The NYT cites very competent sources that there is actually too much VC around in the US:

"It is unclear whether this is a sign of real restraint or just a pause in a resumption of the kind of reckless rush that led to the tech bubble and bust, some investors said. But, they added, it is at least a move in the right direction. "As a venture investor, this is great news," said Mitchell Kertzman, a venture capitalist at Hummer Winblad Venture Partners in San Francisco. "I'd like to see these numbers go down by more. Too much money being invested leads to an undisciplined environment. It leads to bidding wars."

Mr. Kertzman's view was seconded by more than a half-dozen other venture capitalists, and by Mark G. Heesen, the president of the National Venture Capital Association. "To be frank, a 25 percent increase in venture investing would be more alarming" than a steep decline, he said in a statement.

At the height of the Internet boom, venture firms collectively invested $23 billion to $29 billion a quarter. That figure plummeted to less than $5 billion a quarter by mid-2002 and held steady in the $4 billion range through the third quarter of 2003. But venture investing jumped 36 percent from the fourth quarter of last year to the second quarter this year, to $5.9 billion, the MoneyTree survey showed. That prompted venture capitalists to fret over a return to the crazy days of 1999 and 2000, when hype was high but the return on investment was depressingly low, if not negative."

I think the main argument is pretty right, there is at least a too strong concentration of VC money in some areas.

Although overall investment was down in third quarter 2004 what in the world inspired Highland Capital Partners, Oak Investment Partners and Steamboat Ventures to sink US$ 75 million into the first round of fastclick.com?

That is quite difficult for me to understand. Maybe I'm missing something?