Bubble 2.0, top, thomson reuters, venturesource, dow jones, stats, venture capital

Are VCs fleeing the Web? Yes and no

Most venture capitalists are adept followers of the herd. As such, their investments are best seen as trailing indicators — the financial detritus of events past, rather than predictors of what to come. Is there a bubble in Web startups? The numbers themselves are as confused as investors. Dow Jones says the first quarter saw a record $1.58 billion in venture capital invested in Internet companies. Thomson Reuters says its figure of $1.3 billion was down 7 percent from the fourth quarter. Data about VC investments is hard to obtain, and the two categorize companies differently. Anecdotally, it's clear that smart VCs have stopped funding every new social-media website and online-ad network that cross their desks. But the Valley remains awash in dumb money that has yet to be called home. The popping of this bubble will take more than a quarter's time.

4:40 PM on Mon Apr 21 2008
By Owen Thomas
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zacharye at 07:33 PM on 04/21/08
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What is this post about? When did Valleywag become a stream of conscious blog? Aren't there any Arrington farts to report on? Allison side-boob? Bunk tips for bedding skanky whores?

30-word version of this post: VCs are dumb. Dow Jones says VCs invested $1.58B in Q1, Thomson Reuters says $1.3B. Smart VCs are ditching social-media / ad networks. The Valley is full of dumb VCs.
Bornean at 12:34 PM on 04/22/08
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Venture capitalists are trying to put money into the creative, tertiary sector. These web 2.0 sites start from the base as something innovative, as opposed to something meant to generate profit.

Sure, you can whip up a really cool website with new functionality. You can even get lots of traffic. Where venture capitalists seem to fall short is asking the question, "Where, specifically, are you going to derive you revenue from?"

The confident wantrepreneur smuggly responds, "Targeted advertisements, of course".

And there in lies the problem. When I'm socializing or trying to entertain myself, I'm not interested in buying t-shirts. It's amazing how these cutting edge businesses forget how narrow and self-absorbed consumers can be. Unless it's pertinent to my "social life" and free, I'm not clicking.
Bornean at 12:35 PM on 04/22/08
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Venture capitalists are trying to put money into the creative, tertiary sector. These web 2.0 sites start from the base as something innovative, as opposed to something meant to generate profit.

Sure, you can whip up a really cool website with new functionality. You can even get lots of traffic. Where venture capitalists seem to fall short is asking the question, "Where, specifically, are you going to derive you revenue from?"

The confident wantrepreneur smuggly responds, "Targeted advertisements, of course".

And there in lies the problem, when I'm socializing and trying to entertain myself, I'm not interested in buying t-shirts. It's amazing how these cutting edge businesses forget how narrow and self-absorbed consumers can be. Unless it's pertinent to my "social life" and free, I'm not clicking.