Well, in market economics, 'perfect competition' is usually considered a good thing. It allows for maximum innovation and and the maximum alleviation of 'scarcity.'
I think the problem is that so long as this new wave of entrepreneurship is limited to web-startups, we're going to see diminishing returns. There are only so many ideas that can reshape the way we do communicate and do business while remaining within the confines of a webapp. Future startups will presumably have to chase smaller and more niche problems in order to remain relevant.
A byproduct of the maximum alleviation of scarcity is that there is no more economic rent for firms. This means that web/software entrepreneurs in general wouldn't be making huge money, they'd only be making enough to cover their opportunity cost of their next best alternative.
In this scenario, people would be motivated to do it because it's either the only thing they know how to do, or their true passion and more important to them than anything else. Either way, while the consumer wins, the entrepreneur loses in terms of cash (but maybe not in terms of personal fulfilment).
I think the problem is that so long as this new wave of entrepreneurship is limited to web-startups, we're going to see diminishing returns. There are only so many ideas that can reshape the way we do communicate and do business while remaining within the confines of a webapp. Future startups will presumably have to chase smaller and more niche problems in order to remain relevant.