By Allison Bruce - 10/15/2006 Ventura County Star

YouTube. MySpace. Millions.

Millions of users have led to millions of dollars for the creators of the hottest networking sites on the Web that have been snapped up by giant tech companies.

The lure of being the next company to snag a mega deal is enough to bring entrepreneurs, inventors and innovators running to try to beat the odds with their own ideas.

Many will fail. Many don't even make it through the prescreening process used by venture capital firms and angel investors to identify the most promising prospects. But many try.

"What drives all kinds of early-stage investing is legends - legends out there of big deals that are done," said John Dilts, founder and president of Maverick Angels, an investor network in Agoura Hills. "They drive people to say, 'Why couldn't I do that?' "

This year's headlines are about legends in the making.

In July, News Corp. spent $580 million in cash to acquire Intermix Media Inc. That deal brought social networking site MySpace into News Corp.'s Fox Interactive Media group. Last week, Chad Hurley and Steven Chen sold their year-old video sharing site, YouTube, to Google in a $1.65 billion stock deal. And Yahoo reportedly is stepping up its efforts to buy Facebook.com, the second most popular social networking site behind MySpace.

The growth and success of social networking and alternative advertising and media sites on the Internet mark a shift away from traditional media, said Gary Clark, president of the Westlake/Santa Barbara network of the Tech Coast Angels, the largest angel investment group in the United States.

There has been a big increase in entrepreneurs with ideas for new ways advertisers can reach people who are missed through traditional means, he said.

At question is what would cause a new community to form and whether any would see the phenomenal growth of a MySpace or YouTube.

"That's the quandary we're in," Clark said. "What would someone want to buy as a company three years from now? It's great if you're selling MySpace or YouTube today, but normally lightning doesn't strike in the same place twice."

Dilts calls it the "ripple effect."

Seeing deals such as the YouTube purchase gives other entrepreneurs confidence that there is a market for what they want to sell and spurs them to take a risk, he said.

The possibility of failure is great. About 44 percent of companies survive the first four years of business, according to the U.S. Small Business Administration. And the SBA only counts businesses that have made it far enough to have employees.

"As investors, we know only a fraction of them are going to make it," Dilts said. "But we don't want to be left behind, either."

Dilts said most ideas come from people looking at what is successful and trying to make a variation off that, whether it's packaging organic baby food or offering a new form of advertising over mobile phones.

Though it is hard to peg the entrepreneurial spirit on any one thing, there are lots of examples of products that take off and encourage others to follow, said Patrick Bright, a patent attorney with Nordman Cormany Hair & Compton LLP in Oxnard.

"There are many that are eager to be second," he said.

It comes down to basic economics. If there's money to be made and the first company is successful, you can be sure that others will follow.

There's also the lure of possibly being able to do something better, pushing out the existing competition.

Carter said entrepreneurs come to Tech Coast Angels with ideas that build on what is already being done, with certain tweaks and changes for improvement, and ideas that are totally revolutionary.

It's a challenge for investor groups to gauge what will be successful in the relatively new realm of online communities, Clark said.

With traditional technology companies, investors can look at whether there are barriers to entry, a competitive advantage and other criteria that help determine whether the venture will be successful.

"When you're thinking about what does it take to pick the next YouTube, a lot of that criteria doesn't apply," Clark said. "How do you measure what's going to be considered cool and adopted by 16- to 25-year-olds three years from now?"

He added that the next challenge is figuring out what will build a community for 18- to 35-year-olds. People can look at MySpace and see why it was successful for a younger crowd, but the next step is to find out how to appeal to a different demographic group.

"That's kind of the Holy Grail right now of alternative media," Clark said.

Even the most brilliant idea won't necessarily mean a successful endeavor.

Bright said a better mousetrap won't help launch a business without other necessities, such as capital and access to markets. He encourages those interested in spending money for a patent to first figure out how they are going to get a return from that investment.

Dilts said the people involved in a business are the most important part because their dreams have to be balanced by realism and determination.

"Anyone can come up with a good idea," he said. "They have to show they're the right ones to do it."