Bubble or return to pre-bubble? Sequoia raises more money

Updated

Acquisition fever and venture capitalist interest in tech companies is driving up the value of private companies, especially the more mature ones. And we’re wondering if Sequoia Capital might be barometer of sorts.

Some have called this the latest bubble, but VentureOne analyst Josh Grove says prices have merely returned to pre-bubble levels, after valuations fell drastically in 2002, according to the latest report by VentureOne released today. The value of companies, which venture capitalists effectively set by negotiating with entrepreneurs for a stake in the companies they invest in, is at the highest level since the second quarter of 2001. The median pre-money valuation is $15.6 million.

Anyway, the interest in late-state private company is underscored today by a one-line item in PE Week, which reports that respected Silicon Valley venture firm Sequoia Capital has raised $520 million for its latest fund focused on later-stage investments.

No surprise that Sequoia wanted more money. We mentioned here how they’re paying a high price for stakes in some mature Internet high-fliers.

But you remember what happened when Sequoia raised a special fund in 1999 to invest in late-stage investments? Yep, the bubble burst a year later. Here’s our story from 2001 (scroll down).

Update: VentureWire has done the digging (sub required), and reports the following about that previous 1999 fund:

That fund has not had a strong rate of return. According to the Regents of the University of California alternative investments, as of March 31, 2005, the fund had a net internal rate of return of minus 17%.

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