VC - Do you need it?

I am now back in NZ.

The events of the past few days are fresh in the memory. So the experience of Palo Alto is highly relevant to an article I read this morning.

'With cloud computing and rentable hardware driving down the costs of starting up a Web company, venture capital is becoming less important for online entrepreneurs, according to a paper by Santa Clara University business Professor Robert Hendershott. Additionally, new business categories, such as iPhone and social networking applications, have development cycles that can be measured in weeks, not months or years'.

In part, I agree. In part....

The real cost of establishing a web company extends beyond the scope of development and hosting. Building a global presence is not cheap, so significant investment is still required to fund headcount, support, IP and structures. The question I think is rather, are VC's the ideal funding partners for this?

It is not a route that Pingar has taken. In NZ, the reason is quite simple. The lack of a competitive capital market means that the high net worth investor route has been more appropriate. Retaining IP in NZ would have been much more difficult if we had had to access global capital markets.

The issue raised by Professor Robert Hendershott is however an important and relevant want. An evolving technology market certainly impacts on web businesses funding options. As start up firms learn to become leaner and smarter in these 'economic times', venture capital is no longer the only play in town.