Several early employees of Twitter are participating in a deal to sell their stock to BlackRock group at a valuation of over $9 billion, according to a Financial Times report published today.

BlackRock, an investment management firm that’s known as one of the world’s largest asset managers, is making an $80 million to the early employee using capital from a fund it manages, according to FT’s report.

With over $1.16 billion already invested in Twitter, the social network’s investors are undoubtedly eager to have the company show a transparent path to long-term profitability in preparation of going public. Twitter’s management team, however, may want to delay an initial public offering a little longer until it’s satisfied that the business strategy is strong enough to ensure Twitter stock doesn’t end up like Zynga or Groupon.

If BlackRock deal does go through as FT’s report indicates, it could be a win-win situation. As TheNextWeb points out, early investors would be able to cash out, while Twitter would have a better chance of delaying an IPO until its ready.

While we’ve been off tweeting out 140-character nonsense for the past seven years, Twitter has been building its company up to a valuation of over $11 billion, according to analyst firm Greencrest Capital. The company, founded in 2006, may now go public in 2014.

The social company has been growing and changing over 2012, giving hints that the initial public offering is on its executive’s minds, says Greencrest. As Forbes notes, these changes include shaking up the corporate level with a new chief financial officer, chief operating officer, and vice president of design.

Greencrest otherwise determined the new valuation of $11 billion by studying the secondary markets. Secondary markets are where outside investors can buy shares from existing private shareholders — for example founders, early employees — who are looking to unload their shares early. These markets are “a rumor rich and special share class soup,” said Max Wolff, an analyst at Greencrest, to Forbes. But with a little work, they otherwise can give a look into how much a company is worth. Most recently, Twitter had been valued at $9 billion, with this fluctuating after Facebook’s IPO.

It’s understandable, however, if Twitter wanted to hold off and see how the 2013 tech IPO market fares. In 2012, Facebook and Zynga both made it to Wall Street, but both floundered once there. Zynga dropped 5 percent on opening day due to concerns about the new market of “social gaming.” Facebook also declined in months following due to concerns about the way it handled its IPO.

Notetaking service Evernote’s chief executive Phil Libin is also holding back on an initial public offering. The company recently raised $85 million and plans to IPO, but “it’s not a pleasant experience right now to be a public company,” said Libin in an interview with VentureBeat at the time. He went on to say that there’s an “incompatibility between public markets now and tech.”

Twitter bird image via Shutterstock

Violin Memory and its super-fast Flash memory service is hurtling toward a highly successful IPO.

Bloomberg Businessweek reported today that the Silicon Valley company filed to go public under the Jumpstart Our Business Startups (JOBS) act. This allows Violin Memory to keep its public offering under the radar until three weeks prior to the roadshow; for this reason, it has not yet appeared in the U.S. Securities and Exchange Commission.

According to Bloomberg, the valuation on the table is a sky-high $2 billion.

Spokesperson Suzanne Chan declined to comment on Violin Memory’s filing.

Violin’s storage device are in Oracle’s and Cisco’s products, and it recently announced an alliance with Symantec. As we reported, Violin became a storage system maker in August — a major step up in the electronics food chain.

This spring, it raised a $50 million fourth-round, bringing its total venture capital funding to $172 million. At that time, it was valued at more than $800 million.

With the enterprise technology space on the upswing, this will be the second IPO this summer. Workday confounded expectations with its ass-kicking public offering. In early trading, the human resources software maker soared 72 percent.

At the end of the day, your business comes down to numbers — low overhead, high revenue, increasing net profits, and even expanding social media reach. A valuation is an incredibly attractive number that intimidates competition and attracts potential investors, but how can entrepreneurs accurately value their business when it’s still a fledgling startup?

We asked 10 young entrepreneurs for their top tips for putting an accurate valuation on an early-stage company. Here’s what they had to say:

Forget the potential

Devesh Dwivedi, @Break9to5Jail, Breaking The 9 To 5 Jail

Your business is pretty useless for valuation purposes because you can’t put a value on it, or even say with a certain degree of confidence that it will grow as big as its potential. MySpace and other players in social networking had the same potential as Facebook, but today, each of them have different valuations. Look at facts and capacity, not potential.

Ask around!

Stephanie Kaplan, @stephaniekaplan, Her Campus Media

As an early-stage startup, you’re probably not going to be valued based on revenues or other typical metrics used for valuing larger companies. Your valuation is going to be much more subjective. To get a sense of what it might be, ask different players what they would value you at — VCs, angels, advisors, big companies — and see if the figures gravitate towards a similar number.

Consider the ramifications

Doreen Bloch, @DoreenBloch, Poshly Inc.

Entrepreneurs in early-stage firms can benefit from low valuations. When your stock is cheap, it benefits new employees and investors who can still get in at the ground level. Before pursuing a 409A or other formal valuation of your firm by an accounting or advisory company, make sure you speak with advisors and understand the implications of getting your firm formally valued.

Be reasonable and relative

Nathan Lustig, @nathanlustig, Entrustet

Look around and see what other companies similar to yours are being valued at. If you’re in Chicago, you need to look at other Chicago companies, not the latest and greatest in Silicon Valley. Then pick a number that’s justifiable to both you and your potential investors. Make sure not to make it too high, or you will scare off investors or risk having a down round later in the process.

There’s no such thing!

Matt Mickiewicz, @sitepointmatt, Flippa

Valuations for early-stage companies are all over the map. Tech startups always demand higher premiums than retail companies. Businesses with traction and paying customers are usually better valued than mere concepts, and the history of the team and even their geographic location can impact valuation by up to three times. It’s more important to have the right investors than the right valuation.

Read up on intellectual property

Thursday Bram, @thursdayb, Hyper Modern Consulting

Most of the value in a startup is the intellectual property, but the average entrepreneur doesn’t know enough about the topic. Since you can’t copyright an idea, you need to know what your company owns that you can put a dollar value on.

Speak up!

