Private Company Valuations Remain Strong in Silicon Valley

Venture investing across the nation fell in the fourth quarter, but you would never know it by looking at private company valuations in Silicon Valley.

They were strong, with up rounds exceeding down rounds by an expanding margin and average deal prices rising, particularly in later rounds. The news comes from the Fenwick & West’s quarterly deal study, which examined 116 valley financings the law firm handled.

It suggests venture capitalists continue to see big opportunities in the companies they fund.

Here are data points from today’s study:

  • Up round exceeded down rounds in the fourth quarter by 71% to 8%. This was by a substantially wider margin than in the third quarter.
  • The Fenwick & West Venture Capital Barometer showed the average private company share price increased 85%, which was modestly higher than the third quarter. The barometer measures the average share price increase from a previous financing round. Late stage rounds showed strong increases.
  • The median price increase was 41% in the quarter, which was greater than the third quarter’s 23%. Three software companies saw prices increase of more than 400%.
  • Software, hardware and Internet, or digital media, companies experienced the most up rounds. Life sciences deals showed fewer down rounds. Cleantech deals did not.
  • The percentage of Series A rounds in the quarter dropped.

Across the country, VCs invested $6.4 billion in the fourth quarter, down 3% from the third quarter, according to the MoneyTree Report.

Photo courtesy of Shutterstock.

 

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