Future of Startups

Paul Graham: The Future of Web Startups

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 is courage.

Paul continues the theme that commodity hardware and software is making it easier to start web companies, but extends the notion further: that the components that make up the startups themselves are becoming a commodity.

If it’s cheaper to start a startup, more people can do it and do it faster. Founders are cheaper: younger, less experienced people can start them. Ideas are cheaper: you can try more ideas and see what works. Capital markets are cheaper: there’s more companies to choose from to invest in.

Back when it cost a lot to start a startup, you had to convince investors to let you do it. And that required very different skills from actually doing the startup. If investors were perfect judges, the two would require exactly the same skills. But unfortunately most investors are terrible judges. I know because I see behind the scenes what an enormous amount of work it takes to raise money, and the amount of selling required in an industry is always inversely proportional to the judgement [sic] of the buyers.

Fortunately, if startups get cheaper to start, there’s another way to convince investors. Instead of going to venture capitalists with a business plan and trying to convince them to fund it, you can get a product launched on a few tens of thousands of dollars of seed money from us or your uncle, and approach them with a working company instead of a plan for one.

This commoditization will have a ripple effect on other institutions. If companies can be started by younger founders, how will that change education?

If the best hackers start their own companies after college instead of getting jobs, that will change what happens in college. Most of these changes will be for the better. I think the experience of college is warped in a bad way by the expectation that afterward you’ll be judged by potential employers.

One change will be in the meaning of “after college,” which will switch from when one graduates from college to when one leaves it. If you’re starting your own company, why do you need a degree?

There’s nothing magical about a degree. There’s nothing that magically changes after you take that last exam. The importance of degrees is due solely to the administrative needs of large organizations.