Quick thoughts on red ocean strategy -– building multi million business instead of chasing the unicorn

TLDR; multi-million ideas have higher chance of success and getting rich, but the expected reward is not necessarily higher vs the billion dollar one. Even then, if wealth is the only objective, a regular engineering job in the valley might have a better shot.

I first came across this concept of blue/red ocean strategy yesterday from this article that argues for finding profitable startup ideas by identify gaps or white spaces in existing market. The goal of red ocean strategy is to optimise for multi-million outcome instead of the unicorn that everyone in tech is chasing. Their main argument for a red ocean strategy is that the probability of success is much higher than optimizing for billion dollar size idea and the founders can still get very rich.

Of course, billion-dollar companies are rare, extremely rare. Small/mid-sized businesses are no less important to the society and everyone depends on them to function on a daily basis. Venture capital and startup community is dedicated almost exclusively to serve those who are building a billion dollar start-ups, which is why the narrative is shifted away from small/mid-sized ideas in tech.

At the risk of over-simplifying the startup process, here’s some numbers to think about. If getting rich is the goal, then expected finanical reward = probability of success times money upon success. The size of success of red ocean strategy vs unicorn differs by order of hundreds (for e.g, ~10 million vs ~1 billion). So unless the probability of red ocean strategy is at least hundred times higher than an unicorn idea, then it is not clear which is the winner here. This is before accounting for the significant likelihood of multi-million exits to bigger corporation before the startup gets to a billion dollar.

Further, building a billion dollar startup gets you the support and network of the venture capital community. Working on world-changing ideas attracts world-class talent. On the other hand, red ocean strategy often requires you to have an existing network and significant capital that one may raise from family and friends or accumulated through a professional career. If your objective is to build any size business that can get you rich, then venture capital might cause you more harm than good.

I believe what kind of company to build ultimately is a personal choice. Building a billion dollar company is not for everyone, and even building a company is not for everyone. If you want to get rich and you are technically talented, getting an engineering job in the valley is still the surest way.

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