Surely not all of them are able to generate any sustainable revenue that is long-term. What's the value to the creators therefore who sink countless hours into creating them and to investors who pour in so much money?
There's only so many consumer eyeballs and wallets in the world, it almost seems the supply of products and services is unimaginably over supplied to a fixed demand? Or is that the wrong way of looking at it?
Are you of the impression that the demand for, I don't know, B2C cell phone apps is fixed in 2014 to the same value it was in 2007? If you (sensibly) do not agree that the iPhone failed to change the underlying demand for cell phone applications, consider the possibility that we are, in fact, crushingly undersupplied for B2C software. This would counsel people buying positive expected value lottery tickets as soon as the startup founders can print them.
What's in it for a founder when you could go get a job at Amagoobooksoft instead? That's a fair question. One: you will not have to work at Amagoobooksoft for a little while. Two: you may improve your eventual position at Amagoobooksoft by doing a startup versus simply applying to them today. Three: you may invent the next WhatsApp, and end up with several billion dollars in your pocket. Four: for a certain psychograph of developer, there are non-pecuniary advantages to running a startup in a manner similar to their being non-pecuniary advantages to doing the Peace Corps for some people. ("Change the world!") Five: You may, accurately or not, perceive that you are presently not likely to receive an offer at Amagoobooksoft, but accurately perceive that "Nobody can tell me I'm not ready to do a startup" and rationally calculate that this is a better way to build skills and reputational capital than e.g. getting a job at Burger King even if the money is roughly similar.
P.S. The Mobifotosocialgames For White And Asian Geeks space is a small fraction of the total market for software, though you wouldn't know it from "the tech scene."
Regards "the tech scene's" narrow focus, what kind of software does the rest of the world need? I mean what problems can software really solve? And to get a better understanding of how we as developers can do anything about it, what is it exactly about software that allows it to do that?
What we have is a huge slush pile, 98% of which will prove worthless in the end except as a practice exercise for its creators. (Which is valuable, of course, just not valuable to the customers.) Because the bottleneck is the market. That's where the culling happens.
Like the majority of screenplays, most products are dead on arrival because they can't be effectively marketed. That is in part because the marketplace is crowded, but again: Don't mistake the stacks and stacks of App Store offerings for a saturated market. It's just a market choked with weeds.
One of the things the world needs is better software markets. The fact that you can't hear people screaming about their terrible software, or see and count the money that they would potentially pay for better software, is a sign of the market's ineffectiveness.
If you are asking this, perhaps you have not spent a lot of time in industry, especially non-technical industries.
There are approximately a gazillion problems that software can solve in a business setting. Absolutely stupid amounts of goods, services, and money are processed via clunky systems that are begging for software-based improvements.
If you could follow around an arbitrary office worker, factory worker, healthcare professional, paralegal, real estate broker, or retail employee for a week, your head would be positively bursting with ideas for how software could make their businesses more efficient, and improve their employee quality of life.
When you have a community that is predominately creators, expect all well-known unsolved problems to require some great leap to be solved, because easier ones would be solved already. When you have a community that predominately isn't creators, those regular, common-day problems do go unsolved. So go talk to those housewives already!
Here's a counterpart explanation that some may consider a bit more cynical, built after some time in SV working for early stage startups, advising some early stage startups, and even founding (!) such a startup.
The short story is that all of this is essentially a giant economic Battle Royale of sorts, with VCs and investors acting as puppetmasters at the top and raking in all the actual money. When you have an entrepreneur such as Zuckerberg or Page/Brin who emerges at the top, it's purely an unintended side effect of this. The people who are really bringing in the big bucks are VCs/investors/incubators/etc (with the real estate and media companies coming in in second place).
Silicon Valley now is a far cry from the Silicon Valley of the 70s-80s that a lot of people have in mind when thinking of startups (and even then, I have feeling it may have been oversold- but I wasn't there). SV today is an extremely large industry, with lots of money to be made, where every startup is touched in some way by the underlying finance behemoth.
