Post on 28-Aug-2020
Silicon Valley Venture Capital Survey Second Quarter 2020
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 1
Silicon Valley Venture Capital Survey
Second Quarter 2020
Cynthia Clarfield Hess, Mark Leahy and Khang Tran
Background
Our survey analyzed the terms of 203 venture financings closed in the second quarter of 2020 by
companies headquartered in Silicon Valley. The Q2 2020 survey is the first to analyze a full quarter
of results since the COVID-19 pandemic caused widespread business disruptions. It follows our
April 2020 and May 2020 Silicon Valley Venture Capital Flash Reports, special interim monthly
reports tracking the venture capital environment during the pandemic.
Overview of Fenwick & West Results
Valuation results declined sharply from pre-pandemic peak levels.
� Up rounds exceeded down rounds 71% to 15%, with 14% flat in Q2, a decline from Q1 when
up rounds exceeded down rounds 79% to 14%, with 7% flat. The percentage of up rounds was
the lowest, and the percentage of flat rounds was the highest, since Q4 2016. Meanwhile, the
percentage of down rounds was the highest since Q4 2017.
� The Fenwick & West Venture Capital Barometer™ showed the average price increase declining
considerably to 51% in Q2, compared with 93% in the prior quarter and a record 142% in Q4
2019.
� The median price increase for financings was 26% in Q2, a decline from 54% in the prior quarter
and a record 76% in Q4 2019.
� Valuation results across all series of financings declined in Q2 from the prior quarter. Series B
financing rounds recorded the strongest valuation results in the quarter and also weakened from
the prior quarter by the least amount, while the valuation results for Series C financing rounds
experienced the greatest declines.
� The internet/digital media industry recorded the strongest valuation results in Q2, followed
closely by the software industry. Nevertheless, valuation results across all industries weakened
in Q2 compared with the prior quarter, with the hardware industry experiencing the greatest
declines in valuation results.
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 2
Fenwick & West Data on Valuation
PRICE CHANGE — The direction of price changes for companies receiving financing in a quarter,
compared to their prior round of financing were as follows:
The percentage of DOWN ROUNDS by series were as follows:
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
UpDownFlat
Price Change Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
Up 0.78 0.81 0.81 0.86 0.81
Down 0.09 0.08 0.11 0.06 0.07
Flat 0.13 0.11 0.08 0.08 0.12
15%
71%
14%
1
Series Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
B 0% 15% 10% 2% 3%C 13% 5% 9% 4% 3%D 15% 4% 9% 6% 6%E and higher 11% 6% 16% 14% 17%
0%
5%
10%
15%
20%
25%
30%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
BCDE and higher
12%13%
23%
15%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 3
EXPANDED PRICE CHANGE GRAPH — Below is the direction of price changes for each quarter
since 2004.
Quarter Q1’04 Q2’04 Q3’04 Q4’04 Q1’05Up Rounds 51% 67% 53% 60% 59%
Down Rounds 30% 21% 32% 28% 31%
Flat Rounds 19% 12% 15% 12% 10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Q1’04
Q1’05
Q1’06
Q1’07
Q1’08
Q1’09
Q1’10
Q1’11
Q1’12
Q1’13
Q1’14
Q1’15
Q1’16
Q1’17
Q1’18
Q1’19
Q2 '20
Up RoundsDown RoundsFlat Rounds
14%
15%
71%Average percentage of up rounds 69%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 4
THE FENWICK & WEST VENTURE CAPITAL BAROMETER™ (magnitude of price change) — Below
is the average percentage change between the price per share at which companies raised funds in
a quarter, compared to the price per share at which such companies raised funds in their prior
round of financing. In calculating the average, all rounds (up, down and flat) were included, and
results were not weighted for the amount raised in a financing.
The Barometer results by series were as follows:
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
Median Percentage Price Change 71% 85% 75% 77% 88%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
Percent Change Series B
Up rounds 1.38Down rounds -0.71Net result 1.19Median net 0.92
51%
1
Series Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
B 0.92 1.1 0.92 1.06 1.19
C 0.58 0.81 0.73 0.76 1.24
D 0.83 1 0.9 0.89 0.4
E and higher 0.55 0.58 0.46 0.39 0.4
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
BCDE and higher
77%
65%
27%30%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 5
EXPANDED BAROMETER GRAPH — Below is the average percentage price change for each
quarter since we began calculating this metric in 2004.
