The Return of The Big Money VC

Seattle-based real estate information service, Zillow.com raised $25 million, nine months after it raised $26 million. Think about it this way – Zillow has raised $3 million (or about $57 million) for every month of its 19-month existence.

The new cash comes from Boston-based Par Capital Management and others such as Benchmark Capital and Technology Crossover Ventures. The company wants to be the biggest real estate site in the world – we shall see! How long before you figure some of its rivals will get similar, if not bigger, trucks stopping outside their offices and dumping some cash?

Zillow.com is the latest start-up to become part of a late 1990s trend that is making a comeback: the big money VC round. Last week, Seattle-based Jobster raised $18 million from Reed Elsevier Ventures and other existing ventures. Earlier in the month, MobiTV raised a whopping $70 million from the likes of Oak Investment Partners. As we had reported earlier, Limelight Networks is in the process of closing a monster round, which would make some of these investments look like chump change.

In the second quarter of 2006, venture capitalists invested $6.3 billion – the highest dollar amount into the most deals since the first quarter of 2002, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.

“It appears as if the venture capital industry is slowly ratcheting up investment levels for the first time in four years, and these increases seem to be directed in a prudent manner,” Mark Heesen, president of the National Venture Capital Association said in a press release. That might have been true, but the recent trend of big money investments shows that prudence might be giving away to old-fashioned avarice.

You can almost expect this trend to continue, and perhaps accelerate in coming months. Silicon Beat reports that Silicon Valley-based VCs are raising new money from their limited partners – some have already raised billions – and that would have to be deployed soon.

Before they can go out and raise cash for new funds, many of the firms have to invest the remnant money from their circa 2000-2001 funds. Otherwise, Limited Partners might be asking them the difficult question: Why should I give you more cash when you are sitting on a pile already? A good example would be Oak Investment Partners, which raised $2.56 billion to become the largest venture capital fund ever. It also invested $70 million in MobiTV. Coincidence?

Expect more big-ticket fundings!

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