
The Future of Web Startups - byrneseyeview
http://paulgraham.com/webstartups.html
======
electric
What Paul ignores is the fact that most people out of college are faced with
seemingly insurmountable debt as a result of having to pay for an education -
esp. in America (and to a lesser extent in Canada). This is one problem that
will prevent startups from happening at such a rapid pace as he anticipates.
In fact, most graduates want to find stable jobs to pay off their debt --
startups are not really on most graduates' radar. On a somewhat related note,
Businessweek had a survey of the top ten desirable places to work for new
graduates -- three were govt. agencies, one accounting firm, google, etc.

~~~
byrneseyeview
So wouldn't those people drop out earlier? If you strip out the emotional
content of your post, it's quite banal: the price of a product (college) is
going up, so people who buy the product (students who pay full tuition) have
less money, and since money is a transportable, transferable form of freedom,
they're less free.

" In fact, most graduates want to find stable jobs to pay off their debt --
startups are not really on most graduates' radar."

That's irrational. If they're already way in debt, shouldn't they want to take
more risks? Why the hell would you do something boring for ten years to pay
off your debt, when you could do something fun for one year and have a 10%
chance of more than paying off your debt. Also, employers are impressed by
people who start their own businesses.

" Businessweek had a survey of the top ten desirable places to work for new
graduates -- three were govt. agencies, one accounting firm, google, etc."

Right, because Businessweek can't say "The best place for you to work is that
company you start in your apartment with your pals," because 1) that doesn't
appeal to BW's audience, and 2) startups are small and varied, so it wouldn't
make sense. It's like taking a survey of the most popular restaurants
(McDonalds, Burger King) and using that as proof that the swanky new sushi
place down the street is an awful place to eat.

~~~
electric
"So wouldn't those people drop out earlier?"

No those people would not drop out earlier, because they likely did not know
they wanted to be startup founders until they had enough technical knowledge
and/or more importantly built those relationships with students around them
which led to the creation of a startup in the first place. Perhaps your
experience has been different in which case I cannot argue with that.

"when you could do something fun for one year and have a 10% chance of more
than paying off your debt"

For precisely that reason -- that the likelihood of success is only 10%. And
it often takes more than a year to build something meaningful.

"Also, employers are impressed by people who start their own businesses."

This is not always true. It depends on the role the employee is being hired
into.

~~~
byrneseyeview
So you're saying that college, while expensive, is still worth it? I don't get
your argument. For a given student, either college is too expensive to be
worth it, and people will drop out early, or it's cheap enough to be worth it,
and people will finish. Only one of these things can be true, and there are
obvious conclusions depending on which you pick. So which is it?

"For precisely that reason..."

Did you miss what I said above? If you're already broke, why is getting broker
a problem? What do you have to lose if you have less than nothing?

Can you give me some detail on your 'depends on the role' comment? I didn't
realize this; when I recruit people (IT/quant finance), employers respond more
favorably to entrepreneurs than to people who worked for someone else. Where
did you hear otherwise?

~~~
electric
"So you're saying that college, while expensive, is still worth it? "

Yes that's exactly what I'm saying. You meet like-minded people there who are
excited about technology - potential co-founders. You learn about technology.

I've been through 3 universities, and the relationships I have built at these
institutions have helped me to this day. I'm running a startup btw.

~~~
byrneseyeview
What was the point of your original post? It looks like you were saying "It is
better to have a college education than to spend that time or money in any
other possible way." But you keep saying that like it's a bad thing, and
talking about how college reduces your chances of starting a startup because
it's so expensive. If college increases your chances of starting a startup,
and you want to start a startup, your original post doesn't make sense. What
were you trying to say?

~~~
electric
What I was saying is that paying for the education that gives you the tools to
start a startup is one of the biggest impediments to starting one.

~~~
byrneseyeview
I'm really having trouble following this. You're saying that your odds of
success after getting an education are higher than before. But that, uh,
getting an education makes it harder to start a startup. You see the
contradiction.

Is this like saying "If you're going to be a programmer, you'll do better to
buy a computer. But if you buy a computer, you'll have to get money, which
leaves you less time to be a programmer!"?

------
gibsonf1
_"Then the effects of being measured by performance would propagate all the
way back to high school, flushing out all the arbitrary stuff people are
measured by now. That is the future of web startups."_ What an impressive
conclusion - I hope it happens.

~~~
goodspeed
When this happens "Hiring will be obsolete"
<http://www.paulgraham.com/hiring.html>

...because we've inspired everyone to do startups. There will be nobody else
to hire :)

We're back to the pre-industrial revolution era. Where everyone didn't hire
anyone and had their own backyard industry.

Woohoo!

~~~
albertcardona
Not really. We are at a new plateau, if you want: stuff that used to be hard
is now standard. So people can lift up their heads and get going with
something new.

------
broderickturner
I wish acquisition was this easy. I worked at a very large bank in Emerging
Technology and I pushed our group to buy 3 startups. We passed on all of them
because of bureaucracy and lack of vision. Heck, the same bank passed on
paypal (and tried to create their own), and now they have to compete head to
head with a company that could be in house.

------
brett
The unexpected Ted Stevens reference at the end really made me grin. I find
Stevens so hilarious and horrifying at the same time.

I was surprised to find it in a PG essay, but on reflection it seems really
appropriate in context. Though it did distract me enough that I had to read
the last section twice.

------
dfranke
With standardization comes bureaucracy. I dread what will happen when all this
starts to become apparent to the government, and they decide that they need to
"fix" some of the perceived injustices. How long before we start seeing laws
regulating founder/investor relationships that look like our current laws for
employers and employees? Will investors start being required to submit reports
to the government to prove that their investment decisions aren't racially
biased?

~~~
run4yourlives
> Will investors start being required to submit reports to the government to
> prove that their investment decisions aren't racially biased?

Are you suggesting that investors should be racially biased?

