So, now I’m really convinced…

David Hornik, who is a partner at August Capital writes in VentureBlog that he’s got no idea what Web 2.0 is all about (probably because it’s not about venture capital). Once you get past the giggle that he’s writing about this in his blog, he goes on to make a very good point, that it doesn’t much matter whether Web 2.0 is revolutionary or incremental if it gets entrepreneurs creating cool stuff that makes our lives better. I’d add to that – what the heck is wrong with just building (and owning 100% of!) a small, profitable, company? Well… unless you’re a venture capitalist, I guess.

Paul Kedrosky, who is a Fellow at Ventures West, and was one of my co-presenters at the Vancouver Enterprise Forum’s panel on Web 2.0, said it perfectly: The cost of customer acquisition has plummeted, the cost of infrastructure has plummeted, the cost of software has gone basically to zero; so why do you need venture capital again? He added that when entrepreneurs come to him and say they need n million dollars for their new Web 2.0 startup, he tells them: you don’t get it.

In 2001, when I started Enfolding Systems, the tech bubble bursting imposed some of that discipline on us – we couldn’t really raise significant capital, and we had to focus on building value, and doing it on a shoestring. Ultimately, we were acquired by Blast Radius in 2002, which worked out well for everybody, I think, but that wouldn’t have happened if we hadn’t left ourselves (as shareholders) the flexibility to exit in a creative way, that suited us. If we had done a VC round (as, frankly, we had hoped to do), that acquisition would never have happened, and I wouldn’t have been able to do all the cool stuff I’ve done in the last three years.

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