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Venture Capital Database 2018 Now Available!

Fenwick's Q4 2017 Silicon Valley Venture Capital Survey Shows Valuations Remain Strong

MOUNTAIN VIEW, Calif., February 6, 2018-- Fenwick & West today released a first look at results of its Fourth Quarter 2017 Silicon Valley Venture Capital Survey, which analyzed the terms of 190 venture financings that closed in the fourth quarter of 2017 by companies headquartered in Silicon Valley.

Key findings include:

•Valuation results continued to be strong in Q4 2017, but the percentage price increases declined moderately from the prior quarter, following three consecutive quarters of increases.
•The internet/digital media industry recorded the strongest valuation results and was the only industry in which the valuation results were up compared to the prior quarter.
•Valuation results for late stage, Series E+, financings were up compared to prior quarter, while Series D financings recorded the weakest valuation results.

"VC investment activity in Silicon Valley continued to remain strong during the past quarter," said Cindy Hess, co-chair of Fenwick's startup and venture capital practice and co-author of the survey. "While the percentage price increases did decline moderately, we don't believe that represents a dampening of the enthusiasm private investors have shown the past few quarters. Though we'll see whether that translates into the investor enthusiasm needed to open public markets."

"The valuation results for Series E+ rounds improved moderately last quarter, while Series D financings recorded the weakest valuations results and its valuation metrics declined sharply," said Mark Leahy, co-chair of Fenwick's startup and venture capital practice and co-author of the survey. "Late stage rounds, though, were strong in 2017 - aside from the slight decline in Q4. This seems to continue the trend we've seen last year where more investments are flowing into late stage deals at high valuations."

Valuation Results Remain Strong

Valuation results remained strong in Q4 2017, but the percentage price increases declined moderately compared to the prior quarter, following three consecutive quarters of increases.

Up rounds exceeded down rounds 70% to 19%, with 11% flat in Q4 2017, a decrease from Q3 when up rounds exceeded down rounds 79% to 10%, with 11% flat. This was the lowest percentage of up rounds since Q4 2016 and the highest percentage of down rounds since Q2 2013.

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™ showed an average price increase in Q4 2017 of 74%, a decrease from the 80% recorded in Q3 and the first quarter in 2017 in which the average percentage price increase had decreased compared to the prior quarter.

Internet/Digital Media Scores Highest Valuation Results

The internet/digital media industry recorded the strongest valuation results in Q4 2017 compared to the other industries, with an average price increase of 179% and a median price increase of 51%, both up from the prior quarter. The software industry also recorded strong valuation results in Q4, though moderately weaker compared to Q3. The life sciences industry, along with the hardware industry, recorded the lowest valuation metrics in Q4 2017.

Valuation Results Down for Series D Financings

Series D financings recorded the weakest valuation results in Q4 2017 compared to the other financing rounds, with the highest percentage of down rounds and the lowest average and median price increases of all the financing rounds. The valuation metrics for Series D financings in Q4 also declined sharply compared to the prior quarter. In contrast, the valuation results for Series E+ financings in Q4 improved moderately compared to the prior quarter.

About the Survey

The Fenwick & West Venture Capital Survey has been published quarterly for more than 15 years and offers a unique view of the venture capital market in Silicon Valley by providing insight into changes in valuations and terms. Focusing on trends in venture financing and valuations, this Fenwick & West survey complements the economic data presented by Dow Jones VentureSource, PWC/CB Insights MoneyTree™ Report and PitchBook-NVCA Venture Monitor.

Our "First Look" report covering top line trends for venture capital financings of Silicon Valley companies in Q4 is available on Fenwick & West's website. This initial report will be followed in several weeks with a more in-depth "Full Analysis" that will provide a broader perspective and include coverage of venture capital financings in other geographies drawing on data from a variety of industry reports.

About Fenwick & West

Fenwick & West LLP provides comprehensive legal services to ground-breaking technology and life sciences companies -- at every stage of their lifecycle -- and the investors that partner with them. We craft innovative, cost-effective and practical solutions on issues ranging from venture capital, public offerings, joint ventures, M&A and strategic relationships, to intellectual property, litigation and dispute resolution, taxation, antitrust and employment and labor law. For more than four decades, Fenwick has helped some of the world's most recognized companies become and remain market leaders. For more information, please visit fenwick.com.


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