Now is the time to raise money
It is the best time to raise money in four years.
Venture capitalists are giving entrepreneurs more money in exchange for a piece of their companies than any time in the last four years. There is so much money out there that entrepreneurs are negotiating for higher valuations for their companies — forcing VCs to give them more money to get a meaningful slice of ownership.
The median pre-money valuation of U.S. venture backed companies reached $16.8 million in the third quarter, a 29.2% increase from last year and highest since the second quarter of 2001, according to a report today from VentureOne (sub to VentureWire required).
“The recent rise in valuations is due in part to the rise in prices in liquidity for venture-backed companies, particularly for M&A transactions,” said Josh Grove, research analyst at VentureOne. In the third quarter of this year, the median amount paid for a venture-backed information technology company in a merger or acquisition was $59.5 million, the highest it has been since 2000, and about $25 million more than companies were paying a year ago.
While the current median valuation figure still sits well below the mark at the peak of the high-tech bubble – $29.8 million in the first quarter of 2000 – it reflects a significant increase from $9.1 million in the second quarter of 2003 during the downturn.
The difference between the valuations of 2005 and those of five years ago, Grove said, is that later-stage investments, rather than deals with young start-ups, are fueling the increase.
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About the Author, Matt Marshall
Matt launched VentureBeat in September of 2006, with the realization that no one else was covering the entrepreneurial and tech innovation scene with the velocity or depth that he was. Prior to founding VentureBeat, he covered venture capital for the San Jose Mercury News from 2001 to 2006. In 2002, Matt was awarded "Journalist of the Year" by the Northern California Society of Professional Journalists. Prior to working at the Merc, he was a correspondent for the Wall Street Journal in Bonn, Germany from 1995 to 1998, and a writer for the Washington Post in 1994. Matt holds a PhD in Government and an MA in German and European Studies from Georgetown University. In addition to VentureBeat, Matt is also the Executive Producer of DEMO, the leading launchpad event for emerging technologies.
