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Venture Capital - Monday, October 10, 2005

Much Ado About Web 2.0

The Web 2.0 conference had an air of irrational exuberance, partly fueled by acquisitions that were announced around the event. It amazes us how much noise the Web 2.0 crowd can make around fire sales. Four Web 2.0 company buy-outs announced last week eclipsed the coverage of the only significant M&A activity of the week - the $225M purchase of SourceFire by Checkpoint. Can it really be that a security company like SourceFire (which boasts open source roots - sounds pretty 2.0 to us) is too boring to merit as much coverage as pinging companies like Moreover and Weblogs?

In our view, the Weblogs Inc. sale was important because it was a nice windfall on a 2 year investment of what we guess was small change. But it's a small deal next to the New York Times' buyout of About.com for more than $400M. The sale of Weblogs got the price of a good domain name. Who cares.

For its part, the Moreover sale is basically a wash for investors. The company raised $21M in first round funding in June 2000. So investors might get to keep $4M. Investors did a good job to keep the company afloat long enough to get their money back but there are no celebrations with fireworks and Dom Perignon.