Fred Wilson: What Credit Crunch, Take 2

When we touched base with venture capitalist Fred Wilson earlier this month about the credit crisis, he was whistling show tunes. We asked what sort of effect the subprime mortgage mess is having on the start-up scene. Absolutely none, he said.

Now he's backtracking -- but just a little. He's as bullish on the web as ever, but Wilson notes on his blog that the IPO market rots; budget deficits are concerning; and the private equity market is tightening up. "Will the venture market see the same choppy waters? It's hard to say," Wilson writes.

It is true that silicon valley is starting to get more cautious. I've seen a number of stories lately that firms such as Kleiner Perkins and Draper Fisher Jurvetson are taking a more cautious stance toward web applications and services (web
2.0 in the vernacular) . . .

There's something else at work however. The web itself continues to be a major economic force, both in the positive and the negative. The web is disrupting and wiping out margins in industries like music, film, newspapers, and increasingly sectors like personal finance and software. But the web is having an equally positive effect in sectors like advertising and direct marketing. We (me and my colleagues at
Union Square Ventures) believe that the web is accelerating its transformative power and that businesses built around a web foundation will continue to take share of the worldwide economic pie.

We'd love to believe him, but our inner skeptic remembers how shiny and pretty web businesses looked back in 1999. And we all know how that ended.

Photo: Courtesy Union Square Ventures