“Life and Death in the App Store” chronicles the rise and fall of an app company. The programmers are skilled but the products are not always hits. Maximum annual revenue was under $1 million.
My personal theory about having a successful business is that you need to have either (1) a lower cost of capital than everyone else, (2) knowledge and skill that nobody else has, or (3) experience with customers and a market that few others have.
Way #1 works great for government cronies. They can get capital to build a factory for free. Way #2 is the path taken by a lot of MIT spinoffs. Unfortunately it carries a lot of risk, e.g., if the exciting new technology turns not to work as well as hoped. Way #3 seems to characterize most successful software companies. The founders of SAP, for example, had experience as IBM employees building accounting software for manufacturing companies.
Pixite, the company described in the article, would seem to have tremendous prospects if they were to partner with enterprises that have already identified business needs but don’t have the tech skills to implement. Healthcare.gov and associated Obamacare sites, for example, generated about $1 billion in revenue for the software industry. A company such as Pixite might be better off working together with a health insurer, health care provider, or pharma company in order to mine some of the gold in this part of the economy.
Readers: What should these guys do? Go into a business area with a partner or fold their company and get jobs at Google and Facebook?