John Hall, @tweetJohnHall, Digital Talent Agents

Don’t be scared to ask for help. Turn to a mentor or advisor who has a background in valuations. Accurate valuations could have more variables than you would consider. Someone with more experience in the industry and in valuing companies is less likely to miss a material influencer in value.

Comparables are key

Nicolas Gremion, Foboko.com

Comparables are essential. Base your valuation, and support it, using industry comparables. The closer they represent your company — not only in model but also in size — the better. It’s the most accurate comparison you can make.

Are your projections valid?

Brent Beshore, @BrentBeshore, AdVentures

Be reasonable. Investors are looking for returns, so the higher the possibilities, the less ownership they will have to take for the same amount of money to generate a higher return. Your job is to convince them that your projections are valid.

Free cash flow to the firm

Lucas Sommer, @audimated, Audimated

I see a lot of entrepreneurs value their company based on future values, invested time and money, emotion, and other unsubstantial metrics. The only thing that matters (besides patents and intellectual property) is your free cash flow to the firm — what does the firm make when all of its expenses and obligations are paid? That’s the number you want to use in your valuation.

The Young Entrepreneur Council (YEC)is an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. The YEC recently published #FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good), a book of 30+ proven solutions to help end youth unemployment.

Image via gingerbeardman/Flickr

SpaceX’s successful docking into the International Space Station may have ushered in a new era of spaceflight, but the success of the trip also bumped the company’s valuation into a higher orbit.

SpaceX made history last week when it became the first privately held company to dock a spacecraft on the International Space Station. According to financial data company Privco, that milestone was enough to push SpaceX’s worth to $4.8 billion, up from the $2.4 billion valuation before the mission.

PrivCo bases its numbers on SpaceX’s past and future — its recent successes, and rather busy launch schedule over the next few years. SpaceX has fifty-five launches planned through 2017, most of which are for commercial satellites. SpaceX is also contracted with NASA for a dozen resupply missions to the ISS.

But it wants more. According to SpaceX spokeswoman Kirstin Brost Grantham, the company’s next big step would be landing a contract with NASA to bring astronauts to and from the space station, which it hopes to do by 2015.

Total values for these contracts already top $4 billion, so clearly, SpaceX is going to be busy (and making money) for some time to come.

But what about its IPO ambitions? Grantham says those aren’t on the horizon right now: SpaceX is almost entirely committed currently to working out a regular rhythm for its launches — which means don’t expect the company to go public any time soon.

Speaking of IPOs, in a clear jab at Facebook, PrivCo said that SpaceX’s valuation in relation to post-IPO Facebook is reason enough for investors to look beyond Silicon Valley for investments.

But in the aftermath of Facebook’s much-hyped and problematic IPO, can the momentum continue?

Tech-focused Silicon Valley law firm Fenwick & West has released a report called “Trends in Terms of Venture Financings in Silicon Valley” for the first quarter of 2012. The report examined 114 companies headquartered in Silicon Valley that reported raising money in the quarter one 2012. It compiles funding and investment information from  Dow Jones VentureSource, Thomson Reuters, the National Venture Capital Association, and Fenwick & West’s Venture Capital Barometer.

By the end of the first quarter 2012, 50 Silicon Valley companies had registered to go public, more than in any quarter since Q4 2007. How many IPOs happened and how much money they raised depends on which source you rely on:

• VentureSource reported 20 venture-backed IPOs collectively raised $1.4 billion in Q1 2012, compared to 10 IPOs raising $2.4 billion in the Q4 2011.
• Thomson Reuters and the NVCA reported 19 IPOs raising $1.5 billion in Q1 2012, compared to 12 IPOs raising $2.6 billion in Q4 2011.

During the first quarter, up rounds (a round where a company receives money at a higher valuation than it got during its last round) exceeded down rounds (a round where the company’s valuation decreases) by 65 percent to 22 percent. Thirteen percent of rounds were flat, with no valuation changes. This is slightly down from the fourth quarter of 2011, when up rounds made up 70 percent of funding.

Click to enlarge

Q1 2012 is the eleventh consecutive quarter where up rounds exceeded down rounds, according to the report. That means investors are gaining more confidence in the technology industry, prompting them to invest at higher valuations.

“The first quarter of 2012 was a mixed quarter for the venture capital industry, with venture valuations healthy but venture investment down, M&A valuations up but the number of deals down, venture fundraising mixed but corporate venture investing up, and IPOs and Nasdaq up, but Nasdaq down in the second quarter to date and global financial uncertainty continuing to be a problem”, said Fenwick and West partner, and co-author of the report, Michael Patrick.

However, while the number of IPOs was up, the overall amounts of venture capital investments were down in the first quarter:

• Dow Jones VentureSource reported $6.2 billion in 717 deals in Q1, down 16 percent from 2011′s first quarter.
• Thomson Reuters and the NVCA reported $5.8 billion of funding in 758 deals in Q1, with a 12 percent decline over last year.

The biggest issues moving forward is venture capital fundraising, according to the report. As VC firms struggle to raise money for their funds, venture capital investments decline. There were conflicting reports on VC fundraising:  Thomson and the NVCA reported a 13 percent decrease from Q4 2011 and Dow Jones reported a 35 percent increase over the same time frame.

Strong first-quarter IPOs may help the market in the near future. Mobile, cloud, security, big data and social media have attracted attention and funding, which according to the report won’t change anytime soon. But the longer-term prospects for IPOs may be hurt if venture capital firms have trouble raising money for their funds, or invest less in the startups that will eventually become future IPOs.

Empty pockets image via Shutterstock

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Streaming music service Spotify is currently seeking a new mega-round of funding that could more than triple the startup’s current valuation, according to a New York Times report.

Spotify was previously estimated to hold a $1 billion valuation after closing a $100 million round in June 2011. The new funding round, which we first reported rumors of back in March, could end up being as high as $220 million, pushing the music startup’s valuation up to $4 billion. The startup may take several weeks to close the new round.

