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As Web 2.0 goes mainstream, VCs plot a mass exodus

The time to monetize a market is when it's staid and boring, not when it's early and exciting.

The other day Forrester Research published the results of a survey that suggested that 63 percent of enterprises feel that Web 2.0 is going to impact their businesses in a big way.

Tuesday morning, I came across some news that venture investments into Web 2.0 start-ups have slowed.

So, just as enterprise adoption of Web 2.0 has picked up, the VCs decide to stop funding it. Does this make sense?

It does if we assume that VCs invest in early stage bubbles, not the later-stage mainstream. VCs got into the early stage consumer Web 2.0 party, following early insight from Tim O'Reilly, but seem to be forgetting that the real money will be made in the later-stage, boring enterprise adoption of Web 2.0. Tim O'Reilly watches the "alpha geeks" to see where markets are going long-term; I watch the "alpha consumers" to see where the money is in the short-term.

As a case in point, Tim stopped worrying about open source years ago. It's old news now. But that old news is selling incredibly well into the enterprise. Tim saw it years before anyone else, but those who are building businesses in open source now are reaping the harvest.

Web 2.0 is the same, and VCs would do well to remember that the mainstream majority has a lot more cash than the early adopters. Web 2.0 is just now hitting its stride as it becomes boring and mainstream.