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The venture capital game changes ever so slightly

In Claire Miller’s must-read article in the New York Times yesterday, she interviews Silicon Valley venture capitalists to see how the current downturn has affected their investment proclivities. Since our book devotes some pretty hefty space to financing start-ups, there are some important takeaways from the article (but don’t skip the article — I mean it):

Web 2.0 is sooooo 2008
The stand-out result is that VC’s are not throwing money at something just because the words “social” and “network” are peppered throughout the business proposal. “Free” contributes little to the bottom line and advertising hasn’t rushed in to fill the void. VCs expect some revenue generator more concrete than “advertisers will come.” (Personally, this “advertisers will come” hogwash was, to my mind, totally discredited in 2001, but memories are short, it seems).

Like a bad penny, B2B is back
Once, not too long ago, VCs piled money into enterprise applications, big, honking, smelly things that cost tens of millions of dollars to even push off the ground. Then the bottom fell out. Well, the bottom is back, but the enterprise applications VCs are hot about are open source and SaaS (our readers will know, of course, that open-source and SaaS are the software of choice for even the smallest businesses). Database Trends thinks that 2009 will be the year of open-source. There you go.

Go mobile
This is actually old news; VC money started pouring into mobile about three years ago. Heck, the first wave of bold new mobile companies has already come and gone taking a significant pile of VC money with it. The difference between then and now is this: VCs now know that mobile “content” with promises of ad revenue is money quicksand. Instead, they’re going back to the basics: hardware and carriers.

Green is the color of money
VCs get hot on climate warming. The opportunities are endless here. From cabinets to software.

Personalized health care
The article doesn’t really go into this or describe it in detail. So, we’ll just have to take Ms Miller’s word for it.

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