As for participation, Goldman Sachs is said to account for nearly $100 million of the new round, with Spotify still reportedly in discussion with many other firms.

Spotify’s strategy is built on a freemium business model, bringing in both advertising-based and subscription-based revenue. Because of its social features, which allow people to share playlists and listen and share tunes through Facebook, Spotify has been able to stay ahead of streaming competitors like Pandora, Rdio, MOG, and others.

The service has experienced massive growth in the last year, attributed in large part to the international company’s expansion of service into the U.S. as well as its integration with Facebook’s Timeline. The service has more than 3 million paying subscribers, a third of which are in the U.S. alone. But the company experienced $96 million in losses over its two years of existence due to pricey music licensing fees, which has caused some to speculate on its ability to generate a profit in the near future.

Founded in 2009, the Stockholm, Sweden-based startup has raised a total of $189 million to date from Kleiner Perkins Caufield & Byers, Accel Partners, DST Global, Sean Parker, and others.

Facebook users don’t trust the company with their private data, rarely click on display advertisements, and split on the social giant’s investment status prior to the impending IPO, according to a new poll conducted by CNBC and the AP.

Shockingly, the poll data only confirms what we already know — Facebook users are wary of Facebook.

According to the poll results, 59 percent of people distrust Facebook on user data, 57 percent of users said they never click on display ads, and 26 percent said they only rarely click ads. For a company that derives over 80 percent of its revenue through ads that are powered (in part) by that private user data, this could be an issue for Facebook. The company has also done a poor job of monetizing ads via mobile devices, which is increasingly how users are accessing the site.

Facebook has plans to grow its Facebook Credits business as well as making the site a platform for financial transactions, which poll respondents were also wary of. The poll indicated that 54 percent of users don’t trust the site enough for these types of purposes. Honestly, I think this is an area where Facebook will grow despite the current emotions of people who still associate the site with trivial things like social gaming and keeping up with people you knew in the first grade. Once upon a time, the majority of people were also just as wary about using their credit card to buy things from online retail stores. And as Amazon, eBay, and others have proven, this is no longer the case.

As for Facebook’s overall valuation, the poll respondents are divided on both the company’s $100 billion valuation as well as if it’s a good investment, with people under 35 taking a more favorable stance. But not everyone is convinced Facebook’s stock will hit a home run.

“My opinion is that the IPO is taking place too late for future investors to see any benefit, so I’m basically watching it as if it’s a cash-out event for early-round investors,” writes investment blogger Lucas Krupinski. Basically, that means the stock will do great if you bought it prior to going public, but after IPO day everyone will likely dump it. However, that doesn’t say much for its long-term value.

Social network giant Facebook is allegedly targeting May 17 as the potential date for its initial public offering, according to a TechCrunch report that cites unnamed sources familiar with the company.

The IPO date might be off depending on how much time federal regulators need to review Facebook’s recent $1 billion acquisition of mobile-photo-sharing startup Instagram.

And speaking of Instagram, some have speculated that the $1 billion deal was structured around the idea that Facebook shares would be worth more after they began trading publicly. On that assumption, Facebook agreed to pay 30 percent cash and 70 percent in stock. Sources from both TechCrunch and the New York Times indicate that Facebook is looking to raise around $10 billion from the stock sale, with valuation as high as $104 billion.

At that value, Facebook would be very close to trading at the same levels it was hitting while trading on the secondary market, pricing the social network at about $40 per share.

But with the alleged May 17 IPO date just under a month away, we’re bound to hear more about it between now and then. Stay tuned.

Don’t say mobile games aren’t gritty. Funzio, the mobile gaming company behind popular iOS games Crime City and Modern War, is looking to raise a fat $50 million funding round at $350 million pre-money valuation, but anonymous sources familiar with the deal told TechCrunch.

Funzio makes free addicting games with paid downloadable content. Once a player gets hooked on a game, they are likely to fork out small amounts of cash to enrich their playing experience by buying credits, power-ups, and weapons.

The game-company’s team has a pretty good track record, which might making raising cash not all that hard. Chief executive Ken Chiu has already sold a startup to Zygna called “My Heroes Ability” in 2008 and worked for the company for around a year. He was also behind a successful Android gaming company called Storm8.

The $350 million pre-money valuation is comparable to Rovio, which last year raised $42 million at a $200 million valuation. It would make the company worth more than OMGPOP, the game company Zynga purchased for $180 million in March 2012.

So far, Funzio has raised $20 million from IDG Ventures, IDG Capital Partners, and Rick Thompson. The company is based in San Francisco, Calif.

Nearly every aspect of music startup Spotify is growing, including its total active users, paying subscribers, its music library, and the number of international markets it reaches. So it seems reasonable that the company’s valuation should do the same.

The music service is rumored to be seeking a huge new round of funding that could push its total valuation up to a whopping $3.5 billion, according to a BusinessInsider report that cities multiple anonymous sources familiar with the matter. If true, that valuation would mean the company was $2.5 billion more valuable than its estimated worth after closing its previous $100 million round in June 2011.

Spotify is a streaming music service that’s built on a freemium business model, bringing in both advertising-based and subscription-based revenue. Because of its social features, which allow people to share playlists and listen and share tunes through Facebook, Spotify has been able to grow like a weed in the face of heavy competition from the likes of Pandora, Last.fm, Rdio, MOG, and others. The company attained 3 million paying subscribers back in January, with at least a million of those subscribers in the U.S. alone.

However, Spotify’s lack of ownership when it comes to the music it streams might be making potential investors nervous about participating in the high-valuation round.

Unlike the streaming video services, Spotify doesn’t have exclusive access to specific libraries of content, which means competitors can theoretically mimic everything Spotify is doing well while streaming nearly the same exact library of music to their own users. For companies like Hulu and Netflix, competitive advantage means developing their own exclusive video programming. For a music service, however, it might not be so easy.