Quarter Q1’04 Q2’04 Q3’04 Q4’04 Q1’05Barometer 17% 28% 17% 36% 24%
-20%-10%
-0%
10%
20%30%
40%
50%60%
70%
80%
90%100%
110%
120%130%
140%
150%
Q1’04
Q1’05
Q1’06
Q1’07
Q1’08
Q1’09
Q1’10
Q1’11
Q1’12
Q1’13
Q1’14
Q1’15
Q1’16
Q1’17
Q1’18
Q1’19
Q1’20
Average 61%
51%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 6
MEDIAN PERCENTAGE PRICE CHANGE — Below is the median percentage change between the price per share at which companies raised funds in a quarter, compared to the price per share at which such companies raised funds in their prior round of financing. In calculating the median, all rounds (up, down and flat) were included, and results were not weighted for the amount raised in the financing. Please note that this is different from the Barometer, which is based on average percentage price change.
The median price change results by series were as follows:
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
Median Percentage Price Change 42% 52% 56% 58% 54%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
Percent Change Series B
Up rounds 1.38Down rounds -0.71Net result 1.19Median net 0.92
26%
1
Series Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
B 0.92 1.1 0.92 1.06 1.19
C 0.58 0.81 0.73 0.76 1.24
D 0.83 1 0.9 0.89 0.4
E and higher 0.55 0.58 0.46 0.39 0.4
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
BCDE and higher
77%
65%
27%30%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 7
EXPANDED MEDIAN PRICE CHANGE GRAPH — Below is the median percentage price change for
each quarter since we began calculating this metric in 2004.
Quarter Q1’04 Q2’04 Q3’04 Q4’04 Q1’05Median 7% 21% 6% 15% 18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Q1’04
Q1’05
Q1’06
Q1’07
Q1’08
Q1’09
Q1’10
Q1’11
Q1’12
Q1’13
Q1’14
Q1’15
Q1’16
Q1’17
Q1’18
Q1’19
Q1’20
Average 32%
26%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 8
RESULTS BY INDUSTRY FOR DIRECTION OF PRICE CHANGES AND AVERAGE AND MEDIAN
PRICE CHANGES — The table below illustrates the direction of price changes, and average and
median price change results, for companies receiving financing in this quarter, compared to their
previous round, by industry group. Companies receiving Series A financings were excluded as
they have no previous rounds to compare.
Industry
Up
Rounds
Down
Rounds
Flat
Rounds Barometer
Median
Price Change
Number of
Financings
Software 78% 10% 12% 71% 45% 69
Hardware 60% 20% 20% 1% 7% 10
Life Sciences 60% 19% 21% 26% 6% 42
Internet/Digital Media 86% 10% 5% 82% 44% 21
Other 56% 31% 13% 22% 5% 16
Total all Industries 71% 15% 14% 51% 26% 158
DOWN ROUND RESULTS BY INDUSTRY — The table below illustrates the percentage of “down
rounds,” by industry groups, for each of the past eight quarters.
Down Rounds Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2’20
Software 11% 3% 12% 7% 9% 6% 13% 10%
Hardware 14% 26% 0% 0% 7% 8% 29% 20%
Life Sciences 5% 11% 27% 4% 0% 0% 25% 19%
Internet/Digital Media 5% 13% 5% 9% 8% 9% 0% 10%
Other 5% 0% 0% 7% 7% 0% 6% 31%
Total all Industries 9% 8% 11% 6% 7% 5% 14% 15%
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 9
BAROMETER RESULTS BY INDUSTRY — The table below sets forth Barometer results by industry
group for each of the last eight quarters.
Industry Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1'20 Q2'20
Software 61% 118% 78% 85% 93% 158% 102% 71%
Hardware 58% 44% 40% 74% 91% 100% 84% 1%
Life Sciences 110% 35% 30% 56% 47% 40% 67% 26%
Internet/Digital Media 78% 68% 102% 80% 94% 226% 87% 82%
Other 70% 90% 120% 67% 93% 109% 115% 22%
Total all Industries 71% 85% 75% 77% 88% 142% 93% 51%
A graphical representation of the above data is below.
Industry Q3’18 Q4’18 Q1’19 Q2’19 Q3’19Software 0.61 1.18 0.78 0.85 0.93Hardware 0.58 0.44 0.4 0.74 0.91Life Sciences 1.1 0.35 0.3 0.56 0.47Internet/Digital Media 0.78 0.68 1.02 0.8 0.94
0%
25%
50%
75%
100%
125%
150%
175%
200%
225%
250%
275%
300%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
SoftwareHardwareLife SciencesInternet/Digital Media
71%
1%
26%
82%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 10
MEDIAN PERCENTAGE PRICE CHANGE RESULTS BY INDUSTRY — The table below illustrates
the median percentage price change results by industry group for each of the last eight quarters.
Please note that this is different than the Barometer, which is based on average percentage price
change.
