Venture capitalists' enthusiasm about Web 2.0 start-ups was underscored by a newly published report that found investments in those companies hit $262.3 million in the first half of this year -- more than the $199.2 million invested in this area during all of last year.

The report, released Thursday by industry tracker VentureOne, comes as little surprise, given investor enthusiasm over these companies, which typically focus on making it easier for users to hang out with friends and collaborate online.

In the first half of 2006 alone, for instance, 11 Internet start-ups focused narrowly on teenagers -- including a company in Stockholm, Sweden, that invites users to dress up cartoon versions of their favorite celebrities online -- raised a total of $104 million from investors.

"Everyone jumps into the latest VC trends. That's how the business works, for better or worse," said Fred Wilson, co-founder of Union Square Ventures in New York, a firm that has made five investments in Web 2.0 companies in the past 18 months.

Even so, Union Square and many other firms continue to look for new Web 2.0 start-ups.

That's in part because Web 2.0 companies tend to need less money than other start-ups and are thus less of a risk. According to VentureOne, Web 2.0 firms raised an average of $4.4 million per deal in the first half of the year; the median for all venture financings was $7.5 million per deal.

Unlike some predecessors that famously blew through millions of dollars on television promotions and other marketing, Web 2.0 companies also tend not to spend much, if anything, on advertising, relying heavily on word-of-mouth promotion.

Whether VCs will continue to ramp up the pace of Web 2.0 investments remains to be seen. For his part, David Hornik, a general partner at August Capital on Sand Hill Road and a backer of numerous Web 2.0 companies, believes there is more opportunity out there. "I'm still very optimistic about what's possible with Web 2.0," Hornik said.

Hornik concedes that the market is flooded with me-too companies but does not consider that a deterrent. Pointing to Video Egg, a San Francisco-based start-up whose technology tries to makes decoding, playing and editing digital media easier and which August has helped to fund, Hornik said, "The video space was crowded before we invested, but we think this company has the opportunity to be a large, stand-alone company; it's the only reason you invest."

Sharon Wienbar is less sanguine, even though her firm, BA Ventures in San Francisco, has made some Web 2.0 investments.

"You look at MySpace and YouTube and Facebook and those companies alone are valued in the billions of dollars," Wienbar said. But finding that breakout investment seems to get harder by the month. "How do you know if you're too late? You worry about being the nth player in a space; it's scary."