The venture finance world has its good days and let’s say, not so good days. The investment community continues to operate with a strategic and consistent approach to deals.

In fact, the Q3 financing results revealed an ongoing mix of optimism and caution, with deal volume and money going at a robust level.  At the same time, we saw an increase in median pre-money valuations for both Series A and Series B transactions, with a decrease in media pre-money valuations in later rounds.

Deals also told a cautionary tale with several trends in financing terms pushing investors toward caution, such as:

  • Increases in the use of participating and preferred drag-along provisions
  • Increase in utilization of pay-to-play provisions in later state deals
  • Increase in the percentage of tranched deals

Because we have witnessed both positive and cautionary trends in the market, early 2011 deals will send strong signals for what’s to come. As we kick off this New Year in the coming days, the glass for 2011 begins half ______, you fill in the blank.

To view the Cooley report, click here.* This report provides a summary of data reflecting our experience in venture capital financing terms and trends. Information is taken from transactions in which Cooley served as counsel to either the issuing company or the investors.