DESERTIFICATION OF THE VC INDUSTRY?Presented by Eva Rez, Principal, Day One Capital Ltd.City of London Alumni Conference, 18th March, 2016

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THE 4TH INDUSTRIAL REVOLUTION

Source: http://motherboard.vice.com/read/life-after-the-fourth-industrial-revolution; https://www.linkedin.com/pulse/fourth-industrial-revolution-have-human-heart-enrique-suarez

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VC FUNDING IS AT RECORD HIGH IN 2015;44% HIGHER THAN IN 2014;MEGA-ROUNDS DOMINATED

Source: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/01/venture-pulse-q4-report.pdf

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INVESTORS ARE MORE RISK AVERSE?SHIFT FROM SEED-STAGE FINANCINGTO SERIES A INVESTMENTS

Source: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/01/venture-pulse-q4-report.pdf

Median deal size:

USD 2.5M

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THE UNICORN CLUB IS JUST DOING FINE:72 NEW UNICORNS (USD 1B VALUATION) IN 2015

Source: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/01/venture-pulse-q4-report.pdf

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SO WHY TO FEAR???A DIFFERENT PERSPECTIVE:NEGATIVE SENTIMENT SNEAKS IN…

Source: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/01/venture-pulse-q4-report.pdf

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MONEY IS STILL POURED INTO THE SYSTEM

Source: http://www.bothsidesofthetable.com/2016/02/04/industry-insiders-think-will-happen-vc-2016/

LPs are likely to maintain their contribution (no significant increase expected)

Corporate investments Chinese money across

boarders

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SO WHAT’S ON INVESTORS’ MIND?

Source: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/01/venture-pulse-q4-report.pdf

Slowdown in China Interest rates are expected to increase in the US Worries about the IPO market Writing down VC investments to fair market value

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IPO MARKET IS IN BAD SHAPE

Source: http://www.bothsidesofthetable.com/2016/02/04/industry-insiders-think-will-happen-vc-2016/;http://www.slideshare.net/msuster/upfront-vc-analysis-2016/9-IPO_exits_are_down_32

Fear factors Oil prices plummeted Slowdown in China

Refugee crisis in Europe Presidential election in the US

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CORRECTION IN VALUATIONS;INVESTORS WANT TO SEE LOWER BURN RATES;FUND RAISING WILL TAKE LONGER

Source: http://www.slideshare.net/msuster/upfront-vc-analysis-2016/12-Private_market_valuations_had_risen

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BUT GOOD NEWS:EUROPE IS THE OASIS IN THE DESERT?!

Picture credit: http://www.123rf.com/

Already less bullish: valuations are more conservative than in the US

Low interest rates are likely to stay, which encourages investors to look for higher returns

Already more focus on value creation: qualified management and employees, monetisation is more important, sustainable business model

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WHAT ARE INVESTORS EXCITED ABOUT?

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THANK YOU!

Blog:https://medium.com/@evarez