No Web 2.0 Bubble? Hmmm....
Posted by: Rob Hof on October 25, 2005
A new survey of venture capital investment seems to show no incipient bubble in funding new consumer Internet companies, according to Reuters’ take. Well, let’s hope so. But it’s still early, and even the backers of the recent Web 2.0 conference warned that things were getting frothy. So do some VCs, such as Fred Wilson and Peter Rip.
Here’s why I’d still be worried: It costs a whole lot less to fund companies to revenue these days, as Jotspot’s Joe Kraus and others have pointed out. So even if the amount of money going into early ventures is steady, that means a whole lot more companies may be getting funded—and that doesn’t include the many these days that are bootstrapped by repeat entrepreneurs without traditional VC money.
Even more worrisome, a lot of these companies’ products look suspiciously like something Google or Yahoo are likely to have tomorrow. Are these sustainable companies or, as one wag put it at Web 2.0, merely tabs on Yahoo? I don’t know yet. And I don’t want to come down too hard on enthusiastic entrepreneurs who are coming up with great stuff that makes my online experience better every day. But their best scenario, barring a most unlikely Google-style IPO, is to get bought by the companies their creators fled. What about the hundreds of others who don’t?