Saturday, March 19, 2011

What If Every Developer Focused On Lifestyle Businesses?

I recently ran across this post from Justin Vincent, where he argues that entreporn--the overwhelming focus on chasing "the next big thing"--holds developers back from their full potential. Instead, he writes:

"The absolute truth is that each and every one of us can build a business that can support us."

That's bullshit.

While Vincent makes some great points about flaws in the startup ecosystem (TechCrunch prefers to write about outliers like Zuckerberg; VCs chase the next Facebook because that's how their model works, corporations don't want their employees to leave to become entrepreneurs) his fetishizing of the lifestyle business does more harm than good.

Would Vincent believe me if I said, "Each and every one of us startup marketers can build a consulting practice that can support us?" Or what if someone said the same thing about IT administrators? Or accountants?

The statement is absurd on the face of it. So what magical powers do developers have that make all of them capable of building their own business? Sure, thanks to Amazon Web Services and the cloud, a solo developer can build a great app in their spare time. But thanks to WordPress, every would-be writer can start a great blog in their spare time. That doesn't mean either of them can build a business of it.

According to the U.S. Bureau of Labor Statistics, in 2002 there were 612,000 software engineers and 457,000 computer programmers in the US (not sure the distinction between the two, but whatever). That's over a million developers.

Let's imagine that only 1/10 of those developers decided to build $10,000/month web app businesses. If they all succeeded, that would mean that there was a $12 billion/year market for this kind of web app (100,000 developers x $10,000/month x 12 months/year).

Salesforce.com, the world's largest and most successful SaaS company, which has taken over a decade to build, generates annual revenues of just $1.66 billion.

Is there room in the marketplace for 100,000 new web apps that would collectively represent 7 Salesforce.com's worth of revenue? Call me skeptical.

"If you genuinely have the spirit of an entrepreneur inside of you, it’s perfectly possible to build a $10k/month webapp business that can set you free."

Think about how often you hear the maddening statement, "It's easy to raise money for your startup." Most people who have tried will agree that it's BS. Sure, it's easier than before, but that doesn't make it easy.

The same holds true for this kind of "Law of Attraction" pep talk for developers--it is perfectly possible. Just highly unlikely. Maybe not as unlikely as starting the next Facebook, but still darn unlikely. All you have to do is prowl the threads at Hacker News to find hundreds of horror stories about developers who built apps but could never generate a lick of revenue.

Look, I've got nothing against lifestyle businesses. I've observed that you don't need a ton of money to live like a billionaire. I've written about a friend who managed (through years of toil) to build a $50,000/month blog empire. I'm in favor of developers building apps to solve real problems, and I wish I had development skills like my friends Brian and Paul, who can build awesome apps over a single weekend.

But the fact is that even though it's hard to start the next Facebook, and even though it sometimes sucks to work for someone else, the Silicon Valley startup system works. Google now employs over 24,000 people (mostly engineers). Private companies like Facebook, Zynga, and LinkedIn have well over 1,000 employees.

I encourage any developer who has a great idea for a web app to pursue it, and I hope that he or she succeeds. But I'm glad that people are still trying to start the next Facebook, and I'm glad that there are companies that hire people, because I just don't believe that there's room in the world for 100,000 lifestyle web app businesses.

1 comment:

acgourley said...

I don't think it absurd that there could be a 12 billion dollar market filled by tons of lifestyle digital companies (not just webapps!)

I think it's unlikely that 1 in 10 of the current working developers are capable of building a business that generates 10k/month. It's not an intelligence thing, it's a lack of the dozen other traits and circumstances you need to create and run a company.