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Background
We analyzed the terms of venture financings for 128 companies headquartered in Silicon Valley that reported raising money in the third quarter of 2013.
Overview of Fenwick & West Results
Valuation results in 3Q13 showed a noticeable increase over 2Q13, including the greatest difference between up and down rounds in over six years. The software industry was especially strong, not only valuation-wise, but also in the number of deals.
Here are the more detailed results:
- Up rounds exceeded down rounds 73% to 8%, with 19% of rounds flat. This was a significant increase from 2Q13 when up rounds exceeded down rounds 64% to 22% with 14% flat, and the best quarter (measured by amount by which up rounds exceeded down rounds) since 3Q07.
- The Fenwick & West Venture Capital Barometer™ showed an average price increase of 65% in 3Q13, an increase from the 62% reported in 2Q13.
- The median price increase of financings in 3Q13 was 43%, a noticeable increase from the 19% and 14% reported in 2Q13 and 1Q13, respectively.
- The results by industry are set forth below. In general internet/digital media slightly edged out software for best valuation performance, although there were significantly more software deals than internet/digital media, as software deals were 53% of all deals, the highest amount since we began tracking results by industry in 1Q10. Life Science fell to 10.2% of all deals, the lowest percentage since 1Q10.
- The percentage of financings with participating liquidation preference was 27%, the lowest amount since we began our survey in 2002 and an indication of an entrepreneur friendly environment.
Overview of Other Industry Data
Overall the venture environment improved in 3Q13, but due to a slow start 2013 lags 2012 in some categories.
- Venture investing in 3Q13 increased, bringing the first three quarters of 2013 approximately even with 2012, although trailing 2011.
- IPOs were again strong in 3Q13. Although 2013 is expected to be the best year for venture backed IPOs since 2007, much of the increase through the first three quarters has been focused in the life science sector.
- M&A improved noticeably in 3Q13, but 2013 is on track to have the lowest number of acquisitions of venture backed companies since 2009.
- Venture fundraising improved over a weak 2Q13, but 2013 was on track to be the lowest fundraising year since 2010.
- Corporate venture capital participation continued to increase.
- Angel financing results were mixed. And with new more liberal regulations regarding public solicitations and crowd funding, the angel financing world is likely in for some changes.
- Venture capitalist sentiment hit the highest level since the 2008 recession.
The more detailed results follow: http://www.fenwick.com/publications/Pages/Silicon-Valley-Venture-Survey-Third-Quarter-2013.aspx?WT.mc_id=2013.Q3_VCS_BK
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