I'm playing devil's advocate far further than intended for sure, but the laws
regarding employment, although bureaucratic are there for very good reasons.

~~~
byrneseyeview
I think he's suggesting that they could be accused of it. Startups are
disproportionately started by men, most of whom are white or Asian. Paul
Graham says not to blame on malice what you can attribute to math, but other
people might not see it that way.

"I'm playing devil's advocate far further than intended for sure, but the laws
regarding employment, although bureaucratic are there for very good reasons."

What is that reason?

~~~
davidw
I'll take a stab at this. I recently read one of Milton Friedman's books, and
I liked it a lot. His pursuit of freedom is admirable, and something that I
can understand. He even suggests that freedom is more important than using
government power to attempt to stop racism, for instance by letting people
choose not to hire black people (as an example).

That got me to thinking though. While I'm attracted to the sentiment of
freedom above all else, what I think is missing in his equation is that
communities tend to be sort of self-reinforcing. It would be very difficult,
if it were accepted by others to not hire black people, to be the first one to
do so. Now, laws against that kind of discrimination don't change the way
people feel, nor make their racist sentiments go away overnight. However, they
do drive those thoughts underground, and break the cycle of "we've always done
it that way" by making it no longer acceptable. And with time, that improves
the climate and makes it easier for attitudes to change.

At least that's one thought that came to mind. I really admire Friedman's
purity of thought, but think that perhaps it's a bit naive. It would certainly
be an interesting subject to discuss in person with a person of that
libertarian mindset.

~~~
stuki
Just imagine the level of job candidates you could be selecting amongst if you
were the only one hiring from a population as big as the black community. In
any competitive field, employers are fairly limited in how 'racist' they can
be in their hiring practices without setting themselves up for a fall.

~~~
davidw
Sure, but there are a lot of fields that aren't really that competitive (where
you simply hire cheap laborers who basically work about the same), and where
the pressure to conform may be higher than the pressure to find an employee
that is 2% better than the next guy.

~~~
stuki
Even then, widespread aversion to hiring from one of two equally productive
groups creates a big incentive to break the mold. And that incentive will only
keep increasing as long as no one steps out. In the limit case, you pretty
much have access to an 'unlimited' pool of free labor. This line of reasoning
does presuppose a reasonably free country, though.

------
conkhead
Hey, Paul: I've got an even better idea. What say I just cut all you investors
out altogether? Whatever happened to growing a company slowly, based on the
profits coming in? Oh, that's right - we don't do this in the tech industry
because everyone says it won't work.

That's just a bunch of bunk. Nothing was funnier during Web 1.0 than guys
saying we were "rewriting" the rules of business - like, profits didn't
matter. Truth is, from a business point of view, starting a web service is no
different than starting a dry cleaners: give people what they want, at a
reasonable price (in our business, that usually means ad-supported)... and
they'll come back (and click on ads in the process).

Yes, it may take some technical innovation... but it doesn't take any
_business_ innovation. Everything you say in your essay is true; so seriously,
why do I need you? You expect me to go through this whole dance to come to
Cambridge for, what, the possibility of _five-thousand bucks_? And then move
to SilCon for three months so you can keep tabs on us once a week? Like, are
you _serious_?!

Your essay is particularly prescient because you might have inadvertently
predicted the ultimate demise of your current business - i.e., venture
funding. No, I won't fill out your form; no, I won't travel to Cambridge for
the possibility for you to give me five-thousand bucks. No, I won't move to
the Valley so you can keep tabs on what I'm doing. I'm a big boy, and I can
take care of this end myself, thanks. Good luck with giving away your cash.

James Touchi-Peters, Founder/CEO CONK!/Arrow Media Minneapolis USA
conkhead@conk.com <http://conk.com>

------
srt19170
Where is the evidence that Google has the best programmers? Certainly if you
look at Google's acquisitions, they all stagnate post Google. Picasa was a
pretty good product -- two years ago when Google bought it. Since then it's
added a button to upload photos to Blogger. Gmail had a pretty good feature
set for Web-based mail -- two years ago when it rolled out. Since then? etc.

~~~
papersmith
That seems to say more about Google as a company than its programmers.

------
swards
Can't agree with the "Younger, nerdier founders" section.

It's like any other long tail, in this case the prototypical founder (late
20', single, technical guy) will not be as common - it'll become a more-
diverse population. There will be younger founders and there will be older
founders, too. Nerdier, and hipper. Etc.

For example, I'm a 40 yo front-end developer (started in 1995 building
interactive apps at ESPN). I'm now starting a company, doing all the backend
development too, thanks to Ruby on Rails. This was never available to me
before 2006, really.

My bet - the trend will be away from the core developers, as the back end
tools become commoditized and packaged, and the prized employees will become
the designers - UI and graphical. Brands and positioning will start to play a
larger part, and these contributors will have the most to say about this part
of the company. I predict the trend will go away from the technical, as people
will need to wear many hats in a small company.

As for the young, I don't believe they have an advantage in a crowded startup
environment. The lucky bet, or obvious missing younger-demographic website
will be created by the kids, but this will happen less and less as the low-
hanging fruit is gobbled up. Instead, I think the older (or rather
experienced) will have an advantage in a crowded startup world. Here, it'll be
the niche positioning, establishing business relationships, and pursuing
effective growth strategies that will make the difference.

~~~
gregac
Agreed. As per below. You probably know that Fred Wilson stirred up the "age
of founders" issue a few months back. I'm curious to find some data on
age/general demographic trends re: founders.

------
Alex3917
Prediction: Angel investors will ink deals with VCs to create an official
pipeline. For example, let's say KPCB agrees to fund at least one Techstars
company per year in exchange for first pick or something like that. That's the
way elite prep schools interface with certain Ivy's, and it seems to work out
for both of them. Of course startups will never get as locked down as colleges
because there will always be more money than good investments, at least for
the foreseeable future.

