Where’s the 2.0 Money?

I first learned about the problems with the auction rate securities market reading Fred Wilson's blog. I didn't think much of it, since I generally don't have available cash just sitting around for me to play with like that, but I was happy for his primer and the information gleaned from the New York Times article on auction-rate notes when I got to TechCrunch pointing out that up to 20% of VC-funded start-ups can't get to their money due to frozen municipal bonds.

Still, even if it is 20%, the VCs behind these companies seem to be helping them out, so there shouldn't be a need to panic, right? The other 80% who invested their VC in an even safer method than the auction-rate securities were supposed to be should be fine in this case.

Don't be too sure. Venture Beat has even more bad news: word that Comerica has frozen money market accounts. They contacted Comerica, who didn't deny the story, but pointed back to the New York Times article about the auction-rate securities, and said they were working with invidual customers on an as-need basis to liquidate funds.

For those keeping score at home, we have a subprime mortgage mess leading to problems with the auction-rate municipal bonds, which is, in turn, messing with a whole lot of venture-backed start-ups. The idea of a bubble in Web 2.0 has long been denied, but the more dominoes fall like this, the more you really wonder if it isn't time to start worrying.