The Myth of Cheap Web Startups – the Noise Problem

Today Hank Williams wrote a post on his blog that I can relate to. Starting Internet companies has become more expensive over the last years according to Hank. He argues that even with open source frameworks and on demand cloud computing becoming cheaper and more linear in their cost impact, the main cost driver for building and operating still is human resources.

I agree: having a team of bright developers is still the prerequisite to building a competitive web application/service. This has not changed over the last years. Even offshoring in my experience does not reduce the cost significantly. For me offshoring is a necessity to get access to required technical resources attached with a lot of risk and overhead to identify and manage the right people you want to work with.

One development in the Internet economy is responsible for making the launch of a new Internet service more expensive: There is a lot of competition for the users attention. Countless companies coming up with services that are thrown at users who have to try to comprehend what each service is about and whether it generates value or not. To be on top of this Startup Noise is a challenge. You either have to buy yourself in front of your audience – too expensive for startups and arguably not an efficient use of capital – or you have to find other ways to virally get your product spread.

But why do we see much more Internet startups these days than just a couple of years ago? In my opinion to get a working product out of the door is much easier and cheaper than it used to be 8 years ago. And there are a lot of people that have the skills and have been part of an Internet culture for some years where it seems to be natural to at some point in your life try to launch your own product/application.

So while I do not completely agree with Hank that starting a new service is as expensive as it used to be (otherwise we would not see so many new startups) I do agree that getting your startup in front of your audience is more challenging which makes it ultimately more challenging to start a successful Internet company.

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