~~~
far33d
I always assumed the prep-school -> ivy connection was informal, much like the
one between certain software companies and cs programs. For instance, Yale
takes 10 kids from andover every year because they know all about how smart
the 10 smartest kids from andover are from previous experience.

~~~
Alex3917
Most of them are informal, but not all. Here are a few situations where an Ivy
would offer guaranteed admissions:

1) The university promises admission the top student from the Japanese
language program of a certain high school each year. Situations like this
often arise from alumni putting crazy earmarks on the donations to their
colleges.

2) The university guarantees admission to a certain percentage of state
residents each year in exchange for state funding.

3) The university wants to buy more land but the town tries to block the deal
because it doesn't want the property taken off the tax roll. The university
brokers a deal guaranteeing admission to a certain number of students from the
local HS in exchange for the land.

4) A top prep school comes to some more formal agreement with a university for
purely strategic reasons.

Situation #1 seems to be the most common in terms of connections to prep
schools, although it's hard to say since the relationships aren't exactly
published.

------
bluishgreen
"And being Google, they're figuring out how to do it efficiently."

pg, I am a little alarmed by this flat recognition that is awarded to Google.
It might be actually true. But its not an optimal way to think about things in
the long run. As a teen ager I was a Michael Jackson fan, It took me a good
while longer than other people to realize that he has turned into shit.

~~~
zach
That's not a comment about how successful or cool Google may be, it's a
comment about their management and corporate culture.

It's like saying "And being Wal-Mart, they're figuring out how to squeeze the
last nickel out of their suppliers." It's just how they're interested in doing
things.

------
djasek
I think there is a logical inconstancies in here. You say specific startup
hubs are important, but specific colleges are not? Bullshit, either both are
important or both are not. By your own arguments they will be performing the
same service, building communities.

You say one goes to Silicon Valley to be in a community of startups, meet
cofounders and talk with smart people. Then you say that in the future, in
college, we will be more concerned with meeting cofounders and communing with
smart people than we will be concerned with grades. Why won't yo want to go to
the school with all the smartest like-minded people? Thats what Harvard is to
business people. A community of like minded people that band together to help
each other. The same will be created at the new breed of startup oriented tech
schools. The admission standards might be a tiny bit different though.

------
distrsearch
Great post, as usual, there is one point though - assuming that all the best
will move to the startup hubs is like efficient markets hypothesis i.e. not
really. They would move in a rational world but there are many seemingly
irrational reasons that you can find world class people in obscure places
anywhere in the world and, moreover, they are content to stay there. I am
talking from personal experience, in my previous (vertical) search startup my
chief programmer was world-class and had results to prove it, has since
produced another world-class (Facebook) app and has not set foot in US ever.
Similarly in my current search startup, I have some really great young kids.
So the moral is that sure, the ratio of world class people is higher in
startup hubs, but the rest of the world is so much bigger :) that many more
are still out there ...

~~~
herdrick
He didn't say all the best founders will move to Silicon Valley, just that
more will than previously.

------
brianwc
"At the moment, there is no one within big companies who gets in trouble when
they buy a startup for $200 million that they could have bought earlier for
$20 million. There should start to be someone who gets in trouble for that."

I think it's right that startups will be acquired earlier and earlier, but
that makes me wonder: might those earlier acquisitions (which sometimes
decrease productivity to 1/13th what it was) sabotage the success of the
startup either because once acquired the founders don't have to work as hard
to keep their heads above water or because when not constrained by a tiny
startup budget the founders won't worry as much about finding efficient ways
to do things--which in the past made them better startups/companies?

~~~
pg
I wondered if anyone would bring that up. I think another thing that will
happen is that acquirers will figure out how not to ruin the startups they
buy.

A company that bought a bunch of hot startups early on and didn't destroy
their productivity would be a force to reckon with.

~~~
jkush
It seems the act of acquiring does a lot of damage all by itself. One thing
that would probably go a long way would be if the acquiring company kept the
acquisition process short, sweet and easy.

------
Jaggu
Paul,

Your each and every article is giving indication that married people are not
good enough to start startup. Come on man - I am reading your articles to
inspire myself and to keep up my tempo but when I read age analysis then that
is very demotivating.

Well I think I need to find place where there are success stories without age
limit ;)

I understand that kids and wife can take quite a bit time. But if there are
people like me who dreams about own business for years and wasn't able to
start it because never found right channels and due to that now I am above 30.
Now I have vision and courage but also I am married. Does it mean that I have
to stop seeing dream? No way man. I am here to prove you wrong. Will let you
know whenever I am succesful :)

Thanks for all great articles.

~~~
lakai
I agree. I would rather invest in a startup run by a 30+ person than one run
by two 20 somethings. I think one problem of starting up at 30+ is that one
has achieved already a level of income, status etc. Putting that to risk is
not so easy step to take than just having graduated. But if such a person
takes that risk her idea is probably worth a second look...

------
lakai
What about the fact that when an industry matures it tends to become an
oligopoly. It almost happens with any industry in history (e.g. automotive).
With maturity often comes standardization which in turn compliments big
bureaucratic organizations.Will this also apply to the Web? What about the
chances of startups in the automotive industry? They used to be good round
1900... Some thoughts on costs: While it is cheap to get some system up and
running in a world of lots of different apps and competitors that go after a
limited number of users it will be vital to get attention in order to succeed.
In the end this probably means spending loads of marketing money which is
anything but not cheap.

------
tedhenry
If being in silicon valley is important to mix with the best and brightest
then being in a good university deserves the same argument/conclusion. Any old
university won't have students capable of learning at fast pace and so the
curriculum will be watered down. Any old university won't have high quality
teachers that can mentor the most gifted students.

I do think taking that last exam and finishing university was a magical
moment. Following a commitment through to the end even when things are tough
or tedious is valuable experience. You can get this other ways but there is a
huge difference between someone who stuck in there and finished university and
someone who called it off just three credits short.

------
webmaven
Hmm. I find the argument for unlimited concentration of startups in startup
hubs somewhat unconvincing.

If the number of startups founded goes up by an order of magnitude or two,
then the need to move to Silicon Valley in order to be in a startup-rich
environment goes down.

