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AltAssets is the private equity news and research service from Almeida Capital
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PRINT THIS PAGE US Web 2.0 investment jumps 88 per cent in 2007 to $1.34bn19/03/2008. Source: AltAssets. 
Last year venture capitalists invested a record $1.34bn into 178 Web 2.0 deals in the US, up nearly 88 per cent over amounts invested in 2006, according to new data announced by Dow Jones VentureSource. Social networking site Facebook, which raised at least $300m, accounted for 22 per cent of all funding that went into the sector in 2007.
The data also reveals slowing deal growth. From 2002 to 2006, Web 2.0 deal flow doubled every year, but 2007 only saw deal numbers increase 25 per cent to 178 from 143 deals in 2006. Nearly all of this growth happened outside the San Francisco Bay area, the long-time home of web-related investment.
'On the surface, the numbers look fine for the Bay Area - $720m invested in 72 deals - but take Facebook's $300m out of the statistics and you see a very different picture,' said Jessica Canning, director of global research for Dow Jones VentureSource. 'Web 2.0 deals in the Bay Area actually dropped from 74 deals in 2006 to 69 last year and investments were down three per cent from the $431m invested in 2006. It is clear that the real growth in the Web 2.0 sector is happening outside of the Bay Area.'
The median deal size for Web 2.0 companies reached a record $5m in 2007, up from $4.1m in 2006. This is still behind the overall $7.6m industry median for a venture capital deal in the US in 2007.
'The beauty of Web 2.0 companies is that they can do so much with so little. A few million dollars and they are not only up and running but attracting eyeballs and advertisers,' added Canning. 'But 2008 may be a make-or-break year for many internet companies with business models relying on advertising. The slumping economy, coupled with a slowdown in click-through rates for online advertising, is going to pose a real challenge to their ability to generate revenues and position themselves for an exit.'
Copyright © 2008 AltAssets
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