Ask YC: Will there really always be room for more successful web startups?

People's wants seem unlimited, at least in the near term. If you accept that, the only limitation on the number of web startups is how many needs can be satisfied by software. (The web is just the current default software platform.) And since everything is turning into software nowadays, it seems likely that the infinite demand for new stuff translates into an infinite demand for new software.

Not sure whether people's wants - and needs - are unlimited in the short term. In fact they are probably limited by what people themselves perceive is a want or a need, what they know and experience, and their ability to assimilate and absorb new technology. In the long term though...

That's where market-making comes in. People didn't know they needed to search the web until they found out it was easy. They didn't know they needed a computer they saw games, spreadsheets, etc. They didn't know they needed a dishwasher until they saw this amazing machine that washed your dishes. People (the market) might not think up the things they want, but they sure know if they want something when they use it.

The problem is, does every need generate an interesting market? Are the interesting markets unlimited as well?

market = need

No. I can have needs I'm not going to pay for. Or I can have needs whose solutions are too expensive. Or many needs can come from people who have not too much money so not all needs are an interesting market.

What is an "interesting market"? It's a non distinction.

If you aren't going to pay for a solution to a need, then it isn't a need. If you can't afford it, that is a technological issue. There is no such thing as someone with "too much money".

[edit: there are certainly things that money can't buy. Though I'm sure you can mail-order a lovely bride, a Zen Buddhist sensei fresh from Japan, and adopt some children in need to give your life meaning]

Sorry if I didn't express myself correctly. I'm not a native English speaker.

I say: you can have a need, but you can have not enough money to pay for a solution to that need. For example, you can say that as there is so much poverty, there is a big need for food so there is a big market for food right? But probably, the sector that is suffering poverty wouldn't make an interesting market, as would not have money to pay for the food you might offer to it.

That's an exaggeration, but the same can happen with other stuff. There are lots of human needs you can point to, but the segments that would pay for solutions to these needs are, as I think, more limited, for many reasons. Maybe your solution is expensive for them, maybe they don't want to use credit cards online, etc...

About "too much money"... that was where my "non-native" English came along. I meant: maybe the people that have the needs have not enough resources (money) to buy your product/service, making that an uninteresting market despite being an unattended need. I was not saying you can have "too much money".

The two of you have a disagreement, but it's not here, this is just conflicting names for ideas. Putting words in your mouths:

You: if people don't know how to make something cheaply enough it's not a market.

Ivan: it could be a market if you solve the technological problem of making it cheaper.

You: making food cheaper isn't a market because the poor have no money.

Ivan: making food cheaper isn't a feasible market because nobody knows how to make it happen.

There, now you can return to the interesting question, continue arguing about what fraction of the needs you can think up are technologically feasible :)

Now that their kids are starting to get laptops, it shouldn't be too long before you could make a web app which helps third-world poor people learn to farm better, or do other types of work more efficiently. It's easy to come up with things which poor people want. And web hosting is cheap enough for targeting them to be feasible.

Actually, I was just trying to be precise. I think market != needs and I was giving some examples... in the best of the cases, all needs are potential markets, but you haven't markets for all needs. And, what is more important and what was my original comment: not all needs generate interesting markets for you (because of tech possibilities, as you said, because of costs, because of logistics, etc).

I can think of all kind of needs: a google maps with 2d shading would make it fun for kids (to say something stupid). But they wouldn't pay for it, it would be very expensive to do unless you are google, and it would probably be expensive _even_ if you are google (because the raw data are photos and no 3d info excepting some selected places), etc etc etc. That's not an interesting need if you look from the market perspective... but if you fall in the trap "anything useful for anybody is worth doing" you might fall in the trap of creating that kind of worthless project.

That means that someone who can reduce the cost of meeting that need has a market and can be successful. Voila!

What do you mean by "everything is turning into software"?

