Background — We analyzed the terms of venture financings for 103 companies headquartered in the San Francisco Bay Area that reported raising money in the fourth quarter of 2007.

Overview

The results of the 4Q07 survey showed continued improvement in venture valuations, although the amount by which valuations increased was lower in 4Q07 than in the prior quarters of 2007. The highlights of the quarter are as follows: 

  • Up rounds exceeded down rounds for the 16th quarter in a row (69% up vs. 22% down, with 9% flat). For the prior three quarters of 2007 up rounds had, on average, outpaced down rounds 80% to 11%, with 9% flat. 
  • The Fenwick & West Venture Capital Barometer™ showed a 55% average price increase for companies receiving venture capital in 4Q07, compared to such companies’ prior financing round. For the prior three quarters of 2007, the average price increase for companies raising funds compared to their prior round was 75%.

Other U.S. venture industry related results for the quarter and the year include the following:

The amount invested by venture capitalists in the U.S. in 4Q07 was approximately $7.3 billion. Although this amount was approximately 5% less than the amounts invested in 3Q07 and 2Q07, and flat with 1Q07, 2007 was the best year for venture investment since 2001. The total amount invested by venture capitalists in the U.S. in 2007 ($29.9 billion) was up approximately 8% over 2006.1

  • Acquisitions of venture backed companies in the U.S. increased in 4Q07 with 106 transactions totaling $16.2 billion, compared to 97 transactions totaling $11.3 billion in 3Q07. 2007 was the best acquisition year for venture backed companies since 2000, both in terms of aggregate amount paid ($46.2 billion) as well as median amount paid per transaction ($98 million).1
  • IPOs of venture backed companies increased in 4Q07, with 26 IPOs raising $2.0 billion in 4Q07. 2007 was the best IPO year since 2000, with 74 venture backed IPOs raising $6.7 billion.1
  • VC investment in IT in 2007 was $14.8 billion, a 2% increase over 2006, with much of the investment in Web based companies. IT M&A activity increased significantly in 2007, raising $26 billion, a 30% increase over 2006. 34 VC backed IT companies went public in 2007, raising $3.7 billion.1
  • Healthcare investment had another excellent year in 2007, raising a record $10 billion in 671 deals, a 17% increase over the $8.5 billion raised in 662 deals in 2006. Healthcare companies also raised $11.2 billion in M&A activity in 2007. 31 venture backed healthcare companies went public in 2007, raising $2.3 billion.1
  • Cleantech companies saw the most significant growth in deal flow and investment in 2007, raising $2.5 billion (a 67% increase from 2006) in 187 deals.1
  • The San Francisco Bay Area attracted $9.9 billion in VC investment in 2007, a 3% increase over 2006. Washington State (where Fenwick & West has just opened an office) attracted $1.4 billion in 2007, a 27% increase over 2006 and the fifth straight year of investment growth.1
  • Nasdaq was up 9.2% for 2007 (although down 1.9% in 4Q07), but is down 14.3% in 1Q08 through February 29.

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