One trend we’ve seen in the past few months is a rise in venture capital funds dedicated to specific verticals. There’s the Accel big data fund, Accel’s new India fund, the Atlas Venture\Bocoup HTML5 fund, the Intel AppUp fund for cross-platform mobility and American Express’ fund for e-commerce.

Funds dedicated to certain verticals are nothing new (this is Accel’s third India fund), but the surge of activity in this area is relevant. Adeo Ressi recently advised entrepreneurs to start new funds instead of new companies. “At least nine out of ten high-quality angel-funded startups face an unnecessary death, because there is no Series A money to help them survive critical expansion,” Ressi wrote on TechCrunch regarding the decline in the total number of funds over the past few years. “It probably won’t get much easier to launch a new fund than it is right now, and the startup economy needs the help.”

Even if a company does land series A funding, series B an be a problem as well. As our founder and CEO John Furrier recently wrote:

I’ve been saying for some time on SiliconANGLE.tv (over 500 interviews this year) that we are heading for a startup correction at the angel level. In essence a Series B recession. There are just too many companies getting seed Series A and most will not get follow on financing. As I said then which is true now that consolidation will occur.

That helps explain why we’re seeing new funds. But why verticals? The Wall Street Journal notes that there’s an increasing trend towards funding for business-to-business startups.

The technology business is now so big that we can’t really talk about “tech startups” as a homogenous mass. There could be a boom in one area, like big data, and a bust in another, like daily deals, without much overlap. Now, there’s always a danger in the startup world that a bust in one area will take other companies down with it. In our interview with him this week, Puppet Labs founder and CEO Luke Kanies said that there were a lot of companies with revenue back in the dotcom boom that ended up going broke when all the companies that didn’t have any revenue ran out of money. That’s because the companies with revenue were dependent on those shaky startups for that revenue.

That’s a reasonable concern this time around, but I think there’s less financial inbreeding going on.

Most of the successful business-to-business start-ups have a diverse set of customers, large and small across multiple industries. Big data, enterprise 2.0 and DevOps companies seem particularly well positioned. Some of course will end up failing or being consolidated, but the structure these verticals are building on seems sound. I’m a bit more worried about the platform-as-a-service providers and infrastructure apps where a lot of the startups’ customers are also startups. But there’s a lot of value in these companies’ services, and the focus on solving problems for developers could help in the long term. The need to diversify beyond the Web startup world may be part of what’s driving PaaS providers to start providing on-premise solutions.

The funding for big data startups is at over $350 million. That seems big until you realize that startups like Box and Dropbox have raised over $100 million each. Then there’s that company Color, which has become emblematic of Valley VC excess. It raised $41 million as a series A. In comparison to companies like Color and cloud storage those big data investment numbers look downright conservative. No wonder Accel is doing a special fund in that area.

Watch for more action in vertical funds for underinvested areas. How long until we see a DevOps fund?

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