Diminishing Startup Costs: major trends research notes


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Diminishing Startup Costs: major trends research notes

  1. 1. Startup Costs Have Plummeted The capital requirements for startups to launch has fallen dramatically. Cloud computing, open source, 1
  2. 2. Convergence of 10 Major Trends Diminishing Innovation Costs All Location Independent Social Networks Easier Access To Capital Freelance & Offshoring Innovation Ecosystem Access To Scientific, Engineering & Manufacturing Tools Big Data Artificial Intelligence Leapfrog Technologies Collaborative Culture Risk Management Innovation Ecosystem • Cloud Computing • Open Source • Metered Use • Virtualization • Startup Costs Approaching Zero • Digital Economics 2
  3. 3. Promoting Entrepreneurship Is A Global Initiative 3Copyright 2013 OmniPresent Media
  4. 4. Innovation & Entrepreneurship Universities and colleges want to monetize their IP. Business, engineering, sciences and technology-focused departments are increasingly restructuring education curriculum to focus more on collaboration and the integration of real-world experience into the classroom. Municipalities are trying to encourage startups and entrepreneurship to create economic activity, particularly in the midst of a bad economy and shrinking government resources. States have many of the same problems facing municipalities but they also face the added pressure of stemming the brain drain that occurs when a portion of the state’s best and brightest seek opportunity and relocate to large cities or technology hubs in places like San Francisco, Los Angeles, New York, Chicago, Boston, Boulder and Austin. Falling startup costs and the emergence of a global networks of human and financial capital, makes it possible for individuals to access resources independent of their geographical location. Copyright 2013 OmniPresent Media 4
  5. 5. US Colleges & Universities Commercialize IP In 1980, Congress passed the Bayh-Dole Act that enabled universities to own and manage the intellectual property (IP) arising from federally sponsored research. Universities seek to monetize IP by transferring it to existing and spin-off companies. The resulting licensing revenue was split between the university and the faculty inventor. Shortly after 1980, spin-offs and products based on university IP rose steeply as universities and faculty were incentivized to commercialize their inventions . ~source: Vinit Nijhawan 5
  6. 6. 2011 US Small Business Report • 27.5 million small businesses • Approximately 543,000 new businesses were created each month • Account for 65% net job creation • Produce 13x more patents per employee than large companies • Immigrants twice as likely to start a business than native born citizens • 55–64 year old group represented 20.9 percent of new entrepreneurs in 2011 and is growing • 24-44 Aged cohort is the source of most startups ~Source: 2011 Kauffman Index of Entrepreneurial Activity 6Copyright 2013 OmniPresent Media
  7. 7. In 2011, the Global Entrepreneurship Monitor estimated that 388 million entrepreneurs were actively engaged in starting and running new businesses in 2011. Global Entrepreneur Report • Nearly 400 million entrepreneurs were actively engaged in starting and running new businesses world wide in 2011. ~Global Entrepreneurship Monitor (GEM) • In 2011 Total Early Stage Entrepreneurial Activity (TEA) saw a rise of nearly 36% in the US and Australia • ~Global Entrepreneurship Monitor (GEM) 7Copyright 2013 OmniPresent Media
  8. 8. 8 Startup Costs Are Approaching Zero “The falling cost of hardware and software is one of the main drivers in the proliferation of startups over the last five years and an important factor in the growth of accelerator programs” ~Source: The Startup Factories, Paul Miller and Kirsten Bound NESTA 2011 Copyright 2013 OmniPresent Media
  9. 9. Cloud computing is the delivery of computing as a service rather than a product. Shared resources, software, and information are provided to computers and other devices as a utility (like the electricity grid). Cloud computing entrusts services (typically centralized) with a user's data, software and computation on a published application programming interface (API) over a network. What Is Cloud Computing? 9Copyright 2013 OmniPresent Media ~Source: Wikipedia
  10. 10. 10 It costs less than $0.16 to host one Gigabyte per month using Amazon Web Services in 2011. In the year 2000 hosting costs were roughly $19 per Gigabyte and that involved buying your own hardware which needed maintaining too. Cost to Host 1 GB Per Month 2000 2011 $19 per Month $0.16 per Month -100% Effectively hardware costs have fallen by a factor of 100 over ten years. ~Source: The Startup Factories, Paul Miller and Kirsten Bound NESTA 2011 Copyright 2013 OmniPresent Media
  11. 11. Cloud Computing Benefits • Lower Costs • Deploy Projects Faster • Scale as Needed • Resiliency and Redundancy • Universal Access • Increased Collaboration • Automatic Updates • Frees up Cap-X Spend • Focus on Core Business Activities Cloud Computing is a significant shift in the business and economic models for provisioning and consuming information technology (IT) that can lead to a significant cost savings and overall efficiencies. 11Copyright 2013 OmniPresent Media
