Darwinism of Software

Do you ever wonder why there are so many great software companies on the internet?

Charles Darwin could explain it to you. No, he didn’t know how to write code, but his theory of evolution and survival of the fittest applies to software as well.

We’re in a day and age where software tools are so prevalent and plentiful, that consumers have a choice for nearly every solution. And anytime there is a choice, one product will inevitably outperform the others.

If a product or company fails to find product market fit and generate a sustainable revenue, it will slowly lead to it’s own demise and end up extinct — or in the case of San Francisco, in the Startup Graveyard.

Dolores Park — Startup Graveyard

In our analogy, revenue is the food needed to survive, and just like food, there is a finite amount. While there is enough to sustain many companies, there isn’t enough for everyone.

All companies have unique diets — some are very lean and require very little revenue, while others consume the cash equal to a small country’s GDP. But, that’s a topic for another day.

So what happens when entities are no longer hunting for sustenance on their own, but rather someone is supplying it to them?

Charles was particularly interested in his study of birds in the Galapagos. They could adapt quickly, within only a few generations, and they were very reliant on adaption for survival.

For instance, the subfamily Geospizinae, or Galapagos finches, were believed to have derived from the same predecessor, however, Darwin documented 15 different species of varying sizes and beak lengths.

The long beak variation was reliant on this adaption for extracting food out of narrow openings. Birds with shorts snouts would slowly die off because of their inability to access the food.

Now imagine if someone began showing up every day to feed the lesser suited birds. It’s uncertain whether or not they would live a full life, but they would certainly survive while the outside resource is being supplied.

Enter VC injected money.

Many of the startups venture capitalists vet and fund would survive without the outside injection, but there are countless startups that are being strung along, only surviving due to this substantial crutch.

Typically, 80% of VC funded startups don’t show a return [Angel].

In some cases, the injection of money slows adaption to the ever-changing market since a lifestyle business with non-significant cash flow isn’t the priority, so generating revenue isn’t always an early focus.

There’s been talk of a tech bubble for some years now, and that the traditional VC era is coming to an end, making room for VCs focused on more sustainable, slow-growth businesses, like Indie.vc.

What’s your take on the topic? Do self-funded startups have a chance competing against existing VC backed enterprises?