current trends in the venture industry - fundraising

51
Soup to Nuts Presentation March 3, 2001 Presented by: John Gabbert Director of Research VentureOne

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Page 1: Current Trends in the Venture Industry - Fundraising

Soup to Nuts PresentationMarch 3, 2001

Presented by:

John Gabbert

Director of Research

VentureOne

Page 2: Current Trends in the Venture Industry - Fundraising

VentureOne Research

VentureOne tracks companies from their initial round

of venture financing until they achieve liquidity,

become profitable with no plans for future financing,

or go out of business.

Page 3: Current Trends in the Venture Industry - Fundraising

Three Key Elements for

a Robust Venture

Industry Fundraising

Investment

Liquidity

Page 4: Current Trends in the Venture Industry - Fundraising

Fundraising

Page 5: Current Trends in the Venture Industry - Fundraising

Contributions to Venture Capital ($B)

VC Fundraising Dollars Double From 1999

$69.1

$34.5

$19.7

$11.3$10.2$6.1

$2.1 $1.1 $2.7 $4.6 $6.1

$0

$10

$20

$30

$40

$50

$60

$70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Source: VentureOne

Page 6: Current Trends in the Venture Industry - Fundraising

Contributions to Venture Capital ($B)

Fundraising Continues at Historical

Highs Through 2000$18.1

$17.3

$19.1

$14.5$14.8

$7.9

$6.1$5.7$6.1

$4.6$4.6$4.3

$0

$4

$8

$12

$16

$20

1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00Source: VentureOne

Page 7: Current Trends in the Venture Industry - Fundraising

Median VC Fund Size ($M)*

Median VC Fund Size Stable in 2000

$138$135

$115

$85

$58$64

$57$70

$100

$0

$25

$50

$75

$100

$125

$150

1992 1993 1994 1995 1996 1997 1998 1999 2000Source: VentureOne

* Funds greater than $20M

Page 8: Current Trends in the Venture Industry - Fundraising

VC Funds Under Management by Size ($M)

Majority of VC $ Are Now in Large Funds

0%

20%

40%

60%

80%

100%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

$1B+ $500M-$999M $250M-$499M $100M-$249M Under $100M

Page 9: Current Trends in the Venture Industry - Fundraising

Fundraising Summary

New commitments to venture capital are at record

levels.

Over half of VC dollars are in funds greater than

$500 million.

Capital under management per VC partnership

continues to rise.

Greatest amount of VC money in history available

to invest in entrepreneurship.

Page 10: Current Trends in the Venture Industry - Fundraising

Investment

Page 11: Current Trends in the Venture Industry - Fundraising

$38.2

$14.9$11.6

$9.1$6.3$4.6$4.0

$68.83317

20461841

1676

1166943 1049

4107

$0

$10

$20

$30

$40

$50

$60

$70

1993 1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Total Invested ($B) Total # of Venture Deals

2000 Investment Far Ahead of 1999’s Record

Deals and Amount Invested

Page 12: Current Trends in the Venture Industry - Fundraising

$4.2$5.1

$8.3 $9.0

$15.8

$19.4$18.9

$16.8$13.7

853879

112011971090

832817

578540

$0

$4

$8

$12

$16

$20

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

0

200

400

600

800

1,000

1,200

Amount Raised ($B) Number of Deals

Investment Declines Throughout 2000

Deals and Amount Raised

Page 13: Current Trends in the Venture Industry - Fundraising

$0.8$2.7 $4.3

$7.9

$29.6

$56.9

570

207

760

1085

2418

3197

$0

$10

$20

$30

$40

$50

$60

1995 1996 1997 1998 1999 2000

Source: VentureOne

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Total Invested ($B) Total # of Internet Deals

Internet Investment in 2000 Exceeds 1999 Total

Deals and Amount Invested in Internet Companies

Page 14: Current Trends in the Venture Industry - Fundraising

$2.4$3.4

$6.0$7.0

$13.3

$16.6$15.6

$13.7$11.0

628

705

894970

850

617587

364318

$0

$3

$6

$9

$12

$15

$18

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

0

200

400

600

800

1,000

Amount Raised ($B) Number of Deals

Lower Internet Investment Contributes to Overall

Decline

Deals and Amount Raised by Internet Companies

Page 15: Current Trends in the Venture Industry - Fundraising

Internet Steadily Declines in 2000 as Percentage of Overall

Investment

67%

78%84% 86% 83% 82% 80%

57%

72%

0%

20%

40%

60%

80%

100%

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Percentage of Investment Dedicated to Internet

