Are Buyers Bipolar?
David Beisel is quickly becoming one of my favorite VC bloggers because his posts are so good.
On Monday, he gave us this chart in a post he called Bipolarization of Internet Acquisitions in 2005:
I think the data is essentially correct and I agree that "undisclosed" deals are probably under $50M.
If you add undisclosed to Under $50M, you'll get something that looks more like this:
Sorry about the lack of titles, legends,and data labels, I am lazy this morning, but they would be identical to David's chart above.
I think there isn't really a bi-polarization going on in the Internet acquisition market, there is something slightly different happening.
I heard some say this summer that Yahoo! "was thinking that $25M is about the right price for these web services things". That is not a direct quote, but directionally correct.
Buyers are either picking things up before they have a business model, scale, and significant VC investment, or much later. The middle ground (between $50M and $500M) is where the effect of VC comes into play.
If an entrepreneur chooses to raise $10M of venture capital and take significant dilution, then the price at which he can sell and make a decent return goes up. And the price at which the VCs will want to sell goes up too.
That's why there is this valley in the middle of these charts.