Small Business News | Empires built on free code aren’t cheap

The Register has recently claimed that whilst starting up a business is still fairly cheap, the price paid for success is far more expensive.

A reduction in hardware and software costs certainly do suggest that it’s a ‘great time to be an entrepreneur’ as declared by Joe Kraus five years ago. Nonetheless lower start-up costs seem to have had little or no effect on venture capitalists as recent data from the National Venture Capital Association reveals that average investments are similar to levels since 2007. Furthermore the cost of scaling a company may have actually gone up. Customising open-source software and creating data centres – an action recently taken by Facebook – is not cheap. Such facts suggest that things like capital intensity and scale only privilege the minority, leading to market concentration and in cloud computing. Of course the cheaper alternative is to outsource your data centre, but companies such as Facebook are hardly going to trust third parties with such a wealth of information. So whilst it may be cheap to start-up a business, beware, because it is still highly expensive to scale one.

To read the full article please visit The Register website.

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