Value of Startups Rise in Late '09

TechFlash reports: Startup valuations increased during the fourth quarter, a sign that the fortunes of battered entrepreneurs and venture capitalists may be turning for the better. Median pre-money valuations increased across all stages of startups, with series B financing deals showing the biggest improvement, according to the Cooley Godward Kronish venture capital financing report. But don't get too excited.

Valuations have not quite climbed above the levels of 2006 and 2007. And while "up" rounds also increased during the fourth quarter of last year, they too are off when compared to the previous three years.

In fact, only 45 percent of deals during the fourth quarter experienced increases in valuations compared to the previous round. (Known as an "up" round). That compares to 68 percent, 62 percent, and 81 percent in 2008, 2007, and 2006, respectively. Still, that was better than a dismal 26 percent in the third quarter of last year.

"The increases in the number of deals, average pre-money valuations and aggregate dollars raised in the fourth quarter point to a potentially improving landscape for venture financing deals," said Craig Jacoby, who leads Cooley Godward's Emerging Companies practice.

The Cooley study follows a similar report released last week by the law firm Fenwick & West, which also tracked positive momentum when it comes to the percentage of "up" rounds during the fourth quarter.