A valuation is simply an estimated value of a company and is often based on assumptions surrounding the company’s current and future potential. There are several factors to consider when valuing a company including the startup stage that the company is in, prior successes, how much money is needed and for what purposes, the type of investor that is being targeted, how similar companies are valued, the management team of the company and the exit strategy…just to name a few.
How Startup Valuation Works
The following infographic by Founders and Founders details how startups are valued:
Although the legal industry is massive ($300B), it is seeing a drop in funding by 16% year-over-year as investments are concentrated at the seed stage and exit activity is lukewarm. Funding to legal tech startups barely topped $100M across 30+ deals, with the largest deal representing 45% of total investments.
Oddly enough, the industry actually experienced a 41% increase in deal activity despite the 16% decrease in actual funding as depicted in the graph below:
Graph thanks to CB Insights.
Decline in Funding for Social Media Monitoring
The Statistics Don’t Lie
Late-stage financing for social media monitoring and analytics companies has all but dried up. With exits sagging, clearly this fad has reached its conclusion. Over the past year, $128M has been invested in such companies across 25 deals. This represents a decline of both funding and deal flow by 39.9% and 28.6% respectively as demonstrated in the graph below:
Late-stage financing for social media monitoring and analytics companies has all but dried up. TSG Enterprise. The Startup Garage
Of Those That Have Exited
The majority of exits have consisted of small, early stage companies who never achieved critical mass and who were acquired by larger, household companies primarily for talent or technology. The most notable exit came from Radian6 which was acquired by Salesforce in 2011 for $326M, which was nearly 3X larger than all 25 exits in the past year.
If you are a social media monitoring or analytics company, get out while you can. If you are thinking of launching or investing in one, think twice and definitely rethink your exit strategy.
Graph thanks to CB Insights.
While financing in the Asian eCommerce market remains hot, exit valuations remain rather dreary.
Since 2010, $6.9B has been invested in Asian eCommerce companies across 383 deals from venture capital investors. Both deal volume and funding activitiy to the region are up 30% and 56% year-over-year respectively. Not surprisingly, India and China dominate the majority of this activity.
While the number of exits has continued to grow, the valuations of these exits have not been as high as investors might have hoped. The majority of exits have been relatively small as far as venture-level exits are concerned, at less than $50M. Nonetheless, there were 29 exits of Asian eCommerce companies in 2012 with 14 exits year-to-date in 2013. Despite 60% of Asia’s disclosed eCommerce exit valuations coming in at less than $50M, clearly investors believe the tide will turn as they continue to pour millions into the market.
Statistics thanks to CB Insights.
Big Data investment has been gaining momentum seeing nearly $5 billion of funding over the last five years. 2012 was the biggest year of deals and saw YoY growth of 19.5% over 2011. The graph below highlights the five-year financing trend to Big Data companies.
In addition to the acceleration in financing activity, big data exits have also increased with 2012 seeing 20 exits including several IPOs. IBM and Oracle lead the pack with the most acquisitions of Big Data companies.
Below is the five-year financing trend to Big Data.
The Big Data exit activity level has also seen a sizable uptick with 2012 seeing many exits via M&A and 3 IPOs including ed up as well.
More information including a link to the full Big Data Report can be found here.