Start-up Sales Decline, But Prices Rise
July 18, 2005--The median selling price of a U.S. venture-backed start-up rose to $70 million in the second quarter, the highest it's been in five years, according to venture capital research firm VentureOne.
The rise in price is attributed in part to these start-ups' staying power. More than half of the companies bought in the second quarter were initially financed between 1999 and 2001, and their ability to survive the recession is seen as attractive to corporations that now have sizable amounts of cash on hand.
Corporations spent $14.05 billion to acquire venture-backed businesses in the first half of the year -- with $6.77 billion in the second quarter -- also the highest since 2000.
Although prices have gone up, the number of mergers and acquisitions has gone down. Corporations acquired only 77 venture-backed businesses in the second quarter compared with 100 in last year's second quarter.
A few high-priced deals, such as Experian's $330 million buyout of Lowermybills.com and Aetna's $400 million purchase of health care technology provider ActiveHealth Management, helped to pull the median price higher. But these deals are part of a trend, according to Garlick, who noted an equal amount of top-dollar sales in the first quarter.