Fenwick & West LLP has released its Third Quarter 2010 Silicon Valley Venture Capital Survey. The survey looks at the valuations and the terms of financing for over 100 technology companies in Silicon Valley that reported raising capital in the third quarter of this year. And not surprisingly, perhaps, the survey found that valuations are up.The law firm
According to Barry Kramer, a partner in the firm and a co-author of the survey, during the third quarter, "up rounds exceeded down rounds 52% to 30% with 18% flat. This was similar to the second quarter of 2010, when up rounds exceeded down rounds 55% to 27%, with 18% flat, and the fifth consecutive quarter in which up rounds exceeded down rounds."
The firm's Venture Capital Barometer - something that measures the change in share price of Silicon Valley companies funded during the quarter as compared to the share price of previous financing rounds - showed a 28% average price increase for the quarter. This compares to 30% in the first quarter of 2010 and marks the fifth consecutive quarter in which the barometer was positive.
The report also finds that the best performing industries in the quarter were Internet and digital media companies, followed by those in the life sciences. Internet companies have outperformed other industries from a valuation perspective throughout 2010.
Michael Patrick, another partner in the firm and co-author of the survey adds a cautionary note, saying that "as reported by third party sources, since the beginning of 2009 venture capitalists have invested significantly more in companies than the amount of new funds that have been committed to venture funds. This trend would likely result in valuations decreasing if commitments to venture funds do not increase."
The full survey can be downloaded here.