Monthly Archives: June 2021

Silicon Valley Venture Capital Survey – First Quarter 2021

Cynthia Hess and Mark Leahy are partners and Khang Tran is an attorney at Fenwick & West LLP. This post is based on their Fenwick memorandum.


Our survey analyzed the terms of 259 venture financings closed in the first quarter of 2021 by
companies headquartered in Silicon Valley.

Key Findings

Valuation results continued their momentum, reaching historical highs

  • Up rounds exceeded down rounds 85% to 10%, with 5% flat in Q1 2021, a decrease from the prior quarter when up rounds exceeded down rounds 86% to 5%, with 9% flat.
  • The Fenwick Venture Capital Barometer™ showed an average price increase in Q1 2021 of 145%, an increase from 125% in Q4 2020 and the highest average price increase recorded in a quarter since we began calculating valuation metrics in 2004.
  • The median price increase of financings rose to 90% in Q1 2021, the highest median price increase recorded in a quarter in the history of this survey, surpassing the previous high of 3% recorded in the prior quarter.

Series E+ financings recorded greatest gains in valuation results

  • Series E+ financings recording the greatest gains in average and median price increases compared to the prior quarter. In contrast, valuation results for Series C financings declined considerably compared to the previous quarter.

Valuations strengthened across all industries

  • Valuation results strengthened across all industries in Q1 2021 compared to Q4 2020. The internet/digital media and software industries again recorded the strongest valuation results in the quarter.
  • Valuation results for the hardware industry rebounded to pre-pandemic levels, after having lagged behind other industries during the peak of the pandemic.

Use of senior liquidation preferences and participation rights remained low

  • The use of senior liquidation preferences and participation rights remained low in Q1 2021, but
    ticked up marginally from the historic lows of the previous quarter.


Lazard’s Q1 2021 13F Filings Report

Jim Rossman is Managing Director and Co-Head of Capital Markets Advisory at Lazard; Christopher Couvelier is a Managing Director; and Quinn Pitcher is an Associate at Lazard. This post is based on their Lazard memorandum. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here); Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).

  • Rule 13F-1 of the Securities Exchange Act of 1934 requires institutional investors with discretionary authority over more than $100 million of public equity securities to make quarterly filings on Schedule 13F
    • Schedule 13F filings disclose an investor’s holdings as of the end of the quarter, but generally do not disclose short positions or holdings of certain debt, derivative and foreign listed securities
    • Filing deadline is 45 days after the end of each quarter; filings for the quarter ended March 31, 2021 were due on May 17, 2021
  • Lazard’s Capital Markets Advisory Group has identified 12 core activists, 32 additional activists and 21 other notable investors (listed below) and analyzed the holdings they disclosed in their most recent 13F filings and subsequent 13D and 13G filings, other regulatory filings and press reports
    • For all 65 investors, the focus of Lazard’s analysis was on holdings in companies (excluding SPACs) with market capitalizations in excess of $500 million
  • Lazard’s analysis, broken down by sector and by company, is enclosed. The nine sector categories are:
    • Consumer
    • FIG
    • Healthcare
    • Industrials
    • Media/Telecom
  • Within each of these sectors, Lazard’s analysis is comprised of:
    • A one-page summary of notable new, exited, increased and decreased positions in the sector
    • A list of companies in the sector with activist holders and other notable investors
  • Companies are listed in descending order of market capitalization
  • Lazard will continue to conduct this analysis and produce these summaries for future 13F filings
    • The 13F filing deadline for the quarter ending June 30, 2021 will be August 16, 2021


Surviving the Fintech Disruption

Wei Jiang is Arthur F. Burns Professor of Free and Competitive Enterprise in the Finance Division at Columbia Business School; Yuehua Tang is Emerson-Merrill Lynch Associate Professor of Finance at University of Florida Warrington College of Business; and Vincent Yao is AREA Professor of Real Estate at Georgia State University J. Mack Robinson College of Business. This post is based on a recent paper by Ms. Jiang, Mr. Tang, Mr. Yao, and Rachel Xiao.

Advances in financial technology (fintech) are reshaping the landscape of financial services in the United States and globally. The term “fintech” refers to technology and innovation that aim to compete with traditional methods and channels for the delivery of financial services. Telecommunications and information technology have been adopted by financial service providers to create new options and to ease access by consumers (households and businesses) to navigate the complexity and constraints they face. Although the term has gained its prominence in the recent decade as an external disruptor, we are reminded that the evolution of finance has always worked in tandem with the adoption of new technologies, from wire transfer as a long-distance payment technology in the late 1800s to credit cards and automated teller machines (ATMs) during the 1950s and 1960s. Post-financial crisis has marked a dramatic shift toward decentralization (e.g., blockchains and crypto-asset) and disintermediation (e.g., peer-to-peer lending platforms), imposing disruption on the established financial institutions.

Economists have also long debated the trade-off between the new opportunities for businesses and consumers from technological advancement and the labor force displacements caused by them. The common empirical challenge to quantify the effect of technologies on jobs and firm’s outcomes is due to the general lack of ex ante measures for exposure to technology at the micro-level. Our study focuses on such relationship in the context of fintech innovations, and our first objective is to overcome the challenge by developing a novel measure of occupation exposure to fintech innovations. Such a measure is constructed by cross-analyzing and extracting the similarity in the textual information in job task descriptions and that in recent fintech patent filings. Specifically, our fintech exposure measure captures both the similarity between the two text corpuses (i.e., job task descriptions and fintech patent filings) and the intensity of fintech innovations (e.g., the amount of fintech patent filings). The procedure results in time-varying fintech exposure scores for the universe of 772 occupations as classified by the six-digit O*NET Standard Occupation Code (SOC), which can also be aggregated to the firm or industry level.


Corwin Doctrine Remains Powerful Antidote to Post-Closing Stockholder Deal Litigation

William Savitt, Ryan A. McLeod, and Anitha Reddy are partners at Wachtell, Lipton, Rosen & Katz. This post is based on their Wachtell memorandum, and is part of the Delaware law series; links to other posts in the series are available here.

The Delaware Court of Chancery this week dismissed post-closing merger litigation in deference to an informed and uncoerced stockholder vote. In re GGP, Inc. Stockholder Litig., C.A. No. 2018-0267-JRS (Del. Ch. May 25, 2021).

In 2018, Brookfield Property Partners acquired the 65% of shares of GGP, Inc. that it did not already own. Before opening merger talks, Brookfield made clear its intention that any transaction should be conditioned on approval by unaffiliated stockholders. Holders of 94% of the unaffiliated shares ultimately approved the deal reached by Brookfield and a special committee of the GGP board.

Following what the Court of Chancery called a “familiar rhythm,” stockholder plaintiffs demanded inspection of GGP’s books and records related to the transaction and then sued, claiming that Brookfield should be held liable for fiduciary breach as a controlling stockholder.

The Court of Chancery dismissed the action. In determining whether Brookfield was a controlling stockholder, the Court reemphasized the importance of voting power. While “mindful of the practical reality of an alleged controller’s voting power,” the Court found that “a 35.3% equity stake does not transmogrify a minority blockholder into a controlling stockholder (with the accompanying fiduciary duties to match).” Because plaintiffs had not alleged facts showing Brookfield’s ability to “dictate any action by the board” or “managerial supremacy” over GGP, the Court rejected the claim of control.


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