The decline of venture capital for Web start-ups
Last week The New York Times published a piece asking the question, Do Web entrepreneurs still need venture capitalists?
In short, yes. The cost of starting a Web company is decreasing thanks to cloud computing services and other technologies that entrepreneurs can rent instead of buy. Founders can now finance a start-up Web company for less money than ever before, eliminating the need for help from venture capitalists.
As I said in my comment, the bottom line is that with an economy in recession, and with many of those who do have jobs feeling insecure about their future security, now is an amazing time for entrepreneurs with domain experience and good ideas to launch a business without the need to go through the enormous effort and distraction of trying to raise formal VC money. Along with cloud computing, tools like Alpha Five make that entirely possible. Have a look at the article and my comment for the full scoop.
1 comments:
Richard - long live the self-funded software company! Isn't about about time that the so-called LIFESTYLE software companies received the credit they deserve for not taking the usual millions in ramp-up cash that force them on a trajectory that 9/10 startups can't survive?
If one of the junior VC analysts on Sand Hill Road is bored (and there must be many at this point in the econ cycle), he should make create some charts to crunch the past 5 years of data to see exactly how many VC-backed enterprise software companies in the past made a positive exit, vs. the self-funded startups who have been cruising along steadily with comparable revenue streams.
I would guess that chart would show the VC-backed firms with dramatic peaks and valleys, while the self-fundeds show a steady and/or upward line.
It's really kind of funny: Not so many years ago, and still today, a VC-backed software firm would competitively pounce on any lifestyle company for not having a 'pedigree' or 'staying power.' But now that CIOs have been so disillusioned by VC-backed startups forced by design to grow too much too fast (read failed promises and product roadmaps), the 'turtles' of this VC fable are now garnering the attention of mainstream customers.
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