Geodog

Is the bubble coming back? It sure looks like it

The first sign was the $13 million investment in Friendster, a company with millions of eyeballs but no visible business model or profits, led by my old investors Kleiner Perkins and Benchmark. Then came the hype and frenzy over the Google IPO, which is reportedly going to value Google at something like $36 billion. Then I read earlier this week about all the cash trying to get into VC funds, at the same time that research shows:

The optimal fund size, Professor Kedrosky and others say, is a $250 million fund managed by four partners. "There's 25 years of data that shows that funds roughly this size give the best returns, but it's like everyone went temporarily nuts for a while," he said.

The smaller the fund, Professor Kedrosky said, the more a firm's partners can focus on individual companies, which often rely on venture capitalists as much for advice and help as for cash infusions.....

Sequoia... ended up saying yes to only 82 of the 400-plus institutional investors who sought to give it money this time, turning away around $2.5 billion in potential investments, according to Mr. Romanello of Thomson

It certainly seems like there is a lot of money chasing a lot fewer good ideas. Not a good sign. Plus, the Bay Area housing market has gone insane, and traffic is starting to get bad again. There are lots of signs that we are headed towards another period of irrational exuberance. I just hope the slope up is flatter, so that the slope down will be as well.

I also wonder what, if anything, the Valley learned from the bust?