Web2.0 investment spiralling upwards

By September 26, 2006News, Web2.0

Fred at A VC and Val at alarm:clock both posted on the recent Venturesource data which shows that in H106 $262m was invested in 49 web2.0 companies in the US.

Their perspectives differed – Val felt it wasn’t much out of a total of $13bn.  Fred was ambivalent – web2.0 is a hot space after all.  My reaction was worse – this worries me a bit.

There were 51 web2.0 deals in the whole of 2005 and now 49 in H106.  This is still a young sector – there have been a couple of big trade sales and no IPOs thus far – and if this growth rate continues we will surely end up over-funded.  And lets not forget the large number of start-ups that won’t have made the venturesource list because they only took friends and family money.

By way of evidence I was looking into social bookmarking today and found this list of over 200 social bookmarking sites.

  • I share your concern about the sheer number of similar projects. Not only that, but most of these ventures have only rudimentary revenue models, all of which rely either on eyeballs looking at adverts or browsers wiling to subscribe/pay for a transaction. This means that — unlike selling software into the enterprise market — huge gains may well accrue to the winner in each category, but the tail of losers will be very long indeed…

    Fred Wilson puts it well in his blog note on the Long Tail of Venture Deals: http://avc.blogs.com/a_vc/2006/08/the_long_tail_o.html.

    Max

  • I share your concern about the sheer number of similar projects. Not only that, but most of these ventures have only rudimentary revenue models, all of which rely either on eyeballs looking at adverts or browsers wiling to subscribe/pay for a transaction. This means that — unlike selling software into the enterprise market — huge gains may well accrue to the winner in each category, but the tail of losers will be very long indeed…

    Fred Wilson puts it well in his blog note on the Long Tail of Venture Deals: http://avc.blogs.com/a_vc/2006/08/the_long_tail_o.html.

    Max

  • nic

    Thanks Max. “Huge gains may well accrue to the winner in each category” – agreed – you need to be backing market leaders.

  • nic

    Thanks Max. “Huge gains may well accrue to the winner in each category” – agreed – you need to be backing market leaders.