David’s Secret For Beating Goliath
29-year-old Nick Molnar considers himself a lucky man.
By the time he was 26, Nick had co-founded two online businesses.
The first was a jewellery business. By day, Nick was a student at the University of Sydney. By night, he was packing jewellery into boxes and sending it all over the world.
Why jewellery? Well, Nick’s parents owned a jewellery store. They weren’t initially selling anything online, but Nick was able to convince his parents give him inventory to do exactly that.
Nick’s can-do spirit landed him a job with a venture capitalist. While he would learn and earn a lot during this time, Nick was still making far more selling bracelets and rings on eBay.
So, Nick went out on his own.
Are David’s days numbered?
He had the idea to create a payments business for millennials. The younger generation was being left out. Most didn’t have credit cards. They also couldn’t justify a whole week’s pay on a bag, dress or jacket.
So, Nick co-created Afterpay.
With Afterpay, buyers only pay a fourth of the retail price up front. The remaining amount owed is then paid over three delayed payments.
It’s easy for millennials. It’s better for merchants.
And Afterpay collects fees on every transaction. Today Afterpay Touch Group Ltd [ASX:APT] is a $2 billion company.
I’m sure most people thought Nick was crazy at the start.
His original idea would pit him against the likes of Visa and MasterCard. How could he climb that impossible mountain? Those billion-dollar behemoths could easily crush the 26-year-old Molnar.
What made Nick a success was his effort to please his customers. He created Afterpay with millennials in mind. With such customer focus it’s hard not to become a business success.
‘Have the tech giants — Amazon, Apple, Facebook, Google, and Microsoft — grown too big, rich, and powerful for regulators and politicians ever to take them on?’ Kenneth asks readers.
‘Sure, once upon a time, upstarts Facebook and Google crushed Myspace and Yahoo. But that was before tech valuations soared into the stratosphere, giving entrenched players a massive funding advantage.
‘Thanks to their deep pockets, Big Tech can gobble up or squelch any new firm that threatens core profit lines, no matter how indirectly.’
Kenneth does have a point. Companies like Amazon can jump into markets and quash start-ups. They can run losses for much longer to weed out the weak.
If that fails, they can buy out the young start-up and strengthen their already strong ecosystem — or they could buy a competitor to pit against one founder who won’t sell out.
There are a lot of things you can do with money. But even all the money in the world can’t buy the most important factor for success.
How to win in business
How did Amazon topple Barnes and Noble? How did Microsoft rise to the top of the software industry? How did Google overcome Yahoo?
Most didn’t have better resources than their competitors. They didn’t have any obvious edge you could point to and say, that there, that’s why they’re successful.
But all of them, including Nick, share something in common. They build their business with the customer in mind.
Before Google, searching for something online was terrible. While there was information at your fingertips, most of what popped up wasn’t relevant to your query.
Before Amazon, no one had a truly great experience online. But today Amazon is one of the most well-known stores in the Western world, online or not.
While some joke about Microsoft never having an original idea, they’re one of the best at giving customers what they need.
While all the companies above have the funding, a far better weapon is their vision. Sure, they all want to make money — but that’s a side effect of giving customers what they want.
So while Kenneth is right, valuations are sky high valuations. I don’t buy his bit on the tech giants. As soon as any of these companies lose their best advantage (customer focus), there will be an upstart looking to take their place.
Editor, Money Morning
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