Betsy Flanagan: You talked a little about how you can start companies now for far less than you would have been able to before. And so can you talk about how that's changing the VC market as a whole?

David Hornik: Right, right. With these web companies, there are lots of smart entrepreneurs, young and old, that say, "I can build a service that can be compelling to the online consumer in some way." You know, look at a Facebook or a MySpace. People sat down and built a service that was relatively simple. I mean, at that time, at the outset, was relatively simple. It took some number of thousands of dollars but it didn't take millions of dollars to create something that the end-user said, "Hey, this is great! I really like it." Right? And you'd tell your friends and they'll tell their friends and suddenly, the growth curve of your company is something like this, right?

What has happened is that a small amount of money is needed to demonstrate that there is interest and value. If you invest here before you know there's interest and value, it's very risky. The likelihood that you'll find the company that's going to grow exponentially and be exciting is really low. If you invest here, where you know the company is growing like crazy and really interesting, it's going to be very expensive, because the truth is that lots of the risk in that company have been driven out by user adoption and then likely by advertisers or revenues.

So, the challenge that venture investors are having is, do they chase early things and try and invest superearly and see if it works out or do they wait for it to demonstrate that it's working and then invest in the ones that are working? And the problem there is twofold. One, there are a small number of them relative to the number that are started, and there is evidence that it's working and therefore the valuation of that company goes up. So, those are kind of the dynamics of the market right now at least in consumer web products.