Early stage VC being killed by Internet companies?

The Web2.0 event we held last week was a roaring success.

I will be posting a full overview of the presentations as soon as we have done the aggregation, but in the mean time I want to do a few posts on some of the important themes.

 

VC experiencing competition on deals from Yahoo.

Simon Levene at Yahoo gave a careful warning to Venture Capitalists that, if they hadn’t already, they were soon going to be competing for deals against Yahoo!

This links to my experience of many entrepreneurs, who still pre revenue, are asking me for an M&A process rather than VC.

(its not just Yahoo though: could Google also be on the case?)

Simon Levene gave the particular example of Accel being out bid by Yahoo on Flickr, which has been well documented elsewhere.

The more I think about this the more I think it is a quirk of this particular moment in the expansion for web 2.0.

I have raised this with a whole range people and there are two people (who I asked at the recent Silicon Valley comes to Oxford event) who I think are worth citing;

Allan Morgan from Mayfield:

His point was that, like many times before, we are part of a cycle, and right now this is frothy phase where certain coampnies are paying up. This has also lead to the Angels coming out again in a way we’ve not seen since the last bubble.

(Note. The logicial conclusion of this is that Angels see a quick return on the horizon and the company goes for it: remember off a $250k investment it’s pretty easy to turn an impressive IRR in a 12 month window.)

Allan believes there will still be many businesses who want to grow a significant stand alone business and these will always need venture.

Evan Williams founded Blogger and sold it to Google. Now in his second start up, Odeo, he’s raised venture this time around. Why?

Simple really

Because this time “The opportunity was big enough”

It seems some things never change: venture capital is most perfectly suited to entrepreneurs who have a compelling path to a half billion dollar business.

Not a six month flip.

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