Silicon Valley East? New England Web 2.0 Firms Attracted $102 Million in Venture Funding in Year’s First Half, Beating Their Bay-Area Counterparts

Web 2.0 firms based in New England received nearly $102 million in venture capital funding in the year’s first half, the highest total of any region, including perennial leader the Bay Area.

Such was the heady news (for defenders of Boston Web entrepreneurship) contained in a report released yesterday by Dow Jones VentureOne and Ernst & Young. The report identified 10 area deals involving nine companies (see list below) that accounted for the strong showing in local Web 2.0 venture financing. The catch was that more than half the money invested went to two firms—and one of them was Eons, the Boston Internet site for the over-50 set that last week laid off about a third of its staff .

Web 2.0 is an amorphous term. The report defines Web 2.0 firms as those that engage in or facilitate user-generated content, social networking, and online collaboration through such vehicles as wikis, blogs, podcasts, and mashups. Xconomy, for instance, is a Web 2.0 company that recently received angel investor funding.

The VentureOne-Ernst & Young report also highlighted the international spread of Web 2.0 deals. Worldwide, venture investors poured nearly $650 million into 101 deals in the first half of 2007, the highest total for any six-month stretch on record. The slight majority of that—$357 million—went to U.S.-based firms. But that was just a hair above last year’s first-half tally of $351 million. Most of the growth came outside the U.S., particularly in Europe and Israel.

In the U.S., the Bay Area was still the most active place for Web 2.0 deals, with a total of 25 financings during the period. But venture firms invested just $91 million in those deals, compared to the $102 million invested in New England, almost all of it in and around Boston. That marked a stunning 65 percent jump over the region’s total for all of last year, according to the report. That’s particularly noteworthy, since New England has received a lot of criticism for not being a leading Web 2.0 or Internet player.

Although Eons has received the most public attention—or notoriety—of the the New England firms on the list, the $22 million it received in March (led by Sequoia Capital of Menlo Park and Cambridge’s General Catalyst) was not the most received by an area firm. That honor went to n2N Commerce, an e-commerce site for retailers financed by Limited Brands (owner of Victoria’s Secret, among other brands) and General Catalyst (somebody sure is doing Web deals over at GC!). Cambridge-based n2N garnered $30 million in a first-round deal last February.

Listed below are the area’s 10 top Web 2.0 deals for the year’s first half. When we first got the list from the VentureOne folks, we noticed there were only nine deals listed; it turns out the company involved in one deal did not wish to be named. We were able to track it down anyway (we have our ways), so the list is now complete. Sorry,

Top Ten New England Web 2.0 Venture Deals

1) n2N Commerce, Cambridge, MA — $30 million, first round

2) Eons, Boston, MA — $22 million, second round

3) uLocate Communications, Framingham, MA — $11 million, later stage

4) EveryZing, Cambridge, MA — $10 million, first round (See our profile here)

5) Sermo, Cambrige, MA — $9.5 million, second round. (We have profiled this one, too). Sermo has already gotten a third round of funding.

6) Awareness (formerly known as iUpload), Waltham, MA — $7 million, first round

7) RatePoint, Needham, MA — $6.5 million, first round

8), Waltham, MA — $3.5 million.

9) GuestCentric Systems, Stamford, CT — $1.25 million, seed round

10) RatePoint again — $1 million seed round. Busy company.

Bob is Xconomy's founder and chairman. You can email him at Follow @bbuderi

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3 responses to “Silicon Valley East? New England Web 2.0 Firms Attracted $102 Million in Venture Funding in Year’s First Half, Beating Their Bay-Area Counterparts”

  1. bill ghormley says:

    couldn’t resist commenting with a question —

    What does it mean when Victoria’s Secret is the bellringer for investment in web technology?

    Ponder that …

  2. Sam Clark says:

    That is alot of money coming into New England for Web 2.0. I am in Maine and we are very active in the tech sector. We have a Group called Mesda that is also leading the way for technological advancement

  3. Tom says:

    Great article and great website! It’s always good to find another tech firm based in Boston (or Cambridge.)