Paul Graham suggested in a footnote to an article about patents that YCombinator would be interested in funding a company to develop a desktop word processing program. Common wisdom in the software industry is that to do so would be competing directly with Microsoft and you just don't do that unless you want to get crushed like Netscape.

Netscape may have been fighting a losing battle, but I think it's pretty obvious they did themselves in. In the late '90s, Microsoft delivered a better user experience, while Netscape kept delaying the next release of its product. When Netscape 6 did come out, nobody[0] cared. Ironicly, today, Microsoft has gone years without revising IE and they're losing users to Netscape-descended Firefox. Competing with a large and well-funded company like Microsoft is a scary prospect for any startup, but I don't think it's suicidal; Netscape would have still lost had its primary competition been Opera instead of Microsoft.

So, if it's not suicidal to take on Microsoft, office software is a huge market and Microsoft Office has a lot of problems, is building a new product in this market a good idea? I'm skeptical. The market is crowded, and the barriers to entry are significant. It wouldn't be too difficult to create Foobar Write, a usable word processor that can mostly handle MS Word files, but why should I buy Foobar Write when I can download Openoffice or Abiword? Business models that don't involve charging for the product all seem like gimmicks that would annoy users, and it's back to Openoffice or Abiword. For anyone to succeed in this space, they'll need a well-defined target market and an amazing product. Todays word processors have no shortage of flaws, so I don't think the amazing product part is as hard as it sounds. What I wonder is, who will buy it?

[0] To borrow from Joel Spolsky: 'nobody' in this context means fewer than ten million people.