Who turned onf the VC spigot? I mean, the VC is gushing out of Silicon Valley these days - backing all kinds of new start-ups: some with business plans and some without. Today's financings include $12-million for Pandora Media, which recently introduced a free version of its music search service after hoping to only sell subscriptions for $36 a year. Meanwhile, Trumba has raised $8-million from Oak Investment Partners, August Capital, Kleiner Perkins and Trumba's founders. Trumba is among a growing number of companies offering online calendar services (wasn't this model tried during the dot-com boom?). Trumba charges $39.95 a year but offers a free "lite" version. This financing activity is so eye-catching because it is such a contrast to a year or two years ago when VCs were more into portfolio nurturing and cash protection rather than making new investments. I'm not sure what has triggered the onslaught of new deals. Maybe it's the success of eBay, Google and Amazon, which has made people realize there's gold in them thar fields. Maybe it's the excitement of Web 2.0 - whatever that means - and a sense among investors that they don't want to miss out of the next dot-com boom. I find it fascinating to see so much money being poured into interesting ideas that will need hundreds of thousands of users to create a viable business. Pandora, for example, needs one million users to generate $36-million in annual revenue (notwithstanding commissions it could make from e-commerce sales and licensing agreements). Is that enough to justify $22 million of VC investment so far? Maybe the VCs are motivated by M&A action as the big players look to leverage their user bases and differentiate themselves. Every eBay-Skype or Google-Riya (??) deal is just more ammunition for investors to jump into bed with start-ups with intriguing ideas. It is reassuring, however, that most of these investments are modest in size because companies offering Web-based services don't require oodles of cash to create and distribute a new product. Many deals are $10 million to $20-million (Skype's biggest round was $18.8-million) rather than the mega-deals that were all too common during the heady days of the dot-com boom. Of course, only time will if any of these new investments pan out but I'm willing to bet there will be lots of blood in a couple years with many people wondering what the fuss was all about.
Update: I was remiss in not mentioning Brightcove raising $16.2 million from a group that includes Barry Diller, Hearst Corp. and Allen & Co. Brightcove sells Web-based services to the owners of movie, television and video who are looking to sell content directly to consumers - a market taking off as high-speed networks make it for consumers to buy what they want for a modest fee. Apple set the tone a few weeks ago by striking a deal with ABC that lets iPod Video users download Desperate Housewives for $1.99. Any online venture Barry Diller invests in should not be ignored.

 

 

 

To be honest, I haven't paid much attention to Skype since eBay arrived on the scene. After that deal went down, it seemed like Skype lost its momentum or, least, its rebellious buzz. Of course, Skype is still moving forward within the eBay empire but there appear to be troubling signs on the horizon. SBC CEO Ed Whitaker's recent "rant" in BusinessWeek about how Web-based services such as Yahoo, Skype and Google may have to pay to ride on his company's high-speed is the first shot in what could be a nasty war over who has the "right" to travel on the Web and what, if anything, to do have to pay. Skype also seems to be headed for a battle with carriers and cablecos with a deal to sell its service and phones through RadioShack (hat tip to Om Malik for putting the spotlight on this agreement). As Om succinctly points out, it may be just a matter of time before Radio Shack's phone partners "put the squeeze" on it. (Om also wonders Skype is going to have QoS issues). Fundamentally, I think eBay acquired Skype at the zenith of its popularity, industry impact and value - kudos to Tim Draper and Niklas Zennstrom for their brilliant orchestration of the sale. As VoIP quickly goes from novelty to mainstream consumer service, the need for Skype for many consumers will disappear except for hard-core users and people who want a softphone on their desktop. Rather than being a telecom play, Skype's real potential could be as a pay-per-call play - that is, if PPC materializes financially anywhere near how pay-per-click (Thank you, Bill Gross!) has performed. If you're looking for another sign of Skype's demise, check out Skype Killer, which lets IT administrator quickly eradicate Skype from their networks. When this market becomes a growth industry, it's lights out Skype! Russell Shaw provides a step-by-step lowdown on how Skype Killer works - complete with screen shots.