Okay, here’s a thought: I founded one of those infamous Internet startups in 1998 (Remember? Those were the days!) and we had to spend about 500,000 Deutsch Mark (about $400,000 - $450,000 in today’s money) for the whole company founding process, legal advice and documents, software development, servers, hosting, Internet traffic and so many other things… It literally cost us that much just to get the company off the ground. That was one of the reasons why we had to (and managed to) raise DM 2,5m in our first round.

Fast forward 10 years - I recently co-founded another Internet startup. This time we spend around $40,000 - $50,000 to achieve the same result - the 10x factor kicked in. Nearly everything seems to be cheaper today - the servers are Dell boxes which we can rent, Internet traffic is virtually free (we get 1 Terrabyte of free traffic a month - in 1998 I paid DM 50 per Gigabyte!), our servers run on open source operating systems, the application server is open source, development is significantly cheaper - the list is long.

I know, I know - I’m not telling you something new. Bear with me for just a bit longer… Now this ‘10x Factor’ led to a flood of new startups (it’s actually doable to build and thus fund a startup on a shoestring budget) and some people claim we are already in a new bubble. Which is or is not true and which might or might not matter at all. The much more interesting question for me is - what would happen if we could apply the same 10x Factor against the costs of starting a company again? And how would that change the system?

What if we could build a company for $5,000 instead of $50,000? And what needs to change to get there?

We have open sourced the infrastructure - operating systems, databases, application server, middleware, what-have-you (free). We have cloud computing which means we can go with a true pay-as-you-go model for our hosting/server infrastructure (literally pennies). We can get cheap and high quality coding done through a huge array of freelancers and service providers. The very same is true for graphic design, user interface design & usability as well as the beloved logo creation process. So what’s making building your company expensive?

From my experience it’s your legal fees (for T&Cs, your data privacy policy, vendor and partner contracts, employment contracts - the list is endless), marketing and to a certain extend your physical infrastructure (office and the whole shebang which comes with that). Why don’t we open source this as well? Why doesn’t a bunch of young lawyers get together and put this stuff up for free? If we can do it with code - why can’t we do it with legal ‘code’? And why can’t we create effective networks where a community of businesses gives physical infrastructure to startups - share an office, use my printer and so on. And marketing? Come on guys - there are tons of non-utilized ad inventory out there. It costs pretty much nothing to make it available - and you wouldn’t monetize it anyway.

As said - just a thought. Now - let’s build it.