On the Record: Dan Nova
As venture-capital funding surges back toward its dot-com-era heights-$6.35 billion went into start-ups last quarter, many of them new Internet companies-investors are wondering if history is about to repeat itself. Dan Nova, a venture veteran who cofounded search pioneer Lycos in 1995-and who went on to finance Internet stalwarts Ask Jeeves, MapQuest, and Quote.com-insists that E-business has never gone out of style. Now a general partner at Highland Capital Partners in Lexington, Mass., Nova talked with Senior Editor Justin Ewers.
The bust scared most investors away from the Web. You stayed put. Why?
We're still in the early days of the evolution of the Internet. People tend to forget that it's really only 10 or 11 years old. The collapse was a funny thing. What collapsed? Not the businesses themselves. Amazon continues to grow. More and more people buy online now than they ever have. More people search. More people are doing commerce. More companies are advertising on the Internet. Year after year, there's been steady growth.
What lessons did you draw from the bust?
There are always limits. But the public markets are not the public markets of '96, '97, '98. They are at a more rational state, where they're only accepting companies that have sustainable business models.
You talk a lot about Web 1.0, the Internet boom in the late '90s, and the next wave, Web 2.0. What's the difference?
When you look at 1.0, it was really the democratization of access to information. Whether you're sitting in a Harvard law library or a row house in Dublin or a grass hut in Africa, as long as you could access the Internet, you had access to the same information as everyone else.
And Web 2.0?
Web 2.0 is really the democratization of participation. When you think about the blogs and the wikis and the MySpaces, what's really happening is now everyone has a voice. Your currency in the 2.0 world is only based on the strength and credibility of your writing or your argument. We've gone from where it used to be "If you build it, they will come." Now it's "If they build it, they will come." I'm actually more excited about 2.0 than I was about 1.0.
MySpace, in particular, has become the poster child of Web 2.0. With more than 100 million registered users, it's an advertiser's dream. But Lycos had more than 90 million users, too, and it faded away. Is traffic a good proxy for value?
You can never predict the future for any of these companies. Google wasn't the first search engine; it was more like the 10th. What people are doing in the 2.0 world is similar to what many did in the 1.0 world-build audience and not worry about the revenue.
That sounds like the bubble all over again.
I think we've got to look at 2.0 from 2004 to 2015, just like we looked at 1.0 from 1995 to 2005. It's natural to want to say, "Boy, nobody's really making money in 2.0." But somebody's going to harness the collective energy of tens of millions of people creating content on the Internet. Someone's going to organize it, create communities, create commerce, and eventually create advertising dollars around it. Is it going to happen in '06? No. Is it going to happen over the next 10 years? Absolutely.
This story appears in the August 28, 2006 print edition of U.S. News & World Report.
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