state of venture capital 2013
TRANSCRIPT
Startup Capital Ventures
• Early stage enterprise-focused venture capital in Silicon Valley & Hawaii
• Top decile fund performance • We like technology, IP and the cloud • We love insanely curious domain-expert
entrepreneurs
• Silicon Valley • Honolulu Page 2
What’s Going On In The US VC Cycle?
Page 3
VCs Invest In Startups
Startups Exit Via M&A or
IPO
VCs return
capital to LPs
LPs Invest In
VCs
• Silicon Valley • Honolulu
Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu Page 4
US Venture Capital Raised Is Stable At Around $19B
Page 5
.com boom & bust
Source: NVCA
• Silicon Valley • Honolulu
The Number Of US Venture Funds Raised Is Also Stable
Page 6
Source: NVCA
• Silicon Valley • Honolulu
Follow-On Vs. New Funds Raised Is About 70 / 30 Split
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
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Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu Page 8
$26B Of Venture Capital Invested Is Well Above $19B Of Inflow To Funds
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
Page 9"
Software & Biotech. & Cleantch Are The Largest Investment Sectors
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
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IT Venture Investment Is Thriving
• “Life sciences investment was suppressed due in part to the impact of the regulatory environments
• Clean tech investors began moving towards deals less dependent on government support
• Investment in information technology flowed, as far fewer obstacles impeded success in those sectors” - Mark Heesen, President NVCA
• Silicon Valley • Honolulu Page 11
Early Stage Investing Has Returned While Seed Stage Declines
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
Page 12"
Silicon Valley Continues To Dominate US Venture Capital Investment
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
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Early Stage Deal Size Is Decreasing As Startups Become More Capital Efficient
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
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Crowdsourced Equity Is Mostly Small Tranches From Angels
• Silicon Valley • Honolulu
Source: Massolution, Crowdsource.org
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Up-Rounds Continue To Constitute Most Financings
Source: Fenwick & West
• Silicon Valley • Honolulu
Up-Round Valuation Increase Continues About +85%
• Silicon Valley • Honolulu
Source: Fenwick
trends in terms of venture financings in silicon valley — fourth quarter 2012 6
the fenwick & west venture capital barometer™ (magnitude of price change) — Set forth below is the average percentage change between the price per share at which companies raised funds in a quarter, compared to the price per share at which such companies raised funds in their prior round of financing. In calculating the average, all rounds (up, down and flat) are included, and results are not weighted for the amount raised in a financing.
The Barometer results by series are as follows:
100% *90%
80%
70%
60%
50%
40%
30%
20%
10%
0%Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
70%
60%
50%
40%
30%
20%
10%
0%Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
30%
22.5%
15%
7.5%
0%Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
54% 57%
51%
41%
18%16% 16%
17%
52%52%
60% 62%
20%
43%
71% 78%
64%
19%
37%
69%
32%
21%
31%
85% 85%
99%
47%
9%
34%33%
23%
35%
Barometer Combined Total
Uncapped Liquidation
Redemption
Senior Liquidation Preferences
xcomplete
xcomplete
xcomplete
xcomplete
200%
*
160%
120%
80%
40%
0%
-40%Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
246% **
220%
*194%
168%
142%
**
116%
90%
64%
38%
12%
-14%
-40%Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
Series B
Series C
Series D
Series E and Higher
Software
Hardware
Life Science
Internet/Digital Media
Cleantech
12%
36%43%
19%
67%
1%18%
49%
62%
10%
19%14%
39%38%
54%
42%
92%
177%
44%
74% 78%
44%
56% 57%58%
104%
134%
121%
164%
147% 141%
155%
Barometer Percentage Change By Series
Results By Industry Barometer Over Time
xcomplete
xcomplete
*One software company had a 1460% up round and one internet/digital media company had a 1190% up round in 2Q12. If these were excluded the Barometer result for 2Q12 would have been 70%.
*Please note that the two above mentioned software and internet/digital media companies with greater than 10x up rounds in 2Q12 were both Series C rounds. If these were excluded the Barometer result for Series C rounds in 2Q12 would have been 72%.
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Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu Page 18
" Page 19"
IPO and Especially M&A Activity Is Strong
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
VC-backed IPO and M&A Valuations Remain Robust
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu "
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2012 is ex Facebook (avg. would be $5B)
• VC Returns Continue to Outperform • Public Markets VC Returns Currently Untypically Lagging
Booming Stock Markets
.com boom
.com bust
Source: NVCA, Cambridge Associates • Silicon Valley • Honolulu
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Medium Size Funds Produce Best Returns
• Confidential To Recipient Page 22"
• Source: Cambridge Associates, NVCA
0
5
10
15
20
25
30
35
Funds < $50M $50-$150M >$150M
Fund
IRR
(%)
Fund Size ($)
US Venture Capital Fund Returns (1998-2008)
Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu Page 23
The Venture Market Is Moving Nicely
• Plenty of deals are getting funded • Deal quality is solid with good revenue and
profitability • Exit activity is good in both number of
deals and valuation • LPs continue to invest in VC albeit not at
the level VCs are investing in startups
• Silicon Valley • Honolulu Page 24
VCs Invested $26B In Portfolio
$210B In Venture Exits (IPO + M&A proceeds)
LPs Invested $19B In VCs
2012 Venture Funding Cycle Created Good Returns For LPs But Still Imbalanced
Page 25
Sources: NVCA, Thomson Reuters, Cambridge
• Silicon Valley • Honolulu
Market Equilibrium Will Return (One Way Or Another)
• Good VC exit markets create strong returns for LPs (better than public markets)
• Healthy funding levels at all stages • VCs solidly funding new deals • LP funding growing but still lagging VC returns
Page 26
Venture capital shrinks to match LP investment in VC
VC funding grows as LPs return to VC sector
• Silicon Valley • Honolulu
• Copyright © 2010 Startup Capital Ventures Page 27
Author: Tim Dick • General Partner, Startup Capital Ventures
– Boards: SilverTail (acquired EMC), TuneIn, Adama Materials, TagArray
• Entrepreneur, angel and advisor has raised over $300M in early stage capital with over $1.2B of exits – 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 (mentor capitalist, acquired by Amazon) – Grassroots Enterprise (Founding President, acquired by Edelman) – Hawaii Superferry (founding CEO) – Dali Wireless (turnaround CEO)
• Boston Consulting Group • Beckman Instruments: invented first “instrument on a chip” (1985) &
first ICU usable speech synthesizer for intubated patients (1981) • MBA, Stanford University • BSEE, University of California
www.startupcv.com [email protected]