Also, while I agree that there's effectively infinite demand for new software (I can't imagine a day where all software companies and open source projects stop writing code), it doesn't mean that there's infinite room for new software businessnes -- especially the ones that start with a few hackers in an apartment cranking out a webapp in 2-4 months.

What do you mean by "everything is turning into software"?

Can't answer directly for pg but I know my whole field (electrical engineering) has pretty much been converted to software. Musical instruments, medical diagnostics, anything that deals with information processing, which in this day and age, seems to be migrating to a software function.

But like I said, can't speak for pg.

Each individual mainstream user might have a finite number of needs, but the number of needs of users in aggregate is effectively infinite. I agree that I'd rather use 5-10 great apps than 40-50 marginally useful apps, but why do you think the 5-10 apps you find most useful would be the same 5-10 apps someone else does? No one webapp has to appeal to the entire market to be successful, it just has to appeal to enough users to provide an income to cover its costs.

This reminds me of Joel Spolsky's take on the 80/20 bloatware myth. The idea being that bloated programs like Word are bad because 80% of the users only use 20% of the features. But they don't all use the same 20% is the problem, so you can't just remove 80% of the features without pissing off a sizable group of people. I think the same applies to web apps. Nobody needs every one of them, but the right set of web apps for any given person probably isn't identical to anyone else's.

Also - the cost of servicing that marginal niche is now so low that it's economically feasible to build a solution just for them. To use the kitchen example, most people want gas & electric ranges, but a few might want eco-friendly solar-powered cookware. This product doesn't exist (to my knowledge), but it's because the cost of designing, tooling up, and manufacturing it is above what people are willing to pay. In software, a niche solution could probably be coded up by just a couple programmers. It'd have more economic value than the code they wouldn't produce at their day jobs, so it becomes economically feasible.

Actually, it's probably because no one knows how big that market was. If you produced market evidence that there were 1 million people that would buy a solar powered stove in the next year, there would be product rolling off assembly lines in less than 6 months.

Read Seth Godin's book Permission Marketing if you want to learn about market creation and demand-driven design.

Social websites refute this a bit. If you want to connect with people then, generally, you need to have a similar package of web apps as they.

Every idea I think of, someone else has done.

Maybe your ideas aren't specific enough.

Take my own not-yet-launched project (http://www.tarsnap.com), for example: Online backups. Lots of people have done those, right? Mozy, Carbonite, iDrive... google can easily find dozens of them.

But that's just the "30 thousand feet" view of what I'm doing. I'm not just doing online backups -- I'm doing secure online backups. Secure in the sense that I can't steal your data. Secure in the sense that the NSA can't steal your data.

Have other companies done online backup? Absolutely. Can anyone else reasonably describe what they're doing as "backups for the truly paranoid"? No -- that's something which nobody else has done.

That sounds a lot like http://www.idrive.com/ or www.evault.com/ and or several other systems out there. Building a secure system is a hard problem and even if you build the best system few people can judge how well your doing. You could market it as "The only 4096 bit system" but you end up with a tiny market segment.

I would suggest starting with a secure chat system with good logging options. That way you can reasonably target teenagers, bankers and the truly paranoid. And you don't need a huge backup infrastructure or a 50$ / year price tag to compete.

That sounds a lot like http://www.idrive.com/ or www.evault.com/ and or several other systems out there.

As I said, lots of people are doing online backups. Nobody else is doing secure online backups.

Building a secure system is a hard problem

Exactly -- that's why it's something which I can do but nobody else has done yet.

and [...] few people can judge how well your (sic) doing

Fortunately, with a doctorate in Computer Science, as the FreeBSD Security Officer, and as "that guy who found a security flaw in Intel processors a few years ago", I'm ideally positioned to show people what I'm doing right -- and what everyone else is doing wrong.

Is secure online backups a smaller market? Absolutely -- most people don't care about security. That's the price you pay for entering an arena where there are many established companies: The best strategy is to carve off a smaller part of the arena rather than trying to fight for the complete arena.

