Web 2.0 Failures: Less Painful

Dallas IT SupportFred Wilson and Paul Kedrosky are blogging about Web 2.0® failures.  Paul is talking about the lack of failures to date and Fred is suggest we wait, they’ll come.  Fred explains that it takes time to fail, perhaps 12 to 18 months just to run out of cash.  John Battelle notes that Web 2.0® companies can operate for long periods without much cash, most with rates less than $1MM per year.

What would constitute a failure?  For companies in the creation phase, i.e. pre-VC, failure is almost impossible.  Entrepreneurs trade their time for experience - for technology geeks a failed idea is always better than time spent playing WoW or hanging out in Second Life.  My advice?  Don’t worry about the failures, instead embrace the people who make the effort - hire them if you can.

The impact to VCs is not very different than for entreprenuers.  Most of the Web 2.0® investments have been very small (under $5MM) and the resulting losses will be relatively painless.  Fred points out a few exceptions including Jobster ($20MM) and Zillow ($50MM), but I think that is the point.  I keep hearing there is a bubble, but to what extent?  I have not seen ten VCs sinkings tens of millions of dollars in copies of Zillow and Jobster.  There is room for a Zillow or a Jobster, there isn’t room for ten of each right now.  Until we start seeing copy-cat investment I don’t think we will see a painful set of Web 2.0® failures.  Fred leaves us with this note:

I think if we all keep our heads screwed on straight and keep the funding amounts to reasonable levels, keep the burn rates down until we have demonstrated viable business models, and focus on building sustainable businesses instead of companies than can be flipped, we’ll all be fine.

No Responses to “Web 2.0 Failures: Less Painful”

  1. B. Scott Burkett's Pothole on the Infobahn Said:

    Why There is No Web 2.0 Bubble

    I have been working on this post for some time now, and for a variety of reasons, simply have yet to finish it. However, after reading today’s offering by Alex “Semper Fi” Muse over at the Texas VC blog, I am scrapping my efforts on …

  2. kr8tr Said:

    Even failure aren’t “failing” too bad - Kiko, the Web Calendar that “failed” just sold the assest on eBay for $258,100.00 — and there were only three people in the company. Not bad.

    http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ssPageName=ADME:L:LCA:US:11&item=120024164593

Leave your Comment