Comments on: Edgeio: An Interesting Look into the World of VC-Financed Startups http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/ Keeping Tech Sexy Wed, 28 Oct 2009 02:05:44 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: The Top Mistakes Entrepreneurs Make : The Drama 2.0 Show http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1717 The Top Mistakes Entrepreneurs Make : The Drama 2.0 Show Wed, 09 Jan 2008 19:23:47 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1717 [...] seem to think that access to lots of capital is some sort of panacea. It isn’t. As I’ve pointed out before, the VC model for building a business fails for the vast majority of startups because the dynamics [...] [...] seem to think that access to lots of capital is some sort of panacea. It isn’t. As I’ve pointed out before, the VC model for building a business fails for the vast majority of startups because the dynamics [...]

]]> By: Drama 2.0’s Predictions for 2008 : The Drama 2.0 Show http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1127 Drama 2.0’s Predictions for 2008 : The Drama 2.0 Show Fri, 21 Dec 2007 06:01:50 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1127 [...] now that a new year is upon us and I’ve already been hailed as a prophet by a Drama 2.0 Show reader, it’s time that I make my predictions for [...] [...] now that a new year is upon us and I’ve already been hailed as a prophet by a Drama 2.0 Show reader, it’s time that I make my predictions for [...]

]]> By: Drama 2.0 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1039 Drama 2.0 Thu, 13 Dec 2007 04:17:16 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1039 PS: I noticed you're from Brazil. I love your women. Which reminds me that there's a Brazilian woman I met recently who I need to call. :) Bring a few beautiful women from the Copacabana beaches into my cult and I'll make you a lifetime member! PS: I noticed you’re from Brazil. I love your women. Which reminds me that there’s a Brazilian woman I met recently who I need to call. :)

Bring a few beautiful women from the Copacabana beaches into my cult and I’ll make you a lifetime member!

]]> By: Drama 2.0 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1038 Drama 2.0 Thu, 13 Dec 2007 04:14:27 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1038 Go ahead Alex. My thoughts are free. Since I've officially been called a prophet now, I figure it's time to start a cult. Do you want to be the first member? Go ahead Alex. My thoughts are free.

Since I’ve officially been called a prophet now, I figure it’s time to start a cult. Do you want to be the first member?

]]> By: Alex Linhares http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1035 Alex Linhares Wed, 12 Dec 2007 22:26:13 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1035 Drama 2.0: you win. I'm now bearish, because of you! Darn Prophet... The apocalypse is really coming. I'm doing an youTube video stating my arguments; can I use some of your thoughts (with attribution, of course)? Drama 2.0: you win.

I’m now bearish, because of you! Darn Prophet… The apocalypse is really coming.

I’m doing an youTube video stating my arguments; can I use some of your thoughts (with attribution, of course)?

]]> By: Drama 2.0 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1028 Drama 2.0 Wed, 12 Dec 2007 17:06:35 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1028 Keith: thanks for your comment. If it isn't obvious, I'm a fan of the bootstrap model. As I mentioned in the post, VCs do use the "this is a big market and we need to invest big money to attack it" rationale to justify many of their investments but the real problem for the entrepreneur is that for every eBay, Yahoo, Google, etc. there are 100 failures. The fact that most VC-funded startups fail despite the fact that they do not lack sufficient capital to get a proper start would seem to indicate that there's probably something flawed with the model and I think the fact that generating early revenue isn't always a priority has a lot to do with it. The support of exorbitant burn rates that don't correlate with near and medium-term cashflow is also flawed. There may be times when such a model makes sense and is necessary, but I simply think that it's never a good idea for any startup to devalue the importance of revenues. VCs often allow, and encourage, that (although as you know, this doesn't last forever). When bootstrapping, the entrepreneur has a significant incentive to think about ways to make money as soon as possible and for the majority of Internet startups I think this is more conducive to success. Keith: thanks for your comment. If it isn’t obvious, I’m a fan of the bootstrap model. As I mentioned in the post, VCs do use the “this is a big market and we need to invest big money to attack it” rationale to justify many of their investments but the real problem for the entrepreneur is that for every eBay, Yahoo, Google, etc. there are 100 failures. The fact that most VC-funded startups fail despite the fact that they do not lack sufficient capital to get a proper start would seem to indicate that there’s probably something flawed with the model and I think the fact that generating early revenue isn’t always a priority has a lot to do with it. The support of exorbitant burn rates that don’t correlate with near and medium-term cashflow is also flawed.

There may be times when such a model makes sense and is necessary, but I simply think that it’s never a good idea for any startup to devalue the importance of revenues. VCs often allow, and encourage, that (although as you know, this doesn’t last forever). When bootstrapping, the entrepreneur has a significant incentive to think about ways to make money as soon as possible and for the majority of Internet startups I think this is more conducive to success.

