5 years of US VC Investment in the So.Me Bubble
One of a number of posts that caught my attention over the weekend was this one from Keven Lin: Are we in another bubble? Empirical data from Crunchbase.
It is worth a read, simply because Keven suggests that maybe the number of start-ups being launched in a calendar year is the fundamental metric for determining the size of bubble as opposed to, let’s say, measuring the growth of the investment in the sector vs the growth in the revenues for the sector.
So to provide yet another insight into why the growth in investment in the So.Me sector is not reflected in the growth in revenues I just thought I would mashup the data from a couple of previous posts into a single bubble chart to demonstrate how inefficient the past 5 years of US VC investment in So.Me have been.
The two posts I have gathered data from to create this bubble chart are Take a closer look at the US online advertising spend data and you’ll soon discover the only market Google has disrupted is online and Is the level of Venture Capital investment a Lead or Lag indicator of growth?.
As you can US VC’s have invested $22.9 Billion in Internet Start-ups over the past 5 years. Assuming that the revenue model of the vast majority of these start-ups is based on putting ads on the menu (Think: Twitter, Groupon and Facebook) we discover that this $22.9 Billion investment activity has resulted in just $2.5 Billion in annual revenue growth in the US online advertising market once you take Google out of the equation.
Of course not all of these start-ups are in the business of putting ads on the menu but the bubble chart does provide us with yet another visualisation that can assist us to consider the question of just how good venture capitalists are at picking winners and of course how relatively unimportant the Consumer Internet is to the US economy.
