Future of Web Startups - Paul Graham (YCombinator)
Paul Graham of YCombinator postulated that Web Startups will also follow the pattern of any other technology that we have seen many times before. Initially, someone invents an innovative product/technology which is expensive. But soon after, someone figures out a way to do that cheaply and ideas and number of ways of doing it, explode.
The cost of starting a web startup has also decreased dramatically in the new web age, and this will have implications on what will happen in the future. His predictions were:
- There will be a lot of them. As the cost is decreasing, the only threshold left is that, do you have the balls to work in a startup.
- Standardization of things that are produced en-masse. As there will be many startups, there will be a standardization of the way, the deals are done.
- Standardization of Terms of business agreements. At the moment, every VC/Angel can come up with his own terms and deals. But, when the competition will increase, the funding packages and agreements will become standardized with set deals.
- New attitude towards Acquisitions. Companies like Google have solved the stigma of acquisition and they use acquisitions to recruit smart people and ideas. They know this from their own experience.
- More competition. As there are more startups, people will have to take more risk and do more crazy stuff do differentiate themselves.
- Younger Nerdier Founders. More technically minded people who are generally wary of the business side of things, will be able to build new products. They can release good products on the web and get users first, before going to any investor.
- Technology hubs like Silicon Valley are still needed, as they enable face-to-face meetings and easier visibility.
- Also needed are Judges who can pick winners. VC firms and Acquirers both need people who are knowledgeable of the industry and startups. There will be more need for people who can pick the winning companies. Paul also postulates that companies will need to have a Chief Acquisition Officer, whose job is to find who to buy and then buys it.
- College will change.
- The meaning of 'After College' will change from 'When you Graduate' to 'When you leave'.
- It will matter less and less, where you went to college. Peope from smaller colleges will have similar chances.
- Greatest value of college is who you meet there.
- Instead of studying to get grades, students will study to learn because thats the only way they will learn.
- More wealth created. More competitors to satisfy users' needs (which are assumed to be unlimited).
- Faster advances in technology.
I agree with most of the points that Paul Graham makes. Here is my opinion on what he predicts:
- Location: Even though Tech hubs like SV are still needed, it has become much easier to start/seed new ones. All that is needed is a couple of big successes in an area, and that place will start teeming with entrepreneurs/investors/lawyers/etc. This is what Microsoft did in Seattle, and what is happening in cities like Bangalore and Hyderbad in India. But those first few companies will have a hell of a hard time, when they start...
- Competition: I think as the number of startups in any space will increase, the key factors deciding success will be growth and responsiveness. Startups that can move fast, add new features quickly, and have shorter cycles will gain traction quicker. Also, startups will have to be more risk-taking, as PG pointed out.
- Measures of Success: As the cost of starting companies decreases, the pressure to generate revenues will also decrease. So, the startups will focus less and less on making money, and more and more on growing the number of users. The measure of success now will change to popularity, growth and brand, rather than revenue.
It is noteworthy that this is not the same as the Bubble in 2000, as the startups are not spending money as they did then (on huge marketing campaigns and hiring). The startups on the web will become more like charity businesses...
