Fred Wilson: Web Startups Are a Commodity


USV partner and SAI contributor Fred Wilson riffs on an essay by Paul Graham that argues that web startups themselves are now a commodity.  This happened in the late 1990s, too–jumping to startups grew to be viewed as as smart and safe a career move as joining an established law firm–but Fred draws distinctions between the two eras.  Fred recently wrote here about The Coming Internet Downturn

Paul Graham has written a very provocative essay on The Future Of Web Startups in which he argues that like computers, and many technological developments before them, web startups themselves are commodifying. Paul says:

So my first prediction about the future of web startups is pretty straightforward: there will be a lot of them.  When starting a startup was expensive, you had to get the permission of investors to do it.  Now the only threshold you have to get over is whether you have the courage to.

Even that threshold is getting lower, as people watch others take the plunge and survive.  In the last batch of startups we funded, we had several founders who said they’d thought of applying before, but weren’t sure and got jobs instead.  It was only after hearing reports of friends who’d done it that they decided to try it themselves.

Starting a startup is hard, but having a 9 to 5 job is hard too, and in some ways a worse kind of hard.  In a startup you have lots of worries, but you don’t have that feeling that your life is flying by like you do in a big company.  Plus in a startup you could make orders of magnitude more money.

Paul is right about this. I experienced it first hand yesterday. I am trying to help friends recruit a kick arse Ruby/Java/PHP developer for their company. I asked a person I met via this blog to consider the job yesterday and he responded that he’s doing a startup himself with four friends.

The barriers are so low to starting a web company these days that it seems like everyone is doing it. That turned out badly last time when every investment banker left wall street and became a entrepreneur. But Paul’s essay makes me think this time may be different. Because its hackers that are leaving their day jobs and starting companies.

And the companies that hackers are starting are building parts of the web. And since we are developing a modular, programmable web, it may be that the way the web evolves is bit by bit, startup by startup.

Is that a sustainable model? Well if the web is a media platform and if the advertising systems that support the web are open and anyone can play in the sandboxes we create (like you can with adsense) then it could be a very sustainable model.

And so what about VCs in this model? Paul says:

If the number of startups increases dramatically, then the people whose job is to judge startups are going to have to get better at it.  I’m thinking particularly of investors and acquirers.  We now get on the order of 1000 applications a year.  What are we going to do if we get 10,000?

That’s actually an alarming idea.  But we’ll figure out some kind of answer.  We’ll have to.  It will probably involve writing some software, but fortunately we can do that.

So it looks like we are going to need to hire our own Ruby/Java/PHP developer sometime soon. I guess that’s the way it is. And I am OK with it.

Feel free to comment below or directly on Fred’s site, A VC, here.