Valuations of US venture-backed companies fell to a two-year low in the second quarter but the rate of decline has slowed from the previous two quarters, according to the latest report from VentureOne.
The findings appear to confirm what has long been evident – that weak public markets and very thin liquidity continue to undermine valuations.
The report said the overall median pre-money valuation of VC-backed companies fell from $19m in the first quarter to $17.7m in the second. The median valuation dropped $3m in the first quarter and a massive $7m in the fourth quarter from its third quarter peak of $29m.
VentureOne’s president and CEO Dave Witherow said: ‘The liquidity market has always affected private company valuations, and given the current limited IPO prospects and declining M&A values, it’s reasonable to expect a negative impact. But being prepared doesn’t make it any easier to accept – entrepreneurs who raised money at higher valuations are facing much more difficult hurdles now.’
Second round valuations decreased more dramatically, falling from a median $25.7m in the first quarter to $19.2m in the second. Seed and first-round valuations also dropped but there was a marginal increase in later-round valuations to $46.4m following a massive collapse in the previous quarter. Later-round valuations fell to $41.4m in the first quarter from $84.9m in the fourth, the steepest quarterly drop on record.
Witherow found some cause for optimism among the general gloom. He said it still looked as if venture capital fund raising this year would be the second best on record, falling only a little way short of last year’s $72.3bn.
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