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It's Cheaper -- if not Easier -- to Be a Startup

Ann All

Though founding a start-up will likely never be easy, it is becoming a whole lot simpler -- or at least cheaper -- thanks to an interesting mix of market forces, including the falling price of commodity hardware and the increasing acceptance of open source software.

 

In fact, reports SiliconValley.com, some entrepreneurs are shunning traditional venture capital deals for smaller seed investments or other more flexible financial arrangements. We wonder if this might help explain why VC investment in Web 2.0 companies appears to be lagging the funding of other sectors.

 

The SiliconValley.com story profiles Box.net, an online data storage business started with $11,000 in poker winnings from one of its founders.

 

The company recently received $1.5 million from VC firm Draper Fisher Jurvetson in exchange for a one-third ownership stake. The beauty of today's tech market, says the venture capitalist responsible for the Box.net investment, is that it costs less to fail.

 

"Five years ago, it would have taken $10 million or $15 million to determine if you had a business. Most start-ups are ultimately unsuccessful. By lowering the cost of failure, now a team can tell for $2 million or $3 million whether or not it's pointed in the right direction," he tells SiliconValley.com.


 

Another venture capitalist says the popularity of mashups is allowing start-ups to leverage each other's success.


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