June 2009 | Issue 39
A survey of first quarter 2009 Silicon Valley venture capital financings reveals that the proportion of down round financings exceeded up rounds by 46% to 25%, with 29% flat. This was the first time since the fourth quarter of 2003 that down rounds exceeded up rounds. In the fourth quarter of 2008, down rounds accounted for 33% of financings. The corresponding figure for the first quarter of 2008 was 19%.
A down round is defined as a transaction in which the price is lower than that of the previous round of financing.
Overall Prices Down
Not surprisingly, the magnitude of price changes in first quarter 2009 venture financings also underwent a downward shift as compared to 2008. The average overall per share price change from the previous round in first quarter 2009 financings was -3%, as compared to +25% for the fourth quarter of 2008, and +49% for the first quarter of 2008.
One bright spot in the survey was that the percentage of up rounds increased each month during the first quarter of 2009, (January – 17%, February – 29%, March – 35%). The survey covered 92 venture financings, and was carried out by Fenwick & West LLP, a global law firm specializing in services to high technology and life science clients. A copy of the report is available here.