The latest Fenwick and West Silicon Valley VC survey is an interesting read with several takeaways reflecting current market conditions. Whilst most of the time, next funding rounds are being done at higher valuations, there has been an evident weakening of the market. Additionally the Internet and Digital Media sectors is proving more resilient than the more capital intensive sectors such as Life Sciences.
Also worth noting is the almost universal use of investor protection against future down rounds through weighted average anti-dilution provisions.
Overview of Fenwick & West Results Valuation results in 4Q15 were moderately strong, but were not as strong as recent quarters. Up rounds exceeded down rounds 82% to 12%, with 6% flat. This was a decrease from a very strong 3Q15, when up rounds exceeded down rounds 86% to 4%, with 10% flat. For the first time since 1Q10, when we began tracking data by industry, the software industry was not in our top two industries from a valuation perspective, although it did lead with 48% of all deals. Rather the internet/digital media industry, with 94% up rounds, a 111% Barometer reading and a 95% median price increase, and the hardware industry, with 82% up rounds, a 100% Barometer reading and a 63% median increase, were the two strongest industries, followed by the software industry, with the life science trailing.