Albert Wenger writes about the structural changes in both the firm and in web services that make a B2B marketplace more viable today than in the original dot-com boom. It’s a thoughtful piece that’s worth a careful read, and I want to add my $0.02 here:

Albert surfaces some remarkably interesting facts about how non-employer businesses (business where the owner is the only employee) are growing rapidly.

For instance, the US Census Bureau tracks non-employer businesses, which are businesses with no paid employees other than the business owner(s). The number of such businesses increased from 15.4 million in 1997 to 17 million in 2001 or about 10% in 4 years, but then grew by 20% over the next 4 years to 20.4 million in 2005 (most recent year for which data is available).

I think this shift in the makeup (or deterioration) of firms will have many interesting impacts. For example:

  • We will see an increase in micro-acquisitions for the primary purpose of building HR. Large firms will buy one-person companies instead of trying to hire people. This is already happening today: RockYou and Slide are “acquiring” Stanford kids from the Facebook Apps class that BJ Fogg and Dave McClure ran. Instead of trying to hire these grads, RockYou and Slide are giving these kids an acquisition price that is the functional equivalent of a large starting bonus.
  • The SMB services market will become very competitive, and specific verticals will commoditize as this market balloons and entrepreneurs chase the gold rush.
  • The blending of consumer and enterprise software will increase rapidly. When the difference between a firm and a consumer is blurry, the software targeting a non-employer business will be equally as blurry in terms of its defined target user. For example, AOL Instant Messenger and Salesforce.com will start seeing increasing overlap in their user base.

In short, this growing market of Non-Employer Businesses is ripe with investment opportunities, and they will look very different from the current Enterprise and SMB investment opportunities. I’m excited to chase it down.