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Silicon Valley VCs turn more positive on valuations

Silicon Valley venture capitalists turned noticeably more positive in the third quarter, with portfolio company valuations ticking up at a faster pace.

The average share price increase for private companies raising capital rose to 80 percent from 64 percent in the second quarter, according to a report from Fenwick & West. It was the second quarterly increase in a row and the largest.

The most significant hikes came in Series C and D rounds and for life sciences companies, which often trail technology companies in valuation increases.

Up Rounds Vs. Down Rounds (Source: Fenwick & West)
Up rounds vs. down rounds (Source: Fenwick & West)

The rise was more modest for B rounds, and E rounds saw a decline in share price expansion.

The results suggest VCs see expanding market opportunities for, and solid performance from, the companies they back.

The survey also found an increase in the number of up rounds. Seventy-nine percent of deals Fenwick & West examined were up rounds, compared with 77 percent in the second quarter. Ten percent of third quarter deals were down rounds, compared with 13 percent in the previous quarter.

It was the highest percentage of up rounds and the lowest percentage of down rounds since the start of 2016.

The use of senior liquidation preferences and pay-to-play provisions fell modestly in third quarter deals.

Fenwick & West examined 183 financings of Silicon Valley-based companies over the period.

Action Item: To read more about the Fenwick & West Silicon Valley Venture Capital Survey, go to http://bit.ly/2xtxufA

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