Competition among venture capitalists has raised valuations in startups to “frothy” levels, particularly for consumer Internet companies, according to Matt Murhpy, a partner at
After a slow 2009, there is a rush to invest, which has raised prices of startups and sent Kleiner Perkins looking for earlier stage companies, Murphy said at the Reuters Global Technology Summit in San Francisco last week.
For Kleiner Perkins, Murphy manages what is now a $200 million fund focused on applications for the iPhone and other Apple devices. The iFund, which was launched in 2008 with $100 million, has backed game designer ngmoco, texting provider Pinger and music discovery service Shazam.
“It’s gotten pretty competitive out there now for the best ventures,” he said. “It’s gotten frothy for new investments.”
Investors who were on the sidelines through most of 2009 because of the slow economy are rushing back in, Murphy said.
“That frothiness is pretty broadly spread right now, especially among consumer Internet” he said.
Murphy said that the iFund has made 14 investments so far and is looking at investments in health care and education-related applications for the iPad. Such apps could allow, for example, doctors to walk around with an iPad chart of their patients, rather than a clipboard.
The iPhone is seeing new competition from devices running the Android environment created by Google Inc., but for now Apple is the main platform, he said. Developers are not considering starting off with Android, he added. More than 200,000 iPhone apps already are available and more are being developed.
“It’s a fairly Darwinian environment,” Murphy said. “We have received something on the order of 7,500 to 8,000 business plans so far.”
With the doubling of the iFund earlier this year to $100 million, Murphy said that Kleiner began receiving 50 to 200 business plans a day.
In wide-ranging remarks, Murphy also said he is competing more with angel investors, who make smaller investments than VCs, in the race to find good companies at a reasonable price.
“We are doing a lot more seed investing now,” he said. —Poornima Gupta, Reuters