Startup Valuations Dropped 24% in Q4
VCs commonly note that it takes longer for valuations to correct among private companies than among public ones. But the lag-time might not be that long, judging by fourth quarter data from Angelsoft, a software company that tracks valuation trends.
Today, the company reported that valuations for funded startups in Q4 of 2008 fell by 24% when compared to Q3 of the same year. The company’s software, which is used by more than 450 angel groups and venture funds worldwide, tracked a total of 128 deals in the quarter with a median pre-money valuation of $3 million. In the third quarter, it tracked 123 deals with a median value of $3.9 million.
Angelsoft says the Q4 numbers represent the largest quarter-to-quarter drop in the 4 years that it has been tracking company valuations.
However, there was some encouraging news embedded in the numbers, according to Ryan Janssen, Angelsoft’s COO. He called it “damn near a miracle” that angels and vcs actually did more deals on its platform last quarter than in the prior one.
Tom said on January 8, 2009
> However, there was some encouraging news embedded in the numbers, according to Ryan
> Janssen, Angelsoft’s COO. He called it “damn near a miracle†that angels and vcs actually did
> more deals on its platform last quarter than in the prior one.
My question: did the number of VCs/angels that use “Angelsoft” simply increase last quarter,
so the comparison to the prior quarter is not valid? i.e. how many users did Angelsoft have
in Q3 vrs. Q4?
Joanna said on January 8, 2009
The deal count may be up solely because there are more deals being logged on Angelsoft. In fact, that’s quite likely the case, and when Janssen says he’s encouraged by the numbers, he’s taking that into account.
dave mcclure said on January 9, 2009
still, i can’t imagine their growth is more than 25% Q-to-Q, so even with basically no change in # deals, that indicates there’s a still a market going on out there.
*only* a 24% drop in valuation, and *only* slightly-above-flat (or even a 25% drop) in # deals would indicate a much healthier market than most people’s commentary would otherwise indicate.
a 25% or less pullback in Q4 is “manageable” from a startup perspective.
Ryan Janssen said on January 15, 2009
Our stats page (http://angelsoft.net/industry/index.seam) can help provide some clarity about how much of the change can be attributed to Angelsoft’s growth vs. the market. We’ve experienced significant application growth and moderate investor growth during this time. Most investment groups, however, take some time to get up to speed on the platform, so I don’t think they’ve skewed the numbers that much.