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.

Related posts:

  1. The Myth of the Entrepreneur and the Garage
  2. The Google Guidance Myth
  3. The Myth of the Serial Entrepreneur
  4. The Myth of the Management Myth
  5. The Myth of the Serial Entrepreneur — Part II

Comments

  1. worth says:

    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.