Diminishing Startup Costs: major trends research notes

Startup Costs Have Plummeted
The capital requirements for startups to launch has fallen dramatically. Cloud computing,
open source,
1

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

Promoting Entrepreneurship Is A
Global Initiative
3Copyright 2013 OmniPresent Media

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

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

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

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)

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

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?
~Source: Wikipedia

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.

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.

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

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
~Source: Amazon Web Services Blog April 2012
905 Billion Objects and 650,000 Requests/Second

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.

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.

All of this stuff is free

All of this stuff is inexpensive

Promotion has never been easier

The Virtualization Of Companies

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

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

Digital Economics
For the price of a tablet computer, and
an Internet connection, the next multi-
billion dollar company can be launched

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

Diminishing Startup Costs: major trends research notes

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