A veritable plethora of stories have noted the swing in venture activity, some even calling this 'springtime for venture' (although without the theme song of Yelnick's post ...). ZDNet reports the venture market as "blistering hot," noting that "the first two months of 2004 have brought with them more tech companies looking for venture capital, and more venture capitalists looking to invest, than any time since the dot-com bubble burst in 2000." Corante reports that 48% of VC firms are currently in the process of raising new funds. At the Innovation Summit in London, Joe Schoendorf of Accel Partners said he was seeing "another gold rush now in its very earliest stages," expecting venture capitalists to be more willing to invest in speculative start-ups now than at any time in the past 24 months. At the Asia Business Conference sponsored by Harvard Business School, a VC panelist noted that: "Asia's growth in population and spending is attracting VC interest from all over the world—even from die-hard California firms that once invested only in Silicon Valley companies."
The other 'springtime for venture' post reported from fund managers that the "stronger pulse" in the VC industry may be due to "compelling valuations in the venture capital asset class," as valuations today are similar to those during 1984-1985 and 1992-1993, approximately two times forward estimated pre-money revenues. These valuations are beginning to move upwards, particularly at later stages. Yelnick is aware of some recent deals floating around (several not yet announced) with private values around $400M, a number not seen since the end of the bubble. The expectation with them is a fairly rapid IPO.
If sounds as if, if this continues, it will soon be 'summer for venture' with valuation temperatures rising enough to set this bubble echo 'a boilin'. Several items have suggested that there is still a venture overhang, including a recent McKinsey study. The implication is the excess money will chase deals, driving values up somewhat foolishly. ("What do you get when you cross a sheep and a lemming? A venture capitalist.”)
Overall, however, the pundits are getting ahead of the market. Valuations are picking up, as is competition for deals, but it is still relatively selective compared to the 'real' bubble.
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