VC money out of fashion for internet start-ups
Today's WSJ has an interesting article (Many Internet Start-Ups Are Telling Venture Capitalists: `We Don't Need You') about entrepreneurs who refuse VC money to build their businesses.
With costs of creating an internet venture falling down (cheaper storage, open source, outsourcing software development to India...), there is no need for huge amount of capital to create a business: only $200,000 were needed to have Flickr up and running and the company was then acquired for $25m by Yahoo!
This marks the emergence of a new type of start-ups: low up-front without VC money and built with the idea of generating a quick exit, usually by being acquired by a big player. It does not mean that the VCs are going to disapear since there are still start-up companies who need money for long run expansion but it's probably going to be more difficult for VCs to invest in pure internet players, thereby creating an interesting shift of power.
With costs of creating an internet venture falling down (cheaper storage, open source, outsourcing software development to India...), there is no need for huge amount of capital to create a business: only $200,000 were needed to have Flickr up and running and the company was then acquired for $25m by Yahoo!
This marks the emergence of a new type of start-ups: low up-front without VC money and built with the idea of generating a quick exit, usually by being acquired by a big player. It does not mean that the VCs are going to disapear since there are still start-up companies who need money for long run expansion but it's probably going to be more difficult for VCs to invest in pure internet players, thereby creating an interesting shift of power.
posted by k at 8:40 AM
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