How Money Shapes the future of the Web

Marshall Kirkpatrick’s coverage of the huge cash injection Facebook recently received got me thinking about how the flow of capital shapes the future of the web. In the post Marshall outlines his thoughts on the investment, some good and some not so good for the tech ecosystem.

  • Scale: The deal sounds big for a young company but makes up a tiny portion of Goldman Sach’s investments
  • Disruption to Co-Optation: chances of Facebook making high risk decisions have decreased
  • More Money for Tech Companies: some of the folks that cash out on early investments will put that capital back to work through angel and venture investing. Thousands of engineers will work at the high growth company.
  • More Facebook Control over Identity: the cash will help power Facebook’s domination over internet identity as the default log in

All means of business are subject to the disruptive forces of the commercial web

Let’s begin by tracking the motivation behind why investors want to need to pump cash into rapid growth web startups. There’s a wave of realization spreading among investors across industries, and no one puts words to this trend better than founder, angel investor and business strategist Chris Dixon. I highly recommend reading Chris’ Augury, it succinctly captures the cross market macro trends.

The modern economy runs primarily on information, and the Internet is by orders of magnitude the greatest information mechanism ever invented

Predicting the future of the Internet is easy: anything it hasn't yet dramatically transformed, it will. http://bit.ly/eSA7RO
@cdixon
chris dixon

People, companies, investors and even countries can’t stop this transformation. The only choice you have is whether you join the side of innovation and progress or you don’t.

The Devil’s in the Details

Even if the transformation of markets is inevitable, it tells us little about the specific shape of the future global network. Large investors and corporations desperately seek to benefit from the transition of traditional businesses to the web and internet. Their primary means of doing so are through acquisitions and investments. The option for conservative sustaining investments is quickly evaporating, and big players are forced to take risks to place themselves in a position to profit no matter which tech companies dominate. In particular, I’m anxious to see how legacy investment companies will respond to fresh digital upstarts who disrupt the IPO market and the government bureaucracy which protects incumbent banks.

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  • http://readwriteweb.com Marshall Kirkpatrick

    Well put. This is very interesting and I hope we’ll see future-savvy analysts arise to analyze these business changes in a way that leverages forward-looking technologies. Not just for distribution but for research. I’m looking at Felix Salmon at Reuters as a strong example. This kind of business analysis is far enough outside my experience and deep interests that I’m much more likely to remain focused on the technology and culture, with occasional business coverage when I have to. I hope though that some of my favorite tools, like twitter lists, rss filtering, custom search engines, etc can be used to better analyze network-driven business disruption. Just probably not by me ;). Thx for this post, very thought provoking.

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  • http://www.victusspiritus.com/ Mark Essel

    The post image reveals my bias by showing money flowing through the pipes. Money is a symbol for exchanged man hours/resources, information channels are a conduit for currency. Our conversion rates are far from optimal at the moment. There’s certainly big trends taking hold as very sharp financial folks do their best to see that investors find a way to back web/tech companies.

    ps: just had a great time reading John Battelle’s Dependent vs Independent web, and Albert Wenger’s hope for Larry Page to galvanize all of Google around being the network economy champ, instigated by Fred Wilson’s coverage of the topic.

  • FAKE GRIMLOCK

    YOU HIT ON GOOD POINT. INTERNET ALREADY MAKING IT MORE EASIER FOR LABOR (TEMP SERVICES, MONSTER.COM, MECHANICAL TURK, 99 DESIGNS) AND RESOURCES (ETSY, EBAY, AMAZON) TO MOVE.

    BUT IT STILL NOT WORK GREAT. ME NO CAN TAKE PICTURE OF THING ME HAVE WITH PHONE, SELL TO HIGHEST BIDDER IN 24 HOURS, GO TO KIOSK AT GAS STATION FOR DROP INTO BOX AND AUTO SHIP OVERNIGHT.

    AND GUY THAT BUY THING NO CAN PAY FOR IT BY GET ON CROWDSOURCE SITE, DO PICKUP JOB FOR 3 HOURS IN SPARE TIME.

    THAT WORLD US HEADING FOR. THERE STILL LOTS OF DISRUPTION WAITING FOR HAPPEN, AND LOTS OF OLD INFRASTRUCTURE THAT NEED BLOWING UP.

  • http://www.victusspiritus.com/ Mark Essel

    You are a wise and deep thinker dinobot. Pleased that you stopped in, and happy to peruse more of your futurist hypotheses.

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  • http://twitter.com/cleopatraswan Sarah Lynch

    Precisely.