The Consumer-Centric Venture Investing Bubble

Some savvy and appropriately contrarian thoughts on the recent upswing in consumer-centric venture investing from Jeff Bussgang:

I confess to being personally biased on this one.  At Upromise (college savings loyalty program I co-founded in early 2000), we raised over $100M and spent much of it on marketing to acquire the now 6+ million member households.  I saw first-hand how quickly money can fly out the door in a VC-backed consumer play and I’m worried that it’s happening again.  And, yes, I still worry that we in Boston still have a thin talent pool for successfully executing such businesses.
There’s some emerging data to support the "consumer bubble" theory.  VentureOne recently reported that in 2003, there were 183 consumer deals and $1.2 billion invested.  In 2004, it jumped to 246 deals and $2.1 billion invested.  I would be surprised if 2005 didn’t continue the trend.  Most worrying, this month’s featured event at Harvard Business School Club of Boston is, you guessed it, "Emerging Trends in Consumer Technologies".  Uh oh.  Anytime HBS jumps on a bandwagon, you know it’s the top of the curve.  Maybe the contrarian thing to do is plow back into enterprise IT!