Do startups really do this? I thought the capability is built or nearly built or at least in testing already with reasonable or amazing results, THEN they go to market?
Do startups go to other startups, fortune 500 companies and public companies to make false promises with or without due diligence and sign deals with the knowledge that the team and engineers know the product doesn't have the feature in place at all?
In other words:
Company A: "We can provide web scale live streaming service around the world to 10 billion humans across the planet, even the bots will be watching."
Company B: "OK, sounds good, Yes, here is a $2B contract."
Company A: "Now team I know we don't have the capability, but how do we build, test and ship this in under 6 months???"
Startups absolutely sell things they haven't made yet and might not even be capable of doing.
Next thing you know it's 9pm on a Sunday night and your desperately trying to ship a build for a client.
Netflix isn't some scrappy company though. If I had to guess they threw money at the problem.
A much better approach would of been to slowly scale over the course of a year. Maybe stream some college basketball games first, slowly picking more popular events to get some real prod experience.
Instead this is like their 3rd or 4th live stream ever. Even a pre show a week before would of allowed for greater testing.
I'm not a CTO of a billion dollar company though. I'm just an IC who's seen a few sites go down underload.
To be fair no one knows how it's going to go before it happens. It would of been more surprising for them to pull this off without issues... It's a matter of managing those issues. I know if I had paid 30$ for a Netflix subscription to watch this specific event I'd assume I got ripped off.
You don't necessarily have to make false promises.
You can be totally honest and upfront that the functionality doesn't exist yet and needs to be built first, but that you think you understand the problem space and can handle the engineering, provided you can secure the necessary funding, where, by the way, getting a contract and some nominal revenue now could greatly help make this a reality...
And if the upside sounds convincing enough, a potential customer might happily sign up to cover part of your costs so they can be beta testers and observe and influence ongoing development.
Of course it happens all the time that the problem space turns out to be more difficult than expected, in which case they might terminate the partnership early and then the whole thing collapses from lack of funding.
If anything, startups are more transparent about it.
In the enterprise sector this is rampant. Companies sell "platforms" and those missing features are supposed to be implemented by consultants after the sale. This means the buyer is the one footing the bill for the time spent, and suffering with the delays.
Many do, as far as initial investment goes. It makes sense when you think about the capital intensive nature of most startups (including more than web startups here, e.g. lab tech commercialization). It also accurately describes a research grant.
That's for startups that can't bootstrap (most of them). For ones which can, they may still choose to do this with customers, as you describe, because it means letting their work follow the money.
