The law firm Fenwick & West compiles every quarter the financing terms received by Bay Area technology companies. I just found out that this report I used to receive by email from Bill Schreiber (a corporate partner I have been working with for a few years) was available on the web.
This is a very useful indicator as to the evolution of typical terms recently offered by VCs. Key terms of a venture financing are: average round size, pre-money, type of liquidation preference (seniority, multiple, participating,…), dividends, provisions, etc. For a clear definition of all these terms, I recommend checking Brad Feld’s excellent series on financing terms, or the short version from Fenwick. Whilst the report does not give absolute terms (what is the typical pre-money for a Series A), it tells you about price evolutions over the past few quarters.
What were the key trends in Q1’05 ?
- The quarter showed an increase in the number of uprounds (new financing done at a higher valuation than the previous one) vs. downrounds, and an increase in valuations.
- The investment activity continued to trended towards series A and B, i.e earlier stages of innovation, which is good news.
- Non valuation terms continued to improve (e.g. preferred shares received by VCs have a 1X liquidation participation with capped participation).
- At the same time, the IPO market for new offering has all but dried up, making M&As the only real exit route – with an notable increase in number of transactions and amounts.
- VCs invested in less companies, and a lesser aggregated amount than in Q4’04, which I would analyze as a sustained activity that is not getting in "overdrive" mode.
Obviously, this is an aggregated view across all sectors (semi-conductors, software, services, enterprise and consumer, etc.), and finer grain information will often be required. But it is an interesting (free) aggregate.
You can register for next quarter’s report here (for the Silicon Valley version, or the Israeli one).
A good complement of this report is the MoneyTree Survey.
Feel free to post questions/clarifications through comments.