Webware

Jeff Clavier at ETech: I can make mountains from your molehills.

(Credit: Rafe Needleman / CNET)

Maybe two years ago, I hosted a panel discussion on the emerging Web 2.0 economy, and I asked my panelists if we were in a bubble. Because it's clear to me that we are. Not that it's a bad thing, mind you. This is how technology evolves: like life itself, in blooms and crashes. And I think we should all acknowledge where we are in the cycle. Anyway, one of my panelists, SoftTech venture capitalist Jeff Clavier, was adamant that this was no bubble.

Now Mr. Not-a-bubble is trying to convince start-up companies that their income, if it's in the $300,000 a month range--a range that most companies made up of three guys and a credit-card funded Amazon S3 account would kill for--is "noise" that distracts them from their potential.

Clavier, and other Web VCs, have a problem: start-ups are getting off the ground with minimal funding, and some are achieving moderate financial success very early on. That makes them think they don't need funding. Clavier claims that attitude limits them. So when Clavier is trying to sell a company his money, he first has to convince them that their cash flow is irrelevant and distracting.

For entrepreneurs who have dreams of building a real company--one that "scales," as they say--Clavier's position makes sense. But I argue that Clavier is looking for big wins in the wrong places. It's quite a trick to take a small (by VC standards) idea and make it big. Personally, I'd rather see the venture money funnel into truly big ideas, where there is only limited likelihood that profits will plateau, or even arrive at all, before the company is well established. As I've said previously, to win big, bet big.