
Did launching a web startup become 10x cheaper between 1998 and 2011? - chrija
http://christophjanz.blogspot.com/2011/02/launching-web-startup-became-10x.html
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mgkimsal
Yes it's cheaper, but I'm a bit surprised at the comments. I was doing PHP in
1997 using msql and a bit later mysql (98?). Shared hosting wasn't as robust
as it is today, and it wasn't as cheap - usually $20-$25 for something decent.

I 99 I started leasing a dedicated server - 200mhz with 128 megs for
$100/month with decent bandwidth and transfer for my needs (10 gig/month to
start with). I was able to put together quite a lot of projects and host them
for that $99/month.

So, yes, undoubtedly things got cheaper, but not everyone was having to shell
out $50k just to get any website up. I actually did a number of projects that
would sometimes get sustained traffic (from usatoday, yahoo finance, etc) and
had little problem on hardware that was costing perhaps $500/month.

Yes, it was the era of large VC funds pouring money in to lots of
hardware/licensing - of course some people paid because it wasn't their money
in the first place.

During the same period, I was also working at a company that had several
multi-million dollar sites in development - massive budgets, hardware, project
teams, etc. Heady times for sure. I got to see both sides of the fence at
roughly the same time. Clients that had the millions would go to the agencies
or hire top talent. Clients that didn't would still get their stuff done - it
wasn't as 'all or nothing' as people like to remember.

~~~
beagle3
Same here.

MySQL was a viable option for us -- in fact, it beat Oracle in just about
every benchmark we could dream of. Sure, it didn't have referential integrity,
but we didn't need it.

Also, we were using Apache with a few scripts, no need for vignette or any
other weird stuff.

Things are getting cheaper, but they were always reasonably cheap if you knew
what you were doing, AND didn't try to follow buzzwords or have full ACID
properties for your instant messaging status updates.

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nl
It's much, much more than 10 times cheaper now.

In 1998, you pretty much had to use commercial software if your site had any
kind of traffic. That usually meant an Oracle database, and Oracle would only
really scale vertically, so you had to spend even more _up front_ on hardware
that was powerful enough to scale.

Implementing Oracle on Sun wasn't something that most people (even good
programmers) could do themselves, so they hired consulting companies, which
cost even more.

Now, you _might_ pay $5-10K to outsource an iPhone app. Then, you'd easily pay
$100K just to get your database implemented, and easily that again for licence
fees for your web software (Vignette anyone?).

Now, you pay $20/month for a basic EC2 setup, knowing you can scale it out
horizontally. Back then you'd pay $50K _up front_ for Sun hardware that would
support the traffic you might get.

I don't know anything about the example given (DealPilot.com), but I do know
that now days something that could run on shared hosting in 1997 could be
hosted for close to free [1] now. That's still more than 10x less that
$100/month.

I would also point out that developing an app for the iPhone costs $99 if you
do it yourself (which appears to be how they built DealPilot.com), so that is
_still_ more than 10x less than $100/month over a year.

Lets compare costs for a year:

1997: $100/month = $1200, plus $3000 for server = $4200 (I assume there were
hosting costs for the server, but I'll assume they were similar to the
$100/month for shared hosting)

2011: $20/month for EC2 hosting (being conservative here - EC2 would let the
company start off a lot cheaper than this and scale expenses as revenue grew)
+ $99 Apple fee = $339

[1] Free hosting examples include: Google AppEngine up to its free tier,
Amazon's free EC2 offer. There are numerous examples of < $5/month virtual
servers available, too.

~~~
fleitz
I think people often forget the value inherent in shared hosting. I host a lot
of stuff with Dreamhost. I'm probably paying on the order of 25-50 cents a
month per domain. I can setup a new domain and wordpress in about 5 minutes
with a few clicks. Now that dreamhost supports rails3 it's an absolute dream.
(no pun intended). mod_pagespeed? one click. They optimize everything and I
pay a low monthly fee (<$10/month). I'd estimate about $140/month for
comparable performance on EC2. Dreamhost's MySQL systems blow the doors off
anything I've seen on EC2, and backups are free. (I haven't explored EC2's
super high end packages)

If something takes off I'll buy a dedicated server for it, but if you're
starting a company, get a Dreamhost account for $10/month and they throw the
domain in for free. You can buy yourself two years of hosting runway for $200.
If you max your dreamhost account you're well on your way.

I don't even bother paying for github, just throw git on my dreamhost account.
(They have dedicated SVN services as well)

Also, I just got about a dozen notifications today that dreamhost had upgraded
all my wordpress sites to 3.0.4. I don't do anything they take care of it.
Someone breached an account? I get an email.

The only time I've ever run into trouble with dreamhost is an old old
e-commerce site that needed MySQL4. I could get the ancient version of PHP it
used working but couldn't get MySQL4.

~~~
nl
Yeah, I have a dreamhost account too. The other features are excellent -
things like SVN hosting, and they have a special account you can backup
hundreds of Gbs of local files to.

It might not be the fastest, but you can't beat the value, especially if
someone you know can give you a discount code (30OFFER is mine. I think I get
some money off my bill if anyone uses it.. )

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Vivtek
Oh _hellz_ yes. I was there. Like rhizome says, it's a bigger factor than
that; you can host stuff in the cloud now for _nothing_ when we had to cohost
a used Sparcstation for, as I recall, $450 a month. That was 1996, and we
could only do that because we knew the hosting company in Bloomington.

I glommed space on that machine for my own stuff for free - but I still had to
pay $20 a month to _host the DNS_!!

