Matthew Ingram talks with Dr. Paul Kedrosky on Venture Capital and Web 2.0.

He was an equity analyst and is now doing venture capital. He is with Venture West as well and is a Canadian.

MI: Is this another bubble?

PK: In a sense we've returned full-cicle to '95. In a sense it sure feels like one but so what, it takes a lot of dead bodies to fill a swamp. We've got to waste a ton of money before we figure out how things work. There is way to much enthusiasm. A UCLA economist writes that the first bubble - tulips - was not a real bubble but was not as euphoric as it was painted - we spot nine bubbles before one actually happens.

MI: There is money and people have to make investment.

PK: VC is at record levels - even more than in the nineties. The venture industry is a rigged market because the big investors fish from the best pond. the smaller players have to fight for the scraps. For example, one fund looked for 250 million but got offered 3 billion in the same week. Cash is falling on your head.

MI: Do entrepreneurs need VCs today?

PK: If you don't need money don't take. You'd be an idiot not to keep 100% of the stock. The trouble is that some markets need money. A lot of the consumer-centric Web 2.0 companies don't need a lot of money. Technology has democratized the ability to start a company.

Audience: Companies can raise money with no business model. Like YouTube.

PK: They might be the next television... Google initially had no idea what their business model. they had 30 million and had no model. The trouble they have now is because they are spending money like Amazon. (...read more...)