The procedure is simple: take bright kids in their late teens/20s, sell them the dream that they are the smartest in the world and the intellectual elite (the easiest way to get them in that mindset is to get them to apply to be part of a super exclusive, hard to get in club- sorry, "incubator"), that they too can change the world with just some Javascript code, 14h days filled with Mountain Dew, and a $500k seed round. Let them battle it out on the market, and acquire customers any way possible. Most companies will die in less than 24 months, often in shitty circumstances (users lose a product they may have relied on in less than a few months' time, employees get fired with no notice or explanation some random Friday afternoon, etc.).
But the 0.1% of startups that makes it out is more than enough for investors to get back many times what they put into all the other startups (cf. YC numbers, for instance), so this doesn't bother the investors in the slightest (they can give out dozens of $500k seed rounds and not have their wallet dented in the slightest. They basically have infinite money in a roulette game where the top prize is a Google or a Facebook or a Whatsapp).
There are a few older founders who know how to play the game and how to actually turn it to their advantage, whether good or bad (for the good kind: cf Nest. for the bad kind: cf Color Labs). But by and large, SV now is 20 years old slaving away for the promise of "making an impact on the world" and "being the next Mark Zuckerberg".
The good news is that if you're aware of all of this and not too dumb, you can make a good living in Silicon Valley (be sure to save money on each paycheck no matter what), and it can be a great start to your career. The bad news is that it's also easy to fall for it, and find yourself at 35 having worked only for early stage startups that have failed, leaving you with 15 years of work and very little in terms of these silly little things some people like to call "career growth" and "retirement plans". I've seen engineers starting to hit the mid-late 30s, realizing that they're not good enough to make the switch to finance/management or to a larger, more secure company. Some of these people move away to other cities where they can aspire to a more stable career (taking a major pay cut, but gaining things like a 401(k) ), while others keep playing the startup game hoping that the next one will be the one that brings them $10M in options and a VP title.
Caveat emptor.
During the California Gold Rush (1848–1855), few actually got rich from gold. The ones who really got rich were the ones who provided services (bar, housing, food, etc) to the people rushing in to find gold.
History does repeat itself.
The market of visible gold nuggets or quick MVPs may be over-saturated. Gold diggers invest a minimum of thought, equipment, know their chances are getting slimmer and depend mostly on luck.
Very few startup gold diggers can try a different approach, because it's all about starting with minimum capital and preparation. Big capital got mismanaged too often, so there's an over-correction.
Oh dear. I've just seen me.
"A lot of people look at the ever-increasing number of startups and think "this can't continue." Implicit in their thinking is a fallacy: that there is some limit on the number of startups there could be. But this is false. No one claims there's any limit on the number of people who can work for salary at 1000-person companies. Why should there be any limit on the number who can work for equity at 5-person companies? [3]
Nearly everyone who works is satisfying some kind of need. Breaking up companies into smaller units doesn't make those needs go away."
[more in the essay]
Determining what people need and how to fill those needs will never go away. But these organizations will get flatter, as more of their inputs can be purchased in the marketplace instead of needing to be manufactured precisely as the needed for a final product.
Companies that are built on platforms, such as the Internet, these inevitably get simpler and partially more alike as their platform gets richer and easier to use. More will be using AWS, for example, instead of hiring people to build and manage a data center.
And then there's Apple, which has demonstrated that there are still complex products that can be better integrated when you control more of the supply chain. It can switch both hardware and software to a new processor without coordinating with dozens of companies.
Technical people typically use a technical approach to solving a problem, which is not always the best approach. Technical people generally make poor historians. Decisions are a-posteriori, through personal experience and personal failure. Knowledge must be internalized so it becomes intuitive. But this very step is an act of specialization. Expecting the non-specialized market to understand, on faith, this masking of technical complexity, is strange. See, e.g., object-oriented design patterns, geek-speak, a hacker-news comments echo chamber, etc.
There is relatively little value placed on documentation vs performance/correctness. Products are rarely user-centric. There are too many black box APIs. Dumb questions are frowned upon. Gross assumptions are made.
"New" products are quite often not actually new. They are merely evolutionary, not revolutionary. They merely add to the market, or slightly expand it, instead of defining a new one. Just another person internalizing some jargon and slapping a price on it and then proclaiming PEBKAC as if he/she said something insightful. This is not innovation.
