For Web startups, 2011 kicks off with flood of funding

January 12, 2011

MARKETS-KOREA-FOREX/The East Coast has been buried in copious amounts of snow this winter. In Silicon Valley, the only thing falling from the sky seems to be money.

If the first couple of weeks of the new year are any indication, Web startups appear to be awash in cash, with every day bringing one or more high-profile funding announcements.

The latest company to join the fund-raising parade is Formspring, which announced Wednesday it has raised $11.5 million in a round led by Redpoint Ventures. The San Francisco online social networking service, which has garnered more than 20 million registered users since launching 14 months ago, actually raised the money late last year, but had not disclosed the round until now, CEO Ade Olonoh told Reuters.

Earlier this week, Square, the mobile phone payments company started by Twitter co-founder Jack Dorsey, said it raised $27.5 million (Dorsey even took a victory lap with an appearance on the Charlie Rose television show) and Klout, a San Francisco startup that measures users’ influence on social networks like Twitter and Facebook, said it secured $8.5 million in funding.

Other recent winners in just the past few days include Bump Technologies, which makes technology for swapping business cards, money and other data between smarpthones and captured $16.5 million, and Foodspotting, which raised $3 million.

And then of course, there was Groupon’s whopping $950 million in new funding and Facebook’s $500 million round.

All the money flowing into Web companies comes as a recent report indicated that in 2010 U.S. venture capital firms raised the least amount of money from investors in years.

But the explosion of mobile and social Web startups, many of which are signing up millions of users at an astonishing pace, seems to have got venture capital firms eager to put the money that they do have to work in 2011. New York venture capitalist Fred Wilson has deemed it the best time for Web startups to raise money since the late 1990s.

Let’s just hope things don’t end up the same way.

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