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I know that we are all bored with the perennial comparisons
between the Valley and New England in which New England inevitably
appears as the landof the hide-bound and the home of the risk
adverse. The fact that we are all bored with the discussion does
not however address the merits of the claim. It just blinds us to
the looming consequence: New England, already only half the size of
the Valley by many measures, will lose further ground as exciting
start-ups from the Valley (and New York, but we will get to that in
a minute) continue to make their mark and investor money drifts (or
perhaps races) towards perceived greener pastures.
I finally got around to my quarterly comparison of deal terms
published by our firm, Fenwick (a Valley based firm that reports on
transactions in the Valley) and Cooley (a firm with many offices
that reports on transactions handled by it).
And here of New York: No one that I am aware of reports on New
York transactions. But, starting with Q1 o f 2012, we will, because
we are doing increasing amounts of emerging company work there.
So here is part 1 of my thesis: I expect that terms will be most
favorable to entrepreneurs in the Valley, least favorable in New
England and somewhere in between for the rest. Of course, I think
that the "somewhere in between" number will include
Cooley's New England transactions (which will have the effect
of making them generally seem less favorable to entrepreneurs). We
should all note that Cooley feels compelled (at least in some
instances) to report numbers for Northern California separately
from the others.
So, without further fanfare, below is the table that compares
certain of the deal terms reported on by the three firms for Q4 of
2011.
Fourth Quarter 2011
Transaction Terms
Foley Hoag
Fenwick
Cooley
Series A
Series B and Later
Northern Cal
Other
Cumulative Dividends
47%
69%
4%
6%
24%
Participating Preferred
47%
25%
31%
21%
24%
Redemption
41%
78%
9%
13%
46%
Pay to Play
18%
17%
5%
2%
1%
Of course I knew what the chart would say before I made the
prediction, so no surprise that it supports my thesis.
Here, however, is part 2 of my thesis: When we start reporting
on New York separately (which we will be doing starting with a Q1,
2012 report – to come out soon), it will show that terms
in New York are far closer to those in the Valley than to those in
New England. Now I don't' know the answer to that question,
but we are doing the research now and will have an answer soon.
Keep in mind that New York has gone from nowhere just a few
years ago to equaling (or passing by some measures) New England.
Could it be that NYC is just a friendlier place for entrepreneurs
than New England?
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