The Underlying Impact of the “Apps” Phenomenon on VC-Backed Software Startups

5/6/10

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enthusiasm and creative energy is to have them work on a product for three years and then kill it before releasing it to the marketplace—something which happens with unfortunate frequency at the large enterprises. That kind of thing stings a developer’s sensibilities even more than bonuses or stock options foregone. For entrepreneurially-minded developers, the prospect of working on a project with 3,000 other developers is almost as numbing, and hence so many find the startup path undeniably more attractive. Under normal market conditions, anyway.

This developer’s “itch” needs to be scratched above all else. The desire to get a product into market that people will use and love. Along with that, the desire to get immediate feedback so that improvements can be made. Self-publishing a rapidly-deployed app scratches this itch faster and harder than anything you can do working at a big company with process-loving product managers, the goons from marketing and finance dictating the features they want you to build, and a board of directors detached from the day-to-day reality of the company.

The apps phenomenon has created a nearly-Utopian business world in which you don’t even need to build a “real” company with a sales force, funding, and an accounting department—things which are often beyond the capabilities and passions of the software creator type. With an iPhone App Store, your creations can be downloaded by thousands of users within days of completion. The entire creation cycle may be only days or weeks, occasionally months. In any case, an effort measured in two- or three-digit man-months and five-digit funding from Credit Card Venture Partners, not four-digit man years and requiring eight-digit VC funding rounds.

Often developers don’t even bother to incorporate or raise any capital to launch their apps publishing companies. Launching an app company is practically as easy as watering your plants. No interviews or negotiations, no office politics with the sales team, no commute, no office hours, no arguments over what kinds of snacks to stock the kitchen with—no fuss, no muss. A savvy, entrepreneurially-motivated developer can be in business, scratching the all-important itches in a matter of weeks. And thanks to the efficient marketplace distribution mechanism of the App Store, making a living off this becomes a possibility. The more apps you code the more money you make, and coding is what you love to do.

As every Girl Scout learns at the cookie sales table, “if you want to make a million dollars, come up with something you can sell for $1 and get a million people to buy it.”

So, among the many contributing factors to what’s broken with venture capital has been … Next Page »

Ron Wiener is a six-time serial entrepreneur and an angel investor, best known for founding Earth Class Mail. He is currently “Chief Mechanic” at Seattle incubator Venture Mechanics. Follow @

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  • http://bcviewer.com Paul Irvine

    quite right Ron, the landscape has changed again. App store has highlighted it, but its by no means the only avenue. I’m seeing 5 to 10 downloads a day for web software, with almost zero marketing. It doesnt sound like a lot, but it adds up. and now more than ever, a single developer with a decent idea, can bring a product to market with virtually no investment at all. Its a new world where VC’s are not even players. My very best to you,

    pi

  • Memphremagog

    Yes – small software teams can now create small businesses better, faster and cheaper than ever before. Some can create a nice wealth engine for themselves. But, if they want to be part of something greater and do something that creates a major enterprise, they will still need cash, executive talent, and maybe even the guidance professional some venture capitalists provide.

    It is always great sport to trash the VCs (and sometimes they really deserve it!). But it simplistic and wrong to say they don’t have a role to play in the right circumstances, or that software developers don’t need them anymore.

    As always, the issue is to match your funding source to your business and your aspirations.

  • http://www.covario.com Arnel Leyva

    Incisive and strategic analysis — you seem to have identified and explained the zeitgeist (so happy I got a chance to use that word in public) of the current Internet market. As a career product manager for small- to mid-size startups and growth companies, I like to consider myself on the side of the ‘creatives’, though it’s my job to tell them how NOT to develop products for other engineers and instead do so for the other 90% of the population. So just as in previous technology markets, the most successful apps will be developed by a two-person team comprised of a creative engineer and creative marketer who use just enough process to get a compelling product to market quickly and inexpensively — every Wozniak needs a Jobs.

  • http://www.personalmedicine.com Natalie Hodge MD FAAP

    What great perspective, Interested to learn more about your model and incubator. We have been bootstrapping and self funding for years and now that we have come into customers, complete product and revenues, the Venture route looks riskier and riskier. It’s a matter of the right money at the right time from the right people and overall decreasing the risk of the company as we move forward. The notion of a small team that continues indefinitely in lean mode, which plans to KEEP the company for the long term is very attractive to us as founders. Last months Fast Company notes many lean ” virtual businesses” which generally are in the ecommerce space, which operate out of virtual offices, with independant contractors, utilizing basecamp, web ex, and sharepoint. We are products of Steve Blank and Eric Ries customer development and lean teachings, and plan to run the company lean indefinitely as we add process and implement our customers.

    Natalie Hodge MD FAAP
    http://www.personalmedicine.com
    ” Your Doctor Comes to You”
    About Us http://bit.ly/ceWSh6

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