2009 May 28 Thursday
Less Need For Venture Capital Money For Web Startups

Economies are in serious trouble. Many of us fear for our jobs. Others are already unemployed with grim prospects. Some economists warn of a period of extended economic stagnation. All not good. But on the bright side cloud computing has so lowered the hardware cost side of web computing that most web startup companies no longer need venture capital.

Enthusiasm for Web startups has, however, clearly changed since the height of the Web 2.0 boom. This is due partly to tighter economic constraints, but also to plummeting costs of starting Web businesses as cloud-computing infrastructure has spread. Since less capital is required to start a company, there is less need to turn to outside investors.

"I think most [Web] startup companies should not take venture-capital money," said Jeff Fagnan, a partner at Atlas Venture, during a panel discussion. He cited, in particular, companies building lightweight Web applications or software for portable devices like the iPhone. In some cases, Fagnan said, venture capital may damage a startup by creating conditions that push the company to aim too high from the outset.

So this is a great time to do a web-based startup if you have a good idea and the talent to implement it. If the economy stagnates and yet you can bring in big bucks your buying power will be high and you'll be immune to the danger of unemployment.

Share |      By Randall Parker at 2009 May 28 10:34 PM  Economics Venture Capital


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