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Is Web 2.0 Frivolous?

Published: 4/30/2008 9:13:26 PM, comments: 0
I read a recent article by Umair Haque challenging Silicon Valley to create bold solutions to the world's problems.

I agree with the tone of the piece and with the basic premise that many of the Web 2.0 "companies" are fixing small problems and not as ambitious as they could be.  It seems that new Internet companies can be created with so little capital, that the industry attracts many newcomers who think their sheep-throwing "application" is the next big thing.  It isn't.

For their part, many venture capitalists have become afraid of the earliest stages, preferring to invest later in a company's development in order to mitigate their risk.  This has left the early stage wide open for angel investors and a few brave VCs to step in.

I'm not certain that VCs are interested in changing the world when their fiduciary duty to their limited partners to create the best financial returns is paramount.  So I don't see a way out of the current situation of the lack of ambitious imagination, other than the usual shake-out, where companies and their founders are forced out of business by that age-old combination of time and money running out...

Don Jones

Bezos: Amazon = Frugality + Innovation

Published: 4/22/2008 7:03:27 AM, comments: 0
There is an interesting interview in BusinessWeek of Jeff Bezos, CEO of Amazon.com.  I can remember at the beginning of the Web, Amazon was one of the first online stores where I felt comfortable shopping.

The site created the sense that it had everything and the checkout process never, ever failed!

At any rate, one of the takeaways from the interview is that Bezos believes that entrepreneurs can be both frugal yet innovative.  While some things certainly cost money to do, I think he is largely correct.  It is easy to throw a bunch of money at some features or functionality.  It is harder (and not as exciting) to listen to your customers, find the sometimes mundane things that matter the most to them and innovate around them.

So, if you're a user of VentureDeal, let us know what you'd like to see - we're always listening.  Just visit our Contact page and send us your thoughts.

Don Jones

VentureDeal

Getting Very Early Stage Financing

Published: 4/16/2008 2:31:40 PM, comments: 0

What do you do if your company is at such an early stage that you barely have an "alpha" version of your product, yet you need financing in the $50,000 to $500,000 range?

These days, it can be tough.  Venture capital fund sizes are only getting larger, as they invest more in later stage companies while leaving the early stage behind.

The most likely option is to find an "angel" investor, or perhaps an angel group.  Angels invest something like $25 Billion per year in new companies.

How do you find them?  Try existing "pitch" conferences, where they go to look for the latest promising companies.  Find a well-connected attorney or CPA, who has other technology clients, and ask them for introductions in return for using their services when needed.  Of course, you can also use databases like VentureDeal and others to search for angel groups.

"Matchmaker" web sites that pull together entrepreneurs and investors are potentially good, too.  Just be careful to steer clear of the scammers lurking in some of those services.

Don Jones

VentureDeal

Working Code Before Seeking Venture Capital

Published: 4/9/2008 1:13:15 PM, comments: 0

Here's a good (short) post about the value of having a working prototype of your software or Internet application before you go out for venture capital.

As an angel investor, I'm more used to seeing companies at the "idea" stage, but looking back on the past few years, I can't think of one that got funded without at least a bare bones "alpha" stage product.

With the costs of coding something functional continuing to drop - whether through better development tools or cheaper offshore or near-shore resources - you no longer have an excuse for not having a working prototype of at least some basic functionality.

Don Jones

VentureDeal

Venture Capital Exits Are Down

Published: 4/2/2008 10:44:05 AM, comments: 0

For a few years now the venture capital community has been buoyed by the M&A market, which has taken up the slack left by the lackluster IPO environment for venture-backed technology companies.

Preliminary data from the just-ended first quarter 2008 is showing a significant drop in M&A exits as well.  VentureDeal will be reporting on the quarter's activity in due course, but the data clearly suggests that even the technology sector is not immune from the credit crunch and resulting fallout.

How long will it last?  I don't have a crystal ball, but past real-estate driven recessions have typically lasted longer than usual, due to the longer time that it takes to process the bad loans related to real property, foreclosures and the like.

Of course, time will tell, and I'm generally impressed by the speed at which the Federal Reserve has reacted.  I'm also encouraged by Congressional rumblings to take action - perhaps we're lucky that the downturn is happening in an election year - it tends to prod our representatives into moving much more quickly.  Let's hope they make the right moves.

Don Jones

VentureDeal

Don Jones
CEO, VentureDeal

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