Life is good

Venture capital investment in the U.S. in information technology companies (hardware, semiconductors, and communication companies as well as Web 2.0 startups) hit $979 million for the second quarter of 2007, up 52% from the same period last year. This is the highest figure recorded since 2001.

Some reflections on the increasing VC investment on IT startups and some things it made me think of:

1. Venture capital investment in startups doesn’t indicate that we’re in a boom, nor does it pinpoint the current atmosphere (for at least the simple reason that VC’s only invest in a small percentage of startups), but I think it does show that we’re in a time of rapid change and investors are, with restraint, pouring in money to make this change happen.
2. Interestingly, the venture capital funding in Information Technology was topped by $1.045 billion that was invested in medical device companies, a jump of 58% in the same period a year before. The emergence of new technologies such as wireless devices that communicate what they find inside the body – drives such companies. Renewable energy (wind, solar, biofuels are the biggest types) and biotechnology are also two fields that are getting huge increases in VC funding.
3. Bill Gurley, a partner at Benchmark Capital (a VC firm that sprang to prominence in the dot-com era) puts it well when he says innovation is happening “because everyone is pushing the gas pedal.” Large companies such as Yahoo and Ebay, who were the innovator-drivers a few years back, are having a slight ‘brain-drain’. Even Google, the “poster child” of innovation and creativity today, isn’t able to keep up with rapid innovation in video and social networking services (and thus the purchase of YouTube last year for $1.64 billion, and the down payment of $900 million to secure MySpace as an advertising partner). We increasingly need startups that bring creativity, crazy ideas, disruptive business/social models, and new ways to exploit the interactive power of the internet to its full.
4. Startup costs are lower than they ever were, and it will continue to get cheaper. While open source and open platforms on the web are especially to blame for this, everything from servers to bandwidth costs less. This makes it easy for anyone from a tech-savvy 18-year old in a dorm room to a 55-year old experienced software engineer who has a spark of creativity to play the startup game – and be part of this rapid innovation.

I say there’s no better time to be an entrepreneur.