Wednesday, October 06, 2004

Bubble 2.0?

Now on at Web 2.0 is a panel discussion by a group of venture capitalists with the question -- is it a new bubble? Panelists include Safa Rashtchy of Piper Jaffray, Lanny Baker of CitiGroup, William Janeway of Warburg Pincus, and Danny Rimer of Index Ventures.

According to the group, the big difference between what will happen during this growth phase of the Internet and the last one is revenue. While last time there was a blind faith that building an audience would result somehow, someday, in revenue -- this time people know that it is possible (and Google proved it) to build a very profitable business around that audience. So companies have to prove that they know how to make money.

So what are these investors looking for as an investment in Web 2.0? Bill Janeway - "the integration of what has traditionally been back office, batch processing and analytics with real time network generated data..." Danny Rimer - "...the use of the Internet to introduce disruptive technologies... companies that are upsetting traditional economics..." Lanny Baker - " is still about building the largest audience..."

Bill - "Web 1.0 was about experimentation. The Bubble allowed us to overbuild the network, we funded enormous productive waste - and waste, trial and error, is a virtue. This set of proofs allowed us to create Web 2.0. This time around, the cost of capital is substantial which transforms the opportunity for experimentation. There will be a lot of people creating cool concepts but they will likely be acquired by big companies that have a proven audience and revenue... With extraordinary execution a few new companies may emerge... but otherwise, 'successful' companies are more likely to be acquired than to go public."

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