We’ve certainly seen our fair share of "down rounds" in recent months, venture capital deals in which the valuation comes in at a lower price point than previous rounds. That recalibration is certainly part of larger economic forces as VCs and entrepreneurs re-think the values they placed on startup companies from a year or two ago.

A survey released today by Fenwick & West points out just how prevalent "down rounds" are becoming — at least in Silicon Valley where the law firm analyzed recent financings for 89 companies.

According to the report, 46 percent of the deals were down rounds while 22 percent showed "flat" valuations. More interestingly, Fenwick notes that the past two quarters are the only two quarters where down rounds have exceeded up rounds since the fourth quarter of 2003.

And the tide has shifted rapidly. During the second quarter of 2008, just 13 percent of deals were down rounds while 68 percent were up rounds.

Furthermore, Fenwick’s Venture Capital Barometer shows an average price decrease of six percent for those companies receiving venture financing during the quarter. That followed a decline in the first quarter — the only two negative quarters since the firm started tracking price movements in 2004.

What does it all mean?

The New York Times’ Brad Stone offers his insights in a story headlined "Falling Valuations: Poison for the VC Industry."

But there are other things at work here too, highlighted by my story yesterday on DevHub which gave up on venture financing earlier this year in order to focus on reaching profitability.

Those stories may become more common as startups try to make their previous venture round last as long as possible or learn to exist on their own cash flows, rather than butt their heads up against tough terms in a new venture deal. (Seattle-based iLike is another example of a company that’s living off its venture reserves and own cash flows at the moment).

Prominent Seattle venture capitalists — speaking in good times — have told me that you should only take venture capital as a last resort. In tough times like these, that’s probably even more important.

The Fenwick report also discusses liquidation preferences, corporate restructurings and other topics.

READ MORE and COMMENT, more 
and Marchex’s sales; Richrelevance scores cash; CTI; and more  

Seattle online local advertising company Marchex could see its revenue further eroded due to the recently announced advertising partnership between Microsoft and Yahoo, with CFO Michael Arends pointing out potential issues in a conference call this week, reports Domain Name Wire.

Onvia, which provides an online service to connect businesses with government contracts, said that its revenue increased 21 percent during the second quarter to $6.2 million as its clients base grew five percent to 8,500. The Seattle company also trimmed its net loss for the second quarter to $197,000.

In a story from TheStreet.com titled "Honey I Shrunk the Tech Sector," Seattle entrepreneur and venture capitalist Martin Tobias predicts more tech M&A deals in the near future.

Bothell biotech Scolr Pharma saw revenues decline 17 percent to $230,789 during the second quarter as royalty payments from Perrigo fell. The company — which finished the quarter with $3.1 million in cash and cash equivalents on the books and is looking at ways to reduce the burn rate — saw its net loss decrease 26 percent to $1.6 million.

Comcast said it plans to begin reselling its WiMax broadband Internet service — dubbed HighSpeed2Go and currently available in Atlanta and Portland– in Washington state, Philadelphia andChicago this year.

Rosetta Inpharmatics founder Stephen Friend — who is in the midst of creating the new Seattle non-profit Sage Bionetworks — is the subject of a detailed Xconomy profile in which he describes how the life sciences non-profit is taking cues from the open source software movement.

 more 

and Zappos parties it up after big Amazon acquisition deal  

Things have been pretty festive over at online shoe retailer Zappos since the company announced it was getting acquired by Amazon.com. First, Zappos CEO Tony Hsieh said he would hand out bonuses and Kindles to staff. Then the company threw a 10-year anniversary party complete with disco lights, carnival games and an open bar. Here are some video highlights of the over-the-top party. Check out the human hamster ball about 35 seconds in.

Previous coverage:
Amazon and Zappos: a good fit?
A blow-by-blow account of the Amazon-Zappos deal
Zappos CEO: ’Nobody was forced to sell to Amazon’

READ MORE and COMMENT, more 

Kindle users flock to freebies  

Amazon.com has raised the ire of some in the book publishing industry for pricing Kindle versions of best-sellers and new releases at $9.99. But what about Kindle books that cost, well, nothing? The Associated Press reports that free books have become top "sellers" in the Kindle store, a development that could hold promise — or peril — for publishers.

AP writes:

Publishers and authors have been nervous that the standard cost for electronic editions of new releases, just under $10, will take away sales from the more expensive hardcovers and set an unrealistically low price for the future. They are concerned, but open-minded, about free books, which present a chance and a challenge: Readers may buy other books, or, they may simply seek more free titles.

Scott Shannon, publisher of the Del Rey/Spectra imprint at Random House, tells AP that free Kindle books are "a huge hot-button topic we’ve been discussing within our division and at the corporate level." He said free books can prompt people to buy other titles, but "in the long term, we have to guard the market. We have to make sure people understand that time and energy goes into writing a book."

Right now the top three bestsellers in the Kindle store — "The Angel Experiment" by James Patterson, "The Briar King" by Greg Keyes, and "Paranoia" by Joseph Finder — are all free. In fact, half of the top 20 Kindle bestsellers are listed at $0.00.

Amazon isn’t the only company offering free e-books. Sony and Barnes & Noble have tapped Google’s huge book-scanning project to add free public domain books to their collections. But Amazon appears to be the only one including free titles in its bestselling e-book list — giving them broad exposure.

Interesting side note: Amazon’s Kindle store is now heavily promoting its recently announced collaboration with Shmoop. The new Shmoop Classics for Kindle are a mashup offering, combining literary works with an interactive guide of "smart, fun analysis." Kind of sounds like electronic CliffsNotes. More from the Amazon Kindle blog.

Follow my updates on Twitter.

READ MORE and COMMENT, more