A lot of hmmmmmmm here:
So where are the opportunities in software? Is it even possible to build a company that takes an entire market? …
No one could think of a company that has started in the last decade and has clearly dominated above all other competitors. On the flipside, we’ve already rattled off a number of older software companies that continue to dominate market share TO THIS DAY in a variety of areas: Google Search, Amazon Books, Turbotax, etc. This isn’t to say that you cannot build a big business if you don’t own a market, but it’s to say that the old way of thinking about market domination is just not applicable anymore.
Put another way, a lot of the “low hanging fruit” in the US software market is now gone. Software in the US generally works. And new opportunities get swept up with would-be competitors immediately. If the 90s was about thinking through your build, the 2020s is about thinking through marketing & distribution.
As such, while many VCs are still fixated on finding unique technology in software and chasing companies that will ultimately be the sole winner, I’d contend that these two strategies — while successful in the 90s and early 00s — largely no longer work. There are certainly exceptions but if we are talking strictly about software, (not hardware, not drug discovery, not synthetic bio, etc) you’d be hard pressed to find a company where winning does not require a solid marketing and/or sales game. This is very different from the 1990s. Having a marketing skillset and mindset is what you need to win in 2020 in the US software market.
Although the low hanging fruit opportunities in the US are gone, it’s not to say that you can’t build a Salesforce competitor or a Craigslist competitor and be successful. The software market in the US has gotten so big — you can still build a billion dollar business if you are the 15th email service provider. We are seeing more and more unicorns ($1b valuation businesses) and many in the same market. However, we are also seeing many more startups than in the 1990s being built. This means that while there are more unicorns as an aggregate number, there are also many more companies that will not become unicorns. And with increased competition, even if there are more winners, the cost of customer acquisition becomes more expensive for all.