Headstand Media

Last night Headstand Media held our Nightstand 2 event. Thanks to all of you came out and participated despite the busy holiday season. We had a great time of networking, discussion and learning.

Jason Zielke, Venture Associate for the Dillon Kane Group, was the guest presenter for Nightstand 2. Jason’s presentation was entitled: Venture Dollars as a Predictor of Web 2.0 Sustainability. See the summary of his presentation below, references from his talk and our discussion and both a PDF and PPT version of the presentation ready for download.

Although venture capital funds continue to invest in Web 2.0 companies at heavy schedules, basic market dynamics and economics are a signal for the sustainability of these investments. So long as Web 2.0 companies can create value, yielding expected returns to their investors, then venture dollars will continue to pipe into this sector.

Competitive advantage is very difficult to achieve, and it is even more difficult to sustain. In order to survive and thrive, providers must be aware of their competitive threats. The barrier to entry for starting a Web 2.0 company is very low, which makes it even more difficult to reward investors. Questions still remain about the relative value of a critical mass (e.g. Facebook is valued between $4BN and $10BN, depending upon the analyst). Larger questions also loom concerning the long run stickiness of these customers: on a daily basis, websites with hipper names jockey for an incumbent’s customers – it’s not costly for customers to switch.

Venture Capitalists will continue to invest in Web 2.0 companies as long as there is profitable liquidity for them. However, the deals will continue to be small, and more difficult to find (no one really knows how to predict a Web 2.0 winner). Also, the number of large Web 2.0 companies looking to grow by acquisition is very small, which may reduce the likelihood of acquisition as an exit strategy. Finally, VCs are becoming increasingly more interested in the hotter investment sectors like Biotech and Clean Tech (“Venture Capital Strengthens While Private Equity Slumps”, BusinessWeek; Dec 2007)

REFERENCES:
The Innovator’s Dilemma Christensen (1997)

“Global Venture Capital Investment in Web 2.0 Companies on the Rise”; Ernst&Young/Dow Jones VentureOne (March 21, 2007)

“Venture Capital Firms Set Their Sights on New Ideas – Not New Technologies” (http://knowledge.wharton.upenn.edu) August 8, 2007

“Social Computing, Friend Spam”; Technology Review (MIT); December, 2007

“Venture Capital Strengthens While Private Equity Slumps”; Business Week; Dec. 31, 2007

“The Scobel Show”; Fast Company; Dec 2007

“The Big Tease”; Fast Company; Dec 2007

“Venture Capital Investment in Web 2.0”; (http://consultaglobal.wordpress.com/2007/09/27)

“Strategies For Being A Platform Leader”; MIT Sloan Management Review; Oct. 26, 2007

“VC in the OC”, National Venture Capital Association; Sep 12, 2007
www.fuordigital.com, www.simpartners.biz, www.adgooroo.com, www.omniture.com, www.marketleap.com, www.semphonic.com, www.comscore.com

Venture Dollars as a Predictor of Web 2.0 Sustainability (PDF 2.4 MB)
Venture Dollars as a Predictor of Web 2.0 Sustainability (PPT 1 MB)

Thanks again to all who attended. Please leave comments, questions and suggestions off of this post. Feel free to pass our blog and Nightstand information to anyone else in your network who you feel would enjoy and profit from coming to a future Nightstand event.

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