I summarized exit metrics for startup companies in my last posting. This is obviously a very industrial VC outlook. In the Web 2.0 world metrics are all over the map. Some companies like Flikr who had very little revenue exited at huge multiples in 2005. Is this Dotcom 2.0? I don't think so. I have been advising a Web 2.0 company www.fotki.com that is a media sharing community. The difference in Web 2.0 is these startups revenue-generating business models. The opportunity arises from the rapid change in user behavior for consumption of entertainment and commerce. The web is commanding more of everyone's time, from boomers to rebounders. As a result there is a relentless movement of advertising dollars from TV and print to the web. Similarly more and more physical goods are moving to digital goods (eg music and video) and there are emerging new business models to the purchase of physical goods (check out Catharine Arnston's startup www.hotelluxury.com).
Likewise, the purchase of Skype by eBay at an implausible price, or is it? I have been using Skype for 3 years to communicate with employees around the world. They have created a "sticky" user base of over 50 million users in just 3 years with about 5 million people using it at any given moment. eBay users can now complete their buy-sell transactions with a p-p Skype voice call but that hardly justfies the acquisition price. The missing ingredient in my opinion is the value of Skype's brand. As a global telecommunications company, their brand rivals other global companies such as MCI, Reliance and perhaps even Vodafone. Skype's brand is certainly more valuable than Oracle or Sun. Brand value and sane business models are the underpinnings of Web 2.0 exit valuations.