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Actually, I pretty strongly think that there is a limit on the number of startups, if by "startup" you mean "small company in which people create wealth largely

Actually, I pretty strongly think that there is a limit on the number of startups, if by "startup" you mean "small company in which people create wealth largely through computer programming". According to the BLS, there are 1.3 million "software engineers" and programmers in the United States (cite: http://www.bls.gov/oco/ocos303.htm http://www.bls.gov/oco/ocos303.htm). This number will go up over the next fifty years, but not by that much; projected growth is 2% annually. One could see this number increasing more rapidly if programmers are in so much demand that their salaries (either in the form of cash or startup equity) go up very fast, but we don't see that happening; programmers nowadays don't get paid that much more, in either dollars or equity, than programmers five or ten years ago. Now, how many of these programmers have the skills needed to start a successful company? Let's be optimistic and say 10%, which is probably above your estimate ("The top 5% of programmers probably write 99% of the good software", cite: http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html). Now, out of those, how many have the personality and determination needed to start a successful company? In the overall population this number is probably less than 5%, but the traits needed to become a good programmer (high energy, determination, ability to think well) probably correlate significantly with the traits needed to start a successful company, so I'll be optimistic again and say 25%. Now, what's the viable window for programmers to start companies? At a guess, I'd say probably around age 22-37, so 15 years. I'm going to be optimistic again and assume that all working programmers are within this age range. Now, how many founder-class programmers do you need to start a successful company? This number could probably range from one to five, but I'm going to be optimistic again and say one. So, dividing it out, the number of successful startups every year is bounded above by 1,300,000 * 0.1 * 0.25 / 15 = ~2,200, and this is almost certainly an overestimate.

FreeRadical 17y ago
You've excluded successful startups founded by non programmers.
- apsec112 17y ago
  I explicitly defined "startup" to mean companies that need programming skill (as this seems to be the way the word is used nowadays), and there are very few of those that have zero programmers as founders.
huherto 17y ago
I followed your calculations, but I am not sure what point are you trying to make. Are you saying that the upper limit of start ups is 2200 and it is limited by the number of highly capable programmers. What about the Market? Is there enough space in the market for 2200 new start ups?
- apsec112 17y ago
  My point is, even though there are an infinite number of applications to write, there aren't an infinite number of people to write them.
- pg 17y ago
  That's equivalent to asking, are people's desires limited? The answer appears to be no, in the short term.
  - usaar333 17y ago
    It is more asking: A) Do people have the time/money to use X products? and B) Are there X people who want to use a given product (at a given price/time point)? I have no doubt that there is a limit on the number of successful startups due to A and B.
pg 17y ago
The number of programmers is pretty elastic. People can and will learn to program if it starts to seem like that's a valuable skill. E.g. there is a founder in this current YC cycle who came to the US to go to business school, but then realized that if he wanted to start a startup he'd be better off spending the time learning to hack instead. I'd say the upper bound on the number of startups is the number of people who are determined and smart enough. That's probably between 1 in 100 and 1 in 1000.
- apsec112 17y ago
  "People can and will learn to program if it starts to seem like that's a valuable skill." That's basically just a restatement of what I said (more people will learn to program if there are greater rewards for doing so). The thing is, there aren't greater rewards for doing so. Startups aren't any more profitable now than they were ten years ago, and programmers at big companies don't make more now than they did ten years ago (inflation-adjusted). "I'd say the upper bound on the number of startups is the number of people who are determined and smart enough. That's probably between 1 in 100 and 1 in 1000." Few could argue that, say, investment bankers are quite smart and extremely determined (and very good at sales besides), but there's extremely little overlap between investment bankers and technical startup founders, and that doesn't look like it's going to change. Same for corporate law, management consulting, etc. Plenty of i-bankers and consultants and corporate lawyers go into other fields, including non-technical startup positions (eg. Jessica Livingston). Indeed, one of the primary reasons people go into these industries is for the exit opportunities. But very few seem to learn how to code.
  - apsec112 17y ago
    Maybe I should clarify what I mean by "upper bound". "Upper bound" means "how high could the number go if parameters X, Y, and Z are allowed to vary", but neither of us specified what X, Y, and Z were. The hypotheticals I was considering were "suppose the startup community all acted in unison towards increasing the number of startups". For instance, if the startup community exerted enough collective pressure, we could plausibly get Sarbanes-Oxley loosened, or force VCs to become more technically competent, or make it easier for founders to immigrate. But we can't just decide to increase how profitable it is to learn to program or start a startup; these things are driven by consumer demand.
deleted 17y ago
[deleted]
- apsec112 17y ago
  To get "per year" instead of "per however long a programmer remains in the industry". Suppose there are X programmers in the US who could plausibly start a startup. All X people can't start companies when they're 22, and again when they're 23, and again when they're 24, etc. (the vast majority of founders only ever start one company). So, if you assume that 1/15th of the programming population starts when they're 22, 1/15th starts when they're 23, etc., the total fraction of people who start in any given year is 1/15 * 1/15 + 1/15 * 1/15 + 1/15 * 1/15 + ... = 15 * (1/15 * 1/15) = 1/15th.
  - JesseAldridge 17y ago
    Yeah, I got that after a bit. Heh, it seems you replied at the exact moment I deleted my post. For the record, the question was, "Why did you divide by 15?"
gridspy 17y ago
One interesting thing is that a very good programmer might look at those numbers and go "how am I going to beat 1,300,000 people to make the next facebook" whereas it is closer to "how am I going to join the 2,200 startups that make it big?"