The report indicates that both TCV and Andreessen-Horowitz have passed on the new round, which hasn’t stopped Spotify from seeking out other investors.

Founded in 2009, the Sweden-based startup has raised a total of $189 million to date.

Digital pin-board site Pinterest is scorching hot. People are pinning like crazy. Publishers are benefiting from an uptick in Pinterest-driven traffic. And venture capitalists are tripping over themselves to get a piece of the social property.

But does all this interest warrant a $500 million valuation, especially without any substantial revenue streams to speak of? Absolutely, says private financial data company PrivCo.

As a refresher, Pinterest is the private-beta site that encourages members to “pin” products, recipes, clothes, photos, and other items they love to collections called boards. Launched in 2010, Pinterest has ballooned into a top ten social network that has more than 10 million users who spend, on average, 97 minutes on site each month.

On paper, Pinterest is valued at a rumored $200 million, a figure determined by the startup’s $27 million funding round led by Andreessen Horowitz in October of last year. But the rapid growth of the user base — which skews heavily toward female arts and crafts enthusiasts — and Pinterest’s potential to plug-in a number of different revenue-generating features make it now worth more than double the outdated $200 million figure, PrivCo CEO Sam Hamadeh told VentureBeat.

“Pinterest’s user base has nearly tripled since [its last funding round], bringing the valuation now, we estimate, closer to $400 million in a new venture financing,” Hamadeh said.

As an acquisition target, and PrivCo makes a compelling argument for why Facebook should pursue an acquisition quickly, Pinterest could tack on $100 million more for its expected value.

“An additional 25 percent ‘control premium‘ to acquire the entire company puts us at about $500 million today in an acquisition,” Hamadeh added.

That’s a pretty astronomical figure for a company that has only quietly tested the monetization waters — but maybe it’s not so farfetched, after all.

“With their level of engagement and unique audience, I think $500 million would be a bargain for Pinterest,” analyst and occasional VentureBeat contributor Rocky Agrawal said.

Palo Alto-based Pinterest has 30 employees and has raised $37.5 million in funding to date. The site attracts 12 million unique visitors each month. Investors include Andreessen Horowitz, Bessemer Venture Partners, FirstMark Capital, Ron Conway, Kevin Hartz, Max Levchin, Jack Abraham, Michael Birch, and other Angels.

Klout

Klout works by measuring a person’s activity on a variety of social networks such as Twitter, Facebook LinkedIn Google+ and others. Based on that individual’s interaction within those social networks, Klout calculates the true reach of that person’s communications and issues them a 1 to 100 Klout score. The company also launched new Klout Topic Pages that show all the activity from the greatest influencers about a particular subject.

A company spokesperson told VentureBeat it doesn’t comment on rumors. However, the new round, possibly led by Kleiner Perkins with participation from IVP, might be as high as $30 million at a $200 million valuation, according to a report from Business Insider.

Founded in August 2008, the San Francisco-based company previously raised an initial $1.5 million round, followed by a second $8.5 million round in January 2011. The company has a total of $11 million in funding to date from Kleiner, Greycroft Partners, ff Asset Management and others.

Previously, sources close to the deal said the valuation was between $15 to $20 billion.

The Wall Street Journal reports this morning that the $12 billion figure will be pitched to Groupon’s investors during its IPO roadshow.

Previously, we told you that the company’s roadshow, in which the company’s executives would travel around the country to create interest among potential investors, had been indefinitely delayed due to August’s wild market volatility.

However, the company has chosen to press forward with an initial public offering, and it seems the roadshow could begin as early as next week.

The company filed for an IPO back in June, when we described Groupon as “swimming in cash.” Since then, however, Groupon amended an SEC filing (just as the stock market jitters began) to show $102.7 million losses for the first and second quarter of 2011. Around the same time, the market downturn began to impact the IPO window in general. Many startup IPOs were delayed, and other companies raised far less than they had anticipated.

Also not in Groupon’s favor are a class-action lawsuit brought by employees and reports that the service’s daily deals might not be such a great deal after all. Small businesses, too, are weighing in, many saying that Groupon’s vouchers have a negative effect on their bottom line.

These figures come from eMarketer, a digital intelligence firm that keeps a close eye on ad revenues for companies like Twitter and Facebook.

Last year was Twitter’s first full year of selling advertising products. In 2011, however, Promoted Tweets, Promoted Trends and Promoted Accounts (as the company calls its various ad products) really started ramping up. Earlier this month, the company started serving promotional content in a new way altogether, allowing advertisers to push tweets to users even if those users don’t follow the advertiser’s account.

Another new source of revenue for the end of 2011 and the duration of 2012 will be political advertising. The company opened a Washington, DC-based ad sales office to gear up for a slew of political advertising over the next 13 months or so.

While Twitter has played an important and growing role in politics since its use by the 2008 Obama presidential campaign, this marks the first time the platform will be used for traditional, disclosure-tagged political ads.

eMarketer estimates that by 2013, Twitter’s ad revenue shall have grown to around $400 million annually. Not bad for a startup that famously didn’t have a business model just two years ago.

This month, the company also announced that ad targeting options would be coming up soon. These would allow marketers and brands to target consumers by location and other criteria.

Already, Twitter’s unique approach to ads is creating stellar engagement rates for brands. The company doesn’t even call its promoted content advertising, in fact, because it insists that even brand-related messages are and should be indistinguishable from “normal” tweets and trends on Twitter.

“Marketers have seen solid engagement rates with Twitter advertising — in some cases better than those on Facebook — despite Twitter’s relatively smaller audience,” said eMarketer principal analyst Debra Aho Williamson.

Twitter CEO Dick Costolo confirmed this at a meeting three weeks ago, saying, “We continue to see great engagement rates … The health of the business is great.”

Costolo noted that one major advertiser, Virgin, had its fifth largest sales day ever due to a Twitter campaign. Most advertisers see an engagement rate of between 3 and 5 percent, and 80 percent of advertisers run more than one campaign.

