Silicon Valley Venture Capital Survey
First Quarter 2016
Barry Kramer and Khang Tran
Fenwick
fenwick & west llp
Background
We analyzed the terms of 148 venture financings closed in the first quarter of 2016 by companies
headquartered in Silicon Valley.
Overview of Results
The weakening in valuations that began in 4Q15 continued in 1Q16, although the results for 1Q16 are still
mostly above our historical averages.
§§ Up rounds exceeded down rounds 78% to 11%, with 11% flat in 1Q16. This was a small decline from 4Q15,
when up rounds exceeded down rounds 82% to 12% with 6% flat.
§§ The average price increase of financings in 1Q16 compared to the company’s prior financing was 53%. This
was a decline from the 70% recorded in 4Q15, and the lowest amount since 1Q12.
§§ The median price increase of financings in 1Q16 compared to the company’s prior financing was 36%. This
was a small decline from the 39% recorded in 4Q15 and the lowest amount since 4Q13.
§§ This quarter we have included expanded graphs in the survey showing percentage up rounds, average
price change and median price change for each quarter since we began calculating such amounts in 2004.
This was done to provide more historical context for the current results, and these new graphs appear
on pages 3, 5 and 8, respectively. In summary, the 1Q16 up round percentage was above the historical
average (78% vs 66%), the average price increase was slightly below the historical average (53% vs 56%)
and the median price increase was above the historical average (36% vs 28%).
§§ The software, hardware and internet/digital media industries each led one of the valuation metrics, with
the software industry have the largest percentage of up rounds (83%), the hardware industry having the
largest average price increase (96%) and the internet/digital media industry having the largest median
price increase (65%). The life science industry trailed the other industries in valuation metrics.
silicon valley venture capital survey— first quarter 2016
1
Fenwick & West Data on Valuation
price change — The direction of price changes for companies receiving financing in a quarter, compared to
their prior round of financing.
90%
80% 80%
76%
79%
86%
83%
83%
82%
78%
70%
60%
50%
Up rounds
Down rounds
40%
Flat rounds
30%
20%
10%
14%
12%
6%
12%
0%
Q2’14
Q3’14
15%
9%
9%
6%
8%
8%
Q4’14
Q1’15
Q2’15
10%
12%
4%
6%
Q3’15
Q4’15
11%
11%
Q1’16
The percentage of down rounds by series were as follows:
40%
35%
30%
27%
26%
Series B
25%
Series C
20%
20%
Series E and Higher
15%
10%
5%
0%
Series D
12%
9%
6%
4%
3%
Q2’14
11%
13%
12%
11%
6%
9%
6%
3%
Q3’14
9%
9%
8%
6%
7%
13%
8%
6%
9%
8%
8%
0%
3%
0%
Q4’14
11%
0%
Q1’15
Q2’15
silicon valley venture capital survey — first quarter 2016
Q3’15
Q4’15
Q1’16
2
expanded price Change
change graph — Set
forth below
the direction
in Price Direction
fromisPrior
Round of price changes for each quarter since 2004.
90%
80%
70%
average percentage of
up rounds 66%
60%
50%
Up rounds
Down rounds
40%
30%
Flat rounds
20%
10%
silicon valley venture capital survey — first quarter 2016
’1
6
Q1
’1
5
Q1
’1
4
Q1
’1
3
Q1
’1
2
Q1
’1
1
Q1
’1
0
Q1
’0
9
Q1
’0
8
Q1
’0
7
Q1
’0
6
Q1
’0
5
Q1
Q1
’0
4
0%
3
the fenwick & west venture capital barometer™ (magnitude of price change) — Set forth below is
the average percentage change between the price per share at which companies raised funds in a quarter,
compared to the price per share at which such companies raised funds in their prior round of financing. In
calculating the average, all rounds (up, down and flat) are included, and results are not weighted for the
amount raised in a financing.
116%*
120%
113%
110%
115%
107%
100%
100%
90%
80%
79%
70%
70%
60%
53%
50%
40%
30%
20%
10%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
* One company had an over 3000% up round in 3Q15. If this financing was excluded, the Barometer result for 3Q15 would have
been 93%.
