The information technology industry stands apart from most sectors in one remarkable way: its most transformative innovations rarely emerge from established giants. Instead, startups have consistently served as the primary engine of disruption, innovation and growth in IT. This phenomenon isn’t coincidental; it reflects fundamental dynamics about how technological progress actually happens.
Today we have a conversation with Aleks Bykhun, a tech expert, having been contributed to development of various innovative IT projects.
Aleks, what is an innovation paradox of established tech giants?
Large technology companies face what is coined the “innovator’s dilemma.” Despite possessing vast resources, talented engineers and extensive market knowledge, so-called tech giants often struggle to pursue genuinely disruptive innovations, killing promising internal projects that didn’t immediately scale to billion-user products.
The problem isn’t incompetence or lack of vision. Established companies optimize for their existing customer base and business models. A public corporation answering to shareholders finds it difficult to justify cannibalizing a profitable product line for an uncertain future market. Internal processes designed to minimize risk and ensure quality inadvertently stifle the kind of rapid experimentation that breeds breakthrough innovations.
Startups operate under entirely different constraints. With nothing to lose and everything to prove, they can pursue radical ideas that established players must ignore. This asymmetry creates what economists call “creative destruction” – the process by which new firms and innovations render existing products and business models obsolete.
How do you see speed and agility as competitive advantage?
Time moves differently in startup environments. A team of several engineers at a startup can often ship features faster than a thousand-person engineering organization at a major corporation. The reasons extend beyond simple mathematics.
Startups benefit from minimal bureaucracy. Decisions that might require weeks of committee meetings, stakeholder reviews, and executive approvals at large companies can happen in a single afternoon conversation. This velocity proves crucial in technology markets where user preferences shift rapidly and competitive advantages evaporate quickly.
Slack, the workplace communication platform, exemplifies this dynamic. The company pivoted from a failed gaming venture to a messaging tool and grew to a $27 billion acquisition by Salesforce within just seven years. During that period, Slack iterated on its product weekly, responding to user feedback with a speed that traditional enterprise software vendors couldn’t match. The company didn’t invent workplace chat – IRC, Microsoft’s products, and numerous other tools preceded it – but Slack’s ability to rapidly refine user experience based on real-world usage created a product that felt transformatively different.
This agility extends beyond product development to business model innovation. Startups pioneered the freemium model, subscription software-as-a-service, marketplace platforms, and countless other approaches that established companies later adopted. Dropbox made file synchronization simple and accessible when enterprise storage solutions remained complex and expensive. Stripe made payment processing straightforward when existing solutions required weeks of integration work. In each case, startups identified friction in established markets and moved faster than incumbents to eliminate it.
How do a risk-taking and the exploration of uncertain territories proceed?
The IT industry’s frontier constantly expands into unproven territories where success remains highly uncertain. Established companies, accountable to shareholders and protective of existing revenue streams, approach these frontiers cautiously. Startups rush in.
Consider artificial intelligence’s recent trajectory. While tech giants had conducted AI research for decades, dozens of startups accelerated practical AI applications by taking risks established players hesitated to embrace. OpenAI’s decision to release ChatGPT as a public-facing product, despite uncertainties about its capabilities and limitations, helped catalyze an industry-wide transformation. The company could make this bet precisely because it wasn’t risking an existing business model.
Similarly, blockchain technology, quantum computing applications, augmented reality platforms and edge computing innovations have all seen startups leading exploration while established companies watch cautiously or make conservative investments. This pattern repeats across IT’s history. Venture capital’s structure explicitly acknowledges this dynamic: investors mistakenly expect nine out of ten startup investments to fail, betting that the tenth will generate returns large enough to justify all the losses.
This tolerance for failure creates an ecosystem where genuine experimentation becomes possible. Engineers at startups can pursue ideas that might seem impractical or premature, knowing that failure won’t derail their careers the way it might at risk-averse corporations. Some of these experiments fail spectacularly, but others succeed beyond anyone’s expectations, creating entirely new markets.
What do you think on startups as talent magnets to transform a generative innovations culture?
