Q2 2022 Venture Financing Report
Cooley released their Q2 2022 venture financing report. Their report is a great indicator of what’s happing in the VC space because they are the leading law firm in the US for representation of companies in venture capital transactions.
They handled 332 disclosable venture capital financing deals for Q2 2022,representing $16.6 billion of invested capital. Both numbers are down from Q1 2022, when Cooley handled 401 disclosable VC financing deals with invested capital of $24.3 billion.
The invested capital in VC financing deals for Q2 2022 is at its lowest since Q4 2020, when they handled 353 disclosable deals representing $14.3 billion in invested capital, while deal volume is at its lowest since Q3 2020, when they handled 308 disclosable VC financing deals.
Though consistent with generally reported market dynamics, the slowdown in deal volume and invested capital is something to watch during the second half of 2022 to see if the trend continues.
In early-stage VC financing deals, median pre-money valuations also declined somewhat, returning to levels comparable to valuations from the later part of 2021, but still high compared to valuations from early 2021.
Series Seed deals had a median pre-money valuations of $17.1 million, with Series A deals at $60 million, in June 2022. Although slightly down from highs in late 2021 and early 2022, these medians remain elevated compared to numbers from the first half of 2021.
Series B deals saw a slightly greater decline in median pre-money valuations during Q2 2022, dropping from a record high median pre-money valuation of $300 million in January 2022 to $164.4 million in June 2022; however, the June 2022 median pre-money valuation for Series B deals is still above those seen in early 2021, which were in the range of $150 million.
Even in the current climate, median pre-money valuations in later-stage VC financings increased after the decline in Q1 2022, with June 2022 boasting a record high median pre-money valuation of $4.3 billion for Series D or later deals.
Although invested dollars, deal numbers and valuations were generally down, Q2 2022 deal terms themselves continued to be favorable for companies.
In Q2 2022, 97% of disclosable deals had non-participating preferred stock,down slightly from the record high of nearly 98% for Q1 2022.
The percentage of “up” rounds remained high at 94% of disclosable deals, again slightly down from 97% in Q1 2022.
Deals with a pay-to-play provision remained low at just 4.5% of disclosable deals, though this does represent an increase over 3% of disclosable deals in Q1 2022.
Similarly, the percentage of deals involving a recapitalization also remained low at 1.5%, but this is an increase over Q1 2022, when deals with a recapitalization made up less than 1% of disclosable deals.
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SOURCES: Cooley, Pitchbook
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Disclosure: I’ve been using Cooley for all the early stage companies I’ve started or ran over the last two decades. They currently represent a company I am an owner in.