Web Startups Are A Commodity
Paul Graham has written a very provocative essay on The Future Of Web Startups in which he argues that like computers, and many technological developments before them, web startups themselves are commodifying. Paul says: … Paul is right about this.
Context & Ripple Effects
Two days after Paul Graham published The Future of Web Startups, Fred Wilson — writing as A VC — endorses its central claim that web startups are commodifying the way computers and earlier technologies did. The endorsement carries weight because of who is agreeing: Graham runs YCombinator, and in a 2006 interview he had already laid out the worldview this essay completes — no bubble, business models can wait, and the best startups are those positioned to displace old monopolies.
The commodification thesis is not abstract for either man. If founding a web company gets cheap enough to be routine, the scarce resource stops being capital and becomes selection — which is precisely the business an accelerator like YCombinator is built around, and the argument behind Graham's earlier essays on startup centers and the conditions that make a Silicon Valley.
First-order effects
- Seed investors such as YCombinator gain directly: if startups are commodities, the cost per experiment falls and a fixed fund can back more attempts at monopoly-displacing outcomes.
- Founders get cheaper entry but a crowded field — when anyone can incorporate a web startup, differentiation moves from building the product to being picked.
Second-order effects
- Traditional venture firms whose value rested on scarce capital face pressure to move upstage or compete on selection and mentorship rather than check size, since the commodity layer of funding early web teams is being absorbed by accelerators.
- Incumbent web companies face a higher volume of would-be disruptors, consistent with Graham's stated view that the best startups target old monopolies — raising the premium on acquisition as an exit route.
Third-order effects
- If the pattern holds, startup formation industrializes: standardized funding, batch-based acceleration, and geography chosen deliberately rather than inherited — the manufactured-Silicon-Valley logic Graham sketched in his 2006 essays on startup concentration.
- Value migrates out of the commodified layers (incorporation, hosting, initial code, seed checks) toward whatever remains scarce — distribution, audience, and the judgment of who to back — echoing the classic pattern where a commoditized input pushes profit into its complements.
The trend: Falling costs of building web products are turning startup creation into a high-volume, standardized pipeline, with accelerators replacing capital scarcity as the bottleneck.