Now, I do think that startups will still move, but I think that the number of
hubs they can choose among to move to will be increasing as well.

I also have a feeling that beyond a certain density, the largest hubs will
eventually hit diminishing returns in terms of their utility for startups
(which will prompt more hub specialization).

~~~
pg
That is a valid objection. Though there are only 5 or 6 web startup hubs, out
of the thousands of similar sized towns in the world. That number could
increase by a factor of 10, and it would still be likely that you'd have to
move.

And in any case I doubt the number would increase. The power of hubs is self-
perpetuating. So no matter how many startups originated in St. Louis, there
wouldn't be a lot there when a given new one started, because many of the
previous ones would have already moved.

(Suppose it happened that 50% of the next generation of big movie stars were
from St. Louis. That would not make St. Louis a rival to Hollywood.)

Also there's the empirical argument: I can't think of one industry in history
whose growth made the established centers irrelevant.

~~~
dfranke
> Also there's the empirical argument: I can't think of one industry in
> history whose growth made the established centers irrelevant.

How about textiles, after the spinning wheel came to Europe and the cottage
industry developed?

~~~
pg
The spinning wheel replaced the distaff, which was even lower tech.

------
Alex3917
"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."

The company that manages to blend digital identity and reputation with the
information power of networks is probably going to be the next MS. I've been
interested in this problem for a long time now. Someone should really submit a
proposal as a YC idea.

------
gcheong
Does anyone believe that the future viability of web application innovation
depends on the availability of consumer access to higher and higher bandwidth
connections (at a cheaper and cheaper cost - to the point of commoditization),
and if so, as the US falls further behind other countries in this respect,will
that reduce the relevance of Silicon Valley as a startup hub for web
application companies? Which country (city) do you think will emerge as the
web app innovation leader?

~~~
imgabe
I think Japan or South Korea is at the forefront in terms of widespread
availability of cheap high speed internet access. Probably their reputations
as societies that are not very inviting to foreigners, and the difficulty of
non-native speakers learning the language is going to dissuade a lot of people
from moving there to start companies.

~~~
jimbokun
A lot of people study Japanese, think Japan is really cool, and would enjoy
living there, I think. I think Korea is behind Japan in these trends but
catching up.

I do agree, though, that Japan does have a reputation of being not very
inviting to foreigners that is to some degree deserved. I don't know as much
about S. Korea in this regard.

Japan could probably do much to solve some of their looming economic problems
(low birth rate and rapidly aging population, for example) by allowing more
people to immigrate and integrate into Japanese society and culture.
Especially entrepreneurial, technology loving types who could contribute a lot
to Japan's high tech economy.

~~~
gcheong
I lived in Japan for 6 years and found that it's quite an easy place to live
in (and I lived in both a rural/industrial backwater as well as the Tokyo
megapolis - Tokyo was much more fun). Yes, you do always feel like a foreigner
but you also do not feel the pressure to conform to every norm like a typical
Japanese person would. There are some signs that Japan is opening up more. For
example, when I started working there you had to have your visa renewed every
year, by the time I left it was possible to renew for 3 years.

------
ken
Paul, you always speak of acquisition of a startup by a big company. What
possibilities exist for startups merging? Is it common, or do you expect it to
be?

I know a couple other startups in my town (one of your big 3) who do similar
things to my startup. Thanks to the public (link-happy!) structure of the web,
we already let people go from one to the other: a loose ad-hoc integration.
Will this be the future of cooperative web software development?

~~~
imsteve
> What possibilities exist for startups merging?

Sure they can merge, but this is not an "exit". As far as I know, the
_purpose_ of a startup is a successful exit of some type.

~~~
ken
It is if they do it a couple times. Ever try folding a piece of paper in half
5 times? It's how Google might have formed, if they had started acquisition
instead of interview-hiring sooner.

------
n-alexander
Hi Paul,

I'm not quite with you on universities.

I haven't been to US education system, but I don't think you get to know stuff
like Fourier series or why inverting a matrix is unstable, etc., until you get
through a university. And such stuff is important in high tech. Unless you're
into web sites that host user generated videos. Being in video hosting pays
off, for some, but it's not what I'd call high tech. I mean, it isn't a new
UNIX, or a new Internet, or a new CPU design.

Those bigger, more interesting things were done by people who'd been to
universities, and I think there's a reason to it.

Those startups started by undergrads, they may very well make money and
produce cool apps and products, but I doubt they will drive technology.

I recently found I wasn't keeping up with new languages any more. Not because
I've become too lazy, but because there aren't any new concepts in all those
Pythons. Those are products of smart hackers, and new concepts are done by
scientific kind, who seem to be out of fashion today.

Thanks for your writing anyway.

Alexander

------
siber
Yes, I'm kind of fan of PG posts and this one is also cool. While I can argue
a lot about what the future will bring for startups and hackers etc., I'm more
interested into that "being in the hub". While I'm from Europe, I would like
to know what would be the hub in the Europe (Maybe I'm writing in the wrong
place but anyway) and if the cities/areas compete, how come that there are no
Silicon Valley VCs present in Europe, if they are present in Israel?

While I like having in my mind all about good stuff from Silicon Valley, VC
and tech folks, I would encourage Paul to write about bad things that can
happen to hackers when they deal with VCs or Angels like dropping out of the
Board, etc. it would be good to maybe prepare us tech folks to handle the
truth that not all people will be good people around us that will try to
invest in us, or are there only "good people" in Silicon Valley?

------
kevingc
This already happened to me. Early on I realized that grades weren't that
important and the best thing about going to school was having time to take
huge intellectual risks with few consequences. In addition to the basic
computer science concepts I learned, I also took on personal projects that
caught my interest.

Through these projects I learned new ways of making things using current
technologies like Ruby on Rails, Python, Mapreduce, Amazon S3 (and friends),
Lisp, and other technologies that someone simply fulfilling the graduate
requirements would likely not have learned. I also met great people along the
way who were far more impressive than any programmer, designer, or manager
I've met in the industry.

