Internet companies are notoriously difficult to value, as investors learned in the dot-com crash 11 years ago. But since the "Web 2.0" companies fueling this year's Internet IPOs rely upon having a reliable group of engaged users, they do offer at least one telling metric: the amount of money each user is worth. That's why venture capitalists evaluating such businesses in their early stages often examine how much revenue a company is generating per user.
Bijan Sabet, a venture capitalist at Spark Capital, which has invested in several Internet companies, including Twitter, FourSquare, and Tumblr, says his firm often considers $2 of annual revenue per user to be an important target threshold for startups. By that measure, several of today's new Web companies show genuine promise, as the chart below indicates.
To read the full, original article click on this link: How Much Is a User Worth? - Technology Review
Author: MIKE ORCUTT
