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Trends in legal terms in venture financings in the San Francisco Bay area25/04/2006. Source: Fenwick & West.
 In this survey, Fenwick & West analyses the terms of venture financings for 100 technology companies headquartered in the San Francisco Bay Area that reported raising money in the third quarter of 2005.
Overview
The results of the 3Q05 Survey showed a continuation of the positive trend in the venture environment. The highlights of the quarter were as follows:
- Up rounds exceed down rounds for the seventh quarter in a row, and by a significant majority of 60 per cent vs. 25 per cent (with 15 per cent flat).
- The Fenwick & West Venture Capital Barometer showed a 38 per cent average price increase for companies receiving venture capital in 3Q05 compared to such companies' previous financing round. Although the amount of the increase was slightly less than 2Q05, it was the second highest over the past seven quarters.
- The amount invested by venture capitalists in the US is 3Q05 continued strong at approximately $5.5bn according to industry publications. Although such amount was a 7 per cent decrease from 2Q05 it was the second highest amount in the past five quarters.
- M&A activity continued to be solid with approximately $6.0bn paid for venture-backed companies in 3Q05 according to industry publications. Although this was 20 per cent reduction from the very strong 2Q05 and 1Q05 M&A performances in dollar terms, the aggregate number of deals decreased only slightly from the previous quarters.
- IPO activity increased to 16 venture-backed IPOs in 3Q05, which was higher than 1Q05 and 2Q05 combined, but the total of 29 IPOs in 2005 and 2Q05 through the third quarter is significantly behind the 67 total venture-backed IPOs in 2004.
- Nasdaq was up 4.6 per cent in 3Q05, and is up an additional 4.2 per cent in 4Q05 to date.
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Fenwick & West LLP is a law firm providing comprehensive services to high technology clients of national and international prominence. The firm has over 300 attorneys and a network of correspondent firms in many major cities of the world. Fenwick & West has offices in Palo Alto California, San Francisco California, and Washington DC. For more information please visit www.fenwick.com
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