Emerging infrastructure and the entrepreneurial opportunity

Less than 10 years ago one of the first steps in launching your web or mobile app was buying and setting up your own dedicated hardware in a back room or remote server farm.

Actual physical boxes you had to order, unpack, plugin, network and monitor in a rack you had to keep dust and moisture free.

The “cloud” existed, but it was still in its relative infancy, with Amazon Web Services launching in 2006.

When Instagram launched in 2010 they had a single, dedicated machine “with less computing power than a Macbook Pro” installed in a data center in Los Angeles to cater for their first users. The day they launched their app was downloaded 25,000 times — far beyond their wildest expectations. They needed a bigger boat. And fast.

Only back then they were quoted 48 hours to get any new hardware, and that was a rush order with considerably higher cost.

The app grew to a million users in the first three months, scale which no consumer app had achieved before, especially not one built by a couple of guys out of a co-working space.

The only way they were able to keep the app online, and sustain their growth, was because they had shifted all their hosting to AWS shortly after launch. AWS allowed them to spin up new servers in seconds to accommodate the insatiable thirst from the new users pouring in from all across the planet.

If this was prior to 2006 they would have required enormous capital, hardware and personnel to feed the growth beast — and even then the product would likely have frequently fallen over, impacting their ability to hit their aggressive growth targets.

This new infrastructure in the form of virtually limitless and instantaneous servers known as the cloud, empowered the team to scale to 50m users when it was sold to Facebook for a billion dollars. All with a team of less than 15 employees.

This story isn’t unique to this period in time. New advances in distribution infrastructure have often created fortunes throughout the world. What’s unique is the size of the fortune, the speed at which it was accumulated, and the incredibly size of the teams responsible.

The launch of WhatsApp has a familiar ring to it. Founded in early 2009 the messaging app missed out on the almost immediate traction that came to Instagram but within 7 months they had grown to 250,000 active users.

WhatsApp’s meteoric growth to 400 million users in 4 years was less hampered by cloud server infrastructure than it was by the high costs of global SMS verification. In order to limit spam on the platform they used SMS verification to confirm a users identity before allowing them onto their platform. The costs in the U.S. were manageable but unpredictable across the rest of the planet, frequently fluctuating across far flung countries to as high as a dollar per user.

When you’re growing at millions of users a week, and without a clear monetization strategy, those dollars start to add up.

Thankfully there was a new startup in town whose sole purpose was wrangling the world’s telecommunications infrastructure for a new wave of startups: Twilio. Twillio built the connections to every major telco in the world and provided elegant APIs to access them, including negotiating down the rates for phone calls and SMS with the buying power of their hundreds of customers.

It was incredible timing for WhatsApp and came at a time when they were growing so fast and had neither the time nor bandwidth — as a team of <50 people — to deal with anything non-core to the business.

It’s easy to think all the good ideas are taken, or that all of the transformative infrastructure opportunities are past us. But new types of infrastructure are constantly emerging, creating new opportunities for entrepreneurs.

In 2018 a new direct to consumer healthcare company for men launched called Hims. The idea was to make it easier to treat common maladies like erectile disfunction or hair loss for men, and to make it as easy as ordering an Uber.

In such a highly regulated field as healthcare this was no small feat. Medical marijuana companies had paved some of the way with services like Ease, but even they operated in a regulatory gray area.

Hims was able to launch in large part by leveraging the TruePill medication fulfillment API. This allowed them to focus on the customer experience and distribution instead of spending years of their lives in governmental red tape and logistics.

Within a year the company has been valued at $1bn+ with $200m raised and have gone on to launch a complementary brand for women called Hers.

We launched Spritz late last year as a way to eliminate the need for expense reports, and to empower teams to spend what they needed without breaking the rules. We leverage a smart corporate card on the Visa network which codifies your expense policy into the card itself.

The result feels like magic: no more expense reports, no more employees feeling like a line of credit to the business, and instant data for finance teams to be able to do their job.

Even 2 years earlier this would have been an incredibly challenging product to build, which would have required either forging a relationship with a bank, or getting our own banking license and carrying significant capital reserves.

Thankfully we had new infrastructure in the form of Stripe’s Issuing product. This allowed what was initially two guys in their living rooms to build what is indistinguishable from a virtual bank for the price of a box of ramen noodles.

By outsourcing the back end card issuance and compliance we’ve been able to focus, like all of the examples above, on finding customers and building a best-in-class user experience.

You can see for yourself by signing up for free for your first card here.

Entrepreneurs can look at these trends in two ways.

The first is “What emerging infrastructure can I leverage to build a billion dollar company with a team far smaller than ever before?”

The second way to look at this is “What emerging infrastructure can I build to empower a small team to build a billion dollar company upon?”

Thanks to Ozan Nova who provided the inspiration for this post over pastries when I was first searching for my next project.

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Ned Dwyer

Ned Dwyer

Australian in SF. Product manager & entrepreneur. Running & reading.