Social Media VC Funding Jumps As Investors Chase IPO Boom

We'll Finally See Some Big Name Digital Media IPOs

Venture capitalists poured $2.23 billion into hot social media companies in the second quarter of 2011, according to Wedbush Securities, up from $643 million one year ago. The influx of money comes as some of the biggest social media upstarts are going public, or preparing to do so, and reflects huge investor demand for a piece of the action.

Social media investments in the second quarter declined from the first quarter, when venture capitalists poured a whopping $3.17 billion into companies, but that figure is inflated due to Goldman Sachs’ $1.5 billion investment in Facebook, and Groupon’s $950 million fundraising round. Excluding those two investments, second quarter VC investments in social media companies rose by 35 percent compared to the first quarter, Wedbush said (.pdf).

VC Funding of Social Media Companies, Q1 2010 – Q2 2011 (Excludes $1.5 B Facebook Raise in 1/11)

Social commerce companies saw the largest infusion as investors jumped on the daily deal bandwagon, hoping to ride the coattails of market leader Groupon, which is growing wildly and preparing an IPO.

The largest investments in the second quarter were deal service LivingSocial’s $410 million raise (the company is said to be considering an IPO), $200 million raised by Chinese deal site 55tuan and $138 million raised by online retailer Gilt Groupe.

Already this year, LinkedIn (NYSE: LNKD), the business-focused social network, has gone public, and now has a market capitalization of over $8 billion. Social gaming site Zynga filed IPO documents last week, and aims to raise at least $1 billion, and as much as $2 billion. Groupon, the social commerce leader, filed IPO documents last month, and hopes to raise at least $750 million.

And of course, Facebook, the social media kingpin, is expected to go public next year at a valuation north of $100 billion.

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