If you’re an entrepreneur, you’re probably concerned the weakening economy will force venture capitalists to lower the value of your company when they invest.
Well, no sign that’s happening yet, at least through the end of last year. The valuations VCs awarded companies are all over the map, according to the data compiled by Dow Jones. Wait for first quarter data coming out in May to see if there’s any clear downturn.
Dow Jones wouldn’t publish its full table of data, so we’ve just offered you a snippet in the chart above (values are in millions) and below. Above shows divergence across sectors. But don’t worry if your company is in one of the sectors with a down arrow. We saw the full survey info, across multiple years and stage of investment (seed, first round, second round, etc) and there really is no rhyme or reason. If one quarter shows the average valuation at $3 million, the next quarter shows $10 million, so this is like monkeys throwing darts at a dartboard. We’re not sure how much value any of this data holds for entrepreneurs. Indeed, companies will continue to be valued on a case-by-case basis.
More useful, however, is the break down of valuations by stage. Here at least you can see if you’re in the ballpark. I’ve pasted that chart below for last year. (NS means “not significant,” meaning there weren’t enough deals covered the survey for the data be to considered reliable.)
3 Comments
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Benoit said:
I think the weakening economy will have the following effects this time around:
- Small angel investors will be forced to save their money so earlier stage startups won’t be able to get as much funding
- This will weed out startups that don’t have a strong product or strong service
- VCs may have a bit less money but given that there will be less startups (and with better products) their funds will naturally be reallocated.So I’d say: not as many startups, better products/services and more funding per startup. Let me know if I’m off-base.
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Jeff said:
Early stage/seed investments by Angels/VCs is RED HOT!
Getting $1-2M funding for early stage startups is no big deal. Good VCs (big & small firms) understand that this is the time to invest and they are very much in the game.
Startups will get good valuations if they can create competition among VCs.
