10. Fair Value of Financial Measurements

Items measured at fair value on a recurring basis include short term investments, derivative instruments and warrant liabilities.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:

	Fair Value Measurements at
	December 31, 2016
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Money market mutual funds (included in cash and cash equivalents)	$	20,698	$	20,698	$	—	$	—

Certificates of deposit	$	22,046	$	—	$	22,046	$	—
Agency bonds		5,913		—		5,913		—
United States Treasury securities		68,716		68,716		—		—
Short-term investments	$	96,675	$	68,716	$	27,959	$	—

	Fair Value Measurements at
	December 31, 2015
	Total		Level 1		Level 2		Level 3
	(in thousands)
Assets:
Certificates of deposit	$	16,160	$	—	$	16,160	$	—
Agency bonds		10,031		—		10,031		—
United States Treasury securities		5,047		5,047		—		—
Short-term investments	$	31,238	$	5,047	$	26,191	$	—

Money market mutual funds

The Company classifies its money market mutual funds as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in active markets without any valuation adjustment.

Short-term investments

The Company classifies its United States Treasury securities as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The Company classifies its certificates of deposit as Level 2 assets under the fair value hierarchy, as there are no quoted market prices in active markets, and its agency bonds as Level 2 assets under the fair value hierarchy, as these assets are not always valued daily using quoted market prices in active markets.

Convertible preferred stock warrant liability

As previously discussed (see Notes 5 and 7), the Company issued warrants to purchase Series AA preferred stock in connection with the 2013 Series AA preferred stock issuance, which were exercised in full in 2014, and Loan Agreements.

The following table details the assumptions used in the Black-Scholes option pricing model used to estimate the fair value of the Series AA preferred stock warrants as of February 17, 2015, the date upon which the Series AA preferred stock warrants became exercisable for common stock:

	February 17,
	2015
Volatility		60%
Expected term (years)	8.4
Expected dividend yield		0.0%
Risk-free rate		1.7%

Convertible debt redemption rights derivative

The 2014 Convertible Bridge Notes redemption rights derivative required separate accounting and was valued using a single income valuation approach. Pursuant to the IPO, the Convertible Bridge Notes were converted into 337,932 shares of common stock.

2020 Convertible Notes derivative liability

The fair value methodologies related to the 2020 Convertible Notes derivative liability are discussed in Note 5.

During the periods presented, the Company did not change the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during any of the years presented.

The following table reflects the change in the Company’s Level 3 liabilities for the year ended December 31, 2015:

	Convertible preferred stock warrant liabilities			Convertible Bridge Notes redemption rights derivative			2020 Convertible Notes derivative liability
	(in thousands)
Balance at December 31, 2014	$	482		$	480		$	—
Issuance of 2020 Convertible Notes		—			—			12,423
Change in fair value		(267	)		(480	)		42,793
Reclassification to stockholders’ equity		(215	)		—			—
Conversion to common stock		—			—			(55,216	)
Balance at December 31, 2015	$	—		$	—		$	—