A New Sign Of An Internet Bubble Amid Mixed News On Valuations

Another suggestion of an Internet bubble surfaced this week amid mixed signals on the overall portfolio valuations.

A survey from Fenwick & West found that company valuations in the Internet/Digital Media business outperformed those in other industry sectors.

Overall 52% of 107 companies receiving financing in the third quarter negotiated up rounds. Thirty percent accepted down rounds and the remainder (18%) had valuations that were unchanged.

But if you zero in on the Internet/Digital Media section of the report, you notice startups nailed it. Ninty percent had up rounds while none reported a down round.

No other industry sector did as well. The closest (lifescience) saw valuations rise for 64% of companies while 27% settled for down rounds.

Some caution is required with the results. The survey’s sample size is small. Only 10 companies qualified as Internet/Digital Media businesses. A larger sampling is necessary to draw a firm conclusion.

What’s more, Dow Jones Indexes issued a less sanguine report on valuations. The U.S. Venture Capital Index was down 18.29% in the second quarter due to the general decline in equity values and several “disappointing exits.”

 

“Year-to-date we have a drop in values, with most of that decline in the second quarter,” said Sand Hill Econometrics founder Susan Woodward in a press release. “However, venture values are up 57% from the trough in February 2009”

Nevertheless, with observers such as Union Square Ventures’ Fred Wilson and Kleiner Perkins’ John Doerr agreeing an Internet bubble is here, the Fenwick valuation data is worth considering.

That’s why we are turning to you, Dear Reader. If you have a story to tell about Internet valuations, please leave a comment on this post. We look forward to your observations.