Some readers might remember that I was involved in VC funds from 1999-2001. I was the so-called Managing Member of three VC funds known as Internet.Com Funds I, II, and III. The first two funds were small at $5 million and $15 million respectively. Fund III had $75 million.

Our investment philosophy was simple but original for those times. We made investments in Web site ideas that had a vertical subject focus. The idea was that these Web sites would ultimately be acquired by large media companies for a multiple of the original investment value.

Things looked good for our VC funds until the Internet valuation crash which started in the spring of 2000. We were conservative investors. Therefore we were shocked to learn in 2001 that our largest investor in Fund III, a private client part of a giant bank, decided to withdraw most of our funding.

While we had once been wined and dined by this private client group, all of a sudden we were accused of incompetence and dishonesty. The bank did this to justify their demand to take away our funding. Rather than fight the bank, we agreed to their demands and closed Fund III. Shares in about a dozen different investments were distributed to all participants in Fund III. The lead bank got the most shares in each investment.

My parting shot at the bank was that they were frontrunners and would regret "running for the hills." The retort of the bankers was that the "Internet was dead and that yours truly was a poor investor." Ultimately the bank sold their positions in the VC investments, as I understand it, for $150,000 to an investment group.

Fast forward to last week. One of the investment companies in Fund III was sold for approximately $10 million (our total investment was about $400,000 for 30 percent of the company). Fund III at one time owned a good percentage of this portfolio company. The group that bought out the bank probably made about 10x on their investment of $150,000 (and this group still has shares in another 11 or so companies - nice return!).

My erstwhile banker friends probably do not care about their decision. But they sure had things wrong.