Oddly enough, now I'm in grad school, hacking the iPhone for a degree.

Eventually, I imagine that my continual curiosity will bring me to the startup
arena, or perhaps to the international sphere.

------
mcaction
In point 1 where Paul states there will be a lot of startups because it's
cheap to startup, I have to wonder where is the demand side of the equation.
Is there enough demand for whatever it is these startups are/will be doing?
Hearing more about that would be very interesting; I'd love to see a world
with many many more startups.

ak

~~~
anamax
The different thing about the web is that a biz doesn't need to be physically
close to its customers. In fact, there frequently aren't any advantages to
being close to said customers (or it's impossible to be close to all of them
because they're spread out).

However, there are still advantages to a biz being close to itself and its
resources.

The combination of those to things means that startup hubs will become
stronger.

------
thomasptacek
"We know because we make people move for Y Combinator, and it doesn't seem to
be a problem. The advantage of being able to work together face to face for
three months outweighs the inconvenience of moving. Ask anyone who's done it."

Hello, Paul. I'm selection bias. We haven't met formally, but you're obviously
acquainted with me.

------
indie01
>> One of the most important things we've been working on standardizing are
investment terms. <<

I can see this being very beneficial, both for the VCs and the startups. The
standardization of terminology in any discipline or field allows the people in
it to have their lingo easily referenced and indexed, increasing efficiencies.
Who wants to wade through a bunch of superfluous gibberish to get to the
point?

In grad school, I remember having the realization that every discipline has
it's own little shorthand lingo. I remember thinking about how confusion can
result when there are clashes/overlaps in, for example, acronyms.

>>An angel who wants to insert a bunch of complicated terms into the agreement
is probably not one you want anyway.<<

Exactly: reducing complexity, not increasing it, seems a better objective.

~~~
jimbokun
"In grad school, I remember having the realization that every discipline has
it's own little shorthand lingo. I remember thinking about how confusion can
result when there are clashes/overlaps in, for example, acronyms."

I've long ago lost track of all the different meanings I've run into for the
word "feature", for example. Practitioners of various academic disciplines (or
even in the same discipline but for a different theory) use this term for all
kinds of things with absolutely no connection to each other. I nominate this
for most overloaded academic term.

Any other nominees?

------
tx
Many influential and smart guys like Paul are saying that starting your own
company today got a lot cheaper, but what does it mean in practice?

While it depends on a nature of the business you are starting, in many cases
"build something quick" advice does not work as well as advertised IMO: for
most non-trivial ideas "something quick" still means a few months of full time
commitment which means tens of thousands of dollars that many "younger
nerdish" founders _still_ do not have.

I guess what I am saying is that a million dollars is no different from fifty
thousand when that's the money you need but do not have. Sure it probably
easier to find an external investor with 50 grand, but is it really?
Especially for "nerdier" types?

This is why YComb exists, but that is only about 30 deals a year.

------
shawndrost
This essay argues against local YC clones, which I think is at odds with
another point he's made. As he says in "Why to not not etc", the most powerful
reason people get regular jobs is because they're conventional. Local YC
clones can make startups vastly more conventional by supporting hackers who
aren't ready to take the leap and move.

Furthermore, I'd like to point out that even if local YC clones perform worse
than YC, there may still be a market for them. State governments pay much more
than YC (monetary) costs to encourage YC effects. Local VCs demand more
startups, and people to tell them which startups to invest in. And as I argued
above, many YC-caliber hackers would be interested in a local YC knockoff, but
not YC itself.

------
cuda
Startling, arresting and direct as always. Thank you.

The one thing I find interesting is the overall theme that seems to pervade
many of these essays--mainly that all trends are moving to increase the
importance of hackers. While this is true for now, I think the more the web
evolves and the easier it becomes for non-hackers or even technologists to
build apps and start companies then the advantage potentially moves strongly
to those that understand consumers and markets. Which may well be hackers, but
also may not depending on the app--as has been pointed out in the past by Josh
Kopelman the Tech Crunch 50,000 of 2006 (or even 550,000 of 2007) is not the
mass market.

Thanks again--nothing I read provokes more intense thought than your essays.

------
aston
_Google has by far the best programmers of any public technology company. If
they don't have a problem doing acquisitions, the others should have even less
problem. However many Google does, Microsoft should be doing ten times as
many._

I actually think Microsoft does.

~~~
Alex3917
I heard Carl Schramm (the economist) give a talk on Tuesday, and IIRC he said
that MS buys six to ten startups per month. Most big companies are buying
startups like crazy now though, even the ones you'd never expect. For example,
even Proctor & Gamble buys around 100 startups per year.

~~~
florianb
Mostly like in Bioscience they are buying patents ( P&G ) so that is not
really comparable to web startups

------
PatR
Great essay. Maybe a new startup should be something like one of the
microfinance sites like Kiva (<http://www.kiva.org/about/microfinance>) but
instead of people making loans, they purchase equity in a startup. All the
startups put their "pitch" on the web site and let people read the pitch and
decide if they want to purchase equity in the company. If not enough $ comes
in, the pitch was not compelling or they are not giving enough equity for the
$$. One challenge will be to have a system where getting funding is not just
about who can make a slick pitch, but about "real value" (how ever you measure
that). Pat

------
Mistone
also - i felt there was too much focus on the 22 year old hacker set - this is
a segment not the only segment of hungry, savvy, smart entreps. A real
solution to the leaky pipe problem needs to include the slightly older pipes
as well.

