Exit Early

Open source technologies, APIs/Mashups, and Off-shoring have dramatically reduced startup costs. Could cloud computing and scalable public systems lower barriers to entry enough to delay or even forgo VC investment and usher in a new wave of innovation? Answer would largely depend on how VC funds are primarily being used by the startup (development, marketing, or really scaling).

From http://due-diligence.typepad.com/blog/2009/07/behind-the-cloud.html

The combined reductions created by off-shoring and open source had already led to what I’ve called two-stage ventures, where engineering to the point of market test could be accomplished with minimal startup funds. Now public cloud offers the would-be net entrepreneur a way to avoid both the upfront costs of putting service infrastructure in place for a launch, and the ’success failure’ risk of not being able to obtain capital or equipment fast enough if the offering turns out to be a hit. In an extremely tough fundraising environment, staying capital-light as long as possible is just the ticket. The upshot will be even more ‘below the radar’ ventures launched on personal or angel funds, and only turning to venture when and if they prove demand and require external capital to scale their marketing.