  12. 12. Cloud Computing Growing: CAGR 24% US-based cloud computing will grow from revenue of $8.7B in 2010 to $16.7B in 2013, a compound annual growth rate (CAGR) of 24% ~Source: Market Monitor Report: The 451 Group Cloud-based applications will replace 2.34% of enterprise IT spending in 2014 rising 14.49% in 2020. ~Source: Deloitte 12Copyright 2013 OmniPresent Media
  13. 13. 2010-2015 Cloud Traffic Is Expected To Increases Twelve Fold The global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020. ~Source: Forrester Research Global cloud IP traffic will increase twelvefold over the next 5 years, accounting for more than one-third (34 percent) of total data center traffic by 2015. ~Source: Cisco 13Copyright 2013 OmniPresent Media ~Source: Amazon Web Services Blog April 2012 905 Billion Objects and 650,000 Requests/Second
  14. 14. Corporate Software SAP Goes To The Cloud 14 How to Run Your (Not Small) Company Off of a Laptop By QUENTIN HARDY | May 11, 2012 It won’t be long before you’ll be able to run a global corporation from an iPad. Amazon announced an agreement Friday with SAP that enables companies to store their data in the Amazon Web Services cloud, and run SAP’s business applications remotely, using A.W.S. servers accessed over the Internet. This means complex corporate software can be purchased or rented, then accessed and manipulated on a relatively simple mobile device. The companies say it can be almost 70 percent cheaper than buying and running your own servers running similar SAP products. Copyright 2013 OmniPresent Media
  15. 15. 15 Metered Pay-As-You Go Low monthly costs allow startups to experiment and test ideas and services without committing large amount of resources. Demand-pull with turn-key scalability. Examples include Mailchimp which allows startups to manage mailing lists effectively or project management services such as Basecamp or Huddle that make systems only previously available to large organizations affordable for small teams. All this means that the major cost of early-stage startups isn’t technology, but people, and often the problem first time founders face is how to cover their living costs while they build their first product, get their first customers or attract their first investment. ~Source: The Startup Factories, Paul Miller and Kirsten Bound NESTA 2011 Copyright 2013 OmniPresent Media
  16. 16. Startup Costs Are Approaching Zero All of this stuff is free 16Copyright 2013 OmniPresent Media
  17. 17. Startup Costs Are Approaching Zero All of this stuff is inexpensive 17Copyright 2013 OmniPresent Media
  18. 18. Startup Costs Are Approaching Zero Promotion has never been easier 18Copyright 2013 OmniPresent Media
  19. 19. The Virtualization Of Companies 19Copyright 2013 OmniPresent Media
  20. 20. Virtualization The new corporate footprint is light, digital, capital efficient and increasingly distributed. The emerging paradigm enables the global sourcing of talent and resources. Capital efficiency lowers startup costs and funding requirements. Virtual teams don’t need office equipment, office space or commit to significant IT spend until demand rationalizes growing expenditures. Projects can quickly assemble global contributors, distributed teams and digital customers. This is increasingly becoming the norm for early stage companies 'TeleHuman' taps Kinect for 3D holographic videoconferencing By Chris Jablonski | May 6, 2012 Credit: Human Media Lab, Queen's University, Canada 20Copyright 2013 OmniPresent Media
  21. 21. Originally founded by Chris Wanstrath, PJ Hyett,and Tom Preston-Werner as a project to simplify sharing code, GitHub has grown into an application used by over a million people to store over two million code repositories, making GitHub the largest code host in the world. GitHub is headquartered in San Francisco with team members working remotely from all around the world. Home Base San Francisco Company Founded 2008 Employs 69 VC Funding$0.00 ~Source: Github Github is a virtualized company with globally distributed employees and customers. Chris Wanstrath Tom Preston-Werner PJ Hyett 21Copyright 2013 OmniPresent Media
  22. 22. Digital Economics For the price of a tablet computer, and an Internet connection, the next multi- billion dollar company can be launched 22Copyright 2013 OmniPresent Media
  23. 23. The Cambrian Cloud Inflection Points 23 • Nearly 400 Million Global Entrepreneurs. Over 500k new US businesses formed every month • Startup costs are approaching zero • Lower barriers and freer access to resources increases the breadth, depth and rate of change. • Employees can quickly become competitors, capitalizing on expertise, networks and creative solutions tackling problems they have identified. User-based innovation • Successful companies are ever more susceptible to global disruptions. • Digital-based economics trumps Atom-based economics • Small teams of geographically dispersed employees can self-organize and scale with minimal cost and enjoy cost savings and greater flexibility. • Focus on faster iteration methodology, low cost structure, collaborative network intelligence. • Lower capital requirements, user-based innovation and entrepreneurship • User-based innovation: defined as • Facilitates social coding and a social and collaboration around a network of interest • Collaboration • More opportunities for non traditional people to launch and join startups • More opportunities but also more competitive than ever for established companies Minimal & Diminishing Startup Costs