When the Q1 numbers came out, ReadWriteWeb did not share the general doom and gloom in the headlines. We reported the "dog did not bark" story when we said that VC Investment in Internet Deals Did Not Fall Off a Cliff. We did that because the headlines did not match what we heard from entrepreneurs and investors and what we saw from our own limited online research. We had been tracking a small segment of the market -- early-stage Web technology investments -- since the market meltdown in October 2008. In April, we started to work with ChubbyBrain so that we could have more confidence in the quality of the research, and we started to see healthy signs in April and May. It was clear that Q2 was going to look good. But it was critical that we were able to trust the numbers. The startup community makes decisions based on these numbers. The quality of the data matters.

What Is Excluded

The numbers would look a lot bigger if ChubbyBrain had included:

• Global Deals. This is only US deals
• Debt. This is only equity
• Private equity (which usually means leverage buyout). This is only VC deals.
• Angel investment (unless they invested with a VC Fund). This is only VC deals.
• PIPE deals (Private Equity Investment in Public Equity). This is only private companies.

We would have liked to include more angel and global deals. They matter to early-stage innovation, and that is what matters to entrepreneurs. But that would not have dramatically changed the numbers. But if you started adding debt and public companies, the numbers would become meaningless: these deals tend to be way bigger than VC deals. One public or leverage buyout deal would totally change the numbers.

Here are two other things we took care to report on accurately:

• For follow-on investments, we only recorded the portion of the investment made in the quarter, not the total of the announced round.
• The amount that actually closed, not the intended size of the round.

Most importantly, ChubbyBrain only includes deals that were verifiable via either (A) regulatory filings or (B) confirmation from firm or investor or (C) press release.

This process might miss some deals. So the total number maybe bigger than $5.3 billion. But we are confident that what ChubbyBrain has found is accurate.

Trends

Next week, we will be doing a deep dive into the segment that matters to the ReadWriteWeb community: Internet and mobile deals.

The quick takeaway from this early look is that money is available for early-stage startups. Despite conventional wisdom that venture firms would invest only to fortify existing portfolio companies, the quarter saw healthy levels of early-stage investment in seed and Series A rounds, accounting for 35% of the number of deals. This confirms the anecdotal evidence we get from talking to investors and entrepreneurs.

We do not see this as a sign that the general economy is recovering. It is too early to call that. But we do see this is very hopeful news for entrepreneurs. And what is good for entrepreneurs tends to be good for the general economy at some point in the not-too-distant future.

TinyURL has also allowed incomprehensible amounts of value, both in terms of technology and in terms of money, to sit on the table unclaimed. For years. Now a group of some of the web's hottest investors are betting a few million dollars that a smart TinyURL competitor called Bit.ly can take advantage of being the conduit through which millions of people visit sites of interest to them.

We reviewed Bit.ly when the project launched last July and urged readers to use this service to shorten their long links instead of other services like TinyURL. Why do we care what service people use? Because we're fans of innovation and Bit.ly is aiming to be a platform for innovation like TinyURL should have been. If web 2.0 is about democratizing publishing, the next step is machine leveraging all the resulting data.

The Bit.ly Magic

What does Bit.ly do that's so special? They use all the data they see and make it available to third party developers who want to build on top of it. They keep track of the clickthrough numbers and can tell you what the hottest links on the web are at any time. See this @bitlynow Twitter account for one display of that information. Bit.ly says it resolved 20 million distinct URLs last week. That's the beginning of a really large database.

Bit.ly also uses Reuters Calais to extract semantic terms out of the pages that shortcuts are created to. That's valuable information. Want to see the most popular web pages that talk about Dancing With The Stars, or the Federal Stimulus Package, or some other topic, in the last 30 minutes? Somebody wants to, you'd better believe, and that's the kind of real-time information that the Bit.ly API aims to make available. (Disclosure: Calais is an RWW sponsor.)

We've had some concerns about the clickthrough numbers that Bit.ly has reported but the company says they are going through a list of reporting sources that give them problems and eliminating them one at a time. The company says it is now reporting real-time traffic stats that are within 10% of what Google Analytics reports much later. We've been watching the numbers improve in accuracy when it comes to our numbers and can confirm that they are getting much better.

A number of people have looked at today's news and thought it was ridiculous that a link shortening business could raise $2 million in funding. We don't think it's ridiculous at all. Show us a service that can report in real time how many people are visiting millions of pages around the web and what those pages are about, that exposes that data in an API, and we'll show you a platform we're very excited to see work.

While Geni itself is a popular service, a lot of attention has lately gone to Yammer, a side project that grew out of the same company and which is a Twitter-like service geared towards enterprise users. It is not clear if any of the money raised in this latest round will go towards expanding Yammer.

Yammer's story is similar to Twitter's, in that both projects were originally nothing more than side projects. Twitter, however, turned out to be the more lucrative project for Odeo. According to the publically available data, Geni is still growing at a steady clip, however, while Yammer, following an impressive growth spurt after its launch, is in slow decline.