Chart Me Up: Web 2.0 Venture Deals
Erick Schonfeld
22 comments »
Dow Jones VentureSource put out some data on Web 2.0 deals in the U.S. earlier this week that I’ve put together into these charts. The first one above shows how much money has been invested in Web 2.0 startups so far this decade. In 2007, venture capital poured into Web 2.0 companies at a record pace—$1.34 billion. That was up 88 percent from the $716 million invested in 2006.
But did Web 2.0 deals peak last year? Take out the $300 million raised by Facebook, and the amount invested was up only 46 percent, a marked slowdown from the 132 percent dollar growth the year before. (The amounts charted above, starting with 2001, are $68 million, $29 million, $79 million, $232 million, $716 million, and $1.343 billion)
The growth in the number of deals is also slowing. Last year, there were 178 Web 2.0 deals in the U.S. That was up only 25 percent, after doubling every year for the previous four years. And in Silicon Valley last year, the number of deals actually dropped from 74 to 69.
In 2007, the median deal size was $5 million, up 22 percent. And the median pre-money valuation was $10 million, up 66 percent (from $6 million in 2006). Both deal size and valuation for Web 2.0 companies remained below the average VC deal across all industries ($7.6 million and $16 million, respectively)
Here is a list of some of the biggest venture financings of 2007, including ones for Facebook, Ning, Zillow, Veoh, MyStrands, and Hi5. Slide’s $50 million isn’t included because that was in 2008. Hey, maybe things haven’t peaked after all.
everything has its peaks and valleys.
Right, and I have a feeling that this year might be the peek, see a downturn in 09 compared with 08. Statement made based on nothing other then ‘gut feel’
Some more interesting data at http://www.pedatacenter.com that compliments the VentureOne data.
The “odds” are in the favor of the companies doing the investing more often then not, otherwise, they wouldn’t be continually expanding their holdings. What I find ironic about all this is the worst the news seems to be “out there” on the financial front, the more straws the big guys are tying to grasps to diversify their risk, of which there is no lack in today’s marketplace.
Jon
http://dreamclue.com … get the message!
I would love to see the flipped figures versus these figures. There have been some big buys also.
Erick:
You asked if venture deals peeked in 2007? My answer is two fold:
1) Who cares. If the VC market experienced a peek and now is in decline, in a few years there will be yet another peek twice as high. It comes and goes in cycles and these cycles are tied to the overall economy.
2) When the market is bullish, then the VC market is also bullish. The real question here is: Which one is bullish first.
No surprise on either answer.
I’d like to see something like this for mergers & acquisitions of web 2.0 companies.
The nice thing is that this isn’t decline (as @dale and @Fabian seem to think) it’s slowing growth.
And that’s mostly about the law of large numbers.
What would interest me, if anyone has the information, is information on small startups - the local 2.0 market?
Tried to back up you guys up with the other day when people were complaining about posting news late in the MS Silverlight posting, but I liked this story better two days ago when Mr. Ha over at Venture Beat posted this story, the largetst deals chart, and the reference to the impact removing Facebooks investment would make.
http://venturebeat.com/2008/03.....s-peaking/
Give him some link love Eric
2 reasons:
1) Alot of startups prefer angel investors.
2) Starting a company these days is *alot* cheaper and easier to bootstrap, negating (or delaying) the need for VC mulah.
This is actually a good thing
@8 Owen, I never said it was in decline. I said “if … and now is in decline”. But you can call it whatever you want, including slow growth. At the end is the same, less deals. Which is OK and part of the industry and market fluctuations.
Helpful and interesting information, thanks!
Why is Facebook listed twice?
Investment charts are great. But what’s more interesting is to see its returns and/or profits.
Guess nobody was partying like 1999…
I can’t help but sense another .com bubble bursting. I can’t believe $1.34 billion was poured into web 2.0 sites to begin with. Where is the actual value in these websites? That people know I’m having turkey for dinner? I’m eagerly awaiting for the market to go beyond this social networking craze.
I’m not saying web 2.0 are bad in principle (hey my own site is based on it!), I’m just saying that hysterical application of it to almost exclusively social networking sites is disturbing at best.
Well, this year I am looking for Finance for my Web 2.0 start up which can be seen at http://www.thebusinesshours.co.uk Let me know if I will be able to get few hundered grand