Wednesday, March 01, 2006

Venture Capital Economics - Web 2.0

Since I hear all sorts of mindless chatter about the funding and profitability and selling of Web 2.0 businesses, I decided to go right to the horse's mouth and emailed the following query to venture capitalist Brad Feld of Mobius Venture Capital:

Subj: VC Economics - Web 2.0

Do you agree or disagree with the following scenario as a firm basis for Web 2.0 ventures:
Raise $2 to $6 million to be spent over a two to three year period, with an exit of a $20 to $50 million sale to one of the GEMAYANI's.
Would you adjust those numbers significantly, as a general thesis?
Is such a venture model an attractive VC proposition, by definition, or maybe merely acceptable in the absence of a more traditional, larger-scale exit (say, raising $4 to $16 million with a $80 to $300 million exit after 4 to 7 years)? What model has the most appeal to you these days.
Ultimately, it's a question of what entrepreneurs should be shooting for.
Implicit here is the question of whether Web 2.0 is a short-term window which may close in less than two to three years.
-- Jack Krupansky

You can read his reply as well as reader comments here.

-- Jack Krupansky


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