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Venture deal pricing is restrained in Silicon Valley in first quarter

Venture capitalists remained careful dealmakers in the first quarter, showing restraint on valuation increases for Silicon Valley companies and holding up rounds to a pace similar to the fourth quarter, according to a quarterly study from Fenwick & West.

The exception was hardware transactions, where mark ups were more pronounced.

The quarter saw up rounds outpace down rounds 73 percent to 18 percent, a level largely unchanged from the fourth quarter, when 70 percent of rounds were up and 14 percent were down, the study found.

At the same time, the average share price increase for valley deals was 54 percent, a slight increase from the fourth quarter, but well below the increases of 2014 and 2015. Worth noting is that valuations for later-stage rounds—Series D and beyond—rebounded after several soft quarters.

Hardware led other industry sectors with an average 81 percent increase in deal pricing. Software and life sciences valuations were weak in the quarter, with the average price increase for deals slipping.

Investor favorable deal terms also were evident with the rising use of multiple liquidation preferences.

Fenwick & West looked at 191 financings with Silicon Valley startups to reach its conclusions.

Action Item: The Fenwick and West survey can be found here.

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