Investor: Consumer Web best bet for high returns

MENLO PARK, Calif.--If you want to make money as a venture capitalist, the consumer Web offers the highest, most consistent returns, according to Steve Jurvetson.

The low costs required to start these companies is a big part of the appeal, Jurvetson, a partner in Draper Fisher Jurvetson, said in an interview at the Nordic Green conference here this week. By contrast, biodiesel start-ups need millions to get through the experimental stage and then tens of millions to go into pre-production.

Networking also works well with Web companies. A successful word-of-mouth campaign that costs almost nothing can propel growth rates. Skype in a few years collected more than 309 million members. Again, this is something a solar company can't do. If Facebook had to climb on your roof for three days, erect several panels of solar-sensitive glass, and hand you a bill for $20,000 before you could use their product, it wouldn't be that big.

Historically, some consumer Web companies have also figured out ways to exploit inefficiencies in existing versions of similar products. When Hotmail came out, people generally paid for e-mail software. Now it is just a free service supported by ads. Phone service is transforming from a separate expense to a service included in an overall data package. (DFJ was an investor in Hotmail and Skype.)

So laugh all you want at Web 2.0 business plans. They do seem to work. But often, isn't easy to pick the ultimate winners. Veoh Networks seemed to have all the right elements, but it got eclipsed in video sharing by YouTube. Still, you can even make money on a second-tier company.

Interestingly, there's recently been an emergence of companies trying to merge Web functionality with alternative energy. Sungevity, for instance, has come up with a way to give consumers a solar estimate over the Web. Typically, that takes an appointment with a technician.

On other notes, Jurvetson, who sits on the board of Synthetic Genomics, outlined why biological processing may prove superior to thermochemical processing when it comes to making biofuels (Synthetic Genomics creates designer organisms that can metabolize light or waste products into energy or other things). Basically, it comes down to evolution. A metabolic pathway in a microbe may have evolved over millions of years. "I would bet on an evolutionary algorithm over a man-made one," he said.

Microbes often operate at room temperature, so processing, potentially can be more energy efficient.