UK, Ireland grow as Web 2.0 goes global

The growth in venture capital investment into Web 2.0 companies is rising in the UK, Ireland and the rest of Europe, even as it slows among early investors in Silicon Valley.

The UK is at the hub of this activity with a record seven deals at the start of the year, accounting for $22m invested. And Ireland, Belgium and the Netherlands have each seen their first Web 2.0 deals completed in the first six months of 2007. France is also doing well, with five deals which raised US$16m over the same period, according to new data released today by Dow Jones VentureOne and Ernst & Young.

The data suggests that the Web 2.0 movement has now gone global, with more innovation happening outside Silicon Valley than inside it. Overall, the number of global Web 2.0 deals climbed 14% in the first half. However, this was entirely attributable to a rising interest in Web 2.0 in Europe and Israel, as U.S. investments were virtually unchanged from the first half of 2006 with 67 deals and $357m invested.

“We may be seeing a plateau in the number of Web 2.0 companies investors are willing to back in the US – at least until a clear liquidity market arises. In the meantime, more investors are turning to Web 2.0 plays in emerging markets in Europe,” said Jessica Canning, director of Global Research for Dow Jones VentureOne, in a press statement.

The data shows that $52m went into 20 European Web 2.0 deals in the first half, roughly double the deals and investments seen in the same period last year. Furthermore, Israeli Web 2.0 companies raised $15m in five deals in the first half, up from two deals and $5m invested in the whole of 2006.

Most of the US deals completed in the first half of 2007 have focused on the so-called “Enterprise 2.0” area, while deals in China, Europe and Israel tend to focus on the consumer Internet.

The global research showed that investors directed $464.2m into 101 deals worldwide in the first half of the year, the highest half-year total on record for the sector and more than a 7% increase in investments over the same period in 2006. In 2006, Silicon Valley’s Benchmark Capital was the sector’s top global investor, with 16 deals. In the first half of this year, it backed only three deals, only one in the Bay Area. The same is true for Omidyar Network, Kleiner Perkins Caufield & Byers and Storm Ventures, the survey found.
However, it’s worth remembering that the Bay Area remains the busiest region in the US with 25 deals accounting for $91m. New England, the New York metropolitan area and Southern California are on pace to set annual records for Web 2.0 deals and investments.

More details of the study here in PDF