Is the smallness of Web 2.0 killing the big wins?

Great story from the New York Times.

Judy Estrin, who has built several Silicon Valley companies and was the chief technology officer of Cisco Systems, says Silicon Valley is in trouble. In a new book, “Closing the Innovation Gap,” which will be in bookstores Tuesday, she writes that the valley’s problems are symptomatic of a crisis in innovation facing the country as a whole.

I have to agree, but it's not just Silicon Valley. Unfortunately, I'm learning this from direct personal experience with my own startup.

We started as ClickCaster, a podcasting platform that was veryy good at making it simple to create and publish an audio or video podcast. We built a great product and great team. We did everything 'right', but podcasting, so far, hasn't become a business. So, about 6 months ago, we sold it to a company down in Texas (the URL, userbase and a license for the software). We kept the software and intellectual property as well as the team that built it and brought in some new business folks that really understand video.

We created a new company called Medioh and started work on what I call Broadband Social Television. Everyone we've talked to says it's the right thing and the right direction, including customers, and we've got a big jump on it with years of experience dealing with media on the web (creating it, aggregating it and distributing it with a social networking twist).

We want to augment, or better yet, replace, much of the existing media infrastructure with web based solutions. Tools, content and social sharing aspects... all at an order of magnitude less cost to implement, but with the same really big advertising revenues associated with traditional television.

The problem is, it's a swing for the fence kind of play.

There's significant competition, and, the huge legacy media companies think they know what's going o. Some do, but most don't. It just scares the hell out of investors because it's obvious there are only going to be a few winners.

In a word: A Bit-O-Chaos.

I love chaos. Within chaos lies massive opportunity, if you've got the ramp/resources to sniff it out and make it real.

We're as well positioned as anyone to do that (better than most) and we've started the conversation with VC's, but we're not getting alot of traction. Granted, it's early days, but the initial discussions, to date, aren't as encouraging as i'd like.

The market meltdown hasn't helped and, potentially, has killed off pretty much all the potential funding. People are afraid.

As Judy says, the 'big' plays scare today's investors. They're looking for the short term win.

Ms. Estrin traces Silicon Valley’s troubles to the tech boom. She said that’s when entrepreneurs and venture capitalists started focusing more on starting companies to turn around and sell them and less on building successful companies for the long term.

“Starting in 1998, there was such a shift in Silicon Valley toward chasing money and short-term returns,” she said.

For us, I suspect some of the problem comes from the "ITV" or "IPTV" push 10 years ago that failed so miserably. Billions where spent and it didn't take off. Everyone thought it would take a year or two and viola! we'd have webtv everywhere.

As Bill Gates says, we tend to overestimate what will happen in the next year, and underestimate what will happen in the next 10 years. He was so right.

It's been 10 years since the boondoggle of internet video from the late 90's, and the infrastructure, audience, technology and inclination is now very much there and very real.

But the money guys are afraid. They remember (or have heard) the late 90's horror stories and don't want to take the risk.

And as the article says her book implies, it's a broad problem.

Our fund raising situation? I think, we're just a symptom.