------
ceesai
The title of the talk (or article) is "future of web startups" and most of
what is in it is satisfyingly accurate and perhaps marginally prescient.
Except for the jump to the gushing, meritocratic tubes of the future. This
much is true about startups; they are high-risk high-reward options, with the
risk basically come down to around monetary opportunity cost now. Smart people
definitely have a better chance at succeeding at these and college is not
necessary for success at startups. Read that again. Success at startups. What
most young people (I am in my mid-twenties and almost definitely going down
the start-up trail so I do not speak from any graying high horse) do not
understand is that priorities change as you age. And not just fuzzy notions of
priority engendered by cultural forces, but those fostered by your own
biology. There is literature, and longitudinally applied common sense,
suggesting so. The opportunity cost of foregoing college is changing, not
evaporating. Yes you can pick most of those lessons on the web, and the
elitist cachet of iv(or)y league schools is losing its allure. In fact, you
don't need to live in a dorm to have an immersive social experience, not that
many here do anyways. The oppurtunity cost is that of being thrust into social
situations with people whose interests and desires don't align with yours. It
is about being part of a tribe for four or more years and finding a niche to
flourish within that tribe. Most geeks don't get this anyways, and the
evolutionarily obtained multiple equilibria of personalities are partitioned
into the black and white of nerds and jocks. OK, not all are that extreme,but
branding the gentle friction of shallow social interactions as 'fake' is
rather blinkered. That is an opinion, or even a delusion, and may suit some
well, but do understand that what works for some does not work for all. We can
all of course go on with our sheltered lives deciding not understanding why
some cultural institutions have evolved (and why their need may eventually be
obviated) and it cannot be a bad life. An ignorant life is in fact a blissful
one isn't it? But to distort and distill the argument into catchy trade-off:
"startups leads to success; college leads to catalepsy" is not even apples and
oranges. ..

One last thing: Recognize that success is a shape-shifting beast.

------
garbowza
The proliferation of startups also exposes a need for better integration. If
signing up for accounts and remembering usernames/passwords for a dozen
different sites is a pain, think about doing that for hundreds!

~~~
grail
That's what OpenID is for.

------
anthonykuhn
Paul:

Look out, oldsters with all your real world money and stuff, Reality 2.0 is on
its way, and it doesn't look good for slow-moving dinosaurs. I, for one,
welcome our new 20-something overlords. I cross-posted on your piece to
<http://blog.innovators-network.org> The Innovators Network is a non-profit
dedicated to bringing technology to startups, small businesses, non-profits,
venture capitalists and intellectual property experts. Please visit us and
help grown our community!

Best wishes for continued success,

Anthony Kuhn Innovators Network

------
vitool
"standardized procedures" are a very, very important thing. I founded five
small companies in the last 15 years and helped a few other founders to start
their businesses. One of the big problems i never found a solution for within
the process of "standardization starting a startup" is having a tool for the
organisation of all the companies' information - i needed a "mini-SAP" for
that and i found nothing. So i startet vitool.com. What kind of _software_ do
you suggest for your founders, that is simple & cheap and can grow with them?

------
herdrick
The funny thing about a great metaphor is that it somehow makes it easier to
draw conclusions. If Paul had only said, "A startup now can be just a pair of
22 year old guys, so they can move to a new town pretty easily, so we'll
probably see more clustering of startups, not less" then you'd nod and
continue on. But instead he said this about startup hubs: "the particles
they're attracting are getting lighter." Suddenly you can see it and feel it:
move your startup to Palo Alto! Buy real estate in Mountain View! It's so
obvious!

------
markwallace
I love the image of the big straight pipe. However, it's worth noting that no
market operates at perfect efficiency, and even in the big straight pipe there
will be leaks. What's most interesting to me about this image of the future is
where the arbitrage opportunities will be around the edges of the future pipe.
Because they will certainly be there. You have to wonder what the aggressively
ambitious entrepreneurial types will be doing once "tomorrow's startup"
becomes equivalent to "today's college education and job."

------
burcak
"Knowing that risk is on average proportionate to reward, investors like risky
strategies, while founders, who don't have a big enough sample size to care
what's true on average, tend to be more conservative."

I don't think that's the only reason founders want to keep risk low.

The most important reason is that money has diminishing effect on happiness.
People want to be able to guarantee a "moderate" life. What comes beyond that
is not as important basic needs.

------
gingerk
So much to think about. One niggling question I have is related to the
definition of "start ups". I've heard and read varying opinions. Is a start up
a new business with an idea to execute on the web or is a start up a company
that executes an idea on the the web or is it both or neither? Depending on
the definition of start up, there will be vastly different business models,
challenges and economic opportunities.

~~~
rms
The major difference between a business and a startup is that a startup is
intended to scale extremely quickly.

~~~
kashif
That is probably inaccurate. A startup is a fledging business.

If you are instead saying that a big company is not designed to scale as fast
as a small company/startup then that is perhaps inaccurate too, especially if
you were to determine scaling as a function of headcount and/or revenue.

------
davidw
> Acquirers will also have to get better at picking winners.

Hrm... one of the things that makes markets work so well is that it brings
"the wisdom of crowds" to bear, and doesn't require small, homogeneous groups
to attempt to pick winners. So something about that section raises a flag in
my head - if there are more startups in the future, maybe more of them will
have to go it alone, instead of this "easy out" of being bought?

~~~
byrneseyeview
Aren't acquirers a crowd?

~~~
davidw
Maybe, but orders of magnitude smaller than most markets.

------
gregac
It's always been less risky (though perhaps harder) for younger people to
forsake a corporate job and do a startup. They have less to lose. So if the
degree of "courage" needed to do startup is going down, doesn't that suggest
more older people with families and corporate jobs doing startups? (not that's
mutually exclusive with more young nerds. more startups means more
founders...of all types).

------
theirgrrreat
I the article is pretty much spot on; especially the part about how big
companies suck the life out of innovation. Having worked in both environments
myself; I even worked at a startup that went from nothing, to an IPO and then
being acquired by a big company. There aren't words in the English dictionary
that can fully explain how the business and the people changed over the years.

------
thevictor
I'm currently in uni and have been thinking of starting up a biz as soon as I
graduate and as Paul pointed out my goal has actually made me learn stuff in
uni instead of trying to get the best grades to impress employers.

It would also be a great change to see technological universities align their
teaching to help students startup companies instead of preparing them for 9-5
work.

------
some
I dont think starting startups gets cheaper.

The whole essay is based on this idea. But Paul gives no reasons, why there
should be a such a trend.