Twitter’s rising valuation

As the company’s business model has emerged and begun to show early signs of success, its valuation has grown.

In April 2008, the company was worth less than $150 million and actually closer to $80 million, according to sources familiar with the company’s then-latest round of funding.

But by the following year, the company’s valuation had already skyrocketed to $1 billion. Another round late in 2010 put Twitter’s worth at $3.7 billion, with another February 2011 investment pegging it at more than $4 billion.

While speculation was running rampant that some investors valued the company at around $10 billion toward the end of 2010, a confirmed funding round last month left Twitter valued at $8.4 billion.

While $8.4 billion seems like a significant jump from $4 billion a few months before, VC firms aren’t the only ones who’ve pegged Twitter’s valuation in that neighborhood. Recent private stock trading on sites such as SharesPost has seen prices ranging between $34.50 and $31, which values the company at $6.8 billion to $7.7 billion on the private market.

The most recent Silicon Valley Venture Capital Survey from tech-focused law firm Fenwick & West looked at 117 Silicon Valley-based technology and life sciences companies that took funding in the second quarter of 2011.

During this time period, the firm tracked “up rounds” (in which the company receiving funding takes the money at a higher valuation than it got during its last round) and “down rounds” (pretty much the opposite: taking money at a lower valuation). Fenwick & West found that 61 percent of funding deals were up rounds, compared to 25 percent down rounds and 14 percent at unchanged valuations.

Q2 2011 marks the eighth consecutive quarter that saw more up rounds than down rounds; in other words, for the past couple years and for many venture capitalists, confidence in startups’ revenue-generating potential has been creeping back toward pre-recession levels.

However, Q3 saw some rapid deterioration in global markets that raised red flags for many investors.

“A lot of people right now have a wait-and-see attitude,” said Barry Kramer, a partner at Fenwick & West, in an interview with VentureBeat.

“I think if you’re a late-stage VC looking to invest in a company you thought would IPO in the near future at a high valuation, you probably want to pause for a minute. Clearly there’s a lot of turbulence. If you’re an earlier stage investor, I don’t think it has an immediate effect on you. You’re investing for five or more years out, so what’s going on today is less relevant.”

Kramer continued to say that the market fluctuations “may have a depressing effect on valuations, which are more dependent on what the market is doing right now. But it’s still early. We’ve seen this volatility for the past month. It might stabilize, or it might change.”

Fenwick & West also measured the changes in share price from round to round for the same group of companies. The firm found that on average, share price increased 71 percent. This represents a 19 percentage point jump from last quarter’s results and is the highest increase since 2007.

The startups leading the pack in terms of valuation performance were mostly in the software, software as a service, Internet and digital media sectors.

In fact, deals for these kinds of startups (consumer-facing web apps and software companies) were a sweet spot for investment overall in the first half of 2011, according to a comprehensive funding report from Dow Jones.

Still, many Silicon Valley investors think the robust deal activity and higher valuations may be indicators of a bubble. Another report from the Silicon Valley Venture Capitalist Confidence Index showed a slump in investor confidence for Q2 2011. One polled VC even stated, “2011 will be remembered as the year that everyone went nuts and overpaid — $1B is the new $100M valuation. For most, this will end in tears.”

Fenwick & West partner Michael Patrick stated in a release that current market fluctuations may also have some negative effects on investments in the coming quarter. “Q3 has started out very turbulently with a falling NASDAQ, financial market volatility and IPOs being postponed. The effect of all this on the venture market bears watching and is a cause for concern.”

The IPO delays Patrick referred to include a record number of setbacks last week, when around 13 IPOs were put off due to unfavorable market activity. But, as Renaissance Capital’s Paul Bard said at the time, “Investors are looking for unique companies that are capable of growing through all kinds of market conditions and that have a product that is gaining significant traction… We don’t know how much froth has been taken out of the Internet market.”

“There’s certainly concern about [a bubble], but I think the first concern is about worldwide financial stability, which truly has nothing to with Silicon Valley,” Kramer responded. “There was the trouble in Congress, gold’s going through the roof… There’s certainly a concern about a valuation bubble in the internet space, but I’d bet the global market is giving us more pause right now.”

Kramer continued to say that tech, which keeps consumers entertained and can help companies and other organizations save money, is likely not in for a dotcom-style beating if global markets do take a dive.

“While no industry right now is in for a really great time, I don’t thing tech is going to be the first thing to get hit. Governments have to reduce their spending. Industries that are dependent on government spending are a problem — tax breaks for cleantech, NIH funding for life sciences, military contracts for defense companies, those are areas that will have a problem.

“Corporate America is going to cut back on spending, too, and that means advertising. The startups that are focused on consumer-facing and making their money off ads are going to have a problem.”

However, Kramer ended our chat with an interesting and applicable observation on Internet companies that charge users little and give them a lot of value in return — think Hulu Plus, Netflix or Zynga. “In recessions,” Kramer said, “the sale of margarine goes up. It’s cheaper than butter, and butter sales go down. So some of these companies are like margarine. They’re cheap, they provide entertainment. The beauty of business is there are some companies that can ride it out better than others.”

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With the NASDAQ composite index down nearly seven percent for the day in response to the U.S. government’s credit score downgrade, most tech stocks have been sent into a tailspin — especially those that recently filed an IPO.

Such news brings more speculation that group coupon deals startup Groupon could have a less than stellar entrance into the market.

The startup has already come under fire recently for its questionable investing practices and its use of an unusual accounting measurement, which caused Groupon to update its S-1 filling.

But Groupon is still growing strong. And in times of economic depression where people try to stretch their money further, coupons become a far more valuable commodity. Could coupon- and deal-brokering companies like Groupon be an exception to the market downturn effect?

“Groupon started in 2008 when the economy was in a downturn, so I definitely think it has the potential to thrive when the market is down,” said David Sinsky, data product manager for group deals tracking company Yipit.

