Third-Quarter Value Of IT Ventures UpThird-Quarter Value Of IT Ventures Up

The median valuation of U.S. venture-back IT companies last quarter reached $13 million, the highest third-quarter valuation since 2001. Still, the third-quarter valuation dropped by $1.5 million from the second quarter, according to an analysis issued Tuesday by VentureOne, a provider of finance and investment information.

John Gabbert, VentureOne's VP of worldwide research, says the stronger value in IT startups can be credited to investors returning to company-formation investments after divesting older holdings through initial public offerings and mergers and acquisitions. Those divestments have helped investors raise new funds for investing.

"Valuations for later-stage health-care companies jumped with the opening of the IPO window late last year," Gabbert says. "We are perhaps now experiencing a similar phenomenon with information technology as the combination of improved access to the public markets and higher prices being paid for acquisitions provides greater liquidity opportunities for IT companies and their investors."

Within the IT industry, VentureOne says, semiconductor companies, whose value has been increasing steadily for four quarters, had the highest median valuations for the quarter at $24 million overall. That's the highest level for semiconductor companies in more than two years. In addition, semiconductor companies receiving later-stage rounds of financing posted a median valuation of $80 million, the highest amount this quarter for any industry segment.

Among other IT segments, software, communications, and electronics companies also had improved median valuations compared with a year ago--at $12 million, $16.5 million, and $17 million, respectively.

Valuations of IT startups peaked at $30 million in the first and third quarter of 2000 at the height of the dot-com boom.