End of Venture Capital Too

The September 4th issue of Infoworld has an enticing story entitled the “End of Venture capital ?”. The idea is that SaaS start-ups have tended to avoid the classic VC rounds of financing and have gone back to the HP garage model for idea to busness development. And of course the jade, fear and loathing factor are on full Silicon Valley display.

Here is what Infoworld was saying about its story on Kieden the folks that bought because Salesforce could see big advantages in Kiedens Google Adwords tracking technology:
“Kiedens success, like Salesforce, is evidence of a new and powerful wave that just starting to break in the IT sector, as SaaS vendors create environments in which countless smaller companies can be born, grow, and thrive.”
Wow. This sounds an awful lot like the language in Thomas Friedmans book, The Flat Earth, in which he champions the new forces on the Web as creating a new economic order.

But the critical process from Infoworlds point of view was that Kieden was able to bypass the high financial costs of VC by bootstrapping its software development using some of Friedmans key new economic factors. SaaS providers like Yahoo SMB, and for project collaboration and docment sharing were key providers. Open Source and agile development techniques were used as well. But the key success factor was an earn as you go approach as opposed to loading up on rounds of VC capital.

However, one can hear the VC community saying something like the followng. “This is the exception that proves the rule. Start-ups need industry contacts, some managerial mentoring and definite financial discipline and monitoring as well as access. These are real value-adds that Kieden may not have needed, but we bet more than less of SaaS and other start-ups will.” Infoworld seems to have some doubts on the effectiveness of VCs in delivering those value ads. Is Infoworld or the VC world right ?

(c) JBSurveyer 2006

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