Dream about chucking your technology job and starting the next Amazon.com? Fortunes can still be made starting Web businesses, according to a noted venture capitalist -- especially in broadband networking, Internet infrastructure and "wild ideas" for next-generation online companies.
But would-be Web billionaires better have unbeatable business plans to avoid suffocation in a suddenly crowded field, said Ann Winblad, founding partner of Hummer Winblad Venture Partners, in San Francisco.
"Two years ago, it was revenge of the nerds," Winblad told some 2000 attendees at the Direct Marketing Association's Net.marketing conference here this week. "Now, big money is moving into the Internet. There's a deluge of dollars out there."
Venture capitalist firms will invest some $7 billion in Internet start-ups this year. Winblad said some of that investment is not smart money. "A lot of start-ups don't make any sense and pollute the pond," she said. "Money will not separate you from the pack."
Because pioneers are so strongly established, some online businesses -- such as flower stores and information and search portals -- are already closed to newcomers, Winblad said. Companies like online bookseller Amazon.com gained dominance by being first in their category, she said. Now many Web niches are being pursued by a half dozen or more companies.
Better opportunities exist in next-generation applications that leverage tomorrow's high-speed networks and in novel applications. "It's the wild ideas that are attracting the money," Winblad said. She cited as examples thespot.com, which offers live talk shows on the Net, and the-knot.com, a bridal site and registry.
Winblad said aspiring Web entrepreneurs need to answer these key questions: How big is the market? What share can you own? How can you be No. 1? How can you get big, fast? How can you get customer loyalty fast?
A strong chief financial officer and willingness to set aside 15 to 20 per cent of the financing as stock options for employees are also important for success.
When asked whether the current Net stock frenzy has peaked, Winblad predicted "higher highs and lower lows. But I don't think we are in any danger of the bubble bursting."
But reality is also in order: Of the 2000 to 2500 companies auditioned by Hummer Winblad last year, only 10 got funding, Winblad said. The new Internet economy demands such selectivity, she said, quoting a noted Wall Street analyst: "First place is awesome. No. 2 is OK. Three is tough. Four is the pits. There is no No. 5."