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January 22, 2007
Web 2.0 VC Dealmaking On The Upswing
Today the Financial Times has a report inspired by fresh research from Paul Fisher of First Capital on Web 2.0 and Internet investments in the European region in 2006. It reports the amount raised last year jumped to more than £144M (about €219M). It also has commentary from active online service investors, such as Barry Malone of Benchmark Capital who talks about the "spray and pray" approach to investment and Fred Destin who talks about what it will take for Europe to grow.
Fisher posted the original data on his blog along with some good analysis, and created a good table showing all the deals in question. He writes:
More than £144mn was raised in Europe across seed and first rounds in 2006 by 54 European web2.0 companies. This total doesn’t include the “undisclosed investment” rounds, of which there were 16.The growth is remarkable.
In the UK in 2005, just £24mn was invested into web2.0 companies. In 2006 that figure increased threefold with £79mn worth of early stage investments into 21 companies.
The FT's article is currently not behind its firewall, so you can read it now. Here are some quotes from Benchmark's Malone:
These [Web 2.0] companies are also much cheaper to set up than other technology businesses."It is very difficult to build up a semiconductor company or an enterprise software business. You need to invest $40m to $50m before you know if you have a product that works," Mr Malone said. "With web 2.0 companies you can find out after three or four million dollars whether it will work."
As a result, Mr Malone said, many European venture capital companies were using a "spray and pray" strategy, spreading small amounts of investment over dozens of companies in the hopes that two or three would make it.
Atlas Venture's Fred Destin said:
Europe can do well if we learn to live with the losses. Some companies will fail. In the US, when that happens, people say ‘hey, we tried’ and start again, but in Europe people remember the failures more readily than the successes.”
Read - FT.com / Companies / Media & internet - Internet investment surges in Europe
Read - Early Stage Venture Capital in Web 2.0 (coffee shops of mayfair blog)
Posted on January 22, 2007 09:40 AM | Posted to Web 2.0 | Permalink
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