---
title: "When Tailwinds Vanish: The Internet in the 2020s"
link: https://luttig.substack.com/p/when-tailwinds-vanish
published: 2020-04-22
category:
  - Article
tags:
  - VC
  - startup
  - "future of venture"
---

> The Internet tailwinds that propelled Silicon Valley’s meteoric growth for decades are stalling out. The ripple effects will jolt the tech industry.

By [[John Luttig]] https://luttig.substack.com/p/when-tailwinds-vanish


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> Like any mature industry, Silicon Valley must battle to maintain growth in the face of immense economic gravity. For the first time in Internet history, startup growth will require a push from the company and not a pull from the market. Unlike the organic pull that drove many of the dotcom-era successes, today’s Internet startups need to fight for growth by investing more heavily into sales, marketing, and operations.

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> A shift from R&D to SG&A will operationalize Silicon Valley, leaving room for new financial infrastructure. VCs will need to take risks on vision, not numbers. And the founders and operators of tomorrow won’t look like those of the past 20 years.

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> Software companies founded today are competing less with pen and paper than with other Internet-first incumbents. Put another way, as happens in every maturing industry before it, Internet company revenue will become zero-sum. As a corollary, the time between founding years of software startups and their competitive incumbents is shrinking:

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> To pose the inverse of the opex reduction question: if you had an extra million dollars for your startup, where would you spend it?

> In the immature Internet era, a consumer Internet company would likely invest this money into R&D by hiring engineers, product managers, or designers.

> As a SaaS company, you’d spend an extra million to hire more sales reps or run a marketing campaign. These SG&A investments are a prerequisite to drive business growth. Relative to the R&D-driven growth of early Internet companies, SG&A will become the primary growth vector in the 2020s.

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> For startups taking R&D risk in new technological areas, the founding team may look like something we can’t pattern match to historical successes. Maybe it’s a scientist in his garage who escaped the tendrils of academia. Or your first hire for the founding team is no longer your college roommate, but an expert in your startup’s industry.

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