The debate over whether or not Silicon Valley is in a bubble might not be the right question. Instead, we may want to ask whether the fundamental principles of tech investing are shifting, as technology becomes more of a consumer phenomenon. For all the talk of the long tail, the big money is in sites and services that capture a large user base. So how does venture capital and angel investing change to support this model? And should it?

Success in this realm isn’t like success in the old-school Silicon Valley world of building chips or enterprise software. The product still matters, but the audience isn’t the few technically or business-savvy experts at a large company that is evaluating your wares for a multimillion-dollar deal. Today it’s selling to the billion people on Facebook, hoping they will give you a click, a tweet or five minutes of their time to be monetized in the form of ads.

Maybe if you’re good you can build a business actually selling apps, but the name of the game is still driven by hits. The Internet has become a wasteland of lame-duck startups and acqui-hires that couldn’t make it to the next level in popularity. The winners seem to be those who can rise to platform status, and it seems for many segments of the Web, much like in The Highlander, there can only be one. Facebook has won out in social networks while Foursquare is hoping to be the darling of location. Meanwhile the battle plays out for a mobile commerce site, as well as a winner in travel, gifts, gaming (actually there may be more than one here) and so on.

An Inc. magazine profile on the differences between founders of one startup highlights the change that is occurring in tech investing. The article, which details the relationship between the two founders of Turntable.fm, is worth a read. Billy Chasen is the programmer who built the site, while Seth Goldstein is the deal maker. The startup they founded has stopped growing, and the profile explores that and their relationship as they try to tackle their plateau.

Tucked inside the story is a quote that has me wondering if Silicon Valley has moved from developing and promoting real technology to pimping the next hot Web service. And if so, what does that mean for startups and investors?

Goldstein’s latest read is simple: Coders are the new rock stars. Twitter’s Jack Dorsey and Facebook’s Mark Zuckerberg built sites that attract crowds of millions, but they don’t completely understand how they did it—and neither does the money backing them. It’s not as if they do market research. So venture funds now bet on hackers the way record labels bet on rising pop stars, hoping that someday soon, they will make something wild, new, and insanely lucrative.

Hints of this abound. The difficulty in getting a series-B round unless your startup is the Next Big Thing is something I have covered. Then there is the rise of celebrity investors in tech that help push a product. And there’s the influx of brogrammers who code, work out and live a lifestyle that seems incongruous with building a startup, unless you view them as part of the product being sold to investors and consumers.

None of this is to say the traditional tech investment in the Valley has gone by the wayside. There are still hardware-, software- and data-oriented startups that can raise money and aren’t trying to sell to the masses. But they follow a different trajectory for the most part. Sure, a little of the celebrity founder worship sneaks over (witness the love affair with Martin Casado of Nicira), but for the most part it’s business as usual at slightly higher valuations.

And celebrity or the search for the big hit doesn’t get you through the days when the going gets tough. Or as Union Square Ventures’ Fred Wilson so eruditely puts it:

So if you are doing the startup game for money, and lots of it, you are in for a plate full of frustration. It must be for more than that.

Which has me thinking that not everyone is pumped about this hit-maker mindset. Even those who stand to benefit.

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Fab.com co-founders Jason Goldberg and Bradford Shellhammer

A year ago, Fab.com got a new lease on life, pivoting to become a design sales site after a lackluster showing in its first incarnation as Fabulis, a gay social network. As you might have read, this year has been huge for Fab, which is now up to 2.5 million members and is on pace to bring in $100 million this year in revenue.

But what stood out to me was the backstory of the restart for Fab. Jason Goldberg, the founder and CEO said in a blog post that the company repositioned itself after realizing that it needed to focus on what the team was passionate about and was in a position to succeed at. And that, they decided after 20 minutes of discussion, was design. A social network was not, in fact, what they loved doing. It was yet another reminder for me that entrepreneurs, as skilled as they may be, need to care deeply about what they’re building to be able to build it.

