At a party the other day, one start-up founder told me the secret of Silicon Valley’s sky-high valuations. “I’ve had investors tell me, you can name any valuation you want, we’ll just make up for it in the terms,” he said.
His comment points to the fact that in the world of tech start-ups, the word “valuation” means something a bit different than it does for public companies. The favourable terms and generous downside protections that accompany many investments help limit the risk that venture investors take. Read more
A bitcoin start-up has bagged fresh investment from one of Silicon Valley’s best-known venture capital firms.
Coinbase, which provides online bitcoin accounts, said on Thursday that it secured $25m in a round of fundraising that was led by Andressen Horowitz, writes FastFT. Read more
In a rare event, a crowdfunded start-up has gone on to raise mainstream venture capital.
Digital Spin, which raised £60,000 in August from platform Seedrs, has now received several times that amount from Passion Capital and Balderton, two of London’s most active venture funds. Could this be the start of growing links between amateur and professional early-stage investors? Read more
Is Silicon Valley drying up? David O Sacks, founder and CEO of enterprise social network service Yammer, certainly seems to think so. Others, like Marc Andreessen, disagree. That makes for a lively debate, and it is taking place on perhaps the most apt forum of all – Facebook, writes Vinjeru Mkandawire and Robin Kwong.
“I think Silicon Valley as we know it may be coming to an end,” wrote Sacks on his Facebook page over the weekend, just before the social networking site’s shares sank to half its initial offering price. Read more
Funding Circle, a UK-based online marketplace where individuals lend directly to small businesses raised $16m of Series B financing from joint investors Index Ventures and US-based Union Square Ventures. This brings the total amount raised by the company to $21m. Launched in August 2010, the company now facilitates around £1m in loans each week. The company is planning to use the funds to double its staff over the next year.
Dragonplay, a Tel Aviv-based games developer raised $14m in a Series A funding from Accel Partners. Dragonplay specializes in makes card, casino and board games for smartphones and social networks and is best known for Live Holdem Poker Pro, which has more than 2m monthly active players. The company will use the investment to expand its portfolio of games. Read more
The frenzy to invest in mobile payments providers continues with Boku, the San Francisco-based start-up raising $35m, in a funding round led by Telefónica Digital. It will take the total raised by the mobile transactions company to more than $75m since 2008.
Investors in this round also included New Enterprise Associates (NEA), Andreessen Horowitz, Benchmark Capital, DAG Ventures, Index Ventures and Khosla Ventures. Read more
A little bit of much-needed consolidation is finally taking place in the European Venture Capital industry. On Wednesday DFJ Esprit and Tempo Capital announced plans to merge their secondary investment businesses.
Tempo is a specialist in this market of buying existing venture capital investments, and DFJ has been dipping its toes in since 2007 when it bought out Cazenove’s venture capital fund. Read more
The direction in which venture capital is moving is clear: fewer funds investing ever-larger amounts in companies that are good candidates for an IPO. What this means for the industry’s long-term health is another matter. Read more
Tech news from around the web:
- Bulging corporate balance sheets – and a growing reluctance among traditional venture investors such as state pension funds to dabble in risky investments - means that big companies are getting back into venture financing, SilliconValley reports, with nearly 9 per cent of all capital being committed to start-ups last year coming from the corporate sector.
Nobody likes to pay more in taxes. But venture capitalists don’t have much of a leg to stand on in their fight over the way VC profits are treated in the US.
And there is more than simple equity at stake here. If anything, higher taxes might actually be a good thing for VC – at least, as far as the investors are concerned, if not the many others who have been riding this particular gravy train. Read more
The tough times for venture capitalists in the US persist.
The first three months of this year marked the slowest opening quarter to any year since 1993. The $3.6bn raised for new funds was down 31 per cent from the same time last year, and the 32 funds marked a 44 per cent decline, according to Thomson Reuters and the National Venture Capital Association (pdf).
