Reproduced below are a couple of paragraphs from an article in VentureWire the thesis of which is that the venture economy has bottomed out. The article, " Later-Stage Valuations Hold Steady In 2Q After Plunging In 1Q" is by Russell Garland.
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The median pre-money valuation for later-stage deals was $35.8 million in the second period, up slightly from $33.5 million in the first three months of the year, according to the latest data from VentureSource, a research unit of VentureWire publisher Dow Jones & Co. The median later-stage valuation for the first half of 2009 stood at $34 million compared with $51.5 million for all of 2008.
Despite the decline from last year, however, the median later-stage valuation remained well above its $20.7 million low for 2003. Prices in the venture industry tend to lag public markets, but the latest VentureSource data indicate that the bottom has been reached for this cycle.
The median first round valuation for the half is actually higher than last year, $7.3 million versus $6 million for all of 2008. This reflects a second-quarter increase in the median valuation of health care and information technology companies closing first rounds.
For second rounds, the median valuation jumped from $9 million in the first quarter to $16.2 million in the second, driven by a sharp jump in the health care sector, which more than offset a decline in IT. The median for the half, however, was $13.8 million, below last year's median of $18.5 million.
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If the conclusions are true, this is certainly a harbinger of good news for entrepreneurs. One thing to keep in mind is that we can be up 50% from a bottom (not that we are yet) and still be down a lot from "normal" (whatever that may be) times. The economy is still shaking out, and what it will look like when a new equilibrium is reached is very unclear.
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