May 27, 2008
Calling the next Web cycle
“This is the perfect time to start a company.”
At least that is what Max Levchin had to say when I dropped by to see him in Slide’s SoMa office last week. But isn’t creating an internet company at the tail-end of the last start-up boom a disastrous idea?
This is Levchin’s reasoning. Members of the last crop of start-ups - many of them Web 2.0 companies created two-three years ago - are fast approaching their date with destiny. A slowing US economy and worsening financing environment will force those that haven’t already proven they can make money to consider a sale (we reported at greater length today on the general scarcity of revenue in Web 2.0 land and the slow start to the much-hyped “widget economy”.)
When that happens, Levchin hopes to be around to pick up the pieces. He says it was a hunch about the economic slowdown that prompted him to raise a pile of cash at the end of last year as a “warchest” for the tough times ahead. (He won’t comment on the details, but a reliable source says Slide got $50m, putting an eye-popping valuation on the widget-maker of $500m.)
The acquisition game makes sense. Slide is still early in trying to find ways to make money from its widgets, but one that Levchin says is starting to work is the use of corporate sponsorship on SuperPoke: next time you get an urge to throw a sheep at a friend on Facebook, why not send a promotion for Pimms instead? (OK, that one doesn’t sound like it would work, but you get the idea.) SuperPoke wasn’t Slide’s idea: it was started by three young developers in Seattle but Levchin bought it when he realised last summer that it was starting to take off.
And that is apparently why it’s time to think about starting a company again. By the time the coming shake-out is over, a whole new generation will be starting to find its feet. As they say in Silicon Valley: the best time to start a new business is when things turn down.
Though it maybe a good time to start something, I truly believe that people today don’t like that risk.
As a programmer I have coded some neat sniplets, but many are written in the legacy arena.
Good post and I agree with most of it.
Posted by: Frank J | May 28th, 2008 at 2:05 am | Report this commentSo, corporate-sponsored gimmicks (like an online version of trade show give-aways?) and conscripting users for viral advertising campaigns is the future of Web2.0’s ‘user-generated content’ revolution?
Posted by: David | May 28th, 2008 at 10:21 am | Report this commentText messages and video conferencing,etc.,IM, with mobile devices is an area that needs competition and easy to use applications, we still have not jump-started these 2 and others among the elders, among the no-geek huge population, let’s remember that hundreds of millions of people using laptops and mobile phones still never use ( don’t know or don’t want ) how to text and video as well as IP voice, that’s why Microsoft purchase of Yahoo is a Monopoly grab: MS would take over Yahoo text messaging and with AOL-TW still lost in dumboo land ( why would they give up for pennies their web-portal access and browser?) , they would control all in many markets and providers , but will anyone in D.C. and Brussels defend the consumer? will they care ?
I hope the new CEO from Vodafone, Colao ,does not sell anything and instead pushes LTE and WiFi to the max and opens the door to new outside companies to provide new services,more competition, including laptop.org/ for the developing markets ,let’s hope we see some good action , creative markets,new ideas, new batteries,new cameras and new video applications…
Posted by: blogger | May 28th, 2008 at 7:50 pm | Report this commentI agree with the conclusion that it’s a great time to be starting a Web 2.0 business.
Calling time on “Web 2.0″, presupposes a definitive cohort of businesses who must be earning substantial revenues today, if they are ever to be successful. It’s a far more fragmented picture than that. In reality, this sentiment is institutional people telling themselves what they need to get through the credit crunch, rather than evidence that it’s suddenly crazy to start a web business dedicated to enabling users to take control of their retail, entertainment, financial and other personal affairs. The institutional herd is headed for safe havens and a slow summer at the beach, free of write-offs and any nagging doubt that it might be missing key opportunities through its inability to invest in the current tidal wave of innovation.
The curtain is barely up on Web 2.0, and there is plenty of non-institutional money to be had - and you don’t need much of it - to help start a Web 2.0 business. The angel world is also still awash with pre-Crunch bonus money and the likes of ex-Googlers cashing in their options to do help Facebook or do their own thang. Seedcamp is happening again, and (the ironically named) Techcrunch is alive with plenty of news, even from Europe. Remember, too, that venture funding is not required to build any of the infrastructure necessary for Web 2.0 businesses to flourish. The big corporates in the internet game have taken on that job, and are still investing heavily to create the bandwidth and computing capacity on which low cost, web development start-ups like are feeding greedily.
Seems to me that September is going to see a whole new tidal wave of innovative business launches - so it’s gonna be a pretty intense summer for some!
Posted by: Simon Deane-Johns | May 29th, 2008 at 3:05 pm | Report this commentI agree absolutely with Max Levchin. Web 2.0 companies are defining the way we take some of the last steps of seamless content and personal connection. The value of many of these companies exceeds their availability of and access to money. There will be consolidation and aggregation. There has to be - too many of the great slivers of technology being delivered need to be combined to scale their value. Max Levchin is dead right. There is not a Web 2.0 bubble just because you reported it. There will be thousands more Web 2.0 companies, many which are successful - some of which will make their founders and investors quite rich.
Posted by: Vigdor | June 2nd, 2008 at 1:56 pm | Report this comment