~~~
wisty
$450 a month isn't that much for an investor. It's nothing compared to salary.

But I guess that the old Sparcstation could only handle a tiny load. Scaling
it up to thousands of customers would have been very expensive.

~~~
Vivtek
Scaling? Well, fortunately, the online population was a lot smaller then, and
we were targeting a niche (machine tools) - we still had some scaling issues,
but nothing at all like you'd have to worry about now.

But yes - if we'd had to, it would have gotten expensive pretty quick.

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kragen
The basic question is whether what you need to get to a competitive level
today is more labor (or better labor) and less capital than it was then. It
seems to me that the answer almost has to be "yes"; there was no iPhone, no
Android, no AJAX, no Comet, no Django, no memcached, no Varnish, almost no
CSS, JavaScript didn't work, and Perl was your only option on the server side.
Nowadays, knowledge gives you a much bigger slice of what you need to compete.

Also, lots of web startups then couldn't get by on a shared-hosting account or
a used Sparc 20 in a colo, because it cost so much more to render a dynamic
web page or to store data. And lots of people were paying Solaris licenses,
Oracle licenses (MySQL didn't exist, and Postgres was still pretty flaky and
slow), Netscape server licenses, and didn't F5 start selling BigIPs for load-
balancing about that time? And your domain name cost $100 a year.

~~~
rimantas
Well, both MySQL and PHP appeared in 1995. My got my first paid web
development job in 1999 and we already had MySQL and PHP in production.

~~~
kragen
My memory of 1998 is still pretty fuzzy, but I thought MySQL was still pretty
new at the time. (And of course it wasn't free software, but you didn't have
to pay for it.)

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dasil003
I love how all over the map the comments are.

There are so many vectors for comparison, it's ridiculous to try to generalize
it. Seriously, different startups today cost several orders of magnitude
different amounts _today_ based on what they are doing.

To make any kind of reasonable comparison, you have to look at specific costs.
Sure, processing, memory and bandwidth are way more than 10x cheaper, but
applications might eat up a lot of that with additional complexity. Open
source software, modern browsers, the rise of REST APIs, and the relatively
saturated and savvy userbase mean that some apps today are _infinitely_ better
than they were 12 years ago (because they were previously impossible). On the
other hand, people costs aren't any cheaper, the optimal size of a dev team
hasn't changed, and you'll still need to expend the same amount of effort to
compete regardless of how much better all technology products are overall.

------
akronim
Also, in 1998 if you had a budget of a few million you didn't need to think
about commodity hardware, so you called sun and blew some cash. Investors
wouldn't take you seriously if you had a ramen profitable bare bones 2011
style operation!

~~~
fleitz
Web was a capital intensive business then. Now you can do a web startup for
less cost than a hotdog stand. Seriously, one year of hosting costs on the
order of a business license. By 2000 costs had dropped dramatically.

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rhizome
I'd say more than that. The article didn't even mention the cost of a T-1.

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michaelpinto
Back in "the good old days" you wouldn't dream of creating a website using
anything but Java code and hosting it on your own server sitting in the back
of your office: That required grabbing a $100k a year coder, a sys admin at at
least $75k and costly hardware (and rent). These days you'd write the code in
a language like PHP and outsource everything else with a cost of under $10k.

Something else we also tend to forget is that in 1998 the mere act of writing
HTML was an overpriced and highly sought after skill in the hands of a very
few. These days anyone from a child to a great grand parent can author a
webpage without thinking about it by using Facebook.

~~~
beagle3
Ahhm.

In the good old days, (1998), no one used Java on the server side. Java
Applets were still not dead, and Java on the server was still not really born.

Apache SSI and perl were kings. AOLServer+tcl was probably the best available
(though only known and used by a small group).

Java? We're not talking about the same 1998

~~~
trafficlight
_Apache SSI and perl were kings._

I think Matt's Script Archive was the face of that popularity. It still exists
today <http://www.scriptarchive.com/>

~~~
rhizome
Hah. At the very least problems with his formmail.pl gave many sysadmins job
security for a solid 10 years.

<http://www.securitytracker.com/id/1001108>

~~~
trafficlight
Oh, definitely. If I had a dollar for every time I got burned by
formmail.pl...

------
Kilimanjaro
With Google AppEngine all you need is a domain and a text editor. No sysadmin
required and scales into the millions. Learn Python, BigTable and go create
your startup, you have no excuse now.

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nivertech
The R&D costs are still the same.

Sure, today you can develop prototype or MVP at fraction of the costs in 1998,
but it's only 10% of total costs. The 90% is maintenance and support - and
today it's not cheaper than then.

It can only be cheaper if founders willing to work for free. But this doesn't
scale - sooner or later you need to hire employees, which will be demanding
market priced salaries.

So, why then angels and VCs pushing entrepreneurs to do lean startups? The
answer is simple: it allows them to reduce the risks, at the expense of
entrepreneurs.

~~~
kragen
The interesting phenomenon is that these days you need a lot more "venture
labor" in proportion to your "venture capital", so the labor — the founders
and early employees — can extract a better deal relative to the capitalists.

It's true that eventually a growing business will take on people who demand
nothing more than market-priced salaries, but the people you need to get off
the ground won't be satisfied with that.

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a5seo
"why did startups raise so much VC at the end of the 1990s"

VCs pushed them hard to get users at any cost and ipo, since you could do so
easily without profits.

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grandalf
More like 50x.

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mwdev
I just launched a site that I thought I needed $500,000 for in 2004. I
launched it for free and did all the work myself. Thanks appharbor!