Right now, Groupon primarily offers deals for movies, restaurants and activities that aren’t essential to the daily lives of its subscribers, Sinsky said. However, if the service begins offering more essential items from grocery stores and such, it could easily become more valuable to consumers during a downturn.

As for whether that value would translate to Groupon’s IPO, Sinsky says its possible. “Obviously every company’s stock is going to hurt during a downturn, but maybe Groupon and other coupon service companies less so than others.”

But more immediately, the current mood of the stock market will have a greater impact on Groupon’s IPO than anything else.

“I hear what you’re saying about coupon services, but at this point it’s not clear that would help Groupon’s valuation given what’s going on in the stock market,” said Conor Sen, a private investor and columnist for Minyanville.

Sen said there are two possible ways that the stock market downturn could affect Groupon’s IPO. First, Sen told VentureBeat, “the IPO could get pushed back until market conditions are favorable. Bankers don’t like to do IPO road shows when there’s blood in the streets.”

The second way is “pricing could be lower than expected. Investors will see stocks like Zillow, LinkedIn and Pandora down 20-30 percent over the past couple of weeks and recalibrate the price for GRPN accordingly,” Sen said.

“Groupon already wasn’t planning on IPO’ing until September, so it’s too early to say that the launch date will get delayed,” he said. “However, previously some were saying Groupon could be looking at a $20-25 billion valuation, and given the haircuts those other companies I mentioned have gone through something like $15-20 billion might be more realistic, depending upon how their Q2 results look.”

As for competitors like LivingSocial and Coupons.com, don’t expect for either to file an IPO until at least early next year.

“Both have the luxury of waiting to see how Groupon does before going public themselves,” Sen said.

Previously, Dropbox was valued at just $7 million. The new funding round, if true, would put Dropbox on the same level as microblogging social network Twitter.

From an investment standpoint, there is plenty to like about Dropbox. Its user-friendly cloud storage service, which has a total of 25 million registered members, has made it the favorite among the growing number of competitors.

Also, the San Francisco-based company’s expansion into Asia and Europe looks very promising. Dropbox recently reached a deal to pre-load its Android app on Sony Ericsson mobile phones running on Japan’s third largest wireless carrier, Softbank.

However, the company isn’t without its setbacks. Last month, many Dropbox users were vulnerable to a security breach that allowed unauthorized parties to access accounts using incorrect passwords (meaning, any password entered would grant access to the account). Dropbox also recently came under fire for revising its privacy policy to allow law enforcement access to user accounts if requested.

Founded in 2007 by Drew Houston and Arash Ferdowsi, Dropbox has $7.1 million total funding from Y Combinator, Accel Partners, Sequoia Capital and others.

Click here to download the VentureBeat Windows 7 desktop app. The Intel AppUp developer program is the official launch sponsor.

Additional capital is definitely necessary for Turntable.fm to compete against other music startups such as Pandora, Slacker Radio and Spotify.  The company’s current level of funding has not been disclosed. But as BetaBeat notes, Turntable.fm is the reincarnation — the “pivot” — from the failed venture Stickybits, which raised almost $2 million.

Turntable.fm turns its users into DJs who can share musical tastes within specific virtual rooms classified by subject or  genre. Only five DJs can share music in a single room, but anyone can enter a room to listen. All users within that room can rate song selections as  “Lame” or “Awesome.” It’s an innovative way to make listening to music a social experience, which has attracted high profile DJs like author Neil Gaiman and DJ Sir Mix-A-Lot.

Although Turntable.fm only launched in late May, its music service has over 300,000 registered users as well as a growing number of unofficial hacks and apps, according to the BetaBeat report. Interest in the music service is so high that the company was forced to throttle new user registrations to limit operating costs and avoid downtime.

Turntable.fm was co-founded by Billy Chasen, who also created popular real-time analytics service ChartBeat.

UPDATE: Business Insider is reporting that Turntable.fm raised $7.5 million at a $37.5 million valuation. The new round includes all the initial investors, including Polaris Venture Partners, Mitch Kapor, First Round Capital and Lowercase Capital. This brings the company’s total funding to $9.1 million, according to the report.

GSV Capital Corp

In an official statement Monday, Woodside, California-based GSV Capital said it purchased 225,000 shares in Facebook for a total of $6.6 million ($29.28 per share), according to the report.

Since GSV Capital is an investment fund for high-growth, venture capital-backed companies, it’s not shocking that it would put money down on Facebook. However, it does seem like a large risk. The $6.6 million amount represents about 15 percent of GSV’s total portfolio, according to the report.

Also GSV’s $70 billion valuation of Facebook means the social networking site, which has yet to make an initial public offering, is worth nearly as much as companies like Amazon, Cisco and Hewlett-Packard.

Facebook could be planning an IPO for the first quarter of 2012, with a potential $100 billion valuation. In January, Goldman Sachs valued Facebook at $50 billion. The investment firm is seeking to manage Facebook’s IPO.

HomeAway filed for an IPO in March and joins other Web companies aiming to go public this year, such as Groupon and Zillow. In the last few months, car sharing service Zipcar, professional social network LinkedIn, and online radio provider Pandora went public.

Austin-based HomeAway manages the largest online marketplace for vacation rental properties. The company offers rental homes through 31 different websites and has listings in 145 countries. It makes its money by charging homeowners to feature their properties and through various advertising and sponsorship deals.

The company’s financials appear healthy. In 2010, HomeAway had $167.9 million in revenues, up 39.6% from 2009. Net income for 2010 was $16.9 million, which was up from $7.6 million in 2009.

In such a big year for Web-based companies going public, HomeAway will have to hope the market treats it like LinkedIn, which is now trading well above its IPO price, and not like Pandora, which is now priced below its IPO.

Investment titan Goldman Sachs, which has been working with Facebook since January, is seeking to manage the offering. In January, Goldman valued Facebook at $50 billion.

