Wednesday, July 25, 2007

What dotcom bust?

posted by Andy Leff
Great news for start-ups' bean counters: The Financial Times reported yesterday that U.S. venture capitalists invested more in the second quarter of this year than in any three-month period since 2001.

And the news gets better for Web 2.0 start-ups: Total investment in information services companies reached nearly $1 billion for the first time since the dotcom implosion. This includes Internet companies that focus on social networks, blogs, and wikis.

So people can talk about their cool MySpace pages all they want, but the real proof of social networking's strength is its increasing cash flow. Savvy venture capitalists wouldn't put their money into Web 2.0 coffers if they didn't think the investment would pay off big.

But how big? And when? More 2.0 companies are born every day, and most are clamoring for spare change from these forward-thinking VCs. The wallets are bound to dry up at some point. Favor will shift. Other sectors will get the goods. And late-to-the-game start-ups will be left with empty palms and evaporating business plans.

All the more reason to develop your own Web 2.0 business practices now, and make the most of a favorable investment climate.

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