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MIDWEST TECH REPORT DATA-DRIVEN ANALYSIS OF FINANCING, MAJOR PLAYERS, AND GEOGRAPHICAL TRENDS.

COMMISSIONED BY:

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ABOUT LEAD BANK For more than 85 years, Lead Bank has remained a strong independent commercial bank dedicated to delivering smart financial solutions for business owners, managers and their families and communities. With Missouri locations in Garden City, Lee’s Summit, and Kansas City, Lead Bank provides treasury management, lending services, and personal client products. Lead Bank also offers advisory services to companies from bookkeeping to business brokerage services through its division, Lead Business Advisors.

Lead Bank believes in informed decision making. Therefore, we have partnered with CB Insights to release a series of reports that provide ongoing, high quality research. These reports shed light on key drivers of the Kansas City economy. At Lead Bank, we believe in helping our clients do business better. Equipped with this data, our goal is that investors, business owners and policy makers can make better business decisions. www.leadbankonline.com


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ABOUT CB INSIGHTS CB Insights is a National Science Foundation-backed company that uses data to provide VCs, corporate strategy, M&A teams, and business development professionals with intelligence on emerging companies and disruptive technology trends.

To see how our data can make your life easier, visit: www.cbinsights.com

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US And Midwest Financing History

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Most Active Investors 14 Notable Companies 17 Cities And States Breakdown 22

TABLE OF CONTENTS


US AND MIDWEST TECH FINANCING HISTORY

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US TECH HITS $47B IN FUNDING IN 2014 Since 2010, annual deals and dollars in the US saw healthy growth through the first half of 2015. Deal activity increased 121% from 2010 to 2014, and funding rose 201% in the same period. The first half of 2015 has already surpassed deal and funding activity in 2010, with over $31B in funding deployed across more than 3,000 deals.


FUNDING TO MIDWEST TECH ECOSYSTEM REACHES $4.4B IN 2014 Annual funding rose steadily from 2010 through the first half of 2015. Funding increased 67% in 2014 compared to 2010 figures, and 27% over 2014. 2015 is showing no signs of a slowdown, dollars invested are projected to reach almost $5.3B by year-end, at the current run rate. Deal activity is trending toward flat or a slight decrease in 2015.


LAST 5 QUARTERS SAW MORE THAN $1B DEPLOYED TO MIDWEST TECH COMPANIES As seen below, deals and dollars invested in the Midwest are trending upwards since Q1’10. Over the last 5 quarters Midwest tech companies have seen over 200 deals per quarter. In 2010, they saw an average of 94 deals per quarter.


INTERNET TOPS, BUT MOBILE & TELECOMMUNICATION GAIN NATIONWIDE Unsurprisingly, the internet sector commanded the most dollars deployed to any sector at 59% halfway through 2015. Mobile and telecommunication saw healthy growth in investment rising from a 15% share of dollars in 2010, to 20% in 2013, and 27% halfway through 2015. Software deals grew to 12% in 2014, but significantly dropped in 2015’s first half, standing at 6%. Share of dollars deployed to computer hardware and electronics has slowly declined since 2010.


INTERNET AND MOBILE ACCOUNT FOR 82% OF DEALS NATIONWIDE IN FIRST HALF OF 2015 The internet and mobile sectors consistently rank one and two respectively for share of US deals since 2010. Software deals rose from 7% deal share in 2012, to 9% in 2014, and 11% halfway through 2015. Computer hardware & services and electronics have ranged between 3% and 6% of deals in the period covered.


INTERNET SECTOR STAYS HOT, COMPUTER HARDWARE HEATS UP IN MIDWEST Internet companies commanded 59% of capital deployed in the first half of 2015. Computer hardware & services attracted 21% of dollars, and mobile & telecommunications saw a decline in investment, falling from 28% in 2012, to 17% 2014, and stood at 10% in 2015’s first half.


INTERNET AND MOBILE DOMINATE MIDWEST DEAL SHARE In each year since 2010, internet deal share has stood at 55%+ and was at 58% in the first half of 2015. Deal share to the mobile sector hit a five year high in 2014 at 23%. Put another way, over 1 out of every 5 deals completed in 2014 went to mobile startups. Finally, software and electronic deals stayed consistent in the first half of 2015.


FUNDING SHARE TO LATE-STAGE DEALS FALLS IN 2015 Late-stage funding rounds (Series D+) received 30% of Midwest dollar share in 2014, but saw a big decline in the first half of 2015, only commanding 15% of dollar share. Late-stage financings in 2014 included AvantCredit ($225M), SolidFire ($82M), BigCommerce ($50M), and Craftsy ($50M).


