New data shows that down rounds are dying out

As 2020 comes to a close, some parts of the startup world are completing a loop, ending the year where they began.

Startup valuations, for example, as seen in the Silicon Valley area are effectively back to where they were at the start of the year. According to a report from Fenwick & West examining data through October in the San Francisco Bay area, the percentage of startups that raised up rounds (rounds priced higher than preceding investments) came within spitting distance of its pre-COVID levels.


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There are other positive signs in the data for startup bulls.

Median and average price increases for startup valuations in the Valley have both crested their 2019 averages. The gains have proven especially sharp amongst software startups, which managed somewhat epic valuation gains in October; Fenwick’s data, something we’ve covered before on The Exchange, lags the calendar month somewhat.

This morning, let’s take a break from IPOs to look at startup health in the region still generally heralded as its promised land.

Revenge of the bulls

As optimism for business conditions — tech-focused startups in particular — improved in Q3, startup valuations kicked off Q4 on a strong note.

In October, Silicon Valley startup investments that were priced up from their preceding deal rose to 79%. That’s down from what Fenwick reports as 2019’s average, but a dip from 83% to 79% is not much. Notably, startups in the region managed to reach an up-round percentage of rounds in the mid-to-high-seventies over the summer, but during those months down rounds were 11% to 17% of the total.

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