In the fourth quarter of 2019, deal volumes and aggregate dollars raised remained comparable to the robust levels seen throughout last year. Cooley handled 267 disclosable deals representing more than $7.9 billion of invested capital during the final quarter of 2019.
For the full year, we handled 996 disclosable deals representing more than $29 billion of invested capital. 2019 represented the high-water mark with respect to both deal volume and aggregate dollars raised in our 16 years of tracking this data.
In Q4 2019, median pre-money valuations rose somewhat across early-stage deals, while declining partially in later-stage transactions. Of note, median pre-money valuations for Series A transactions reached $30.6 million – a new record, though this aligns with the general trend that Series A transactions are happening later in a company’s life cycle than in bygone years, as well as the general trend in the increase in sizes and valuations of Series Seed transactions over the same time period.
Overall, deal terms remained company friendly. Up rounds accounted for 90% of transactions during the quarter, a level not seen for more than four years. The percentage of deals with no participating liquidation preferences remained high at 89% of all transactions. Additionally, the percentage of recapitalization transactions decreased in Q4. Transactions structured in tranches also remained low, with 4% of technology deals and 22% of life sciences deals utilizing the structure in Q4.
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Key insights from Qiming Venture Partners’ Nisa Leung
On how US/China trade tensions are impacting VC investing: China tech and healthcare investments into the US have dropped 90% as a result of trade tensions. In the meantime, more European and Southeast Asian companies are fund raising in China.
On the economic impact of coronavirus: Many businesses are adversely impacted given China and, increasingly, many countries across the globe are taking a cautious approach to control spread of the virus. The financial market had its biggest drop since 2008. In some sectors, we have seen an uptick in their business, including online education, food delivery and, in the healthcare sector, diagnostic and lab tests, to name a few. Companies that have filed for an IPO have delayed, as it is difficult for management teams to go on roadshows with the quarantine requirements. We had a Shanghai Stock Exchange Science and Technology Innovation Board (STAR Market) virtual IPO recently, where the official ceremony was postponed but the trading of the stock began and performed very well. We hope things will be back to normal soon.
VC deal terms favoring investors: The investment pace has definitely slowed down in Q1 in China, but we are still seeing activities as investors perform their due diligence online and through video conference. One of our companies just closed a $100 million round, and one received six term sheets last week.
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