VC, Meebo, and the Burst
A while ago, I promised you that I will write a more thorough article about Meebo VC funding. This is yet another web 2.0 company that receive a VC funding even when the company doesn’t have a revenue yet and the money is only projected on the business plan. To keep this entry as objective as possible, I’ve asked Meebo (through their contact page) regarding their business plan, some kind of “what’s next†after the funding. That’s about 3 days ago I believe (or is it 2?) and I haven’t heard back from them, so I guess this post will be very subjective.
Meebo is yet another example of a web 2.0 company that grabs the attention of many (including venture capitalists). The idea is pretty simple but the execution is brilliant. It can bypass the port-blockade by system admin by using a usually-open-port (such as 80) to connect to internet messenger’s server. But regarding money, simple idea and a brilliant execution is just not enough.
I’m an management student majoring in financial who has a knack on technology. And it’s a requirement for a company to generate some revenue before it becomes worthy in the eyes of potential investor. The company should be able to prove its self that it can generate money in some way, wether it’s ads, services, or whatever they can throw up to make some money.
This requirement is by-passed on the previous dotcom bubble burst and, in this specific case of Meebo, is again bypassed. Without any real proof that this business can generate money, VC are flocking to its banner like it’s 1999 all over again. Okay, probably they have a good projection of cash on their business plan, good enough to cover the investment of the venture capitalist and even generate some gain if possible.
But without the real evidence that their business model could work, without the real inflow of cash, it looks like the bubble are ready to burst once more. I’m not talking that this company (or any web 2.0 company) should be able to demonstrate that they are profitable before receiving VC funding. Infact, if they are already profitable, and given that their ideas are HOT, the don’t need any VC investment ;-)
What I’m saying here is that the company not necessarily has to be profitable, but at least can proof that they have a working business plan with a real evidence of a real cash inflow. If the company, in this case Meebo, can’t come up with that very evidence, I’m afraid that bubble burst 2.0 will soon realized.
Meebo is an excellent idea and they will continue to gain mindshare in the eyes of the consumer. Meanwhile, MeeboMe is a brilliant concept and one that will allow the social networking and blog communities to engage in real-time communication with their visitors. The company probably didn’t respond because they are too busy to do so. And earning value is of great interest, but remember, you need to be logged into their Meebo URL in order to activate the service — the opportunity to drive revenue from ads and services are well within their reach … and lastly, Sequoia knows what they are doing. This company has plenty of directions to reap economic returns from their efforts.