UK, Europe Now Lead Plateauing US Web 2.0 Investment

Web 2.0 investment has peaked in the US and is now being led by Europe and Israel, according to research by Dow Jones (NYSE: DJ) VentureOne and Ernst & Young. In the first half of the year, there were 67 US investments in what the pair term “Web 2.0” companies, totaling $357 million (£178.62 million), but this was virtually unchanged from last year. In contrast, European deals roughly doubled on the same period last year to 20, totaling $52 million (£26 million) – and the UK is leading the continent with seven deals, totaling $22 million (£11 million). France is also strong, five deals worth $16 million in the half (£8 million), with Belgium, Ireland and Holland each closing their first Web 2.0 deals in the period.

VentureOne research director Jessica Canning, in a release, notes that the San Francisco Bay Area – so often a hub of innovation – accounted for 40 percent of all Web 2.0 investments between 2002 and 2006 (did “Web 2.0” exist in 2002?), but now makes up just 20 percent: “It seems many longtime stalwart Web 2.0 investors have filled their portfolios with Bay Area companies and are stepping aside, giving new investors opportunity to scour for promising
deals in less- saturated regions.” Indeed, top tech investors like Benchmark Capital, Omidyar Network, Kleiner Perkins Caufield & Byers and Storm have all invested in fewer web outfits so far this year; in the US, New England is now buzzing with more deals.

Overall, though, $464.2 million (£232.2 million) has gone in to 101 such investments around the world so far this year – 14 percent more deals than lat year. While Israel only clocked two deals, worth $5 million (£2.5 million), in the whole of 2006, in the first half of 2007 it raised $15 million in five deals.