Part of what I hope to accomplish in writing this Blog is to peel back the esoteric layers of the "Cloud" and distill reality from hype, facts from vagueness, and principles from chaos.
To that end, until proven otherwise, one concrete example of how I think the Cloud has and will continue to change the world is its ability to enable greater Founder control of companies.
Yes, I'm attempting to use a catchy title to draw in readers, but, the metaphor remains true. I'll explain...
Particularly for consumer-focused internet technologies, like Instagram, DropBox, Tumblr and Yammer to name a few, the product can be scoped, built and in the market rapidly, at far lesser financial cost than was the case even 5 years ago, let alone a decade or more.
The single greatest economic factor driving down costs for early stage software companies is Cloud technology and the wide-spread availability of on-demand computing resources including, database storage/hosting, computing power, security tools and much more.
Moreover, the pricing model for cloud infrastructure services allows companies to pay for only what they actually consume, and the technology allows for rapid scaling up or down to meet network demands. No more building software for large-scale use to accomodate peak-demand, only to watch computing resources lying dormant during non-peak periods.
Whereas once software companies had to invest millions of dollars buying computer hardware and other infrastructure equipment, now they can rent this by the hour from mega Cloud providers like Amazon Web Services.
That fundamental dynamic has shifted the relationship between software Founders and their investors. Because an internet-delivered software product can be built and delivered without an initial capital expenditure of millions of dollars for computing equipment, Founders no longer must raise great sums of money during initial product development, launch and early iterations; put plainly, early on Founders can keep much more of the equity in the company for themselves and delay bringing in large-scale institutional money, which would require shareholder dilution and Founder relinquishment of control over time.
By the time larger moneyed parties are now brought in, Founders have a real product with demonstrated value, so their money buys much less of a percentage of the company's shares. Consequently, Founders of SaaS companies can hold onto a percentage ownership of the Company that allows them to control core business decisions and its overall direction.
Founders tend to have longer-term, albeit more emotional, perspectives, which fosters large-scale innovation. This trend is only beginning to play out, and I believe will have a long term impact on the global technology economy.
Yes, this analysis is a bit of an oversimplification, but the fundamental principles hold true. So get used to your Founders sticking around a while.
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