By Sunshine Mugrabi

Everyone’s pretty sick of hearing about Web 2.0 these days. Most can barely stomach the thought of another me-too social-networking idea.

Not Mohr Davidow Ventures partner David Feinleib.

Mr. Feinleib shared some thoughts recently with Red Herring on the well-explored category he’s still enthusiastic about. He shared his views on where he thinks the industry is headed and what he looks for before committing to a new startup.

Meeting at the California Cafe in Palo Alto for lunch, we discovered there were no available tables, leading him to joke, “Things are back—you can’t get a lunch reservation anywhere good anymore.”

So we sat outside and discussed the current state of the industry.

A former entrepreneur himself, Mr. Feinleib defends his sunny view of the investment climate. His background includes founding Centeris in 2004, a venture-funded company providing interoperability software for mixed Windows and Linux environments, and co-founding Consera Software—acquired by Hewlett-Packard in 2004—while an entrepreneur-in-residence at Ignition Partners.

Before Consera, he was CEO of onDevice, which was acquired by Keynote Systems in 2001.

Red Herring: Where is Web 2.0 heading, and will the ad-supported model they’re chasing ever really pay off for most of them?

David Feinleib: Revenue is growing for many of these companies. So you have to believe that the advertising model can work. People are spending tons and tons of money on online advertising. They key is, you have to have a lot of traffic if you’re a destination site for it to work. The other way to make money … is to build advertising infrastructure companies. I also have seen several companies succeed with the “freemium” model [where users sign up for free but then are offered upgrades at a cost]. So there are multiple ways … to approach this, and pick up an angle.

RH: So this isn’t like the last bubble in your view? Why not?

DF: Everyone is online now. They’re not just testing it out [as they were during the last bubble]. Nowadays, everyone uses Craigslist. Everyone uses eBay, and has a Paypal account. And everyone knows about online communities like MySpace. So with all of that a given, it’s now possible to monetize what people are doing online.

Also, there’s a different entrepreneur mindset than what we had before. The old aspiration was just raise a whole lot of money, and then say, “We’ll figure out something to do with it.” The new aspiration for an entrepreneur is to build a site people will really use. And they are very capital efficient.

RH: What about on the VC side? With so few exits these days, how are you guys going to make any money?

DF: If you look at the IPO pipeline for this year it’s not bad. There was even an IPO pipeline last year. One of our companies is Shutterfly [a photo sharing service that went public in September 2006, raising $87 million]. We believe there will be more.