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Venture Capital

by Mike Masnick

Thu, Sep 11th 2003 6:51pm





VCs Are Still Getting More For Their Money

from the at-the-bottom dept

All the stories suggest that venture capitalists are really opening up their wallets again (though not always intelligently). However, if you're out their hunting for venture money right now, it sounds like many VCs are still using the story of the "drought years" to keep valuations low. The latest VentureOne report shows that valuations just keep on declining. If you're a company trying to raise money, I would say that now is probably a bad time. If things really are picking up, then valuations will start to rise also as more VCs fight over the "prime" companies.

4 Comments | Leave a Comment..


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  1.  

    startups and lawyers

    identicon
    Anonymous Coward, Sep 12th, 2003 @ 6:24am

    It's worse than just the valuations -- it's the dirty tricks. See the first paragraph of Cringely's recent column:

    http://www.pbs.org/cringely/pulpit/pulpit20030904.html

    [ reply to this | link to this | view in thread ]

  2.  

    Re: startups

    identicon
    Anonymous Coward, Sep 12th, 2003 @ 9:12am

    However, taking money for a bad deal beats unemployment.

    [ reply to this | link to this | view in thread ]

  3.  

    VC climate

    identicon
    TJ, Sep 12th, 2003 @ 10:30am

    Your post is a bit one sided. Valuations are relative to the market environment. So if you are in a fast growing market, which you will be seeking VC, the real value depend on what future or actual competitors are raising. This is a major factor. Another one is that exits are still only predictable not realizable in the moment. Therefore it's prized like an option with a major premium.

    [ reply to this | link to this | view in thread ]

  4.  

    Re: VC climate

    icon
    Mike (profile), Sep 12th, 2003 @ 10:48am

    Your post is a bit one sided. Valuations are relative to the market environment. So if you are in a fast growing market, which you will be seeking VC, the real value depend on what future or actual competitors are raising. This is a major factor. Another one is that exits are still only predictable not realizable in the moment. Therefore it's prized like an option with a major premium.

    Indeed, indeed. I'm reminded of the big online pet store dot com race in 1999. About five of those companies started at the same time. One of them (can't keep it all straight now) raised about $60 million - and when a reporter asked the CEO "what differentiates you from all these competitors" the CEO said "we have raised more money".

    Within a month at least two other pet dot coms had raised more.

    Anyway, if you really believe that the market is heating up, doesn't it make sense to hold out until valuations are higher?

    [ reply to this | link to this | view in thread ]


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