~~~
pg
Moore's Law, open source, more abstract languages, the web for promotion. (I
believe this list is in the Wikipedia entry for YC.)

~~~
youngnh
so its cheaper for software startups only, then?

~~~
ivankirigin
Hardware development, prototyping, and testing is cheaper for a number of
reasons.

Cheap CAD tools, cheap custom boards, processized manufacturing.

Most people drastically underappreciate how much China has helped innovation
in this regard.

------
ivankirigin
>> "Sometimes it literally is software, like Hacker News and our application
rating system."

You have software to rate the applications?

~~~
dfranke
I assume he just means that the administrative interface to the submission
system lets them record scores for each application they review.

~~~
ivankirigin
yah... 7\. Better Judgement Needed

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.

------
sola
Great essay...there is only one point I disagree with and that deals with
elite universities. The same argument that is applied to startup hubs applies
to elite universities (which usually happen to be in these hubs). The
competitive advantage of finding a better cofounder or employee is one that
should not be passed up on.

------
JPBrown56
Another trend: as start-ups veterans become more common, they will form a
group of people who are not reliant on organizations for their livelihood.
Like Jefferson's agrarian ideal of individual farmers living off the land,
those citizens who control their own destiny through technology will be enjoy
the greatest liberty.

------
tmaniaci
Paul excellent essay but I disagree on one point. A college education is more
than learning about business. It is to be informed to make better decisions re
public issues. The elite college issue is very true. Note how most VCs and
investment bankers tout their "Ivy" pedigree. Very few of them could start a
lemonade stand.

~~~
pg
I certainly don't think a college education is a matter of learning about
_business._ Where did I say that?

------
arminf
There is a fundamental flaw in academic education given today's speed of
change.

So I couldn't agree more to your 8th point on the future of colleges!

I am a professor at a German University of Applied Sciences for 7 years now
and a serial entrepreneur and business angel of 9 start ups.

------
dispersion
Do you have any comments on the similarity in ideas which early founders
share. Essentially an idea emerges out of ones experience of life. Most of
life's problems are out of context for undergrads. I am 22 ear old myself,
have started, but this thought is bugging me.

------
fallintothis
Forgiving the possibility of alternate spellings I'm unaware of (e.g., "color"
vs. "colour"), and despite the fact that I wish I had more to contribute, I
would like to file a:

Pedantic Typo Report

The Future of Web Startups, Section 2. Standardization.

 _"In essense, let the market design the product."_

"essense" vs. "essence"

That is all.

------
sureshkrishna
Nice article Paul. I always get many forwards from my longtime friend Frank
Gerhardt about your articles. I like the way you compared the commodities and
webstartups. I am in silycon valley and i know exactly what you are tallking
about.

------
benkronberg
I think what you say and how you say it is wise. you could help change
education as we know it. but i guess, even in a subversive way, you are - but
i just ruined it by talking about it.

thank you for your communication skills.

------
imsteve
This was unexpectedly quite good. It hit some points that I've been feeling
strongly about for a while.

I found the warning that it's getting more risky to just sit on ideas and not
act inspiring. Will be doing extra coding tonight!

------
gaurav679
Hi paul,

I have enjoyed all ur essays and am fascinated by how insightful they are. I
am graduating from college in december with a bachelors in electronics. Could
u please recommend some of the books which have helped evolve ur thinking to
this level.

Thanks

Gaurav

------
Mistone
on the topic of starting a startup right out of college - being a rich kid of
course would have its many advantages - but thats a given in all aspects of
life - thus moot point - here is where the US Gov can and in some cases does
offer some help. You can call up the US loan dept., and tell them you having a
hard time paying the loan because you quit your lame job and are starting a
business and they will defer the loan payments for a while, I did it and it
works.

In the future maybe they could offer this to entice more young people to start
companies.

------
apetra
The same old mistake, assuming a transitory boomlet will continue forever.

------
byrneseyeview
"I think acquirers may eventually have chief acquisition officers who will
both identify good acquisitions and make the deals happen."

I know of one company that already has this, with a different title.

~~~
yubrew
This is common practice in biotech and life sciences businesses, and probably
in any other field where innovation happens at a rapid rate.

------
api
Problem: you're confining your thinking entirely to "web" startups. This
irritates me, as one currently involved in a non-web oriented startup. The
world is bigger than the web.

~~~
rms
He did present on the topic "The Future of Web Startups" at a conference
called "The Future of Web Apps." Perhaps you can forgive his limited
perspective.

~~~
api
True enough. It just irritates me occasionally that the startup community
seems overly focused on the web. There is a lot more out there that can be
done than just web sites.

~~~
tocomment
Examples?

------
emmanuel81
Yet another essay on startups, by PG... It appears that essays tend to be
cheaper to make, as time goes on, too (thanks to, you know, copy/paste). I
couldn't find any ideas here that hadn't been expressed elsewhere in your
writings or wasn't self-evident. We want more crazy controversial stuff, like
the last (brilliant) one on philosophy!

Ideas for new subjects:

\- "google is dead";

\- "how to fund painters";

\- "all things considered, java rocks";

\- "vaporware, or why I gave up arc";

\- "return of the web 1.0"

There are plenty of weird ideas that only wait for PG to write clever stuff on
them! Seriously, I don't know why people like FOWA, whoever that is, actually
pay you to listen to the same old story...

~~~
bluishgreen
I didn't downmod you. But I guess the reason people are downmodding you might
be for the way you said things rather than what you are trying to say.

