Last post, I shared my observations from the recent Microsoft VC conference hosted by Steve Ballmer in Silicon Valley (BTW: what an amazing young entrepreneur turned mega-executive and company-builder; he has my vote for CEO of the century so far - and I'm not just trying to suck up so that I can sell any of our companies to Microsoft!). I included in that post an observation that the enterprise software business model is dead and VCs are really shying away from these deals.
The corollary is that consumer is hot again in the VC community. E-commerce version 2, the digital home, online advetising, social networking and finding the next Google -- all are themes that VCs up and down Route 128 and Silicon Valley are chasing. As a result, experienced enterprise software investors are trying to convert themselves into consumer VCs. Literally every VC I talk to in Boston is asking themselves: "How do I reinvent myself as an enterprise IT guy/gal into a consumer VC?"
And so the obvious contrarian thing to ask is: is there a consumer VC bubble coming? Just as Gary Rivlin of the NY Times observes the phenomenon of "VC Tourists" in his recent Sunday Business Section Article So You Want To Be A Venture Capitalist, I might argue there are "Consumer VC Tourists" now jumping into areas where they have little to no background and are therefore bound to lose lots of money. Fast. I confess to being personally biased on this one. At Upromise (college savings loyalty program I co-founded in early 2000), we raised over $100M and spent much of it on marketing to acquire the now 6+ million member households. I saw first-hand how quickly money can fly out the door in a VC-backed consumer play and I'm worried that it's happening again. And, yes, I still worry that we in Boston still have a thin talent pool for successfully executing such businesses.
There's some emerging data to support the "consumer bubble" theory. VentureOne recently reported that in 2003, there were 183 consumer deals and $1.2 billion invested. In 2004, it jumped to 246 deals and $2.1 billion invested. I would be surprised if 2005 didn't continue the trend. Most worrying, this month's featured event at Harvard Business School Club of Boston is, you guessed it, "Emerging Trends in Consumer Technologies". Uh oh. Anytime HBS jumps on a bandwagon, you know it's the top of the curve. Maybe the contrarian thing to do is plow back into enterprise IT!