The Barometer results by series are as follows:
212%*
200%
192%
169%
173%
160%
141%
126%
129%
120%118%
95%
126%
113%
93%
81%
80%
61%
68%
45%
64%
40%
37%
Q2’14
Q3’14
Series C
101%
82%
50%
Series D
Series E and Higher
81%
57%
39%
63%
55%
38%
35%
16%
13%
0%
Series B
106%
88%
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
* Please note that the above-mentioned over 3000% up round financing in 3Q15 was a Series B round. If this financing was excluded,
the Barometer result for Series B rounds in 3Q15 would have been 132%.
silicon valley venture capital survey — first quarter 2016
4
expanded barometer graph — Set forth below is the average percentage price change for each quarter since
we began calculating this metric in 2004.
Average Price Change from Prior Round
120%
100%
80%
60%
average 56%
40%
20%
0%
16
Q1
’
15
Q1
’
14
Q1
’
13
Q1
’
12
Q1
’
11
Q1
’
10
Q1
’
09
Q1
’
08
Q1
’
07
Q1
’
06
Q1
’
05
Q1
’
Q1
’
04
-20%
results by industry for price changes and fenwick & west venture capital barometer™ — The table
below sets forth the direction of price changes and Barometer results for companies receiving financing in this
quarter, compared to their previous round, by industry group. Companies receiving Series A financings are
excluded as they have no previous rounds to compare.
Down Rounds
Up Rounds
Software
83%
8%
9%
65%
54
Hardware
82%
18%
0%
96%
11
Life Science
65%
18%
17%
7%
23
Internet/Digital Media
80%
10%
10%
61%
20
Other
71%
0%
29%
16%
7
Total all Industries
78%
11%
11%
53%
115
silicon valley venture capital survey — first quarter 2016
Flat Rounds
Barometer
Number of
Industry
Financings
5
down round results by industry — The table below sets forth the percentage of “down rounds,” by industry
groups, for each of the past eight quarters.
Down Rounds
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Software
8%
8%
7%
8%
3%
6%
9%
8%
Hardware
9%
8%
6%
6%
25%
0%
18%
18%
Life Science
0%
21%
6%
13%
12%
6%
25%
18%
Internet/Digital Media
7%
14%
6%
12%
9%
4%
6%
10%
Other
0%
25%
0%
9%
11%
0%
10%
0%
Total all Industries
6%
12%
6%
9%
8%
4%
12%
11%
barometer results by industry — The table below sets forth Barometer results by industry group for each of
the last eight quarters.
Barometer
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Software
114%
78%
134%
103%
107%
88%
60%
65%
Hardware
87%
85%
61%
92%
67%
67%
100%
96%
Life Science
75%
26%
39%
22%
110%
76%
25%
7%
169%
139%
178%
124%
125%
136%
111%
61%
65%
56%
83%
155%
108%
509%*
53%
16%
113%
79%
115%
100%
107%
116%*
70%
53%
Internet/Digital Media
Other
Total all Industries
* If the above-mentioned over 3000% up round financing in 3Q15 was excluded, the Barometer results for companies in the “Other”
industry group and for all reviewed companies in 3Q15 would have been 47% and 93%, respectively.
A graphical representation of the above is below.
200%
175%
150%
125%
Software
100%
Hardware
Life Science
Internet/Digital Media
75%
50%
25%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
silicon valley venture capital survey — first quarter 2016
Q3’15
Q4’15
Q1’16
6
median percentage price change — Set forth below is the median percentage change between the price per
share at which companies raised funds in a quarter, compared to the price per share at which such companies
raised funds in their prior round of financing. In calculating the median, all rounds (up, down and flat) are
included, and results are not weighted for the amount raised in the financing. Please note that this is different
than the Barometer, which is based on average percentage price change.
80%
74%
75%
70%
62%
61%
60%
51%
50%
39%
43%
40%
36%
30%
20%
10%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
median percentage price change results by industry — The table below sets forth the median percentage
price change results by industry group for each of the last eight quarters. Please note that this is different than
the Barometer, which is based on average percentage price change.
