I attended the F.ounders event last week and felt inspired to write about it.

F.ounders is an invitation-only event for around 150 people – mainly founders of technology companies with a few investors, media and others thrown into the mix. It is based in Dublin and is naturally focused more on the European scene although there is fairly strong representation from the US.

I had a great time and think that is has clearly consolidated it’s place amongst the few events that manage to attract a high quality crowd and provide real peer to peer networking that we are so often promised but is so rarely is delivered.

My view is that meaningful relationships are forged when people spend a good amount of time together, when they respect and like one another and also when they are relaxed enough to let the ‘corporate guard’ down and really talk about interesting stuff, openly and honestly.

I think F.ounders manages to achieve this and that it is principally down to three things – the quality of the people, the cultural experience it provides and the effortless vision of its founder Paddy Cosgrave.

The founders are roughly divided between those that have done it, those that are well on the way and those that are up and coming. This approach works well and makes for a more stimulating event seeing founders at different stages, tackling different issues and with the next generation given something to aspire to and with the older guys being kept on their toes by those trying to eclipse them. You then throw into the mix a small selection of investors and media and you have a great cocktail.

There were two pieces in the Wall Street Journal last week on the subject of the US venture capital market losing momentum. First there was a piece about the widening gap between capital being invested and capital being raised.

And hot on the heels of this there was a piece about a possible ‘cash crunch’ saying that some of the momentum had come out of the market, that some start-ups were struggling to raise money and valuations were starting to come down.

I think the US market is cooling off a little and see this as a healthy and inevitable phase for it to go through.  Over the last few years the megatrends of cloud computing, social and mobile have jet-propelled the start-up scene and as a result more and more exciting companies have emerged that seemed to have the potential to really disrupt their industries. The trailblazers for this new generation are companies like Facebook, Zynga, Twitter,  Groupon, LinkedIn, Dropbox and Skype.

However, as sure as night follows day, a heated market will always be followed by an over-heated market. You know you’re in an over-heated market when valuations get so high it’s difficult to work out how they were calculated, more and copycat companies emerge and all start-up related costs go through the roof such as office space and salaries.

At the end of the day even an exciting and fast-growing market is ultimately finite – we only have a certain amount of money to spend. In all the excitement people sometimes forget this.

So things are cooling off a little but I see this as a natural correction in the cycle and I don’t expect there to be a dramatic fall in valuations and confidence – as I’ve said before I really don’t believe this is like the bubble of 2001. This new generation of companies are leveraging the three megatrends of mobile, social and cloud computing that are completely reshaping the technology landscape – and the largest ones are so much more mature with much more substantial revenues than was the case ten years ago.

There have been some extraordinary events in May that makes me feel it will be seen as a defining month for the cloud (as opposed to evidence of a second internet bubble as some have been saying).

Firstly, we had the Microsoft acquisition of Skype for $8.5B – more than three times what the previous investors paid only two years ago and around 10x 2010 revenues. Whether you think Microsoft overpaid for Skype or not (and only time will tell – see my post) what it does show is the huge value they placed on internet-based voice and video communications of which Skype is not only the clear leader but also the verb that’s used to describe it. It also showed the huge cash reserves the big technology companies have and how much of it they’re prepared to spend to stay competitive in world that is moving more and more into the cloud – a world that is in danger of passing them by.

Secondly, we had LinkedIn’s IPO delivering results that exceeded virtually all expectations. Their shares opened at the higher end of the expected range at around $40 and reached $94 at the end of the first day reflecting a 109% increase. The company’s valuation had reached almost $9B and nearly 20x current year revenues (expected to be in the $450-500M region). Whether this is sustainable or not (probably not) it shows the level of excitement and belief in the potential of social networking and, more broadly, of cloud computing.

Lastly, we saw Salesforce, the leader in the SaaS market, report record quarterly results with revenues up 34% to $504M and on track to be the first SaaS company to exceed $2B for the year. Marc Benioff, Salesforce’s outspoken CEO, talked about being a top 5 software company overall showing how cloud companies are now starting to measure themselves against the whole market rather than just within their category; he also had some sharp words to say about Microsoft:

‘Customers continue to want visionary products that give them a competitive advantage, not the me-too Zune-type products locking them into these old, proprietary, desktop-driven platforms that are dying off.’

I think that $8.5B is a lot to pay for Skype. My understanding is that Microsoft didn’t have a competing offer for anything approaching this number so I’m not sure why they felt compelled to pay so much. It clearly suggests that they want Skype very badly and see it as strategically important to their future, as based on financials the valuation doesn’t stack up at all. They are paying around 10x last years revenues of $860M which is a very high multiple – plus the revenues are all for their local calling product from Skype to any phone and this is low margin revenue that costs a lot to support. Skype does have a very large user base of around 650M, higher than any of the other social networks, but the problem is people don’t go to Skype to ‘hang out’ – they go there to make free calls. Indeed only 1-2% of Skype users have upgraded to the chargeable services and that’s the issue they face.

That said, there is definitely a great deal of value in Skype. They have a huge number of users, a strong brand that has become a verb and is synonymous with internet-based calling and they are absolutely the dominant player in the fast growing market for IP communications. But I wonder whether Microsoft can really integrate the service with their various different ‘fiefdoms’ of Exchange, Office, Xbox, Mobile and MSN groups and at the same time retain the creative, entrepreneurial qualities that have been so central to Skype’s success. I have to say I very much doubt it.

But if Microsoft is able to pull this off it would give them a communications platform stitching together their various products and provide them with a much more connected and social element that would be very powerful. This is especially true if they were able to take it a stage further and use the Skype platform to reconcile a single set of user ID’s across their whole on-line environment. And they have Skype’s very large user base to tap into to sell other Microsoft products and services. But there’s a very long way to go if they are to make the acquisition a successful one and Microsoft has not shown us in the past that they are able to successfully marry third party technologies with their core products.