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State of Venture Capital & Angel Markets 2016
STARTUP CAPITAL VENTURES
What’s Going On In The US VC Cycle?
Page 2
VCs Invest In Startups
Startups Exit Via M&A or
IPO
VCs return
capital to LPs
LPs Invest In
VCs
Silicon Valley Honolulu
Significant Changes From Last Year & Signs of Curves Ahead
• Strong LP investment in VC • VCs investing more than at any time
since .com era • Signs valuations & $ will decline • California & software still dominate • Exit market off highs but still strong • Strongest angel market in 15 years • Angels investing differently than VC
Silicon Valley Honolulu Page 3
Agenda
LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
Silicon Valley Honolulu Page 4
VC Fundraising Market Is Healthy
Page 5
.com boom & bust
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Source: Thomson Reuters / PwC / NVCA
Number Of VC Funds Raised Declined But Still Robust
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
New Funds Represent Over 30% Of Total Funded
Source: Thomson Reuters / NVCA
Silicon Valley Honolulu
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• VC Returns Continue to Outperform • Public Markets VC Returns Continue To Exceed
Public Market Returns
Source: NVCA, Cambridge Associates
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Agenda
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LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
$59B Of Venture Capital Invested In 2015 Is Highest Since 2000
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
$7B Of Corporate VC Is Highest in 10 Yrs Focused On Software & Biotech
Silicon Valley Honolulu
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Source: PWC Moneytree Report
Number of US VC Deals Remains Essentially Flat For 15 Years
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Source: Thomson Reuters / PwC / NVCA
Silicon Valley Dominates US VC With CA Making Up Almost 60% of Total $
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
LA / Orange County
Software Is Eating The $ While Consumer Products Bumped Up
Silicon Valley Honolulu
Page 14
Source: Thomson Reuters / PwC / NVCA
Software Represents 40% Of Deals With Biotech #2 at ~10%
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
Seed Stage Investment Continues To Be Scarce
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Source: Thomson Reuters / PwC / NVCA
Deal Sizes Close To .com Highs...
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Source: Thomson Reuters / PwC / NVCA
* Driven by two billion $ deals and several multi-hundred $ deals
Valuations (All Rounds Combined) Dropped Significantly In Q4
Silicon Valley Honolulu
Page 18
Source: Dow Jones VentureSource
Venture Investment Environment Is At Highest Levels Since .com Era
However the comparison is unfair • Still just 50% of .com highs • Most funded companies have revenue and growth • Investing sectors are more tech. heavy (e.g.
software, cloud) vs. internet and media • Business models are more sophisticated AND
more capital-efficient • Cloud services (e.g. AWS) reduce capital needed
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Agenda
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LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
Technology Angel Funding Strong But Disconnected From Venture
Angel funding at highest levels in years • $1.65B invested in 870 deals Deal size and valuations strong but also falling But disconnected from venture capital • Investing in different sectors than VC • Most active angel syndicates are outside major
VC markets
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Crowdfunding Industry Still Dominated By Project & Lending Sectors
Project funding (e.g. Kickstarter: $2.2B funded to date) and lending (e.g. Lending Club) dominate Angel.co is largest equity funder at $160M in 2015 SEC unaccredited investor equity crowdfunding regulations remain limiting • Remains nascent with no dominant platform yet
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Average Tech. Angel Round Size At All Time High
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Source: ARI Halo Report
Tech. Angel Valuations At All Time High (2013 Median Was $2.5M)
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Source: ARI Halo Report
Tech. Angel Dollars More Democratic Than CA-Centric Venture Capital
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Source: ARI Halo Report
Angel Dollars Are Less Software & More Healthcare Than VC
Silicon Valley Honolulu
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Source: ARI Halo Report
Why Are Tech. Angels Investing Differently Than Venture?
Many possibilities or combinations • Investing in concepts angels understand • Investing proportional to applicant pool • Consumer internet has lower entry barriers • Angels unaware of VC funding patterns • News making consumer IPOs (TWTR)
create observational bias • ?
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Agenda
LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
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Page 29
Venture M&A and IPO Markets Activity Are Off Highs
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Source: Thomson Reuters / PwC / NVCA
Slowest M&A market since 2009
VC-backed IPO and M&A Valuations Are Also Down
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
FB acquisition of WhatsApp for $19.5BN
Agenda
LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions Silicon Valley Honolulu
Page 31
VCs Invested $59B In Portfolio
~$90B In Venture Exits (IPO + M&A)
LPs Invested
$20B In VCs
VCs Invested Far More In Startups Than LPs Are Investing Back Into VC
Page 32 Sources: NVCA, Thomson Reuters, Cambridge
Silicon Valley Honolulu
VC will decline unless LP investment into VC grows
Better Angel & VC Investing Synchronicity Could Improve Angel Returns
Startups and angels are dependent upon follow-on venture funding Angel investing patterns do not appear to influence VC investing patterns VCs are focused on investing in active exit markets
Silicon Valley Honolulu Page 33
www.startupcv.com
STARTUP CAPITAL VENTURES
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