2006 may have been a sign that things were getting a little overheated. One long term problem with VCs is that if they get locked out of a hot deal, they fund a competitor. The result is three or four funded startups for every good idea, and they have to fight it out until one hits critical mass and the Network Effect kicks in. This seems to be playing out with the market niche of online slide shows – Slide, FilmLoop, RockYou and Photobucket all have similar products and all are funded. FilmLoop is in trouble, and the other three will continue on fighting.
Good article that describes the differences between the current Web 2.0 hype and the .COM bubble of the late nineties. Bottom line: lots of companies fail, lots of VCs make bad investments, and this ain’t no bubble.
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