The California Gold Rush holds many parallels to our own current second Internet boom. More technology businesses are being started now than at any time in history, including during the first boom. Far fewer of them will go public, and far fewer of them will blow tens or hundreds of millions in VC (at least, I hope so). But, there are some similarities between this new boom and the previous boom and the Gold Rush of 1849.
A lot of people in all three instances struck it rich by tapping a rich vein…gold in the 1800’s, and huge user base and network effects in 2000 and today. But, and this is a big but, even more people barely broke even. If you don’t strike just the right balance of luck, hard work, and talent, you may end up holding an empty bag. Likewise, some walked a different path, and chose to serve those looking to find gold. Levi Strauss and Leland Stanford both began building their fortunes during the gold rush, but they did it not by searching for gold, but by selling tools, clothing, and supplies to the folks looking for gold. Yes, they had to work longer than the folks who actually found gold. But their odds of success were significantly higher. If you’re surrounded by people who need what you’re selling, and the alternative for your customers is to give up and go home or delay and miss out on a strike, it’s a safe bet you’re going to move a lot of product.
During the first boom, Sun and Oracle made more money than just about anyone by providing tools to the folks building businesses. They weren’t doing anything interesting on the Internet. They weren’t building websites that benefited from network effects, and it didn’t matter to them if millions of users chose their product or service every day. They only needed thousands of users…but they needed those thousands to pay a lot for their goods and services. Paul Graham talked about this in his An Alternative Theory of Unions, and it’s true that when time is of the essence, and staking a claim to your territory is a vital element of success, you’ll pay more to avoid delay.
Of course, Sun and Oracle weren’t the only businesses to make their fortunes providing tools for the first boom, and they aren’t going to be the ones making the money on this boom. The landscape is different, and the success stories are going to be in different areas. Hardware is cheaper and faster, entirely a commodity. Dell will make plenty on servers, but nothing like Sun’s astronomical profits. Databases, too, are a commodity. Every Web 2.0 service is using MySQL or PostgreSQL for their database needs.
We’re placing our bets on systems management. It’s boring, just like servers and databases. It’s necessary, just like servers and databases. And it’s not a commodity (except where we’ve made it a commodity with our own Open Source software). In fact, it’s surprising how weak server management is for web servers. We’re not the only folks placing our bets this way, of course, and it’s a rather big field. Analytics have been hot, because it’s easy to build technically and there’s been big upside for a few of the analytics providers (Urchin sold to Google, NetIQ bought WebPosition from FirstPlace, Instadia sold to Omniture, etc.), so it’s not surprising to see Mint, and dozens of others. Likewise for web service monitoring, with lots of new companies approaching the problem in new ways (we even have some plans in that direction, but only as an ancillary to our core product line). These are both products that tap into a desire that I believe is deeply ingrained into almost everyone, but managers tend to have almost no other desire: Measurement of success. I think of it as the “Ooh, look at the pretty graphs!” factor.
So, while our Open Source project Webmin is a wide-ranging general purpose web-based system administration tool (the most popular in the world with ~2 million downloads per year), our commercial products are tightly focused on web servers and the tools people building the next generation of web services need. So, we don’t get to enjoy the excitement of our first “million page view” day…we do get to live vicariously through our customers successes. It’s exciting to talk to Evan Williams about how he uses our software at Twitter. Nobody knows about it, since it’s on the back end. But it’s cool, nonetheless.
So, maybe if your consumer web business hasn’t taken off as well as you’d hoped, maybe you can refocus on making it a success as a tool for enabling others who are building businesses. Or, maybe not, and it’s time to get back to panning for gold. But it’s worth considering the alternatives to building a business whose only chance of success is convincing millions of people to use it every single day.
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