That’s the logical thesis of this FT story: Now that credit is gone and the ad market is about to fall off a cliff, the only way for most Web 2.0 companies to survive is to get Rupert Murdoch, or Les Moonves, or Barry Diller, or…somebody to buy them out, and for much less than they’d like. That sounds right to us.
That said… the paper’s excellent Ken Li can only find one example of this actually happening, and it’s related via an anonymous big media guy talking about an unnamed startup:
One senior media executive recounts a September meeting with an entrepreneur seeking funding. Shortly after the meeting, “the CEO pulled me aside and asked ‘What about an acquisition?’ I said, ‘Let’s walk before we run.’ “
The offering price was a fifth of the $100m valuation of a year ago. “There are bargains out there,” the executive says. But for now, “we want to take a breath”.
The last part is most interesting to us, actually. Given that many of the Web 2.0 companies are either “pre-revenue” or have just a modest amount of Internet ad dollars to begin with, we’re pretty sure that the notion of a “bargain” is going to change dramatically: Is a company that was once putatively worth $100 million now a deal at $20 million? Or is it still overpriced? It’s going to be a lot harder for M&A guys to justify any deals for the near future, but we think the ones they do push going forward are going to be actual businesses, with real revenues, and perhaps even profits. How many of startups meet those criteria?
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