As time goes by, it is becoming increasingly inexpensive (and popular) to start web companies. Fred Wilson of Union Square Ventures refers to this as the ‘expanding birthrate of web startups’ in his latest blog post. Fred makes the point that many startups need parents (investors) with deep pockets to ensure that they reach adulthood (cash flow breakeven). Basically, he’s saying that startups should either reach adulthood quickly or make sure that they have parents who will stick with them until they become independent.
In the developing world, I worry about both sides of the coin. While the people birthrate is still very high, the birthrate of startups is much lower than in places like California. For the developing world to become economically competitive, it is important to track the rate of startup birth to ensure that it expands as quickly as possible. Seed funds and entrepreneur training is critical to this effort. There’s no reason to worry about parenting if there are no children.
However, in the long run, Wilson’s point applies strongly to the developing world. Ultimately, it will be necessary to ensure that proper funding is available for early stage startups to grow into big companies. The wealthier classes in the developing world have a huge opportunity to invest their resources in technology companies that can propel their economies to a brighter future. Governments must do their part to ensure that the legal frameworks are in place to encourage these types of investments.
There’s a lot of work to be done to ensure that many startups are born, and that those with potential have the parenting necessary to allow them to achieve their full potential.