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Venture Capital Funding Slips, Slowing Business Development
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"My sense is we're in a fairly steady state," he said. Indeed, Grotech, in partnership with AOL founder Steve Case and his wife, took part in one of the more high-profile venture capital investments of the quarter: $5 million in LivingSocial of Georgetown.
LivingSocial, formerly known as Hungry Machine, builds applications that allow people to share, discuss and explore their likes and dislikes on profile pages on social-networking giants such as Facebook and MySpace. LivingSocial currently has applications for six areas -- books, music, movies, restaurants, games and beers -- that build on more basic tools the sites provide.
LivingSocial makes money in a few ways. If someone clicks on a friend's recommendation to buy a book, it takes a cut. It also integrates ads into the applications -- recently, for instance, promoting a Sony movie through its book recommendation widget.
"They are succeeding by monetizing the social network in a variety of ways rather than a single way," Rainey said.
Last week, LivingSocial launched a Web portal, allowing users to search through thousands of recommendations by their friends and other users.
Tim O'Shaughnessy, a 2004 Georgetown University graduate and one of the founders of the company, said the site gives people a one-stop shop for exploring their friends' interests.
"There's very much the social discovery aspect and browsing everybody else's collection," he said.
Asked about whether Web 2.0 companies can effectively turn their millions of users into dollars, he said that traditional strategies, such as placing display ads around content, may not work.
"It's going to be a little more integrated advertising campaigns, building add-on functionality that's sponsored by somebody or really kind of integrating their brand into the product experience," he said.
