VW Venture Deals Year in Review 2016

April 28, 2017  |  By

In December of 2015, we released a three-year audit of early stage venture deals facilitated by VW and felt that the data was an indicator of early-stage financing trends and the good health of the venture industry in DFW.

See our 2013 – 2015 Seed Round Capital Raise Audit and the blog explaining our results

We’ve just completed our 2016 audit, and the results are encouraging, if not impressive.

First of all, let me frame the data points. Our intention is to reflect trends and provide analysis on early-stage venture financing. Because our main office is in Dallas, a majority of our clients (both startup and investor side) are in North Texas, and thus most of the activity is in the area. For the purposes of the 2016 audit we excluded any raises less than $100,000 and any Series B or later raises. Thus, the analysis below, and the slides that follow, highlight deals in the $100k – $4M range, spanning rounds which we would traditionally coin as Friends & Family, Series Seed, and Series A.

I recognize that VW only facilitates a fraction of the venture deals in the area, but we are confident that our sample size is significant enough to make general conclusions. I can also report that our figures are consistent with what I’m hearing when conversing with the other venture guys around town.

The volume of deals is skyrocketing

We facilitated almost as many deals in 2016 as we did in 2013 – 2015 combined, and that pace seems to be staying steady into 2017. I believe that this will continue to be the case as more investors tread into venture investing waters, a point I discussed in “Why Dallas is Primed for Series A Funding.”

The round sizes are increasing

In 2013 – 2015, the average round size was $421k. In 2016 it was $675k, or a 150% increase. The rounds are getting larger because:

  1. More investors are coming to the table
  2. More institutional investors are dipping into smaller rounds as the later-stage rounds become saturated

The average cap for convertible notes went up from $3.2M to $7.1M and the average convertible note round increased from $417k to $490k Median convertible note discounts (20%) and interest rate (6%) stayed consistent over the entire period, and are pretty much entrenched.

Larger seed rounds means DFW is maturing

On the equity side, we split Seed and Series A deals in our 2016 study. You can see in the slides that the average raise and the average valuation for Seed rounds has increased considerably. What’s most interesting is how large the Seed rounds are getting. A few years ago, in DFW, a raise north of $750k was possibly getting Series A terms, and a million-dollar raise was usually an A round. Last year, we facilitated a handful of $1M+ deals with Series Seed terms, and we saw Series A rounds approaching $4M. These figures are consistent with what we see out of the West Coast and indicates that DFW is maturing as a venture community.

In conclusion, it’s an exciting time for venture in DFW. Enjoy the data in the slides, and feel free to post questions or comments below.

Posted in: Funding & Capital Raising

About the Author(s)

Kevin Vela

Kevin is the managing partner at Vela Wood. He focuses his practice in the areas of venture financing, M&A, fund representation, and gaming law.

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