Page 16: Current Trends in the Venture Industry - Fundraising

Median Amount Invested Per Round ($M)

More Money Placed in the Hands of Entrepreneurs

$3.5$3.1$3.0$2.9$2.5

$4.0$5.0

$7.0

$11.0

$0

$3

$6

$9

$12

$15

1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

Page 17: Current Trends in the Venture Industry - Fundraising

Median Amount Raised Leveling Off Across Round

Classes

$0

$5

$10

$15

$20

$25

1Q99

2Q99

3Q99

4Q99

1Q00

2Q00

3Q00

4Q00

Source: VentureOne

Seed First Second Later

Median Amount Raised by Round Class ($M)

Page 18: Current Trends in the Venture Industry - Fundraising

Shipping-Stage Companies Raise Bulk of Venture

Investment

$0

$3,000

$6,000

$9,000

$12,000

$15,000

1Q99

2Q99

3Q99

4Q99

1Q00

2Q00

3Q00

4Q00

Source: VentureOne

Startup Product Development Shipping Profitable

Total Amount Raised by Development Stage ($M)

Page 19: Current Trends in the Venture Industry - Fundraising

Median Premoney Valuation by Year ($M)

Valuations Rise Substantially in 2000

$11.4$9.5$10.7

$8.5$8.1

$13.2$15.5

$22.5

$29.9

$0

$5

$10

$15

$20

$25

$30

$35

1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

Page 20: Current Trends in the Venture Industry - Fundraising

Median Premoney Valuation by Quarter ($M)

Despite Investor Caution, Valuations Remain High Through

4Q

$27

$30

$25

$30

$24

$16 $16$19

$23 $22

$0

$5

$10

$15

$20

$25

$30

$35

3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Page 21: Current Trends in the Venture Industry - Fundraising

Predominance of Internet Companies Affects Overall

Valuations

3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

$0

$10

$20

$30

$40

Source: VentureOneOverall Internet

Median Premoney Valuation ($M)

Page 22: Current Trends in the Venture Industry - Fundraising

Median Pre-Money Valuations Remain Relatively Stable

$0

$30

$60

$90

$120

1Q99

2Q99

3Q99

4Q99

1Q00

2Q00

3Q00

4Q00

Source: VentureOne

Seed First Round Second Round Later

Median Pre-Money Valuations ($M)

Page 23: Current Trends in the Venture Industry - Fundraising

Valuations Differ Markedly by Industry

$0

$5

$10

$15

$20

$25

$30

$35

$40

3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Healthcare IT Products and Services

Median Premoney Valuation by Industry ($M)

Page 24: Current Trends in the Venture Industry - Fundraising

Venture Commitments by Industry Sector, Quarterly

Products & Services Investment Continues Decline

in 4Q’00

0%

20%

40%

60%

80%

100%

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Information Technology Products & Services Healthcare

Page 25: Current Trends in the Venture Industry - Fundraising

Percentage of Internet Investment by Dimension

Infrastructure Rises as E-Commerce Falls in 2000

0%

20%

40%

60%

80%

100%

1996 1997 1998 1999 2000

Source: VentureOne

Business Services Content/Pubs Software/DBISPs Infrastructure E-Commerce

Page 26: Current Trends in the Venture Industry - Fundraising

Infrastructure, Software Hold Steady as Other Internet Sectors

Shrink

$0

$3,000

$6,000

$9,000

$12,000

$15,000

$18,000

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Software/Database Infrastructure ContentE-Commerce ISPs Business Services

Quarterly Internet Investment by Dimension ($M)

Page 27: Current Trends in the Venture Industry - Fundraising

Investment in Early vs. Later-Stage Companies

Early-Stage Investment Decreases

in Late 2000

0%

20%

40%

60%

80%

100%

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Seed and First Rounds Second and Later Rounds

Page 28: Current Trends in the Venture Industry - Fundraising

Percentage of Venture Deals Involving Corporations

Corporate Involvement in Venture Deals Accelerates

18%16%

12%10%9%

23%

27%

0%

5%

10%

15%

20%

25%

30%

1994 1995 1996 1997 1998 1999 1H00Source: VentureOne

Page 29: Current Trends in the Venture Industry - Fundraising

Despite Year-End Deceleration, 2000 is a Banner

Year

$0

$10

$20

$30

$40

$50

$60

$70

1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

Information Technology Products & Services Healthcare

Venture Commitments by Industry Sector ($B)

Page 30: Current Trends in the Venture Industry - Fundraising

Regional Investment

Page 31: Current Trends in the Venture Industry - Fundraising

Regional Venture Capital Investment in the U.S.