And oh, the part about ideas for new subjects... ok. I am wondering why I
didn't downmod you now.

~~~
emmanuel81
Ok, let's prentend I didn't write the stupid suggestions (which i still find
funny). The fact remains, this essay is basically a compilation of ideas
already expressed by PG, who needs to know that some of his fans are
disappointed... Mod it up, if you want good writing!

------
earcaraxe
This essay definitely gives me a sense of fear and dread. What Paul makes out
to be a good thing, really gives me a nasty reaction. Startups becoming
ubiquitous? If startups really become so prevalent, I feel like it's not
necessarily worth doing. Aren't there only so many things that web startups
can do? I'm afraid of startups becoming "the cool thing to do," for students
in technical fields. College starting to game students specifically for
working on startups. 1000 applications, 10000 applications, it stops becoming
novel, it feels like a sellout.

------
bosshog
PG: Shouldn't that be Brian, not Ryan (Oberkirch)?

------
bainbridge
the trouble with the big pipe theory ..personally I'm living in hope it turns
up one morning..is most everybody LIKE the leaks twists and bends, believing
rightly or wrongly, taking time's their insurance policy (albeit a cracked
Crystal ball) www.peterbainbridge.com

------
kirse
I think this is what Clayton Christensen called "the law of conservation of
attractive profits."

------
allenbrunson
well, i hope he's right about startups becoming more pervasive.

i'd love to be on the bandwagon already, but i don't meet a lot of the
qualifications. if the bar is lowered just a LITTLE bit, i am so there.

~~~
garbowza
The only qualification that you don't meet is confidence! If you say you
can't, then you won't.

~~~
allenbrunson
that's a nice attitude, and generally i agree.

by "don't qualify," i mean i'm not really into the game the same way as the
companies ycombinator seems to fund. for example, i'm not that excited about
writing web apps, it just doesn't appeal to me. i think there are important
sectors that could benefit from a bunch of startups that paul has completely
written off, because he thinks it's less lucrative, i guess. well, i'm willing
to take a LOT less money to do something i'm actually interested in, rather
than learning ruby on rails, say.

~~~
byrneseyeview
You're very specific about what you won't do, but very vague about what you
will do. Why?

~~~
allenbrunson
erm, because it seems off-topic here?

this is paul's world. i like reading about the energy and creativity involved
in web startups. i personally think that narrowing the field to just web
startups is short-sighted, but that's not my call to make, certainly not here.

~~~
alex_c
Web apps are probably the most common because the barrier to entry is very
low, but the field really seems to be more "software" rather than "only web
apps". Xobni is desktop software, Loopt is mobile software, Justin.tv is (as I
understand it) a mix of hardware and web streaming.

Interestingly, those also seem to be some of the higher profile projects.

~~~
allenbrunson
well, that's certainly encouraging.

i'm personally more drawn to "real" software that runs on desktops and
servers. web stuff is nice, but it doesn't fit the way i think as a
programmer.

------
benkronberg
i like what you say. your argument for speeding up tech and all...one of the
best articles (it came at the perfect time)i have read in a long time.

------
nextmoveone
Awesome essay/speech!

I haven't spent one penny or any time on/in college!

------
anton
Looks like Moscow will soon be renamed to New-Vasiuky

------
marcelcn
Eye openning.

------
dcholloway
The following is 100% true and accurate: <br><br> 1\. start-ups are in fact
cheaper now. register at facebook.com, learn how to use their API, and create
a facebook app. there is your start-up for the cost of how long it takes you
to program the API and any other additional costs, which aren't much. storage
is almost free now, and all the other web services you could dream of exist
and on the cheap.<br> 2\. current pedagogy s __*s. i'm about to complete a
degree from a "prestigious" silicon valley school (marketing/finance) and i
can tell you that most lectures are regurgitations of what we read in our over
priced text books. additionally, stanford and berkeley (to name just 2 of many
more) post many of their lectures online FOR FREE. so in effect, you can
actually get a stanford or berkeley education for the price of your computer
and internet connection. the autodidacts will have even more access to free
information and knowledge, and anyone who focuses more on a meaningful
education instead of a brand name/good grades will get the better education. i
tell most of my professors to just help me get C's because, after all, no
employer is going to ask me what my GPA was 5 years after graduation. why
should i care now? plus, the internet has so much more information that most
university classrooms that spending my time on the computer all day will
actually make me smarter than sitting in most any classroom. but the people
still do make the education worth it in some sense. i've met everyone of my
partners on campus. and if you're genuinely interested in other people you
will meet a lot of cool people who will shape the world. many of the leaders
of tomorrow are at a keg party on a college campus right now. <br> 3\. most
start-ups don't start off as 8 hour a day 40 hour a week gigs. so it's not
always necessary to just finish school or drop out entirely to do your start-
up. most kids or people will start a company in their spare time. i've already
started 3 that way. when you have a good idea sleep isn't as important or
necessary, so the work will be done after work or between classes. the only
time you drop out of school or quit your job is if the start-up actually has
some success and a lot of promise. and the advantage is definitely with the
younger, unmarried, childless, crowd. we don't have as much responsibility
other than our own selfish needs. in other words, keep it in your pants if you
want to increase your chances for success. the world isn't fair, don't cry.
and when you get married your testosterone decreases, any way. google search
it (hint site: newscientist.com/channel/sex/love)<br> 4\. web start-ups are a
good thing to write about in the context of this essay because the are so
damned comparatively easy to do. give me another example? a biotech company? a
nanotech company? a traditional, bricks and mortar company where you have lots
of PPE? storage space is nearly free, we have things like google adsense,
social networks are great mediums for free, viral, guerrilla marketing, ruby
on rails, etc etc etc. all of you griping about a lack of representation in
other areas are being ridiculous. stop griping and come up with an idea
instead of complaining. none of you will probably ever succeed in a start-up
with that kind of attitude. your chances of success are already,
statistically, a rare event at 5%. but if you cheer up and take a look at all
the positive things this essay mentions your chances for success immediately
pick right up. name one successful (truly, in every sense of the word) person
who does nothing but complain and gripe about things. <br><br> and lastly, a
shameless plug, if you enjoyed my insights check out my new blog at
quantumcreative.blogspot.com <br><br> cheers -

------
Gates
"JOIN ME MY MINIONS! ITS IN YOUR INTEREST!" - P.G.

------
jeanettekwok
that was excellent!

