News
Venture-Backed Valuations Rose In Q1 2004
Full apportionment credit is hereby given to VentureOne.
Continuing a trend of steady improvement for three consecutive quarters, valuations of U.S. venture-backed companies rose in the first quarter of 2004. The overall median premoney valuation reached its highest level in more than two years at $13.7 million, up from $12.1 million in the fourth quarter of 2003, according to VentureOne, a wholly owned subsidiary of Dow Jones & Company.
By industry, health-care companies posted the highest valuations; the median valuation of a health-care company reached $18.4 million this quarter, holding steady with the fourth quarter median. The number was sustained by increased quarterly valuations for biopharmaceutical companies, which surpassed the $30 million mark for the third quarter in a row. The medical devices segment also saw its median premoney valuation increase to $19.3 million this quarter.
"In the post-bubble environment, health-care companies have now established a two-and-a-half- year record of posting higher valuations than information technology companies," noted John Gabbert, Vice President of Worldwide Research at VentureOne. "While there was a smaller pool of these health-care companies receiving financing this quarter, investors are putting more capital at higher valuations into the select companies they fund. The increased valuations in this segment also reflect the appetite for health-care companies by the public market and corporate acquirers."
The median premoney valuation for health-care companies completing later rounds, defined as the third round and beyond, reached $60 million this quarter, an amount last seen in mid-2000. The median valuation for later rounds within information technology also increased, to $25 million, the highest level in more than two years. By development stage, companies identified as shipping product saw the median valuation rise to $13.8 million, the highest amount for this development stage since 2001. Companies at the profitable stage also saw an increased valuation, to $16.1 million.
In terms of fund raising, with $4.3 billion committed to new venture capital funds, the first quarter validated the projections of an outlook study performed by VentureOne and Ernst & Young in late 2003. It was the highest fund-raising quarter in more than two years, with some large funds raised by long-standing venture capital firms. Ten of the funds were at $200 million or larger, and one fund neared the $1 billion mark: the $900 million Technology Crossover Ventures V fund.
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