I can understand why. Reporters grate on peoples' nerves while lawyers simply have no scruples. (I'm teasing...though not entirely.) But pose the same question to Silicon Valley entrepreneurs and I'd bet they'd award that dubious distinction to venture capitalists.
Maybe I'm setting the bar too low but it's not that VCs are less moral than lawyers or journalists. This is more about the psychology of scapegoating. Money and power nourished many a speculative boom-and-bust cycle. So when a lot of people who should have known better got seduced by over-the-top ambition in the late 1990s, the story ended with a predictable denouement: in the rubble of Internet Mania 1.0, venture capitalists became favorite fall guys.
Everyone's got a favorite sob story from that era about how some venture hotshot persuaded a gullible client to reject a serious buyout offer. Instead of taking the money at the height of the bubble, they got bamboozled into believing a public stock offering would vault their company's capitalization into the billions. Only to wind up bankrupt.
I suppose demonizing a greedy MBA consigliore is better than looking into the mirror and admitting to a lobotomy. After all, who wants to fess up to stupidity? Remember PointCast's founder Chris Hassett? He's the guy who decided to let lapse a reported $450 million offer from News Corp. It didn't take long before customers discovered that PointCast's push technology caused more grief than it was worth. The company never recovered from that once-in-a-lifetime opportunity.
Whether they lived through those times or just read about them, the newest crop of Internet entrepreneurs have taken away their own lessons. Thus, MySpace took the $580 million buyout from News Corp., while Facebook continues holding out for a bigger payday. Who's the smarty and who's the sucker? Too soon to tell but you have to admire the size of founder Mark Zuckerberg's, um, moxie. Word on the street has it that Zuckerberg rejected a buyout offer of more than $1 billion. He apparently thinks Facebook is worth several times that sum. Maybe his confidence will be one day borne out by a spectacular initial public offering in the future. Or he might wind up becoming the second coming of Chris Hassett.
Meanwhile, the deals keep coming. Just this week, France's Hi-Media Group announced it had acquired Fotolog for $90 million. Fotolog CEO John Borthwick calls the company a social-media network. That's the hot buzzword today and Fotolog did the smart thing by selling out. Someone's got to say it: the French acquired a gussied-up photo-sharing site and good luck trying to recoup that investment.
A company like Fotolog or MySpace or Facebook remains cool and coveted until somebody else flips a switch and turns it into yesterday's hot story. That's been the case forever in high tech. Digital Equipment put a major hurt on the mainframe makers. Then the workstation and server makers did the same to DEC. And then came the march of the PCs--and the rest was history.
These days the barrier to entry's never been lower. All you need is a PC, an Internet connection and a great idea. Personally, I hope each and every one of these start-ups get gazillions. If big companies are incapable of innovating and instead are willing to pay ridiculous sums to buy Web doodads, then "Laissez Les Bon Temps Rouler."
Some will take the money and run. A few will hit the IPO jackpot. But if history's a good predictor, most will wind up bitching about how they were led astray by their venture backers.
Charles Cooper is CNET News.com's executive editor of commentary.
3 commentsJoin the conversation! Add your comment