"What is market?"
"What is the trend?"
These two questions are heard frequently in Silicon Valley, but there is too often a dearth of local, original data to answer either one. For 10 years now, Silicon Valley technology law firm Fenwick & West has been addressing this need in the area of venture financings.
A hands-on team at the firm publishes an in-depth quarterly analysis known as the Venture Capital Survey. The latest "anniversary edition" was released a few weeks ago for the fourth quarter of 2011 and is available on Fenwick's web-site here.
I read this report every quarter for a few reasons. First, the amount of data analyzed by the survey is remarkable. In the most recent survey, 117 companies that reported raising money in the fourth quarter of 2011 were analyzed. The financings are examined not just for valuation but for some of the key provisions that were used, such as liquidation preferences and anti-dilution features.
Second, the results have a strong local flavor. The analysis covers Silicon Valley-headquartered companies, giving it a much more relevant feel for our ecosystem than national statistics.
Third, the work is unique and original. Much of the research on financing terms involves manual labor. About 10 Fenwick professionals are involved in putting the report together every quarter.
Finally, the authors draw many interesting conclusions that help put the mountains of data into useful context about trends. In the latest edition, the authors state that some industries, such as Internet/digital media and software, are concerned about a bubble, while others, such as cleantech and life science, are having a tougher time. Against this backdrop, the detailed tables reveal that in the fourth quarter 80% of the software industry financings were up rounds, but only 29% of the cleantech transactions were up rounds.
To join me in subscribing to Fenwick's Venture Capital Survey, click here.