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Fenwick & West’s Silicon Valley Venture Capital Survey Reveals Softer Valuations in First Quarter of 2013

May 23, 2013 (Mountain View, CA) – Fenwick & West, one of the nation’s premier law firms providing comprehensive legal services to high technology and life science clients, today announced the results of its First Quarter 2013 Silicon Valley Venture Capital Survey.

The survey analyzed the valuations and terms of venture financings for 118 technology and life science companies headquartered in the Silicon Valley that raised capital in the first quarter of 2013.

“During the first quarter of 2013, up rounds exceeded down rounds 68% to 11%, with 21% flat. This was a slight decline from the fourth quarter of 2012, when up rounds exceeded down rounds 71% to 8%, with 21% flat,” said Barry Kramer, partner in the Corporate Group of Fenwick & West and co-author of the survey.

An up round is one in which the price per share at which a company sells its stock has increased since its prior financing round. Conversely, a down round is one in which the price per share has declined since a company’s prior financing round.

However, the Fenwick & West Venture Capital Barometer™ – which measures the percentage change in share price of companies funded during the quarter compared with the share price of their previous financing round – showed a 57% average price increase for the quarter, a noticeable decline from the 85% reported in the fourth quarter of 2012. Similarly, the median price increase of those financings was only 14%, a significant decrease from the 41% recorded in the fourth quarter. 

“The Barometer results showed some valuation softening this quarter,” said Kramer. “We will need to see next quarter if this is an anomaly or a trend.” 

“The best performing industries in the quarter from a valuation perspective were internet/digital media and software, but hardware and cleantech did reasonably well, with only life science performing poorly,” added Michael Patrick, partner in the Corporate Group of Fenwick & West and co-author of the survey. 

“At the big picture level, it was a tough quarter for the venture environment, with venture investing, acquisitions and IPOs all down compared to the last quarter of 2012. And while valuations were reasonably healthy this quarter, they declined from last quarter. But with the macro environment appearing to stabilize, and Nasdaq up both in the first quarter and second quarter to date, there is reason to believe that the venture environment will improve,” added Patrick.

Complete results of the survey with related discussion are posted on Fenwick & West’s website at www.fenwick.com/vcsurvey.

About the Survey
The Fenwick & West Quarterly Venture Capital Survey, co-authored by law firm partners Barry J. Kramer and Michael J. Patrick, has been published for over 10 years and offers a unique view of the venture capital market in Silicon Valley by providing insight into the changes in venture capital valuations and terms. Focusing exclusively on trends in venture financing and valuations, the Fenwick & West Survey complements the economic data presented in the Dow Jones VentureSource Survey and the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

About Fenwick & West
Established in 1972, Fenwick & West LLP is one of the nation’s premier law firms with extensive expertise in venture capital, public offerings and other corporate finance, joint ventures, M&A and strategic relationships, intellectual property, litigation and dispute resolution, taxation, antitrust and employment and labor law.

Contacts:
Barry Kramer
Fenwick & West LLP
Phone: 650.335.7278
Email: bkramer@fenwick.com

Michael Patrick
Fenwick & West LLP
Phone: 650.335.7273
Email: mpatrick@fenwick.com