VC Invesment in Web 2.0 On Track For $500M This Year: Report


So says Dow Jones VentureOne, citing its own data…it says that “Web 2.0” Internet companies this year are on track to double last year’s levels to about $500 million. For the first half of 2006, 49 such companies have been funded, garnering $262.3 million in total. That compares to 51 deals and $199.1 million invested into similar companies in all of 2005.
Here is how it defines Web 2.0: Companies that have “a business model that revolves around a dynamic interface facilitating participation through such methods as user-created content, networking, and collaboration. Applications used include podcasting, tagging, blogs, social networking, mashups, and wikis”.
More than half the companies (25) receiving investments in 2006 were generating revenue, including three which were identified as profitable. None of the financings in 2005 went to profitable companies. However, the category appears too new for considerable liquidity activity. None of the venture-backed Web 2.0 companies have achieved an IPO to date, and fewer than 10 have been acquired, including such companies as and MySpace, the report says.
VentureBeat: The majority of Web 2.0 companies aren’t getting the great valuations, despite the hype. For example, the median pre-money valuation for a Web 2.0 company this year is $5 million, but the median pre-money valuation for the median venture-backed company is $20 million, so far this year, according to the survey

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