It would be easy to assume that 1999 is the kind of year Fred Wilson would like to repeat.
In January of that year, Yahoo bought the web hosting service Geocities. Wilson and his first firm, Flatiron Ventures, were an early Geocities investor.
1999 was near the peak of the dot-com bubble, and Yahoo paid a staggering $3.57 billion for Geocities. The $8 million Wilson and Co. invested in Geocities in 1996 was worth $234 million after the Yahoo purchase.
“It was the first rocket ship ride I had in the venture business and it will always have a special place in my head and heart because of that,” Wilson wrote on his blog, A VC.
1999 popped Wilson’s cherry with a big exit, but it’s not a rocket ride he’d care to take again. “When I look at where we are right now, it reminds me so much of 1999 and frankly it scares me,” Wilson wrote over the weekend, continuing to hammer home the point that there is a bubble building in tech investing, especially for consumer facing web services and mobile apps.
Couldn’t Wilson look at this as an opportunity? After all, in this frothy market, an investment like Foursquare could easily sell for a high price. Who wouldn’t mind hitting another home run?
Wilson’s issue is that he’s in the game for the long run, not a single inning. And the bubbles which produce big exits also make it hard to generate good returns over time.
“We made greater than 5x on that first fund,” Wilson wrote. “Eleven years later, we will be lucky to make 2x on the $350mm second fund.”
Still, Wilson says he’s not going to sit by the sidelines, like he did back in 2000. He doesn’t think it’s possible to time the markets. The best strategy, he’s now decided, is to keep a steady pace, investing slowly and carefully, trying to spread his bets out over the unpredictable cycles of tech boom and bust.