The 2025 Development Bubble: A Looming Crisis for Startups and Investors

by James Hansen and Adam Elkassas

animated man climbing pile of money
How will startups and investors succeed when product development is pure guess work?

by James Hansen and Adam Elkassas

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Imagine a world where transforming ideas into reality doesn’t demand millions of dollars or a dedicated team of engineers. Unfortunately, for many founders, this remains a distant dream as they navigate the treacherous waters of the startup ecosystem. With the rising popularity of web and mobile applications, first-time founders often pursue the next big idea, from simplifying dating (Hinge) to revolutionizing transportation (Uber). While these platforms promise convenience to everyday users, they share a common, formidable challenge: raising capital. To launch a successful startup, founders must master project planning and fund allocation to avoid bleeding their ventures dry.

The Impending “Development Bubble”

In this article pre.dev’s VP of Business Development James Hansen and Founder Adam Elkassas address the birth of the impending “Development Bubble,” responsible for thousands of failed products and billions of dollars in lost venture capital.

The article then introduces pre.dev, a technology revolutionizing the workflow from idea to development for non-technical founders without requiring exorbitant capital and helping VC’s make more informed investments by forecasting the costs of development. We will examine the industry from the point of view of three different stakeholders:

  • Startup founders
  • Development firms
  • Venture Capital

Startups with Non-Technical Founders: Dead on Arrival

Most products fail in the pre-development phase of software development before a single line of code is written.

The majority of first-time founders are non-technical and unaware of the true costs involved in app development, whether it’s a prototype or a full-stack project

Most startups die before development even starts because non-technical founders struggle to deliver when they have to assume the roles of product managers and CTOs, despite lacking the technical knowledge. This situation leaves them struggling to make informed decisions about the technical aspects of their projects. Consequently, their startups often fail to produce any tangible code to show investors as proof of concept, leading to an early death.

Try a free demo of our AI Product Architect on the front page of pre.dev and start building today.

After consulting with over 200 founders and 500 development agencies, a significant flaw in the pre-development planning stage has emerged, leading to billions of dollars in capital losses for both founders and VCs. The majority of first-time founders are non-technical and unaware of the true costs involved in app development, whether it’s a prototype or a full-stack project. Ironically, development agencies are well aware of this gap in knowledge and have exploited it for years — until now, with the advent of new AI tools that are leveling the playing field (CB Insights, 2023).

The Auto Mechanic Analogy

To illustrate the problem, consider the auto mechanic analogy: imagine your car breaks down, and you have no mechanical knowledge.

cartoon mechanic

In this example the dev shops are the mechanics and the founders are consistently getting ripped off

You take your car to the shop, explain the problem, and the mechanic tells you to come back in a few days or weeks. The issue is that you don’t know exactly what needs to be done to your vehicle, leaving room for unnecessary surcharges. Developing an application works similarly, and without a technical background, founders can easily be taken advantage of (Grand View Research, 2023).

The VC Perspective

Moreover, the high failure rate of startups, due to inadequate technical planning, discourages VC’s from investing in early-stage companies, especially those led by non-technical founders

VC’s invest billions of dollars in tech startups annually, yet many of these companies fail due to poor project planning and going over time and budget on MVP development. Development shops will continue prioritizing their own profits over the success of startups, viewing tech platform development as a high-ticket sale. This creates a significant financial burden on founders’ balance sheets (BDC, 2023). From a VC’s perspective, the inability of a founder to present a detailed, accurate product plan and a working prototype is a major red flag. It not only indicates a potential misuse of funds, but also highlights the founder’s lack of preparedness. This often results in VC’s either shying away from investment or demanding a significant equity stake in exchange for their capital.

investor and burning cash
VCs are in search of unicorns but taking shots in the dark without knowing the true cost of development.
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Moreover, the high failure rate of startups due to inadequate technical planning discourages VCs from investing in early-stage companies, especially those led by non-technical founders. This perpetuates a cycle where only the well-funded and technically adept startups get the chance to thrive, leaving many innovative ideas unexplored (Fundera, 2023).

Introducing pre.dev: Automating Pre-Development Planning with AI

pre.dev gives you the power to view your product on the atomic scale
Use coupon code DEVBUBBLE2025 at pre.dev for 50% off the first month of our AI Product Architect starting at just $14 for unlimited access.

Enter pre.dev, a user-friendly platform offering a suite of AI tools that enable founders to converse with an AI product manager about their ideas. The AI product manager maps out the front-end and back-end user journey for the application, recommends the tech stack, and provides a detailed statement of work. As new challenges arise, users can easily spin up multiple versions of their concepts and project complex timelines and their impacts on cost estimates. Traditionally, founders have one shot with development agencies to handle this process, often leading to inaccuracies, mismanagement, and inflated costs.

At pre.dev, we automate the stage of software development where most products fail: pre-development.

pre.dev AI technology analyzes your idea and outputs a technical blueprint of your product with a cost breakdown, product roadmap, and custom boilerplate codebase.

Our AI technology analyzes your idea and outputs a technical blueprint of your product with a cost breakdown, product roadmap, and custom boilerplate codebase.

