Is now a good time for Young Internet Entrepreneurs? October 8
Web 2.0 is anything but in the shadows these days. Everyday we are hearing more and more about Facebook, YouTube, and MySpace in traditional media. Sources like The Wall Street Journal and New York Times are keeping up with these colossal new companies that built themselves up in a matter of months and are now looking to be acquired for over a billion dollars.
There in lies the problem, however. Or rather it is the sweet spot. It depends on which side of the spectrum you are on. If you are YouTube or Facebook then the number of suitors have grown pretty slim in terms of potential acquirers simply because of the price tag. Viacom backed out of wanting to purchase Facebook because they thought it was too expensive. They did, however, say that they are looking for younger, less established businesses with huge potential. This is where today’s young entrepreneurs come in.
The fact that big Web 2.0 has exhausted many of their options because of their price tag means that there are a slew of companies out there looking for great ideas with great business plans that haven’t even begun to hit their potential yet. These acquirers know that Web 2.0 is real and that a dot-com business is possible. They’ve seen Google and they’ve seen MySpace. They also know that the biggest wave of new corporate giants is going to come from the Internet. That is why this is the time to really try and get noticed if you are in the Web 2.0 world. It’s true that there are a ridiculous number of Web 2.0 “businesses” out there. However, most of these do not possess a solid business plan. Some of them don’t even have a way of making money other than Google Adsense.
If you are confident that your service is helping make other people’s lives easier and is something that they would use on a daily basis like Google or MySpace, then you should have no reason not to make something big out of your company. With a strong business plan, a business model, the right execution, and some luck, you can make your Web 2.0 a true success in the eyes of the world.
Nathan Waters Oct 9
Interesting thought that web 2.0 acquirers are shying away from the larger established, more expensive startups and going for the smaller, less expensive, but with similar potential ones.
My question is: why has it suddenly become the norm that entrepreneurs must sell their startups early to the big boys like Google or Yahoo?
Sure, startup a company which you have a passion for, build it up as far as you can take it or until you get sick of it… then look for a sale to move on.
But I tend to get the feeling that many entrepreneurs these days are starting companies with a major focus on being bought out within the year or two.
I think we’re letting the VCs get into our heads and giving them too much control. They’re the ones that want a quick ROI, we should be the ones that sell when the time is right and startup companies for reasons other than a quick cashout.
cheers
nathan
RohailR Oct 10
Oh I completely agree with you, Nathan, that the prime focus of one’s startup should not be to find an acquirer, but rather to build the best business that one can. They should most definitely go after what they’ve envisioned for their business and build something that they believe will change the world. Jay Adelson, the CEO of Digg, said the same thing recently on a podcast at Venture Voice and felt that too many startups are looking for buyers early on when they shouldn’t even be worried about that; they should simply focus on building a great business.
Nevertheless, the chances of getting an IPO are pretty slim so it’s always important to keep an exit strategy in mind for the long run. If you’re purpose in building a great business is to hold on to it forever then that’s fine. However, if one day you’d like to get picked up when you feel you’ve done as much as you could or would like to do with the business it makes sense to position yourself in a way that you look appealing to whatever acquierer you feel would be the best fit for your business. This by no means suggests that you shouldn’t work towards your visions of the business, however. I think it’s possible to do both at the same time. It’s really a difficult balance and something that has to be looked at individually as a business owner.
Flee The Cube Jan 17
I think one important difference betweeen the web 1.0 bubble and (let’s face it) the web 2.0 bubble is in terms of scale. There’s bound to be plenty of failures this time around too, but the amounts of lost capital will be smaller. On the flip side of the coin, this means that there’s plenty of potential for new web businesses to be successful without having to hit it big time, in the multimillion dollar range. To me, this means that this time around there will be many more “small” successes, and that’s just fine in my book.