Report from the Churchill Club
Last night, I attended a VC panel at a meeting of the Churchill Club, a Silicon Valley business group. If you're a regular reader of this blog, you're already familiar with the topics that were discussed: too much money in the VC business, investing in China, the predominance of life sciences, etc. One of the panelists was Bill Gurley of Benchmark Capital, who, as you might assume, had nothing to say about being named as a defendant in a lawsuit filed last week by founders of Epinions, a dot-com that Benchmark funded in the naughty '90s. (Get the details here.)
Gurley was, however, effusive about two "virtual world" startups he recently funded: Habbo Hotel and Linden Lab. These companies make online multiplayer games in which players assume an alternate identity and lead an imaginary life. Sounds like fun, but I haven't yet seen companies like these turn into big, profitable businesses.
Perhaps the profit-making opportunity lies in a related business, which an attendee mentioned during the question-and-answer period. As hardcore gamers know, a marketplace has developed on the Internet for trading "digital assets," the objects and features that plug into online games, such as a secret weapon that gives a character an advantage. Gurley said he recently met a guy who is making $3,000 a day selling these things online. There are legal issues around royalties (who owns the asset?), but if someone works them out, an eBay of digital assets could emerge.
None of the panelists wanted to make predictions about the next 12 months in the VC business. So moderator Geoff Yang of Redpoint Ventures threw out a few that were refreshingly skeptical: recent stock market activity is going to drive up valuations for VC-backed companies; a bubble will develop in the Internet media sector, especially in search and localization; investing in China will get overheated, and VCs will place some dumb bets there. Here we go again?
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