Venture Financing Report – Q4 2016 – A Solid Close to a Strong Year

In the fourth quarter of 2016, there were slightly higher deal volumes and aggregate dollars raised compared to prior quarters. In Q4 2016, Cooley handled 187 disclosable deals representing more than $2.7 billion of invested capital. While deal volume increased by 18% compared to Q4 2015, the total proceeds decreased by roughly 23%. 

For the overall year, we handled 710 disclosable deals representing over $11 billion of capital. In 2015, we handled 602 transactions representing over $14 billion of capital. This followed the same trend as in Q4 where deal volume increased measurably in 2016, but overall deal proceeds decreased. 

In Q4, we included seed-stage financings for the first time. In order to keep period-to-period comparisons accurate, we have also included them in the 2015 data referred to above. Over the course of the past two years, the median pre-money valuation for seed-stage financings was $6 million and the median deal size was approximately $2 million. 

For Q4, we again separated out deal valuations by broad industry category to see differences, if any, between technology and life sciences companies. In this observation, it appears that although the percentage of overall deals with valuations of $100+ million showed a slight increase when broken out by industry, the percentage of these larger deals differs greatly between life sciences and technology. For life sciences deals, the percentage of transactions with a valuation of $100+ million decreased from 22% in Q3 to 4% in Q4. Technology deals with these valuations slightly increased from 16% in Q3 to 18% in Q4. 

We also looked at tranched transactions between industry categories. We note that while the percentage of deals with tranching is relatively steady as compared to earlier quarters, within each broad industry category the percentage is quite different. Life sciences deals with tranching increased to 42% in Q4, while technology deals dropped to 3% in the same time frame.

View our latest report in pdf format or visit Cooley GO to view the interactive visualization.

Commentary from Mark Suster

Mark Suster, partner at Upfront Ventures, discusses recent venture trends and what’s ahead for 2017.

2016 saw the rise of the global investor: Out of Japan and China we saw a massive increase in capital come into the US market.

Corporate VC involvement: Not only are there new CVCs, but they’re writing much bigger checks.

Founder-friendly terms: Terms are shifting back to being founder-friendly. And salaries are on the rise. I’m willing to bet that option refreshes are also on the rise. I expect that to be true for 2017 and 2018 unless there’s an unforeseen black swan.

Trump: Under the new administration, one other thing that is likely to happen is the repatriation of capital for the large corporates, including the global tech giants.

Read Cooley’s full interview with Mark Suster on Cooley GO.