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Venture Capital post web 2.0
 

Venture Capital post web 2.0

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Brief update on how the web2.0 world differs from an investment point-of-view for web startups.

Brief update on how the web2.0 world differs from an investment point-of-view for web startups.

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    Venture Capital post web 2.0 Venture Capital post web 2.0 Presentation Transcript

    • Venture Capital in the Web 2.0 world Edward French, 14 th June 2007
    • Background
      • Enterprise Ventures: Mid-sized fund manager~ £60m
        • Mostly in technology funds
      • RisingStars Growth Funds (I & II)
        • 38 Early stage technology investments
        • ~40% software (no “pure content” deals, sorry!)
        • £50,000 - £1.4m per company
      Pen computing Social mobile game EDA tools Diagnostic webservice Mobile phone UI Enterprise Mashups E-learning E-tail
    • Contents
      • Background 
      • A couple of sample investments
      • Changes in technology investing
      Enterprise Mashup Software
    • Investment Preference
      • Early-Stage
      • IP delivers commercial value
      • Where small investment works
      • Opportunity to build management
      • Big Market Opportunity
    • nCapsa
      • Software for Consumer Electronics UI
      • Modest first investment to build team and test route to market
      • Larger sum followed to build out product and engage with customers
      • Pursuing £2m series A round
    • Yuuguu
      • Instant, free, screensharing
        • www.yuuguu.com
      • Worked with the founders for around a year prior to launch
      • Growing at 20% per month
      • We introduced two new people to the team, and follow-on investors
    • Changes in technology investing
      • Technology cheaper and quicker
        • Good side
        • Bad side
      • Audience is larger and broader
      • New sources of revenue are possible
    • Cost of technology is lower
      • Lower costs:
          • Opensource software- LAMP
          • Outsourced development- lower prices
          • Better prototyping tools- e.g. Ruby
          • Cheaper servers etc.
          • AJAX provides lower cost, consistent, web UI
      • Therefore lots of market entrants!
          • Many, (often low quality), competitors cause a high “noise” level
          • Nothing is ever really “new” (lots of web1.0 recycling)
          • VC’s waiting to follow user numbers
    • Audience is larger/broader
      • 2bn mobile phones- coverage for ~90% of world’s population
      • ~300m broadband users globally
        • Growing by 9-10% p.a., faster post WiMax?
      • Real online communities- early adopters can be found
        • E.g. “The TechCrunch effect”
    • New Sources of Revenue
      • Advertising revenue is real!!
          • But only significant once you have millions of users
          • Rumour: “Youtube $7m/month on 70m users”
      • Corporations can be sold to “guerrilla-style”
          • But you need to tread carefully…
          • Expect major change in this sector- consolidation?
      • People can be “up-sold” on a freemium basis
          • But free model must be genuinely useful and viral
          • Premium model must be modestly priced
      • BUT subscription revenues still thin
    • What’s the same!
      • Commercial relationships are no faster/easier
        • 12-24 months to get cash for something new from someone large
      • “ No-brainer” management is very scarce
        • UK has few precedents
      • Lots of money around, but…
        • it’s never enough!
    • So we don’t need VCs?
      • True if you …
        • If cheap-to-build features will be enough create user growth
        • If you wont suffer from delays whilst partners take decisions
        • If you can take your time as no-one else is chasing the opportunity
        • If you don’t need backing to attract new world class people
        • If you don’t need cash to get above the “noise level”
    • Summary
      • Web 2.0, spread of broadband, stunning exits, and real advertising have changed opportunities and risks for new ventures
      • Venture Capital is less obviously essential to software companies now, but is still going to be essential for many
    • Contact Details
      • Edward French
        • Email [email_address]
        • Phone 07966 347407
        • Yuuguu ID [email_address]
        • Website www.rsgf.co.uk
        • Blog techgain.net