FreeRadical 17y ago

You've excluded successful startups founded by non programmers.

apsec112 17y ago
I explicitly defined "startup" to mean companies that need programming skill (as this seems to be the way the word is used nowadays), and there are very few of those that have zero programmers as founders.

huherto 17y ago

I followed your calculations, but I am not sure what point are you trying to make. Are you saying that the upper limit of start ups is 2200 and it is limited by the number of highly capable programmers. What about the Market? Is there enough space in the market for 2200 new start ups?

apsec112 17y ago
My point is, even though there are an infinite number of applications to write, there aren't an infinite number of people to write them.
pg 17y ago
That's equivalent to asking, are people's desires limited? The answer appears to be no, in the short term.
- usaar333 17y ago
  It is more asking: A) Do people have the time/money to use X products? and B) Are there X people who want to use a given product (at a given price/time point)? I have no doubt that there is a limit on the number of successful startups due to A and B.

pg 17y ago

The number of programmers is pretty elastic. People can and will learn to program if it starts to seem like that's a valuable skill. E.g. there is a founder in this current YC cycle who came to the US to go to business school, but then realized that if he wanted to start a startup he'd be better off spending the time learning to hack instead. I'd say the upper bound on the number of startups is the number of people who are determined and smart enough. That's probably between 1 in 100 and 1 in 1000.

apsec112 17y ago
"People can and will learn to program if it starts to seem like that's a valuable skill." That's basically just a restatement of what I said (more people will learn to program if there are greater rewards for doing so). The thing is, there aren't greater rewards for doing so. Startups aren't any more profitable now than they were ten years ago, and programmers at big companies don't make more now than they did ten years ago (inflation-adjusted). "I'd say the upper bound on the number of startups is the number of people who are determined and smart enough. That's probably between 1 in 100 and 1 in 1000." Few could argue that, say, investment bankers are quite smart and extremely determined (and very good at sales besides), but there's extremely little overlap between investment bankers and technical startup founders, and that doesn't look like it's going to change. Same for corporate law, management consulting, etc. Plenty of i-bankers and consultants and corporate lawyers go into other fields, including non-technical startup positions (eg. Jessica Livingston). Indeed, one of the primary reasons people go into these industries is for the exit opportunities. But very few seem to learn how to code.
- apsec112 17y ago
  Maybe I should clarify what I mean by "upper bound". "Upper bound" means "how high could the number go if parameters X, Y, and Z are allowed to vary", but neither of us specified what X, Y, and Z were. The hypotheticals I was considering were "suppose the startup community all acted in unison towards increasing the number of startups". For instance, if the startup community exerted enough collective pressure, we could plausibly get Sarbanes-Oxley loosened, or force VCs to become more technically competent, or make it easier for founders to immigrate. But we can't just decide to increase how profitable it is to learn to program or start a startup; these things are driven by consumer demand.

deleted 17y ago

[deleted]

apsec112 17y ago
To get "per year" instead of "per however long a programmer remains in the industry". Suppose there are X programmers in the US who could plausibly start a startup. All X people can't start companies when they're 22, and again when they're 23, and again when they're 24, etc. (the vast majority of founders only ever start one company). So, if you assume that 1/15th of the programming population starts when they're 22, 1/15th starts when they're 23, etc., the total fraction of people who start in any given year is 1/15 * 1/15 + 1/15 * 1/15 + 1/15 * 1/15 + ... = 15 * (1/15 * 1/15) = 1/15th.
- JesseAldridge 17y ago
  Yeah, I got that after a bit. Heh, it seems you replied at the exact moment I deleted my post. For the record, the question was, "Why did you divide by 15?"

gridspy 17y ago

One interesting thing is that a very good programmer might look at those numbers and go "how am I going to beat 1,300,000 people to make the next facebook" whereas it is closer to "how am I going to join the 2,200 startups that make it big?"