VCs Who Know Nothing About Online Businesses… Investing In Online Businesses

from the is-that-a-bubble? dept

In 1999 VC firms who weren’t investing in internet plays were being ridiculed. Those who resisted (like Hummer Winblad, who eventually caved in) said it was because they just didn’t have the expertise to understand what appeared to be a somewhat irrational market (a view supported by the eventual bubble bursting). So, is it a sign that we’ve got a new bubble when VCs who have no experience with internet businesses are investing in internet businesses again? The counter argument, of course, is that if a VC’s expertise is really in investing and helping a company grow rapidly, that can be applied across the board. However, when the VC fund has specifically stated its goal is to invest in: “Photonics, optics, lasers and fiber optic and microwave communications,” and they go out and dump money into yet another comparison shopping company and yet another e-commerce gifts site, you have to wonder. Almost all VCs I know hate the oh-so-popular cliche about VCs, but Matt Marshall may be dead on in repeating it to explain the reasoning: “Because it’s hot, and VCs are lemmings.”

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