Fred Wilson's "What Has Changed" which provides his thoughts on the changing funding environment for these companies. He lists three developments that have made it harder for consumer internet companies to get funded:
- The consumer web has matured,
- The consumer is moving from to the desktop/web to the mobile/app, and
- The momentum/late stage investors have moved from consumer to enterprise.
Another post, "R.I.P. Frothy Times, A Return To Normalcy" by Alexia Tsotsis on Techcrunch.com, also discusses the increasingly difficult environment for consumer internet companies. According to the post (citing Dow Jones), investment in consumer internet companies is down 42% in the first nine months of this year compared to the same period last year.
These posts echo what I've been seeing in the industry. I would add that the public markets have been especially harsh on companies that disappoint (Groupon, Facebook, Zynga, etc.) and that IPO buyers are more scrutinizing, making it harder for consumer internet companies to go public. Another impact is that under FAS 157 (ASC 820) guidelines, funds may need to mark down some of the consumer internet companies in their portfolios based on the poor performance of public comps.
"What Has Changed" by Fred Wilson:
"R.I.P. Frothy Times, A Return To Normalcy" by Alexia Tsotsis: