Web Start-Up Values Soar

The technology-heavy Nasdaq Composite Index is relatively flat this year. Yet tech company valuations are rapidly rising in one area: closely held consumer Web firms.

Venture-capital investors and others have been bidding up the valuations of consumer Web start-ups this year, particularly of the firms that show the most user traction. In an echo of the 1990s dot-com boom, some investors also are giving lofty valuations to Web firms that have no revenue and that barely have a product out.

Among them: question-and-answer website Quora Inc. in March raised around $14 million in a financing round that inputs a value for the whole company of about $87.5 million, people familiar with the matter have said. The Palo Alto, Calif., firm didn't publicly launch its service until June and hasn't said how it will make money.

Another company, Blippy Inc., which allows people to share and discuss their purchases online with friends, raised $11 million in a deal valuing the whole company at $46 million earlier this year. In June, mobile-technology firm Foursquare raised $20 million in funding at a company valuation of $95 million, up from a $6 million valuation less than a year earlier, a person familiar with the matter said.

Valuations for closely held companies are typically guesswork. But the strong numbers for consumer Web companies indicate how parts of Silicon Valley's start-up market are bouncing back following the recession. The recovery already started showing up last year, when Twitter Inc. was valued at $1 billion during a round of funding, up from $95 million in mid-2008 when it raised a previous round of funding, according to research firm VentureSource, a unit of Wall Street Journal owner News Corp. More...

09-23-2010 05:41