The Underlying Impact of the “Apps” Phenomenon on VC-Backed Software Startups
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added this problem that the shiny object attracting top talent today may no longer be the promise of building massive wealth through stock option accumulation, but rather the instant gratification and “fail fast” modality of self-publishing apps. Even a mediocre developer can strike upon a super-popular iPhone app idea and be basking in the glow of massive user adoption, notoriety among peers, and even cash flow, very quickly. How do you compete with that? VCs had better start figuring out how to create work environments that appeal better to developers’ intrinsic motivations than the unreliable extrinsic motivator of stock options, especially after a wave of gloom like the one that hit our industry over the past two years.
Apple’s dual innovation of the iPhone device and the App Store distribution model combined with an economic blight upon software companies and their investors, the massive shift in time that users are now spending staring at their palms instead of a desktop or laptop screen, and the momentous influx of new platforms like the iPad and Google Android enabling even more opportunities for apps developers, have all come together to create a perfect storm in the venture capital business which will spell the demise of many VC firms and the less efficient VC-backed startups. It will be interesting to observe the new landscape after the economy completes its recovery and the waves die down again.
The silver lining to this circumstance—at least from the entrepreneur’s perspective—is that whether you’re talking about a one-man self-publishing apps shop or a five-person “software company,” thanks to the widespread availability of SaaS-based platforms—from development platforms to telephony and accounting platforms—it has never before been this easy or this quick to launch a company on absolutely minimal funding. Even three years ago, it was difficult to imagine a significant software company launching on so few resources and without first surviving the gauntlet of getting at least some angel or VC funding.
This is indeed the most exciting time we’ve ever witnessed for entrepreneurial software developers. Their future is so bright that sunglasses vendors are lining up outside their apartments and incubator facilities to sell them some stylin’ new shades.