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State of Venture Capital & Angel Markets 2016
STARTUP CAPITAL VENTURES
What’s Going On In The US VC Cycle?
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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
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Agenda
LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
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VC Fundraising Market Is Healthy
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.com boom & bust
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Source: Thomson Reuters / PwC / NVCA
Number Of VC Funds Raised Declined But Still Robust
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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
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Source: Thomson Reuters / PwC / NVCA
$7B Of Corporate VC Is Highest in 10 Yrs Focused On Software & Biotech
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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
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Source: Thomson Reuters / PwC / NVCA
Software Represents 40% Of Deals With Biotech #2 at ~10%
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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
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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
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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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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
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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
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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
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www.startupcv.com
STARTUP CAPITAL VENTURES
