Ask HN:  End of IT Venture Capital?
Here I make an observation somewhat familiar on HN, draw a conclusion, and seek reactions.

Currently for a first equity investment in a project in Internet Web site information technology (IT), it is nearly universal for the investors to assume that (1) the software is easy and can be done in a few weeks and (2) the investment decision is to be based on a working prototype.

Another more explicit criterion for a Series A is a Web site with at least 100,000 unique visitors a month.

Mostly such projects plan to get revenue from ads on the Web site.

So, suppose that the software is done and goes live. Suppose the 'business idea' is good and is 'promoted' well and the number of pages served start to grow.

Now the founders can seek equity funding. The usual stories are months of contacting some dozens of investors, giving demonstrations, studying term sheet details, forming a C corporation, etc.

But, as is reasonable for a good project, suppose during those months the number of users of the Web site continues to grow. Suppose there is just one ad on each Web page sent, and suppose, from whatever ad targeting is available from the ad networks, etc., the result is $2 of ad revenue for each 1000 ads displayed. So, that would be $2 CPM (charge per thousand).

Suppose the project has a server that can serve 10 pages a second 24 x 7. Then the monthly revenue would be

2 * 10 * 3600 * 24 * 30 / 1000 = 51,840

dollars. For the computing, that might be just a 4 core server with 16 GB of main memory and some RAID disks with an Internet connection with, maybe, 30 Mbps of upload bandwidth. So we're talking a tower case on the floor next to the knee of one of the founder programmers. Ten months of that, with no further growth, would be $518,400 in revenue, more than a usual seed round.

So that revenue would be plenty to buy more servers and bandwidth, move to the cloud, a hosting site, a colocation site, or just build a server farm in a few hundred square feet of commercial space and get a 1 GbE Internet connection.

For 1 GbE half filled 24 x 7 with Web pages with, say, 2 Mb per page, that would be

(0.5 * 109) * (1 / (2 * 106)) = 250

pages per second or

250 * 3600 * 24 * 365 / 1000 = 7,884,000

dollars a year. So, a 1 GbE connection can support a nice stream of revenue.

If the project is good, then in a few months usage should increase by a factor of 10 to

2 * 100 * 3600 * 24 * 365 / 1000 = 6,307,200

dollars a year in revenue, and that is more than most Series A rounds. And, yes, that would fit in a 1 GbE Internet connection.

So, the "observation" is that a few servers in tower cases and a good Internet connection have the capacity to generate some significant revenue. Indeed the revenue should arrive so fast that, in the months it would take to get equity funding, the revenue would exceed the usual amounts for a seed or Series A round.

So, the conclusion is, a good project should just remain 100% owned by its founders and f'get about equity funding.

Yes, it is true that so far all the famous Web startups did get equity funding, but maybe this situation is about to change. If so, then we will see some successful projects that remain 100% owned by the founders, or maybe just one founder?

Are we about to see the death of equity funding for such projects?

Reactions?