Silicon Alley Insider reported a recent venture capitalist remark, “Investing in Internet startups is now basically the same as investing in the ‘cement business.’”
He based this conclusion on just two data points: rapid Internet adoption (1990s) and dial-up-to-broadband switchover (2000s) have both petered out. Only the irretrievably lazy would buy into this crap.
When did investment upside get tied exclusively to broadband growth? By that measure, television must be a horrid business to get into – you know, ’cause everyone already has a TV. ~ [ eye roll ]
Let’s briefly consider some further data. The largest year-over-year rise in broadband subscription growth added 11 million households. Perhaps impressive, on the surface. I can fathom this used as supporting evidence for an investment in 2003-2005, but it is hardly the industry-wide bellwhether for Internet startup potential that Dear VC is pitching. Oh if it were only that simple (minded).
How many new users first venture onto the Internet each year? Annual United States births have risen to 4.29 million, ranking 137th worldwide. International growth is even higher, yet US births alone accounted for 1/4 of the largest broadband spike in Dear VC’s data set. By the nature of the world they enter, Millennials use technology at higher rates than previous generations (2007, Junco and Mastrodicasa). They’re characterized as goal-oriented with a desire to make a difference, a need for immediate communication (SMS, chat, email), and access to the Internet everywhere – not merely from their home broadband connection. Startups need to build tools that Internet users want to use. Empower them to achieve their goals and your success will have little if any correlation to broadband growth (or cement).
If a business can’t find a market amongst tens of millions of new customers arriving every year, it wouldn’t likely have survived during a broadband boom. Who is this genius* venture capitalist? Entrepreneurs would do well to avoid him.
