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New Year’s Predictions

Predicting is great way to make sure one is wrong often, but here are a few trends that I see:

  1. The contraction of venture capital. VC assets under management exploded in the late 90s on the basis of a bubble, and while returns plummetted post-bubble, the assets did not. We will see venture capitalists return their focus to capital-intensive industries, which describes software less well than it used to. But to the extent that there are very attractive economics in software, and a load of moneymen who understand the business, we will see smaller funds, perhaps with different structures than current VCs, that are able to handle these busineses.
  2. The expansion of “alternative” financing. In addition to smaller funds, we will see different models for financing early-stage startups increase in popularity, including debt and royalty structures.
  3. The decline of advertising. The success of Google’s contextual advertising has confused someinto thinking this is a cure-all for funding software projects, and is particularly popular with the “everything should be / will be free” crowd. We will see new revenue models for software - particularly for web-based “services” - that allow for revenue generation with fewer customers.

Am sure there are more trends, but am seeing others give their predictions more eloquently, and based on better information than I, so I defer.

This entry was posted on Friday, January 6th, 2006 at 6:03 pm and is filed under Technology Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. Reddit This

One Response to “New Year’s Predictions”

  1. 52 Bicycles » Blog Archive » Holding Myself Accountable Says:
    December 24th, 2006 at 12:48 am

    […] At the top of the year, I made a few New Year’s Predictions on changes in the startup scene. Let’s see how I did: The contraction of venture capital. VC assets under management exploded in the late 90s on the basis of a bubble, and while returns plummetted post-bubble, the assets did not. We will see venture capitalists return their focus to capital-intensive industries, which describes software less well than it used to. But to the extent that there are very attractive economics in software, and a load of moneymen who understand the business, we will see smaller funds, perhaps with different structures than current VCs, that are able to handle these busineses. […]