venture capital & angel markets 2015

State of Venture Capital & Angel Markets 2015

STARTUP CAPITAL VENTURES

What’s Going On In The US VC Cycle?

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


Agenda

LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions


VC Fundraising Market Is Healthy

.com boom & bust


Source: Thomson Reuters / PwC / NVCA

Number Of Funds Raised Increased Again



New Funds Raised Exceeded 30% For First Time In Years

Source: Thomson Reuters / NVCA


• VC Returns Continue to Outperform • Public Markets Venture Returns Continue To Exceed

Public Market Returns

Source: NVCA, Cambridge Associates


Agenda



$49B Of Venture Capital Invested In 2014 Is Highest Since 2000



2015 = Q1 annualized

For comparison: Apple 2015Q1 revenue $74.6B

US Corporate VC Also at a Decade High


Source: PWC Moneytree Report

Number of US VC Deals Remains Essentially Flat For 15 Years




Silicon Valley Dominates US VC With CA Making Up Almost 60% of Total $



LA / Orange County

Software Is Eating The $ While Industrial & Energy Is Bouncing Back



Software Represents Nearly 50% Of Deals With Biotech #2 and Down To ~10%



Seed Stage Rounds Continued To Decline As Series A & B Rounds Increase



Seed And Expansion Stage Deal Sizes Close To .com highs*



* Driven by two billion $ deals and several multi-hundred $ deals

79% Of Round Valuations Were Up While Just 6% Were Down-Rounds


Source: Fenwick

Software & Internet / Media Had Greatest % Of Up-Rounds With Life Science Continuing To Lag


Source: Fenwick Q4 2014 * Cleantech & Other were statistically insignificant with two deals each

Round To Round Price Increases At Post .com Record Levels


Source: Fenwick

Bullish VC Sentiment As Measured By Low Senior Liquidation Preferences


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

Agenda



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


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


Average Tech. Angel Round Size At All Time High


Source: ARI Halo Report

Tech. Angel Deal Size Up Across All Sectors



Tech. Angel Valuations At All Time High



Tech. Angel Deals Approximately Proportional To Population

(Different Than CA-Centric VC)



Angel Investing Continues To Be Centered On Consumer & Mobile Internet



Big Takeaway: Angels Invest (Much) More In Consumer & Less In Software Than VCs


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

Agenda



Venture M&A and IPO Markets Continue Healthy Levels Of Activity




VC-backed IPO and M&A Valuations Remain Strong


Facebook, Groupon, Twitter, Zynga


FB acquisition of WhatsApp for $19.5BN

Agenda

LP Investments In VC VC Investing Activity Angel, Accelerator & Crowdfunding Exit Activity Conclusions Silicon Valley Honolulu

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

Sources: NVCA, Thomson Reuters, Cambridge


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


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

www.startupcv.com

STARTUP CAPITAL VENTURES

venture capital & angel markets 2015

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