Due almost entirely to the dotcom boom, the late 1990s were a boom time for the globally-renowned VC firms on Sand Hill Road in San Francisco. IPOs were taking truly irrational leaps, and access to «friends and family» shares was becoming a major determiner of who would benefit from any such IPO; the ordinary investor rarely got a chance to invest at the strike price in this period.

The NASDAQ crash and technology slump that started in March 2000, and the resulting catastrophic losses on overvalued, non-performing startrups, shook VC funds deeply. By 2003, many VCs were focused on writing off companies they funded just a few years earlier, and many funds were «under water»; that is, their portfolio companies were worth less than when invested in. Venture capital investors sought to reduce the large commitments they have made to venture capital funds. As of mid-2003, the conventional wisdom was that the venture capital industry would shrink to about half its present capacity in the following few years. However, Pricewaterhouse Coopers’ MoneyTree Survey shows total venture capital investments holding steady at 2003 levels through Q2 2005. The renaissance of an Internet-driven business (thanks to deals such as eBay’s purchase of Skype, the News Corporation’s purchase of MySpace, and the very successful Google IPO) has helped to revive the VC environment.