Fenwick published its quarterly survey of venture financings and to sum it up, valuation results improved moderately. Fenwick’s Q2 2019 survey indicates that there is a strong rise in median price increases since mid-2015. The survey analyzed the terms of 215 venture financings closed in the Q2 2019 in Silicon Valley and found the following:
Up rounds exceeded down rounds 86% to 6%, with 8% flat in Q2 2019, an increase from Q1 2019 when up rounds exceeded down rounds 81% to 11%, with 8% flat. This was the highest percentage of up rounds in a quarter since we began calculating valuation metrics in 2004.
According to The Fenwick & West Venture Capital Barometer, the average price increase in Q2 2019 was 77%, a moderate increase from the 75% recorded in the Q1 2019.
Series B and C financings recorded stronger valuation results compared to the Q1 2019, while valuation results for Series D and E financing rounds weakened.
The software industry recorded the strongest valuation results in Q2 2019, with an average price increase of 85% and a median price increase of 68%, both metrics up moderately from the Q1 2019. This was followed by the internet/digital media software industry which recorded the next strongest valuation results in Q2 2019, with an average price increase of 80% and a median price increase of 60%, though both metrics were down from Q1 2019.
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.
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Fenwick’s survey (Silicon Valley Venture Capital Survey – Second Quarter 2019) can be found here: