John Battelle, always insightful, is worried about Web 2.0 as a bubble. Given that he’s one of the great 2.0 enthusiasts this comes as a bit of a surprise. John writes:
… one of the really cool things about Web 2 is that you can keep making new companies, see if they work, then disassemble them and try again. Only, that won’t happen if the companies are kept falsely alive by a preponderance of venture capital and VC-related spending …
It’s a very provocative point, and I can see this happening during trips to Silicon Valley where some of the efforts simply … suck … yet they have enough funding to keep on trying. I’m not even convinced some of these folks believe in their companies – they just show up at the trade shows and go through the motions until the money runs out, then head to a new gig.
That said I’m not as worried as Scoble or Battelle about a bubble, because I think this is what is going on right now and I think it’s a healthy and natural, though “new”, model for business development.
* The internet business ecosystem is inherently unstable and ripe with uncertain outcomes.
* This instability and uncertainty leads to an experimental, rather than “sweat equity” approach to building businesses.
* For the Venture Capital community the best approach is to fund many Web 2.0 startups at modest levels, hoping that perhaps one in ten will become a solid business OR an aquisiton target and yield 10-100x the VC investment.
* For the big players like Google, MSN, Yahoo, the best model is to let the new 2.0 companies shake out on their own and aquire the successful ones as Google did with Keyhole maps, Picasa, etc, etc and Yahoo with Flickr, del.icio.us, etc, etc.
Ummmmm …. but what is the best model for aspiring 2.0 companies? I think it’s to stay away from the VC fray and build lots of *inexpensive* experiments. One of the best examples of this approach is the brilliant site PlentyofFish.com by Markus Frind, which started almost as a lark and has become a top tier site in a short time.