[charlesju]

My second reply is simply: free markets.

If there was a better ROI for young entrepreneurs, they would do it. There is nothing that scales like the internet/software that can be built with such a low cost. Michael Lewis said this best in his book, the last 20 years have been the largest legal value creation in the history of mankind in Silicon Valley (measured by normalized job creation, revenue, new businesses, etc.)

[keiferski]

I don't disagree with you in that entrepreneurs choose software because it's cheaper.

My question was: what's inherently derivative about software startups? Why is everyone making photo-sharing software and not software to solve other (unaddressed) problems?

[gamble]

Most of the software-based 'hard problem' niches that are accessible to programmers without specialized domain knowledge outside software were filled by startups in the 70s and 80s that are now the establishment. Nobody is going to fund another word processor, operating system, or DBMS.

Web startups are attractive because they have low capital requirements, don't need much domain knowledge, and are more closely tied to changes in culture than technology, so there are always a few open niches.

[nbashaw]

What unaddressed problems do you think they should be solving? All in all, the consumer web is a pretty over-served market. I don't see a problem with there being ~5 serious competitors in a big, fresh problem area.

[keiferski]

1. According to that line of thought, every problem has been solved already. Are we really at that point? There are hundreds of problems that are more relevant than "how do I share images of my location with people in my same location".

2. ^What real problem does a company like Color solve? Is there one?

3. Maybe the problem is that startups are targeting consumers? B2B has a way of culling the herd: if you don't solve a problem, no one buys your product.