Excellent article in Business Week - for the "web 2.0" crowd 2007 will be the year to put up or shut up... time to prove that the business can scale beyond the founders, develop and implement a real distribution / sales strategy and pull in material revenues.
extracts below - but it's worth reading the whole article
It's a formula that has fired up Internet entrepreneurs from Palo Alto to Paris: Start with free software, add falling prices for computing and data storage, toss in ever-cheaper distribution costs, and you can launch an online service for practically nothing. But now that many so-called Web 2.0 outfits have a couple of years under their belts, it's sinking in that it takes real money to turn those ideas into real businesses--to reach a broad audience, scale up operations, and, you know, turn a profit. "It's true that you can do a science experiment more efficiently than you could five years ago," says Rob Shurtleff, managing director at Divergent Ventures, a venture capital firm. "But don't confuse doing the science experiment with building a large enterprise."
... out of scores or even hundreds of startups in any given category, whether it's video sharing or photo slideshows, only a handful will be bought in their first rush of success. ...
That means raising significant money to spend on nuts and bolts. Web services may cost mere hundreds of thousands of dollars to set up. But turning them into profitable companies could cost $15 million to $25million, much of which must be spent on distribution, engineering, and infrastructure, says Brad Feld, a managing director at Mobius Venture Capital Inc.
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