Beware the Venture Capital Herd: It's Overgrazing in Wireless

The way they invest, you might think that venture capitalists have achieved a higher form of social thinking, tapping into each other's thought processes. It could be that so many VCs are clumped together in office parks on Sand Hill Road in Palo Alto, Calif. Or maybe they just sync up their Palm Pilots.

However they manage to coordinate their moves, venture investors continue to march in lockstep from one sector to another. After plunging hundreds of millions of dollars into business-to-business and e-commerce in late 1999, VCs early this year began deserting those categories en masse in search of greener fields. Where? Wireless.

The Magic Word

By now, VCs are slamming the door on any hapless entrepreneur still seeking funds for B2B or (god forbid) business-to-consumer start-ups. But those who show up with business plans containing the magic word wireless get the fatted calf treatment. "There's this sense that wireless is what comes after e-commerce and B2B," says Seth Goldstein, a principal at Flatiron Partners in New York, which established a fund for so-called pervasive computing in late 1998. ...