable piece of the company,” I added.

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