It’s been awhile since I was actually investing money for a living, so this post might be a bit off. Lately I have been hearing a lot of feedback about how web 2.0 is over and done with and investors are moving on to the next thing. I’m not totally sure, but I think there is something else at work here. To date, the vast majority of deals that have been announced are mostly angel and Series A deals. By and large, the goal if this financing seems to be to either a) build up something that can be sold for <$50 million to a major Internet property or b) demonstrate that the concept "has legs" and can grow to be a substantial destination property (Facebook, Yelp, etc). Given the valuations and total dollar outlays, placing a lot of Series A bets in a growing space seems to make a lot of sense. Things are a bit different now, though. Most of the easy and quick bets have been placed. As companies look to raise their Series B rounds, the expectations are a bit different. There are two inter-related things that drive this -- companies are usually looking to raise more money than they did in Series A and the exit needs to be larger to justify the size of the investment. This is where things get difficult. In order to make Series B deals with post-money valuations in the $40-80 million range work (this isn't uncommon from what I have seen), you have to be pretty sure that you're going to have some sense that the right exit opportunities exist. To date, there just haven't been a lot of acquisitions or exits in the $150-300 million range; you'd probably need exits in that range to make Series B investing interesting at a $40-80 million post. So, what's a Series A investor to do? My sense is that a reasonable Series A investor might decide that he/she has deployed enough capital at the early stage until the path to exit or self-sustainability clears up. Why not sit on the sidelines for a bit and see what happens to some of the fast-growing companies who have already raised a Series B? Taking a pause until we see how some of the current crop of web 2.0 companies perform post Series B is very different than saying the game is over. If those companies do well (either get acquired, go public, or continue to grow and be perceived to be valuable), people will plunk down more money in the space.