Q3 2018 – Deal Environment Remains Strong as Later Stage Valuations Rise

In the third quarter of 2018, both deal volumes and aggregate dollars raised remained extremely high. In Q3 2018, Cooley handled 243 disclosable deals, representing more than $6.6 billion of invested capital. Up rounds represented 87% of deals during the quarter. Our data points to a notable increase in median pre-money valuations in later stage deals relative to prior quarters, with Series C median pre-money valuations rising from $115 million to $190 million and Series D and later median pre-money valuations rising from $245 million to $450 million. In Q3, Cooley handled six disclosable deals having pre-money valuations greater than $1 billion, one of which had a valuation greater than $6 billion.

Other than late-stage median valuations, deal terms during the quarter trended modestly toward the investors. For example, the percentage of deals with no participation feature decreased from 87% in Q2 to 83% in Q3.

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Commentary from Bruce Booth

Bruce Booth, partner at Atlas Venture, sat down with us to discuss his view on the state of VC investing.

On deal terms: The pendulum is definitely favoring entrepreneurs and founders, which in life sciences also typically includes venture creation-focused investors.

On shifting dynamics: These trends bring life sciences terms closer to where technology terms have been in recent years – where companies and entrepreneurs have many options to play off each other.

On pharma deal flow: There’s been a real disconnect between pharma partnering and the equity capital markets recently, in particular around M&A. … If the equity markets cool considerably, I would anticipate an increase in pharma dealmaking.

On market outlook: I think we’ll see a cooling of venture financing and public offerings through the end of 2018 with a likely resurgence in early 2019 as markets stabilize and IPO activity picks up again.

Read full commentary from Bruce Booth

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.