

Net startups slow their metabolism - amrithk
http://www.nytimes.com/2008/10/27/technology/companies/27dotbomb.html?ref=business

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curiousgeorge
"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.

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markessien
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.

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gaius
_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.

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ojbyrne
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."

