Easy Money?

Fred Wilson comments on a journalist’s observation that we are about to enter "the most furious investing cycle in history" due to the vast amounts of cash raised by VC funds in 1999-2000 that their partnership agreements require them to soon use (invest) or lose (return to limited partners along with management fees that pay their salaries and expenses).

It is true that there is a huge "overhang" of venture money left over from the 1999/2000 fundraising binge. But that money can’t go into early stage deals because those deals take 5-6 years to turn into realizations. So this "overhang" is going into later stage deals. Look at $75 million going into Fastclick or $108 million going into Webroot. That’s where the overhang money is going to go. The early stage market may also be entering a "furious investing cycle" but that’s not being driven by the overhang from 1999/2000, its being driven by Web 2.0 and the realization that we have entered another wave of innovation around the Internet that will result in a lot of interesting companies being created, built, and sold over the next several years.

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