[graycat]

There is a really big company nearly everyone in the world has heard of for decades. I know the founder, COB, CEO, and saved his company twice.

Once I asked the founder for an introduction to a VC, and the founder turned me over to his also famous CIO. We chatted about old times and my startup.

He gave me a warm introduction to a Silicon Valley VC.

Did it help? Nope. Did the VC seem to care about the introduction? Nope.

So, for a VC, what might be the role of a warm introduction? Sure: Keep down the e-mail traffic.

Next, given a warm introduction, what does an information technology VC really want to hear? Sure, an easy way to make a lot of money quickly, i.e., an information technology company with some good barriers to entry in a huge market with significant traction growing very rapidly and with founders desperate for some cash and ready to sign an onerous term sheet?

I never imposed on that very busy founder or his CIO again.

Yes, some VCs regard a contact without a warm introduction as something contemptible from "over the transom". Well, sounds like the VC is so rich they don't want any more money, is having trouble handling their e-mail, or would be a total pain to have on a BoD.

And, just what is the VC going to bring except fungible cash? Do they know how to manage high end sites of Windows Server and SQL Server, grow a large server farm, manage software development with 100 developers, protect against nuisance law suits, do well with publicity, etc.? What do they really know?

[tmat]

They're "The money guy." They don't need to know squat except how to squash ideas that don't turn out hockey stick growth. Most websites don't need funding, it's a misnomer, and ruins what could be a perfectly good life style business.

People need to get over the idea that they're building the next big thing.. Because they're not. Turn out profitable business and then if the growth is there push on till the day. Otherwise enjoy what you have or sell it and try again.

[graycat]

Right!

E.g., suppose a Web site starts to take off, that is, has number of users per day increasing rapidly. Then, a crucial number in the growth is how soon can one server computer generate enough revenue to pay for a second server computer? That is, we're talking about a start on exponential growth.

Well, long the M. Meeker KPCB reports said that can get paid about $2 per 1000 ads displayed. Okay, maybe now that's down to $1.

Okay, suppose send just one ad per Web page. Get, say, a server with an 8 core AMD processor at 4.0 GHz for $1000 and send on average 24 x 7 just one Web page per second. Then the monthly revenue would be

     1 * 3600 * 24 * 30 / 1000 = 2,592

dollars.

So, in two weeks, get another server. So, we have essentially exponential growth with a doubling time of a little less than two weeks.

So, we have, in the history of (legal) business, about the fastest growth, the best business opportunity, of all time.

But we were talking 8 cores, right? At 4.0 GHz, right? If the Web pages are relatively simple, then we're talking being able to send maybe 8 Web pages a second. And we may have more than one ad per page. Okay, assume as above but 8 pages a second with 4 ads per page and get

     1 * 8 * 4 * 3600 * 24 * 30 / 1000 
     = 82,944

dollars a month in revenue. That was one server. So, in a spare bedroom get a wire rack shelf unit at Sam's Club for $100 and put 12 midtower cases of such servers on that rack. Have an electrician upgrade the house circuit breaker box and run 240 V to the spare bedroom for the computers and a big window unit A/C. Also put a propane powered backup generator on a concrete slab in a small hut out back. Now we're up to ballpark $1 million a month in revenue.

So, we're talking ballpark $10 million a year in pre-tax earnings. At a P/E of 40, we're talking a company worth $400 million, from a spare bedroom.

Is the Internet a great opportunity or what?

Sure, the issue is getting the users.

But with the users, there's only a small window of time when even a dirt poor founding entrepreneur would take equity funding. And without the users, still there would be not equity funding.

Net, it looks like equity funding and Web sites mix like oil and water. If the site grows, if it doesn't, in either case, there's little or no role for equity funding.

Of course, if have just a Web site, may have only a lifestyle business. Okay. Not so bad.

[sharemywin]

But advertising slows growth. Both because of focus and not as good of an experience.

[graycat]

I'm not clearly understanding what you wrote:

What about "focus"? User's focus when the look at the screen; my focus when I have to work on all the issues in the startup and, then, in addition the ads and, thus, lose my focus; something else?

For user experience, with my Web pages, the ads are fairly easy to ignore. The pages are dirt simple with essentially no JavaScript -- so that pages don't jump around. And all the layout is just via tables so that I know to the last pixel where everything is.

The content the user wants is on the left, and some ads 300 x 250 pixels are on the right. Simple.

So, I'm guessing that the ads will not be very distracting, e.g., won't hurt the ability of the users to focus on the content, i.e., won't yield a poor user experience.