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VCs: Who's Hot?: Page 3 of 4

Of the next three VCs on the list, two of them, Lightspeed Venture Partners and Worldview Technology Partners, have investments in storage service providers (SSPs) -- Lightspeed in Storability and Worldview in StorageWay. These are considered to be relatively risky investments, considering the lack of success of similar business models (see StorageWay Snags $42M). [Disclosure: Lightspeed is an investor in Light Reading Inc., the publisher of Byte and Switch.]

However, both these investment firms have balanced their portfolios with startups that rank highly on the Byte and Switch Top 10 list, perhaps to offset this risk.

One particular member of our Top 10 list, BlueArc, stands out as a well-funded company -- with $100 million to date from several different investors. However, the majority of these do not appear on the movers and shakers list above. For all of them except JP Morgan and Dell Ventures, BlueArc is their only investment in this sector.

There are pros and cons associated with retaining multiple VCs, as opposed to going for just a few.

Chris Baldwin, a partner at Charles River Ventures, says the cons outweigh the pros, in general. “A VC's most precious asset is their time and the people that they know. If there are many VCs in a deal it means that each has a smaller piece of the pie and they can’t devote the time or resources to the deal compared to when there are just two involved.” The challenge of leading the syndicate as it grows, he says, is also hard for both the company CEO and the lead investors.