The value to creators is to learn a new skill set, merrily hacking away at trees, and chopping down the right tree using brute force luck, a rather naive traveling salesman. For some reason the hard problems are considered easy and the easy problems are considered hard. The difficulty of achieving simplicity is under-appreciated. You solve some technical problem, and stop there, thinking you have won. But this is not the end, this is the beginning. The problem never was minimizing big-o or memory efficiency. The problem was, and is, messaging; the communication of the solution.
Investors recognize market saturation and look at evolutionary innovation as low hanging fruit. "Killer" products are harder to create and higher risk. Demand is more fixed in evolutionary space but demand can be uncovered when entering revolutionary space. The problem is not Wile's proof of Fermat, it is explaining the value to everyone. Explanation is the messaging channel. Properly encapsulating the complexity of a problem is the difficulty. Properly recognizing the problem is the difficulty. Implementing it is the easy part. Much of nerd culture (including myself) has this backwards, through no fault of their own (INTPs are introverted, formal analysis is prized).
This is the same with any real world, brick and mortar business. 9/10 small businesses fail within the first year. The chances your business or product will succeed is very small. Entrepreneurs often go through several failed businesses before they get one that succeeds. How you define success is also important. It's much easier to create a sustainable SAAS service which you can maintain yourself and pays you $50-70k per year that it is to take funding, grow to 1 billion users, and make money.
No errors means no trial is happening.
The thing is, it's impossible to know in advance with certainty which will fail and which will succeed. But the ones that do succeed create an enormous return on all that sweat and money. Investors try to pick winners, but even then it's acknowledged that the majority of even the best portfolio will not make a large return.
From the founder's point of view, building something on your own that people genuinely want is an amazing education - even a small amount of success makes a founder far more valuable and goes a long way to expanding their possibilities to try again.
For example, do you think of Uber and AirBnB as two tech products? Or do you think of Uber as brokering (and therefore improving) transportation availability using tech and AirBnB improving housing availability using tech? After Uber was created, AirBnB wasn't an additive "tech" company.
So its not the "tech" part that is key to a company's redundancy but the "goods and services" part.
The way to make it BIG is to find an untapped market and be the first to really serve it.
One example I would look at is that health and fitness trackers are crowded but a lot of suffering and lost productivity is caused by chronic pain of various sorts, there is no safe and effective drugs, no end of scams, but perhaps it is the kind of problem, like cystic fibrosis, that can be defeated with intensivity. For instance if you see a physiotherapist he or she might do the right things but only 1/10 as much as you need.
But then there is also an other point: how people see things. Let's take the "To do list" example. None of my friends and coworker are using the same app, they all are die hard fans of their app. That's what happens when everybody comes with it's vision of how the to do list should be done. You end up with hundreds of app doing the exact same thing and they will almost all find their users, because nobody agrees on what should be the standard. That is inherent to software and human nature, lots of the startups are not creating anything new, just re-implementing their version of something they think must be done differently!
That being said, as the number of startup grows and the number of garbage projects/products grow you see also crazy ambitious and life changing stuff emerging. I think the analogy to the gold rush made by an other guy here is very pertinent! While most people are ending up with a handful of dirt, some rare lucky diggers got trucks full of gold! The economical dynamic created by the Startups in SV and everywhere else is bringing wealth to the US like crazy. Eventually everybody benefit of it to some extent. But that's only my opinion.
The value oftentimes goes beyond a monetary gain but important lesson's one can learn professionally and personally. When I helped start Promoter.io my professional output increased significantly. For investors and founders this a community that can really help others and itself to further the advancement of idea's and execution.
> There's only so many consumer eyeballs and wallets in the world, it almost seems the supply of products and services is unimaginably over supplied to a fixed demand? Or is that the wrong way of looking at it?
While this might be true it leaves much undiscussed. Most of the time it takes one evolution of technology to lead us to the next great invention. It takes time to understand where opinions lie with our current iteration of technology to realize where the next idea should take us. An oversupply lets me know that we are actively experimenting to try new things.
It isn't easy but is very rewarding.
