PALO ALTO, Calif. -- Are the days of the big software firm numbered? No one expects Microsoft, Oracle or SAP to go away anytime soon, but the idea that a hot startup might someday reach such levels seems increasingly doubtful according to an early investor in Google.

"We're seeing the emergence of the app economy," said Ram Shriram, managing partner of Sherpalo and founding board member of Google (NASDAQ: GOOG). "The big companies aren't hiring, but you see people from [various universities) starting little companies, making the top ten list on the iPhone App Store. "I think we're going to see lots of little companies that will perhaps be successful with ten or 15 employees. This is wonderful."

He also said the phenomenal success of the iPhone App Store and other online store fronts are a better business model for startups because getting revenue by charging for applications is a better, more sustainable business model than relying on ads. Shriram spoke at a panel here at Stanford as part of the Silicom Summit.

Shriram also uttered what many may consider heresy for a Silicon Valley venture capitalist. He said this new class of mobile software startups are generating profitable revenue streams, but warned "if you aim to build big you will fail."

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