Venture capital running dry: why that's a good thing

It has become far too easy to start a business in software and Internet. As one VC marketing exec told me recently, most venture capital investors are followers. They find someone who's doing something good, and they throw dollars at the best people they can find to copy it. I talked with serial entrepreneur John Landry yesterday. At McCormack & Dodge in the 1970s, things were a little different.

Every component that you needed to build a system with was scarce. Programming talent was scarce. Machines were expensive. Competitive info was really hard to get. [Landry told me he used to put on a mustache and go to competitor's events at the Mariott.]

When you built something in that environment you had a lock on it. If you got through those hurdles and built something people wanted you could dictate pricing and you could have a lead position forever as long as you kept it fresh.

Now, companies like animoto put their stuff together and run it up on Facebook. The next morning, through the wonders of virtualization, they're transacting massive amounts of data over the Web, without needing to invest in a room full of servers.

So if you've got a really solid idea, now's the time, right? The venture capital firms are all putting their cash back into their existing portfolio, so you don't have to worry about a pack of followers scheming for your intellectual property or your market share. And with cloud computing, plus armies of hungry programmers, you don't need to share the pie with Daddy Warbucks. By the time the economy turns around, you'll be rich. Either that or we'll all be living in grass huts.

Next week's post: how to build a better fish weir.