Funding…is it for Ferraris? by Jonathan

Maybe it’s because we’re sitting over here in quiet little Sweden… but how the ?#£*% can all the vc funding for web companies be justified. We would love to know where all that money is going to, because it surely can’t be towards building a web-application. Let’s look at Renkoo as an example, They were reportedly given $3 million dollars in, what we have to assume is first and only–but that’s doubtful, funding by Matrix Partners. Almost a year later after blogging about the site, Renkoo today offers an invitation-only beta version. If you have a chance to test the site, you could easily wonder…”but where did all the money go??”

Wisdump’s post on making 37signals for free is another argument that these web-apps aren’t so high tech and appearantly a one man show out of Serbia is capable of developing something to rival one of the industry’s darling products, basecamp. So if developing and designing are becoming easier and cheaper…why all the funding?

p.s. If you’re a vc reading this, please ignore this post… we could use a little overfunding.

[tags]venture capital, web 2.0, ferrari[/tags]

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July 7, 2006 / 5 Comments.

5 Comments

  1. Ivan replied:

    I believe answer to your question is in marketing expenses. In today’s world the biggest part of a price is not the work or resources, but marketing part. Not just in the web business, but in any type of industry this is on first look invisible, but necessary and very expensive ingredient.

    Or to put it differently, if one day aliens come and take away all marketing people, all prices would drop by at least 50% instantly :)

    July 7th, 2006 at 9:14 pm. Permalink.

  2. Adam replied:

    Well, one thing I can tell you is that Renkoo’s money didn’t go into hardware.

    See for example:

    http://renkoo.typepad.com/renkoo/2006/06/move_complete.html

    July 8th, 2006 at 12:05 am. Permalink.

  3. jonathan replied:

    Appreciate the comments.

    …and the intention really wasn’t singling out Renkoo(other than they got a good chunk of change and decided to blog and build up expectations for almost one year), because everyday you see site A received x milliion in “iniitial” funding.

    We read so much about virul marketing, 37signals and their .pdf books, Tara Hunt, etc… and it seems so many of these sites are really made for “gorilla” marketing.

    …would be interesting how much Renkoo, spent on cakes, t-shirts, hot-air balloons, parties, etc.

    July 8th, 2006 at 8:54 am. Permalink.

  4. jonathan replied:

    …come on Adam, you can share a little info…(we won’t tell) :)

    best of luck on it.

    July 8th, 2006 at 8:59 am. Permalink.

  5. Adam replied:

    Jonathan, don’t believe the hype. A lot of Web 2.0 companies take more than a few months to build.

    Joyce wrote about this in her blog post a few months ago:

    http://troutgirl.com/blog/index.php?/archives/160_Is_starting_a_Web_2.0_company_cheap.html

    July 10th, 2006 at 5:16 am. Permalink.

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