The Startup Rush
The one very hard to miss elephant in the room amidst all of today’s startup hype is the inevitable question: “are we in a bubble?” I certainly don’t claim to be able to predict the future of the software market, and like most people, I’ve had at least a twinge of skepticism towards all the current software startup hype. However, after some careful consideration I think the obvious conclusion is that this really isn’t a bubble.
There are two possible analogies I’d consider using to describe today’s software startup phenomena. The first would be to think of it a bit like a gold rush. The first people to start mining for gold typically see much greater odds of success. Soon after word spreads of these early success stories, hordes of latecomers flock in to try to claim their own little piece of, what they hope to be, overnight success. Soon after the early apparent abundance of gold quickly dries up as the demand quickly overtakes the supply.
It’s tempting to view recent tech startup successes this way though many would agree that there are still at least more than a few untapped veins, in terms of opportunities to create innovative and valuable software, which have yet to be mined, so to speak. Typically though, a gold rush is characterized by the relative scarcity of opportunities to the numbers of prospectors looking to ‘strike it rich’. In the end, the vast majority of latecomers lose out and many of the people investing in the high risk gamble are too late to reap any significant rewards. So the question we have to ask is, are the opportunities in the software industry right now scarce relative to the number of potential prospectors too?
If you consider that question for a moment you can easily see why the gold rush analogy isn’t all that good a fit here. The reality is that there seems to be a significant deficit of modern, high quality, software solutions in many, if not most, markets and furthermore, there is also a deficit of talented developers and designers to capitalize on and satisfy these markets. This situation won’t suddenly change overnight either, unlike a gold rush, we can’t simply ask anyone to pick up a pick-axe or a pan to help fill this deficit.
This view of the current software market leads us to another potential analogy, that of a land rush, which is, I think, a much better fit. For anyone unfamiliar (of course you can click that Wikipedia link too) this was the way land was sometimes distributed to settlers in the US in order to attract people to come to develop, farm and ultimately prosper. There are a few reasons I prefer the land rush analogy.
- Relative to the supply of settlers there was an abundance of land and a huge need to have it settled much like the opportunities for new software products and the relative lack of people who can deliver them today
- Those unprepared for the hardships and challenges of ‘making it’ on this new were land often met with failure along the way. Likewise, not everyone who tries to form a startup is going to succeed immediately, or at all. There are few, if any, true overnight successes
- Finally, those who were able to persevere on this ‘free’ land did ultimately find themselves successful and better off. After the dust settled many of the most successful settlers expanded and built on their success, buying and developing more land and investing.
The land rush analogy feels much more like the entrepreneurial landscape we are seeing in the software industry right now. There are still many opportunities to deliver valuable new software even only by leveraging existing and well known software technology, to say nothing of future innovations, and we’re still a long way from fully capitalizing on these. There is an abundance of demand for new or even merely improved software solutions. The current software industry landscape is still littered with the software technologies of the past, many established businesses are currently doing a poor job of servicing their customers modern needs and still stuck in outdated software technology paradigms. While, in some areas the landscape of opportunities is practically unsettled, like open land just waiting for the right settlers to come and develop on it.
So in the end, it’s hard to see this as simply a new tech bubble. Obviously, the free land isn’t going to last forever, though, clearly there’s always some room for innovation. At some point in the future, the present abundance of opportunities in the software industry will begin to shrink, and the hype will die down. But the end of the land rush will not finish with a crash but rather leave behind a stable landscape of new successful entrepreneurial ventures and hopefully also a much more mature software industry than we see today.
It’s an exciting time to be a software developer.
Reference: The Startup Rush from our NCG partner Chris Nicola at the lucisferre blog.