To venture capital or not to venture capital that is an interesting question. Internet businesses are growing fast some making alone and some making with venture capital backing.
For those of you that don’t know what venture capital (VC) is, its money given to a young company with high money making potential. The money is usually given by another rich individual or orgainsation for all the usual business building needs (research, product development, advertising etc). The investors will have an end game normally consisting of selling the company or floating it on the stock markets.
Webandrank is a search engine placement service and a very good one at that, we wondered how VC backing helps or hinders SEO companies in moving forward. After conducting some research online it is not easy to find companies similar to Webandrank that have received venture capital funding. The most notable are I-COM and SEOmoz.
Back in 2006, Manchester based SEO company I-COM secured venture capital of an unspecified amount. In 2007 SEOmoz received $1.1 million in external funding.
Both companies put out a press release revealing some of the details. I-COM simply states that they have ‘doubled its monthly revenues in the last six months and is looking forward to a continued phase of ‘organic’ growth!’.
SEOmoz released a whole run down of its current business because under the new management it will be the last time they will be able to do such a thing. Reading the SEOmoz press release raises interesting questions about venture capital, randfish explains ‘Sadly, this will be the last time I’m able to share this much about the inner workings of SEOmoz this publicly…This means the sharing certainly isn’t over, it just probably won’t be this all-encompassing again’.
For many SEOmoz fans the venture capital investment will mean a big change in the way the company is run. Those fans that help to build up the popularity of websites can sometimes be left behind when firms start chasing the money.
Aaron Wall wrote an interesting article over on SEObook about venture capital. He starts the article saying that he had refused to accept a venture capital offer, mentioning that ‘VC…isn’t a good fit for niche publishing’ over on plentyoffish Mark Frind notes ‘how are 100-1000 or so VC funded companies going to compete with a couple of hundred thousand webmasters who have created sites wanting a piece of the action’.
Frind and Wall both make interesting arguments against the need for venture capital, I especially like the idea that Wall writes about ‘passion driven armature website makes search more relevant and cuts the publishing market into more pieces’. Venture capital can hinder creativity and in many cases firms can make it alone with the right sort of business savvy.
The problem with these arguments is, how can you ignore Google? Before Google figured out how to make money from paid search they almost went out of business. If Google had not received funding they may have just been an insignificant memory in Web history. In many cases startups do simply need the funding to get going or stop them from going under. To quote blackbeard ‘There will always be some people who have enough business sense and web experience to make their ides profitable without having VC’s involved, but as long as there are tech nerds with cool ideas and no business sense, VC’s will drive a lot of the web growth’.
Even this statement is not entirely true, a tech nerd teaming up with the big investor is a romantic idea but often not the case. Companies have both tech expertise and business savvy but find it hard to break into the big leagues. The big league is an exclusive club and if you want to sip champagne with the major players then VC is, for most, the only way to go.
Webandrank.com tried to contact I-COM but they are not sharing any news about how the funding has helped them to move forward. I-COM seems to still exist as a small firm and makes very little noise in the world of SEO and SEM.
SEOmoz as we all know continues to grow and become more and more popular. The firm has moved away from grass roots organic search engine placement work and is now focusing on software and developing new tools. The new Linkscape SEO tools looks like it’s going to be very popular.