In Friday Link, Investment

Sorry I’m late with this one so it’s actually coming on a Saturday!

Andrew Chen has written an interesting piece entitled Stop asking “But how will they make money?”.  He is advocating the idea that for internet startups the Google/Facebook model is valid – that if you can build a large enough user base then monetisation can, and should wait, and is easy.  It’s an interesting read, but I’d love to know what people in Scotland think?

I agree that internet businesses are different in many ways, but I think that pursuing early opportunities for monetisation makes businesses much more credible to European (and especially Scottish) investors who haven’t had past successses using the “wait for monetisation” model, and don’t yet see beyond the lessons of the .com bust.

The question is, will a preference for the relatively small proportion of internet businesses thatcanmonetise early result in European (and especially Scottish) investors missing out on the really big plays?  Google, LinkedIn, Facebook and Instagram all followed the “eyeballs then money” model, and probably couldn’t raise investment here even now.  E-commerce businesses like eBay, Amazon and PayPal all monetised early but lost cash for many,many years – and I suspect would still look like unattractive propositions here.

Most agree that Facebook and Instagram pricing represent some sort of bubble, but is it one that merely needs a little deflation, or are we heading for another .com style bust?

Are local investors missing out?  Or is there another internet bust coming, which our investors are successfully insulating themselves from?


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