*“Hot Spots” include Austin, Boston, New York, Potomac, Research Triangle, and Southern

California

Venture Capital Concentrated in Bay Area and

Key Regional Hot Spots*

0%

20%

40%

60%

80%

100%

1996 1997 1998 1999 2000

Source: VentureOne

Bay Area Hot Spots Other

Page 32: Current Trends in the Venture Industry - Fundraising

$1.8$2.7

$3.9$5.0

$15.1

$25.4

535

378

619711

12111341

$0

$7

$14

$21

$28

1995 1996 1997 1998 1999 2000

Source: VentureOne

0

400

800

1,200

1,600

Amount Raised ($B) Number of Deals

VC Investment in the Bay Area

Number of Deals and Amount Raised

Page 33: Current Trends in the Venture Industry - Fundraising

Bay Area Investment Summary

Investment in the Bay Area fell 26% during the

fourth quarter. Deal flow fell 12%.

In 2000 as a whole, Bay Area investment is ahead

of 1999’s total by 68%. Investment was at its peak

during 3Q’00.

Due to a sharp decline in consumer and business

services, investment in communications

companies now leads, followed by software.

Page 34: Current Trends in the Venture Industry - Fundraising

Financing Summary

Despite quarterly declines, VC investment in 2000 nearly doubled 1999’s record.

Internet investment declined from its record high in 1Q’00, but still comprised 83% of overall investment in 2000.

The drop off in consumer and business services investment drove the decline; investment in Internet infrastructure and software/database companies remains strong.

IT receives the most VC investment of any industry. Products & Services absorbed the brunt of the Internet decline, while healthcare investment is at a record high.

The Bay Area still sees bulk of investment, but capital is also concentrated in select “hot spots.”

Page 35: Current Trends in the Venture Industry - Fundraising

Liquidity

Page 36: Current Trends in the Venture Industry - Fundraising

M&As vs. IPOs

Venture-Backed Liquidity Shifts Toward M&As

0%

20%

40%

60%

80%

100%

1995 1996 1997 1998 1999 2000

Source: VentureOne

IPOs M&As

Page 37: Current Trends in the Venture Industry - Fundraising

$5.5

$12.8$8.2

$15.3

$43.9

$23.1$19.0

$9.9

67

9497107

797581

54

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

0

25

50

75

100

125

Amount Paid ($B) Number of Deals

M&As Decline in the Fourth Quarter

Deals and Amount Paid in M&As

Page 38: Current Trends in the Venture Industry - Fundraising

$9.9

$26.4

$13.1 $14.2

$41.7

$95.8

365289

235234204

149

$0

$20

$40

$60

$80

$100

1995 1996 1997 1998 1999 2000

Source: VentureOne

0

100

200

300

400

Amount Paid ($B) Total # of M&As

Despite a 4Q Decline, M&A Dollars

More Than Double in 2000

Deals and Amount Paid in M&As

Page 39: Current Trends in the Venture Industry - Fundraising

$1.3

$5.1$5.6

$7.1 $7.3

$3.2

$6.6

$1.4

16

70

40

677478

72

20$0

$1

$2

$3

$4

$5

$6

$7

$8

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

0

20

40

60

80

100

120

Amount Raised ($B) Venture-Backed IPOs

IPO Volume Falls Sharply in 4Q’00

Deals and Amount Raised Through IPOs

Page 40: Current Trends in the Venture Industry - Fundraising

$9.5

$5.4

$4.2

$19.1 $18.4

193

244

77

135

231

$0

$4

$8

$12

$16

$20

1996 1997 1998 1999 2000

Source: VentureOne

0

50

100

150

200

250

300

Amount Raised ($B) Venture-Backed IPOs

Despite 4Q’00 Shortfalls, IPO Activity for 2000 Is

Strong

Deals and Amount Raised Through IPOs

Page 41: Current Trends in the Venture Industry - Fundraising

Percentage of IPOs by Industry

Healthcare Continues to Increase as Percentage of

Overall IPOs

0%

20%

40%

60%

80%

100%

1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Information Technology Healthcare Products & Services

