According to a new survey conducted by Dow Jones VentureOne and Ernst & Young LLP, venture capitalists are seeking to tap into new markets. As a result, global deals having to do with Web 2.0 and Social Media (Social Networking, Social Bookmarking), are up a whopping fourteen percent in the first half of 2007.
The survey also concludes that investors pumped more than US$465 Million into Web 2.0/Social Media companies and they’ve backed a bunch more deals in Europe and in Israel. The San Francisco Bay area is no longer the hot spot when it comes to Web 2.0 and Social Media/Social Bookmarking. Apparently New England may be emerging as the new “Web 2.0 / Social Media Hotspot”.
This global research study shows that investors have directed US$464.2 million into 101 deals worldwide in the 1st half of 2007, which is the highest 6 month total on record for the Web 2.0/Social Media industry. This is more than a 7 percent increase when compared to the first half of 2006. In the first half of 2006, there were 67 Web 2.0/Social Media deals and $357 million dollars US invested.
Worldwide, Web 2.0/Social Media deals have climbed 14 percent during the first half of 2007, mostly due Israel and Europe becoming more interested in Web 2.0 and Social Media. Deals in the United States were virtually unchanged (the number of deals in the US were about the same), while the overall increase is due to this explosion of interest in Web 2.0 and Social Media in Europe and in Israel.
Data from the survey results show that US$52 million was used in 20 European Web 2.0 / Social Media deals in the first half of 2007, which was about double the number of deals and investments seen in the same period of 2006. There’s a rising increase in Web 2.0 and Social Meida in Israel, as Israeli Web 2.0 / Social Media companies raised US$15 million in five deals in the first half of 2007, which is up from two deals and US$5 million invested in all of 2006.
Within Europe, the UK (United Kingdom) had the most investor activity in the first half of 2007 with a whopping seven deals accounting for US$22 million invested. France is also on pace to have a great year, as France had five deals that raised US$16 million in the first half of 2007. Belgium, Ireland and the Netherlands each saw their first Web 2.0 / Social Media deals completed in the first six months of 2007.
According to the Dow Jones VentureOne and Ernst & Young LLP survey, the New England region had the biggest “pick-up” at the expense of the San Francisco Bay Area. New England had $102 million US dollars invested in 10 Web 2.0 / Social Media deals during the first half of 2007. This is 65% more than what was invested in 12 New England Web 2.0 / Social Media deals in all of 2006. Furthermore, this is slightly more than what was invested in companies in the San Francisco Bay Area in the first half of 2007.
Another area of the United States that’s seeing large investor interest is Southern California. There was US$59 million invested in 8 Web 2.0 /Social Media deals in Southern California.
According to the Dow Jones VentureOne and Ernst & Young LLP survey, “Most of Web 2.0 / Social Media deals completed in the first half of 2007 focused on the so-called “Enterprise 2.0” area-companies that use Web 2.0 technologies such as mashups and online collaboration to improve traditional business functions- while deals in China, Europe and Israel had a distinct consumer bent to them. Among the largest Web 2.0 deals of the first half was the US$30 million first round for enterprise software provider n2N Commerce.
Other notable trends the data showed include:
— Despite seeing a flat first half, the U.S. still dominated the Web 2.0 market, accounting for 66% of all deals worldwide and 77% of venture financing.
— The Bay Area was the busiest region in the U.S. with 25 deals accounting for US$91 million. New England, the New York metropolitan area and Southern California are on pace to set annual records for Web 2.0 deals and investments.
— China posted just nine Web 2.0 deals, accounting for US$41 million in investment, down from the US$43 million invested in 12 deals during the same time last year.
— The median size of a Web 2.0 deal on a global basis was US$4.6 million in the first six months. For U.S. deals, the median round size reached US$5.2 million in the first half, the highest figure on record.
— The most active investors in Web 2.0 on a worldwide basis so far in 2007 are Sequoia Capital and Draper Fisher Jurvetson.”
Dow Jones VentureOne and Ernst & Young LLP says that all of the investment figures reported are “based on aggregate findings of VentureOne’s proprietary research. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early-stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.”
Dow Jones VentureOne is a unit of Dow Jones Financial Information Services, and “has been the leading provider of finance and investment data to the venture capital industry for almost 20 years. Dow Jones VentureSource, a sophisticated electronic database on the venture capital industry, is published by VentureOne.”
Ernst & Young is a global leader in professional services, and “is committed to restoring the public’s trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited does not provide services to clients.”