Web 2.0 Is A Gift (continued)

A number of commenters took my post yesterday on this topic a bit too literally. I mislabeled the x-axis on the charts which made it worse (I’ve fixed the charts).

My point was not that it still takes $20mm in investment capital to get a web startup to breakeven.

Every company has different economics. Some may never need a dime of capital. Others could require $100mm to get to profitability.

My big point was that the timing of the capital needs has shifted and that helps everyone. The curves I drew were examples to make a point. The specific numbers in them are largely irrelevant.

An interesting follow up point is the question of why the slope of the web 2.0 curve goes steeply upward once the service hits ‘scale’.

In my experience, many lighweight businesses find themselves ‘getting heavy in a hurry’ when things start taking off.

All the things you don’t need to build and launch start to hit you all at once when you ‘break out’.

I listed many of the things (sales, customer service, capex) in my original post but the list goes on. Real estate, HR, executives, marketing, legal, etc, etc

As Steve Kane said and I will paraphrase, ‘the very best people always go up in cost, never down’

This catch up game doesn’t last forever and the slope doesn’t keep getting steeper and steeper. You can’t extrapolate my charts and you can’t take them too literaly.

I hope this clears up some confusion.