Silicon Valley venture capitalists tempered their enthusiasm for investing in the first quarter, though only modestly, as software and Internet startups continued to spark spirited check writing, according to a study from Fenwick & West.
The law firm’s quarterly report on valuations found that up rounds exceeded down rounds during the three-month period by 68% to 11%. The remaining 21% of deals were flat.
While that may seem like a healthy margin, it is less than the 71% to 8% split of the fourth quarter. What’s more, the law firm’s Venture Capital Barometer – which measures the change in private company share prices – indicated a 57% average increase during the quarter, down from 85% in the fourth quarter.
The numbers appear to parallel the findings of other investment studies and show an environment where valuations are still healthy but down slightly. The MoneyTree Report, assembled by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters, found venture investing across the nation slumped 12% in the quarter and 15.4% in Silicon Valley from the fourth quarter. (Thomson Reuters is the publisher of peHUB.)
The Fenwick & West study found software, Internet, and digital media startups received the greatest percentage of up rounds. Seventy-four percent of software companies were marked higher and 88% of Internet and digital media companies were. Cleantech and hardware companies also fared reasonably well.
Perhaps of greatest concern was a noticeable drop in the median increase in share price. The median price increase of transactions in the quarter was 14% compared with 41% in the fourth quarter.
The study looked at 118 technology and life sciences financing for companies headquartered in Silicon Valley.
Photo courtesy of Shutterstock.