It might seem intuitive or obvious that if you’re going to stake your life to a new startup, you might as well do what you love. But that lesson can get lost in the quest to build a successful start-up. That’s what happened with Fab, Goldberg told me. He said he initially built something for him and his friends but realized he was really just chasing an opportunity. Goldberg told me in an email:

It was driven from being opportunistic, not from pure passion. I think a lot of people often mistake opportunity for passion. Too many people are passionate about building a business vesus being passionate about building this business.

Not built to flip

Or as former AOL co-founder Steve Case told GigaOM in an interview last year, some entrepreneurs are looking at building businesses they can flip quickly, rather than committing to something they love. ”A lot of people are starting businesses because they think it’s an opportunity to make some money,” Case said. “You occasionally get lucky, but that doesn’t really work. You have to be passionate about it.”

Kickstarter co-founder Perry Chen

The misunderstanding can sometimes come from the signals entrepreneurs receive from investors. Charlie O’Donnell, a former principal at First Round Capital who started his own fund called Brooklyn Bridge Ventures, recalled his regret passing on Kickstarter when he first met co-founder Perry Chen in 2008. In a blog post, he said he was caught up on the murky details about how Kickstarter was going to build a business and a roadmap. But he didn’t key in on the “why” behind founder Chen’s quest to build Kickstarter. He said after hearing Simon Sinek’s TED Talk he realized that people don’t buy “what” you do, they buy “why” you do it. And Chen, to his credit, kept plugging away on his idea.

I didn’t understand how important that pattern was at the time, but now, four years later, I get it.  Nowadays, one of the first things I ask someone is why they do what they do.  I used to ask it out of curiousity, but now I get how important that is to the success of your business.

Getting the passion thing right can mean the difference between success and mediocrity — or even failure. Billy Chasen, founder of Turntable.fm, recounted the story in November behind his start-up, which began life as Stickybits, a QR-code provider. He said he made the decision after losing interest in QR codes and what the company was doing with it. But what really excited him was music, which led to Turntable.fm, even though Stickybits was a modest success.

When passion meets opportunity…

Simply having passion doesn’t guarantee anything. But the opposite can be true too. You can have a great opportunity and a solid team, but if you don’t have a burning passion and a vision, things can get muddled quickly and the drive can desert you. As Goldberg points out, he needed to find a place where his passion was matched with a market ripe for disruption and a belief that Fab could be the best at what it does.

Foursquare co-founder Dennis Crowley

Looking at companies like Twitter and Square under Jack Dorsey or Foursquare under Dennis Crowley, you can see founders who are locked in on a passionate goal. They may not know all the details of how it will unfold but they know what they want to see ultimately because they’ve been obsessing about their ideas for a long time. As Crowley told me recently, one of the reasons why Foursquare has been able to separate from other location-based rivals is because he and many others in the core team have been ruminating on location for years. This is built into the company’s DNA and guides its direction.

Again, passion is not the only ingredient to success, but trying to build a successful business without it is tough. If you can align work and passion, the payoff can be rewarding, said Y Combinator co-founder Paul Graham in blog post several years ago:

Finding work you love is very difficult. Most people fail. Even if you succeed, it’s rare to be free to work on what you want till your thirties or forties. But if you have the destination in sight you’ll be more likely to arrive at it. If you know you can love work, you’re in the home stretch, and if you know what work you love, you’re practically there.

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Apple Nets Multi-Touch, iPhone Patents, Better Position From Which to Threaten Palm – A lot has been made of the threatening words spoken by Tim Cook during the Q1 2009 Apple conference call, in which he hinted that Palm’s Pre could be grounds for a suit(s?). Today Apple can further back that up, since they acquired the patent for multi-touch and the iPhone.

Apple Adds New Ad – A new iPhone 3G ad was posted today by Apple on their website, this one again featuring third party apps available in the App Store. The apps featured are Yelp, Osirix, and Classics, and the theme is reading. Because all of those apps require you to read something, see.

