A friend, Mark Walker, came over today for a little holiday cheer, and we started talking about his next entrepreneurial idea. (Mark's a real dyed-in-the-wool entrepreneur who has left a career in law  far behind.) Without getting into the details of what he plans to do (which will address a huge point of pain), we talked about the key ingredients you need these days to create a Web 2.0 start-up with a good shot of becoming successful. Surprisingly, way down on the list is money. These days, it's more important to have a really good idea, a crack development team (you can do it in-house but it's probably cheaper to hire a crack developer or development team from overseas), and first or second-mover advantage. If there's a real problem to be solved, you run as hard as you can to generate a critical mass or community of users. The key elements during this phase are user-friendly technology that simply works well, and a general idea of how to make money. Once a lot of people start digging your application or service and you make some revenue, then you need to think about introducing other fee-based services that a portion of your user base will buy into. At this point, the VCs come into play but until then there's really not a lot of money that needs to spent given distribution costs over the Web are minimal and a good service will be your best sales tool thanks to the power of online viral marketing. If you think about it, the best example of this formula is Skype, which didn't raise a lot of money  ($18.8-million in venture capital) but had an excellent service that millions of users loved. Of course, the downside of the Web 2.0 start-up environment is the barriers to entry are pretty low, which explains why there are dozens of companies chasing the same Web 2.0 dream. Look at the photo-sharing market, which SiliconBeat put the spotlight on recently. The only people really thriving from this start-up phenomena are Michael Arrington (a.k.a. Tech Crunch) and Emily Chang (a.ka. eHub), who spend much of their time chronicling all the new cool services being unveiled. Given the intense competition, a successful Web 2.0 start-up needs a really good idea that addresses a point of point; some money at the right time and a lot of luck to hit it big. Rick Segal (a.k.a. Post Money Value) has had some excellent posts recently on the worlds of VC and entrepreneurs. Check out “Build to Flip=Build to Fail“,  “The New VC Handbook” and “Inside the Process”. Perhaps the most encouraging development of 2006 – putting aside all the hype and hand-wringing about Web 2.0 – is the return of the entrepreneur. After several years of hibernation, it was encouraging to see optimism and enthusiasm come back into the technology world. Entrepreneurs are a different breed of cat that bring sizzle to business. Without them, life is dull. We should all celebrate that Web 2.0 or whatever's going on within the tech world has brought the entrepreneur back to life!