The startup ecosystem has fundamentally changed how skilled technologists think about their careers. In previous generations, top engineering talent gravitated toward stable positions at established corporations like IBM, AT&T or Hewlett-Packard. Today’s most ambitious engineers often view startups as more attractive destinations than Fortune 500 companies.
This shift reflects more than compensation, though startup equity can indeed generate life-changing wealth. Engineers join startups for the opportunity to work on challenging problems with significant autonomy, to see their code directly impact users rather than disappearing into vast corporate systems, and to help shape company culture rather than adapting to established norms.
Startups have pioneered workplace practices that established companies later adopted: remote work arrangements, flexible schedules, outcome-focused rather than time-focused evaluation, transparent salary structures and non-hierarchical organizational models. Companies like Basecamp, GitLab and Automattic demonstrated that distributed teams could build sophisticated software products years before of widespread acceptance of remote work.
This cultural innovation extends to technical practices as well. Startups popularized agile development methodologies, continuous deployment, microservices architectures and developer tools like Git when waterfall development and centralized version control still dominated enterprise software. The open-source movement, while not exclusively driven by startups, found its most enthusiastic adoption in startup environments where proprietary enterprise software seemed unnecessarily restrictive and expensive.
The concentration of talented, ambitious people creates a multiplier effect. Engineers who work at successful startups often leave to found their own companies, creating networks of experienced entrepreneurs who mentor new founders, invest in emerging companies and circulate best practices. Silicon Valley’s mythology celebrates this phenomenon – everyone knows about PayPal founders and early employees who went on to create LinkedIn, YouTube, Yelp, Tesla and numerous other successful companies. But similar networks exist in startup hubs worldwide – London, Berlin, Dublin, Bangalore, Montevideo, etc.
Are startups market creation tools to spread expansion of possibility?
Definitely, yes! Startups’ most important contribution involves creating markets that didn’t previously exist. Established companies excel at optimizing existing markets and capturing market share from competitors. Startups create entirely new categories of products and services.
Before Airbnb, the accommodation market consisted of hotels, bed-and-breakfasts, and vacation rentals arranged through classified ads or specialized agencies. Airbnb didn’t improve the hotel experience; it created a new market by making it simple for property owners to rent spaces and for travelers to find those spaces. Today, that market generates tens of billions of dollars annually and has changed how millions of people travel.
Uber and Lyft didn’t marginally improve taxi services; they created ride-sharing as a distinct category. Netflix didn’t make video rental stores slightly better; it created streaming entertainment as an industry. In each case, startups identified latent demand for services that existing market structures couldn’t efficiently provide, then built technology platforms to unlock that demand.
This market-creation function proves especially important in IT because software’s economics favor abundance over scarcity. Unlike physical goods, software scales at near-zero marginal cost once developed. This characteristic means that even narrow market segments can support viable businesses if technology reduces customer acquisition and service delivery costs sufficiently. Startups have launched successful companies serving remarkably specific needs: project management for construction crews, scheduling software for hair salons, payment processing for creators, and thousands of other niches that would seem too small to interest established software companies.
The cumulative effect of this market creation has been the “softwarization” of the global economy. Industries from agriculture to healthcare to manufacturing now depend on software systems that often originated in startup environments. This transformation continues accelerating as machine learning, Internet of Things devices, and cloud computing create new opportunities for software to optimize previously analog processes.
How startups catalyze the venture capital in IT sector?
Startup contribution to IT growth cannot be understood apart from venture capital’s role in funding experimentation. Venture capital provides patient, risk-tolerant funding that allows startups to pursue long-term visions rather than immediate profitability.
Amazon lost money for years while building infrastructure and market position. Facebook operated without a clear business model for several years after its founding. Google spent heavily on data center infrastructure and experimental products long before these investments generated returns. In each case, venture capital funding allowed the companies to prioritize growth and innovation over short-term financial performance.
This funding model has become increasingly sophisticated over decades. Early-stage investors provide small amounts of capital to help founders validate ideas and build initial products. Later-stage investors fund scaling and market expansion. Growth equity investors help mature startups expand internationally or develop new product lines. This staged approach allows capital to flow toward promising ventures while limiting losses on failures.
