Facebook teaches deep VC is increasingly critical to electric and social companies

[Guide] In the past, investors have been keen to invest in fast-growing internet start-ups, whether or not the company is profitable. But after a tortuous Facebook listing and a setback for Zynga and Groupon, VCs have come to the point of carping.

Beijing Time January 14 news, according to foreign media reports, The New York Times published a recent article said that the 2012 High-profile Facebook launched the IPO process, but the market was full of bumpy, and Zynga and Groupon share prices have been falling, This has led venture capitalists to be more cautious and picky about the investments of technology start-ups, especially for e-commerce companies and social gaming and application companies that rely heavily on platforms such as Facebook.

The following is the main content of the New York Times article:

This is the Facebook effect. Before that, investors were keen to invest millions of of dollars in fast-growing internet start-ups, whether the company was profitable or not, even if it had plans for future profits. But after a tortuous Facebook listing and a setback for Zynga and Groupon, VCs have come to the point of carping.

"In the past, entrepreneurs didn't need a real profit strategy and they could rely on battery revenue because the investment they received was their revenue," said Brian Malley, an early investor at Ventures, a VC company. They can rely on investment rather than users to prop up their start-up companies. ”

E-business start-ups are no longer favored, and these companies face logistical problems and require a lot of money. The once-exciting shift to smartphones has also strained some investors, as it turns out that the profitability of mobile devices is far more difficult than e-commerce on the web.

Investors are also increasingly impatient with startups and apps that rely on Facebook, Twitter and LinkedIn to get users, and these companies are now focused on their bottom line. In addition, Silicon Valley is becoming increasingly aware that, while starting a company is easier than ever, building a sustainable business is more difficult than ever.

Start-up companies are strapped for cash

Young startups are starting to feel the pinch. CB Insights, a market research firm, has analyzed seed-wheel financing from U.S. technology start-ups since 2009 and found that more than 1000 startups that have invested in angel investors have been feeling helpless this year because venture capitalists have rejected their financing requests. As a result, the 1 billion Dollar angel investment amount will evaporate from it.

While the horrors cannot be compared with the bursting of the dotcom bubble in 2000, Nasdaq lost 3 trillion of billions of dollars, but that was enough to make internet investors and entrepreneurs feel disconsolate. CB Insights predicts that internet companies will be hardest hit because they have more seed-round funding than companies and hardware companies, but face greater difficulties in securing follow-on investments.

Some of the problems can be explained in simple mathematics. Angel investors support their businesses through small sums of money, usually with no more than 1.5 million dollars in investment. But in order to develop a company, entrepreneurs ultimately need to represent the foundation and other institutions of venture capitalists to invest. While the number of angel investors willing to sign cheques has increased, the number of active venture capitalists is shrinking.

Easy to start a business, difficult to build

But investors say this is not the only bottleneck. "Starting a company is never as easy as it is now, but developing a company has never been as difficult as it is now," said David Lee, a venture capitalist at early-stage investment company SV Angel. ”

David O. Sacks, a Silicon Valley entrepreneur, sold Yammer to Microsoft last year at $1.2 billion trillion, David Ol Sax The challenges last August by posting on Facebook.

"It seems to me that Silicon Valley is on the end. "To create a new and successful enterprise now," Sachs said, "entrepreneurs must find a" far away from the concerns of large internet companies ", and to attract subsequent funding, the new company must prove its worth less than 5 million dollars. In addition, if the Internet giants notice what they are doing, they must "be able to withstand this attack". "How many of these ideas are left?" said Sachs.

The Sachs view has sparked widespread debate inside Silicon Valley, and Anderson (Marc Andreessen) is one of the main critics. The founder of Netscape, Andreessen-horowitz co-founder of the venture capital, retorted on Facebook that the opportunities for startups were "never-ending".

The electronic commerce company meets the cold

But startups have found that their money is in short supply. "Corporate valuations are always too advanced, and in the past people focused on only a few quarters and now want to get a return on investment," says Rich Wong, a venture capitalist Richie Wang Accel. ”

He says E-commerce companies have been subject to particularly stringent scrutiny. Investors saw Amazon invest $1.2 billion in acquisitions of Zappos and bought Diapers.com owner Quidsi with 540 million of dollars, thus aggressively investing millions of of dollars in e-commerce sites, but found it difficult to manage.

Gilt Groupe, a fashion-goods flash-purchase website, raised about $220 million trillion in money but still failed to make a profit. The company was forced to lay off staff last year, while starting to shrink its focus on major brands such as Gilt ParknShop and Park & Bond, and began peddling its popular online travel website Jetsetter. Fab.com, a creative fashion flash-buying site, also has a lower valuation than expected when it comes to fundraising because of the Facebook IPO setback. Investors also forecast that zulily, a mother-and-child appliance flash-purchase site, had a $1 billion trillion in the latest round of fundraising, but it was hard to prove its valuation with real performance.

Hollywood socialite Kardashian (Kim Kardashian) 's Footwear shopping website ShoeDazzle financed $66 million, a wine-buying website Lot18 45 million dollars, investors bullish on the development of the two companies, but they were forced to lay off workers last year.

Benchmark Capital Venture partner Peter Finton (Peter Fenton) said: "I am very skeptical of the" Business 2.0 ", this is only a few buy and discount. "Zulily and Gilt's flash-purchase sites" not only require a lot of capital, they also face structural challenges, and their share prices will not go higher if they go public, "he said. In addition, I seriously question their ability to compete with giants like Amazon.

Social and mobile road is difficult

Similarly, investors are increasingly questioning social gaming and apps based on social networking sites such as Facebook, Twitter and LinkedIn. For a business, these social networking sites are just the bedrock of the shaking because they are also under pressure to profit.

Facebook, for example, tweaked its algorithms for streaming last fall, leading to a decrease in the number of users who can see Facebook status updates. The company said the adjustment was meant to show users more relevant content, while advertisers complained that it led to halving the number of users of their advertising content.

Advertisers say the real purpose of the Facebook adjustment is to force corporate users to use Facebook's new promotional features, and corporate users can choose to pay for their updates to reach a wider audience.

The recruiting website BranchOut from LinkedIn and Facebook, which has won 85 million of dollars from VCs, but has had to change its business model after LinkedIn cut off the BranchOut data-collection route in 2011. More recently, Twitter's third-party client-side Tweetro applications for Windows 8 platforms have been too popular, exceeding the number of users Twitter has imposed on Third-party apps, leading to Tweetro from the app market.

"Investors are becoming more savvy in terms of source of traffic, relying too much on Twitter and Facebook, or Battery for moving companies," says Omell of ventures. ”

The CB Insights data show that 2012 years ago nine months, the amount of venture capital for mobile companies rose 75% from a year earlier, but developers faced challenges that were quite different from those of the Web platform in smartphones.

Omell said: "The transition to mobility has aroused so much attention, but people are beginning to realize that the mobile field is full of challenges." One of the hurdles, he says, is that developers have to be subject to moody apples. In addition, they have to convince people to download their apps, and it's more complicated to advertise on smaller screens.

The rule of the fittest

So which consumer startups can survive in a tough environment?

"There is a growing emphasis on interaction," says Omell. How many of your users will log in again? How high are they interacting? Are they sticky users? "

SV Angel, a venture capitalist, David Li Hu said it was a healthy reality. 18 months ago, one of the companies he had heard about was social, local or mobile. Entrepreneurship is now more diversified and has a more sustainable and predictable business model.

"Companies that can get high valuations now either have predictable business models, have a channel for interacting users, or have a global reach," says

David Li Hu. But he said, "It makes me more picky." The