Want To Put A Price Tag On Web 2.0? Try $455 Million Of Venture CapitalWant To Put A Price Tag On Web 2.0? Try $455 Million Of Venture Capital

Is too much venture capital chasing too few deals in the consumer Internet market?

In the first three quarters of this year, $455.5 million was invested in Web 2.0 companies in 79 deals--more than twice the money such companies landed in the first three quarters of 2005, according to Dow Jones VentureOne and Ernst & Young. The researchers tagged companies as Web 2.0 based on their business models tied to user-generated content, collaboration, and social networking, and their rich Internet applications, including use of technologies such as Ajax and RSS.

That $455.5 million amounts to 28% of the $1.6 billion that venture capital firms have invested in U.S.-based consumer technology companies in the first three quarters of the year, as VCs searched for the next YouTube or MySpace. To some, the "lemming effect" is as inevitable as talk of a new tech bubble. "As long as I've been in this business, too much money has been chasing too few deals," says Shanda Bahles, general partner at El Dorado Ventures. There are still plenty of opportunities for those willing to look beyond the obvious, Bahles adds. For example, tech startups are targeting women and baby boomers.

Count on this: As long as companies like Google and News Corp. keep buying Web 2.0 startups, venture firms will keep investing.