Yesterday, they brought the bodies of two diplomats home to Japan. They had been shot down on the road to Tikrit, traveling to a conference for the reconstruction of northern Iraq. Mr. Oku and Mr. Inoue were colleagues and friends of my Japanese business partner, Yukio Okamoto.

Like the Spanish, Italians, and Koreans who have also make the final sacrifice, they did not have to be there, they did not live on Ground Zero. They could stand aside and hope the fight never reached them. Instead, they gave up their families and everything else in this world because, I think, they understood that what is now transpiring in Iraq is the turning point of our age. The fate of Iraq may well determine whether the war with Islamist totalitarianism and terror results in a beneficial synthesis of Islam with democratic liberalism, or ends in the holocaust of a full clash of civilizations. In that struggle, they were warriors for civilization as least as much as those who carry guns. I bow to their spirits.
3:23:45 PM    

Venture capital as a whole has seen its market bottom pass, and is recovering. Overall investment has been at a relatively steady rate of $4b/quarter for a year now. A small quarter-to-quarter drop off in Q3 actually represents an even rate, given the seasonal slowdown always seen in late summer, due in part to the proverbial VC vacation season. I'm not going very far out on the limb to forecast a decent uptick for this quarter, since everyone I've talked to of late is seeing more deals, and at least claiming to be in the process of funding more. Valuations haven't shifted much, except in a few overheated areas (social software, anyone?), and it's too early to say that the early/mid/late stage venture fund food chain has restarted (or will). But, most of the decent downs and recaps have been worked through, the unsalvageable deals killed off, and things are moving ahead again.

Ah, but in what direction? Where is the money going? If you take another look at the PWC survey, you'll see that biotech has now moved into first place as a target sector, displacing the perennial favorite, software. A fluke, driven by a temporary downturn in the software sector? I don't think so. The bulk of software investment has always flowed into products and services aimed at the enterprise. The slow-down in enterprise IT spending is likely transient - though unlikely to return to the late '90s pace - but the landscape has changed. "Horizontal" enterprise software can no longer try to take a free ride on the transition to open standards. Instead, it must fit into a complex ecology of such systems, while still differentiating and extracting revenue. There are many opportunities for using modern architecture to address vertical industry requirements, but these pose challenges to the investor in understanding the target industry, and ascertaining that the size and velocity of the potential market afford a VC style exit. This is not to say there are no opportunities around, but that successful play is now more splitting seams than open field running, and that has implications on size and velocity of investment.

This fund is no exception to the pattern. If you follow this blog regularly, you'll notice my interest in things like security, sensors and data handling, and information organization continues. But our investment pattern says something different of late. If you look at our portfolio, we've visibly done three deals this year - Nanonexus, Ultradots, and Triformix - that are either basic materials or materials processing based ventures. And there's one more stealth deal you don't see, and another likely to close by the end of the year. That's a full half of our closes for the year, and I expect it will be at least that next. So while I'm rather skeptical of the grand Drexlerian nanotechnology vision of self-replicating nano-bots Real Soon Now, we're starting to bet that there's room for innovation and profit in the better arrangement of atoms, molecules and composites. Nano is in fact the wrong label for our vision: we don't care if novel structures are big, slow, and cheap, so long as they make money. I haven't been saying too much about this, as we got the ship onto the new course, but you can expect that in the future there will be more talk here to go with the walk.
1:54:07 PM