SAN FRNACISCO, Calif. – Entrepreneurs seeking venture capital are in the strongest position they have been since the “dot com” boom ended in 2000, based on new statistics from Dow Jones VentureOne.
The median pre-money valuations of U.S. venture-backed firms soared to $18.5 million in 2006, the highest since the dot com bubble burst and the telecom industry imploded along side it. Valuations that year reached $25.1 million.
Fourth quarter valuations soared in the fourth quarter to a median of $20 million compared to $11.7 million in the last quarter of 2005.
Valuations for all of 2005 stood at $15.9 million.
The increase in valuations mirrored a jump in venture funding in 2006, with VentureOne reporting more than $25 billion in investments, the highest total since 2001.
“The rebounding opportunities for venture-backed companies to achieve liquidity, either via an IPO or an acquisition, are boosting these median valuations higher,” said Steve Harmston, director of global research for VentureOne, in a statement. “In 2006, the U.S. had the strongest exit climate in several years with the median pre-money valuation of IPO companies reaching $201.6 million and a median $52 million being paid to acquire companies.”
Leading the way in valuation increases were those for information technology and healthcare firms, VentureOne reported. IT valuations rose to $20.8 million in 2006, double the median of 2003. Healthcare firm valuations climbed to $19.5 million.
On the IT side, VentureOne statistics showed that communications companies are back in favor with investors. Valuations rose to $29.9 million, up a third from 2005.
The value of electronics and computer hardware firms also skyrocketed, to $24.9 million last year from $14.9 million in 2005.
Valuations increased at all levels – seed, first round and later rounds, VentureOne reported.
Seed values hit $2.4 million, up $600,000 from 2005.
First-round financings increased to $6 million, up $500,000.
Later-round median deals increased to $35.4 million from $32 million.
In Europe, valuations increased as well, VentureOne reported. Pre-money valuations climbed to $7.3 million, up from $5.2 million.
Especially hot in Europe were seed rounds, which tripled in value to $2.47 million.
Later round valuations soared to $14.8 million from $11.44 million.
“The increased valuations reflect the increased interest of investors to refocus on early-stage rounds in Europe last year,” Harmston said. “Additionally, the positive exit environment for venture-backed companies in Europe, particularly in the IPO market, is contributing to higher later-stage valuations.”
