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Web 2.0 Expo : The web 2.0 pyramid and the lower price of failure

Two notable observations from Web 2.0 Expo.

(i) A pyramid of Web 2.0 companies. The pyramid consists of three tiers; at the top are the few Web 2.0 breakouts: YouTube, MySpace and Wikipedia, which are worth more than $1 billion.

In the next tier, about 30 companies valued at $30 million or more, from big names like Facebook, Flickr, LinkedIn, Bebo and Digg to up-and-comers like Flixster, Pandora, Meebo and eSnips.

The last tier has 2,000 other companies, which may break out, but probably won’t.

Yael Elish, CEO of eSnip noted that:

“Web 2.0 is a lot of very, very, very small sites which are not managing to get above the techies and early adopter stage,” “You don’t get too many companies that have the potential for a breakthrough, to get big.”

This accurately describes the state of Web 2.0 Companies.

(ii) Lower Cost of Failure. Jeff Clavier of SoftTech VC noted that:

The cost of failure is lower than before, both for entrepreneurs and investors, encouraging everyone to take more risks. The seed round of funding allows entrepreneurs and investors “validate assumptions” before raising capital to “scale.”

At least we have learned something from the Web 1.0 and it is being applied to Web 2.0 Companies!

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April 19th, 2007 Posted by Sunny Kalara | Venture Capital | 2 comments