Venture capitalists poured $844 million into Web 2.0 startups last year, according to Ernst & Young and Dow Jones VentureOne. That's double the $406 million they invested in 2005, and up from the nadir of Web 2.0 investing in 2002, when they put in just $32 million. From last year's total, 83 percent went to 126 U.S. deals, including Facebook (which raised $25 million), Zillow ($25 million), PodShow ($15 million), Zimbra $14.5 million), Veoh Networks ($12.5 million), Six Apart ($12 million), Kayak.com ($11.5 million), and Revver ($10 million). The average valuation of a Web 2.0 company prior to these financings was $6 million, which is still one-third the so-called pre-money valuation that was the median for all venture-backed startups.
Overseas, some Web 2.0 financings included NetVibes ($14.4 million), Where Are You Now? ($9 million) , and Toodou ($8.5 million). Worldwide, there were 167 Web 2.0 venture deals last year, up from 95 in 2005 and 35 in 2004. The most active venture capital firms in the Web 2.0 space were:
VC Firm Number of Web 2.0 deals
Benchmark Capital 13
Draper Fisher Jurvetson 10
Sequoia Capital 9
Omidyar Network 8
Accel Partners 7
General Catalyst Partners 7
Kleiner Perkins Caufield & Byers 5
IDG Ventures China 4
Index Ventures 4
Storm Ventures 4
(Source: Ernst & Young, Dow Jones VentureOne)
At this rate, counting Web 2.0 deals will soon become meaningless because all Web startups will be Web 2.0 companies. You could argue that is already the case. The number of Web 2.0 startups out there is much greater than these numbers may suggest, because many of them are self-financed or take on only angel money.