Meet Startup @TW

Why marketing is eating the world

Elizabeth Yin

I was born and raised in the San Francisco Bay Area and grew up during the dot com boom in the late 1990s. One of the most interesting things in looking back are the stark differences in what it took to be successful back then with a software company and what it takes to be successful in building a software startup today in the US.

When I was a teenager, if you wanted to get into internet startups, you needed to find information on how to build websites. Although there were some no-code website builders, they were largely terrible. Building websites from scratch was the way to go. Moreover, developer knowledge was not really available online, because content on the internet was still being written. You had to hop over to your local Barnes & Noble bookstore to buy books on HTML, Javascript, Perl and whatnot. Lastly and most importantly, you needed access to servers. It was not uncommon for internet companies to spend boatloads of money setting up their infrastructure in a closet at their office. Back then, technical knowledge was a really valuable and a limited skill. If you could assemble the best technical teams and keep them happy, that was a really strong moat for you because you could prevent other would-be competitors from being able to build a competing offer.

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And as a result, for many years, there were not that many websites in the US market (or anywhere). If you had a website, it was relatively easy to capture attention and web traffic. One such website, Craigslist, a simple peer-to-peer marketplace site that we are all familiar with, was started in 1995 and continues to reign to this day despite so many upstarts trying to compete with it on better design and usability. Why? Craigslist gets the job done and more importantly, people know about its existence. Distribution is king.

Although it often took months to build out a website in the 90s, today you can often get a fairly straightforward site out the door even with no-code tools in less than a day. And if you do need to write code, you can search for code examples on just about every possible topic in a variety of discussion forums and on YouTube. Even more advanced computer science topics such as in machine learning now have so many open source resources and infrastructure. You can often use a variety of specialty libraries without having specialized knowledge. For the most part, in software, technical information has largely become commoditized. This isn’t to say that you can’t make good money being a software engineer — and in fact, if you are a top engineer, you can now make a boatload of money! But it’s to say that most “run-of-the-mill” software development is not a unique skillset and most software businesses developed today don’t require specialized software development skills.

This has led to a flurry of many applications being built online – often with multiple teams building the same thing. It is not uncommon to run into 50 different founding teams all trying to build a marketplace for gym trainers. Or 300 founding teams trying re-invent marketing automation.


According to Statista, the number of websites has ballooned to nearly 2B!

For most software businesses in the US, the problem isn’t technical knowledge anymore. The problem is getting a wedge into distribution — also known as marketing.

Furthermore, incumbents who generally do a good job, often manage to continue reigning. According to Brad Gerstner, CEO of Altimeter Capital, who recently did a podcast on Invest Like The Best, large tech companies have managed to take even more market share than 10 years ago. Some people may argue this is because the large tech companies have improved their products over time to stay ahead due to their increased collection of data and better algorithms that feed on that data over time. That may be true for some companies but not all. This also applies to other products that have not made significant strides in their technology — Craigslist, Salesforce CRM, Turbotax, Quickbooks to name a few. Even Google Search which arguably had a better product in the 1990s compared to its peers is about on par with alternative search engines today, but 90% of people worldwide still use Google. Old habits die hard, and distribution matters more than ever if you are just starting a business. It’s hard to topple incumbents who have strong distribution and already large audiences — even if you can build a much better product.

So where are the opportunities in software? Is it even possible to build a company that takes an entire market? I took to Twitter to find out.

Elizabeth Yin

A big warm thanks to everyone who participated. A number of people came up with some great suggestions of winner-take-all companies within a variety of developer tools / API markets, but in large part, this was an incredibly difficult challenge. 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.

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In fact, there are economic schools of thought around where we are in the tech-economic landscape. As economist Carlotta Perez describes, we are now in the Deployment Phase of the internet in the US — meaning, we are in-process of exhausting all use cases for internet technologies in the US. What has traditionally happened at the end of a technology phase is oversaturation of investment dollars chasing smaller returns. Valuations go up, returns go down, and investors lose their money. (Sound familiar?) On a company level, what this means is, if not careful, a lot of companies will end up wasting marketing dollars in this type of landscape. Companies in the 2020s, unlike in the 1990s, need to really be performance-marketing driven in order to compete. The end of last year certainly showed us many examples of well-funded companies that could not make the unit economics work. The software industry has become a marketing game.

Even if you aren’t running a strictly software business but use software platforms to operate a business, marketing is still key. If you run your company off Yelp, Shopify, Patreon, Stripe, Recurly, ConvertKit, Substack, or any of the others, you need to stand out, and that’s marketing. And the people who do the best at marketing make a LOT of money, and those who don’t, just can’t catch a break, even if they are good at their craft. Marketing is necessary.

There are, of course, exceptions to this — there are still emerging markets (both in the geographical sense and technology sense) where marketing doesn’t matter as much.

In developing geographical markets, it’s largely greenfield. We have a portfolio company in Indonesia that was able to get 250k signups almost immediately from brick and mortar small businesses and no budget. In the US, without a large marketing budget, this would be challenging to do now. Why? Because every Square and Opentable is knocking on their door and has been for years. There’s just so much noise small businesses tend to ignore. But in Indonesia, that isn’t the case…yet. The software landscape there is similar to the 1990s in the US. It’s harder to piggyback off of existing software infrastructure — whether it’s payments or platforms — but there’s also a lot of obvious opportunity in software that no one is going after. The same could be said about investing elsewhere in Southeast Asia or in LatAm or Africa. There are fewer startups to compete with for attention, and it’s less of a marketing game than building a software company in the US.

In addition, for companies pursuing developing technologies — such as in hardware or drug discovery, we’ve barely just scratched the surface of these technologies. There is so much opportunity left to be explored outside of software, and I suspect many US software investors will eventually have to rejigger their skillset to migrate away from strictly software into other technologies to find opportunities that don’t require playing as much of a marketing game. But eventually, marketing will become the name of the game for both global software markets and these other technologies.

In conclusion, the US software industry, for the most part, is no longer about technology. If you are highly technical, and you want to win on product and tech, your best bet is likely in building a business that is not strictly software in the US OR in building a software business for an international market. But if you want to win in the US software market, ironically, the best thing you can for your company is to really ramp up your performance marketing knowledge. Marketing is eating the world.

This article was first published on, on Jun. 30, 2020.