VCs Take It Easy on Web 2.0

Ann All

Venture capitalists, an audience not exactly known for their cynicism, haven't been as quick as some others to buy into the Web 2.0 hype.


Maybe it's because so many of them got burned during the intial dot-com days, but VCs have been relatively conservative with their investments in Web 2.0 companies. According to VentureOne, a Dow Jones Research subsidiary, just $262 million of a total $13 billion in VC funding went to Web 2.0 businesses in the first half of 2006.


At least some VCs don't think a real business plan, rather than some vague notion of becoming "the next MySpace" or "MySpace for pet lovers," is too much to ask when it comes to doling out the dollars.


There has been a marked increase in the number of Web 2.0 companies getting VC cash in 2006 when compared to 2005, and the size of the deals is certainly growing. But on average, they aren't receiving as much cash as other companies.


One sign that Web 2.0 cred may be growing with the VCs: Seven late-stage deals were completed with such companies in 2006's first half, compared to zero late-round deals in the previous three years.

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