This doesn’t mean they think the idea is bad, the entrepeneur isn’t capable of delivering on the promise or the business will fail. They just don’t think the opportunity is big enough for them to get involved.
The VC’s logic is very simple. Why do I need the hassle of managing 10 to 20 small investments when I can achieve the same scale of returns on a single investment?
In 2007, Lightspeed Venture Partner’s Jeremy Liew presented a piece at the Web 2.0 Conference on the challenges you would face trying to build a $50 Million eCommerce or online media business. He then followed up the discussion with a couple of posts on the Lightspeed blog.
Jeremy’s position was simply this: The cost of building and maintaining an online media business today is negligible. So it is relatively easy to breakeven. The problem is you need to be big to go public and that, in web terms at least, is extremely difficult to achieve.
Here are the links to Jeremy’s presentation and blog so you can see the discussion in full.
- The original web 2.0 Power point presentation
- 3 Ways to build an online media model to $50 Million.
- More on building an online media company to $50 Million
Anybody thinking about raising finance for their next big web idea should spend a little time taking a look at what Jeremy has to say.
It provides some lemon juice to the mainstream silicon valley success stories of Facebook, Youtube and Google and puts some much needed perspective on the pervasive idea among Web 2.0 start-ups that the “Exit Strategy is the new Revenue Model“
As Jeremy points out in his presentation: Plan A can’t be “Get bought by Google”
Posted on October 28, 2009
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