Is this the top for Venture Debt?

It has been kind of fun watching this subprime mortgage meltdown and finding out who the guys were that were actually behind the funny money. Me and my cohorts are all for free money when our companies are taking advantage of it. Should we have some concern for endowments, pension plans and for ourselves to the degree that we have some financial exposure to banks who are giddy about lending to startups? Rather than post a diatribe, let me just put a few questions down here:
1. Does anyone remember Comdisco? They were the first ones and the last ones to price venture debt at 1 or 2 over prime with 2% or 3% warrant coverage. For the rest of the market, even going to 5% warrant coverage was too thin and a bad path to go down.
2. Are any financial sponsors questioning the pricing and underwriting that is going on at venture debt firms?
3. Is any one thinking about the pricing and the mortality rate of startups? If 3% warrant coverage is sufficient, why not 2%? How about 1%.

Who are the players and how can you profit from a downturn in venture debt portfolios? Study Comerica, Silicon Valley Bank, Western Technology, Hercules Growth, Lighthouse Capital and Eastward Capital to name a few. First get a term sheet from a venture capitalist, then call a few of these firms and look at their terms sheets. This money is easy and we know the fate of easy money.

Peter Thiel of Facebook to CNBC: "People are one of the most important things in the world."

Video clip link:

CNBC asks Peter Thiel is explain the end game for social networking.

Here is the story: CNBC had been hyping having Peter Thiel on as a guest in San Francisco. I have never met Peter. I do have some common friends and was naturally interested to see and listen about why he had been invited to one of my friend's party and why CNBC wanted to interview him. With all due respect for Peter, I was disappointed. Aside from the fact that his answers were peppered with "umms" and pauses, there really was little to no substance. There is nothing that I know now that I did not know before watching the interview except that Peter thinks that "People are one of the most important things in the world." This was his answer to the question "Is social networking a fad?"

Another comment I might tag as "curious" if not "questionable" was Peter Thiel's assertion that valuations for companies that produce "social networking" services are, in the aggregate, not too high to provide an attractive risk adjusted payoff for investors. Bill Griffith asked Peter Thiel if there is a bubble in the market for web 2.0 and social networking companies. Notes, his line of questioning was: ‘is social networking a fad?’ and ‘what is the next Google?’. In response, Peter Thiel uttered “Facebook” although Griffith had not asked about any specific companies, then he offered four reasons why there is not a bubble as it relates to [private venture equity capital] investments companies that offer web 2.0 and social networking services. Peter Thiel said [this is not from a transcript, just my notes from the interview and my sarcastic comments are in [bracktets]]:

1) There are "no IPOs" for these companies. [Did you know bubbles are defined by whether or not the public can invest directly instead of indirectly? I did not.]

2. MBAs are going to private equity not coming to Silicon Valley [Mr. Thiel added, and I am not making this up, that ‘this was what was going on a year ago’. So his reasons are not even forward looking, they are backward looking, and at least a year old. This one is too easy. No, MBAs are not coming to Silicon Valley, they are dropping out of undergrad and moving to Silicon Valley - they don't have time for an MBA when there is also this tagging and networking and mashing up to do! : ) ]

3. And this was perhaps the most interesting reason why valuations are supposedly not too high: "...it takes far less cash to get these companies off the ground". [Peter Thiel is such a genius that people like you and me can not even follow his logic.]

4. People in the late 90s were swapping out old economy investments for new economy investments. [Well, that was true...therefore your little widget code must be worth $5M pre, right?]

I have an economic interest in the web content economy as do many people that I care about. Peter made a reference to the importance of enabling human communication globally and that was appropriate. Much of the rest sounded like cheerleading and the explanations were not exactly what I would expect from someone who is probably Mensa material. Facebook is obviously thinking IPO. If publishers like Anthony Noto or Mary Meeker are going to explain Facebook to the likes of Bill Miller or Will Danoff, I guarantee that these will not be the four bullet points they use to justify the valuation. Fidelity is a "build it" shop, so they probably won't let Noto or Meeker "poke" or "nudge" or "wink" at Danoff or the other managers using Facebook when the initiation report is ready.