Notice that I am talking about sustainable businesses - something that can independently exist. A lot of start-ups work on borrowed money until they get bought out. I’m not saying these are not real businesses. As an example of what I mean - in Australia, they often tout the statistic that 95% of small businesses fail. However my firm did some research and found that is only true after 5 years - within one year, most of these entities are still around (ie, 95% ).

I suppose because the internet is transforming things so rapidly, a lot of innovation needs to occur - and in that respects, the web is like one big R&D factory. The big names in town walk down the aisle and buy who they think who has potential. From Y! and Google’s point of view - it’s awesome. Cheap innovation for them to choose from.

But why that bothers me, is that if Y!, Google or Microsoft was a start-up in 2004-2007 - they would probably have been swallowed up, rather than seeing an extension of their innovation. I am sick of seeing the big names dominating the industry, and with time, further entrenching it. I am not bagging the great ideas people – I’m just saying to do more!

I was speaking to an entrepreneur/new VC, and he flat out told me the business he just sold was purely done to be bought out - it never had any long term viability. Like you say, that’s fine - we need the innovation. But as my blog post states - we shouldn’t be trying to replicate businesses like that - being acquired should be an option, not a strategy. I feel the culture of web2.0 is overwhelmingly in the same mindset.

Although it is possible to believe that the web allows interesting ideas to be built and then allows some other people (with some cash) to see where (how) they can monetise that idea.

Is this so different from an oil investor valuing a company on what he thinks they can extract from the ground. Nobody knows if a government will revoke a license or the oil proves unreachable - its just a question of balancing risk.

Yahoo appear to balance risk with small acquisitions at relatively low price points for interesting technology like del.icio.us.

Don’t be to hard on the great ideas guys - but perhaps we should encourage them to keep their day job (revenue model?) whilst they develop the idea onto Yahoo!s radar.

Sri - true, that is what Yahoo! values them, which privately they may have valued higher. And yes - I suppose you can liken a start-up company to owning property, that appreciates in value before you sell it. But the consequence of having an industry like that is you create a pricing bubble…just like what has happened with the dot com bubble, and the Sydney property bubble. Wealth is simply shifting around to different people, not actually being created.

I think there’s a good balance of taking advantage of the new techniques and web2.0 audiences, and creating solid value for existing people and businesses–to see the opportunities though you’ll most probably have to step out of web2.0 and into the real world.