Median % Price Change
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Software
94%
49%
79%
72%
74%
51%
29%
42%
Hardware
78%
40%
53%
44%
29%
45%
63%
56%
Life Science
30%
0%
26%
18%
61%
13%
23%
20%
Internet/Digital Media
99%
54%
56%
99%
97%
83%
95%
65%
8%
38%
29%
92%
77%
36%
44%
2%
75%
43%
61%
62%
74%
51%
39%
36%
Other
Total all Industries
A graphical representation of the above is below.
116%
90%
64%
Software
Hardware
38%
Life Science
Internet/Digital Media
12%
0%
-14%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
silicon valley venture capital survey — first quarter 2016
Q4’15
Q1’16
7
expanded median price change graph — Set forth below is the median percentage price change for each
quarter since we began calculating this metric in 2004.
Median Price Change from Prior Round
80%
70%
60%
50%
40%
30%
average 28%
20%
10%
’1
6
Q1
’1
5
Q1
’1
4
Q1
’1
3
Q1
’1
2
Q1
’1
1
Q1
’1
0
Q1
’0
9
Q1
’0
8
Q1
’0
7
Q1
’0
6
Q1
’0
5
Q1
Q1
’0
4
0%
financing round — This quarter’s financings broke down by series according to the chart below.
Series
Q2'14
Q3'14
Q4'14
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Series A
23%
28%
27%
25%
18%
23%
28%
22%
Series B
21%
21%
21%
29%
28%
22%
22%
27%
Series C
26%
20%
19%
18%
20%
19%
24%
29%
Series D
13%
14%
9%
13%
16%
14%
11%
8%
Series E and Higher
17%
17%
23%
16%
17%
22%
15%
14%
silicon valley venture capital survey — first quarter 2016
8
Fenwick & West Data on Legal Terms
liquidation preference — Senior liquidation preferences were used in the following percentages of financings.
50%
45%
40%
35%
35%
30% 26%
25%
32%
31%
29%
29%
25%
20%
19%
15%
10%
5%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
The percentage of senior liquidation preference by series was as follows:
80%
60%
52%
50%
50%
46%
41%
40%
39%
35%
24%
22%
20%
17%
Series C
39%
38%
35%
37%
31%
Series B
40%
38%
36%
Series D
Series E and Higher
32%
26%
22%
21%
23%
26%
24%
20%
22%
16%
16%
13%
9%
7%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
silicon valley venture capital survey — first quarter 2016
Q3’15
Q4’15
Q1’16
9
multiple liquidation preferences — The percentage of senior liquidation preferences that were multiple
liquidation preferences were as follows:
30%
25%
20%
17%
15%
12%
11%
10%
5%
5%
8%
14%
6%
5%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
Of the senior liquidation preferences that were a multiple preference, the ranges of the multiples broke down
as follows:
100%
100%
100%
90%
80%
70%
67%
67%
67%
75%
75%
60%
>1x - 2x
50%
40%
33%
30%
25%
20%
33%
33%
0%
Q2’14
0%
0%
Q3’14
0%
0%
Q4’14
Q1’15
0%
0%
Q2’15
Q3’15
silicon valley venture capital survey — first quarter 2016
>3x
25%
25%
10%
0%
>2x - 3x
50%
0%
Q4’15
25%
0%
Q1’16
10
participation in liquidation — The percentages of financings that provided for participation were as follows:
60%
50%
40%
30%
22%
20%
24%
20%
17%
22%
25%
18%
14%
10%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
Of the financings that had participation, the percentages that were not capped were as follows:
70%
70%
65%
63%
60%
53%
50%50%
63%
52%
50%
40%
30%
20%
10%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
cumulative dividends – Cumulative dividends were provided for in the following percentages of financings:
10%
9%
9%
8%
7%
7%
6% 6%
6%
6%
6%
5%
5%
5%
4%
3%
2%
1%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
silicon valley venture capital survey — first quarter 2016
Q3’15
Q4’15
Q1’16
11
antidilution provisions –The uses of (non-IPO) antidilution provisions in the financings were as follows:
100% 98%
99%
98%
98%
96%
98%
100%
98%
80%
Ratchet
60%
Weighted Average
None
40%
20%
1%
0% 1%
Q2’14
2%
0%
Q3’14
1%
0%
Q4’14
2%
3%
2%
0%
Q1’15
1%
Q2’15
0%
Q3’15
0%
0%
Q4’15
2%
0%
Q1’16
Please note that the chart above only applies to non-IPO anti-dilution provisions. In other words, the chart refers to anti-dilution
provisions that protect the investor against a future venture financing at a price below what the investor paid. The chart does not
include anti-dilution provisions designed to protect against an IPO at a price below the price paid by the venture investor (e.g., an IPO
ratchet), because those provisions are generally only negotiated/included in very late stage, high value deals. We believe it would
not be useful to provide a percentage of all financings that have IPO anti-dilution provisions, because it will provide a result that is
artificially low. An analysis of IPO anti-dilution provisions is included in our Unicorn Survey, which by its nature is focused on late
stage, high value deals.
