Valuations of startups in the online marketing/advertising sectors are going through the ceiling. Usually, private-company valuations tend to be 40 per cent below comparable public valuations, depending on the sector. Now, valuations of private companies are at a premium over the public valuations. [Ouch.]
Some startups in the online sector already have very healthy revenues and so they don't need investment capital. But the founders are taking money off the table by selling stakes to VCs. [Interesting to see such liquidity events because no IPO or sale of company was involved]
Many young startup companies are seeing fantastic revenues - but they can't collect what they are owed fast enough, so they are burning precious reserves between the time they invoice and when they get paid. The VCs can provide a float. For example, with a $5m monthly revenue it's typical to take 60 days to collect payment from large companies, so it needs a float of $10m, which VCs can provide.Foremski in his posting does not queston the supply-side factors in VCs that are driving these very different roles including the VC money glut.
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