Venture Capital Term Sheets 101
Louis Lehot, business lawyer and partner at Foley & Lardner LLP in Silicon Valley, and formerly the founder of L2 Counsel, P.C.
Live Webcast: Tuesday, August 4th, 2020 at 10:00 am PDT- for Founders, Executives, and Investors
The COVID pandemic has made 2020 a very challenging year for most businesses. While most braced themselves for a profound economic impact as the shutdowns descended, Q2 venture capital numbers are one of the few economic bright spots.
According to PWC and CB Insights MoneyTree Report for Q2 2020, global deal activity in North America, Asia, and Europe totaled 3,812 deals, a relatively modest decline of 9% year-over-year. The aggregate deal value was $50.2 billion, a decline of just 13% year-over-year. Looking at Q1 to Q2 changes, Asia saw an increase of 20%, while Europe and North America grew 9% and 3% respectively.
Although it may seem the US numbers are modest, with $27 billion in Q1 and $26.9 billion in Q2, deal activity actually reversed three consecutive quarters of decline despite the pandemic. In 2019, pre-COVID totals showed $27.2 billion in Q1, peak of $30.8 billion in Q2, and a steady decline of $29.1 billion in Q3 and $24.8 billion in Q4.
Also, in Q2, the number of quarterly mega-rounds hit a new all-time record — 69 companies raised rounds of $100 million or more in Q2 2020, with a relatively flat share of total deals at 45%. The record mega-round share was 63% in Q4 2018.
Top five sectors remained almost the same, with food and beverages replacing consumer products.
There was a decline of new unicorn valuations for the fourth consecutive quarter. Q4 2018 had a record 23 unicorns. Q1 and Q2 2020 only saw 13 and 11 respectively. However, the total US unicorn population continues to grow with 209 US companies currently valued at one billion dollars or more (an aggregate valuation of $630 billion.) This also reverses the two-quarter trend of decline.
In the seed stage and Series A stage categories, volumes were way off, and finding initial capital for new startups was challenging in the period.
Join our next webinar for a panel of Silicon Valley experts to learn how to negotiate your VC financing term sheet in the pandemic, and other insights, on August 4th, 2020 at 10:00 am PDT.
Register here.
