Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The Company measures and reports its cash equivalents, restricted cash, short-term investments and preferred stock warrant liabilities at fair value. The following table sets forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy:

	December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Money market funds	$	148,604	$	—	$	—	$	148,604
Restricted money market funds		225		—		—		225
Total financial assets	$	148,829	$	—	$	—	$	148,829

	December 31, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Money market funds	$	27,847	$	—	$	—	$	27,847
Restricted money market funds		75		—		—		75
Short-term investments		—		10,010		—		10,010
Total financial assets	$	27,922	$	10,010	$	—	$	37,932
Financial Liabilities
Preferred stock warrant liabilities	$	—	$	—	$	1,810	$	1,810

Money market funds and restricted money market funds are measured at fair value on a recurring basis using quoted prices and are classified as a Level 1 input.

The short-term investments contain observable inputs. Accordingly, the carrying value of this instrument approximates its fair value and is classified as Level 2 inputs.

The Company’s preferred stock warrant liabilities contained unobservable inputs that reflected the Company’s own assumptions in which there was little, if any, market activity for at the measurement date. Accordingly, the Company’s warrant liabilities were measured at fair value on a recurring basis using unobservable inputs until the warrants were exercised in 2015. The warrant liabilities were classified as Level 3 inputs.

At December 31, 2014 and 2013, the Company remeasured the preferred stock warrants to fair value using the OPM and/or the PWERM models with the following assumptions used in the OPM:

	Year Ended December 31,
	2014	2013
Expected term (in years)	1.2 – 2.5	2.5 – 3.1
Expected volatility	69 – 86%	66 – 70%
Risk-free interest rate	0.3 – 0.6%	0.4 – 0.7%
Expected dividend rate	—  %	—  %
Discount for lack of marketability	19.5 – 24.3%	23.7% – 25.8%

The Company estimated the volatility of its stock based on comparable peer public companies historical volatility. The risk-free interest rate was based on the U.S. Treasury zero-coupon bond. The expected term applied in the OPM considered both the probabilities of failure and success of the Company. Cumulative dividends associated with preferred stock were calculated as of the accrual start date of each security to the OPM maturity date. The assumptions used in calculating the estimated fair market value at each reporting period represent the Company’s best estimate, however inherent uncertainties are involved. As a result, if factors or assumptions change the warrant liability, the estimated fair value could be materially different.

During the year ended December 31, 2015, the Company remeasured the preferred stock warrants using the OPM and/or PWERM models, or based on the fair value of the underlying stock. On the closing of the IPO, the outstanding preferred stock warrants were exercised and the liability on the preferred stock warrants were reclassified to additional paid-in capital in stockholders’ equity (deficit), and was no longer subject to remeasurement.

There were no transfers between Levels 1, 2 or 3 during the year ended December 31, 2014. During the year ended December 31, 2015, $10.0 million of short-term investments transferred from being a Level 2 financial asset to a Level 1 financial asset when the short-term investments were sold in July 2015. The proceeds from the sale of the short-term investments were invested in money market funds, which is a Level 1 financial asset. The Company realized a $10,000 other-than-temporary impairment loss on its short-term investments through other income (expense) in the accompanying consolidated statements of operations. During the year ended December 31, 2014, the Company did not realize any gains and losses related to its financial assets.

The following table provides a summary of the changes in the estimated fair value of the Company’s preferred stock warrant liabilities, which were measured at fair value on a recurring basis using unobservable inputs (Level 3) until their exercise (in thousands):

	Year Ended December 31,
	2015			2014		2013
	(in thousands)
Fair value, beginning balance	$	1,810		$	430	$	171
Fair value of preferred stock warrants exercised		(19,253	)		—		57
Change in fair value of preferred stock warrants		17,443			1,380		202
Fair value, ending balance	$	—		$	1,810	$	430

The change in fair value of the preferred stock warrant liabilities is attributable to the increase of the fair value of the underlying stock. The change in the fair value of preferred stock warrants for each presented period is recognized as a component of other income (expense), net in the consolidated statements of operations.