Web 2.0 start-ups dodge US recession – for now

The US economy may be ailing, but that hasn’t stopped venture firms inundating web 2.0 start-ups with funds, the Boston Globe reports.

According to PricewaterhouseCoopers, US venture capital firms invested $US1.3 billion in internet companies in the first quarter of 2008, many of them web 2.0 start-ups. And while that is a recent high, it isn’t unusual – venture capital investment in online companies has topped $US1 billion in six of the past seven quarters.

More venture capital currently has been pumped into internet companies over the past year than in any period since the dot-com boom of the late 1990s. Of course, that boom was quickly followed by a bust – but is the same thing likely to happen this time around?

Views are mixed, but everyone seems to agree that we are likely to see some form of slow down. Michael Hirshland, general partner at US VC firm Polaris Venture Partners, says the current environment differs from that in the late-90s.

“With the huge flow of money into that sector, we’re absolutely going to see a shakeout in the next 12 to 24 months,” Hirshland told the Globe. “But we’re not going to see a collapse of the entire sector.”