Web 2.0 Funding In 2007 Discouraging

According to new data from Dow Jones VentureSource, Web 2.0 investments remained popular last year.  More deals took place (and more money was involved) than ever before.  Yet some of the details seem a little ominous.

 VentureSource Web 2.0 Report

"From 2002 to 2006, Web 2.0 deal flow doubled every year, but 2007 only saw deals increase 25% to 178 from 143 deals in 2006," a VentureSource release notes.  Granted, growth of 25 percent is still something many industries will admire, but compared to 100 percent, it’s a significant drop.

Also, if Facebook is taken out of the equation, the amount of cash at stake in 2007′s Web 2.0 deals looks less impressive.  VentureSource found that the social network "accounted for 22% of all funding that went into this sector in 2007," and even if you leave Facebook in, onlookers weren’t exactly applauding as Microsoft and Li Ka-shing contributed their cash.

With 2007 being so questionable, 2008 looks decidedly daunting.  The economy, as a whole, seems to be in much worse condition now than it was then, and the VentureSource release even goes so far as to state, "The Web 2.0 investment boom may be peaking." 

This situation could lighten competitive pressures on existing companies, at least, and spare everyone else from seeing as many launch-layoff-shutdown cycles take place.