When well-performing venture capital-backed start-ups raise an additional round of capital, the valuation of the business is usually higher than it was at the previous fund raising round. The portion of VC-financed start-ups that experiences “up rounds” – as new fund raising at a higher valuation is called - is an indication of how well venture capital-backed companies are doing. If most of the companies obtaining additional capital experience an up round, then start-ups are generally doing well. But if the majority of companies face down rounds, then venture capital-backed companies in general are having trouble.
Data collected by the law firm Cooley LLP and presented in their publication Venture Capital Report provides a picture of the kind of fund raising rounds venture-capital backed companies are experiencing. As the figure below shows, the situation has returned to normal, after having been upended during the financial crisis and recession. As the Cooley data indicate, in normal times, around 70 percent of VC-financed start-ups experience up rounds. Back in 2007 before the financial crisis and recession hit, that’s what was happening.
To read the full, original article click on this link: Share of Up Rounds is Back to Normal - Forbes
