15 year veteran of the valley here, and as much as I agree with Steve Blank that the herd money is chasing social media right now (and why not?), I don't agree that the long-term payout investments are gone - just look at Planetary Resources for an instant counterexample (I know, they're based in Seattle so they don't count, right?).
But more importantly, all of Web 2.0's 30ish billionaires are as mortal as the rest of us. The difference is that they actually can throw money at that problem and stand a good chance of at least a modest payout (just look at Sergei Brin and Parkinson's research). And while I agree with Steve Blank about the importance of government funding for long-term technological development, I think we're about to see a Cambrian explosion in biotech as these guys try to fight off the inevitability of death. Because what good are all their toys if they don't stick around long enough to play with them?
Meanwhile, the north end of Silicon Valley has quietly transformed itself into a mecca for biotech and bioinformatics in recent years. Silicon Valley itself started out as farmland and look at it now. I see this as just the latest in a series of transformations to whatever is the next big thing.