First-quarter venture capital investments rose by 35 percent over last year, aided by big plays in social media, gaming, and online shopping companies. According to data released this morning from Dow Jones VentureSource, venture capital devoted to Web-heavy consumer media companies tripled over the same period in 2010.
That spike is thanks in part to outsized rounds collected by companies like Beyond Oblivion, a New York-based digital music service. The early-stage company raised $77 million from Allen & Co. and two undisclosed investors.
Investors are attracted to consumer-focused Web companies, but right now the money is only flowing to a select few, according to Scott Austin, editor of Dow Jones VentureWire. Proof? While investments may have tripled in value, deal volume for the sector rose by only 7 percent.
“A handful of large rounds are boosting the total amount of capital invested, but the median amount raised by consumer companies is a reasonable $4 million,” Austin said. That number is less than half of the median round sizes in 2000, just before the dot-com bubble burst. Meaning, if we are in fact experiencing an ad-driven tech bubble, we may only be halfway there.
Breaking it down further: Advertising and marketing deals increased by 34 percent in volume year over year, with a 51 percent climb in value; entertainment deal volume experienced a 68 percent uptick, with a 218 percent growth in dollar value.
The trend of big money to few players is reflected just as clearly in first-quarter venture capital fundraising numbers reported earlier this month, where a handful of funds raised the lion’s share of investor commitments. Funds raised by Kleiner Perkins, Sequoia Capital, Bessemer Venture Partners and Greylock Partners—firms with investments like Groupon, Twitter, Facebook, LinkedIn, and Tumblr under their belts—drove the quarter’s blockbuster fundraising numbers. Meanwhile, J.P. Morgan’s new Digital Growth Fund raised the quarter’s second-largest fund, at $1.2 billion. Its success was thanks in part to the fund’s well-publicized minority stake in Twitter.