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Now is the time to raise money

It is the best time to raise money in four years.

Venture capitalists are giving entrepreneurs more money in exchange for a piece of their companies than any time in the last four years. There is so much money out there that entrepreneurs are negotiating for higher valuations for their companies -- forcing VCs to give them more money to get a meaningful slice of ownership.

The median pre-money valuation of U.S. venture backed companies reached $16.8 million in the third quarter, a 29.2% increase from last year and highest since the second quarter of 2001, according to a report today from VentureOne (sub to VentureWire required).

"The recent rise in valuations is due in part to the rise in prices in liquidity for venture-backed companies, particularly for M&A transactions," said Josh Grove, research analyst at VentureOne. In the third quarter of this year, the median amount paid for a venture-backed information technology company in a merger or acquisition was $59.5 million, the highest it has been since 2000, and about $25 million more than companies were paying a year ago.

While the current median valuation figure still sits well below the mark at the peak of the high-tech bubble - $29.8 million in the first quarter of 2000 - it reflects a significant increase from $9.1 million in the second quarter of 2003 during the downturn.

The difference between the valuations of 2005 and those of five years ago, Grove said, is that later-stage investments, rather than deals with young start-ups, are fueling the increase.

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From: Qumana Investor Blog
Now is the time to jump on the tech train ...
Word from SiliconBeat  isthat raising from VCs for your startup is getting more competitive ...oh not for the start...
Tracked: December 1, 2005 10:46 PM



I couldn't agree more. But I think this goes beyond the VC community. Excess capital permeates the entire technology ecosystem right now.

I posted my thoughts here in case you're interested. http://woodrow.typepad.com/the_ponderings_of_woodrow/2005/11/theres_excess_c.html

Jason on November 30, 2005 2:55 PM
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Matt, I have a consumer Internet app. I plan to look for VCs early next year. Who are VCs out there? Besides the business plan with a great idea and resumes, what should I do to get their attention. Do you have tips and shortcuts? Any advise is very, very welcome.


Shar on December 1, 2005 9:23 AM
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Let me know if the app is ready to market. I might be able to help. I do online promotion for other internet apps like www.stamps.com, www.photo.stamps.com, www.gotomypc.com, www.identityguard.com, www.stopzilla.com, etc.


Terry Whalen on December 1, 2005 11:06 AM
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Shar, I don't know your situation, and don't even know where you live. But as I've advised before, it's all about who you know. Reach out to your friends and family, and ask each one of them if they know any investors. Go to conferences, and try to meet folks. Reach out to people you know who are students, and might have a helpful plugged-in professor. That's first step...


Matt Marshall on December 1, 2005 10:02 PM
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Matt gave you excellent idea, if you are in the valley it is very easy to network with folks who can help you to take to VCs


bala on December 2, 2005 12:41 AM
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Thanks all. I am doing the network. I am in Atlanta Georgia, the VC desert. I am looking at the valley from the distance. This site gives me a lot of good leads. Like today, I found Mayfield is a VC not the maker of washer and dryer;-).


Shar on December 2, 2005 6:59 PM
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Stay away from any VC asking for up front fees! We talked to a VC who said that he would fund any project that we told him about. Pure Hoodia, Pure Hoodia Plus or any other product we could come up with. All we had to do was come up with the 5k of the 15k up front fees. The good thing is that the other 10k would come out of the VC funding. Remember, if it sounds to good to be true, Yah Hoodia it is! - Hoodia

Hoodia on December 8, 2005 12:25 PM
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