True, but I don't see any reason why low capital = low innovation. Cheap internet companies aren't derivative by default.
If there was a better ROI for young entrepreneurs, they would do it. There is nothing that scales like the internet/software that can be built with such a low cost. Michael Lewis said this best in his book, the last 20 years have been the largest legal value creation in the history of mankind in Silicon Valley (measured by normalized job creation, revenue, new businesses, etc.)
My question was: what's inherently derivative about software startups? Why is everyone making photo-sharing software and not software to solve other (unaddressed) problems?
2. ^What real problem does a company like Color solve? Is there one?
3. Maybe the problem is that startups are targeting consumers? B2B has a way of culling the herd: if you don't solve a problem, no one buys your product.
Web startups are attractive because they have low capital requirements, don't need much domain knowledge, and are more closely tied to changes in culture than technology, so there are always a few open niches.