How art dealers are like venture capitalists

August 10, 2009

Until now:

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There’s one thing that art dealers and venture capitalists have in common: a severe allergy to “down rounds”. A dealer will never sell an artist’s new paintings for less than the cost of the paintings in the last show, and a VC-backed company will never raise funds at a lower valuation than in the last round of funding.

Until now:

We analyzed the terms of venture financings for 89 companies headquartered in the Silicon Valley that reported raising money in the second quarter of 2009.

Down rounds exceeded up rounds 46% to 32%, with 22% flat. This was slightly better than 1Q09 when down rounds outpaced up rounds 46% to 25%, with 29% flat. The past two quarters are the only quarters since 4Q03 in which down rounds have exceeded up rounds.

The Fenwick & West Venture Capital Barometerâ„¢ showed an average price decrease of 6% for companies receiving venture capital in 2Q09 compared to such companies’ prior financing round.

I don’t know how you’d even begin to do this kind of analysis for primary art-market prices, but it would be fascinating. Have art dealers finally capitulated and started cutting their list prices from boom-era levels? Or are they just offering much larger discounts these days?
(Via Stone)


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