Wednesday, December 13, 2006

The Next Big Thang

I ran into someone from the days immediately after leaving Microsoft who did a very successful VC-backed startup that went public and was eventually was purchased. He bailed and is now turning his attention to his next venture. He's thinking about a Web 2.0 venture.

My initial reaction to his area of venture interest was "Oh no, not another Web 2.0 venture." This is based partially on the numbers of entrepreneurs who are flocking to this corner of the software/Internet industry, the horde effect of the VCs in funding these ventures and overlooking other opportunities, but also my skepticism based on my lack of confidence in the business models of these ventures. Web 2.0 certainly offers technology that helps realize the business opportunity of the long tail where there are millions of niche markets which can be served by individual proprietors on the Internet. The technology, however, is not the issue; the issue is the business model. IMHO, Web 2.0 "freemium", subscriptions and the advertising model don't readily lend themselves to VC-outcomes -- except for a few first-mover companies, like YouTube and MySpace. Google is certainly a successful Web 2.0 company, but it is already public.

Note to self: I shouldn't be skeptical. I am, after all, the one who forged ahead when most of the VCs who I initially talked to expressed skepticism about Black Duck Software's business model. (One idiot tried to convince me that I should adopt a license model because the up-front cash was better.) I will endeavor to be positive about Web 2.0 startups in an effort to support my entrepreneurial brothers and sisters.

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