08/31/2010
Venture Financing Report - August 2010
Q2 2010 — Mixed Signals in Financing Results
Cooley LLP is pleased to present our findings on venture financings for the second quarter of 2010. This report provides a summary of data reflecting our experience in venture capital financing terms and trends. Information is taken from transactions in which Cooley served as counsel to either the issuing company or the investors.
Overall, our data points to mixed signals in the venture financing environment. In Q2, we saw a reversal in a recent trend of increasing up rounds. Though the majority of deals were still up rounds, the percentage decreased to 52% from 61% in the prior quarter. Median pre-money valuations were also mixed. The data showed valuation increases for Series A and C deals, while pre-money valuations declined for Series B and D+ rounds. Deal terms also mirrored the financing statistics. We observed a significant reduction in the percentage of deals with participating preferred provisions and a decrease in the number of tranched deals, both signaling increased optimism from investors. However, the data also points to increased use of pay-to-play provisions and an increase in recapitalization transactions from the prior quarter. We also looked at bridge loan financing transactions for the first time in this quarter's report and analyzed trends around conversion discounts and warrant coverage.
We hope you find this Update informative. Please let us know what other information you would find useful by contacting any of the Cooley partners listed at the end of the report or your local Cooley counsel.
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