Fenwick Releases 2011 Internet, Digital Media and Software Industries Seed Financing Survey

Showing Strong Valuations and Terms

Mountain View, CA (March 22, 2012) – Fenwick & West LLP, one of the nation's preeminent law firms providing comprehensive legal services to high technology and life science clients, today released its 2011 Seed Financing Survey.

The survey covers 56 internet/digital media and software companies that raised seed financing primarily in the Silicon Valley or Seattle markets in 2011. For purposes of the survey, a "seed financing" is the first round of financing of a company in which it raised between $250,000 and $2.5 million and is led by a professional investor.

"This is our second annual Seed Financing Survey. We began publishing the survey last year in response to the increased amount and importance of seed investment in the entrepreneurial community. This second survey finds that valuations of seed equity financings in the internet/digital media and software industries have continued to increase, from an average of $3.2 million in 2010 to $3.8 million in 2011, and discusses the continued growth and diversity of funding sources for seed investments," said Barry Kramer, co-author of the survey and a partner in the Fenwick & West Startup Group.

Some of the results of the survey are as follows:

  • The use of convertible notes increased by 10 percentage points, and likewise the use of preferred stock decreased by 10 percentage points, in seed financings.
  • The median size of convertible note deals increased from $662,500 to $1 million, while the median size of preferred stock deals stayed basically flat around $1 million.
  • The median valuation cap on convertible notes increased from $4.0 million to $7.5 million.
  • The percentage of convertible note deals that convert at a discount to the next equity valuation increased from 67% to 83%.

"These results show a strong, generally entrepreneur-friendly environment for seed stage investments in the internet/digital media and software industries," said Steve Levine, also a co-author of the survey and a partner in the Fenwick & West Startup Group. "The relatively small amount of money required to bring these companies to market makes this area an appealing investment area."

Complete results of the survey are available at

About Fenwick & West
Established in 1972, Fenwick & West LLP is one of the nation’s preeminent 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.

Barry J. Kramer
Fenwick & West LLP
Phone: 650.335.7278

Steven S. Levine
Fenwick & West LLP
Phone: 650.335.7847

Merredith Branscombe
Le@p! Public Relations
Phone: 702.235.7353