By Ken Schachter<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

A flashing exit sign is boosting the valuations of venture-backed companies, according to a study released Wednesday.

The median valuation of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />U.S. venture-backed companies—before the capital infusion—climbed to $18.5 million in 2006, the highest level since the boom year of 2000, Dow Jones VentureOne reported.

Startups are fetching higher values because the opportunities for a handsome return via an initial public offering or an acquisition have improved, an analyst said.

“In 2006, the U.S. had the strongest exit climate in several years with the median pre-money valuation of IPO companies reaching $201.6 million and a median $52 million being paid to acquire companies,” Steve Harmston, director of global research for VentureOne, said in a statement.

Some of the strongest gains were posted by information technology companies, whose median valuation in 2006 doubled from 2003 to $20.8 million and health care companies, whose $19.5 million valuation was “on par with 2000 levels,” according to the report.

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The top sector among IT companies was communications. Communications companies had a median valuation of $29.9 million, almost 50 percent higher than in 2005. Electronics and computer hardware companies saw their median valuation rise to $24.9 million in 2006, a $10 million increase in one year.

Medical software and information systems were the only categories within health care in 2006 that had year-over-year valuation increases.

Valuations also increased based on the financing stage. Seed round companies were valued at $2.4 million in 2006, a $600,000 increase over the previous year. Companies receiving their first-round financing were valued at $6 million versus $5.5 million in 2005. The median valuation of later round companies reached $35.4 million in 2006, up from $32 million the prior year.

In Europe, the median valuation of venture-backed companies before funding was 5.6 million euros, or $7.4 million. Seed round valuations climbed to 1.9 million euros, or $2.5 million, roughly triple the 2005 valuation.

“The increased valuations reflect the increased interest of investors to refocus on early-stage rounds in Europe last year. Additionally, the positive exit environment for venture-backed companies in Europe, particularly in the IPO market, is contributing to higher later-stage valuations” Mr. Harmston said.

Venture-backed companies in the United Kingdom had the highest median valuations at 6.6 million euros, or $8.7 million. French companies were worth 5.3 million euros, or $7 million, while German firms were valued at 4 million euros, or $5.3 million.