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Q2 2022 Venture Financing Report – Deal Volume, Invested Capital And Early-Stage Pre‑Money Valuations Decline – Corporate and Company Law


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Cooley handled 332 disclosable venture capital financing deals
for Q2 2022, representing $16.6 billion of invested capital. Both
numbers are down from Q1 2022, when Cooley handled 401 disclosable
VC financing deals with invested capital of $24.3 billion. The
invested capital in VC financing deals for Q2 2022 is at its lowest
since Q4 2020, when Cooley handled 353 disclosable deals
representing $14.3 billion in invested capital, while deal volume
is at its lowest since Q3 2020, when Cooley handled 308 disclosable
VC financing deals. Though consistent with generally reported
market dynamics, the slowdown in deal volume and invested capital
is something to watch during the second half of 2022 to see if the
trend continues.

In early-stage VC financing deals, median pre-money valuations
also declined somewhat, returning to levels comparable to
valuations from the later part of 2021, but still high compared to
valuations from early 2021. Series Seed deals had a median
pre-money valuation of $17.1 million, with Series A deals at $60
million, in June 2022. Although slightly down from highs in late
2021 and early 2022, these medians remain elevated compared to
numbers from the first half of 2021. Series B deals saw a slightly
greater decline in median pre-money valuations during Q2 2022,
dropping from a record high median pre-money valuation of $300
million in January 2022 to $164.4 million in June 2022; however,
the June 2022 median pre-money valuation for Series B deals is
still above those seen in early 2021, which were in the range of
$150 million. Even in the current climate, median pre-money
valuations in later-stage VC financings increased after the decline
in Q1 2022, with June 2022 boasting a record high median pre-money
valuation of $4.3 billion for Series D or later deals.

Although invested dollars, deal numbers and valuations were
generally down, Q2 2022 deal terms themselves continued to be
favorable for companies. In Q2 2022, 97% of disclosable deals had
non-participating preferred stock, down slightly from the record
high of nearly 98% for Q1 2022. The percentage of “up”
rounds remained high at 94% of disclosable deals, again slightly
down from 97% in Q1 2022. Deals with a pay-to-play provision
remained low at just 4.5% of disclosable deals, though this does
represent an increase over 3% of disclosable deals in Q1 2022.
Similarly, the percentage of deals involving a recapitalization
also remained low at 1.5%, but this is an increase over Q1 2022,
when deals with a recapitalization made up less than 1% of
disclosable deals.

Cooley continued to hold the top spot globally and in the US for
representation of companies in venture capital transactions in PitchBook’s Q1 2022 Global League Tables.
The firm also was credited as the second-most active law firm in the US and
for representation of investors in VC deals and in
overall venture deal count.

Spotlight on life sciences

Deal volume and invested capital for financings of life sciences
companies continued to decline in Q2 2022. During the quarter,
Cooley handled 52 disclosable financings of life sciences
companies, representing more than $2.2 billion of invested capital.
This is down from 70 disclosable deals representing more than $2.4
billion of invested capital in Q1 2022 – and is a notable
drop from 86 disclosable deals with more than $5.4 billion in
invested capital in Q4 2021. Disclosable deal sizes for financings
of life sciences companies increased slightly to an average deal
size of more than $44 million in the quarter – as compared to
an average deal size of more than $34.8 million in Q1 2022 –
but are still well below the average of more than $63.8 million
from Q4 2021. The percentage of life sciences financings structured
in tranches increased to just over 19% of disclosable deals (from
just over 17% in Q1 2022). These percentages are high compared to
the percentages of tranched deals for earlier quarters in 2021, but
are low compared to Q3 and Q4 2020, when life sciences deals
structured in tranches exceeded 20% of deals.

Spotlight on technology

After reaching record numbers during Q1 2022, deal volume and
invested capital both declined in Q2 2022 for technology company
deals. During the quarter, Cooley handled 203 disclosable
financings of tech companies, representing more than $11.5 billion
of invested capital. This is the lowest deal volume and amount
raised for technology company financings since Q3 2021, when Cooley
handled 201 disclosable financings of tech companies representing
more than $10.1 billion of invested capital. Average disclosable
deal size during the quarter for technology company financings
decreased to more than $56 million, compared to more than $72
million in Q1 2022.

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