The Web 2.0 Myth

Worth reading piece by Gilman Louie at Alsop Louie on what he calls the “Web 2.0” myth. While I mostly agree, I think it’s also somewhat over-general in a rapidly-changing media market, not to mention having a whiff of post-YouTube apologia to it. Would he feel the same way in Sequoia’s place?

We see a lot of Web 2.0 pitches from young entrepreneurs. The basic pitch: for an investment of $2 to $5 million, they can build a company that Google, Yahoo or Microsoft will buy. And, in under two years, we
can get 5-10 times our money back. How could you not like that?!

We don’t. We always decline to participate in deals like that. We think this is a kind of disease, often caught by these youngsters in business school. They are looking to cash in on Web 2.0 fever and flip their companies quickly for a nice tidy sum.

These entrepreneurs confuse a feature for a company.

Comments

  1. Nice “worth reading piece” description – just like my blog title! Regarding the “flip it” mentality, I’m not sure how someone could reasonably fund a business at the idea stage with millions of dollars and have a high expectation of selling it for 10s of millions of dollars a few years later. I mean, if the pitching people are THAT intelligent and creative and driven and clairvoyant, wouldn’t they just figure out a way to bootstrap it and keep all those millions to themselves, rather than their measly 20-30% that they’d get to keep after getting funded? No, because they’re too impatient and focused on money for themselves right now today – which is exactly the kind of people you would NOT want building your multi-million dollar investment from the ground up. I’d look for the person/people who have been efforting in every ounce of spare time for the past year, or who have quit their jobs and found a way to make ends meet for a year or more, and who have actually produced smoething AND monetized it in some (maybe small) way, who just need that extra push to capitalize on what is obviously a sure thing.