Q2 2018 – Invested Capital Spikes as Valuations Hold Steady

In the second quarter of 2018, both deal volumes and aggregate dollars raised remained at historically high levels. In Q2 2018, Cooley handled 224 disclosable deals, representing more than $7.5 billion of invested capital. This is the highest level of invested capital we have seen in a calendar quarter since the inception of this report. In Q2 2018, 86% of all transactions were up rounds, the highest percentage since Q4 2015. Median pre-money valuations remained strong in Series B and C financings, but cooled a bit in Series A and D+ deals.

Deal terms during the quarter continued to be company-friendly. Consistent with recent quarters, we saw just 9% of deals with full participating liquidation preferences. We also noticed decreases in the percentage of deals structured in tranches and in recapitalization transactions. However, the data did show an increase in the use of pay-to-play provisions in later stage deals.

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Commentary from Stephen Kraus

Stephen Kraus, partner at Bessemer Venture Partners, sat down with us to discuss his view on the state of VC investing.

On deal terms: Generally, the terms have been company and entrepreneur favorable for a long time now, and they continue to remain that way.

On the proliferation of late-stage investors: It’s created this downward movement on stage of financing, and therefore upward pressure on what a normal Seed or Series A round looks like.

On Bessemer’s response to the influx of capital: We’re doing a lot more earlier-stage investing. The key to moving earlier is to know when to double down on your winners.

On fewer IPOs: There’s a lot more talk about companies staying private, and I don’t necessarily think that’s a bad thing … by definition if you have more time to mature, you should be more predictable and stable in your growth profile and earnings potential, which is generally more attractive to public market investors over the long term.

Read full commentary from Stephen Kraus

GO Visualize (powered by Tableau)

Welcome to Cooley GO Visualize, which allows you to drill down on trends gleaned from deals we’ve worked on with entrepreneurs. The data you see here will be updated in conjunction with our quarterly VC Financing Reports. We hope you’ll find this and other Cooley GO resources such as the Convertible Note Term Sheet Generator and our guidance in Raise helpful in navigating and accelerating your fundraising efforts.