Report: More Pre-Money Valuations Topped $100M in 2010, as Q4 Up Rounds Spiked

Deal terms and valuations shifted in favor of entrepreneurs last year as onerous term sheets became less common and money flowed more freely.

These were the findings of a study by the law firm Cooley released this week. (The data come from transactions in which Cooley served as counsel.)

The trend is hardly a surprise as the rebound from the recession in 2009 has been evident for six quarters or so. But the extent of the shift is interesting, nonetheless.

For instance, while up rounds rose unevenly through the year, they spiked noticeably in the fourth quarter, when 72% of financings were marked higher (see Cooley chart above). This was the highest percentage of up rounds since 2006.

Also of note was the increase in rounds getting pre-money valuations of more than $100 million.

Here are details from the report:

*Last year saw a sharp increase in up rounds from 2009. Sixty percent of deals in 2010 had higher valuations. The fourth quarter saw the percentage rise to 72 percent.

*The year saw an increase in pre-money valuations across all deal stages. The median pre-money valuation for a Series A rose to $7 million, or to what it was in 2008 (see Cooley chart left), and the median pre-money valuation for Series C increased to $45 million, well above the $40 million of 2008.

In the fourth quarter, interestingly enough, pre-money valuations sunk in both Series A and B rounds, but climbed in Series C and higher.

*Also of note, the number of deals and the percentage of deals with pre-money valuations higher than $100 million rose. There were 51 deals for the year, or 13% of the total. That’s up from 7% of the total in 2009, but consistent with the 13% for 2008 (see Cooley chart below).

*Terms also eased. The percentage of deals with liquidation preferences of greater than 1 times decreased for all deal stages, except for Series D.

The percentage of deals with fully participating preferred provisions and pay-to-play provisions fell across all deal categories. Fully participating preferred provisions fell most significantly in Series A and B deals.