Schumpeter’s SaaS : Startups and Creative Destruction

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rudebaguette.comBack in my economics classes, I was always fascinated on how theories from books could be related to real life events. I read about Kondratieff’s cycles, Smith’s invisible hand, Keynes’s supply and demand. But my favorite was Schumpeter’s creative destruction, and now after six years in the world of startups, it’s fascinating to see it play out in the real world.

At a fundamental level, the economics of a startup are pretty simple. Most startups bootstrap their way to their first customer, and probably their first hundred customers. They bet everything on scaling those first hundred customers into the first two hundred customers, spend money they don’t really have on achieving that scale, and pitch investors on their ideas and potential. And the founders work damn hard to get those investors to write checks to sustain the startup until the moment it becomes a little more mature, and a lot more profitable.

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