The latest VentureOne VC funding statistics are out, and the headline is “Valuations Reach Highest Level Since Bubble”. The nut:
According to industry tracker VentureOne, the median pre-money valuation for venture-backed companies in the U.S. was $20 million for the half, compared with $15 million for all of 2005. The last time the median figure reached over $20 million for the year was in 2000, when it hit a lofty $29 million.
Whoa, sounds scary, like the bubble is back. Those are big increases, and serious steps back toward bubble numbers.
Or is it? Because the reported figured is the all-round median, not the mean, not the mode, and it’s not broken out by round. What really matters in venture, arguably, is per-round valuations. So here they are, from the very end of the piece:
Valuations for second, later and restart rounds all were above last year. Second rounds in particular saw strong upward pricing pressure and the median valuation for the half was $20 million compared with $12.5 million in 2005. First round prices stayed steady at $6 million.
Get that? First-round valuations, the place where bubbles are born, were flat in the quarter. Nothing changed. It is later rounds where valuations are going up, which can be read as a positive sign: Business are delivering results, and investors are paying up for those results. I’m hard-pressed to see why that’s a bad thing.