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No IPO For Web 2.0

By: Dan Morrill

Going IPO or to be "hoovered" by a big company, the choices of how to cash out of your web 2.0 company are getting more complex, and require patience.

Forbes this morning is asking the question, why no Web 2.0 IPO's and then answers it with the idea that these companies are just not mature enough to go up for sale on the markets, or they are hoping to be bought out or "Hooevered" by a bigger company that make it through the Web 1.0 process.

Forbes states:
"But venture capitalists say that while the boom is back, there is a fundamental change: The era of the overnight IPO, they say, is gone forever. That means that almost all of the Web 2.0 companies that have sprung up in the past few years simply aren't mature enough to go public."

"It's almost a 1999 mentality to say, 'How do you build a public company in three years?' You don't," said Bill Gurley, a general partner with Benchmark Capital who sits on the board of Web 2.0 real estate venture Source: Forbes

This does not mean that you won't have something to offer a bigger company down the road, but getting rich and famous quickly is just not in the VC Playbook anymore.

The options then for a company that is going Web 2.0, or is dependent upon API's or other systems and other companies some of the business modeling needs to take into account the dependency your company might have on another service.

If those services go dark permanently, that service you provide to your customers also goes dark. This kind of problem is going to keep some investment firms away from some web 2.0 companies that are heavily dependent upon services from companies that might not have the staying power. Linking to API's provided by Amazon, Google, Yahoo and Microsoft makes sense in the longer run, because those companies are survivors.

Of the 400+ API's over at programmable web, choosing the right survivor API's for your company can become a sales point when working through the Angel, VC food chain. Eventually maybe your company will get lucky with the IPO, or being bought out (hoovered) by a survivor company. Depending on where you want to go, and what vision you have for your company, everyone is playing risk a tad bit different.

IPO's for Web 2.0 companies are rare, it's more common to be bought out or struggle through at some medium level that just covers operations. Level setting your expectations for your web 2.0 company is important, as important as working towards buy out or IPO.


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About the Author:
Dan Morrill has been in the information security field for 18 years, both civilian and military, and is currently working on his Doctor of Management. Dan shares his insights on the important security issues of today through his blog, Managing Intellectual Property & IT Security, and is an active participant in the ITtoolbox blogging community.

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