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Background

This survey is a special interim report to highlight changes in the Silicon Valley venture capital environment in light of the COVID-19 pandemic. It focuses on May financing activity and supplements our March 2020 and April 2020 Flash Reports.

Please note that when providing data on a monthly basis, and especially when analyzing trends among industries or series on a monthly basis, we are working with smaller numbers than in our quarterly report and accordingly the possibility of statistical anomalies increases.

Key Findings

Financing deal volume continued at levels similar to pre-pandemic levels, but May valuation results were weaker than April and significantly trailed 2019 results.

Overall financing volume stable.

  • The number of financings in May was flat with April, with 70 in each month. There was an average of 65 deals per month in 2019, although May 2019 had 75 financings.

The percentage of late-stage financings declined to close to pre-pandemic levels.

  • The percentage of Series D/E+ financings declined to 31% of all financings in May, compared to 38% in April. As the average percent of D/E+ financings in 2019 was 26%, we are likely seeing a reversion to the mean. This is perhaps an indication that venture capitalists who were focused on securing financing for their older, existing investments earlier in the pandemic are now returning their focus to earlier stage opportunities.

Software and life sciences deal volume strong.

  • Software companies accounted for 54% of May financings, above the 46% they accounted for in 2019. Life sciences financings also were above average, at 19% of May financings, compared to 14% in 2019. At the other end of the spectrum hardware deals accounted for only 3% of the financings in May, as compared to 11% of financings in 2019.

Valuations weaken.

  • The percentage of up-rounds declined modestly from 71% in April to 67% in May, but continued noticeably lower than the 83% up-rounds on average in 2019. The 67% up-rounds in May was the lowest monthly amount since August 2018, when only 66% of financings were up-rounds.
  • Flat-rounds continued above normal at 16% in May, which was the same in April, compared to 9% in 2019. This likely indicates an ongoing increase in reopening of prior rounds and/or insider-led rounds. Down-rounds increased from 13% in April to 17% in May, and remained above the 2019 average of 8%.
  • The average share price increase of May financings weakened noticeably, declining from 63% in April to 43% in May. The results for both April and May were significantly below the 2019 average increase of 93%.
  • The median share price increase also weakened, from 40% in April to 17% in May. Again, both were significantly below the 60% increase seen in 2019.
  • The valuation weakening compared to 2019 was evident in all industries except life sciences, where the average price increase in May slightly surpassed 2019 results.

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