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The same systems that make outsourcing of small tasks more efficient have driven down the cost of launching a company. Once, an entrepreneur would go to a venture capitalist for an initial five-million-dollar funding round—money that was necessary for hardware costs, software costs, marketing, distribution, customer service, sales, and so on. Now there are online alternatives. “In 2005, the whole thing exploded,” Ravikant told me. “Hardware? No, now you just put it on Amazon or Rackspace. Software? It’s all open-source. Distribution? It’s the App Store, it’s Facebook. Customer service? It’s Twitter—just respond to your best customers on Twitter and get satisfaction. Sales and marketing? It’s Google AdWords, AdSense. So the cost to build and launch a product went from five million”—his marker skidded across the whiteboard—“to one million”—more arrows—“to five hundred thousand”—he made a circle—“and it’s now to fifty thousand.” As a result, the number of companies skyrocketed, and so did the number of angels: suddenly, you didn’t need to be a venture-capital firm to afford early equity.
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