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Despite Tech Frenzy, Seed Financing Boom Has Its Limits

March 23, 2012

Fenwick & West recently released their Second Annual Seed Financing Report. This report, authored by Fenwick attorneys Barry Kramer and Steve Levine, is based on 56 transactions by West Coast companies last year, as well as 52 deals completed in 2010. The Wall Street Journal recently covered the results of this survey in the article, "Despite Tech Frenzy, Seed Financing Boom Has Its Limits."

The Fenwick report found that of the seed-funded companies surveyed in 2010, about 45% received venture capital financing last year. An additional 12% were able to secure further seed financing, while the remaining companies were acquired, closed, operating without additional capital, or no information was available.

The Fenwick report highlights that the Silicon Valley financing boom can have limits, and initial funding does not always ensure future success.

"There's a non-trivial hurdle to get to series B," says Barry Kramer, partner in the corporate group of Fenwick & West, and co-author of the seed funding report.

Kramer went on to say that at the seed stage, many entrepreneurs made out well, with the survey indicating that the median pre-money valuations of Web companies raising seed dollars rose to $4 million in 2011, up from $3.4 million in 2010.

The Fenwick survey also indicated a shift in the source of seed funding last year, with venture capitalists and institutional seed funds grabbing market share from professional angel investors.

View the entire Fenwick & West Seed Financing Report.