Authors: Michael Grantmyre and Ryan Unruch
Financing structure intelligence
Conversion of convertible securities (such as SAFEs or convertible notes) in connection with financings, by series, by year
The graph below displays the proportion of financings in which a convertible instrument (such as a SAFE or convertible note) was converted in connection with financings included in the Deal Points Report, by year. In 2024, 49% of all financings included the conversion of convertible securities. As compared to prior years, there was a higher incidence of convertible securities converting in connection with Series A (62%), Series C (50%) and Series D (43%) financings. The higher concentration of conversions in later stage financings is consistent with prior data, which reported that more companies in 2022-2023 raised insider bridge rounds on convertible instruments — which started to convert in 2024 financing rounds.
Post-financing available option pool size, by series
New for 2024, the chart below shows both the average and median available option pool size (represented as a percentage of a company’s post-money fully-diluted equity) for companies that closed a financing round in 2024. The size of the post-closing available option pool is negotiated at the term sheet phase of a financing transaction, where any increase in the available option pool is typically counted in the “pre-money” shares, and as a result affects the effective pre-money valuation of a company (in that increasing the size of the available option pool drives down the effective pre-money valuation of a company).
Minimum investment required to be invested at the initial closing of the financing, by year
The chart below illustrates the percentage of financings included in the Deal Points Report, by year, where the transaction documents included a provision expressly requiring that the company raise a minimum investment amount at its initial closing. Although requiring a minimum investment amount has not historically been a standard term for preferred share financings, the number of deals that included a minimum initial investment amount has consistently increased since 2022, peaking in 2024 at 20% of all financings. This trend, consistent with other terms covered by this Deal Points Report, helps illustrate the heightened caution venture investors are taking as they seek additional certainty around the minimum amount of committed capital and syndication for financings before they are willing to finalize the initial closing and release funds.
A conversation with Erin Trapp of Emmertech.
Osler clients share their success stories.
Watch the interviewCompany covering investor fees in connection with the financing, capped vs. uncapped
Of the financings included in the Deal Points Report for 2024, the overwhelming majority required the company to cover a portion of the lead investors’ legal fees. Of those financings where investor fees were covered, 94% placed a fixed dollar cap on the maximum amount of reimbursable fees, as indicated in the pie chart below. This data is consistent with the statistics reported in prior years of the Deal Points Report.
Financings with multiple closings, allocation of proceeds
In 2024, notwithstanding the increased number of mega deals reported, the percentage of financings that included multiple closings decreased by 9%, as compared to 2023, returning to a percentage consistent with the average for 2020 to 2023. As in prior years, in 2024, dollars funded at the initial closing of a financing round continued to represent a majority of all proceeds invested in an applicable financing round.
Use of CVCA/NVCA based forms of principal agreements in financings
The use of the CVCA/NVCA model financing documentation remained ubiquitous for Canadian preferred share financings, with 98.3% of all financings reported in 2024 using the CVCA/NVCA model financing agreements. The use of a “single” unanimous shareholders agreement has consistently fallen out of favour with Canadian companies and their investors, as companies look to adopt documentation aligned with U.S. venture capital standards familiar to U.S. and international investors. Companies using off-market (non-CVCA style) governance documents place themselves at a significant disadvantage, especially when dealing with U.S. or international investors, often resulting in longer closing timelines and higher transaction costs.
Existence of secondary transactions in financings, by series, by year
In 2024 there was a general resurgence of secondary transactions, with 17.4% of the reported financings including a secondary component. The most significant increase in 2024 was the percentage of Series B financings that included a secondary component (56%, as compared to only 17% in 2023), as companies sought to provide additional liquidity to early-stage investors and employees. As noted below, the size of secondaries for companies raising a Series B financing also increased by approximately 22% in 2024.
In addition, interestingly, 2024 saw the return of secondary components to later stage financings, with 14% of all Series D and beyond financings including secondary sales, as later stage companies sought to provide liquidity to employees to help retain talent and satisfy long-term investors amidst a slower exit market. As reported below, the Series D and beyond category also saw a massive spike in the value of these late-stage secondary transactions, due to a small number of outlier secondary transactions. As companies remain private longer and traditional exit routes such as IPOs remain less certain, we expect the popularity of secondary transactions will continue in 2025.
A conversation with Dion Madsen of Amplitude Ventures.
Osler clients share their success stories.
Watch the interviewType of equity sold in secondary transactions in financings
In 74% of the 2024 secondary transactions included in the Deal Points Report, the purchaser acquired preferred shares (including transactions where secondary shares were exchanged for preferred shares in connection with the applicable secondary transaction). In the remaining 26% of secondary transactions, the investors purchased the same securities “as-is,” without any interim exchange of securities.
Average dollar amount of secondary transactions in financings, by series, by year
In 2024, there was mixed data on the value of secondary transactions. The most striking difference, as compared to prior years, was the 2024 data for Series D and beyond financings. The substantial increase in the average value of Series D secondaries was due to a small number of exceptionally large outlier later stage financings that included a significant secondary component.
For Seed financings ($0.94 million) where only a small number included a secondary component, the 2024 average secondary size was in line with the historical average for the prior four years ($1 million).
For Series A financings, the average for 2024 ($1.91 million) was below the average for the prior four years ($3.3M). Although there was a higher number of Series B secondary transactions in 2024, the size of Series B secondaries ($6.6 million) was approximately half the prior four-year average ($12.8 million), but still increased 22% from 2023. Series C financings saw the most material decrease in the average size of secondary financings ($1.62 million – noting that historically, the most volatility in the secondary data has been found in Series C financings). For Series D financings, the large average secondary size was concentrated in a small number of 2024 financings.
