Big three clouds, Apple, Facebook are buying all the best cloud tech

Tip for entrepreneurs: World could soon need automated cloud-sueball-flinger

Those of you contemplating a cloud startup have two options: get acquired by one of five companies or build an automatic sueball flinger.

So says Sam Altman, president of startup factory Y Combinator, in his annual letter describing the organisation's activities.

The letter's full of StartupLand cliches - “Our mission is to … make the future great for everyone” - and lots of stuff about the importances of companies with important missions and the nobility of founders willing to build those companies. But there's also the following observation about the advent of what Altman calls “the era of hyperscale technology companies”:

Companies like Amazon, Facebook, Google, Apple, and Microsoft have powerful advantages that are still not fully understood by most founders and investors. I expect that they will continue to do a lot of things well, have significant data and computation advantages, be able to attract a large percentage of the most talented engineers, and aggressively buy companies that get off to promising starts. This trend is unlikely to reverse without antitrust action, and I suggest people carefully consider its implications for startups. There will of course be areas where these companies are naturally weaker, and these are good areas to start companies.

There's a few of things to read between the lines here.

For one, neither IBM or Oracle is considered a hyperscale company, yet both are loudly proclaiming that's where their future lies. And where's Salesforce or the other big SaaS players? Not on Altman's radar, that's where.

Second, if Altman's analysis about competition law likely becoming a necessary tool for those hoping to offer hyperscale innovation it appears the five companies he mentions are going to concentrate a lot of innovation within their walls. Today, a fair bit of that innovation trickles down – think Open Compute and Kubernetes, two recent examples among many – but Altman's suggestion appears to be that the five companies are becoming increasingly guarded in terms of what they'll share.

Or perhaps even guarded about the kind of customers they will welcome. Consider this year's must-have: an artificial-intelligence-infused, always-improving-thanks-to-machine-learning chatbot that needs a big public cloud's hyperscale capabilities. Might a promising chatbot startup find itself excluded from a public cloud that sees its efforts as a threat to its own chatbot API?

If so, perhaps an automated sueball-flinger could be the only cloud startup really worth doing. ®

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