VCs do better in 2003
The venture capital business saw a turnaround in 2003 according to this Wall Street Journal story (subscription required) and VCs began to throw money and valuations at entrepreneurs all over again if you were in the hot social networking sector. Did no one learn anything from that dotcom experience we just went thru?
Indeed, some promising companies that weathered the downturn, especially those turning a profit, found themselves with multiple offers, or term sheets. Hungry venture capitalists piled on -- and, in some cases, bid up to bubble-esque levels -- the valuations of companies in a few "hot" sectors, such as security, wireless, and social networking via the Internet. One case in point: Friendster, a Sunnyvale, Calif., networking Web site, whose $13 million investment from Benchmark Capital and Kleiner Perkins Caufield & Byers pushed its valuation into the $53 million range, according to people familiar with the matter.
Such deals pushed the median valuation of start-up companies to the highest level since 2001: $11.4 million in the third quarter, the most recent data show. That increase followed an eight-year low of $8.7 million in the second quarter, according to Alternative Investor's VentureOne, an industry tracker in San Francisco.