Should Groupon have turned down a $6 billion buyout offer from Google late last year?
These are signs of an Internet valuation bubble. Want another one? Greylock Partners reopened its current $575 million fund and raised the cap to $1 billion. This will allow the firm to place as much as $25 million to $200 million with promising companies and begin an initiative to focus on larger stage financings of “breakout consumer Internet and enterprise companies.”
With its new money interest, Greylock is not alone. Accel is raising capital. Andreessen Horowitz late last year closed a $650 million second fund and recently bought a pile of Twitter stock in the secondary market. Sequoia Capital added a $930 million growth fund as long ago as 2008.
Venture capitalists say it is different this time. In contrast to 2000, aspiring Internet companies today have real business models with real revenue. Think of hot companies like FourSquare, Etsy or Tumblr. All will want more capital someday at attractive valuations. Competition will be fierce.
The irony is that this new field of opportunity may throw a lifeline to the venture industry. The industry last year raised just $16.3 billion for new funds. If LPs suddenly think they can buy a piece of a Facebook or Zynga and make monster profits, they will likely throw new money at the asset class.
Good or bad, it is bubble behavior. And Greylock is a part of it. Seems like there is more money ready to move. Greylock says its fund expansion came from existing LPs and was oversubscribed.