Investment by venture capital funds is going to shrink by as much as 50% from 2007's $25 billion, according to a recent report by the Kauffman Foundation, entitled: "Right-Sizing the U.S. Venture Capital Industry."

As Paul Kedrosky, a senior fellow at the foundation, explains the in accompanying video, the VC industry is about to suffer a major comedown.

With the last of the bubble-era IPOs (or "exits" in VC speak) coming out of the performance figures, the industry's 10-year average return is set to turn "dramatically negative," Kedrosky says. He predicts 10-year returns will go from up 25% or 30% to negative 7%, which is going to have a major impact on investors' willingness to put money in the VC sector, certainly not those investors who fueled the industry's surge at the end of the dot.com era.

The key here is VC funds have high barriers to exit...

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More speculation surrounding TechTicker’s parent company, Yahoo. The New York Times reports that Yahoo may announce more layoffs as soon as Tuesday, when the company reports 1Q results. Kara Swisher expects it to be some 500 people or more. In classic public company style, Yahoo will announce the cuts now but not notify impacted employees until June. Soak up all the TechTicker you can until then, just in case!

More on that Skype IPO: JP Morgan analyst Imran Khan says a Skype IPO could be worth as much as $3.1 billion, based on Skype's estimated 2010 net revenue of $740 million. That's no doubt good news for eBay...

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So much for our write up of Skype's founders buying itself out of eBay's clutches. eBay announced yesterday that they'd be taking Skype public in 2010 instead. In a statement, eBay's chief executive John Donahoe said what analysts and reporters have been saying since the deal was announced, "It's clear that Skype has limited synergies with eBay and PayPal." Henry Blodget, for one, was excited enough to put an exclamation point in his headline. He notes that this could just be a negotiating ploy to get would be buyers to pony up now. Can Skype's founders come to the table with a sweeter offer? As a user, I'd rather see them take the product back then spin it into an IPO.

A small victory for the many opponents of Time Warner's plan to "meter broadband"-- in other words, make people pay more for the more Internet they use. The plan has received nothing but hate for the last two weeks...

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There is one big story that made the rounds yesterday that has two parts. It’s about eBay, and its attempts to undo the bizarre acquisitions made by former CEO Meg Whitman. The company announced that it was spinning off StumbleUpon, a startup that helps people discover like-content on the Web, acquired for $75 million back in 2007. StumbleUpon has never been a fit with eBay, although the auction site’s cluttered inventory could certainly use some help on the search and discovery front.

But the bigger question on everyone’s lips: Is Skype next? Experts have expected something to happen with Skype this year, but the question was who would buy it in a market like this. Apparently, its original owners and some private equity investors have stepped up to the plate. Om Malik has a great write up explaining why eBay should accept the offer, even if it’s about $700 million shy of what eBay execs were hoping to get...

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For once, the biggest story in the Valley isn’t about sexy Web upstarts. It’s about big-old-boring IBM and seen-better-days Sun. It turns out they aren’t merging after all. In a deja-vu turn of events for anyone who watched the Microsoft-Yahoo drama last year, it seems Sun’s board was split about the deal. You know, the only one the company could allegedly scare up during the period it was shopping itself.

There’s speculation that Scott McNealy, the firebrand founder of Sun who opposed the deal, may be retaking the CEO slot as a result. Having watched Jerry Yang, Michael Dell and other returning founders flounder, I can’t imagine that mollifies upset Sun shareholders. eWeek put things well when it wrote that Sun better have “a solid backup plan.”

The most successful Internet companies are frequently the ones who destroy traditional business models and sky-high fees charged by middlemen. Consider the music industry with iTunes and file sharing; media with blogs and enterprise software with open source and software-as-a-service. Revolution Money, founded and funded by former AOL scions Ted Leonsis and Steve Case, has been trying to do the same to the world of credit card payments and processing, but it’s had mixed results. Today, the company announced another $42 million in funding to keep on trying...

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Much of Silicon Valley is still reveling this morning in April Fool's Day: A holiday more popular among geeky Web hackers than Christmas. TechCrunch has a round-up of the wacky gags, in case you missed them. But one story was no joke, and it’s still being talked about today: Facebook’s surprise firing of its CFO Gideon Yu, formerly of Google and YouTube.

Although the company has said it was simply seeking someone with public company experience, Kara Swisher of AllThingsD reports that Yu was fired for disagreeing with founder and CEO Mark Zuckerberg. Both versions of the story set off a lot of discussion. Clusterstock decided to tell us that the move meant Facebook wasn’t filing for an IPO in April, nevermind that wasn’t even a rumor, and given the market, no one  expected them to. Meanwhile, other blogs said the “my-way-or-the-highway” style of Zuckerberg would be a detriment when the company did go public.

No doubt. But the company isn’t public yet, and the CEO has the right and responsibility to his venture investors to build the best team around him before they do file. The job of CEO isn’t being nice. Zuckerberg has always fired people who didn’t share his vision, and last I checked the company was still growing, adding users and, according to many sources, growing in revenue too. I think he's earned the benefit of the doubt. After all, since when is volatility not a day-in-the-life of a startup?...

