It's been a grindingly frustrating comedown for what was once the preeminent brand on the Web. Microsoft offered to buy Yahoo for $45 billion in February; the company is now worth a third of that. Miller would pay $28 billion to $30 billion for Yahoo, if he can raise that sum from sovereign wealth funds, the investment pools run by cash-flush Middle Eastern and Asian governments. They are understandably skittish at the idea of paying twice the going rate for a stake in Yahoo.

The notion is that Miller would run the show, and thereby make money for his investors. Fired as AOL's CEO in 2006, Miller has been rehabilitating his reputation as an investor ever since. (He's been amply helped by his replacement, former NBC executive Randy Falco, who has proved to be a thoroughly useless corporate stooge.) But Miller did not demonstrate at AOL what Yahoo so desperately needs: a keen product vision, and a ruthless determination to get his way with dithering engineers.

It's pathetic, really, that Yahoo hasn't yet been sold or found a CEO to replace hapless founder Jerry Yang. The company's traffic is still immense. And it's big in Japan! Someone, somewhere ought to think that Yahoo is worth saving. That Miller is the best Yahoo can find speaks volumes

Now hardly seems like the time. The pension funds and college endowments which invest in VC funds have been pulling back, as of late. And investments in consumer Web startups — Miller and Levinsohn's specialty — are not looking as wise as they were a year ago. If the duo do raise money in this climate, it will be an impressive feat. If they don't? Then their second careers as venture capitalists may come to an abrupt end.

We've heard Levinsohn likes to trade on his MySpace-to-News Corp. deal by "bullying around little startups, demanding special deals because he's a famous 'CEO'." Problem is, Levinsohn may have run Fox Interactive, the News Corp. company that purchased MySpace, but he never exactly wrested control of MySpace, the only Fox Interactive property that matters, away from Chris DeWolfe and Tom Anderson. Levinsohn's attitude is known to irk the Valley's influential, particularly angel investor Ron Conway.

Still, we applaud Microsoft's selection. Joining ComVentures, now renamed Velocity Interactive Group, at the expense of two partners last December, Levinsohn neatly proved his worth in a knife fight.

When Microsoft set Facebook's value at $15 billion last fall, Miller and Levinsohn's plans to acquire four startups and roll them into one blog publishing company suddenly got a lot more expensive. Too expensive. So much so that funding partner General Atlantic dropped out. That turn of events left Miller and Levinsohn ready to listen to ComVentures cofounder Roland Van der Meer. Van der Meer offered them spots on a five-man team leading a new venture capital firm focused on digital media. Miller and Levinsohn agreed to join. Problem was: There were already five ComVentures partners. Two would have to go. Van der Meer decided to ax Michael Rolnick and Jeb Miller.

On the morning of December 17, the ComVentures partners gathered for their usual Monday morning meeting. Rolnick and Miller took their seats, coffees in hand, according to PEHub. Then Van der Meer told them they were out.

"They were blindsided," one VC told PEHub. "There was no reason to treat people that way... Rolnick had been there nine years. This isn't a giant company doing layoffs, it's a small partnership. It was simply wrong."

That's just business, right? Well, according to PEHub, investors aren't happy about how the shakeup went down either. They feel it makes the firm seem unstable.

One investor said:

Levinsohn and Miller are impressive guys, but it's tough for me even if I want to invest with them. To do so, I have to believe that this entire team is going to still be together in five years, and I just can't trust that. Either Levinsohn and Miller will decide to leave because they aren't VCs at heart, or Roland will fire them for some reason or another. Either way, it's too risky.

(Photo by ahhhh)