The Venture Capital community has rediscovered the power of eyeballs - those bilateral orbs in the center of our faces which in most cases are connected with our brains. At one time VCs thought eyeballs were an extraordinarily important indicator for the prospects of a dot-com business. The simple thesis being the more eyeballs that could be attracted to a website, the greater the likelihood....... Well it was never entirely clear the connection between eyeballs and wallets - those things most of us sit on. But then perhaps the VCs have some insight about anatomical linkages between their heads and their tails that most of us don't.
So in a bit of throwback to the good old days a couple of the more audacious VC firms have recently been playing around in the social networking sphere and re-discovered the price if not necessarily the value of eyeballs. Jobster and Odeo as noted in the snippet below have attracted substantial early funding from some of the VC communities more successful financiers. And the subject of today's NYT: Billion-Dollar Baby Dot-Coms? Uh-Oh, Not Again (requires subscription to NYT online) - Facebook.
Facebook enables students on college campuses to connect (requires subscription to Mercury News online)and interact with other people on campus - not exactly a cyberdating service but more like a directory resource for the laptop and cellphone carrying crowds. Apparently spreading like a virus it has found favor with advertisers and promoters who want to test/survey products and ideas on their future customers.
Among venture capitalists it's a poorly kept secret that Facebook's valuation came in just shy of $100 million. Assuming that's true (Mr. Breyer declined to say), Accel paid a little more than $12 million for roughly a 15 percent share.
Which is a very steep price for a company that even Mr. Breyer acknowledges is a risky venture. The company says that 3.6 million collegians are currently registered at facebook.com to use this online equivalent of the "meet" book that many colleges issue to their freshmen.
The high price of the Facebook deal is hardly an isolated case. Tongues were flapping this week over the $19.5 million that three venture firms invested in Jobster, a recruiting service used by corporate clients.
And they were wagging two weeks earlier, when word spread that a well-heeled group of private investors were set to invest in Odeo, a start-up hoping to cash in on the podcasting phenomenon - until the venture firm Charles River Ventures proved willing to offer three times as rich a price.
So does this indicate a new found appetite for eyeballs among the venture set? Not likely. It is just some of the more adventurous types deploying a small fraction their assets in a field with significant potential but also significant risk. These plays have occassionally worked out for the VCs who were early into the game - insert the usual suspects here. But large investments in speculative investment themes isn't what drives the ecosystem into frenzy mode. Large, spectacular exits are required for that. And until we eyeball a couple of those, there isn't much chance of the public getting off their tails and opening their wallets.
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