EARLY-STAGE DEALS DROP BELOW 50% In each of the past five years, early-stage deal share (Seed/Series A) hit 50%+, reaching as high as 59% in 2012. However, the first half of 2015 saw early-stage deal share fall below the 50% mark — at 49%.


MOST ACTIVE INVESTORS IN THE MIDWEST

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TOP 20 MOST ACTIVE MIDWEST VC INVESTORS Despite announcing in February that their 10th fund will be their last, Austin Ventures was the most active VC in the Midwest, though their investments were primarily in Texas. Foundry Group placed 2nd in the top 20 list and notched a big exit in June’s IPO of FitBit, which Foundry invested at the Series B. See the chart below for a list of the most active VCs in the Midwest.

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INTEL CAPITAL LEADS MOST ACTIVE CORPORATE VC INVESTORS Below is a breakdown of notable corporate VCs active in the region, including Google and Salesforce’s venture arms.

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NOTABLE MIDWEST STARTUPS

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Company Total Funding

WELL-FUNDED COMPANIES IN THE MIDWEST

$330M

$166M

Select Investors

RRE Ventures, August Capital, DFJ Growth, Tiger Global Management

Foundation Capital, Intel Capital, Tenaya Capital, Crosslink Capital

RRE Ventures, Siemens Venture Capital, General Electric

New Enterprise Associates, Samsung Ventures, Valhalla Partners

$158.1M

$150M

$141M Kleiner Perkins Caufield & Byers, Camden Partners

Description

Online consumer lending platform

Human resources software

Energy management software

Data Storage

Healthcare Solutions


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COMPANY MOSAIC Assessing the health of opaque private companies using public data. What the National Science Foundation backed us to create to help you see what’s next.

What is Company Mosaic?

Quantitative framework to algorithmically measure the overall health and growth potential of private companies.

Companies scored on a 0 to 1000 scale.

It tracks 3 “M”s for each company based on non-traditional signals such as:

•! Momentum – Uses signals ranging from hiring growth, exec turnover, news volume and sentiment, customer & partner signings, product development velocity, web traffic, mobile app data, and social media chatter

•! Market – Uses Market Mosaic to assess health of industry the company competes in

•! Money – Financial strength and viability of company based on burn rate, financing history and investor quality

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Company Mosaic Score

NOTABLE EARLY-STAGE COMPANIES IN THE MIDWEST RANKED BY MOSAIC SCORE

846

819

Select Investors

Silverton Partners, S3 Ventures, Tim Draper

Greycroft Partners, Chicago Ventures

Chicago Ventures, Hyde Park Venture Partners, Pritzker Group Venture Capital

Correlation Ventures, Greycroft Partners

816

813

Description

Mobile delivery application

Online retailer of arts and crafts

Business software review platform

Same day delivery for businesses

808 Pinterest marketing and analytics tools SeedStep Angels, i2E

*Note: CB Insights’ Company Mosaic score uses public data and predictive algorithms to assess the strength of private companies.


Company Mosaic Score

NOTABLE EARLY-STAGE COMPANIES IN THE MIDWEST RANKED BY MOSAIC SCORE

808

785

Select Investors

Battery Ventures

General Catalyst Partners

Greycroft Partners, e.ventures

Highland Capital Partners

785

779

Description

IT Infrastructure Service

Data analytics tools

Employee scheduling software

Content and data solutions

784 Digital tools for students Great Oaks Venture Capital

*Note: CB Insights’ Company Mosaic score uses public data and predictive algorithms to assess the strength of private companies.


CITIES AND STATES FINANCING BREAKDOWN


TOP STATES RANKED BY DEALS AND DOLLARS Texas and Colorado saw the largest amount of deals completed since 2010 with over 1,200 and 750, respectively. Illinois saw over $5B invested across 700 deals since 2010. The table below lists other states in the Midwest region and how they rank in deals and dollars terms.

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TOP 10 CITIES RANKED BY DEALS AND DOLLARS Austin, Chicago, and Boulder lead the pack in the number of deals and dollars since 2010. The table lists other top Midwest cities for deals and dollars.

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TEXAS: DEALS AND DOLLARS TREND Texas has led the Midwest in deals and dollars since Q1’14. Austin is the hub, but cities such as Houston and Dallas have also seen significant investment, accounting for roughly 20% of Texas deals. See the chart below to learn more.


ILLINOIS: DEALS AND DOLLARS TREND Chicago received 83% of dollars deployed in Illinois since Q1’14. Other cities like Champaign have received significant investment as well. Below is a chart showing Illinois’ financing activity since Q1’14.


