Round and Round: Bubble 2.0?
At last year’s ILM:05 event in Reston, Virginia — by all accounts the best ILM conference to date (that is, until the upcoming one :) — the final panel "The Local Landscape: A Coming Bonanza or Bubble 2.0?" featured a very thoughtful group of VCs:
- Randy Haykin, Managing Director, Outlook Ventures
- David Horowitz, Principal, Comcast Interactive Capital
- Isaac Kato, Principal, General Catalyst Partners
- Warren Lee, Principal, Canaan Partners
- Mike Orsak, General Partner, Worldview Technology Partners
While local was the starting point, the entire Internet and investment climate was the broader theme. Since that conference only 3 1/2 months ago, things have continued to speed up (if that’s possible). More and more money is flowing into funds looking for a return. Om Malik and SiliconBeat tonight have posts about how Silicon Valley is awash in money. (If there’s anyone out there who would like to send me a check, you know where to find me. :)
I spoke not long ago with a very smart managing partner at a high-profile VC firm who said he was almost compelled to invest "in anything that moves" because of the logic and economics of these funds and the marketplace now. I’m not by implication disparaging any of the investments described in the mentioned posts. I’m merely observing from the sidelines that it does seem that money is very easy to come by and there are more funders than there are takers — people are more skeptical and resistant to VC funding these days.
Round and round it goes and where it stops … ?
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I think that the economics of software and content development means that many "Web2.0" projects are either "built to flip" or are able grow organically through community.
"Built to flip" projects (i.e get bought out for a few $m by Google-Yahoo-MSN) don’t need VC funds (and don’t make much sense to VCs anyhow).
…and the community build ("Craigslist" model) of organic growth (10 years to reach 20 employees, no sales team, no marketing, no exit strategy, no IPO – slow and steady wins the day) isn’t of much interest to VCs either.