VCs like to target markets with big potential, especially tiny markets growing quickly into big markets, like the Internet. If it's a small market, the chance for a portfolio-levitating, reputation-making home run isn't there. A VC's portfolio return is an average of all its investments, so he'd rather have a huge winner and some no-ops than a bunch of minor successes. If you're off-target slightly in a big market, you might still make it, and, if you make it, it can still be big. Off-target in a small market means you're dead.
