Why the Smart VCs Are Boarding their Jets
I started my career as a finance reporter covering wonky subjects like banks, bonds and agribusiness. I ended up in Silicon Valley covering tech, because it was the late 1990s, and I was doing what finance reporters are supposed to do: Follow the money. I’ve since realized if you want to cover startups well, it’s more complicated than that: You have to distill between the pioneer money and the lemming money. By the time the lemming money is investing, the story has been told, and the pioneers have already picked their bets.
There are a few ways to do this. One is to poll the smarter VCs, but frequently they don’t want to share their secrets. Another is to look at relative increases in the percentage of capital going to different sectors. For instance, in the mid-2000s, sectors like Web 2.0 and clean tech weren’t getting the most venture capital, but they were getting the biggest percentage of increases in funding before Facebook was gracing every magazine cover and John Doerr was weeping over the environment at TED. A third way is to look at how the money shifts in a downturn. When a bubble bursts do formerly hot sectors turn into wastelands?
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