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Background
This report analyzes the valuations and terms of venture financings for 208 companies headquartered in the Silicon Valley that raised capital in the second quarter of 2017.
Overview of Results
Valuations Continue Improvement
Following a decline in 2016, venture valuations continued the improvement that began in Q1 2017. Valuation metrics are now marginally higher than their 13-year averages.
Software Sector Improves in Valuation Metrics
The software industry recorded substantial improvements in valuation metrics and had the strongest valuation results in Q2 2017. It was followed by the hardware and internet/digital media industries - both recorded moderately weaker valuation metrics than in Q1.
Stronger Valuations Results for Early Stage Investments
The Fenwick & West Venture Capital Barometer™ showed an average price increase in Q2 2017 of 64%, an increase from the 54% recorded in Q1 and above the historical average of 56%.
In contrast to Q1 2017 when earlier stage rounds recorded weaker valuation results and later stage rounds recorded stronger valuation results compared to the prior quarter, the average price increases for early stage (Series B and C) rounds increased in Q2 while the average price increases for later stage (Series D and E+) rounds decreased.
Investor-Favorable Deal Terms Decrease
Following an increase in the use of investor-favorable deal terms in Q1 2017, the use of multiple liquidation preferences and participation rights declined in Q2 2017 – the lowest since Q4 2014.
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