I've written a little about lower valuations over the last few weeks. A few people have been in touch to question this (I love a good discussion).
Here's a report that confirms my views: valuations are indeed down. Law firm Cooley looked at deals where it was involved (it has offices in the US, Europe, and China) and reported fewer deals, fewer valuations. The exception was post Series D raises, where there was a sharp value increase, but these are not really representative of the industry mean.
Not surprisingly, M&A seems to be active as founders want to cash in before values shrink even further. Brad Feld, MD at the Foundry Group, commented as part of the report that “M&A activity on one hand seems very lively, although it’s less in everyone’s face.”
It's still not 100% clear why this trend is happening, but I have argued that it is a fall out from the horror shows put up by the big tech companies missing their targets, and the media sized ones refusing to IPO. Investors want to see a return after all.
Let's hope the forthcoming Xmas season gives the industry a little more cheer.