Page 42: Current Trends in the Venture Industry - Fundraising

IPOs, Internet vs. Non-Internet

Internet IPOs Lose Ground as Percentage of Total in 2000

0%

20%

40%

60%

80%

100%

1995 1996 1997 1998 1999 2000

Source: VentureOne

Non-Internet Internet

Page 43: Current Trends in the Venture Industry - Fundraising

Median Amount Raised at IPO ($M)

Median Amount Raised at IPO Reaches Record High in 2000

$77

$63

$19

$32 $33 $32

$44

$0

$20

$40

$60

$80

$100

1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

Page 44: Current Trends in the Venture Industry - Fundraising

Median Venture-Backed Pre-IPO Valuation ($M)

Pre-IPO Valuations Continue to Climb in 2000

$366

$317

$45$67 $79

$105

$174

$0

$100

$200

$300

$400

1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

Page 45: Current Trends in the Venture Industry - Fundraising

Median Venture-Backed Pre-IPO Valuations ($M)

Pre-IPO Valuations Remain Stable in 4Q’00

$320$349$333

$474

$386

$309$270$264

$214

$0

$100

$200

$300

$400

$500

4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00

Source: VentureOne

Page 46: Current Trends in the Venture Industry - Fundraising

2.92.82.7

3.13.1

4.24

0

1

2

3

4

5

1994 1995 1996 1997 1998 1999 2000

Source: VentureOne

Younger Companies IPO Since Mid-90s

Time (Years) From Initial VC Funding to IPO

Page 47: Current Trends in the Venture Industry - Fundraising

Liquidity Summary

Both the IPO and M&A markets for venture-backed companies saw substantial decreases in 4Q’00.

IPO volume in 4Q was at its lowest since 4Q’98. Strong activity earlier in 2000, however, kept annual totals high.

Due to strong interest in biopharmaceuticals, healthcare IPOs raised a record amount in 2000 and saw the largest number of offerings since 1996.

Despite the 4Q’00 decline, 2000 was a record year for M&As. Much of the increase is due to the high number of multi-billion-dollar transactions that took place during the year.

Page 48: Current Trends in the Venture Industry - Fundraising

Conclusions

Despite caution, continued liquidity and high valuations will drive VC returns and should continue to fuel an overall healthy VC/entrepreneurship climate in the United States. Overall is not all.

Investors in the US, Europe, and Israel are increasingly pursuing opportunities outside their own borders--opportunities which include co-partnering as well as independent investment.

For more information or details, please contact [email protected].

Page 49: Current Trends in the Venture Industry - Fundraising

VentureOne Products & Services

Online Databases

VentureSourceOnline database of venture capital information with more than 11,000 venture-backed companies, nearly 4,000 investors—including more than 1,100 traditional and corporate venture firms with over 2,200 funds—and nearly 31,000 financing transactions and 80,000 key executives.

CompensationProOnline salary, bonus, and equity consultant with compensation information from over 800 venture-backed companies.

Page 50: Current Trends in the Venture Industry - Fundraising

VentureOne Products & Services

Venture Capital Conferences The Summit (Spring, San Francisco)

Best of breed in venture capital

The Exchange (Summer, Boston)

Outstanding East Coast companies

The Premiere (Fall, Washington DC & San Jose)

The nation’s best seed-stage companies

Venture Capital Europe (Spring, Paris & Winter,

London)

Strategies for Europe’s private equity community

Page 51: Current Trends in the Venture Industry - Fundraising

VentureOne Products & Services

Industry Publications

VentureEdge (quarterly)

VentureMail news (weekly)

Venture Capital Industry

Report (annual)

Venture Capital Sourcebook

(annual)

Executive Compensation at

Privately Held Startup

Companies (semi-annual)

Customized Research

Comparable Valuation

Reports

To help determine a

company’s relative value

Custom report services

To address specific

business challenges