TechCrunch 40: An abundance of incremental innovation

Venture capitalist Fred Wilson ponders whether good times of Web 2.0 will be squashed by an economic downturn. Economic uncertainty aside, he points out that there is a huge supply of new tech companies, including a lot with less than six degrees of separation and "slight twists on ideas that are now five years old."

TechCrunch 40 showcased the latest supply of new Web 2.0 ware, an abundance of incremental innovation. The atmosphere was bubbly and energetic, with people who spent $2,500 to attend the event in an overflowing ballroom at the stately Palace Hotel in San Francisco.

The 40 companies on stage and dozens exhibiting their mostly alpha and beta products during the two-day event didn't provide evidence of revolutionizing or redefining a market or presaging the rise of the elusive Web 3.0 or 4.0.

The winner of the $50,000 best of show was Mint, a free site for managing personal finances that automatically categorizes purchases and provides insights and alerts. Of course, mint is joined by other startups, such as Wesabe, Geezeo and Buxfer--in the personal finance management category that has been dominated by Intuit's Quicken.

The people's choice award at TechCrunch 40 went to Kaltura, a free online site for group video creation. Users can invite friends to contribute content, such as video, music and photos, and edit it collaboratively. It not a unique product, in the sense that dozens of startups offer rich media editing. Kaltura makes the process more social, and with a good user experience.

TechCrunch 40 hosts: Mike Arrington and Jason Calacanis

To give you a flavor for other applications at TechCrunch 40, there was Viewdle, which looks inside video streams and recognizes and indexes the appearances of people on screen; Lat49 , which allows users to geo-target within map services by selecting real estate, such as a neighborhood, to place ads; Zivity, which builds a social network around half-dressed models and photography; WooMe's online speed dating (meet five people in five minutes); mEgo, which lets users makie personalized avatars that manage online profiles that can be applied to other sites and services; Orgoo, a personal communications cockpit; Story Blender, a collaborative video production platform; TripIt, an service for managing travel plans; and 8020 Publishing, which takes user generated content on a topic and turns it into a print magazine--too name few.

Indeed, TechCrunch 40 displayed evidence of an emerging tech product bubble, a somewhat irrational exuberance for anything Web 2.0.

Partying at the TechCrunch 40--cheese and crackers, cheap wine, no caviar--hence no bubble

I expect the DEMOfall 07 conference next week to be the same.

That abundance of companies, bunched together, floating in the clouds as they innovate incrementally with social, AJAXed, rich media, business model-less, and mashup applications means that gravity will soon take over, and many will plummet to the ground.

Bottom line: It's a great time in the tech industry because those hordes of startups, as well as established companies, are trying to create the next hit product or service based on Web 2.0 foundations.

Most of them have come up with a feature, an incremental innovation, but who knows which could fork into a major innovation that defines a new category, as MySpace and Facebook did on a major scale with social networking. The VCs are spreading their bets, helping to propel the industry forward in search of 100+x return. Few of the TechCrunch 40 or DEMOfall 07 companies will survive, but it's for the good of the entire industry and users that they try hard in failing...or succeeding.