Unicorns and bubbles

Square’s faltering march to an IPO has reinvigorated the debate about whether all of these ‘Unicorns’ are symptomatic of an investment bubble or not.

I do think there’s a bubble, though I don’t know how big it is.

The reason is very, very simple

Pundits, investors, and analysts consistently underestimate the effort required to develop, maintain, and update strategically important software in the long term. The sad fact is that most software projects fail to achieve their goals and the capability these startups have for longterm software development is still largely unproven. Even Facebook is showing symptoms of technical debt. (Which is embarrassing since I just praised their dev team a few days ago.) The only difference between startup dev teams and regular ones is that startups are generally staffed by cowboy coders who stack up lines of technical debt faster than a monkey playing Tetris. Odds are that their code problems are bigger, not smaller, than that of the rest of the software industry.

The value of all of these startups hinges on their ability to execute a novel strategy using software.

In essence, the bubble is the failure of investors to discount the future value of software. Most software projects fail or they accumulate technical debt until they stall or fail. Anybody who doesn’t take that into account is either going to get shafted or counting on somebody else being shafted.