Joshua Mayers September 22, 2016
Our 1H VC Valuations report has already proven quite popular, breaking down US venture valuations by stage, sector and a number of various financing terms. It's completely free and can be accessed here.
For the quick highlights, take a look at the charts below:
Financing terms haven't been affected too much by an evolving venture landscape, judging by the fact that median percentages acquired have flatlined in some cases and inched upward incrementally otherwise.
Completed financings and exits have slowed, but amid these industry changes, valuations generally held steady through the first eight months of the year. Only Series B valuations have seen a slide, albeit a modest one.
Continued growth in Series C and D+ rounds is due to a number of factors, including late-stage companies staying private longer and capital-rich investors willing to back these already successful startups deep into their lifecycle.
The slow pace of investment at the seed stage hasn’t had much of an effect on valuations, as median pre-money valuations are up within nearly all industries—a trend accompanied by rapidly growing deal sizes.
Software's climb continues unabated in 2016, even while other industries like commercial services and healthcare services/supplies/systems have seen median valuations drop at the latest stages.
Interestingly, late-stage valuations for rounds with corporate VC participation plummeted by 24% from 2015 into 2016, a trend that moves counter to that of rounds with traditional venture firms.
Hedge fund managers have reduced the amount of capital deployed in the market, far more so than their mutual fund counterparts.
Contrary to a popular narrative, down rounds have risen by only 1% of total completed deals YoY. 76% of VC financings have received a higher valuation than the company’s previous round.
Note: Up, flat or down rounds are calculated based on share price (e.g. if the price per share in the most recent round of financing was lower than in the prior financing, that would be classified as a down round).
The time between rounds has been lengthened at every stage in the VC lifecycle, so companies have had to find ways to make their cash last longer. Burn rates seen over the past couple years were unsustainable for the long term.
Note: Time between rounds is calculated by the time between the date of the last financing completed and the financing prior to that.
Over the past three years, there has been a distinct decline in the proportion of participating stock in venture financings across all series. Participation rates have somewhat leveled off in 2016 at a few stages.
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