Valuations of technology start-ups before investment have soared to their highest levels since the dotcom boom as venture capitalists seek to deploy large amounts of cash in search of the next big thing in the Internet, telecommunications and healthcare sectors.
A study released yesterday found that the median value of a pre-investment start-up hit $18.6m in the first quarter, up $3m from last year. The figure is the highest since the fourth quarter of 2000, when the median value of a company before accepting venture capital funding topped out at $23m.
The rise in valuation price comes as venture capitalists scour the technology sector for places to invest cash they have raised over the past year, amid a surge in interest in communications, Internet and healthcare start-ups.
“Investors are affixing higher valuations to later-stage IT and healthcare companies as they continue to place bigger bets on the most promising startups nearing exit in these segments,” said Steve Harmston, director of research at VentureOne.
VentureOne said that higher acquisition prices and an increase in the number of healthcare companies seeking initial public offerings could also have played a role.
Later-stage telecommunications companies saw the biggest increase in median valuation. The median value of a telecoms startup rose to $82.8m, up from $29.9m just one year ago. The median value of a later-stage software startup rose to $35.5m, up from $19m last year.
First round investments were the only investment class to experience a drop in pre-investment valuations. The median valuation of a first-round startup fell to $5.9m from $6.5m one year ago.
In Europe, median pre-investment valuations rose to €6.1m, their highest level since hitting Euros 7m in 2000. Second-round valuations nearly doubled to €10.4m.
“Last year’s liquidity climate in Europe continues to encourage higher valuations across all sectors,” said Mr Harmston.
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