Venture Capitalists and Web 2.0: Where is the Money Going?
posted by: Vlad Akilov
Over the past couple of years, Web 2.0 companies have been collecting venture capital at a record pace. And during the first half of 2007 this trend held the same. In fact, approximately 6 percent more money was invested during these six months. But guess what? Most of this increase took place outside of the United States; particularly in Israel and Europe.
The most noticeable sign of a slowdown in the US is the pace at which venture capitalists are investing. For instance, take Benchmark Capital; the country’s top investor in 2006. Last year, this firm made 16 deals. Through the first half of this year, they have only backed three companies. To make this situation even more complex, only one was in the Silicon Valley area. Similar situations can be found with other large venture capital companies such as Storm Ventures, Omidyar Network, and Kleiner, Perkins, Caufield, and Byers.
The question is: are venture capitalists starting to abandon Web 2.0 companies. While this may appear to be the case, to get the entire picture you need to look outside of the United States. A recent survey shows that investments by venture capitalists in Web 2.0 companies was pretty much unchanged during the first half of 2007 when compared with the first half of last year. There were approximately 67 deals that resulted in nearly $360 million in invested dollars.
It seems that venture capitalists are putting more money into Web 2.0 companies from other countries. The first half of 2007 saw seven deals completed in the United Kingdom for more than $20 million.
During the four year period from 2002 to 2006, just about 40 percent of deals involving venture capitalists and Web 2.0 companies took place in the Silicon Valley area of California. This number dipped to approximately 20 percent during the first half of 2007.
Is this venture capital trend going to continue? Nobody knows the answer to this question, but it will be interesting to see what happens in the second half of the year.
