The first thing that many investors will ask you - I've funded a one-man-show startup from scratch, had my doze of investors of all kinds, from small time brokers to a breakfast with another 15 Israeli web startup CEOs and Michael Moritz, not to mention many one-on-ones with angry looking GPs - is: "What could be the Barrier to Entry for a non-technological startup?" They know the answer, we know it. It going on for years. They ask about the IP. What will you do if evil Googlers will clone you, just like that, with all their evil engineers with evil t-shirts - and the doors at their campus won't open if you're not tagged, and they have like a hundred yards of freezers, full with free ice-cream bars for the Googlers, and they have, like, a real spacecraft hanging from the ceiling - so what's the IP, they ask. How will you defend yourself. And I say the same things, eyes half closed. Over and over again. Venture after venture. Year after year. Something like:
Take a look at YouTube, what do you see?
Sold for billions of dollars. So? where's the IP?
Encoding? Decoding? Oh, that's almost free
Find it hard to believe? Download VLC!
Some great technologies, very hard, expensive to develop, maintain and operate, are offered for free: Video streaming, Multimedia conferencing, Satellite based positioning, Instant global publishing, the Web itself, a fast global connection for a flat/no fee... All those and many others are free to use, directly or through APIs. Infrastructures, if you want. We take those science fiction techs for granted - ever walked with your Smartphone in hand, following a compassed Google map, holding the phone before you like Harry Potter's wand? Some are highly valued by the market (remember the evil Googlers?) - but most are just, you know, free stuff. Open source. Satellites launched by the friendly government for the benefit of the ungrateful public and mega-gicks doing their best to serve the (grateful) community. This is heaven. I mean it. On such structure you can build some truly cool stuff.
On the other hand: Facebook, Twitter, Zinga, Groupon, Foursquare. Gmail. Again, the list is endless. Good UI/UX, cool. Great platforms, really. I love them and use many of them. No technology to mention, no barrier to entry. Much less if we're talking mobile apps. Sky high valuations - you go, wow. Why? people liked them, buzzed about them, thought they're really cool. They were marketed right. Yes. Just like a TV show. Technology had almost nothing to to with it. Barrier to entry? Ha. If you can produce, you're in - actually, if you can fund or otherwise motivate professional production. It's a commodity nowadays. You can buy well-made apps anywhere from SF to Bangalore. As with broadcast, it's now all about talents and marketers involved.
Mix in the API factor. In this post by Hillel Fuld, he's wondering how come there is no app to update all social services by user preference, via the offered APIs - and hey, almost anyone offers an API, from Facebook to the smallest startups. But then, will you base your app on an API, asks the wise - the one from above, with his Barrier to entry and annoyed look - the chance for the evil... Facebookers, lets say this time, to clone you is even better! They will eat you alive, as easy as Polly would have a cracker.
But this never happens, you know. The large players will buy you if they want you. Other startups have their own ideas (very dear to them! like little sweet babies. Try and argue with any co-founder, he'll bite your head off) - so even if those apps don't need a unique technology anymore than the Seinfeld team needed one - still, I suspect that's the main reason for us not seeing loads and loads of multi-API based thingies. Those are hard to fund. Extremely cheap to develop, high risk and potential, could boom like magic if are truly cool - but hey. No IP.
So, how can you raise seed and partners for a new app - That will check you in to Foursquare and Facebook while grabbing realtime coupons - By taking a picture of the business logo? It's not a theoretical question. We did just that, all the way into the app store. Picalogo - www.picalogo.com - uses APIs by Google, Facebook, Foursquare, Apple (and few others, ho ho ho) to dramatically shorten the business-specific location process, avoiding the long venue lists scrolling. Where's our technological IP? We smile in the face of the investors and say, there is none, then explain that we have our propitiatory logo DBs, then the initial user-base etc, but the fact is that if we were indeed attacked by a Silicon valley giant, there isn't much that we could have done, we'd be cloned to the ground in one punch (but they'd rather buy us, as said). What I can not say at the - mostly over-designed - VCs offices, but can say here: Dear investor, angel and institutional alike - If you're looking for barriers to entry and protectable technology, don't even consider investing in mobile or web apps. It's not for you. You wouldn't put a penny into FarmVille, at the time, right? So there.
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