Friday, May 12, 2006

VC Buzz: Web 2.0 & TechCrunch Influence

Josh Kopelman recently wrote a post that "strongly caution[s] entrepreneurs from taking their initial consumer adoption metrics and extrapolating them too far into the future" because the early-adopters of technology don't represent main stream Americans who ultimately need to be converted in order for these startups to be successful. Much of the focus seems to be on TechCrunch and the post really seems to have gotten the VC blogsphere buzzing. Brad Feld, Paul Kedrosky, Jeff Nolan, Charlie O'Donnell and David Beisel all have written detailed responses.

I think all of the posts are interesting and intelligent but they all do seem to underestimate the earlier adopters in two key ways:
  1. early-adopters are willing to build out the user generated content that so many of these startups rely on to provide value to main stream users later on
  2. while VCs may not be ready to make series A investments in web 2.0 startups with fewer than 25K users, these early-adopters provide a key metric for friends/family and seed rounds. It is definitely less costly to build a web 2.0 company than an enterprise software company but there are server, rack space, power and bandwidth cost that are beyond the means of many entrepreneurs.
Thus, I believe that that while these early-adopters are not sufficient on their own, they are imperative in building a venture fundable business. Nonetheless anyone starting a web 2.0 company should definitely read the following posts:

Brad Feld adds that the PR like TechCrunch can lead to an initial spike in site visits but these are trial users and usually do not represent sustainable growth.

Paul Kedrosky followed Brad Feld with similar post adding that TechCrunch readers make fickle beta testers and ties in the concept of "crossing the chasm."

Jeff Nolan writes that enterprises aren't likely to purchase Web 2.0 features like tagging behind the firewall anytime soon because they don't understand what is and that "maintenance is the primary function of enterprise IT, not innovation."

Charlie O'Donnell advises companies to release early and not worry about waiting to launch when TechCrunch decides to a review the site because many other more niche focused media outlets may be more effective in targeting the startups core audience and also a more attainable PR target.

David Beisel adds that all sources of users acquisition are not created equal. While he does not suggest in the post which sources are best (I've already left a comment asking) he does imply that TechCrunch's audience does not produce highly monetizable users.


At May 16, 2006 8:41 PM, Anonymous Fraser said...

Nice job gathering and summarizing the various thoughts on this - a helpful collection... thanks.


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