When the going gets tough, the tough get Meeker

News just in that Mary Meeker, the Morgan Stanley dotcom bubble Optimys...we mean Analyst - is moving to VC firm Kleiner Perkins.

This occurs at the same time as the Venture Capital industry is hitting an "interesting" problem all of its own, as Fred Wilson points out today:

The venture capital business is showing good returns for the first time in a decade. The sectors that are performing best are web services and early stage/seed investing. These are sectors we have been investing in for over fifteen years. We've seen these sectors boom and bust before and we'll probably see it again. We are committed to these sectors and have no plans to leave them.

However, these sectors of the venture capital market are filling up with investors chasing returns. And some of them do not understand what they are investing in. I got a call a few weeks ago from an individual investor who wanted to invest in one of our portfolio companies. He asked about the company and from his questions it was pretty clear he did not understand the business very well. He went ahead and made an offer to invest. That scared me.

I've been visited recently by a number of foreign investment vehicles, many of whom are investing billions of dollars of sovereign wealth. They all want to get into our funds and our deals. When I talk to them about why, they can't really articulate a cogent argument about the economic potential of the social web. But they see the returns and want some of them too. That scares me.

Sounds like a bubble is forming to to me. And in such conditions, who better to advise all these desperate funds on where to invest them than Ms Meeker

What is more telling though is "Why leave Now"? I would take this as an indication that Morgan Stanley et al are not playing too hard, probably because although lots of money is going in, the number of IPO exits is still small, most are trade sale. Mind you, at these sort of overblown values, you can see where bubblemania is coming from....but despite this, relying on Google to pay over the odds for every prospective exit is not a viable strategy.

Updates:

(i) The FT makes the same point about the big banks not really in the game at the moment.

(ii) Sarah Lacy at TechCrunch:

I asked Zynga CEO Mark Pincus what specifically Meeker would bring to Kleiner that the firm doesn’t have already. He emphasized Meeker’s data-driven approach* to championing new markets versus the Valley’s more common gut-feeling, intuitive approach. “She has been the first to call many major markets, showing with data what many of us are pursuing based on instincts,” Pincus said. “In the past year she has called out the social Web and mobile Internet as opportunities of much bigger scale.Facebook’s market valuation probably went up significantly after her presentation at Web 2.0, in which she showed the potential impact of the social Web.”

Calling Social Media and Mobile Internet in 2009 - good lord, how did everybody else miss it till then The next sentence on in the quote tells you everything you need to know.....

*Data-Driven eh...well, here was the last one at Web 2.0. and - well, it shows that social media and mobile internet are waaay bigger than anybody thought, as the man Pincus said above. And thus it was..... .