All aspiring internet entrepreneurs should read Jeremy Liew’s ‘Three ways to build an online media business to $50m in revenue’. The article was published in February 2007 but the essence of the message is still just as relevant today.

In summary, Jeremy shares an insight into what venture capitalists look for in online media businesses, examining the basic valuation models and citing companies currently in the marketplace to provide an idea of how big startup ventures need to become in order to be attractive to VCs.

The truth of the matter is that most companies which receive funding from venture capital firms have to be able to generate over US$50 million in revenues per year.

If that sounds like a lot, imagine the larger traffic numbers which your site will have to generate to translate into this revenue. Now, that’s a lot of eyeballs!

Just consider his simulation of 3 online media properties that are focused on different content categories and have different advertising rates (to reflect their vertical segments) based on US$ revenue per thousand pageviews.

• US$1 RPM: 50 billion pageviews required a Year or over 4 billion per month
• US$5 RPM: 10 billion pageviews required a Year or over 800 million per month
• US$20 RPM: 2.5 billion pageviews required a Year or over 200 million per month

In reality, it is almost impossible for startups to generate the amount of traffic required to make them viable to VCs and that may be why Jeremy has another article exploring the difficulties in building a media business to $50m in revenues.

Jeremy Liew is a Managing Director at Lightspeed Venture Partners. He invests primarily in the Internet and mobile sectors, with a particular interest in social media, commerce, gaming and methods for increasing monetization.