Why does a web startup need millions on VC capital?
One of the great benefits of the web application business is that startup costs are generally fairly low compared to brick and mortar businesses. Web hosting is getting cheaper and programming costs usually do not exceed 6 figures. So what are most of these millions being put into?
Funding Venture Capital Website Web App
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Well on what context you are referring to millions,kindly clarify If an e-business is unique and is being done first time then a lot of market research and analysis is need to be done before stepping into it...I think that's how millions may cost – Dot Net Soldier 13 years ago
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excellent question – Hartley Brody 13 years ago
2 Answers
- good hosting and million of impressions cost money.
- development (programming costs) If you want top developers x number of developers.
- marketing - making a web product known by a lot of people cost a lot of marketing efforts.
- rent, infrastructure, lawyers, etc...
For many eBusinesses, like Facebook for example, large sums of money are being put into the founders pockets.
Seriously a business is not valued simply on costs; many times a potential investor can see value in a business that is a lot more than simply what it cost to put together.
Suppose you spent a year building a web business and it attracted a million paying customers in the first month it was live. Then Microsoft called you up and asked to buy 10% of your company would you start thinking "lets see, we spent X on servers and Y on food..."
Of course not, you would think "Lets see, I have a million paying customers right now which will generate a profit of Z this year plus we are growing a Y rate per month so at this rate next year we will make...."
