23:25 PM

1999 all over again? VCs setting funding records

By Richard Koman for SiliconValleyWatcher

The Valley is back. How do you know? Follow the money.

AP reports that VCs sunk $6.35 billion into 856 startups in Q2 - the hottest quarter for VC investing since Q4 of 2001. And surely you remember that quarter with fond memories. VCs also set records in fundraising for future investments - $11.2 billion.

VCs delivered first-time financing to 282 companies for a total of $1.2 billion in the quarter. That's the most in five years.

And what are they funding? Yup, Web 2.0. PricewaterhouseCoopers just compiled a list of Q1 funding to W2s (.xls file) and it comes in at $870m, up from $786 in 2005's Q4. But Ajay Sanghani at ITVidya.com notes that the list is a little funky, as it includes such back-end companies as Riverbed and Netli

So Bubble 2.0? Ajay talked to Tracy Lefteroff, the global managing partner of PwC's venture capital practice. "People are trying to contrast this with the Internet bubble, and want to know if we're getting in the same risk category we saw developing in late 1999, early 2000.You always run that risk, but I still don't see the frenzy to invest in these companies that we saw in the late 1990s."

Seven of the top W2 deals in the first quarter were in Silicon Valley, it's Seattle that's grabbing headlines this week. Jobster, a Web 2.0 approach to head-hunting is now valued at $100m, the Merc's Matt Marshall reported last week.

And yesterday, Zillow.com, which provides value estimates on homes, landed a $25m round and has now raised $57m.

All of which leaves Jason Wood in a cold sweat. He commented: "Seeing some of these new rounds is absolutely sending a chill down my spine as a public investor. Where's the exit strategy? I would love to know the post money valuation Zillow got for this round. Wow."