Fenwick published its quarterly survey of venture financings and to sum it up, valuation results are at three-year highs, with the software industry recording the strongest valuations. Fenwick’s Q4 2018 survey indicates that there is a steep decline in the use of multiple liquidation preference. The survey analyzed the terms of 234 venture financings closed in Q4 2018 in Silicon Valley and found the following:
Up rounds exceeded down rounds 81% to 8%, with 11% flat in Q4 2018, an increase from Q3 2018 when up rounds exceeded down rounds 78% to 9%, with 13% flat.
According to The Fenwick & West Venture Capital Barometer, the average price increase in Q4 2018 was 85%, an increase from the 71% recorded in the Q3 2018, and the highest average price increase since Q3 2015.
Stronger valuation results compared to Q3 2018 were recorded across each series of financing.
The software industry also experienced the highest valuations, with an average price increase of 118% and a median price increase of 58%, both significantly higher compared to the Q3 2018. This was followed by the internet/digital media industry which recorded the next strongest valuation results in Q4 2018 with an average price increase of 68%.
What does this all mean for values generally and 409A specifically? For companies that have recently raised money on higher valuations, we would expect that a reasonable application of the OPM Backsolve method will result in higher fair market value determinations.
Contact us today to learn how the venture capital financing market may impact the value of your company and the price at which you issue options!
Fenwick’s survey (Silicon Valley Venture Capital Survey – Fourth Quarter 2018) can be found here: