New research shows that the number of software startups in the last couple of years has declined sharply.
All good things must come to an end, it seems, and in the world of software, it seems to be true than ever before. The technology sector is no stranger to rises and falls in the market, as the infamous dot com bust has proven. Now, it’s startups that seem to be on the decline, due to a variety of factors.
According to research from venture capital firm Redpoint, software startups went from a two-year period of averaging more than 1400 new businesses per year each year between 2011 and 2013, to just 450 startups in 2015. Ignoring all the possible startups that continued to launch but did so “under the radar” to avoid proprietary theft concerns or who opted to keep things low-key until they had revenue sources lined up, the main factor seems to be the idea that starting a business was far easier than actually running one. That led to a saturation of sorts, which later translated into new companies taking a good, long look at the industry before deciding to take the plunge.
Another quite likely factor is that we’ve finally reached market saturation for great software concepts. Tomasz Tunguz theorized that the abundance of viable, user-friendly, and successful software tools in the software space may have scared off a smaller developers. In much the same way that app developers noticed their overnight successes turning into a struggle to promote their content in the already-clogged app stores, software developers have had to think twice about launching a new company and new product line.
Of course, things like open-source projects, cloud-based services, and the software as subscription model have also played key roles in fostering or smothering the startup market. Only time will tell how this shift will play out for the “little guys,” but for now, they’re hanging on.