Venture Financing Report - November 2010

Q3 2010 — A Continued Mix of Optimism and Caution

Cooley LLP is pleased to present our findings on venture financings for the third quarter of 2010, 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 points to continued mixed signals in the venture financing environment. In Q3, the percentage of up rounds versus flat/down rounds remained consistent with prior quarters. A majority of deals were up rounds for the third consecutive quarter. Median pre-money valuations were also mixed. The data showed valuation increases for Series A and B deals, continuing a trend of escalating pre-money valuations for Series A deals going back to Q4 2009. Valuations for later stage deals decreased in Q3. Deal terms also mirrored the financing statistics. We observed increases in the use of participating preferred and drag-along provisions across all deal types in Q3 2010. Additionally, though recapitalization transactions decreased from the prior quarter, the data pointed to a significant increase in utilization of pay-to-play provisions in later stage deals.

We hope you find this Update 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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