Median % Price
Change Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1'20 Q2'20
Software 45% 58% 66% 68% 77% 101% 82% 45%
Hardware 30% 24% 32% 48% 29% 69% 44% 7%
Life Sciences 44% 25% 9% 43% 16% 30% 22% 6%
Internet/Digital Media 47% 56% 96% 60% 60% 87% 69% 44%
Other 37% 48% 69% 60% 29% 114% 68% 5%
Total all Industries 42% 52% 56% 58% 54% 76% 54% 26%
A graphical representation of the above data is below.
Industry Q3’18 Q4’18 Q1’19 Q2’19 Q3’19Software 0.45 0.58 0.66 0.68 0.77Hardware 0.3 0.24 0.32 0.48 0.29Life Sciences 0.44 0.25 0.09 0.43 0.16Internet/Digital Media 0.47 0.56 0.96 0.6 0.6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
SoftwareHardwareLife SciencesInternet/Digital Media
45%
7%6%
44%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 11
FINANCING ROUND — This quarter’s financings broken down by series were as follows:
Series Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4'19 Q1'20 Q2'20
Series A 27% 31% 32% 26% 35% 39% 40% 22%
Series B 20% 20% 21% 25% 21% 22% 24% 21%
Series C 18% 18% 18% 22% 17% 18% 17% 20%
Series D 13% 11% 12% 7% 8% 11% 8% 15%
Series E and Higher 22% 20% 17% 20% 19% 10% 11% 23%
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 12
Fenwick & West Data on Legal Terms
LIQUIDATION PREFERENCE — Senior liquidation preferences were used in the following
percentages of financings.
The percentage of senior liquidation preference by series was as follows:
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19Liquidation by Preference 0.24 0.24 0.27 0.28 0.26
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
21%
1
Series Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
B 14% 17% 31% 28% 18%C 26% 28% 24% 21% 22%D 22% 12% 23% 19% 38%E and higher 34% 34% 28% 40% 34%
0%
8%
16%
24%
32%
40%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
BCDE and higher
7%
20%
30%
28%
Q4’19
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 13
MULTIPLE LIQUIDATION PREFERENCES — The percentage of senior liquidation preferences that
were multiple liquidation preferences was as follows:
Of the senior liquidation preferences that were multiple preferences, the ranges of the multiples
broke down as follows:
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19LIQUIDATION PREFERENCE 0.08 0 0.09 0.07 0.03
0%
5%
10%
15%
20%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
18%
1
Series Q3’18 Q4’18 Q1’19 Q2’19 Q3’19>1x – 2x 0.67 0 1 1 1>2x – 3x 0.33 0 0 0 0>3x 0 0 0 0 0
0%
20%
40%
60%
80%
100%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
>1x – 2x>2x – 3x>3x
83%
17%
0%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 14
PARTICIPATION IN LIQUIDATION — The percentages of financings that provided for participation
were as follows:
Of the financings that had participation, the percentages that were not capped were as follows:
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
Participation in Liquidation 0.11 0.11 0.12 0.1 0.11
0%
5%
10%
15%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
8%
1
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
Uncapped 0.54 0.58 0.65 0.68 0.6
0%
25%
50%
75%
100%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
76%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 15
CUMULATIVE DIVIDENDS – Cumulative dividends were provided for in the following percentages
of financings:
ANTIDILUTION PROVISIONS –The uses of (non-IPO) antidilution provisions in the financings were
as follows:
Please note that the chart above only applies to non-IPO antidilution provisions. In other words, the chart refers to antidilution provisions that protect the investor against a future venture financing at a price below what the investor paid. The chart does not include antidilution provisions designed to protect against an IPO at a price below the price paid by the venture investor (e.g., an IPO ratchet).
