Two Reasons Social Media Startups Don't Get Funded

Social media is a noisy, crowded landscape. Getting traction is difficult because access to cloud storage and the technology to build apps is so cheap and simple. This means anyone with a semi-intelligent idea and a few friends can toss together a chat platform to share videos and pictures. They cloak it in some new age unique value proposition for the younger generation, it doesn't get any kind of real backing, and it fails within a year.

There are two primary reasons for this, and it's a lot simpler than you might think.

Your Unique Value Proposition Isn't Unique

Being innovative and disruptive (I so hate those buzzwords) is more difficult than ever. The sad part is watching investors who are so married to the concepts. They chase the youth founder myth all over the financial spectrum until they realize Facebook beat Google at social media for a good reason: Money doesn't equal success.

Even when people believe they found a new algorithm to better predict human behavior and cultivate sales leads (or whatever the pitch deck is trying to over emphasize), many are shocked to realize someone else had the same revelation. The reality is success in developing social platforms is really about timing, funding, and promoting to the right audience.

SnapChat capitalized on the inbred narcissism and overall insecurity of young people to build itself into a powerhouse. That was great timing as the Facebook user based aged and the platform stopped being teenager cool. Combine that with the overbearing noise on Twitter and some great marketing, and SnapChat stepped into the space at the right time.

However, for every SnapChat, you have Google+, Frienster, Digg, and MySpace. Maybe at one time they were cool (MySpace) or had tons of funding and support (Google+), but they had bad timing and didn't hold the right audience. 

User Acquisition Is Harder Than Ever

There are so many different ways for people to connect the market is saturated and users are harder and harder to cultivate. If an app can't build a user base, it can't sell ads. Without advertising revenue, no one gets paid and funding dries up.

A VC fund associate confirmed this to me when I approached her about how her fund decides to invest in social media or not. "To be honest, social apps don't appeal to us. . . companies don't have the ability to get enough users."

What she is really saying is that user needs have fragmented the marketplace. Finding your niche and making space is next to impossible. Here are the examples:

Some users need social media to chat with friends. Facebook and Twitter have that covered. Never mind the dozens an dozens of free chat apps anyone can download from iTunes (see Line and Kik. Add your favorite here).

Some use social media to generate sales contacts. I can't tell you how many times I see a new social media app guaranteeing a better way to cultivate sales leads. I wonder if it's a requirement that every accelerator have one each cohort? 

Some use social media to share video and pictures. Facebook, Instagram, Snapchat, and every cell phone can already do that. Oh. My. Goodness. SO MANY CUTE BABY AND CUDDLY CAT PICTURES!

Professional networking online through social media is a waste of time. LinkedIn is a mess. I tried several times to join professional groups to get a better look at an industry. I'm part of a marketing group on Slack right now. It's become a scream fest where everyone is plugging their newest book or latest revelation to sell something. Social networking has turned into a selfish endeavor. No one wants to help anyone.

Finding a job is next to impossible on social media unless you fall into one of a few select categories: Web and app development, engineering, IT infrastructure, or a protected minority group. If you aren't one of those, move along because no one cares.

The Answer To The Funding Question

I don't like talking about a problem without offering a solution. So how will the next great social media startup find space? Excellent customer service for hyper focused niche industries. Everyone sees Facebook, Twitter, and LinkedIn as these massive monoliths and believes they have a better way. The better way is serving a single, small group of like-minded people. 

It was previously the case on LinkedIn that you had to be invited to post on the platform. Only industry experts could provide insights. It made LinkedIn into a place to find expert analysis. While Gmail isn't technically a social network, it gained popularity because you had to be asked to join by someone at Google.

If a startup can find space in a cash-rich industry and provide enough to secure a user base, it will get traction. However, it will only succeed by saying no to the wrong people, yes to the right people, and creating the air of exclusivity.