Fenwick – Silicon Valley Venture Capital Survey (Q3 2016)

For more than four decades, Fenwick & West venture law firm has helped some of the world’s most recognized companies become, and remain, market leaders. From emerging enterprises to large public corporations, our clients are leaders in the technology, life sciences and cleantech sectors and are fundamentally changing the world through rapid innovation.

The venture law firm analyzed the terms of 149 venture financings closed in the third quarter of 2016 by companies headquartered in Silicon Valley.

fenwick-venture-capital-survey-q3-2016-01bq

Overview of Results:

  • The weakening in venture valuations that began in the second half of 2015 continued in 3Q16, with two of our three valuation metrics declining. Overall the valuation metrics have returned to their 12 year averages after a very strong 2014-2015.
  • Up rounds exceeded down rounds in 3Q16, 71% to 14%, with 15% flat. This was a decline from 2Q16 when up rounds exceeded down rounds 74% to 13%, with 13% flat. This was the fourth straight quarter in which the number of up rounds declined and the lowest percentage of quarterly up rounds since 2Q13.
  • The average price increase of financings in 3Q16 compared to the prior financing round (the “Barometer”) was 52%, an increase from the 40% recorded in 2Q16. This increase was primarily due to two (life science) companies that closed financings with price increases five or more times their prior round. There were no such financings in 2Q16.
  • The median price increase of financings in 2Q16 compared to the company’s prior financing was 31%. This was a decline from the 36% recorded in 1Q16, the fourth straight quarterly decline and the lowest median increase since 4Q13. The 12 year average median increase is 28%.
  • The median price increase of financings in 3Q16 compared to the prior financing round was 27%, a decline from the 31% recorded in 2Q16. This was the fifth straight quarterly decline and the lowest median price increase since 4Q13.
  • The strongest industry was “Other”, which consists primarily of venture backed food and personal care/fashion companies. Although software was the next strongest industry, its average price increase was the lowest since 3Q10.

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About the Survey
The Fenwick & West Venture Capital Survey was first published in the first quarter of 2002 and has been published every quarter since then. Its goal is to provide information to the global entrepreneurial and venture community on the terms of venture financings in Silicon Valley. It is a source of information to entrepreneurs, investors, educators, students, journalists and government officials. The analysis of Silicon Valley financings is based on independent data collection performed by the firm’s lawyers and paralegals, and is not skewed towards or overly representative of financings in which the firm is involved. For purposes of determining whether a company is based in “Silicon Valley” the survey uses the area code of the corporate headquarters. The area codes included are 650, 408, 415, 510, 925, 916, 707, 831 and 209.