Founders often fall into two categories:

  • no planning at all, essentially free-styling the development process
  • overplanning — spending months and even years without execution

Using pre.dev, founders will quickly find that they can generate a more comprehensive development roadmap in 5 minutes than they could in weeks on their own.

pre.dev analyzes your idea in minutes by asking simple followup questions
pre.dev analyzes your idea in minutes by asking simple followup questions

pre.dev shifts the planning paradigm and allows founders to innovate on the fly without sacrificing organization or time in the planning phase. They can easily experiment with different scopes of their projects and differentiate between nice-to-haves and must-haves. With pre.dev, the founder is no longer starting from 0: this gives non-technical founders negotiating power and prevents them from being overcharged by development agencies. At pre.dev, we believe efficient planning is the key to delivering quality code fast, accelerating ideas to development (Fundera, 2023).

pre.dev gives PM powers to non-technical founders who can project out their full product roadmaps and track progress using tools such as Jira.
pre.dev gives PM powers to non-technical founders who can project out their full product roadmaps and track progress using tools such as Jira.

AI Planning Agents — ChatGPT and Claude were not designed to plan ahead

How are people approaching planning with AI now?

People are looking for hacky ways to string together planning and development
People are looking for hacky ways to string together planning and development

ChatGPT and Claude are primarily used to generate the plans that are fed into downstream code generation agents such as

If the user of an AI SWE technology doesn’t exactly know how to describe what they want to the agent with an effective prompting strategy, these technologies are no better than co-pilots for technical developers. ChatPRD attempts to automate some of the PM work in the same phase of the software cycle as pre.dev, but its outputs lack the deep planning detail necessary to map out complex products. pre.dev takes a graph theory approach to architecture mapping, which gives the platform a dynamic ability to model complex systems such as full-stack software products.

Use coupon code DEVBUBBLE2025 at pre.dev for 50% off the first month of our AI Product Architect starting at just $14 for unlimited access.

pre.dev takes a graph theory approach to architecture mapping, which allows it to embed complex relationships and perform deep-planning algorithms
pre.dev takes a graph theory approach to architecture mapping, which allows it to embed complex relationships and perform deep-planning algorithms

The best alternative to pre.dev is just using Claude 3.5 Sonnet or GPT 4o to do planning. The problem with this approach is that foundational models such as ChatGPT and Claude are trained as general purpose models to predict the very next token in the output, not to break apart complex systems down to an atomic scale and provide task estimates. Andrew Ng, Founder of DeepLearning.ai and AI Fund, mentioned this at his talk earlier this year at Sequoia Capital’s AI Ascent (https://www.youtube.com/watch?v=sal78ACtGTc)— where he believes planning agents will be key to better code generation results.

Andrew Ng at Sequoias AI Ascent describing how an agentic workflow, especially planning, will be key to delivering automated software solutions.
Andrew Ng at Sequoias AI Ascent describing how an agentic workflow, especially planning, will be key to delivering automated software solutions.

How does the current market adapt?

Development shops must integrate new AI tools into legacy workflows to amplify lead flow and lower prices

With advanced AI technology, pre.dev transforms a process that used to cost tens of thousands of dollars into a simple subscription service. pre.dev manages project planning, design, and budgeting within minutes, at a fraction of the market cost. As tech founders become more aware of AI tools like pre.dev, they are likely to gravitate away from outsourcing the planning step to traditional dev shops, potentially eating at this $90 billion market segment with the next generation of entrepreneurs (Salesflare, 2023).

Development shops are faced with the following decisions:

  • Drop prices and increase customer acquisition.
  • Develop and implement their own AI tools.
  • Use a proven product that has already gained traction among the founder community.

Disrupting How VCs and Accelerators Value Investments

pre.dev assists investors in more accurate cost forecasting by providing detailed project plans that account for the majority of development allocation capital. Accurately pricing a project is more valuable to VCs than allocating arbitrary amounts of capital and hoping for successful execution.

pre.dev provides a cost breakdown of any custom application, giving investors a way to forecast product costs and make more informed investment decisions.

By delivering a clear and realistic multi-version product roadmap, pre.dev minimizes the risk associated with early-stage investments and enhances the chances of successful project delivery. This precision in planning allows VCs to make informed decisions and allocate their funds more effectively, thereby increasing the overall success rate of their investment portfolios (ANB Bank, 2023).

~70% of all early stage funded startups will inevitably fail in the first 5 years

Conclusion

pre.dev is revolutionizing the startup development process, making it more accessible, transparent, and cost-effective for non-technical founders to negotiate with development shops, while providing valuable insights for investors.

As the “Development Bubble” continues to expand, tools like pre.dev will undoubtedly play a crucial role in shaping the future of startup development and funding.

Use coupon code DEVBUBBLE2025 at pre.dev for 50% off the first month of our AI Product Architect starting at just $14 for unlimited access.

Sources:

BDC (https://www.bdc.ca/en/articles-tools/start-buy-business/start-business/start-up-financing-sources)
Fundera (https://www.fundera.com/business-loans/guides/startup-funding)
Salesflare (https://blog.salesflare.com/startup-funding-sources)
Bunch Capital (https://www.bunch.capital/blog/comprehensive-guide-startup-funding-sources-and-options)
ANB Bank (https://knowledge.anbtx.com/small-business/starting-a-business/article/sources-of-start-up-funding)
Grand View Research (https://www.grandviewresearch.com/industry-analysis/app-development-software-market)
CB Insights (https://www.cbinsights.com/research/startup-failure-reasons-top)