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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.

https://www.fenwick.com/insights/publications/silicon-valley-venture-capital-flash-report-april-2020

https://www.fenwick.com/insights/publications/silicon-valley-venture-capital-flash-report-may-2020


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


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


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


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


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


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


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%


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%


Other 70% 90% 120% 67% 93% 109% 115% 22%


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


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%


Other 37% 48% 69% 60% 29% 114% 68% 5%


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


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%


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


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


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


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


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


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


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


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.

http://www.fenwick.com/vcsurvey/sign-up


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.

https://www.fenwick.com/professionals/Pages/cindyhess.aspx

https://www.fenwick.com/professionals/Pages/markleahy.aspx

https://www.fenwick.com/professionals/Pages/khangtran.aspx


Contact/Sign Up Information

For additional information about this report please contact Cynthia Hess at 650.335.7238;

[email protected] or Mark Leahy at 650.335.7682; [email protected] 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

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