]]> By: Mike Rundle http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1027 Mike Rundle Wed, 12 Dec 2007 16:25:43 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1027 I don't have any relation to the Edgeio founders, but I think one of their biggest problems is that they were spending all their money and time creating the platform that would allow them to do something, rather than on building a definable product or service off the bat. Keith defended the server purchases by saying how much number crunching and processing was going on so they could pull listings down from the cloud and process them for usage elsewhere. I understand the concept of a distributed listing system but the immediate value to users I cannot see. Look at the most well-known exits we've had in the "Web 2.0" industry -- YouTube, MySpace, Flickr, LiveJournal -- you can explain each of them in just a few words and everyone will understand. Easy video sharing. Customizable social networking. Easy photo sharing. Edgeio was... a platform for allowing websites to list auction entries and make micro-revenue from them. Their value proposition just didn't hit the mainstream of Internet users, which is essentially what you need if you want to gear up as quickly as your investors want you to. If you target a niche audience then growth is flatter, if you target the largest of audiences then growth can be more exponential. The problem with drinking the "Web 2.0" koolaid and building software for others in the web industry is that you're missing out on the 99.9% of people. MySpace, Flickr, and YouTube provided interesting services for everyone, regardless of technical knowledge, and they took off rapidly. That's the key difference. I don’t have any relation to the Edgeio founders, but I think one of their biggest problems is that they were spending all their money and time creating the platform that would allow them to do something, rather than on building a definable product or service off the bat. Keith defended the server purchases by saying how much number crunching and processing was going on so they could pull listings down from the cloud and process them for usage elsewhere. I understand the concept of a distributed listing system but the immediate value to users I cannot see.

Look at the most well-known exits we’ve had in the “Web 2.0″ industry — YouTube, MySpace, Flickr, LiveJournal — you can explain each of them in just a few words and everyone will understand. Easy video sharing. Customizable social networking. Easy photo sharing. Edgeio was… a platform for allowing websites to list auction entries and make micro-revenue from them. Their value proposition just didn’t hit the mainstream of Internet users, which is essentially what you need if you want to gear up as quickly as your investors want you to. If you target a niche audience then growth is flatter, if you target the largest of audiences then growth can be more exponential.

The problem with drinking the “Web 2.0″ koolaid and building software for others in the web industry is that you’re missing out on the 99.9% of people. MySpace, Flickr, and YouTube provided interesting services for everyone, regardless of technical knowledge, and they took off rapidly. That’s the key difference.

]]> By: Keith Teare http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1026 Keith Teare Wed, 12 Dec 2007 16:21:26 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1026 I don't think it is possible to generalize like you do. Many many companies have raised cash and used it to build a revenue generating company, often a huge one. Google (raised $25m before revenue) eBay ($15m) YAHOO (IPO'd when not proftable_ as did Netscape, etc etc. On the other hand many many companies bootstrap and grow from revenue. My first startup, Easynet Group plc (UK) did that. We went IPO without VC funding. It is really about the market, it's size, what is needed to attack it. edgeio was attacking a $50 billion US market ($200 bn worldwide). My analysis is that a smart investor would have funded the next stage, even up to $15-20m raise, to go after that, and would probably get a 100 x return. However, today's VCs are heavily metric focused, perhaps due to bubble shock from 2000. They do not look for big ideas that are not yet profitable. There are exceptions, and clean tech is one, where they put huge amounts to work in drives, acting like sheep. Classified Advertising is not one of those. It should be. Best Keith Teare ceo/edgeio I don’t think it is possible to generalize like you do. Many many companies have raised cash and used it to build a revenue generating company, often a huge one. Google (raised $25m before revenue) eBay ($15m) YAHOO (IPO’d when not proftable_ as did Netscape, etc etc.

On the other hand many many companies bootstrap and grow from revenue. My first startup, Easynet Group plc (UK) did that. We went IPO without VC funding.

It is really about the market, it’s size, what is needed to attack it.

edgeio was attacking a $50 billion US market ($200 bn worldwide).

My analysis is that a smart investor would have funded the next stage, even up to $15-20m raise, to go after that, and would probably get a 100 x return.

However, today’s VCs are heavily metric focused, perhaps due to bubble shock from 2000. They do not look for big ideas that are not yet profitable.

There are exceptions, and clean tech is one, where they put huge amounts to work in drives, acting like sheep. Classified Advertising is not one of those. It should be.

Best
Keith Teare
ceo/edgeio

]]> By: jamboree http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/comment-page-1/#comment-1023 jamboree Wed, 12 Dec 2007 07:30:50 +0000 http://www.drama20show.com/2007/12/12/edgeio-an-interesting-look-into-the-world-of-vc-financed-startups/#comment-1023 Edgeio failed because they didn't burn cash fast enough. Look at Youtube... 1M/month just in bandwith alone with 0 revenues... Result? $1.6 BILLION valuation! Edgeio failed because they didn’t burn cash fast enough. Look at Youtube… 1M/month just in bandwith alone with 0 revenues… Result? $1.6 BILLION valuation!

]]>