Nivi · October 15th, 2008
“Financings are blowing up, terms are being renegotiated, venture lenders are getting more conservative, and existing investors are stepping up to fill the gaps…
“I guarantee that there are some financings happening right now that are getting done at valuations which would have made sense nine months ago but don’t make sense right now… I also guarantee that there are some financings happening right now that are getting done at valuations at half or even less of what they would have commanded nine months ago, even though the public markets have only gone down about 33% year to date.
“You can look to the public markets for some clues, and everyone I know is doing that, but it will only help so much. We are going to have to make up a lot of this as we go along. But I know one thing for sure. Capital has gotten more expensive in the past month (actually it started getting more expensive late last year) and we all had better reflect that in our plans and strategies.”
This is consistent with my observations and discussions with investors. Investors are looking at the public markets and renegotiating terms or pulling offers altogether. Their argument goes along the lines of “Google is worth less today and therefore so are you.” If you were a smart-ass, you would reply, “We didn’t come up with that valuation, you did.” But that won’t get you far if you don’t have leverage.