Cooley is one of the big dogs of the VC legal eagle biz. Something like a third of the unicorns on the WSJ's Billion Dollar Startup Club list have used Cooley for one purpose or another.From Cooley:
Additionally, 20 or 21 of the companies on the "Technology Review's 50 Smartest Companies 2017" list have been represented or counseled by the firm. As I said, one of the biggies.
Q2 2019 – Early-Stage Valuations Push Higher
In the second quarter of 2019, both deal volumes and aggregate dollars raised remained at robust levels. In Q2 2019, Cooley handled 227 disclosable deals, representing more than $7.8 billion of invested capital. Up rounds constituted 87% of all transactions during the quarter, remaining at historically high levels. Of particular note was the continued rise in median pre-money valuations in both Seed and Series A deals, which reached the highest levels seen since the inception of this report. The median pre-money valuation for Series Seed deals in Q2 reached $9.8 million across 50 transactions, while median Series A valuations reached $24.8 million across 74 transactions. This points to the increasing pool of capital available to early-stage companies. With that said, later-stage median valuations ticked down somewhat, returning to the levels seen in the same quarter last year.
Deal terms during the quarter continued to be mild. In Q2, just 7% of deals had full participating liquidation preferences. Additionally, we saw a decrease in recapitalization transactions compared to the prior quarter.Commentary from Balderton Capital’s Suranga Chandratillake
View PDF
On technology companies driving valuations to historic highs: “Software is eating the world, and it has a voracious appetite. … Against a backdrop of sweeping technological change, the right companies have an opportunity to be truly gigantic.”....MORE
On European deal term trends: “This feels like a healthy place to be. Entrepreneurs are no slaves to investors, but, equally, investors are able to exercise appropriate fiduciary responsibility on behalf of their own backers.”
On how Brexit could affect the UK startup community: “My biggest long-term concern is that a hard Brexit and nationalistic rhetoric will fundamentally damage Britain’s hard-earned reputation as a welcoming, supportive home for ambitious folk from the world over.”
Based on Cooley data for the quarter, how does your experience in the market – especially in Europe – compare? Are you seeing the same rise in early-stage valuations?
Yes, we broadly see a similar trend. I do think it’s always hard to judge too much from medians, though. The very best companies are somewhat disconnected from the pack, and we have absolutely seen some of those gain very high valuations.
As far as VC deal terms, is the pendulum in Europe favoring companies or investors?
As an ex-CEO who now sits on the VC side of the table, I think the terms are fairly well-balanced in Europe these days – 1x liquidation and no participating preferences, no full ratchets, etc. This feels like a healthy place to be. The entrepreneurs don’t become slaves to investors, but, equally, investors are able to exercise appropriate fiduciary responsibility on behalf of their own backers.
Do you think this will continue through 2019?
I don’t think it will change dramatically in the near term.
Are there noticeable patterns that are different for early-stage deals compared to later-stage deals?
“Founder friendliness” is the flavor of the day for early-stage investments. I think investors recognize that the journey ahead of founders is a long one these days. The trend for companies to stay private for longer and aggressive terms limiting a founder’s flexibility early both chip away at long-term incentive and drive. Later-stage investors, I think, are still closer to a proxy for public investors and so are more likely to expect terms that protect their rights strongly....