I am not talking about the size of the market, just pointing out there are already several companies that seem to do this. To be more clear: looking at idrives's home page's table iDrive, Mozy, and Carbonite all do "Security: Encryption on transfer, Encryption on storage" now I don't think these systems are going to be NSA level security but you now have to convince people you do security better than the existing players which tends to be hard.

In the end security is more about trust than the algorithm. I need to trust you not to log the password somewhere etc. Established players gain some trust because they have other things on their mind than your data and presumably they want to protect their reputation, so IMO the new guy is bester off focusing on something more tangible so you get a chance to build your reputation.

Which is why I suggest a free App that demonstrates you do security. You could build that relationship of trust and drum up some somewhat free press around how subversive your application was and turn that into a strong market.

PS: Good luck with your startup. I think you can make it work, but after considering the same idea and talking to people about what they trust I moved on to other areas .

Mozy, Carbonite, and all the other big ones I have heard of seem to be Win/Mac only. Linux might not be a huge market, and there are DIY solutions, but personally I would pay for an easy to use linux backup system. Tarsnap isn't exactly what I need, but it's the closest I've seen yet.

Tarsnap isn't exactly what I need

Feel free to send me an email (address on website) to let me know what you'd like tarsnap to do -- the more feedback I can get, the better tarsnap will be. :-)

Sent :)

Viewing the web as a kitchen is quite limiting. There are thousands of products in your house...many are for entertainment (TV, DVDs, CDs, ipod, etc.), some are for news and education (TV, radio, magazines, newspaper), some are for communication (phone, mailbox), and on and on...Software and web applications can be involved in all of those things in one way or another.

I don't think I'm going out on a limb if I say that I think changes will come much more rapidly in the future than they have in the past. So, while the telephone has been around for over 100 years, I don't think Skype will last out the next seven years. Facebook will be lucky if it gets five years at the top (if it ever bests MySpace and makes it to the top). I don't think a better "social network" will dethrone Facebook...I think a whole other class of product will take its place (actually a dozen or more classes of products, probably, since people do so many different things with Facebook). Your job, as a technology innovator is to spot those trends and build the products that enable them.

And keep in mind that little web applications aren't the only problem worth solving. There's a lot of software that runs inside the firewall at businesses--and a lot of it is moving to web-based variants. There are many worlds to change, not just the world Facebook is addressing.

That said, there aren't many opportunities to make something as big and world-altering as Google. There's only so many problems on the web that touch every single human being that uses the web (that's a big customer-base). Search is actually the only one I can think of. Email, perhaps.

I don't think there is demand for another search engine that is 10% better than Google. Whatever comes along that can challenge Google, isn't going to be a "search engine" in a traditional sense of the word. Because Google mostly works and works pretty well. To displace Google from it's position in the search engine market, one needs to redefine the problem. Or be 10 times better than the leader.

I can think of many ways to make things 10% better, but that's just the next set of features these guys need to implement. I'm not convinced that is a business.

When Google started to work, it was definitely 10 times better than the competition, or had redefined it.

Yes there will always be room for new applications (web or not) or kitchen appliances for that matter.

Don't make me think about my kitchen! it's awful! I can't seem to keep it clean and the traditional solution to this problem, marriage, has apparently run its course. My girlfriend is a software geek as well and hates to clean the kitchen (and vacuuming) even more than I do. So where is that long promised robot revolution? Bring it on!

And where is that website that lets me auction my food orders, to be delivered by the best bidder? And knowing about the food I eat, the site could also tell me which nutrients I'm supposed to consume more of and which ready meals contain them, excluding the ones I hate.

There are so many old unsolved problems. Anonymous hassle free micropayments for instance...

> Anonymous hassle free micropayments for instance...

Someone please make this, much lighterweight than PayPal, and saturate the market with it. Add a prepaid micropayment card anyone can buy at a store with cash.