Anonymous sources in the report suggest Facebook will be prompted to file by next spring because of the SEC’s 500 investor rule, which limits the number of investors a private company can have before having to publicly disclose its finances. Since Facebook will likely reach more than 500 investors this year, the company would have to disclose its data by April 30, 2012.

Other social websites have made waves in the investment community during the last few months. Group deals site Groupon filed for a $750 million IPO earlier this month and will likely start trading publicly later this year. With its new funds, the company intends to continue spending aggressively and experiment with new products.

Professional social networking site LinkedIn began trading publicly in mid-May and was valued at $7 billion. LinkedIn priced its initial shares at $45 and the price quickly rose to about $80 on the same day. LinkedIn shares currently sit at around $76.

It’s impossible to know the exact schedule for Facebook’s IPO filing, but we know the company intends to start trading publicly in 2012. But we’ll certainly let you know if we hear any more IPO news on the ever-changing Facebook front.

According to TechCrunch’s sources, the startup is raising a new investment round of at least $50 million to bring the company’s valuation upward of $1 billion. However, it’s too soon, the sources said, to know exactly how high the round of funding will go as the company is rumored to be meeting with additional investors.

Square’s service lets merchants process credit card transactions on iPhone, iPad and Android devices by using a magnetic strip reader accessory that plugs into the audio jack.

The startup, which launched publicly in May 2010, currently processes over $3 million-worth of mobile transactions per day, according to Square CEO Jack Dorsey. The company’s total investment to date is $37.5 million, which does not include an undisclosed strategic investment from credit card giant Visa in April.

It’s a sign of the excitement around social networking and its promise, although the results were enough for some people to say it was part of a ridiculous bubble.

That means LinkedIn now has a market cap of around $9 billion — well above the valuation of $4 billion it claimed when it priced the shares of its initial public offering between $42 and $45. Shares of LinkedIn traded as high as $122 earlier today, giving the company an implied valuation as high as $11 billion. LinkedIn’s valuation is the first official record of the hyper-valuations many Web 2.0 companies like Twitter and Facebook have seen in recent years.

LinkedIn’s shares hovered at around $103 for most of the afternoon before finally dipping down below that level of support toward the end of daytime trading. The company also saw a quick decline in its share prices in the ten minutes before the markets closed, dropping as low as $91 before leveling off at around $94 minutes before the final bell. The shares were trading at $94.24 most recently in extended trading.

The company’s stunning debut on the stock market could end up creating additional chatter about whether several Web 2.0 companies are overvalued. LinkedIn’s closing share price and valuation mean the company is worth somewhere north of 36 times its revenue for 2010, which was around $243 million. There’s also the chance that share prices of LinkedIn could turn south over the next several days, like shares of Chinese social networking company RenRen. That company turned out to be a flop on public trading markets and has fallen below the IPO price of $14 to $13.75 it saw earlier this month.

A number of highly successful Web 2.0 companies like Facebook and Zynga — and LinkedIn — have seen ballooning valuations as investors have rushed to snatch up as many shares as possible ahead of what could be some of the most high-profile tech IPOs to date. Facebook, for example, was valued at $50 billion after its most recent round of funding — though it is trading at a higher price than that on secondary markets.

LinkedIn is based in Mountain View, Calif., and has more than 1,000 employees. The company, founded by Reid Hoffman (pictured above), is a business network that’s designed to help professionals connect with other potential business contacts and get a “warm introduction” through people in their network.

It was just 8 days ago that LinkedIn claimed a valuation of $3 billion in an amended S-1 filing with the SEC. The quick about-face to increase the company’s valuation could end up creating additional chatter about whether several Web 2.0 companies are overvalued. LinkedIn’s valuation is the first official record of the hyper-valuations many Web 2.0 companies like Twitter and Facebook have seen in recent years.

The company is looking to raise up to $217 million in its initial public offering by selling 4.8 million shares of common stock. Employees and other shareholders plan to sell around 3 million shares of LinkedIn stock as well — meaning nearly 8 million shares will be up for grabs for public investors. The latest high-profile tech stock to make its trading debut in the U.S. — Chinese social networking company RenRen — turned out to be a flop and has fallen below its IPO price of $14 to $12.73 after the company started trading earlier this month.

A number of highly successful Web 2.0 companies like Facebook and Zynga — and LinkedIn — have seen ballooning valuations as investors have rushed to snatch up as many shares as possible ahead of what could be some of the most high-profile tech IPOs to date. Facebook, for example, was valued at $50 billion after its most recent round of funding — though it is trading at a higher price than that on secondary markets.

LinkedIn’s shares will make their trading debut Thursday on the New York Stock Exchange (NYSE) under the ticker “LNKD.” It’s one of several high-profile tech initial public offerings that landed on the NYSE over the tech-heavy NASDAQ stock market, ending the exchange’s decade-long dominance over the tech IPO market. The NYSE has dueled with the NASDAQ stock market to attract high-profile tech IPOs, but it’s traditionally been a losing battle as the NASDAQ stock market regularly plays host to the largest tech companies in the world like Google and Apple.

LinkedIn, founded by Reid Hoffman (pictured above), is a business network that’s designed to help professionals connect with other potential business contacts and get a “warm introduction” through people in their network.

LinkedIn’s valuation is the first official record of the hyper-valuations many Web 2.0 companies like Twitter and Facebook have seen in recent years. The company plans to offer up to 4.83 million new shares of common stock, which would raise up to $175 million if they sell at the top end of the expected pricing. Current shareholders also plan on selling around 3 million shares of the business social networking company.

LinkedIn, founded by Reid Hoffman (pictured above), is a business network that’s designed to help professionals connect with other potential business contacts and get a “warm introduction” through people in their network.

The company has warned that a majority of its revenue comes from a small number of members who generate a majority of the page views for the site. Its major investors — Sequoia Capital, Bessemer Ventures and Greylock Partners — will not participate in the initial public offering, according to Reuters. Those investors own around 40 percent of the company, according to the company’s S-1 filing with the SEC.

