Thinking about investing in a startup? Screw direct to consumer and go B2B!

Mobile seems to have all the characteristics required of a typical VC investment - large and growing addressable market, favorable demographics, fragmented space, early in terms of user experience etc. You would think its a hot and sexy sector to invest in... Truth be told, it is unclear. There isn't a great deal of evidence on big exits, relative to the amount of VC dollars that have been poured into each teeny weeny mobile application/usecase. The few exits that come to mind: SavaJe, AppForge, VoiceSignal, ScreenTonic, ThirdScreenMedia and Tellme.

As I grapple with trying to figure out what type of investments make sense in the mobile value chain - platform companies vs consumer apps vs infrastructure providers vs technology enablers, I've always wondered if there's an accessible source on the debate amongst VCs on the return potential boring investments versus flashy investments.

The WSJ article today seems to have sparked off a debate by highlighting a handful of recent B2B IPOs:

The profits generated by the dozens of stock debuts of these work-horse, business-focused equipment companies dwarf the venture returns of the handful of recent consumer deals, such as Google Inc.'s $1.7 billion purchase of YouTube.com, which had been backed by just one venture-capital firm. Indeed, of the 79 technology IPOs in the U.S. since January 2006, only a handful involved companies directly serving consumers. One was troubled Internet-phone company Vonage Holdings Corp.; its stock has plummeted in the past year amid heightened competition and a patent dispute with Verizon Communications Inc.

VC blogger Ed Sim seems to think modest exits are just fine as long as the investment is in a "capital efficient" company. On the surface it seems logical. I did attend a panel discussion where a similar case was made by Ann Winblad about SaaS investments. Mark Sherman sums up his investment case for SaaS.

Would be nice to see some data on exits (IPO, M&A) to support the "capital efficiency" argument for direct-to-consumer (eg social networking, social shopping etc) startups.