Two stories hit the front page of Hacker News yesterday that caught my eye. Both were about startups who lost access to key platforms. PadMapper is a user-friendly app for finding rental properties. A major source of PadMapper’s listings come (or came) from Craigslist. Pealk has developed recruiting productivity tools on top of LinkedIn for recruiters.
These occurrences beg the question: How heavily should one partner/platform be relied upon when building a new company? Seems to me one of the key responsibilities of a founding team is to reduce risk wherever possible. When it really comes down to it, you have to look at the business model of the company whose ecosystem you’ll be joining and assess risk by asking a few questions of the model: What happens if this partnership goes away? Will my company be viable? Is the relationship symbiotic or one-sided? Do they need me as much as I need them?
Companies like LinkedIn and Craigslist have built their businesses on very specific models, and only secondarily have become ecosystems for 3rd parties. One mustn’t forget that being a platform isn’t necessarily in their DNA. And it’s not their primary source of revenue. They provide access to one of their most important assets, their data, to entice 3rd parties to contribute to their product. But in the end this is primarily to increase their own user base.
When a startup depends almost exclusively on a behemoth like LinkedIn or Craigslist, the imbalance is just too great and at the end of the day the startup has very little leverage.
So what’s the best course of action if you want to join a platform ecosystem? Read and understand the terms of services, decide if you are willing to build a business within those constraints, and hope that the terms remain consistent as you build your company. It’s best to remember that at the end of the day these are corporations and the business factors are likely to override the benevolence of the engineering teams when it comes to monetizing their products.
