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
Strongest Venture Investing, Exit & Angel Market In A Decade
• Strong LP investment VC asset class • VCs investing more actively than in the
past 15 years (although at just 40% of .com era)
• Strong exit market producing good returns • Strongest angel market in 15 years
• Challenge: angel investing concentrated in different sectors than venture
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Agenda
LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
Silicon Valley Honolulu Page 4
VC Fundraising Market Is Healthy
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.com boom & bust
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Source: Thomson Reuters / PwC / NVCA
Number Of Funds Raised Increased Again
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Source: Thomson Reuters / PwC / NVCA
New Funds Raised Exceeded 30% For First Time In Years
Source: Thomson Reuters / NVCA
Silicon Valley Honolulu
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• VC Returns Continue to Outperform • Public Markets Venture 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
$49B Of Venture Capital Invested In 2014 Is Highest Since 2000
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
2015 = Q1 annualized
For comparison: Apple 2015Q1 revenue $74.6B
Number of US VC Deals Remains Essentially Flat For 15 Years
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
2015 = Q1 annualized
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 Industrial & Energy Is Bouncing Back
Silicon Valley Honolulu
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Source: Thomson Reuters / PwC / NVCA
Software Represents Nearly 50% Of Deals With Biotech #2 and Down To ~10%
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Source: Thomson Reuters / PwC / NVCA
Seed Stage Rounds Continued To Decline As Series A & B Rounds Increase
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Source: Thomson Reuters / PwC / NVCA
Seed And Expansion Stage 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
79% Of Round Valuations Were Up While Just 6% Were Down-Rounds
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Source: Fenwick
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Software & Internet / Media Had Greatest % Of Up-Rounds With Life Science Continuing To Lag
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Source: Fenwick Q4 2014 * Cleantech & Other were statistically insignificant with two deals each
Round To Round Price Increases At Post .com Record Levels
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Source: Fenwick
Bullish VC Sentiment As Measured By Low Senior Liquidation Preferences
Silicon Valley Honolulu
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Source: Fenwick
Venture Investment Environment Is At Highest Levels Since .com Era
However the comparison is unfair • Still just 40% of .com highs • Most funded companies have revenue and
strong growth • Investing sectors are more tech. heavy (e.g.
software, cloud) vs. internet and media • Business models are more sophisticated AND
more capital-efficient • Cheap cloud services (e.g. AWS) reduce capital
needed Silicon Valley Honolulu
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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 very strong 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: $1.4B funded to date) and lending (e.g. Lending Club) dominate Angel.co is largest equity funder at $100M in 2014 SEC has still not finalized unaccredited investor equity crowdfunding regulations • Adverse selection remains an unresolved issue
• e.g. crowdfunders mostly get the deals rejected by angels, accelerators & VCs
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Average Tech. Angel Round Size At All Time High
Silicon Valley Honolulu
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Source: ARI Halo Report
Tech. Angel Deals Approximately Proportional To Population
(Different Than CA-Centric VC)
Silicon Valley Honolulu
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Source: ARI Halo Report
Angel Investing Continues To Be Centered On Consumer & Mobile Internet
Silicon Valley Honolulu
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Source: ARI Halo Report
Big Takeaway: Angels Invest (Much) More In Consumer & Less In Software Than VCs
Silicon Valley Honolulu
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Source: Thompson-Reuters NVCA, ARI Halo Report
Why Are Tech. Angels Investing So Differently Than Venture?
Many possibilities or combinations • Investing in concepts they understand • Investing proportional to applicant pool
• Consumer internet has lower tech. barriers • Angels unaware of VC funding patterns • Newsmaking consumer IPOs (TWTR)
create observational bias vs. broad exit market (7X more M&A than IPO, etc.)
• ? Silicon Valley Honolulu
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Agenda
LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions
Silicon Valley Honolulu Page 33
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Venture M&A and IPO Markets Continue Healthy Levels Of Activity
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Source: Thomson Reuters / PwC / NVCA
2015 = Q1 annualized
VC-backed IPO and M&A Valuations Remain Strong
Silicon Valley Honolulu
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Facebook, Groupon, Twitter, Zynga
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 $49B In Portfolio
~$100B In Venture Exits (IPO + M&A)
LPs Invested
$30B In VCs
VCs (Still) Investing More In Startups Than LPs Are Investing Back Into VC
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Sources: NVCA, Thomson Reuters, Cambridge
Silicon Valley Honolulu
Better Angel & VC Investing Synchronicity Could Improve Startup & Angel Yields
Startups and angels are dependent upon subsequent venture funding Angel investing patterns do not appear to influence VC investing patterns
– Angel investing sectors has stayed consistent for 5 years whereas VC investing evolves with market
VCs are focused on investing in active exit markets
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Author: Tim Dick
General Partner, Startup Capital Ventures – Boards: PlayFab, SilverTail (acquired by EMC), TuneIn, Adama
Materials, TagArray (acquired MXIM) Investor / Founder / CEO:
Match.Com (Angel, acquired by IAC), WorldPages.com (Founder, CEO, IPO NYSE:WPZ acquired by BT), TRUSTe.org / Privacy Assured (Internet privacy standard),
Accept.com (advisor, acquired by Amazon), Grassroots Enterprise (Founding President, acquired by Edelman), Hawaii Superferry (founding CEO), Dali Wireless (turnaround CEO) Boston Consulting Group – cofounded West Coast technology practice Beckman Instruments: invented first “instrument on a chip” & first ICU usable speech synthesizer for intubated patients MBA, Stanford University, BSEE, University of California