Is Now a Good Time or a Bad Time to be a Tech Entrepreneur?

Base Technology

The foundational technologies behind our modern tech world are still racing ahead. While the speed of traditional CPU’s hasn’t been increasing as quickly as in the past, new ways to perform tasks like the use of GPUs for machine learning have dramatically improved. Network technology is rapidly changing as well, both mobile and wired. And artificial intelligence is probably the most visible space where innovation happens faster than ever.

Horizontal Platforms

The largest fortunes in technology are traditionally built by large, market-dominating horizontal platforms. The top five — Google, Apple, Amazon, Facebook and Microsoft — are all dominant players or near monopolists in a particular business segment that has the characteristics of a broad platform. They’re not simple products, but rather offer a broad solution that enables customers and third party vendors to transact with each other in some form or shape. The business models that allow for the extraction of value from these platforms vary, but they all have in common that they are two-sided or multi-sided markets.

Platform Complementors

But what if you want to build a company on top of these platforms as a platform complementor? It’s a time-tested recipe. Microsoft’s Windows platform alone has an ecosystem that generates over half a trillion dollars in annual revenue for partners, according to the company. Apple’s app store last year generated about $26.5B in revenue for third-party app makers — small compared to Apple’s own revenues, but still more than half of what the entire global movie industry made in box office revenues. So there’s clearly plenty of opportunity to be had.

Industry-specific Platforms

This is a segment that has seen tremendous growth over the last few years. Companies like Uber, Spotify or Airbnb transform industries one at a time, not so much as core technology companies but as advanced, disruptive users of technologies. Entrepreneurs who are interested in this kind of recipe are in a better position than ever before. There are plenty of industries still waiting for disruption.

Pick Your Battle

The bottom line is: today’s technology industry is a very mixed bag for ambitious entrepreneurs. There is plenty of opportunity in industry-specific platforms for different segments of the economy that are still largely undisrupted. Unicorns like Netflix, Uber, Spotify, WeWork or Airbnb have shown how to do it. There is also plenty of opportunity in deep base technology that might become a necessary building block for somebody else, but this type of company takes time and deep skills.

Is Now the Time?

To get back to the question in the title: Now is probably as good a time as any to start a tech company. The infrastructure in technological, financial and institutional dimensions has never been better. Its easier and cheaper to start a company than ever.

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Andreas Goeldi

Andreas Goeldi

Technologist, entrepreneur and investor. Likes startups, gadgets, movies, good audio technology and rambling about any of those topics. Partner at btov.vc