This is one of the things that I have great interest in using (both as a user and as a client), but not so interested in building and running it myself! :-/

The prepaid card is a good idea. And I wonder whether it is always necessary to authorise individual payments. For something like newspaper articles, payments could be pooled and transferred en bloc via some kind clearing mechanism that doesn't require me to have an account with every magazine or website I read. The seller wouldn't even know who was paying and the clearing institution wouldn't know what exactly is being paid for.

The reason why nobody does it that way is probably that it's difficult to garantee settlement and the credit risk involved. But do we really need such a garantee in cases where no physical goods are delivered? Maybe it's enough if it works in 90 % of all cases. That's more than the rate of legally acquired software licenses today.

Whenever I think this way I remember the story of Newton's students complaining that he'd already discovered everything.

I think the Web may be less like the kitchen, and more like television. Shows come and go every year, so there will always be a need for new ones.

In an attention economy you're fighting for eyeballs. And there's a smaller group that's always looking for what's new and different. If you want to pursue this demographic, and the larger, lagging crowd behind them, then you have a chance at capturing attention.

I share many of your concerns, and personally use very few Web applications--basically maps and mail. I often ask the same question: what can I build?

Perhaps it's better to choose a pre-existing category/market and try to win through better execution. I also think success is more likely when building software as a product instead of a free service.

"Every idea I think of, someone else has done."

Make a list of 10 absolutely fabulous web products that you love. Now draw a line through all of them that came to market as the first mover. I'll bet you don't draw a single line.

As long as businesses want more money and want to save more time, there is always room for b2b products that can demonstrate good ROI.

On the consumer side, there's certainly plenty of room. I just read that Meebo is reaching 30 million people per month. Twitter is functionally brand new and kicking ass.

The good news is that most consumer sites transition from a "providing value" stance (in the early days) to an "extracting value" stance (in the later days). Later stage consumer sites add more advertising, do more biz dev deals, and overall muddy up their value prop. Meanwhile, the next round of consumer startups leap into the fray with a nimble team, the next rev of web technologies, and a desire to provide value and build something that's better than the big guys. Compuserve, Prodigy, AOL, Friendster, MySpace, Facebook... They are/were all on the same road.

Well it is not easy to penetrate established markets. Even Google will have trouble drawing away traffic from Naver in South Korea. One thing that I am experimenting with is porting popular web-apps in the developed world to the developing world and that has been working well for me so far.

That sounds neat. I'd like to hear more.

Me too, that sounds awesome!

Always is too big a word. Perhaps in 50 years we will all have plugs into our brains, and we will just KNOW things - we don't have to read stuff anymore, we are just connected to the information. No more need for web applications, so no, I would not say that there will always be web applications, although there might be.

Will there always be new opportunities? Of course. At the moment, there are also still lots of opportunities for web applications.

The brain plug invention would only increase the need for automated information processing.

Of course, but I would not call it "Web application" anymore. Perhaps brain application?

"Aw, man... BrainBook is down again..."

As long as Wikipedia is still working. ;)

Also, don't just limit your thinking to consumers. Consumers might need the next huge improvement to consider switching. Something to replace Google would probably need to give you a well researched and balanced report on your query, as opposed to just a fairly accurate link to something someone said somewhere. That's a HUGE leap.

Businesses on the other hand (rational ones anyway) will buy anything that exceeds a certain ROI, provided it meets certain requirements. There are so many ways to do this, but they aren't technologically sexy in the way consumer startups are. For instance, find a way to improve measuring their ROI! Then they're not guessing, you can point to exactly how much money they'll make/save. Improve something by 15%, then multiply that savings times the thousands of corporate users for one buyer. Viola, an upgrade license. Joel Spolsky is a master of this: see http://www.joelonsoftware.com/articles/fog0000000052.html There will always be more of a market for things like this.

I think that yo have replied yourself, 20 years ago there were not microwave ovens!

