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Few people have played as big a role in recent tech booms and busts as Steve Jurvetson, managing director of venture capital firm Draper Fisher Jurvetson in Menlo Park, Calif.

One of the leading venture capitalists in Silicon Valley, Jurvetson is best-known for his involvement in Hotmail, Interwoven, Kana, and more recently, Skype. He spends his spare time building and firing rockets of all sizes with his young son, and recently has financed a new movie, The Singing Revolution, about his parent's tiny home country of Estonia.

CNET News.com reporters Michael Kanellos and Carl-Gustav Linden recently sat down with Jurvetson to discuss how the downturn in the broader economy will impact venture capital firms. The investor said he isn't concerned as there is no lack of new "disruptive" ideas that his firm is exploring.

The following is an edited and condensed version of the interview.

Steve Jurvetson says the pace of innovation keeps accelerating.

(Credit: Carl-Gustav Linden/CNET News.com)

How much has the downturn changed the environment for venture capital?
People say the venture market is up, or it is down, but it doesn't change that there are tons of entrepreneurs out there and their ideas keep floating. So we shouldn't ever imagine, as a prenatal, that the entrepreneurial pool is shrinking. There is a sort of a constant, and if anything, the pace of innovation keeps accelerating and the diversity of that innovation keeps growing.

I don't really care what the venture industry thinks. We try to be a bit more maverick: We want to invest in unique ideas that can change the world. We don't even care what industry they fall into, but ideally they're driven by some major disruptive force, as a different way of looking at the economy and venture opportunities. I know that 10 years from now we will be investing in something that relates to that.

If you look five years ahead, what do you see?
Over the next five years or so, there (will be) a lot of investment going on in emerging clean tech, and a number of them, like the electronics companies, will start to bear fruit. That's a smaller niche, one of the highlights of nanotech, creating new companies you did not even think about before.

But you don't talk about nanotech as an industry?
There is no business concept of nanotech. It doesn't describe the customer, and there's no synergy at the business level. The only synergy in the concept of nanotech is on the R&D technology level--researchers all over these disparate fields: biotech or biology and genetics, all the way to software to computer design.

Nanotech didn't disappear, it just went into the fabric of other industries, where the company that has got a nanotech solar cell, and if they're shipping a product they want to talk about a solar cell--they don't want to say, "Oh yeah, it's nano inside." But over half of our investments are in consumer Internet-related products, it's still the bulkhead, the stalwart investment category, it is the most consistent place to get a return on investment, we found.

The consumer market, on the other hand, seem so unpredictable. Why, say, is YouTube winning against other video-sharing sites?
Yeah, it's a thin line between stupid and clever. It's difficult to predict winners when there are 10 or 20 that you can identify. We've already invested in a peer-to-peer sharing video system years ago, and it is one of the stories that makes sense today, but it was way too early.

The cost of investing in these companies is very low. Does that mean you can make a lot of bets?
One of the reasons I think (Internet-related companies are) such a great place to invest is that the capital required to hit the market is much lower. Energy projects are much higher, and the same of course goes for pharmaceuticals. So the cost component is one. The second is network effects possible over the Internet; you can reach global customers like never before, so Skype is now 309 million users. I mean, measure that with a cost on a global basis to any traditional based model before the Internet.

The disruption point, in the case of Skype, in the case of Hotmail--is the most interesting one. They take existing businesses and turn them on their head, in terms of a business model. Hotmail was offering their product into a market that was used to paying for clients and servers, you paid five bucks a month for service for e-mail, as a separate bill item. Hotmail as a Web-based service changed forever the notion that it's just an application that runs on a network.

Skype is doing the same for VoIP. I mean we all remember the time when we paid our phone bill, we probably still do. I'm going to remember those crazy days in the 21st century when you actually paid a separate bill for a phone service. It's just an application, right?

But there is no way to say what consumers will buy and for how long they will buy it?
If I want to make a product that is appealing to consumers, like a piece of clothing or a video game, that's fad driven. Some companies do it and I don't know how they do it, but it's generally a bad place to invest.

But 25 years ago, couldn't Apple have been seen as one of those one-hit companies?
Would we invest in a new start-up where (Apple CEO Steve) Jobs would be at the head? We have been less enamored with consumer hardware, to try to build a device, be it a new recorder or a Segway, Palm Pilots, that have been venture backed. I say give it 10 years and they're going to be gone. Apple is the one counter example of a start-up doing consumer-facing hardware that is still around 20 years later--or stays a billion dollar company for a long period of time.

What you have instead are the flash-in-the-pan phenomena where they just don't get the next product generation, they don't have enough capital or resources to be able to compete with the big guys. And it comes back to why does a start-up ever exist? If there isn't anything disruptive in the market then the big companies have huge advantages.

Apple is maybe one of those examples; they launched during a disruptive foundation of the PC industry. That's classic for a start-up, But why are they still able to introduce new products that are innovative and world-beating in all these markets? That's very unusual. (Hewlett-Packard) was celebrated for a while when they were doing the printer business as one of their core businesses, and they were looked at as a exception from the general rule of no innovation from big companies. Now Apple is looked to as the hero for all big companies everywhere to say, "Wow , we can be like Apple, right?"

But HP is doing well.
HP is doing well, but I wouldn't say they're innovative; they just do what big companies do well. I would say that HP today is doing well in the same sense (as) most other big companies, same strategies: dominate the market, use supply power on sourcing of component costs, and be in really big markets and be No. 1 in those markets.