LinkedIn will list its shares under the ticker “LNKD” on the New York Stock Exchange (NYSE) after spurning the tech-heavy NASDAQ stock market. It’s one of several high-profile tech initial public offerings that landed on the NYSE over the NASDAQ, ending the exchange’s decade-long dominance over the tech IPO market. The NYSE has dueled with the NASDAQ stock market to attract high-profile tech IPOs, but it’s traditionally been a losing battle as the NASDAQ stock market regularly plays host to the largest tech companies in the world like Google and Apple.

LinkedIn filed to go public in January this year to raise up to $175 million. The latest filing with the SEC also indicates that LinkedIn now has 100 million members, up from the 90 million it indicated in its last S-1 filing. It had 990 employees at the end of 2010, the last time it reported how many employees it had.

The information was revealed during LivingSocial’s negotiations to purchase advertising network Social Media for 545,000 shares of LivingSocial common stock valued at $3 million, according to a report from TechCrunch.

While Social Media’s success has slowed in the past few years, it still had potential as well as $10 million in funding, part of which came from mutual-fund company T. Rowe Price, which recently confirmed investment in LivingSocial competitor Groupon. If the leaked LivingSocial financials are sound, then approval of the acquisition would be a lucrative move.

LivingSocial is still far behind generating the kind of revenue its lead competitor Groupon is doing, but if it continues on its current pace, it could clear upward of $1 billion in 2011.

StackOverflow is a lot like Quora, but is largely populated by professionals in technical careers like engineering and programming. It’s a crowd-sourced site where anyone can post a question and StackOverflow users can quickly write an answer to that question. Other StackOverflow users can then vote up or vote down a response, ensuring the most popular or the most correct answer becomes the top answer for a question.

But the site is overvalued despite its cult popularity among programmers and engineers, said Dodge, an evangelist with Google which includes working with its investment arm, Google Ventures. Dodge made the comments on stage at the Launch Conference when the panel of judges was deciding which startups were best. He said he was initially impressed with the product, but that doesn’t mean he’d invest.

“I just saw the valuation for (StackOverflow’s) Careers 2.0 and I had a heart attack,” Dodge said. “No way I would write a check for that.”

Dodge later said that he thought the valuation was only for StackOverflow’s Careers 2.0 site, but said the site still looked like it was overvalued.

“Even for all of StackOverflow, the entire site, it’s a pretty rich valuation,” he said.

The new site, Careers 2.0, features openings at major companies like Microsoft and links StackOverflow users to sites where they can apply. StackOverflow users can search based on a number of keywords or by zip code, city or county. The idea is to connect StackOverflow’s highly technical and prolific users with potential job opportunities.

Netflix, a subscription service for mail-order and streaming movies, has joined some of the largest and most prominent companies in the world on the Standard & Poor’s 500 stock market index, kicking out the New York Times in the process.

It’s a pretty big milestone for the company, which has been considered a mid-cap stock (meaning it isn’t all that big) since it went public back in 2002. The company is now worth $10.2 billion, compared to the New York Times’ paltry $1.4 billion.

Netflix has seen some pretty explosive growth in recent years as it shifted toward streaming content online. Like its competitor Hulu, Netflix streams movies and TV shows for a monthly fee on its site. But the company is paying out enormous sums of cash to get access to the best content as quickly as possible. Netflix paid out $115 million this quarter, which was more than 10 times greater than the $10 million it paid in the same quarter last year.

The results are pretty stellar. The company’s quarterly profit jumped by about 27 percent year-over-year last quarter. Netflix’s net income jumped to about $38 million this quarter, compared to $30 million in the same quarter last year, after adding another million subscribers in the last quarter. That brings Netflix’s total subscribers to somewhere between 19 million and 19.7 million, according to its most recent earnings report.

It’s also a pretty telling sign of the direction of media, as well. The New York Times is still seen as a champion of old media, with one of the largest newspaper subscription circulations in the country. But advertising revenue has dried up for old media companies since advertisers have flocked to cheaper and more pervasive online media sources. The New York Times’ stock price has been on a steady decline for the past three years as well, falling from around $26 to $9.39 today. Office Depot and Kodak were also booted to mid-cap status as part of the announcement.

But oftentimes companies are promoted to large-cap status due to run-ups in stock value rather than personal success. It makes sense, seeing as Netflix’s shares are up a mind-blowing 241 percent from a year ago (they were up 1.3 percent today) when they were worth $56.74. It means there’s either a tremendous vote of confidence for the company, or the stock is highly overvalued. Given the state of the stock market today, it wouldn’t be surprising to see the company’s shares take a nose dive as traders cut a nice profit from the recent run-up.

Facebook, already valued at $30 billion, would be his choice over a company like Google when deciding when to go “long” — or invest in the company for an extended period with the expectation that it will continue to grow.

“I think Facebook is still insanely focused on building a product. It’s in part driven by [Facebook CEO Mark] Zuckerberg who in many ways is like Steve Jobs,” Thiel said. “As long as he stays involved in the company, it will be about really building a great product.”

Thiel said that Silicon Valley had not yet reached a level of valuation similar to the last dot-com bubble that spurred the 2001 recession, but some of the major companies were stifling innovation due to their massive valuations.

Thiel likened the growth of the tech giants to the growth of the automotive industry in between the 1920s and the 1950s — from when cars had not yet reached mainstream adoption to when they became the status quo. Technology is still in its budding stage, even with giants like Google, Intel and Oracle, he said.

Zuckerberg was largely sensationalized in the soon-to-be-released Facebook movie, “The Social Network,” and far from the “evil genius” TechCrunch reporter Sarah Lacy described in her interview with Thiel, Thiel said.

“The movie’s an accurate description of Hollywood,” he said. “But it’ll be good to the extent it encourages young Americans that they can start great companies that will dominate everything.” (Here’s a video excerpt of the end of the interview below).