On the XIX century people believed that everything has been invented.

Why the net should be different? It is still on a very early stage, we have only seen what it can provide. I think that there is plenty of room for new web startups!

> I think that yo have replied yourself, 20 years ago there were not microwave ovens!

They didn't have microwave ovens in 1987 ?!

"20 years ago" is not a fixed date ;-)

One of the basic problems with this whole discussion, is that most are thinking like Americans: that everywhere in the world is like where we are now.

If you go to any lesser-developed countries they are not entrenched in "google" or "facebook" or anything for that matter because they don't have computers --but they do have mobile phones.

Everybody's talking about China & India, great. But what about the many nations on the African Continent? In five to ten years, countries like Nigeria, Kenya, Ghana, etc. will be the new technological and economical hotbeds.

Your measures in comparison are totally wrong.

Retail products are totally different than software as service which is free. Thus the barrier for the user to try new stuff on the internet is zero comparing to buying something.

Also, the barrier to create automobile technology it's obvious very high and discouraging. However, enough costly innovation is occuring from the existing companies. Hubrid cars are becoming reality. A model car from sketch to manufacturing to get in the roads is at least a 5 year effort. Compare that to developing an app in 2 months!

He argued that the mental cost constitute a barrier. A barrier of non-zero costs.

Get the kitchen analogy out of your brain. Kitchen needs are different from information needs. What information do people want to get? What information do people want to spread? That universe is a lot bigger than your kitchen.

Any time you encounter pain or desire (yours or somebody else's) that's information-related, you've stumbled upon the opportunity for a web and/or mobile startup. When you meet that need, people's demand for time online will grow to encompass what you've given them.

The Universe IS my kitchen.

> The Universe IS my kitchen.

As long as the kitchen isn't your Universe... :)

The way I see it, there will always be something that takes us (the users) to the next level. Maybe you have all the racks and detergents, then you discover the dishwasher. Maybe some day we'll get an oven+fridge all in one. It might be hard to think about it but there is definitely room for growth. It might not be growing upwards, it might be sideways, or even abstract it to a different dimension.

"I'd rather use 5-10 really useful apps than 40-50 marginally useful ones."

You answered your own question. What this means is that if you are serious about your start-up, you should shoot for nothing less than being in the 5-10 "really useful" list.

It is not easy by any means and pg has said before that as more and more start-ups launch, the difference between great ones and average ones would become more apparent.

I wouldn't worry about doing things that have been done. I would worry about doing it better than what's already been done.

For the last 100 hundred years there has been a constant introduction of new paper based magazines and newspapers. After the introduction of the web, that has changed and now the web is where most new media is introduced and will continue to be introduced.

You've identified a very worthy area to explore that no one to my mind has solved in any definitive way. The problem of letting users get the value of having many apps with the overhead equivalent of using very few. It's a damn hard problem and there's a ton of value in solving it. Have at it!

I tend to agree that while people want a lot of things in the world, we're just not wired to handle, say, interacting with 50 web applications for our needs. I think if you really studied it, people probably have 5-15 web apps they use on a regular basis, with maybe another 5-15 they use now-and-then. That's it.

I don't think this number is due to a lack of web applications to fit people's needs, but limitations of the wetware itself. This implies that there is a biological driver for web application consolidation. It also implies that whatever your app, you're already competing for "web app" time in the user's mind with some other site, even if it is completely unrelated. Futhermore, it implies that great non-consolidated apps actually cause some harm, assuming they take people away from other sites that are providing value to them.

Pure speculation on my part, of course. I just know that while I've seen a boatload of crazy-cool web applications, the number I use is fairly static -- I just shuffle some in and out every now and then.

Great question!

"Always", no. For the foreseeable future, yes.

Web applications, including both code and English sentences, have unlimited capability to express knowledge. They have universality.

There is no limit to our use for knowledge. No point at which things could never be improved again. No end to progress.