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
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.