Fenwick & West's Silicon Valley Venture Capital Survey Reveals Strong Valuations in Third Quarter of 2012 - But Not as Strong as the Second Quarter

Nov 15, 2012, 14:30 ET from Fenwick & West

MOUNTAIN VIEW, Calif., Nov. 15, 2012 /PRNewswire/ -- Fenwick & West LLP, one of the nation's premier law firms providing comprehensive legal services to high technology and life science clients, today announced the results of its Third Quarter 2012 Silicon Valley Venture Capital Survey.

The survey analyzed the valuations and terms of venture financings for 117 technology and life science companies headquartered in the Silicon Valley that raised capital in the third quarter of 2012.

"During the third quarter of 2012, up rounds exceeded down rounds 61% to 17%, with 22% flat. This was a solid result, but not as strong as the second quarter of 2012, when up rounds exceeded down rounds 74% to 11%, with 15% flat. This was the thirteenth consecutive quarter in which up rounds exceeded down rounds," said 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.

The Fenwick & West Venture Capital Barometer™ – which measures the change in share price of Silicon Valley companies funded during the quarter compared with the share price of their previous financing round – showed a 78% average price increase for the quarter, a decrease from the 99% reported in the second quarter of 2012. The median price increase of these financings was 23%, also a decline from the 29% recorded in the second quarter.

"The Barometer results were also solid this quarter," said Kramer. "Three financings that had over 7.5x increases in valuation played a significant role, but even excluding those three financings the Barometer would have still been up a healthy 50%." 

"The best performing industries in the quarter from a valuation perspective continued to be software and internet/digital media, while the life science industry lagged significantly," added Michael Patrick, partner in the Corporate Group of Fenwick & West and co-author of the survey. 

"The overall results from the third quarter of 2012 show that good companies can continue to get very healthy valuations. But with the amount of venture investing, M&A activity and IPOs all down this quarter compared to the second quarter of 2012, and also down in the first nine months of 2012 compared to the first nine months of 2011, and with the amount of venture fundraising continuing to be less than the amount of venture investing, there is certainly room for improvement," added Patrick.

Complete results of the survey with related discussion are posted on Fenwick & West's website at www.fenwick.com/vcsurvey.

About the Survey
The Fenwick & West Quarterly Venture Capital Survey, co-authored by law firm partners Barry J. Kramer and Michael J. Patrick, has been published for over 10 years and offers a unique view of the venture capital market in Silicon Valley by providing insight into the changes in venture capital valuations and terms. Focusing exclusively on trends in venture financing and valuations, the Fenwick & West Survey complements the economic data presented in the Dow Jones VentureSource Survey and the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

About Fenwick & West
Established in 1972, Fenwick & West LLP is one of the nation's premier law firms with extensive expertise in venture capital, public offerings and other corporate finance, joint ventures, M&A and strategic relationships, intellectual property, litigation and dispute resolution, taxation, antitrust and employment and labor law.

Barry Kramer
Fenwick & West LLP
Phone: 650.335.7278
Email: bkramer@fenwick.com

Michael Patrick
Fenwick & West LLP
Phone: 650.335.7273
Email: mpatrick@fenwick.com

Merredith Branscombe
Le@p! Public Relations
Phone: 720.235.7363
Email: merredith@leappr.com

SOURCE Fenwick & West