You have taken some nice rocket photos (which can be viewed here). When are you going to go commercial on rockets?
We have heard pitches from maybe three rocketry companies. My partners have encouraged me to look a little bit more into them. There is definitely some innovation going on in motors and in composite materials. And there is one really cool one, I can't speak so much about it, out there that I really like. They've figured out a way to electrically control solid fuel repellent, and that's been one of the biggest nemesis of solids. I mean solid boosters are great but once you light them you can't turn them off, you can't throttle them like a liquid fuel. But I think a rocket investment would have to have some non-rocketry application to really get big enough.

But isn't it more interesting now when NASA wants to establish a base on the moon?
...And there's the Google prize (a $30 million competition for the first privately funded team to send a robot to the moon) and all. Oh yeah, but we don't like regulatory environment, we don't like highly capital intensive businesses. If you hold it up against a Skype or a Hotmail then, gosh, I can put $2 million in here or $200 million there, which one should I rather do? I could make 100 $2 million bets."

Microsoft's Windows Live services are living up to its name by going live, losing the "beta" label, and becoming available as a free, Windows suite of six Web-connected applications.

The suite includes Windows Live Mail, which integrates with Hotmail and supports POP and IMAP. Among the other complete desktop services are Windows Live Messenger and Windows Live Writer for composing blog posts. Windows Live Photo Gallery manages picture albums that can be uploaded to Microsoft Spaces, MSN Soapbox, or Yahoo's Flickr.

The Windows Live Installer took about 10 minutes to work.

(Credit: CNET Networks)

Also final are Windows Live Spaces for blogging, the Windows Live Events invitation service, as well as the security products Windows Live OneCare, and the 3MB Windows Live OneCare Family Safety, which offers parental controls over children's Web-surfing habits. Microsoft's many other online-only tools with the Windows Live moniker include search, Local mapping, and Favorites for bookmarking Web pages.

Fully using these tools requires a Windows Live ID, which replaced Microsoft's former Passport ID. Sign-up is available at get.live.com.

In our tests on Windows XP so far, the download took several seconds. Installation took another 10 minutes. Before you install, make sure to tell Microsoft not to change your browser and home page settings if you like them the way they are.

The Google Pack of 13 applications, which includes Picasa photo editing, Norton security scanning, an IM client, a browser toolbar, and desktop search, may be the closest competitor to the Windows Live bundle. However, the Google Pack does not offer a desktop blog composer or an e-mail client as Microsoft's suite does.

Last year, when we picked our favorite Windows Live services, Microsoft still seemed only to be getting started with its stable of online tools, each of which remained in beta testing for up to two years.

Although Windows Live has reached prime time, we suspect that Microsoft will continue to add features. For example, we wish that you could chat within Windows Live Hotmail, which came out of beta testing in May. But at least the e-mail service will notify you when buddies are online so that you can open Windows Live Messenger with a few clicks. Plus, the Messenger clients from both Microsoft and Yahoo enable users to chat with users of the other brand.

Windows Live services remaining in beta testing include Windows Live Calendar beta, released today, and Windows Live SkyDrive.

Microsoft's latest mobile offerings for checking e-mail work with Wap2.0, iMode, and HTML phone browsers.

We'll report back soon with results and a review from our hands-on testing with the Windows Live desktop suite.

Microsoft on Monday made a series of updates to its Windows Live Hotmail service, chief among those being an increase in the size of its inboxes. Standard users now get 5GB of storage, while paid MSN Premium and Hotmail Plus accounts now get 10GB of storage.

The move follows Yahoo's decision to offer its mail customers unlimited storage. Google's Gmail currently touts 2.89GB worth of free storage for its accounts. Apple also recently upped its .Mac storage limit to 10GB, split between mail and file storage.

In addition, Microsoft said Windows Live Hotmail is also adding the ability to accept and decline meeting requests from Outlook accounts, as well as a tool for eliminating duplicate contacts and an easier way to switch to Hotmail from other mail services.

Responding to complaints from users and gripes in the blogosphere, Microsoft is also bringing back the option to choose to see one's inbox, rather than a Today page of MSN News, upon login.

"We already did a ton of work to get the basics ready to get out of beta, so now we've been able to add some more of the extras that our more advanced users have been asking for," program manager Ellie Powers-Boyle said in a blog posting. "We're continuing to collect feedback and using it to guide which areas of the product to improve next."

The company promised more changes in the coming months.

After more than two years of overhauling its free Web e-mail service, Microsoft plans on Monday to drop the "beta" term from its Windows Live Hotmail service, according to sources familiar with the company's plans.

Microsoft has already dropped the beta tag in a few places, including the Netherlands where the service launched in final form back in November. The company also decided back in February not to completely drop the Hotmail name. Until then, Microsoft had been testing the product under the Windows Live Mail name.

Throughout the testing process, Microsoft has been adapting the product to make it more comfortable for its existing base of Hotmail users, including adding a classic mode that more closely resembles the existing MSN Hotmail service.

Earlier this week, Microsoft sent notes to testers thanking them for taking part in the beta program and saying that Windows Live Hotmail was "ready to launch." The company is not expected to make available Live.com addresses immediately at launch, however, a move that some enthusiasts have been hoping would happen.

Microsoft's move to take Windows Live Hotmail out of beta on Monday was reported earlier on Thursday by IDG News Service.