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VCAOnline

Venture-Backed Valuations Dip Again

Venture Capital Fundraising at Its Lowest Point in Seven Years, According to VentureOne

SAN FRANCISCO, Dec 4, 2002-- Valuations of venture-backed companies continued to decline mildly in the third quarter of 2002, according to VentureOne, the leading information provider of the venture capital industry. The median pre-money valuation fell from $11 million in the second quarter of 2002 to $10 million in the third, remaining in the neighborhood of 1996 figures. From an industry perspective, the most highly valued sector is the biopharmaceuticals segment of healthcare, where the median jumped from $10 million in 2Q02 to $22.3 million in 3Q02.

However, John Gabbert, VentureOne's Vice President of Worldwide Research, cautioned against excessive emphasis on biotechnology valuations. "While growing, biopharmaceuticals is still a small sector, and a sharp fluctuation from one quarter to the next may easily result from the distribution of deals among rounds." Indeed, the percentage of seed and first-round deals, which was in the fifties during the first two quarters of the year, declined to 43% in the third quarter.

Valuations continued to regress toward the median, with earlier rounds rising in value and later rounds declining. Second-round financings increased from a median valuation of $12.5 in 2Q02 to $14 in 3Q02, while later rounds dropped from a median of $25 million to $18 million. However, more later-stage rounds were completed than in any other round class, resulting in the overall decrease.

The one area in which valuations have been remarkably consistent is the shipping product category. These companies have maintained a median pre-money valuation of just over $12 million throughout 2002.

Fundraising was negligible in the third quarter, with $1.2 billion committed to venture capital funds. This is the lowest quarterly total since 2Q 1995, when $520 million was raised for venture investment. The largest venture capital fund closed in 3Q02 was Outlook Ventures III, at $140 million.

The investment figures included in this release are based on aggregate findings of VentureOne's proprietary US research. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early-stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors.

About Alternative Investor: VentureOne & The Private Equity Analyst

Alternative Investor, the premier provider of information products for private market professionals, leverages the research strengths of VentureOne with the editorial expertise of The Private Equity Analyst and The Venture Capital Analyst. Our databases, publications, conferences, directories, and customized research offer investors and industry service providers the comprehensive information they need to make informed investment decisions and stay abreast of industry trends and events.

Flagship products include The Private Equity Analyst newsletter, covering private equity fundraising and investment; VentureSource, an Internet database of financial and valuation information on startups and investors worldwide; The Directory of Alternative Investment Programs, profiling institutional investors and their investments in private equity; and The Private Equity Analyst Conference and VentureOne Summit, the nation's leading private equity and venture capital events.

For more information about Alternative Investor, please visit our web site: www.AlternativeInvestor.info.

CONTACT: Tamar Zemel, Senior Communications Manager of VentureOne/The Private Equity Analyst, +1-415-538-2658, or corpcomm@ventureone.com

 

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