VCs, Consumer Technologies, & Cursed Lemmings

Matt Marshall of the San Jose Mercury News (free sub required) argues that VCs are doing the “lemming thing again”, albeit this time in consumer-oriented technologies. He points to IM2, Fatlens,, Adbrite, and others as examples.
I don’t disagree that consumer-oriented stuff is in vogue, but I think Matt draws the wrong implication. It is (currently) rational for VCs to chase consumer tech.
Why? First, it is the consumer-centric technologies that have mostly made VCs money the last few years, highlighted by Google. Second, the enterprise technology market is still looking more than a little cramped and peristaltic. Stuff isn’t clearing out as continuously as it once did.
Now, as I have said here before, most VCs have no business investing in consumer technologies, and so returns are going to be lower here, in general, than in enterprise tech. Too many GPs strategize about consumer needs by extrapolating from a sample of four raging early-adopters (them and their partners). (Granted, there are exceptions, like Maveron in Seattle, but they are very different folks.)
But to return to Matt’s piece, it is nothing new for VCs to be lemmings. Most VCs firms have acted that way through most of the venture industry’s history — and it hasn’t always been a bad idea. Everyone eventually figures out that, with rare exceptions, this game is about timing and execution, not about technology. Four startups will be too early, four startups will be too late, and three of the ones that are started at the right time will screw up — so that will leave only one or two that figure things out and return money to investors.
Will some VCs make money by striking out on their own and ignoring the lemmings? You bet, and the best of them will lead the industry in returns. But most who try that strategy will earn less money for their investors than VCs who follow the pack — those cursed lemmings.