Here's a recipe for raising a boatload of venture capital: Take information in the public domain and Web tools that are either free or easy to license and cobble it all together on a cool website. Voila, you have a mash-up. Some of the most popular mash-ups use Google's free mapping software to present in-depth real estate information. San Francisco-based Trulia, which has raised $8 million from investors including Accel Partners, an established Silicon Valley venture capital firm, lets users search listings pulled from real estate brokers' websites. Another site, Zillow.com, lists valuations for 67 million homes, mapping them using technology licensed from Microsoft. The Seattle-based mash-up raised $32 million from investors.
Both sites are well designed and attract hundreds of thousands of visitors per month, but it's not entirely clear how they intend to make money. Google prevents companies that use its technology from charging a subscription fee, which would seem to leave advertising as the only likely revenue stream for mash-ups that rely on its technology.
The entrepreneurs and investors fostering the mash-up boomlet concede that the business model needs to be refined. "We as a venture industry are probably overinvesting," says Accel's Theresia Gouw Ranzetta, who sits on Trulia's board. "There's probably too much capital now, but it doesn't mean that every company will be a bad company."
Mash-ups are attractive investments, she continues, because they are cheap to run. Of course, the fact that they are cheap suggests low barriers to entry for potential competitors. And what about Google? What happens to Trulia if the search giant starts charging a licensing fee or--worse--starts a competing service? "We obviously follow Google closely," says Trulia co-founder Pete Flint.
A Look at Some Popular Mash-Ups
|The market||Cool Web tool||+ The complementary component||= Mash-up company||Capital raised|
|Homebuyers||Microsoft Virtual Earth||Publicly available real estate data||zillow.com||$32 million, mostly from VCs|
|Job hunters||Social networking from LinkedIn||Online job listings from Monster et al.||Simplyhired.com||$18 million from News Corp. and others|
|Pedometerless Joggers||Google Maps||Open-source message boards||Mapmyrun.com||None so far|