It's a great time to be an entrepreneur

There’s never been a better time to be an entrepreneur because it’s never been cheaper to be one. Here’s one example.

Excite.com took $3,000,000 to get from idea to launch. JotSpot took $100,000.

Why on earth is there a 30X difference? There’s probably a lot of reasons, but here are my top four. I’m interested in hearing about what other people think are factors as well.

Hardware is 100X cheaper
In the 10 years between Excite and JotSpot, hardware has literally become 100X cheaper. It’s two factors – Moore’s law and the rise of Linux as an operating system designed to run on generic hardware. Back in the Excite days, proprietary Sun hardware and Sun hard drive arrays had to be bought. None of it was cheap.

Today, we buy generic Intel boxes provided by one of a million different suppliers.

Infrastructure software is free
Back in 1993 people had to buy and continue to pay for maintenance on everything they needed just to build their service -- operating systems, compilers, web servers, application servers, databases. You name it. If it was infrastructure, they paid for it. And, not only was it costly, the need to negotiate licenses took time and energy. I remember a story of one of my oldest friends having a deadline at Excite that required him to buy a Sun compiler through their Japanese office because it was the only office open at the time (probably midnight) and he needed that compiler NOW.

Compare that to today. Free, open source infrastructure is the norm. Get it anytime and anywhere. At JotSpot, and startups everywhere you see Linux, Tomcat, Apache, MySQL, etc. No license cost, no maintenance.

Access to Global Labor Markets
Startups today have unprecedented access to global labor markets. Back in 1993, IBM had access to technical people in India, but little Excite.com did not. Today, with rent-a-coder, elance.com and just plain email, we have access to a world-wide talent pool of experts on a temporary or permanent basis.

SEM changes everything
Ten years ago to reach the market, expensive distribution deals had to be signed. People advertised on television and radio and print spending a crap-load of money. There’s an old adage in television advertising “I know half my money is wasted. Trouble is, I don’t know what half”.

It’s an obvious statement to say that search engine marketing changes everything. But the real revolution is the ability to affordably reach small markets. You can know what works and what doesn’t. And, search not only allows niche marketing, it’s global popularity allows mass marketing as well (if you can buy enough keywords).

So What?
It’s nice that it’s cheaper, but what does it mean to entrepreneuring?

More people can and will be entrepreneurs than ever before
A lot more people can raise $100,000 than raise $3,000,000.

Funding sources explode which enables more entrepreneurs
The sources of funding capable of writing $100,000 checks are a lot more plentiful than those capable of writing $3,000,000 checks. It’s a great time to be an angel investor because there are real possibilities of substantial company progress on so little money.

More bootstrapping to profitability
With costs so low, I think you’ll see many more companies raise angel money and take it all the way to profitability.

Higher valuations for VCs.
And, for those that do raise venture capital, I think it means better valuations because you can get far more mature on your $100,000 before you go for the bigger round.

All in all, it’s a great time to be an entrepreneur.