Digg, Twitter and Flickr all have a 'relatively' higher barrier to entry. To run any of these services you require a fairly substantial investment. This is not true for bookmarking extensions.
Also this logic about investing in Teams and Markets - not products is faulty. This kind of thinking is what causes a bubble. If a team is good, part of it shows in the product they choose to build.
I don't often say this, but you're just plain wrong.
The reason to invest in teams and markets is because products change dramatically and often in early stage startups. Here's a quote from Fred Wilson (one of the top consumer VCs, in terms of performance):
aEURoeaEUR|Of the 26 companies that I consider realized or effectively realized in my personal track record, 17 of them made complete transformations or partial transformations of their businesses between the time we invested and the time we sold. That means there a 2/3 chance youaEURXll have to significantly reinvent your business between the time you take a venture capital investment and when you exit your business.aEURX
Regarding barrier to entry, I believe that phrase refers to the difficulty in starting the business-- not running it once it's successful. Of course Flickr and Digg are expensive to run at this point. But a good hacker or three could duplicate the core featureset in a few hard weeks of coding.
