Caroline McCarthy of CNET’s blog The Social has a long post that uses as a jumping-off point the party at this week’s Web 2.0 conference thrown by Mashable, with sponsorship from a new social-networking startup (still in alpha) called Chi.mp. The highlight of Caroline’s post, as Erick Schonfeld of TechCrunch noted on Twitter, was a line from an anonymous observer, who provided this humdinger:
“I’ll tell you what Chi.mp is. It’s venture money getting set on fire.”
In other words, no one cares what Chi.mp is or does, and even an alpha site clearly has enough VC money to blow on a fancy party. What does this prove exactly? Nothing, really — although it sure is a great quote. Caroline goes on to quote one of Tim O’Reilly’s typically enthusiastic comments about the Web’s effect on the world, in which he says that “We’re at a turning point akin to literacy or the formation of cities,” and then she notes how it’s easy to raise money if you’re PayPal founder Max Levchin or serial entrepreneur Marc Andreessen, but everyone else had better watch their step because the Web economy looks tippy.
Given that the party — which McCarthy seems to see as a kind of 1920s, pre-crash, Gatsby-style bacchanal — was thrown by Mashable, it’s probably not surprising that Mashable writer Adam Ostrow steps up to challenge the CNET blogger’s post. But I think Adam (who is also a Web entrepreneur, having acquired and relaunched Readburner.com) makes a number of good points. The bottom line is that the Web makes it so much easier to start and run a business — and yes, I’m using that term broadly — that it’s hard to see where the sturm und drang about the crumbling Web 2.0 “economy” comes from.
As Adam points out, the previous bubble was made up of companies with sky-high valuations that had gone public. How many Web companies have done that this time around? Not many. So Slide convinces VCs it’s worth $300-million, and Twitter raises money at a $60-million valuation based on hopes and dreams — so what? That doesn’t hurt anyone except VCs who should know better. Web startups will continue to pop up like mushrooms because it’s just so cheap to put them together. Eric Ly started a scheduling service called Presdo with $35,000 and some code he wrote in a weekend. Let’s try and relax, shall we?
{ 8 comments… read them below or add one }
Seth Finkelstein 04.26.08 at 1:26 am
Bah, humbug.
This post regurgitates the most dangerous idea: “IT'S DIFFERENT THIS TIME”
As in: “The bottom line is that the Web makes it so much easier to start and run a business ” - it's different! Not like the old bubble! DON'T LEARN THAT LESSON!!!
In fact, I'd argue starting and running a real business is pretty much as hard as it's always been. People are confusing a shift in expenses with a revolution in economics.
Warren Whitlock 04.26.08 at 11:56 am
companies will come and go, money will change hands, but the trend is the thing to watch.
Obvious that the technology is here to stay, no deaths from start up hyperbole, and good ideas get out regardless of the economy.
Millions of small businesses are doing things more efficiently due to the net, billions of consumers lives are better.
Great post, those pundits have myopia. You have it right
mathewi 04.26.08 at 12:49 pm
I had a feeling you would be dropping by, Seth. You know the funny
thing about saying “It's different this time?” Sometimes it really
*is* different — and refusing to acknowledge that is just as much an
example of blinkered, head-in-the-sand behaviour as the opposite.
Was there a distributed server cluster like Amazon's S3 back in the
first bubble? No. Or if there was, it was orders of magnitude more
expensive than what startups can currently afford — that's a real
difference in economics. So is the existence of Google Apps, and of
Amazon's EC2 and Simple DB, and even of Basecamp, for that matter.
Those things make a difference — maybe not enough to turn a dumb idea
into a smart one, but enough to make it easier to try them both out
and figure out which is which. In the last bubble that didn't become
obvious until after the IPO.
Alexander van Elsas 04.26.08 at 1:28 pm
Good one Mathew. I agree with you. I wrote a post about this a few days ago, in which I argued that web 2.0 technology has made the cost of starting a web service drop to almost zero. That allows anyone with an idea (it doens't have o be a good idea) to start a business. But lowering the thresholds to create new services doesn’t make the process of creating a great service ANY easier. It still requires craftsmanship. Web technology has brought us democracy, but it comes at a cost.
evan barton 04.26.08 at 1:53 pm
i think that you and the mashable guy are focusing on
the wrong angle. with the exception of a handful of
very successful companies, most web 2.0 shops are
small fry. here's the problem: the CPMs utterly blow -
and unless you're a onesie, twosie shop and can keep
expense way low, it's tough to make a buck. more power
to anyone who can do that but then you're not talking
about the next google here. second point, in a
recession, who do you think is going to get whacked
first? that's easy. advertising-dependent startups.
i'm not saying the web 2.0 landscape will get
decimated but let's not close our eyes to what's
happening on the ground. also,.lots more enterprise
companies are getting into the space and they have
staying power just in case the economy heads south.
saw this post apropos…http://www.news.com/8301-10787_3-9929415-60.html?tag=nefd.top
Seth Finkelstein 04.26.08 at 10:45 pm
“I had a feeling you would be dropping by, Seth.”
And, see, it wasn't different this time! :-)
Again, you're confusing one component with an overall process. That's a very standard evangelist ploy, Since the laws of mathematics haven't changed, to a good approximation, the net results will never be different.
150 years ago, were their railroads like [BigName]? 100 years ago, was there TV and radio like [BigName]? 50 years ago, was there cheap air travel like [BigName]? All of these created a few new big businesses - and also lots of failed businesses. It's never different, in that there's always people running around saying that this time it's different.
mathewi 04.26.08 at 11:18 pm
Wow — I'm impressed that you were able to dismiss the past 100 years
or so worth of economic progress so quickly. Nice work. “All of
these created a few new big businesses — and also lots of failed
businesses.” That pretty much describes every technology ever
invented since the industrial revolution.
Your comment reminds me of Warren Buffett's famous saying about how
the airline industry has been a net destroyer of capital since the
Wright Brother first flew at Kitty Hawk. The upside? We get to fly
places instead of taking boats and cars.
Aidan Henry 04.28.08 at 5:48 pm
The potential cost of launching a new web venture nowadays can be close to 0, if you discount human labour and leverage free software/tools/platforms. For this reason, I don't see an Internet bubble in sight. I wrote about it all here:
http://www.mappingtheweb.com/2008/03/20/there-i...
Cheers,
Aidan