

Ask HN: Is the next wave a bunch of sub-$10m Web companies? - wschroter

In the last 7 year Web cycle, how many Web "successes" do we know about that had greater than $20M in real revenue and were sold?<p>I can probably think of about 20, but not 50 or 100.  My point here is that it feels like the “big revenue” opportunities for most companies are shrinking quickly.<p>The big revenue / market cap sites are getting diluted by the new free/lean model:<p>Ebay/paid classifieds = craigslist/free
Match.com/paid dating = plentoffish/free
CNN.com/premium news = digg.com/free<p>If that’s the case, I wonder if Web 3.0 is just about a bunch of niche sites in the $5m - $10m range that are run by a dozen (or less) guys in a room.  I’m seeing more a trend toward smaller companies owning bigger categories with far less revenue and overhead.  I don’t see the $10m venture funded business model really being all the viable if free/cheap is the future since you're not necessarily producing a revenue monster with free/cheap that is IPO worthy.<p>What do you guys think?  It may seriously change the way we approach capital in the next round, or even our expectations for the entire Web/startup industry.
======
brk
I personally think that the "traditional" venture-backed (ie: having raised
$10MM+) web startups are going to find acquisitions less rewarding than what
they had hoped for.

By and large, there have not been a lot of successful Web2.0 startups that
have gone on to acquisitions, and many of those that have didn't really end as
well as people would have expected.

IMO, the current and future wave of web startups is the 3 guys in a basement
building out an app and selling it for $3MM-$9MM. Maybe they took a little bit
of angel money, maybe they boot-strapped it.

In order for a Web/SaaS company to gain real value, they need to be able to
have a super-solid revenue model, with a very low COCA (cost of customer
acquisition) and customer support/training cost, and TLV for each customer of
5x-10x+ the COCA and CS costs.

~~~
wschroter
Agreed. Part of what I'm wondering is how viable the venture model is when the
amount of revenue a category can generate gets quickly reduced from a free
competitor that can operate at a fraction of the cost.

That's why I mentioned PlentOfFish. Probably not the best example, but if they
are doing $10m as one of the leaders in the category, that doesn't spell a
great future for others in the classified dating model. There are only so many
of those major categories (like jobs, autos, dating) available.

The other trend is that advertising just doesn't pay the bills, even in mass
amounts. I'm familiar with a handful of private companies that are doing
millions of uniques per month and can't even pay a modest staff and support
cost to stay afloat. The idea in the past was that with enough traffic the ad
dollars would pay for free, but even that's not entirely working.

------
pclark
also, a good reason why we don't see may web success stories that have
revenues over $20M is because large companies have people dedicated to
sourcing companies to acquire.

If they're good at their job they'll acquire them before they have huge
revenues - because its cheaper.

------
pclark
$5M - $10M in revenue or in valuation?

------
vaksel
just build something people are willing to pay for.

------
wschroter
Revenue

