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1 Internet 2.0 – Time for the VC industry to look again at the opportunities George Hadjigeorgiou Corporate Development, Yahoo!

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Presentation on theme: "1 Internet 2.0 – Time for the VC industry to look again at the opportunities George Hadjigeorgiou Corporate Development, Yahoo!"— Presentation transcript:

1 1 Internet 2.0 – Time for the VC industry to look again at the opportunities George Hadjigeorgiou Corporate Development, Yahoo!

2 2 Internet 2.0 – Trends and Implications 2 Trends: The users The industry 2 Implications: Implications for the VC industry Implications for entrepreneurs and public policy makers

3 3 5 long-term macro trends driving technology investment Population is aging Time Compression Wireless – take it with you Decreasing reliance on oil Security Biotechnology Internet/ Connectivity Energy/ Environmental Technology IT/Software

4 4 Trend 1 (Users): Internet User growth (breadth) Internet User engagement (depth)

5 5 Global Internet Users have been growing Future usage growth will come primarily from Asian countries

6 6 Internet is becoming more essential across a range of demographics

7 7 However, real action and engagement is due to begin just now In Cable, once penetration leveled out around 60-70%, growth in usage accelerated, increasing almost 3x, from 29 hours/month in 1990 to 81 in 04

8 8 Three key drivers of usage depth In 1996, John Doerr said: by the year 2006, people will remember the current Internet experience as quaint, like black and white television with limited sound

9 9 Internet 1.0 was all about breadth – Internet 2.0 is all about depth Internet more users (breadth) massive change in how users get information and communicate breadth of usage or driving total users Internet 2.0 – more user engagement (depth) User experience is getting better due to: experience and feedback k better product integration of key sources of value faster speeds, always on and accessibility,

10 10 Trend 2 (Industry): Internet 1.0 – Boom/bust cycle Internet 2.0 – Healthy expansion/consolidation

11 11 Internet traditional capitalist cycle Overinvestment may seem wasteful, but then its always easy to identify winners once the race is over…theres no substitute for experimentation with business models as well as with technology – Hal Varian

12 12 The emphasis is shifting form ISPs to Pure Internet and Internationals

13 13 Internet 2.0 – expansion and consolidation Internet 1.0: Classic boom/bust cycle -> darwinism traditional capitalist cycle aggregate market value of the Internet survivors are above 1999 levels mix of the top 10 Internet players has evolved Internet 2.0: Healthy expansion/consolidation cycle number of Internet companies is now expanding significant consolidation on a global basis is likely over the next 5-10 years led by product integration and flush balance sheets

14 14 Implication 1: M&A can and will be an attractive exit strategy and the VC industry can help play an important role in building the Internet ecosystem

15 15 Internet 1.0 – Hyper investment and fingers burnt Huge investments in start-ups – more business than technology investments Survival of the fittest – bust and $1 acquisitions Leaders focused on custom build underlying technologies : Internet-shy investments

16 16 Trends are changing Some examples of recent acquisitions – Kelkoo, Musicmatch, Flickr, Oddpost, Farechase Most of them backed by VCs – only one public company Some examples of recent acquisitions – Urchin, Keyhole, Picasa, Dodgeball Only some of them backed by VCs/angel investors Some examples of recent acquisitions – Shopping.com, Gumtree, Loquo, Rent.com, Kurant, Marktplaats, Craigs List, Baaze, mobile.de, Internet Auction Co. Most of them backed by VCs – only one public company

17 17 Implications for the VC Industry Exponential growth in Internet industry Internet industry leaders will typically acquire for two reasons: Market share/brand Talent and innovation – technology enabling companies By building technology-enabling companies, the VC industry will help to move the whole industry forward and build the internet ecosystem VCs will create a lot of the companies that will fuel innovation for the leaders of Internet 2.0

18 18 Implication 2: Entrepreneurs need to think beyond the country/regional boundaries whilst supported by public policy makers to foster innovation

19 19 Implications for entrepreneurs and public policy makers Tax incentives for innovation World-class talent in universities and applied research Infrastructure/ broadband Focus on one or two killer technologies Extroversion – Think regional and beyond Killer apps and technologies

20 20 In summary … Internet 1.0 was all about user growth (breadth) – Internet 2.0 is all about user engagement (depth) 1 Internet 2.0 will be characterised by consolidation in the industry 2 VC industry can help play an important role in building the Internet ecosystem – M&A will be an attractive exit strategy 3 4 Entrepreneurs need to be extrovert/ think beyond the boundaries of the country 5 Public Policy Makers can help to foster further innovation


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