Once Again and Again

“They're called ‘tweeners,’ one- to two-year-old Web 2.0 companies with some name recognition and maybe a bit of revenue. They managed to raise one round of funding, but it's running out fast -- no real revenues, plus a bum economy in general. Yikes. So they're swarming around VCs on both coasts, begging for more. ‘We see dozens that fit that profile every week,’ says Todd Dagres, a VC with Boston's Spark Capital. ‘They're going to have a hard time raising more money.’

“Pageflakes is a tweener. Founded in late 2005, the site lets users personalize a browser's home page with widgets. It raised an estimated $4 million from Balderton Capital but never caught fire. Former Yahoo exec Dan Cohen came on as CEO and in January went looking for financing. No luck. In the absence of a big user base or a clear path to revenue, VCs scoffed. ‘The environment is much tougher than it was six months ago,’ says Cohen. ‘The bar for the second round is much higher.’

“Cohen sold Pageflakes to LiveUniverse and says he eked out a small return. But such exits are fading fast, leaving Web 2.0 companies with fewer and fewer options. No IPO window. M&A shriveling. What's left? ‘There are hundreds of cute little application companies out there that have no real hope for revenue,’ says Sharon Wienbar, a VC with Scale Venture Partners in Silicon Valley. ‘They're about to go out of business.’”

(“Cash Runs Dry for Web 2.0” Michael V. Copeland. Fortune: May 26, 2008. pg. 40)

GET TOUGH, ENVIRONMENT; GET TOUGH! Here is creative destruction at its best, destroying me-too-itis throughout the land -- hurrah!

We are glad that you cuties give it a try, but we are just as glad to see rigor rearing its fearsome head.

Let's hear it for the invisible hand's push toward the highest and best use of resources!