A big trend over the past few years has been Web 2.0 (despite the fact that I'm still not sure how to define this malleable thing). However, there haven't been any IPOs in the sector. What's more, the M&A transactions have been muted, except for some outliers, such as Time Warner Inc.'s (NYSE: TWX) $850 million deal for Bebo.
Despite all this, venture capitalists continue to pour money into Web 2.0 deals. According to a report from Dow Jones VentureSource, there was about $1.34 billion in investments last year (across 178 transactions). In fact, this was an 88% spike over 2006.
Sounds good, huh?
Perhaps not. If anything, we may be seeing a weeding out of the weaker players and a bigger focus on the winners. After all, Facebook snagged about $300 million in funding. There was also a $44 million infusion for Ning as well as a $49.25 million deal for MyStrands.
Interestingly enough, the pace of the number of deals getting funding is starting to decline. In 2007, there was a 25% increase.
Simply put, Web 2.0 companies will need to prove their models work. If not, it could be particularly tough over the next couple years.
Tom Taulli is the author of various books, including The Complete M&A Handbook
Reader Comments (Page 1 of 1)
3-19-2008 @ 7:46AM
Matt said...
You may want to look into the business sector. Web 2.0 is just now catching on in that space. I would agree that the Web 2.0 social networking world (other than the AOL Bebo acquisition) is not quit as loud as a few months ago but companies are buying each other frequently. Mzinga just purchased Prospero Technologies and Demand Meida just Purchased Pluck.