Venture capitalists put their money into more valuable startups during the first quarter, according to a report released Wednesday.

Startup pre-money valuations—the worth of a venture-backed startup before it seeks additional VC funding—rose to their highest levels since 2001, according to the VentureOne report. During the first quarter of 2005, typical pre-money valuations rose 23 percent over the same quarter last year.

Median valuations increased to $19 million for healthcare companies, up from $18.3 million during the first quarter of 2004. Information technology startups jumped in value to $15.5 million during the first quarter of 2005 from $10.3 million during the same period last year.

The largest valuation gains came to startups collecting first-round financing. Valuations improved 58 percent for early-stage companies.

“These first-round financings are more established than traditional early-stage deals,” said VentureOne’s John Gabbert. He cited the valuation increase as a product of bootstrapping and belt-tightening through 2002 and 2003.

The value of later-stage startups dipped to 24 percent.

“The liquidity market has always affected private company valuations,” Mr. Gabbert said. “Given the uncertainty surrounding the current IPO market, it’s reasonable to expect a flattening of later-stage valuations.”

The IPO market had an anemic first quarter with only eight venture-backed companies going public (see Fewest IPOs Since 2003). Still, venture is outperforming other asset classes (see Venture Outperforms Nasdaq), which has attracted investor attention (see VCs Double Fundraising) despite the decline in venture funds (see Fewer VCs & Fewer Startups).

The overall increase in valuation may be a product of pickier VCs. Funding during the first quarter dropped more than 16 percent as fewer startups got funding (see Venture Funding Down in Q1).