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Web 2.0 venture capital increasing, but real success hard to find…

“A Dow Jones research subsidiary just published a report on Web 2.0 venture capital investing, and it contains a few surprising finds. Out of $13 billion in VC investments in the first half of 2006, only $262 million went to Web 2.0 companies.Before going any further, let me clarify what the report counts as a Web 2.0 business model. These US-based ventures revolve around ‘a dynamic interface facilitating participation through such methods as user-created content, networking, and collaboration,’according to the press release. ‘Applications used include podcasting, tagging, blogs, social networking, mashups, and wikis. Technologies used in these applications include: AJAX, RSS, SOA, CSS, XHTML, Atom, and rich Internet applications.'”

Those of you who’re familiar with my Ecademy ‘blog will no doubt remember my previous posting on the term: “Web 2.0”, which neither Sir Tim Berners-Lee or myself find entirely appealing of sensible.

“In all of 2005, only 51 companies that met this description received any VC funding, for a total of $199 million. This year is on pace to double or maybe even triple those amonts, and the average deal size has grown from $3.9 million to $4.4 million. That’s still behind the overall venture capital market, where the average round of financing raises about $7.5 million, but it’s a promising trend nonetheless and a hard-to-beat growth rate. ‘Since 2002, deal flow and investments to Web 2.0 companies have increased year over year,’ says Steve Harmston, director of global research for Dow Jones’ VentureOne, ‘along with a fairly consistent pattern of new companies being funded.’

Most of the Web 2.0 deals this year have been early-round investments, providing funds for companies with little more than a theoretical business plan and a vague promise of future profits. However, seven later-stage deals have been completed in the past six months, compared to zero Web 2.0 late rounds in the previous three years.”

Clearly then, the Americans have a huge reserve of faith and money to plough into such things.

Right now, I’m currently wending my way through the circuitous hills & valleys of business support, hoping to find funding, backing and a potential tie-up with a business angel or venture capitalist to help me develop a range of web applications for the creative market.

It’s not easy and support from local government and various related agencies has been thus far quite patchy and a hit & miss affair. However, I’m determined to make this work. Right now, web application software is the way to go, and I want to be at the forefront of that.

So I have to sit and ponder these statistics and wonder whether it might make more sense for me to move over the pond to see if I can bring my own venture to market. Let’s face it, I’ve got to a stage where I’ve got much more than just a: “theoretical business plan and a vague promise of future profits.”

Now where did I put my passport last?

By Wayne Smallman

Wayne is the man behind the Blah, Blah! Technology website, and the creator of the Under Cloud, a digital research assistant for journalists and academics.

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