Some startups in the “hot” sectors are getting insane valuations based on projected revenue!
Hold on here, I just had a de ja vu moment – I’ve been here before… let me see. It was 1999 – 2000. I remember flying to Boston and New York for a two day visit to two venture funds and a private equity group to raise a mezzanine round of financing prior to the IPO of a client. My task was to get commitments for twenty million. These were two funds that we had met with several times and we knew that they were very interested in our space. Well I was successful times three – I got commitments for up to sixty million and spent no more than four hours with each group!
I remember flying home to Utah and shaking my head, wondering how I just accomplished what I had done. Now I remember what I learned that time around – there was no rationale around valuation or investment criteria. I’ve also recalled the aftermath of the bubble bursting – the so called “nuclear winter” of raising capital. No one was making new venture investments and a lot of businesses folded.
Lest we be forced to re-live history, let us remember the lessons from the past. I found this blog post titled ‘Another Prick; Is the Bubble Over?‘ that does a good job of reminding us – read and learn or re-live and suffer!!!
Here is the full reference to the post I mentioned: http://blog.openviewpartners.com/another-prick-is-the-bubble-over/?referrer=exacttarget