In the victorian times, the technology booming was railways. There was always a market for railways (until the car came along, but that wasn't really for another seventy years), but the real issue was the number which they built. There was passengers, but not enough to support the frantic investment that people were making (it was, after all, the next big thing!). This is where I see the VC backed SaaS startup investment market going. Frankly, there cannot really be a market for every SaaS app we see traipse through here with $10m of backing. The real question is, how long until the failure rate becomes high enough that people panic?

YCombinator has the right idea. Start with a small seed, build a good app and perhaps only once you have something launched, start looking for more investment. A website can generally lead to profitability either by being loss making but really, really popular, or by having revenue from day one. What worries me is the websites that have very little revenue from the beginning, and yet are attracting multi million dollar investments. That cannot last.

As an aside, we're thankful for those rail investments now - the UK not only has a very large railway network, we also have a very large bicycle path network built on ex-railway lines!