VC funding looking up, but what's behind the numbers? $100 billion $50 billion $15 billion.

• Author: Sweeney, Paul
• Position: Venture Capital - Statistical data

Credit the wild stock market gyrations of August for at least one casualty: it has silenced talk of a bubble in Internet and technology stocks. Concerns over a likely bubble mounted this spring and summer when several hot media and Internet companies--the online social network Linkedln, Internet radio company Pandora Media and online real estate appraiser Zillow--offered only fractions of their shares in their initial public offerings, and investors snapped them up with gusto.

The demand for Linkedln's initial public offering was especially pronounced. LinkedIn went public in mid-May at roughly double its $45 opening price. By July, its stock price cleared $100 and the company's valuation was said to be a staggering $9 billion, despite reporting sec ond-quarter earnings of just $4.5 million on $121 million in sales revenues.

Linkedln appeared to be the template for future venture-backed Internet companies going public.

Facebook, of course, remains the 900-pound gorilla. Boasting more than 750 million users worldwide and flush with a $1.5 billion capital infusion from Goldman Sachs, Facebook's market valuation--based on private trading in the pre-IPO market--is stratospheric, valued at anywhere from $50 billion to $100 billion.

Meanwhile, Twitter, Zynga, HomeAway and Groupon are among a string of Internet companies that have either registered to go public or are waiting in the wings. By all accounts, high-dollar investors and institutions had been chomping at the bit for a piece of the action.

But that was before the August stock market roller coaster played havoc with IPOs. Some 18 IPOs were pulled or canceled in August as a result of the dramatic global market fluctuations.

Even so, the controversial trading of private stock of venture-backed companies in the pre-IPO market, coupled with companies' practice of releasing only a fraction of their stock to drive up demand--Linkedln made a mere 15 percent to 20 percent of company ownership available--has propelled valuations skyward.

One recent study by professional services firm BDO USA found that 75 percent of capital markets banking executives believe that pre-IPO valuations ranging into the billions of dollars were "not justified." In the same study--based on phone interviews with 100 bankers--62 percent of respondents reported that chances of a second dot-com bubble similar to the 1990s is at least "somewhat likely."

Says Lee Duran, a partner in the capital markets and technology practices at BDO: "The good news is that it helps companies understand how much interest investors have in their stock. But if you're only trading 15 percent of the company publicly, it may be a false sense of optimism."

James Nolen, a senior lecturer in finance and entrepreneurship at The University of Texas' McCombs School of Business, says: "For technology as a whole, there hasn't...