This image was lost some time after publication.

"Investing $5 million in a company that gets bought out for $25 million isn't going to get me into the VC Hall of Fame," Mayfield Fund VC Allen Morgan told Wired in 2006. "That's not why I got into this business." But that is why he's getting out of the business. Morgan was a champion of the Web 2.0 movement, suavely predicting that now-forgotten startups he funded like Pluck and JotSpot would soon go public in splashy IPOs. He bet that the spread of broadband would resuscitate business ideas which failed in the 1990s.

True enough — but it turns out that those businesses, cheaply started and cheaply run, did not need much investment; nor would they return much capital to investors. Morgan, a former coprorate lawyer, was counting on public stock-market investors to show up and play the greater fool, taking his startups off his hands for hundreds of millions of dollars. That was venture capital's business model in the 1990s, when Morgan got into the business. It was the one revival he was really counting on. It never happened. And now he and VCs of his ilk have been revealed as the greatest fools of all.