Rapid Experimentation

It can be exhausting to try and stay caught up on every new tech company being started. The Gotham Gal said me to yesterday, “everyone is an entrepreneur these days.” She’s right about that directionally although most companies have employees who are not founders so it is not exactly correct.

The rapid expansion of tech startups and the entrepreneurs who create them has been building for fifteen years, or possibly twenty-five years if you include the early Internet exuberance and the period of disillusionment that followed.

But over the last ten years, in particular, we have seen a number of factors come together to make for an environment where “everyone” can do a tech startup.

We have more and more software engineers and related skillsets around the world as education systems are starting to respond to the market demand for this talent. This is particularly true in Asia and other parts of the rapidly developing world. But it is also increasingly true in the developed world. Our portfolio company Stack Overflow, which serves software engineers almost exclusively, sees 31 million people a month now, up from 22 million five years ago. That likely overestimates the number of globally employed software engineers but it is indicative of the vast number of people solving problems in software right now.

The explosion of open source software, transparent code repositories, and open source tools and languages like MongoDB (we own Mongo stock), React, JavaScript, Python, Ruby, Go, TensorFlow, and so many more, has made it easier to build things in software than ever before. And popular services delivered via APIs (like Twilio and Stripe, both USV portfolio companies) make building software applications even easier.

We also have more support systems for entrepreneurs than we did ten years ago. Paul Graham and Y Combinator were the innovators and first mover in the market for entrepreneurship support systems that are market-based and for profit. That model has been copied and evolved on all around the world and it is powerful, important, and its impacts are far-reaching. We have learned how to best support entrepreneurs early on in the life of a company which leads more people to try it and also leads to more projects graduating from these programs and getting seed funding.

Which takes me to capital. We now have more angel and seed and venture capital being invested in startups every year than ever before. It took a long time, almost twenty years, to pass the go-go years of 1999 and 2000, but pass it we have and even though many see that as a sign that we are in bubble territory again, I am not one of them. Technology innovation is happening in all sectors of our economy and all parts of the world. I think the expansion of capital being deployed into startups can continue for some time to come.

So there are more skilled people to help an entrepreneur build the thing they want to build, more support systems to help them avoid the big mistakes, and more capital to allow them to invest in the business ahead of revenues and profits.

And so, we are in a golden era of tech entrepreneurship where anyone with an idea can make a go of it.

That does not mean that all of these efforts will succeed. They won’t. Think of this golden age as a time of rapid experimentation in which every problem will be attempted to be solved in many ways. Most will fail. Some will succeed. And we will see multiple successful approaches to solving the same challenges.

The good news is that all of the systems that feed these startup efforts, the talent market, the accelerator programs, the capital markets, and the entrepreneurs themselves, understand that these are experiments and that most will not succeed. For the most part, the market has evolved to a point where the economics of each input system has built the loss ratios and likely payouts when you win into their pricing structures. It is not perfect by any means. We may, for example, need to do more for the very early employees. And the rapid inflation in financing valuations may need a pullback if those new economics don’t work long-term for the capital markets.

But if we are thinking about society, and I mean our global society, not just the US, the result of this era of rapid experimentation is likely to be progress on important, and also mundane, human needs.

None of this makes it any easier to try and stay on top of all of this. It seems to me that the only way to do that is to pick a subset of the tech sector and focus just on that and let others take on the challenge of doing the same on another sector. It has gotten way too big for anyone to be able to stay on top of it all.

But when you feel overwhelmed and wonder what will come of all of this entrepreneurship mania, I would urge you to think of all the good that will come of it. Lord knows we need it.