“It will become a lot tougher for consumer internet companies to break out”



Fred Wilson of Union Square Ventures wrote a blog about the evolutions in the VC world in the last couple of months. He reacted to a WSJ article that noted that VC funding of consumer internet and mobile companies is down 42 % in the first nine months of 2012. And it’s not seed rounds that are down, it’s follow-on rounds. Wilson sees three trends that caused this:

1. The consumer internet has become ossified

The web has become more or less “ossified”, according to Wilson: a few huge platforms “suck up a lot of the oxygen”. He’s referring to Google, Twitter, Facebook/Instagram, Yahoo, AOL, Craigslist, etcetera. This means that there’s less room for new sites to make their way into the daily internet use of people.

Wilson: “It is harder than ever to build a large audience from a standing start”.

2. Apps complicate the distribution of startups

Starting a consumer internet company is harder, because you have to nail both your desktop and mobile app exactly right from the beginning:

Wilson: “Distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. You need to master the “download app, use app, keep using app, put it on your home screen” flow and that is a hard one to master.”

3. Late stage investors want enterprise now

The momentum/late stage investors have moved from consumer to enterprise. Wilson: “This pool of capital was “all in” on consumer web/social web in the 2009-2011 time frame. Now that the momentum/late stage wants enterprise, we should expect the layers below to give them enterprise.”

Consumer internet: “tougher sledding”

Conclusion: consumer internet had the wind at its back for 7 or 8 years, now it will become “tougher sledding”. Tell us what you think in the comments.

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via A VC: What Has Changed.

Photo: Flickr, T3rmin4tor

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About the author

Raf Weverbergh

Editor of whiteboard. Raf Weverbergh was a magazine journalist whose work appeared in magazines like Rolling Stone, Playboy, Mail on Sunday, Publico and South China Morning Post. He is the co-founder of FINN, a corporate communications agency where he advises startups and multinationals on their PR and Mustr, the easiest media database for PR professionals. You can contact him on Twitter, Linkedin or Skype (rafweverbergh).

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