The venture capital industry itself has grown dramatically, with global venture funding reaching over $300 billion annually in recent years. This capital concentration in startup ecosystems creates intense competition among founders to build exceptional products and companies, driving innovation forward at accelerating rates.
Critics reasonably point out that venture capital’s influence creates distortions: excessive funding of copycat businesses, pressure for growth at all costs, and winner-take-all dynamics that concentrate wealth and power. Some startups prioritize venture capital fundraising over sustainable business building, creating bubbles in various technology sectors. These concerns deserve serious attention, but they don’t negate venture capital’s essential role in enabling the risk-taking that drives IT innovation.
What role play independent IT initiatives in the open source revolution?
Startups have been instrumental in driving the open-source software movement, which has fundamentally reshaped IT industry economics and collaborative practices. While open source predates the modern startup ecosystem, startups accelerated its adoption and proved that open-source foundations could support commercial businesses.
Companies like Red Hat, MongoDB, Elastic and Databricks built billion-dollar businesses on open-source foundations by offering managed services, enterprise features and support while keeping core products freely available. This approach seemed counterintuitive to traditional software economics, where companies jealously guarded proprietary code as their primary competitive advantage.
The open-source model solves several problems simultaneously. Developers can inspect, modify and improve software rather than treating it as a black box, accelerating innovation across the entire industry. Companies can build on proven foundations rather than reinventing basic functionality, allowing them to focus resources on genuine differentiation. User communities can contribute improvements, effectively crowdsourcing development work.
Startups have been particularly effective at building communities around open-source projects. Docker’s containerization technology became an industry standard partly because the company invested heavily in developer advocacy and community building. GitLab’s development practices, conducted entirely in the open with public issue tracking and roadmaps, created transparency that attracted contributors and users alike.
Today, even established technology giants have embraced open source, contributing code to major projects and releasing their own software under open licenses. This shift reflects recognition that openness often provides more competitive advantage than secrecy, a lesson that startups helped teach the industry.
Is there specific trends of geographic dispersion of innovations?
While Silicon Valley maintains its position as the world’s preeminent startup hub, the startup ecosystem has become increasingly global over the past two decades. This geographic dispersion has been crucial for IT industry growth by bringing diverse perspectives and talents to technology innovation.
Estonia, a nation of just over one million people, has produced startup success stories like Skype, TransferWise (now Wise) and Bolt, while also pioneering e-government systems that other countries now study. Israel’s startup ecosystem, often called the “Startup Nation,” has generated more NASDAQ-listed companies per capita than any country except the United States, with particular strength in cybersecurity and enterprise software. China’s startup scene has produced giants like ByteDance (TikTok’s parent), Alibaba and Tencent, while India’s has created companies like Flipkart, Ola and Freshworks.
This geographic diversity matters because different regions often develop expertise in different technology domains based on local strengths and needs. Nordic countries have produced strong gaming and mobile technology startups, building on regional expertise in these areas. African startups have pioneered mobile payment systems that work in low-connectivity environments, innovations that now influence fintech globally. Southeast Asian startups have developed logistics and delivery platforms optimized for dense urban environments and fragmented geography.
The globalization of startup ecosystems also creates redundancy and resilience in innovation systems. If regulatory changes or economic shocks affect one region’s startup scene, others continue driving progress. Talent and capital flow increasingly freely across borders, with investors funding promising startups regardless of location and engineers willing to relocate for opportunities.
How do startups challenge incumbents and prevent stagnation?
Perhaps startups’ most important function is preventing the IT industry from settling into comfortable oligopoly. Without competitive pressure from new entrants, established companies would have less incentive to innovate, reduce prices or improve customer service.
History provides cautionary examples of industries that became dominated by a small number of firms and subsequently stagnated. Before deregulation, airlines, telecommunications and other sectors saw minimal innovation and high prices. When regulatory barriers or natural monopolies protect incumbents from competition, consumer welfare often suffers.
