Fenwick Survey: Private Company Valuations are Up in Q4 2020!

Fenwick published its quarterly survey of venture financings and to sum it up, valuations are definitely up! Fenwick’s 2020 Q4 survey indicates that the private company financing market continues to generally favor companies. The survey analyzed the terms of 229 venture financings closed in the 2020 Q4 in Silicon Valley and found the following:

• Valuation results rebounded from the prior quarter but haven’t completely recovered from COVID-19 peak levels

• Up rounds exceeded down rounds 86% to 5%, with 9% flat in Q4 (with Q4 enjoying the highest percentage of up rounds since 2019 Q2), will all series print the tape with stronger valuation results

• While results were stronger across all industries, software and internet/digital media industries recorded the strongest valuation results and the life science industry recorded valuation results that have surpassed pre-pandemic levels

• Use of senior liquidation preferences and participation rights declined sharply in Q4 to the lowest percentages recorded in the history of Fenwick’s survey

What does this all mean for values generally and 409A specifically? For companies that have recently raised money on higher valuations, we would expect that a reasonable application of the OPM Backsolve method will result in higher fair market value determinations.

Fewick’s survey (Silicon Valley Venture Capital Survey – Fourth Quarter 2020, By Cynthia Clarfield Hess, Mark A. Leahy, Khang Tran) can be found here: https://www.fenwick.com/insights/publications/silicon-valley-venture-capital-survey-fourth-quarter-2020

Contact us today to learn how the venture capital financing market may impact the value of your company and the price at which you issue options!

Contact us today to learn how the venture capital financing market may impact the value of your company and the price at which you issue options!