Looking For Failures
John Battelle follows on Paul Kedrosky's post Techcrunch party post on bubble 2.0 with a post about the lack of web 2.0 failures.
To all this discussion, I'll just simply add "just wait, they''ll come". They already are coming in fact. Kiko put itself up for sale on eBay and Tribe just went through a mass exodus of the management team and investors and the founder, my friend Mark Pincus, is trying to restructure the company.
It takes time for companies to fail (thank goodness!). We like to fund them for 12-18 months although we'll do less for real early stage seed deals. And as John discusses in his post (which you should read if you care about this stuff), web 2.0 companies can operate at burn rates of less than $1mm per year.
So while I agree that there is a bubble in web 2.0 company creation (driven by entprepreneurs) and web 2.0 company funding (driven by VCs), there may not be much of a bubble in the VC markets in general because the financing sizes are still mostly small rounds. Sure there are troubling signs like the ~$20mm financing for Jobster and $50+mm funding for Zillow to date, but I believe they are still the exception rather than the rule.
I think if we all keep our heads screwed on straight and keep the funding amounts to reasonable levels, keep the burn rates down until we have demonstrated viable business models, and focus on building sustainable businesses instead of companies than can be flipped, we'll all be fine.
As Tom Evslin likes to say, "nothing great has ever been accomplished without irrational exuberance".