Venture Financing Report – Q3 2012

Deal Volumes Slow and Early-Stage Valuations Decline
November 26, 2012

Cooley LLP is pleased to present our findings on venture financings for Q3 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 slowing deal volumes and decreased invested capital during the quarter. In Q3 2012, we saw median pre-money valuations decline in Series A and B transactions. Additionally, the data showed a decrease in up versus flat/down rounds from the prior quarter. Up rounds represented 71% of all financings in Q3, down from 77% in Q2. The percentage of tranched transactions increased in Q3 to over 20% of all deals, though the percentage of recapitalization transactions decreased. Deal terms in Q3 2012 remained mixed. We observed increases in the use of fully participating preferred and pay-to-play provisions in Q3, compared to the prior quarter. The data pointed to increased utilization of greater than 1x liquidation preferences in Series A and C deals, while showing a decrease in Series B and D+ transactions. Additionally, we saw a decrease in the use of drag-along provisions during the quarter.

Please note that this report includes data from our recently opened office in Los Angeles. 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.

View Report