Web 2.0 VC Cycle May Be Peaking, US Flat

Global venture capitalists pumped $464 million into 101 Web 2.0 deals worldwide in the first half of 2007, VentureOne and E+Y report, up 7% from last year.  Notably, however, the U.S. portion of this total was flat, and Q207 investments were down year over year.  It's dangerous to draw firm conclusions from lumpy data, but the smart money may well now be looking offshore and to other sectors.  This seems yet another sign that the dozens of start-ups that launch every month offering free, participatory products will have a far rougher go of it than their predecessors.

VCs were burned as badly as public-market investors in the last crash.  According to VentureBeat, moreover, the VCs that that backed off Web 2.0 the most are not only the smartest of the smart money but the firms that got to Web 2.0 first: Benchmark, Omidyar Network, and Kleiner Perkins Caufield & Byers.  Sequoia and DFJ are still putting capital to work in the sector, but theirs is headed overseas (the same trend played out in the last cycle).

Raise that capital while you still can...  (See Dear Internet: Brace For Harder Times and Online Ad Recession Watch: Tracking the Signs).

Spin:
The Smart Money Flees Web 2.0, VentureBeat (includes link to release)
Oh, How Much Money You've Raised, GigaOm
Boston is the New Silicon Valley, CNN