Is it just me or does it seem like we're going back to the height of the bubble with people trying to get funding for websites that are sure to become huge on-line communities? At the height of the bubble, there were so many companies buying domain names and trying to secure funding based simply on the expectation, "If we build it, they will come." In my readings, I've seen quite a few of those pop up over the last month or so, but worse, these are from trusted sources, sources that should know better. What has brought new life to these expectations? Social networks. We're seeing the exact same ideas from seven or eight years ago but with new hope because of the success of some social networking sites. It is probably a different group of people that are having those ideas. I wonder if we'll experience this every ten years or so when a new group comes along. I speak as if I were a veteran in the industry when anyone who knows me knows that I'm not, but I still think the observation has to be made. A successful website needs to have a whole lot more than just an idea for people to build around. You can't just say, "We're going to give people that have the same likes, hobbies, or passions, the ability to network with each other on the website. They'll love it." You can't even say, "There's no one place for people to go for information on this certain subject. We'll build a network around it and they'll keep coming back." Reasons you can't say that? There are no barriers to entry and don't think you're getting first mover advantage. All it takes is someone else to come along and say, "I can make a site like that and make it better" and you're done. And yes, it will happen. Another reason, gone are the days when we go to lots of different sites for all of our different interests. If there really isn't good info out there on the subject, create a blog and let them add it to their reader. Don't expect them to come to the site. Another reason, this requires absolutely no funding. Create the website for a couple hundred bucks by hiring a buddy or finding someone on-line from another country. There are plenty of websites that will connect you with talent for a cheap price. If the community gets huge, then great, secure some funding and proceed from there. Turn it into something big. But don't go out spending tons on some fancy website when you don't have the followers or the revenue stream to make it worthwhile. I know that history is bound to repeat itself, but you hope not in the exact same way and in such a short time. I hope the VCs and angels will be a little hesitant before going into something like this and I hope that otherwise credible sources will not lose credibility by backing such ideas until they've thought around all that they're going to have to deal with to enter the market. I'm not always this conservative, only with bad ideas.

Labels: bad ideas, funding, VC