Net startups slow their metabolism

Net startups slow their metabolism(nytimes.com)

17 points by amrithk 17 years ago | 4 comments

"Though it has paltry revenues and just 20,000 registered users, the company pays only $8,000 a month to rent its offices in San Francisco and has received $8 million from investors."

$8 million? And all they can get is 20,000 registered users??? You've got to be kidding me.

"The company raised $35 million three years ago and, thanks to financial prudence, has $20 million in the bank."

$5 million burn rate a year for failed company is prudence?

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All reading this sort of coverage does is make me feel that anyone wanting part of our company will have to pay through the nose for it.

markessien 17 years ago |

I see what's happening here. Many companies don't deserve investment. Investment is for companies that need money to get started or to grow - like companies in the mechanical, electronics industry or web companies that are growing too fast (like YouTube).

For many Web 2.0 companies, taking outside money is not something that is good for business. Outside money brings in problems and gives you too much space to fail, since there is this money cushion underneath you. It makes the companies get used to spending money at the stage when most other companies learned about financial prudence.

Investors don't care about this, however. They care about getting a return on their investment. So if they feel the hype will be enough to get someone to buy it out, or for the stock price to shoot up on an IPO, they will invest in companies that should not be invested in. They gamble there.

But right now, those gamblers see something different - the gambles are not going to pay off because the hype is dying down.

If your company does not offer true value, then you should not take money. You should fight in the market till you have a product that offers real value, and only when external money is needed should you take on capital.

gaius 17 years ago |

the same factors that have made it so easy to create Web 2.0-style start-ups - low fixed costs, access to inexpensive overseas programmers and cheap ways to advertise online

Is outsourcing really a significant factor here? I can't imagine any YC-style startups using it.

ojbyrne 17 years ago |

The Seesmic picture is just awful. Giant Loic LeMeur head surrounded by smiling, supine employees. It just screams "we just got fucked by the alpha male."