• Financial Times, Tuesday, May 1, 2007 10:31 AM

The next Web bubble is coming, says Todd Dagres of the venture capital firm Spark Capital, but this one doesn't affect most of us. Private investors, especially those who've poured money into the overcrowding Web video space, should be forewarned. There isn't enough room out there for every "Next Big Thing" proposal that comes across their desks.

According to a Dow Jones/Venture One report, the amount of U.S. venture capital going into video related-startups jumped by 95% last year to $682 million. However, not all are trying to be the next YouTube. Many are providers of networking or Web software tools, although some 30 startups attracting VC money last year are consumer video sites, says Dagres, whose firm is invested in the video-sharing site Veoh Networks. These video sites have an average investment of about $10 million each, and that eventually, total investment could top $1 billion.

Most investors will lose money, though the shakeout is unlikely to come this year. Todd McInerney, the founder of Guba, agrees--his company is currently looking for a buyer. He says now that Internet users are gravitating toward a handful of video sites, and copyright holding media companies are starting to take back their content. Many of these startups will struggle to find an audience.

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