The debate on the bubble rages on, but there is a small but interesting data point from Fenwick – a Silicon Valley startup law firm.
90% of all series B and beyond rounds tracked by Fenwick for INTERNET companies were up rounds – way more than the software category. Small data point, but that’s a big % above.
November 30th, -0001 at 12:00 am
It is a data point rather than opinion, but sample set of 10 companies so hard to distinguish a trend. Regardless of whether you believe it's a bubble, a boom, or steady as she goes… my take is that the internet companies receiving follow-on financings are the ones performing well. The ones that are doing ok not great or poorly either aren't seeking capital right now or aren't getting funded if they are.
Also as a sector, internet companies have had a much lower % of startups that end up doing down rounds, recaps, etc. Unlike other sectors which require lots of capital before reaching commercial viability (e.g. biotech, data comm, cleantech, etc), the vast majority of internet & digital media companies that haven't built upon prior traction simply don't receive follow-on financing, rather than getting some financing at lower valuations.
November 30th, -0001 at 12:00 am
Hi Lee,
I'm not sure I agree with the statement that poorly performing internet companies are less likely that traditional VC funded businesses in getting the next round of financing. I saw a number of not-so-hot internet companies get down rounds a few years ago when I was a VC.
I looked at older "trends in SV" data from Fenwick and found this quote in the Q4 2009 report: " financings of internet/digital media companies, and software companies (which includes SaaS companies), which had 60% and 65% up rounds, respectively."
So, less than a year ago far fewer internet businesses got up rounds – 60% vs. 90% most recently. You are totally right that this is too small of a sample set to really be valid, but I think there does appear to be some excitement in the internet startup space right now, and I believe that is helping out valuations…
November 30th, -0001 at 12:00 am
But your comment on the only internet companies seeking out financing right now are the good ones may be totally valid; I don't have any ability to see into that and am sure you have a much better view into that than me!
November 30th, -0001 at 12:00 am
yes but small sample size
November 30th, -0001 at 12:00 am
Agree- but getting any kind of data like this is really hard so we've got to go with what we've got, and then make predictions that the sky is falling!
November 30th, -0001 at 12:00 am
True, the data size is small, but interesting stuff.