Q2 2022 Venture Capital Funding Report – Decrease in Transaction Volume, Invested Capital and Early-Stage Pre-Money Valuations
Cooley managed 332 discloseable venture capital funding transactions for the second quarter of 2022, representing $16.6 billion in invested capital. Both numbers are down from the first quarter of 2022, when Cooley managed 401 discloseable venture capital funding deals with invested capital of $24.3 billion. Capital invested in venture capital funding deals for the second quarter of 2022 is the lowest since the fourth quarter of 2020, when Cooley processed 353 discloseable deals representing $14.3 billion in invested capital, while the volume of deals is at its lowest since the third quarter of 2020, when Cooley processed 308 discloseable venture capital funding deals. . While in line with generally reported market dynamics, the slowdown in trading volume and invested capital is one to watch in the second half of 2022 to see if the trend continues.
In early-stage venture capital deals, median valuations before the money have also declined somewhat, returning to levels comparable to late-2021 valuations, but still elevated relative to early-2021 valuations. 2021. Series Seed deals had a median pre-cash valuation of $17.1 million, with Series A deals at $60 million, as of June 2022. Although down slightly from the highs of in late 2021 and early 2022, these medians remain elevated compared to the first half of 2021. Series B transactions saw a slightly larger drop in median pre-money valuations during the second quarter of 2022, falling from a valuation median pre-monetary record from $300 million in January 2022 to $164.4 million in June 2022; however, the June 2022 pre-money median valuation for Series B transactions is still higher than those seen in early 2021, which were in the $150 million range. Even in the current climate, median pre-money valuations of later-stage venture financings have increased following the decline in the first quarter of 2022, with June 2022 posting a record median pre-money valuation of $4.3 billion for Series D transactions or later.
Although dollars invested, deal counts and valuations generally declined, Q2 2022 deal conditions themselves continued to be business-friendly. In Q2 2022, 97% of publishable deals were nonparticipating preferred shares, down slightly from the all-time high of nearly 98% for Q1 2022. The percentage of “up” rounds remained high at 94 % of reportable transactions, again slightly down from 97% in Q1 2022. Transactions with a pay-to-play provision remained low at just 4.5% of reportable transactions, although this represents an increase of more than 3% of discloseable deals in Q1 2022. Similarly, the percentage of deals involving recapitalization also remained low at 1.5%, but this is an increase from Q1 2022, when transactions with a recapitalization represented less than 1% of publishable transactions.
Cooley continued to hold the No. 1 spot globally and in the United States for company representation in venture capital deals in PitchBook’s Q1 2022 Global Rankings. The firm was also recognized as the second most active law firm in the United States and globally for investor representation in venture capital deals and in total number of venture capital deals.
Spotlight on life sciences
Deal volume and invested capital for life sciences company financings continued to decline in the second quarter of 2022. During the quarter, Cooley managed 52 publishable life science company financings, representing over $2.2 billion in invested capital. This is down from 70 discloseable deals with more than $2.4 billion in invested capital in Q1 2022 – and a notable drop from 86 discloseable deals with more than $5.4 billion in invested capital in the first quarter of 2022. fourth quarter of 2021. Disclosed deal size for Life Sciences Corporate Funding increased slightly to an average deal size of over $44 million in the quarter – from an average deal size of over of $34.8 million in the first quarter of 2022 – but are still well below the average of more than $63.8 million in the fourth quarter of 2021. The percentage of tranched structured life sciences financings increased to just over 19% of publishable transactions (compared to just over 17% in Q1 2022). These percentages are high compared to the tranched deal percentages of previous quarters in 2021, but are low compared to Q3 and Q4 2020, when tranched life sciences deals exceeded 20% of deals.
Spotlight on Technology
After hitting record highs in the first quarter of 2022, both deal volume and invested capital declined in the second quarter of 2022 for deals with technology companies. During the quarter, Cooley managed 203 discloseable technology company financings, representing more than $11.5 billion in invested capital. This is the lowest deal volume and amount raised for technology company financings since the third quarter of 2021, when Cooley managed 201 discloseable technology company financings representing more than $10.1 billion in invested capital. . The average size of discloseable deals in the quarter for technology company financings decreased to more than $56 million, from more than $72 million in the first quarter of 2022.