Previously, a “technology startup” meant a company founded in order to develop and build a great new technology. Just look at the original startup – Fairchild Semiconductor – or later famous examples like Cisco, Apple or Google – all of them were created to work for years without profit, even without customers, on building and testing some new technology before turning it into a product.
Nowadays, everyone expects startups that are somehow miraculously profitable from day one – as Daniel Markham nicely puts it in his post The Startup Racket. In other industries it is normal for a long time to pass between founding of the company and its profitability – I was shocked when I heard that in pharmacy and biotech it’s quite normal that a company even goes public sooner than turning profit. And it makes sense that in IT those times will be much shorter – but I never expected they will all but evaporate.
VCs are looking for “traction” and profit before considering investing – but where is the R&D supposed to happen? Just look at the hottest current startups: Facebook, Twitter, Foursquare, Dropbox… While they have a ton of users, none of them is really innovating; they’re using existing Web and mobile technologies and stretch them to the brink. Perhaps it’s not completely fair to assert that they’re not innovating – it’s just that tere’s very little technological innovation going on; what we have is confined to usability, social aspect of applications and the like.
But I still think that at one point we’ll have to start inventing again.