NEW YORK (
) -- Valuations among Silicon Valley startups rose in the third quarter, according to a survey released this week from law firm Fenwick & West.
Up rounds exceeded down rounds 52% to 30%, meaning that companies receiving venture funding are commanding higher valuations than they previously received. This was the fifth quarter in a row when up rounds exceeded down rounds.
Companies receiving venture funding showed an average price increase of 28% compared to their prior funding round.
Internet and digital media companies had the best valuation-related results in the quarter.
Hot startups that received funding this quarter include smart-grid star
, which added $106 million to its piggy bank, and biofuel company
, which raised $110 million.
While the survey results are positive for existing investors whose slice of the company is worth more, the news also bodes well for startups.
Macro trends affecting the venture capital industry, however, are not as rosy. U.S. venture capitalists invested $5.5 billion in 662 deals during the third quarter -- a drop from the $7.6 billion invested in 740 deals in the previous quarter, according to DowJones VentureSource.
Additionally, since the first quarter of 2009, the amount of capital venture capitalists invested into companies was greater than the amount of capital committed to venture funds. This trend is not sustainable, said Barry Kramer, a partner at Fenwick & West.
"Venture capitalists can't invest money that isn't provided to invest," he said.
Overall, it's a "mixed picture" for the VC industry, said Victor Shum, a partner at Jeffer Mangels Butler & Mitchell. "Short term, it's a positive trend that investments are being made at higher valuations, but long-term it's more troubling."
Survey results were based on the terms of venture financings for more than 100 companies based in Silicon Valley.
--Written by Olivia Oran in New York.
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