Values suffer as VCs focus funds inside

It’s taking venture capitalists longer to cash out of startups, causing firms to invest more in their own portfolio companies than in new deals, data shows.
The increased use of so-called inside rounds, in which no new investors join in a private equity funding, not only means less capital for entrepreneurs seeking first-time funding, but also means tech startups are having a harder time determining a current valuation because a company’s valuation is often recalibrated as new investors join an investment round.
Experts say a vicious circle is being created as a result: An accurate valuation is critical in making a merger or acquisition deal happen, but with no new investors, most potential acquirers are taking a harder line on what a potential acquisition is truly worth — and that is slowing M&A deals, industry experts say.