I think this is part of the reason I smell 'bubble' (although not as big as the last one). Like Paul has written elsewhere, there is tons of space left for startups, but what is happening is that lots of them are piling into the same spaces - depth instead of width. And that virtually guarantees some kind of shake out, especially if the economy in general turns south.
Another thing that happens too with this cramming of industries is that all of the legitimate good ideas are blended in with the others. It becomes harder for a business with a great idea to not be compared to every other obvious idea in their market.
I think this is part of the reason I smell 'bubble' (although not as big as the last one). Like Paul has written elsewhere, there is tons of space left for startups, but what is happening is that lots of them are piling into the same spaces - depth instead of width. And that virtually guarantees some kind of shake out, especially if the economy in general turns south.