There’s been a confluence of events in the past week or so that continues to support what we’re seeing and doing in the web publishing space.

First, Evan Williams announced the formation of Obvious Corporation, to create a network of web-based services, each with a distinct purpose and brand, but sharing a set of principles and leveraging technology, attention, and good ideas where it makes sense.

Second, Reddit announced a sale to Conde Nast. Particularly interesting was that Reddit only raised about $100K.

Third and finally, Charles River Ventures announced a seed fund for startups where they would loan $250K for the right to invest in future rounds.

Lots of folks have commented on these, notably Josh Kopelman and Fred Wilson.

So it’s clear that the barriers to entry in this space are low, capital requirements are very low to get started, and as always these are attractive business investments.

The one point we would add to this discussion is we believe the lifetime need for capital for many of these businesses is also very low. We hear a lot of entrepreneurs telling us they “want to build a $100MM business” and they are looking for large amounts of capital to get there.

Our approach is much more pragmatic:

1) Be as frugal as possible in building the business. Be very smart in how you build your site, how you hire brand and design consultants, and how you build your technology (use very inexpensive and/or open source stack)

2) Cash flow your business as soon as you possibly can

3) Use free cash flow generated to re-invest and grow your business from there

What this means in practice is a) make sure your ongoing costs are as low as possible so you can cash flow at relatively low CPMs — you won’t be able to sell ads directly till you get to a certain traffic size anyway b) don’t invest in an ad sales force to start unless you are at the beginnings of scale (over 1MM uniques, probably 15MM page views per month). We see a lot of business plans that want to hire a direct sales force out of the gate; we like to hire reps one at a time and use free cash flow generated to invest in more reps.

The key is to create a business that generates a reasonable amount of cash that gives you as an entrepreneur options. For many businesses, we think that $0.5 to $1.5MM invested capital gets you there. The problem of taking $6MM is if you use it to build a business that generates $1MM in cash a year no one will be happy — not the entrepreneur and not the VC.

This does not apply to all opportunities of course — each one is different and a good VC will add tremendous value — our only point is to think about what the likely probable outcome and endgame will be as you decide on a financing strategy.

If it is *highly probable* that you can quickly get to cash flow positive quickly with a little bit of cash, we would generally recommend that approach.

Thoughts?