Welcome back to Baby Breakerdom! This week's quest to uncover budding Rule Breakers finds a dapper dandy of Web 2.0 candy and a big bag of global deals.
First up this week is Dapper, which aims to turn any Web page into "a LEGO block" -- or so the founders write on the firm's blog. There's precious little other information available about how Dapper proposes to do what it does.
Yet even that one-liner has me intrigued. I blame Web 2.0. Venture firms had committed $262.3 million to Web 2.0 firms as of September. But that's for the established companies like real estate spy Zillow. Dapper wants to make it simple for any user to create a personal Web 2.0 experience.
That's where the LEGO analogy comes in. Quoting from the blog, "Imagine you want to build a service that gets movie theaters details in your zip code. All you have to do is dapp Yahoo Theaters, and voila, you have a web service API for Yahoo theaters, which can be accessed with any zip code and returns the relevant data in a format of your choice."
By "dapp," the founders mean use their software to create the code that links a source of data on one website to another source of data elsewhere. Talk about disruptive. If Dapper is to be as simple as the blog suggests, then any of us would be capable of creating custom Web data feeds that serve us exactly as we wish.
Perhaps that's why VentureWire reports that Dapper's recently closed financing round was "hotly contested." Regardless, well-heeled VC Accel Partners -- which has backed RealNetworks (Nasdaq: RNWK ) , RedBack (Nasdaq: RDBK ) , and Supportsoft (Nasdaq: SPRT ) , among others -- won the right to provide financing.
But this is the best part of the story: After all the haggling, Dapper took home just (cue Dr. Evil voice) $1 million dollars.
That might lead some to conclude that this is an insignificant deal. Wrong. Remember that private equity legends such as Sequoia Capital have made fortunes with modest bets. And Sun Microsystems (Nasdaq: SUNW ) co-founder Andy Bechtolsheim gave Google $100,000 before anyone else had faith in the technology. How do you think that turned out? Pretty well, I'd say.
Meanwhile, the VC industry as a whole is turning in the opposite direction. According to Ernst & Young and VentureOne, which is a unit of Dow Jones (NYSE: DJ ) , venture firms are on pace to commit $32 billion during 2006 -- the highest total since 2001.
Much of the increase can be attributed to global opportunities, the study says. Europe is particularly ripe; 42% of deals brokered there were "seed stage" -- code-speak for new firms seeking an initial round of financing.
Technology, too, has played a role in the increase -- including, ironically, Web 2.0. But it's clean technology that took the top prize. The study reports that venture firms have invested $761.4 million in sectors such as solar and wind power.
No doubt there are many good ideas in clean technology, Web 2.0, and other areas. But if the Dapper deal proves anything, it's that more money isn't needed to foster groundbreaking innovation. That's why so many of us Fools prefer return on invested capital to earnings when examining the worthiness of the stocks we follow.
Before investing in your next IPO, get to know a little bit about ROIC. Then check the financials and run the numbers. If ROIC has been improving, then by all means, go with your thesis. If not, be wary. You may be buying damaged goods from a VC that had too much money to put to work.
That's all for now. See you back here next week when we continue the quest to find the greatest growth.
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Fool contributorTim Beyers, ranked 1,024 out of 17,497 inMotley Fool CAPS, didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all the stocks he owns by checking Tim's Foolprofile. The Motley Fool'sdisclosure policyis a rebel on Wall Street.