Technik

More on Disintermediation of Venture Capital

MIT's Technology Reviewe weighed in on Web 2.0 companies disdaining venture capital. They note that "through trial and error ... it's possible to build and launch a Web-based product for a fraction of what it would have cost only a few years ago. Open-source software, virtual work environments (i.e., no rent or overhead), and cheap and plentiful server capacity have helped keep down costs." They think this to will pass. ... As a result, many Web 2.0 entrepreneurs have been able to roll out compelling services without becoming involved in the culture of venture funding." They think this too will pass, once Web 2.0 companies begin to find sustainable business models. Getting launched should not be confused with having a business. Then again, they did not deal with the threat to VCs from Google and Yahoo.

Is Google Disintermediating Venture Capital?

Google is going through that glorious period where It Can Do No Wrong. Sergey and Larry can buy a 767 and still do no evil.  Google can take on the phone companies with free WiFi.  It can take out the libraries by digitizing books.  It can align with Sun and take on Microsoft!  Fear of Google is causing odd business mashups like Yahoo IM + MSN IM, or MSN + AOL.  So maybe Google can also overturn the venture business? 

'Froth' in the Venture Market

Web 2.0 has re-energized the entrepreneurial community.  (Whatever Web 2.0 means.)  Stories are coming in of competition for deals and a surge in A round valuations. Here is a flavor. A couple of Stanford sophomores got $5M on $8M pre-money. A deal turned down by one name partner got picked up by another at a leading fund. One of the hot deals from DemoMobile claims to have three term sheets, ranging from $7-10M on $12-15M pre-money. The list goes on.  What gives? Have the VCs once again lost their good sense?  And so soon after the last bubble?