Building a Startup around Algorithms
Algorithms have existed since the ancient age. But only in the last few decades, they have taken the form of software. And that is good because it creates repeatability.
Today, they are an invisible part of our daily lives. Algorithms are the underlying fabric powering the growth of the biggest brands. Food and beverage recipes are algorithm examples in the simplest form. Retailers use algorithms to stock inventory. And algorithms have found widespread use in dating, recruiting, trading, and much more.
Algorithms are like the two sides of a coin. They can be used for the good or have unintended not-so-positive effects. One must address both the sides before any implementation. Dominant social media platforms have made the world smaller and enabled positive changes. And they also have not-so-positive effects as highlighted in The Social Dilemma.
In most cases, a company uses an in-house built algorithm. This proprietary block stays within its walls. Now imagine if a company made only algorithms. And sells them like middleware or operating systems. Some possible examples of algorithms sold to businesses:
Don't know what the ideal business model may look like, but here are some initial thoughts:
Using pure human intellect as the foundation block for startup building excites me. Simple enough to get started, but not easy to replicate. Moat from the very beginning!
Today, they are an invisible part of our daily lives. Algorithms are the underlying fabric powering the growth of the biggest brands. Food and beverage recipes are algorithm examples in the simplest form. Retailers use algorithms to stock inventory. And algorithms have found widespread use in dating, recruiting, trading, and much more.
Algorithms are like the two sides of a coin. They can be used for the good or have unintended not-so-positive effects. One must address both the sides before any implementation. Dominant social media platforms have made the world smaller and enabled positive changes. And they also have not-so-positive effects as highlighted in The Social Dilemma.
In most cases, a company uses an in-house built algorithm. This proprietary block stays within its walls. Now imagine if a company made only algorithms. And sells them like middleware or operating systems. Some possible examples of algorithms sold to businesses:
- Industry: Choosing the next retail location for the food & beverage industry.
- Use-Base: Targeting teenagers for large consumer brands.
Don't know what the ideal business model may look like, but here are some initial thoughts:
- Creation: It takes only a few human brains to create a powerful algorithm. D.E. Shaw is a classic example that started this way in 1988.
- Deviation: There will always be the temptation of creating an end-product or service. If this spurs an enduring startup, so be it. In 1994, a D.E. Shaw employee realized the internet would be a hyper-growth phenomenon. He capitalized on this single thread. And created the world's largest online retailer, Amazon.
- Adoption: Sell as intellectual property (IP), or an enterprise software product. Rambus and ARM are two good examples of sizable companies built around IP.
Using pure human intellect as the foundation block for startup building excites me. Simple enough to get started, but not easy to replicate. Moat from the very beginning!
Let's Talk: If you have a true experience that resonates, please send me an email.
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