The IT industry has avoided this fate partly because startup formation costs remain relatively low. A small team can build and launch software products with minimal capital, testing market demand before committing significant resources. This accessibility ensures that good ideas from talented people can reach users regardless of the founders’ wealth or connections.
A founder can launch a global service accessible to millions of consumers, just having minimal financial resources. This shift has enabled entirely new categories of startups that would have been impossible, while big companies must spend huge budgets to maintain their big teams to achieve desired tasks. The threat of startup disruption keeps existing tech giants investing in innovation when current products remain not so profitable.
What is startups economic impact and job creation opportunities?
Beyond their direct contributions to technology innovation, startups play a crucial role in job creation and economic growth. Research consistently shows that young firms create a disproportionate share of new jobs in developed economies.
This job creation function becomes especially important during economic transitions. As automation and software eliminate certain categories of employment, new startups create different kinds of jobs that didn’t previously exist. Twenty years ago, professions like social media manager, app developer, data scientist and user experience designer barely existed; today they employ millions of people globally, with much of that employment growth driven by startup needs.
Startups also tend to create high-quality employment. Technology sector jobs generally offer above-average compensation, strong benefits and opportunities for skill development. While concerns about contractor versus employee status, excessive work hours and other issues deserve attention, startup employment has provided economic mobility for many workers, particularly those with technical skills.
The economic impact extends beyond direct employment. Successful startups generate wealth that founders and early employees often reinvest in new ventures, whether as angel investors, mentors or serial entrepreneurs. This recycling of capital and expertise creates self-reinforcing growth in startup ecosystems.
How do you see the road ahead?
As the IT industry matures, questions arise about whether startups will continue playing their historically crucial role. Some observers argue that increasing concentration in technology markets, rising regulatory burdens, and the capital advantages of established platforms will make startup disruption more difficult.
These concerns have merit. Building a social network to compete with Facebook or a search engine to challenge Google requires overcoming massive network effects and economies of scale that didn’t exist when those companies started. Regulatory compliance costs have increased in many domains, from data privacy to financial services, creating barriers that favor established firms with legal departments and compliance expertise.
Yet the IT industry continues evolving in ways that create new opportunities for startups. Artificial intelligence, quantum computing, biotechnology, climate technology and other emerging domains remain wide open for entrepreneurial innovation. Established companies’ focus on existing markets and business models still creates openings for startups pursuing radically different approaches.
Moreover, the startup model has proven remarkably adaptable. As certain domains become more capital-intensive, new funding models emerge to support them. Deep technology startups working on semiconductors, biotechnology, or advanced materials can now access specialized investors willing to provide patient capital for long development cycles. Corporate venture arms and strategic investors help startups access resources and distribution that were previously available only to established firms.
The fundamental dynamics that make startups effective at driving IT innovation – speed, risk tolerance, talent concentration and lack of legacy constraints – seem likely to remain relevant regardless of how the industry evolves. As long as technology continues advancing and creating new possibilities, startups will find ways to pursue those possibilities faster and more boldly than established companies can.
The information technology industry’s remarkable growth and evolution over the past half-century reflects many factors: scientific advances, infrastructure investments, globalization, and changing user needs. But throughout this transformation, startups have consistently served as the primary mechanism for translating technological possibility into practical reality, for challenging comfortable assumptions, and for ensuring that innovation continues even when established players would prefer stability. This role seems unlikely to diminish as long as ambitious founders continue believing they can build something better than what currently exists.
By Weston Clark, Los Angeles
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About Aleks Bykhun
Aleks Bykhun graduated from MIPT with a degree in physics (2012-2018). The first startup he created was the open-source project. Then, in 2021-2024, he created and ran more complex startup, Buildship, which initially was a platform for launching NFT collections, including metascapes.sloika.xyz. After that Bykhun created generative art platform, artgene.xyz. In 2024, he created a commercial AI bot – a conflict solution coach, @dora_ai_ai_bot. In 2025, he created a platform for developing and programming directly from smartphone, yolocode.ai.
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