Redeye VC

There have been a number of wonderful blog posts debating whether this is a good or bad time to start a business.  Fundamentally, I believe that the reason the debate is occuring is because there have been some fundamental changes to the risk/reward ratio involved in business formation.

When I started my first business (Infonautics Corporation) in the early ‘90’s, the cost to “get in the game” for an IT business was $4 - 5M (ie, first round was $4M). It took that amount to buy the expensive sun hardware, build a datacenter, write the custom software, and build the appropriate infrastructure to grow a business. When I started Half.com in the late ‘90s, our first round of VC was about $2.5M – we didn’t have to build our own datacenter, hardware costs were coming down, and although we had to write custom software we were able to use development tools that made it faster and cheaper.

In recent years, however, it’s gotten much cheaper to launch a software/Internet company. The power of open-source software, cheap Intel-based servers, a plethora of robust development environments, ASP-based services to handle backoffice processes (ie, at Half.com we had to build a help desk – now startups can use an ASP) --- combined with the rise of offshore development – have dramatically reduced the costs to “get in the game”.

This allows companies to bring