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Report: Fenwick Study Points to Rising Valuations, but Don't Call It a Bubble

August 11, 2014

​Fenwick & West corporate partner Barry Kramer was cited by PandoDaily in an article about the findings and implications of the firm’s latest Silicon Valley Venture Survey, which Kramer co-authored.

While Fenwick’s survey results for the second quarter of 2014 show higher company valuations, the report doesn’t indicate an absence of investment fundamentals or large volumes of investment activity. Kramer views the latter two factors as essential components for a bubble. Without them, higher valuations alone are not a cause for concern.

As reported by PandoDaily, Fenwick’s 2Q survey examined 174 rounds of venture capital funding of Silicon Valley technology and life sciences companies. Based on the firm’s proprietary information, as well as publicly available data, the survey found that company valuations went up an average of 113 percent from their previous rounds of funding—the highest quarterly increase since Fenwick started calculating this statistic in the first quarter of 2004.

But there are a number of factors that distinguish recent valuation increases from the dot-com bubble of 2000, including:

  • Most valuation increases are supported by revenues or other business fundamentals.
  • Fewer funds are available for VC investment.
  • Entrepreneurs and investors are savvier.
  • New companies are being tested longer and not going public as quickly.

The full article is available through the PandoDaily website.