Investors Warming to Higher Valuations—for Some

Last week, HotelTonight enjoyed something that had started to seem like a faint memory in Silicon Valley: an up round. The hotel booking site raised $37 million at a valuation of $400 million, up from about $300 million. The funding came not long after a few other bigger startups raised money at higher valuations, including Instacart, WeWork, SoFi and Airbnb.

The private tech landscape is starting to thaw—slowly—after a chilly period over the past 18 months. The number of up rounds as a proportion of total fundraisings is up to 73% so far this quarter from 71% a year ago, according to PitchBook, although total fundraisings will likely be down. Overall tech companies raised around $8 billion this quarter, compared to $11 billion a year earlier.

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For also-rans, it’s a different story. “Valuations matter more when it’s not clear you’re the market leader. Nothing erodes economic value than with intense competition,” one investor said.

—Cory Weinberg contributed to this article.

Theresa Maloney commented on this article.
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“Gone are the days when a business with negative gross margins that scales is going to get a big valuation. That could have and probably did happen two or three years ago. It won’t happen now.”