Venture Financing Report - Q2 2012

Valuations Continue to Climb on Mixed Deal Terms
July 31, 2012

Cooley LLP is pleased to present our findings on venture financings for Q2 2012, which can be found by clicking on the PDF link below. This report provides a summary of data reflecting our experience in venture capital financing terms and trends. Information is taken from transactions in which Cooley served as counsel to either the issuing company or the investors.

Overall, our data pointed to a quarter marked by increasing valuations across all deal stages. In Q2 2012, we saw the volume of deals remain relatively flat from the prior quarter, while aggregate dollars raised increased from Q1. As mentioned, median pre-money valuations increased significantly across all deal stages and we saw an increase in up versus flat/down rounds. Up rounds represented 82% of all financings in Q2, a level not seen since 2006. Additionally, the percentage of tranched transactions fell in Q2, though the percentage of recapitalization transactions increased. Deal terms in Q2 2012 were extremely mixed. We observed decreases in the use of fully participating preferred and pay-to-play provisions in Q2, compared to the prior quarter. However, the data pointed to increased utilization of greater than 1x liquidation preferences and drag-along provisions during the quarter.

Please note that this report includes data from our recently opened office in Shanghai, China. Future reports will also include transactions from Cooley's newest office in Los Angeles, California. The office is located in Santa Monica—a vibrant hub for technology, media and venture capital—and will complement Cooley's three existing California offices. From the outset, the office will leverage the firm's existing relationships with more than 200 clients in the Los Angeles region. It brings to eleven Cooley's offices across the United States and in Shanghai.

We hope you find this Report informative. Please let us know what other information you would find useful by contacting any of the Cooley partners listed at the end of the report or your local Cooley counsel.

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