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September 21, 2006

Web 2.0 on dramatic growth curve

Posted by Tricia Duryee at 10:56 AM

VentureOne put out interesting new statistics today on the Web 2.0 craze, saying that although the sector is receiving a lot of hype, it isn't receiving a disproportional amount of dollars.

To show this, VentureOne reported how many dollars Web 2.0 companies have received funding stretching back to 2001.

In the first six months of this year, 49 such companies were funded, garnering $262.3 million in capital. That compares to 51 deals and $199.1 million invested in all of 2005. At that rate, activity is likely to double this year.

As for the definition, companies included in this study were defined as having a business model that revolves around a "dynamic" interface, which relies on user-created content, networking, and collaboration. Applications may include podcasting, tagging, blogs, social networking, mashups, and wikis.

A spokeswoman for VentureOne said that Web 2.0 companies showed up as early as 2001 because the statistics included companies that have evolved their business model to encompass Web 2.0 and have remained venture-backed.

Some other interesting facts for the first half of 2006:

-- Although Web 2.0 may be considered overhyped, it still remains a small portion of the overall venture pool. While Web 2.0 companies attracted $263 million in the first half of the year, the overall total for venture investments during that period was $13 billion.

-- Also, the median size of a Web 2.0 financing round this year is $4.4 million, compared to $7.5 million for a venture financing overall.

-- The most heavily invested category, not surprisingly, was "IT consumer services," which had 27 deals.

-- The second-most popular category was "IT business services," with only five deals.

-- The most popular stage of development for the companies was early stage with 26 of the deals being categories as first rounds.

-- The largest Web 2.0 deals this year are Facebook of Palo Alto, Calif., which received a $25 million round, and Zimbra of San Mateo, Calif., which received a $14.5 million round.

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Tricia Duryee
Tricia Duryee
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Angel Gonzalez
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Kristi Heim
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