Zune Revenue Plummets 50% in 2Q – Microsoft should really just put the thing out of its misery at this point. It’s no good, and it’s doing terrible. For a frame of reference, consider that Apple’s iPod sales rose 3 percent in their own first fiscal quarter. Just kill the thing, for all our sakes.

One Analyst Thinks New iMac Soon, Also It Will Rain Someday In Future – At this point I think the odds are in your favor if you claim a new iMac is on the horizon. Especially when you suggest a whole bunch of logical reasons why they may be waiting, as this particular analyst does.

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New Yahoo CEO Carol Bartz is a solid, proven manager who will bring some much-needed stability to the beleaguered Internet giant, but she has a big hole in the No. 2 spot. Bartz needs a president who is young and energetic, has engineering chops, clear vision, and — most importantly — expertise building great products that provide a compelling Internet user experience for a diverse group of consumers.

My candidate to be her consigliere: Jason Kilar, CEO of Hulu. I’ve spoke to quite a few people who know Kilar well, and most of them described him as that rare content guy with technical chops. A good team builder, he is said to inspire. Others waxed eloquent about his sense of design and his passion for media. Remember, he ran the DVD store for Amazon. His defining quality is hyper-competitiveness — something that would be important to fire up the troops.

With his service growing by leaps and bounds, and advertisers lining up to get on board, Kilar’s only problem is that he doesn’t have enough traffic –- like, say, YouTube. This is where Yahoo can help. Or rather, where the two can help each other. Clearly search and search advertising isn’t quite working out for Yahoo; what Yahoo knows best is media and content. Which is why buying Hulu would be a strategically relevant acquisition for the company — it would play to Yahoo’s media strengths.

You’re probably thinking, why would Fox and GE sell their pet project to Yahoo? Well, why not? After all, they took a $100 million investment from Providence Equity Partners, which means they have an interest in making some sort of a return on this company. By selling to Yahoo for stock -– say, $2 billion worth — Rupert Murdoch would get a nice big chunk of Yahoo shares, which could come in handy if he wants to offload MySpace to Yahoo sometime in the future. NBC would get a significant Internet presence with Yahoo, which could only help its other digital efforts. And the Providence guys –- well, they’d get to make some money.

Read the full post on GigaOM.

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Still, instant messaging and lately Twitter-styled short messages have only become more popular. At the other extreme, we have Google trying to build immersive communication environments with the launch of Lively. Between those two new communication methodologies, however, there lies a third way.

For the past couple of days I have been playing around with a new web service called Firef.ly, which adds chat and avatars to any site on the web. It’s instantaneous like Twitter, yet is localized to a web page and allows for customization through the use of avatars.

The service, which was developed by Billy Chasen and is likely to go into beta sometime today, is the creation of NY-based Betaworks, who describe it as a real-time social messaging system. I know of many people that have used it and found it to be a better service than what’s offered by some of its rivals like Yaplet.

By adding a tiny bit of Javascript code, any site can become chat enabled. (You need a Flash plugin installed in your browser as well.) If you want to chat about, say, the L.A. earthquake, you go to a page, start typing, and your comments show up on a layer that seems to float above the page. Others can respond in real time.

People conversing are seen on screen either as avatars or a simple mouse pointers. The service also provides a timeline of the conversation, allowing you to navigate through the entire thread. That’s possible because the company stores these conversation threads on Amazon’s S3 service. (You can download and try it here.)

The comments can be posted on a web site; they can also be sent to your Twitter account and be broadcasted to your Twitter stream. This integration with Twitter could result in Flash Mobs versions of a conversation in which people converge on a story and talk about it amongst themselves before moving onto something else.

I like the idea, but I’m not sure how this translates into a business. Perhaps the company can charge publishers for its service. The Huffington Post is one of 300 web publishers that have been participating in a private alpha test of Firef.ly in the last two months, the company says.

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