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
CUMMULATIVE DIVIDENDS 0.06 0.04 0.04 0.05 0.05
0%
1%
2%
4%
5%
6%
7%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
7%
1
Type of Provision Q3’18 Q4’18 Q1’19 Q2’19 Q3’19Ratchet 0 0 0 0 0Weighted Average 0.98 0.97 1 0.98 0.99None 0.02 0.02 0 0.02 0.01
0%
20%
40%
60%
80%
100%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
RatchetWeighted AverageNone
98%
0%1%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 16
PAY-TO-PLAY PROVISIONS – The percentages of financings having pay-to-play provisions were as
follows:
REDEMPTION – The percentages of financings providing for mandatory redemption or redemption
at the option of the investor were as follows:
Q3’18 Q4’18 Q1’19
TOTAL ALL SERIES 0.02 0.03 0.04
0%
2%
4%
6%
8%
10%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
6%
1
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
REDEMPTION 0.06 0.06 0.06 0.06 0.06
0%
2%
4%
6%
8%
10%
12%
14%
16%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
5%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 17
CORPORATE REORGANIZATIONS – The percentages of post-Series A financings involving a
corporate reorganization (i.e. reverse splits or conversion of shares into another series or classes
of shares) were as follows:
DUAL-CLASS COMMON STOCK – The percentages of financings with dual-class common stock
structures, where there is one class of common stock with more votes per share than the other
class, were as follows:
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
REDEMPTION 0.07 0.06 0.09 0.05 0.04
0%
2%
4%
6%
8%
10%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
3%
3
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19
REDEMPTION 0.09 0.08 0.09 0.08 0.07
0%
2%
4%
6%
8%
10%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
8%
5
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 18
IPO DOWNSIDE PROTECTIONS – The percentages of financings with IPO downside protections
were as follows:
Type of Provision Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20Blocking right (IPO price must be at least as high as financing price)
0.44 0.44 0.41 0.45 0.38 0.44 39% 46%
Ratchet (investors receive additional shares if IPO price is less than financing price, or in some cases, the financing price plus a premium)0 0.01 0.01 0 0.01 0 0.4% 2.5%
0%
10%
20%
30%
40%
50%
Q3’18 Q4’18 Q1’19 Q2’19 Q3’19 Q4’19 Q1’20 Q2’20
Blocking right (IPO price must be at least as high
as financing price)
Ratchet (investors receive additional shares if IPO
price is less than financing price, or in some cases, the financing price plus a
premium)2.5%
46%
1
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 19
About our Survey
The Fenwick & West Venture Capital Survey has been published quarterly since the first quarter of
2002. Its goal is to provide information to the global entrepreneurial and venture community on the
terms of venture financings in Silicon Valley.
The survey is available to all, without charge, by signing up at www.fenwick.com/vcsurvey/sign-up.
We are pleased to be a source of information to entrepreneurs, investors, educators, students,
journalists and government officials.
Our analysis of Silicon Valley financings is based on independent data collection performed by our
lawyers and paralegals, and is not skewed toward or overly representative of financings in which
our firm is involved. We believe that this approach, compared to only reporting on deals handled
by a specific firm, provides a more statistically valid and larger dataset.
For purposes of determining whether a company is based in “Silicon Valley” we use the area code
of the corporate headquarters. The area codes included are 650, 408, 415, 510, 925, 916, 707, 831
and 209.
Note on Methodology
When interpreting the Barometer results please bear in mind that the results reflect the average
price increase of companies raising money in a given quarter compared to their prior round of
financing, which was on average about 18 months prior. By definition the Barometer does not
include companies that do not do follow-on financings (which may be because they went out of
business, were acquired or went public). Accordingly we believe that our results are most valuable
for identifying trends in the venture environment, as opposed to calculating absolute venture
returns. Please also note that our calculations are not “dollar weighted,” i.e. all venture rounds are
treated equally, regardless of size.
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 20
About the Authors
Cynthia Clarfield Hess is co-chair of Fenwick’s startup and venture capital
group. Recognized as among the best corporate lawyers by Chambers
USA, Cindy has counseled technology companies on a broad range of
corporate transactional matters, from formation matters and venture capital
financings to mergers and acquisitions and public offerings, representing
both companies and underwriters. She has worked with a wide range of
high-technology clients – from established technology stalwarts to emerging
companies developing disruptive technologies, which include some of
the hottest and most innovative companies in the mobile, SaaS and social
media spaces.
Mark Leahy, co-chair of Fenwick’s startup and venture capital group and a
seasoned advisor to technology companies on a broad range of corporate
transactional matters, provides legal solutions that advance his clients’
business objectives. His practice focuses on venture capital financings,
corporate governance, mergers and acquisitions, and public offerings.
His expertise spans a wide range of technologies, including software,
semiconductor, internet/e-commerce, and data management and storage.
Khang Tran supports the firm’s knowledge management efforts by collecting
and sharing knowledge and expertise across the firm, which in turn, is
leveraged to improve the quality of legal services to the firm’s clients.
SILICON VALLEY VENTURE CAPITAL SURVEY SECOND QUARTER 2020 21
Contact/Sign Up Information
For additional information about this report please contact Cynthia Hess at 650.335.7238;
chess@fenwick.com or Mark Leahy at 650.335.7682; mleahy@fenwick.com at Fenwick & West.
To view the most recent survey please visit fenwick.com/vcsurvey. To be placed on an email list for
future editions of this survey please visit fenwick.com/vcsurvey/sign-up.
Disclaimer
The preparation of the information contained herein involves assumptions, compilations and analysis, and there
can be no assurance that the information provided herein is error-free. Neither Fenwick & West LLP nor any of its
partners, associates, staff or agents shall have any liability for any information contained herein, including any errors
or incompleteness. The contents of this report are not intended, and should not be considered, as legal advice or
opinion. To the extent that any views on the venture environment or other matters are expressed in this survey, they
are the views of the authors only, and not Fenwick & West LLP.
© 2020 Fenwick & West LLP