Gigaom, Venture Capital, Golden Handcuffs, And The Valley of Death

Good interview of Mathew Ingram, about the shutdown of Gigaom, in the Columbia Journalism Review (excerpt below) and the dangers of media companies, startups, and others, taking venture capital money--it's not always the smartest move--

Christopher Massie, CJR: One reason this is so strange is that Gigaom seemed like it was doing so well. What should the takeaway be for other media outlets? 

Mathew Ingram: "Everyone has their own favorite lesson. Danny Sullivan at Search Engine Land talked about what this says about taking [venture capital] money when you’re a media company. And that’s part of the story. Gigaom has been VC-financed from the beginning. Other media startups were not. And when you take venture capital money they’re golden handcuffs, in a way. It’s a Faustian bargain. You make certain promises about your growth, and if that growth doesn’t materialize then VCs lose interest and your company fails... The model that Danny and others have chosen is to grow slowly and to be funded only by your cash flow. And that’s a much safer model—there’s no question about it. The only problem is it takes a lot longer. And you frequently don’t build as big a business... If you are super small and super focused and super niche you can succeed, arguably. And if you’re super huge and mass and gigantic and growing quickly, you can succeed. But in the middle, is death. The valley of death. So arguably we got caught in that valley of death...." (read more at the link above)


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