I just finnished reading Mark Skapinkers post on the brightspark blog. It’s a good read and I recommend it for those interested in what some Venture Capitalists think of the current Web 2.0 debate.To paraphrase – Mark doesn’t think the name Web 2.0 is an apt term considering for the current boom in web2.0 applications we’re seeing now…these were the types of services that the web promised 10 years ago and we were working towards when the bust occurred (and after that if you stayed in the industry.) Thus, this isn’t Web 2.0 which implies an whole new web (hence the 2.0 designation) but perhaps Web 1.1 Relase 5 or some such thing (my words.) Paraphrasing done.I’m of the opinion that in some ways Mark is and both right and wrong. Fence sitting can be fun :)Let me state that I’m not (and never was) a VC and that my experiences will significantly differ from those who did this in the classical VC model. That said I helped finance a few Web companies so based on my experiences here is what I see.There are fundamental differences in what’s driving the new thought process behind today’s ‘Web 2.0’ Applications. I was investing (with OPM) in the Dot-com’s of 1996-2001 and there is a difference between then and now…. people like me are not investing.What does that mean? Well back in 1997 an investment in a Dot-com would be made with the idea of: monetization of eyeballs, traffic numbers, advertising potentials, content delivery…. Or you would invest in companies that created tools to help monetize eyeballs drive traffic numbers, increase advertising potential, deliver content, process online sales…The dev staffs of these startups would usually be 10+ people meaning you had an annual burn rate easily in the $1 – 2 Million Canadian range, for a small to the grind staff with no extra runway. Ordinarily you would try and get 400K angel round build the team, go for a $3-4 million round and a ‘proper’ CEO. Then either do a land grab (if you could) meaning: pump out a product as fast as possible, build the feature set in Rel. 2 allowing the team to say ‘hey we’ve got first mover advantage invest another $3-10 million in us’ or you’d do the ‘I’m going to build X,Y,Z in features that my competitor doesn’t have’ or ‘I’ll be cheaper, or go for a niche etc.’ You get the idea.All of this was in an age where the pot of gold at the end of the rainbow was an oversubscribed IPO (or RTO with a sidecar), usually led by Yorkton, or possibly Cannacord/Research Capital/TK (if you were desperate)/Octagon/Sprott (Yes, Sprott did do silly tech investments… though now its all about Gold.) There were others but this was generally those with whom I had experience.That’s not what’s going on today.
Today, Venture Capitalists aren’t investing in the Web…. I know, I know – Some are. But the flow of VC dollars in to the Web is not blinding by any means, the google effect is slowing and more locally Mark Evans has complained on numerous occasions about the dearth of Web 2.0 startups north of the Border… while at the same time trying to call the top of the Web 2.0 market – like every good Tech Reporter does 🙂
The reason for the dearth is easier to understand than calling the top of the market in this case (in contrast to last time round.) This is because Web2.0 isn’t about eyeballs, metrics or any of the things I’ve mentioned earlier. It’s not about dev staffs. It most importantly is not about taking the company to IPO. Its about ‘Neato!’ the wow factor.
That’s what Yahoo was in 1996/7 when they kept Wowing me with new services… Today some guy fired from TechTV is wowing me.. his site is sticky.. just like yahoo’s was when I saw it 1994. The difference is the wow factor can be achieved on the cheap… there isn’t much money in it for today’s VC’s – we know this because the ‘moat’ that protects the Wow factor is more or less a trickle of a garden hose. Anyone can steal (improve/borrow) a site, the mash-up phenomena is a perfect example/effect of this…
I’m think that’s why Mark can rightly say this isn’t Web 2.0 – there is the same democratization and wow factor that we had back in 1994. But now the big difference a VC see’s is the barrier to entry has changed dramatically (there isn’t one generally) and instead of needing millions to build services that make less (occassionally more) millions – these things are being launched for a few grand… Thus VISA’s soon to be announced slogan – ‘Max out a pre-approved Visa that arrives in the mail and launch your Web 2.0 dot-com!™’
Thus, there isn’t a need or reason for a VC to invest (Brightspark hasn’t) in the ‘new’ web – that’s why I’m still comfortable calling it Web 2.0 – but I can also see that there isn’t anything all that new. So… its the Same-Different Web, maybe thats a better term.