Fenwick & West has released the results of its First Quarter 2013 Silicon Valley Venture Capital Survey, which analysed the valuations and terms of venture financings for 118 technology and life science companies headquartered in the Silicon Valley that raised capital in the first quarter of 2013.
"During the first quarter of 2013, up rounds exceeded down rounds 68 per cent to 11 per cent, with 21 per cent flat. This was a slight decline from the fourth quarter of 2012, when up rounds exceeded down rounds 71 per cent to eight per cent, with 21 per cent flat," says Barry Kramer, partner in the corporate group of Fenwick & West and co-author of the survey.
An up round is one in which the price per share at which a company sells its stock has increased since its prior financing round. Conversely, a down round is one in which the price per share has declined since a company’s prior financing round.
However, the Fenwick & West Venture Capital Barometer – which measures the percentage change in share price of companies funded during the quarter compared with the share price of their previous financing round – showed a 57 per cent average price increase for the quarter, a noticeable decline from the 85 per cent reported in the fourth quarter of 2012. Similarly, the median price increase of those financings was only 14 per cent, a significant decrease from the 41 per cent recorded in the fourth quarter.
"The Barometer results showed some valuation softening this quarter," says Kramer. "We will need to see next quarter if this is an anomaly or a trend."
"The best performing industries in the quarter from a valuation perspective were internet/digital media and software, but hardware and cleantech did reasonably well, with only life science performing poorly," says Michael Patrick, partner in the corporate group of Fenwick & West and co-author of the survey.
"At the big picture level, it was a tough quarter for the venture environment, with venture investing, acquisitions and IPOs all down compared to the last quarter of 2012. And while valuations were reasonably healthy this quarter, they declined from last quarter. But with the macro environment appearing to stabilise, and Nasdaq up both in the first quarter and second quarter to date, there is reason to believe that the venture environment will improve.”
