Angelsoft.net, a software provider to VCs and angel investors, reports that the valuation for funded start-ups in the fourth quarter of 2008 fell by 25% when compared to the prior quarter. From October through December groups reported investing in 128 deals with a median pre-money valuation of $3 million. That is a 25% drop from the median pre-money valuation of $3.9 million for the 123 deals that received investment from July through September. This represents the largest quarter-to-quarter drop in the four years that Angelsoft has been tracking valuations through their software. Although the trend is worrisome, Ryan Janssen, Angelsoft’s COO, warned against reading too much into the numbers, and also points out the decline is more moderate than the decline in equities. “Listen, when the price investors are willing to pay for a few guys and an idea drops less than the price they’re willing to pay for companies on the S&P 500, we’re in pretty good shape.”

Activity levels, at least as measured by use of the Angelsoft system, actually increased during the quarter, a fact Janssen terms “damn near a miracle.” When asked about other trends in the last quarter, Janssen said investors were increasingly seeking companies with plans to reach breakeven without needing additional funding. “Angels in particular aren’t making investments that require follow-on rounds. They want to know you can survive with the money they put in.”

Go to: Yahoo! Finance

Posted February 25th, 2009 under Tech Transfer

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