pay-to-play provisions – The percentages of financings having pay-to-play provisions were as follows:
20%
16%
12%
9%
8%
4%
4%
5%
4%
2%
0%
Q2’14
4%
2%
Q3’14
Q4’14
Q1’15
Q2’15
2%
Q3’15
Q4’15
Q1’16
redemption – The percentages of financings providing for mandatory redemption or redemption at the option
of the investor were as follows:
20%
15%
12%
Q2’14
15%
9%
9%
10%
8%
5%
0%
14%
13%
8%
Q3’14
Q4’14
Q1’15
Q2’15
silicon valley venture capital survey — first quarter 2016
Q3’15
Q4’15
Q1’16
12
corporate reorganizations – The percentages of post-Series A financings involving a corporate
reorganization (i.e. reverse splits or conversion of shares into another series or classes of shares) were as
follows:
15%
12%
9%
8%
7%
6%
5%
6%
5%
4%
5%
4%
3%
0%
Q2’14
Q3’14
Q4’14
Q1’15
Q2’15
Q3’15
Q4’15
Q1’16
§§ About our Survey
The Fenwick & West Venture Capital Survey was first published in the first quarter of 2002 and has been
published every quarter since then. Its goal is to provide information to the global entrepreneurial and
venture community on the terms of venture financings in Silicon Valley.
The survey is available to all, without charge, by signing up at www.fenwick.com/vcsurvey/sign-up. We
are pleased to be a source of information to entrepreneurs, investors, educators, students, journalists and
government officials.
Our analysis of Silicon Valley financings is based on independent data collection performed by our lawyers
and paralegals, and is not skewed towards or overly representative of financings in which our firm is
involved. We believe that this approach, compared to only reporting on deals handled by a specific firm,
provides a more statistically valid and larger dataset.
For purposes of determining whether a company is based in “Silicon Valley” we use the area code of the
corporate headquarters. The area codes included are 650, 408, 415, 510, 925, 916, 707, 831 and 209.
§§ Note on Methodology
When interpreting the Barometer results please bear in mind that the results reflect the average price
increase of companies raising money in a given quarter compared to their prior round of financing, which
was on average about 18 months prior. By definition the Barometer does not include companies that do not
do follow-on financings (which may be because they went out of business, were acquired or went public).
Accordingly we believe that our results are most valuable for identifying trends in the venture environment,
as opposed to calculating absolute venture returns. Please also note that our calculations are not “dollar
weighted,” i.e. all venture rounds are treated equally, regardless of size.
silicon valley venture capital survey — first quarter 2016
13
§§ Disclaimer
The preparation of the information contained herein involves assumptions, compilations and analysis, and
there can be no assurance that the information provided herein is error-free. Neither Fenwick & West LLP
nor any of its partners, associates, staff or agents shall have any liability for any information contained
herein, including any errors or incompleteness. The contents of this report are not intended, and should not
be considered, as legal advice or opinion. To the extent that any views on the venture environment or other
matters are expressed in this survey, they are the views of the authors only, and not Fenwick & West LLP.
§§ Contact/Sign Up Information
For additional information about this report please contact Barry Kramer at 650-335-7278; bkramer@
fenwick.com at Fenwick & West.
To view the most recent survey please visit fenwick.com/vcsurvey. To be placed on an email list for future
editions of this survey please visit fenwick.com/vcsurvey/sign-up.
© 2016 Fenwick & West LLP
silicon valley venture capital survey — first quarter 2016
14