Talent is the limiting factor in startup growth

It is much easier to start a web startup in 2011 than it was in 1995, or even 2005.

You don’t need upfront capital to buy racks of machi­nes, miles of CAT-5, routers and load balancers, redun­dant power and backbone connec­tivity — all are avail­able on-demand from Amazon for pennies an hour.

You don’t need to write server-side Web frame­works — you have your pick in nearly any language. In fact, you have your pick for any number of services you might once have had to develop or maintain yourself: email deliv­ery, web analyt­ics, A/B testing, server monitor­ing, file hosting.

Because the infrastruc­ture cost of starting a startup has gone down, the amount of money you need from investors to get your company off the ground has also decreased. You can build a proto­type in a few months (as every YC class demon­strates, twice a year) for less than $20,000.

And there are more people to give you that money — VCs, ex-Googlers and Facebook­ers, other angels, startup accel­er­a­tors and incubators.

But ask any startup around what they really do need right now, and the answer is clear — great technical talent. Startups of all sizes are competing for a small pool of highly skilled candi­dates, and in startup hubs like San Francisco and New York the compe­ti­tion for engineers is fierce. This scarcity has persisted despite consis­tently high national unemployment rates.

And because it has become so easy and cheap to start a startup, convincing great engineers to join an existing startup has gotten much harder.

All of these trends will continue — infrastruc­ture costs will continue to decrease, tools for creating web products will get more sophis­ti­cated, and more people (and more kinds of people) will be investing in startups at all stages.

But those startups who can hire and retain great talent will achieve greater success because they have the capacity to out-execute their peers.