It’s not just Web 2.0 hype that’s hotting up

According to a new report by Dow Jones VentureOne, investment in Web 2.0 start-ups is set to double last year’s levels. $263m was invested in the first half of 2006, compared to $199m in 2005. Matt Marshall of VentureBeat analyzes the figures and puts them into context here.

Here are some of the nuggets:

• Web 2.0 investment, while growing fast, is still a small proportion of overall VC funding: a total of $13 billion was invested in 1,213 U.S. venture-backed companies in the first half of this year
• Web 2.0 deal sizes are also smaller than the average: $4.4 million, compared to $7.5 million for venture financing overall. According to Matt, this partly explains the increasing popularity, since “it takes smaller amounts of money to experiment.”
• Web 2.0 financing is still mostly early stage – 65% of deals were seed or first round this year, down slightly from 75% last year
• More than half the companies receiving investments in 2006 were generating revenue, and three were profitable
• The three most active investors are Accel Partners, General Catalyst Partners and Draper Fisher Jurvetson
• Facebook received the biggest investment so far this year, with $25m in second round financing

Let’s hope that these investments were in Wired’s list of the best Web 2.0 companies, not the ones that plumb “the depths of suckitude.” Among the winners: Flickr, Odeo, Writely, del.icio.us and NetVibes. Topping the list of losers was Web 2.0 posterchild MySpace. You can also check out Wired readers’ pick of the “champs” and “stinkers” here. Interestingly, MySpace, YouTube and del.icio.us made it into both categories.

Technorati Tags: Web 2.0, venture capital