COLORADO: DEALS AND DOLLARS TREND Boulder and Denver commanded 67% of deal activity in Colorado since Q1’14. Lesser known cities such as Englewood received 7% of deals completed in the Rocky Mountain State. The chart below illustrates deals and dollars invested in Colorado since Q1’14, including notable deals and top cities.


MISSOURI: DEALS AND DOLLARS TREND St. Louis commanded 56% of deal activity in Missouri since Q1’14. Cities like Kansas City and Maryland Heights accounted for 17% of deals completed. Below is a chart showing Missouri’s financing activity since Q1’14.


INDUSTRIES OF NOTE IN THE MIDWEST


FINANCIAL TECHNOLOGY: ACTIVITY

$0.22!


FINANCIAL TECHNOLOGY: AVERAGE DEAL SIZE

$0.22!


FINANCIAL TECHNOLOGY: TOP INVESTORS

$0.22!


AG TECHNOLOGY: ACTIVITY

$0.22!


AG TECHNOLOGY: AVERAGE DEAL SIZE

$0.22!


AG TECHNOLOGY: TOP INVESTORS

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COMING SOON

•! FULL REPORT ON THE STATE OF FIN TECH IN MIDWEST

•! FULL REPORT ON THE STATE OF AG TECH IN MIDWEST

•! REPORT ON MINORITY AND WOMEN LED VENTURES

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METHODOLOGY – WHAT’S INCLUDED? WHAT’S NOT? We encourage you to review the methodology and definitions employed by us to better understand the numbers presented in this report. If you have any questions about our definitions or methodological principles, we encourage you to reach out to us directly.

What is included? Equity financings into emerging companies.

•! Fundings of only private companies. Public companies of any kind on any exchange (including Pink Sheets) are excluded from our numbers even if they received investment by a venture firm(s)

•! Companies must be headquartered in the USA. Our geographic data is based on the city and state where the company receiving investment is headquartered. If a company has a satellite office/presence in multiple cities or was founded in a particular city but has moved its HQ, our results reflect only this HQ address.

•! Only include the investment made in the quarter for tranched investments. If a company does a second closing of its Series B round for $5M and previously had closed $2M in a prior quarter, only the $5M is reflected in our results.

•! Round #s reflect what has closed –not what is intended. If a company indicates the closing of $5M out of a desired raise of $15M, our numbers reflect only the amount which has closed.

•! Only verifiable fundings are included. Fundings are verified via (1) various federal & state regulatory filings (2) direct confirmation with firm or investor or (3) press release.

•! Funding close date matters. Fundings are provided based on funding close date and not on announcement date.

What is not? •! Angel investment. These are not included in numbers unless an investment round included

Angels investing alongside a venture capital firm or corporate venture group. •! No contingent funding. If a company receives a commitment for $20M subject to hitting

certain milestones but first gets $8M, only the $8M is included in our data. •! No business development/R&D arrangements whether transferable into equity now, later or

never. If a company signs a $300M R&D partnership with a larger corporation, this is not equity financing nor is it from venture capital firms. As a result, it is not included.

•! Buyouts, Consolidations and Recapitalizations. All three of these of transaction types are commonly employed by private equity firms and are tracked by CB Insights. However, they are excluded for the purposes of this report. Private equity investments into companies which may have received venture capital investment prior are also not included.

•! Private placements. These investments also known as PIPEs (Private Investment in Public Equities) even if made by a venture capital firm(s)

•! are not included. •! Debt/loans of any kind (except convertible notes). Venture debt or any kind of debt/loan

issued to emerging, startup companies even if included as an additional part of an equity financing is not included. If a company receives $3M with $2M from venture investors and $1M in debt, only the $2M is included in these statistics.

•! Government funding. Grants, loans, equity financings by the federal government, state agencies or public -private partnerships to emerging, startup companies are not included. Strictly venture or corporate venture outfits.

•! Incubator investments. Investments of money as equity or debt and/or services by incubators are not included.

•! Strategic corporate investments. Corporations making strategic investments in companies but not as part of a specific organized venture group are not included.

*States included in this analysis: North Dakota, South Dakota, Nebraska, Colorado, Kansas, Oklahoma, Texas, Minnesota, Iowa, Missouri, Arkansas, Louisiana, Wisconsin, Illinois, Kentucky, and Tennessee.


Web | www.cbinsights.com

Twitter | @cbinsights

Tel | 212.292.3148

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midwest tech report - lead bank - personal and … · @cbinsights midwest tech report data-driven...

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