Consumer internet dead? “You’re wrong!” says Dave McClure
That didn’t take long: Dave McClure, another big shot VC, is saying that Fred Wilson has it all wrong when he says that the consumer web party is over, as we reported this morning:
“Consumer and small business internet opportunities are FAR from “over”, and any such commentary is foolish, narrow-minded, and simply dead wrong (altho, it may indeed be “over” for most large funds attempting to do seed-stage investing at any scale similar to YC or 500).
In addition, i most certainly take issue with the statement that it’s “harder than ever to build a large audience”… nothing could be further from the truth.
1. Finding users is EASIER than before
Almost every possible internet distribution channel has MORE users than ever before – whether it be search, social, mobile, video, local, SMS, email, chat, etc. And for those of us who invest outside silicon valley and new york, the global consumer opportunity is huge as well in Asia, Latin America, the Middle East, and other fast-growing internet and mobile markets.
2. MORE startups are breaking into the huge userbases (and billions of revenue)
In fact, the assertion that consumer is “tougher” is so absolutely incorrect and provably wrong that i’m puzzled why anyone would even say such a thing. The number of recent internet services that have grown from nothing to hundreds of millions of users is frankly rather astonishing – Pinterest, Instagram, Groupon, Zynga – all of these took less than a few years to get to hundreds of millions of users and in some cases billions of revenue.
Perhaps mobile app distribution can be challenging sometimes, due to Google and Apple still learning how best to offer organic or paid distribution on mobile. But regardless we’ve invested in several startups that have gathered millions of users quickly, and in a few cases tens of millions of users in under a year (ex: 9GAG, PicCollage, Cubie).
But i think most of this discussion is missing the main point. Historically, the venture capital industry has been used to finance high-risk business where significant capital is required to get companies off the ground, usually in two key areas: building product, and acquiring customers.
3. It’s CHEAPER to build a product and acquire customers
But in today’s world, it’s certainly MUCH cheaper & faster to build product than ever before, and due to the explosion in adoption of consumer platforms, it’s also cheaper to acquire customers than ever before (altho here is where larger VC can be helpful in scaling up fast). This is why it’s such a great time to be an internet entrepreneur – it’s REALLY EASY to bootstrap most internet and mobile businesses to at least the operational stage on a very small amount of cash.
4. Let a thousand small wins bloom
And as online payments and monetization improves, again we will see less need for venture capital to finance customer acquisition for successful internet businesses.
It just won’t be cost-effective for big VC to finance all the “little” startups that are going to be built on consumer commerce and small business services. There will be thousands of small wins, but larger funds can’t handle the scale required to do so many small investments. Maybe we need something like the SBA small business loan equivalent, but on the the equity side.
So for all of you folks ready to call it a day on investing in consumer internet, i’m happy to see you go… that just means less competition for those of us ready to really dig in and invest at scale in all the millions of new “small” businesses that will emerge and dominate the globe in coming years.
Receive our top stories in your mailbox every day!
Sign up here:
Photo: Windows Error in Chinese, by Scoble
Powered by Facebook Comments