MATTHEW BUCKLAND: Tech firms are making wild profits due to scalability
Low costs and low barriers to entry mean it’s much easier for an entrepreneur to start a tech company with minimal revenue and get it to a point of inflection
Technology has brought something special to the world of entrepreneurship: the ability to scale. In other words, at a certain point tech start-ups are able to increase their revenues exponentially, while their costs grow only incrementally, resulting in wild profits. Tech companies have this amazing ability to scale because they are heavily automated and mostly don’t have the expensive infrastructure or product costs of the real world. It’s why venture capitalists just love tech start-ups. In the loose sense there are millions of entrepreneurs out there, but very few have businesses that are truly scaleable. Many people call themselves entrepreneurs, but are not running start-ups in the Silicon Valley — or Silicon Cape — sense of the word. They are really just one-man or one-woman bands that generate a single salary for the founder, providing an alternative form of employment. These companies generally stay small, and maybe progress to about two or three employees. Some can be reall...
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