Do SaaS ventures need VCs?

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Don't confuse SaaS with Web 2.0

Let's don't confuse SaaS with Web 2.0. There is plenty of overlap, but they are not the same thing. A lot of Web 2.0 is straight up collaboration around simple models. Web 2.0 doesn't need much VC--the apps are simple and they grow virally or not at all.

SaaS applies to a much broader spectrum of activity than just collaboration. SalesForce.com, SugarCRM, and RightNow are all SaaS businesses that were fairly costly in terms of capital both to develop their software (despite one being Open Source!) and to move towards critical mass with Sales and Marketing.

It isn't because the founders of those companies were dopes--it is because they're not really collaborative Web 2.0 applications.

More thoughts on this Web 2.0 vs other stuff, namely SOA in my blog:

http://smoothspan.wordpress.com/2007/05/28/understanding-web-20-and-soa-its-about-collaboration/

In conclusion, I would say that Web 2.0 is not capital intensive, but some SaaS businesses can (and should) be. The latter are better suited to VC.

FWIW, my VC friends tell me they are increasingly "stage agnostic" about what they view as "consumer" (e.g. Web 2.0) deals. Not long ago, taking Angel money meant you could never get a top tier firm to invest--they had to be in on the ground floor. Now they'd almost rather have the Angels take the beachhead and proove the idea has legs before they come in.

Best,

BW

Posted by: BobWarfield   Posted on: 05/28/07 You are currently: a Guest | Members login | Terms of Use

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