Mintz Levin Study Finds Continued Strength and Improving Valuations in East Coast Venture Capital Market
6/7/2005
Washington, D.C. - The venture capital markets on the East Coast continue to show signs of strength, with 72% of all deals based on increased company valuations, according to a survey conducted by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C of publicly reported venture capital financings that took place in the New England, New York Metro and Mid-Atlantic regions during the first quarter of 2005.
"Interestingly, while the number of deals being done is the lowest it has been in several years, the dollars flowing into those deals remained relatively stable," said David P. Dutil, of counsel in the Business and Finance Section in Mintz Levin's Washington D.C. office. "VC's are making larger investments and there is a much higher number of up rounds. A year ago, only 53% of all deals were up rounds compared to 72% this past quarter. There has also been a significant increase in the proportion of second round financings."
Among the key findings of the Mintz Levin survey:
All East Coast
- Nearly three of four financings were ?up? rounds.
- Second round financings led the way, comprising 43% of the deals, with both first and third rounds accounting for 21%.
- This quarter showed a significant up tick (61%) in the percentage of deals using cumulative dividends.
- While the liquidation preference multiples were fairly low, three-quarters of all deals included participation for the most senior series of preferred stock.
- About one in four deals included a "pay to play" provision, meaning non participating stockholders in future rounds would suffer some adverse consequence.
Mid Atlantic
- Second round financings led the way, comprising 60% of the deals, with first rounds accounting for 13% and third rounds accounting for 7%.
- A majority of the financings (69%), were "up" rounds.
New York Metro
- Second round financings led the way, comprising 38% of the deals, with first rounds accounting for 31% and third rounds accounting for 19%.
- A majority of the financings (64%), were "up" rounds.
New England
- Second round financings led the way, comprising 38% of the deals, with first rounds accounting for 18% and third rounds accounting for 28%.
- There were more "up" rounds than "down" rounds.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC is a multidisciplinary law firm with over 450 attorneys and senior professionals in Boston, Washington D.C., Reston, VA, New York, Stamford, CT, Los Angeles and London
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