Startups and the role of capital and investments

One of the most exciting things about the computer industry these days is the ease with which can get started. Decent computers can be had for well south of $1000, hosting is cheap, services like Amazon EC2 make it ever easier to scale rapidly should the need arise, and the only other things you need are an internet connection and a place to sit. This is leading to more people, like 37 Signals to question the need for investment entirely and others, like YCombinator to successfully make very small investments (thousands of dollars, rather than millions).

Sometimes, however, I wonder – is it just a passing moment in time, a window of opportunity, or is it a long term trend? Historically, to set up something like a factory required a great deal of money, putting it beyond the reach of anyone unable to obtain financing. Even in this day and age, there are plenty of endeavors that require large amounts of capital, and a lot of time, prior to seeing returns: that’s how things work in my wife’s field, biotech. Some fields have even become more expensive with time. High end computer games are very expensive propositions in this day and age, compared to the low budget stuff typical of, say, the Commodore 64 era, although it’s also true that the market has also grown a lot, and that there is still space for smaller-budget operations.

How does all this look historically? Have there been industries in the past where it was so easy to get started? Anything that was able to scale? By which I mean: it might have been relatively easy to start some kind of small business, but it would most likely always stay small, whereas things like Craigslist or 37Signals have the means to grow a great deal without adding lots of people. Will things change in the future so that one or a few programmers can’t compete with a big team? Or perhaps things will go in the other direction and more industries will become like computing is today and it will be possible to a biotech startup in your home office?

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