Tuesday, May 16, 2006

Non-VC Buzz: Web 2.0 & TechCrunch Influence

After having written last week about VC's buzz surrounding Josh Kopleman's post that too many companies are building products solely for the TechCrunch / early-adopter audience, I've noticed that a number of the non-VC blogs I read have now also commented on the subject. However, I believe the whole meme still seems to under-estimate the value of this audience in two key ways:

  1. Early-adopters demonstrate market traction to friends&family and seed stage investors (but not Series A) that helps keep these startups afloat
  2. Early-adopters build out the user-generated content and community that so many web 2.0 startup rely on in order to add value to a wider audiences... think LinkedIn... mainstream corporate America is now starting to use this service but only because the network of 5M+ has existing value

Here is a summary of what continues to be an interesting conversation:

Matt Marshall suggests that the "53,651" buzz is itself newsworthy... and I agree :)

Dharmesh Shah advises that the TechCrunch landslide of user feedback is largely redundant and hard to manage. He further writes that "[startups are] much better off, where possible, trying to “stage” this adoption – to the degree [they] have control over it."

Om Malik argues that the mainstream will adopt web 2.0 technologies slowly and the tipping point is likely to be Yahoo, AOL and Microsoft incorporating them into their mainstream product launches. He also concludes that Web 2.0 may have its greatest impact on the enterprise where many of the scale issues that he claims plague web 2.0 companies with user bases greater than 300,000 users do not exist.

Dave Winer writes that size of user base only has relative importance if the startup is looking to make money and/or raise venture capital. He also suggests that VCs are not usually investors in very early technologies and therefore user base may not even be an indication of potential success for truly ground breaking companies. (I'd like to caution that I personally think this is very dangerous advice because very few companies really have ground-breaking technology that is simply too early for VCs to invest in w/o clear signs of market traction. Yet virtually every entrepreneur believes they have this type of ground-breaking technology. My three cents (ie more than anyone asked for) is that w/o market traction startups should remain hobbies rather than businesses because knowing when an entrepreneur should kill his/her own baby is always extremely difficult. People don't lose their homes because they decided to re-mortgage in support of their hobbies, yet this happens to entrepreneurs all too often. Delicious is a great example of a company that started as a hobby.)

Robert Scoble notes how far mainstream Americans are from web 2.0 commenting that he doesn't see ipods or any sign of web presence in advertising (ie urls) in his hometown. He suggests that widespread wifi, ala Google in Mountain View, and a more geek oriented culture may help diffuse web 2.0 to wider audiences.

If you missed it, don't forget to check out my summary of the last weeks VC buzz including Brad Feld, Charlie O'Donnell, Paul Kedrosky, Josh Kopelman, Jeff Nolan and David Beisel.

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