Fenwick published its interim report on the venture capital environment in light of the COVID-19 pandemic and overall, the environment continued to exhibit strong deal volume. Fenwick’s August 2020 survey indicates that venture metrics were solid although lagged pre-pandemic levels. The survey found the following:
The percentage of up-rounds in August 2020 was 77%, effectively level with the 78% up-rounds in July 2020. Both of these results were the highest since February 2020, but continued to lag the 2019 average monthly result of 83%.
The average share price change declined from 81% in July to 65% in August. Despite this decline, July and August results were the best results since February, although they lagged the 93% average monthly increase in 2019. The median per share price change increased from 30% in July to 39% in August. Again, both results were below the 60% median monthly increase seen in 2019.
Financing volume continued to be strong as the number of venture financings continued to be strong in August, with 73 financings. This is same as that of July 2020, but surpassed the 2019 average of 65 financings per month.
Life sciences industry results were strongest compared to historical norms. There were 19 life sciences financings in August 2020, an increase from 14 in July 2020 and more than double the average monthly rate of nine seen in 2019. The number of software and internet/new media financings were approximately even with life sciences, at 22 and 19, respectively.
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 Flash Report - August 2020) can be found here: https://www.fenwick.com/insights/publications/silicon-valley-venture-capital-flash-report-august-2020