The cost of entry to the startup world has decreased dramatically in the last decade. We’re now at the point where the tools that were once only available to enterprise users have made their way into the hands of everyday users.
Access to bleeding-edge innovation is no longer limited to an elite few. This transformation has been called the consumerization, or democratization, of tech.
The performance of computers has soared as technologists realize and surpass Moore’s Law. Today, ubiquitous smartphones pack power that would have been inconceivable to early computer pioneers. Consider this: A single Apple iPhone 5 has 2.7 times more processing power than the 1985 Cray-2 supercomputer.
Free tools like Google Docs, Skype and Dropbox have collapsed the cost of “getting stuff done.” At the same time, computer- and cloud-based services offer affordable and infinitely scalable ways to run websites and web applications, meaning there is rarely a need to buy hardware beyond a laptop. The result? Investors are considering ideas from folks who don’t have built-out engineering teams or heavy-duty, costly hardware, both of which were once essential to making a startup happen.
The key role of the venture capitalist in the past was to provide entrepreneurs the initial capital they needed to take a concept to a prototype or trial phase, often with material up-front investment before a product even reached customers. Investors weren’t looking for a minimum viable product (MVP) straight out of the gate, because getting to that stage could take millions of dollars and years of effort.
As the cost of entry has collapsed, competition has grown more fierce.
The democratization of tech has created an environment where more people than ever have the chance to turn their ideas into reality at low — though not quite zero! — cost. Now an individual with an idea can build a basic MVP cheaply and quickly. On the other hand, as the cost of entry has collapsed, competition has grown more fierce and expanded from local or regional to global. Inevitably with the explosion of startups came an aggressive winnowing down of the also-rans.
The entrepreneurs who are succeeding understand this shift in the landscape and pitch accordingly. They know that early-stage investors today typically won’t pay to develop an MVP. You’ll need to do that on your own dime, unless you are the lucky recipient of “friends and family” backing. Professional investors expect to see the product in action before they part with their cash.
Entrepreneurs also need to demonstrate traction in their pitches. That means they need to show that real users are using the product and that there are early signs of potential for a much bigger market opportunity. That investors look for early indicators of success should surprise no one; but, positive outlook is not the only criterion.
The product is still worthless to investors if they don’t believe the company can scale rapidly. In turn, a pitch needs to go beyond the MVP and early success to lay out how the entrepreneur plans to grow the business, fast. The most vital aspect of this overview is the customer acquisition strategy. Expect to hit a roadblock if you can’t answer the question of how your product will grab users, and at what cost.
It’s important to keep in mind just how much noise you’ll be going up against.
Particularly in this hot app market, entrepreneurs should brace themselves for a tough road ahead. Be prepared to get close with rejection and isolation. Starting your own company is a lonely venture — the outcome rests on your two shoulders alone. Ninety percent of startups fail and, given the volatility of the industry, even established companies may encounter hardship. While there isn’t a cap on good ideas in Silicon Valley, it’s important to keep in mind just how much noise you’ll be going up against.
Self-care is just as important as nurturing your business. It takes a certain amount of resolve, bordering on stubbornness, to pour material and emotional resources into creating a real product from an idea. But like any resource, emotional energy is finite. Take time to recharge — read for fun, exercise, eat well and get lots of sleep. Talk to someone about the challenges you’re encountering, whether that person is a friend, family member or another founder whom you trust.
If you want to make your own job as a tech entrepreneur, the MVP is the key step to getting your idea off the ground. There are many free resources that can help you along the way. Training programs like General Assembly are geared toward teaching entrepreneurs new skills, while meetups are a great way to meet your peers.
We’re also seeing more accelerators and incubators provide space, cash and mentoring to turbo-charge entrepreneurships. Competitions like the App Idea Awards offer non-technical innovators the opportunity to have an app designed and developed completely for free. It boils entrepreneurship down to business savvy and an idea.
So, who has the most to gain from the democratization of tech? Anyone starting out, between jobs or even a more seasoned individual feeling trapped in corporate life. In short, everyone! If you’ve ever wanted to venture out solo, this moment is as good as any. As an investor, I can’t wait to hear more of your ideas.