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Is there a silver lining in Steve Jobs’ leave of absence for Apple investors? His co-founder Steve Wozniak sees one. I just left the set of a new tech show produced by our local NBC affiliate, and as coincidence would have it, “Woz” and I were both guests. Wozniak said that when most creative types take a time out, they tend to have a flood of ideas. After all, it was after Jobs’ last leave from the company that we got the iMac, the iPod, the iPhone, and an entirely new Apple.

Wozniak was clear to say he hadn’t talked to Jobs recently, and expressed some frustration at the amount of ink and airtime that had gone into discussing Jobs’ health. He added that some of the alarm was overstated, given how large of a pipeline of products a company like Apple has and how long they take to get to market.

For more on Wozniak’s view of the situation and thoughts about where technology is going, catch the show “Press Here” online Sunday. Of course, for an extra dose of Woz, relive his Segway jousting match with our own Andy Kessler. 

New Google diet...

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Before the Steve Jobs health bombshell hit the Valley, it was abuzz with other news. Here's one bright side of the dismal Holiday retail season: Retailers were so desperate to goose sales that they pumped more money than expected into online advertising. The numbers fell hard from 2007, but that's been the trend throughout 2008. Blogger Om Malik reported the news, and, true to form, found a way to make it sound dire, asking, “Was this a bottom or was it a more momentary lull in hostilities brought on by a widening credit crunch?” My vote is the latter. 2008 was a year filled with one-time catalysts boosting online advertising higher than it would have been normally given the housing slump and financial crisis. That included the Olympics, the election, and apparently, holiday shopping desperation. The real test will be the first quarter of 2009.

It seems to be the week for Silicon Valley executives to come out of retirement. Yesterday, it was Carol Bartz; today it’s eBay founder Pierre Omidyar. Far from a high profile gig like fixing Yahoo, Omidyar is heading back to the world of early stage, stealth startups, reports Marshall Kirkpatrick of ReadWriteWeb. The company is called Ginx, and no one seems to know a thing about them, but the move has the valley whispering and speculating. Kirkpatrick guesses it’s a Twitter management service, that will tailor recommendations of news items and potential friends, based on your interests. Marshall was plenty excited, but it doesn’t sound like something that would need $2 million in funding or a super-star executive like Omidyar to me. I’m hoping Twitter management is just the beginning, as discovery is a problem across the entire Web and Omidyar is an expert in crowd-sourcing. If nothing else, the move emphasizes the growing Web-crush everyone has on Twitter.

Venture Capital

Here’s another important data-point in the turmoil descending on the world of venture capital, and by extension, all of Silicon Valley. Valley kingpins Kleiner Perkins Caufield & Byers are so worried about the paucity of returns from discount-acquisitions and non-existant IPOs that the firm is raising an “annex fund.” In English that means ...

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The tech-elite started buzzing early this morning about the weekend Times' article that broke down the environmental impact of a Google search. Apparently, just two searches cause the same carbon footprint as boiling a teakettle. (Did I mention this was written by a British publication?) With over 200 million searches per day, that carbon mini-print adds up to a "provoking concern," the article argued. (Since Tech Ticker's parent wasn't mentioned in the article, let's assume Yahoo searches are just fine for Planet Earth...)

Blogs were littered with Google defenses today, calling out the carbon footprint of a book or a cheeseburger or even a human being taking a breath. Everything has a carbon footprint, and, clamored the Valley pundits this morning, at least Google is making investments in alternative energy to do something about it. (Google's official response is here.)

In other news, the Holy Grail of the late 1990s - the almighty one-stop-content-shop of the Internet portal - is finally dead. Or at least that's the contention of one of its former champions, AOL...

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There’s one topic conspicuously under-reported on the tech blogs today and that’s last night’s pre-Consumer Electronics Show keynote by Microsoft chief Steve Ballmer. The headline on AllThingsD’s coverage sums up why: It was a “Yawnnote.”

There was little new for Microsoft to announce. They beta version of Windows 7 was leaked last week and the win for Verizon’s mobile business was expected, and as Scott Kessler noted earlier today on TechTicker, a bit “desperate.” 

Believe it or not, there’s more buzz about today’s Palm keynote and the unveiling of its new handsets and its much-hyped new operating system. This is the make-it-or-break-it moment for the iconic Silicon Valley company that private equity firm Elevation Partners has pumped $425 million into so far. A lot of Valley people have not only money but strong emotions invested in the Palm comeback, and early reviewers were impressed, but still skeptical of a full comeback.

Meanwhile, Barack Obama just keeps fighting to keep his Blackberry. On Wednesday he told reporters, “They’re going to pry it out of my hands.” Palm sure hopes not every Blackberry and iPhone user feels that way.

While those Valley titans slug it out at CES, Google is quietly slimming down its force of contractors...

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