The sluggish opening to the year is probably the result of the stubbornly closed public markets. “Many firms have been waiting until the exit market improves before embarking upon their fundraising efforts,” said NVCA president Mark Heesen. “This wait has been considerably longer than many firms anticipated.” Read more
The London technology community was dealt a blow on Tuesday when it emerged that Atlas Venture was planning to move its European operations to Boston. All new European investments will be co-ordinated from there, and Fred Destin, the London-based partner who has backed companies like Seatwave and Dailymotion, will be moving across the Atlantic this summer.
Other London-based partners, Christopher Spray, Graham O’Keefe and Regina Hodits will remain in London but only to service existing investments. They will not be involved in bringing new companies in to the portfolio. Which means that, as exits eventually arrive for the likes of Seatwave, these portfolio managers will have less of a role, and Atlas is likely to be slimming down further. Read more
There was a strained, unreal air today hanging over Silicon Valley’s Rosewood Hotel, the newest addition to the local venture capital enclave on Sand Hill Road.
This was the setting for Tony Perkins’ annual Venture Summit – always one of the best places to check up on the mood of the Valley’s start-up financiers.
What made it unreal was an odd blend of gallows humour and expectant anticipation. Even in the worst of times, these professional optimists can still find something to look forward to: it’s spelled I-P-O. Read more
Dailymotion, Europe’s biggest online video challenger to YouTube, on Thursday said it had raised $25m in a new funding round led by the French Sovereign Fund (FSI). The French strategic investments fund, which is 49 per cent owned by the government, contributed $11m to the round, with all the existing investors, Advent Venture Partners, AGF PE, Partech International and Atlas Ventures, taking part.
Dailymotion chief executive Cedric Tournay also said the company had now hit break-even and expected to make a profit next year. The site now attracts around 60m unique users each month, up from 35m a year ago. Although it is dwarfed by YouTube, it is doing well to survive and grow in a market where competitors like Joost and Veoh have had to retreat. Read more
Silicon Valley cheered three months ago when there was a slight uptick in venture capital investment during the second quarter of the year. Sure, investment was down 50 per cent from a year ago, but at least it was up from the first quarter, representing a “new normal” from which growth could begin anew.
Turns out the celebrations were premature. Investments in US venture-backed companies dropped in the third quarter, putting 2009 on track to be the worst year since 2003, according to new data from Dow Jones VentureSource. The total number of deals was up to 616, from 595 the previous quarter. But the total dollars invested was down to $5.1bn from $5.4bn.
“The slow recovery we’ve seen for venture capital has faltered,” said Jessica Canning, director of global research at Dow Jones VentureSource. “As liquidity and fundraising lag after the economic meltdown in 2008, investors have no choice but to keep a tight rein on investments until the industry is on more solid ground.”
Nor are many venture firms raising new funds. Just 17 VC firms raised new funds in the third quarter, the smallest number since the third quarter of 1994, according to Thomson Reuters and the National Venture Capital Association.
What’s worse, VentureSource didn’t take a rosy view of the future. Read more
Now that the first half of the year is over, it’s a good time for taking stock. These numbers pretty much tell the story of the tech financing markets:
Down 57 per cent. The value of tech IPOs and M&A in the US in the first half of 2009, compared with the same period last year (figures from Dow Jones Venture Source.) At only $2.8bn, this is back at 2003 levels. The NVCA reckons that the amount that all venture-backed companies raised from “liquidity events” fell by 53 per cent, to just under $4bn. Read more
When I caught up with Bill Hambrecht on Wednesday, he certainly wasn’t overflowing with sympathy for venture capitalists (the NVCA just launched a campaign to counter what it claims are structural obstacles that discourage young companies from seeking a listing on Wall Street, hurting VC returns.)
Asked why there weren’t more IPOs even before the financial crisis took hold, the veteran Silicon Valley financier had this to say: “I think what the [venture capitalists] really don’t like are the valuations.” Read more