Venture Capital & Angel Investing Market 2014
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Transcript of Venture Capital & Angel Investing Market 2014
US VC & Angel Investing Climate 2014
What’s Going On In The US VC Cycle?
Page 2
VCs Invest In Startups
Startups Exit Via M&A or
IPO
VCs return
capital to LPs
LPs Invest In
VCs
• Silicon Valley • Honolulu
An Outstanding Market For Entrepreneurs & VCs
• US VC fundraising returning to strength in 2014 on back of strong exit markets
• Highest level of VC investment since 2003 • Highest levels of IPO activity since 2003 • Investment shifted from seed to later stages • California & software sector taking growing
share of VC $ and deals • Angel investors concentrating on different
sectors than VC, presenting challenges to entrepreneurs
• Silicon Valley • Honolulu Page 3
Agenda
• LP Investments In VC
• VC Investing Activity
• Angel, Accelerator & Crowdfunding
• Exit Activity
• Conclusions • Silicon Valley • Honolulu
Page 4
VC Moneys Raised Declined In 2013 But Up Well In Q1 2014
Page 5 • Silicon Valley • Honolulu
Source: Thomson Reuters / PwC / NVCA
Number Of Funds Raised Increased Slightly
• Silicon Valley • Honolulu "
Page 6"
Source: Thomson Reuters / PwC / NVCA
Growing % of New Vs. Follow-On Funds So Far In 2014
• Silicon Valley • Honolulu "
Page 7"
Source: Thomson Reuters / PwC / NVCA
Agenda
• Silicon Valley • Honolulu Page 8
• LP Investments In VC
• VC Investing Activity
• Angel, Accelerator & Crowdfunding
• Exit Activity
• Conclusions
$29B Of Venture Capital Invested In 2013 Is At Post .com High
• Silicon Valley • Honolulu "
Page 9"
Source: Thomson Reuters / PwC / NVCA
VC Dollars Concentrating In Software, Biotech. & Media / Entertain
• Silicon Valley • Honolulu "
Page 10"
Source: Thomson Reuters / PwC / NVCA
Number Of Deals Also Concentrating In Software
• Silicon Valley • Honolulu "
Page 11"
Source: Thomson Reuters / PwC / NVCA
California Makes Up Over 50% of US VC $
• Silicon Valley • Honolulu "
Page 12"
Source: Thomson Reuters / PwC / NVCA
LA / Orange County
2013 Saw More Expansion Rounds While Seed Stage Rounds Continued To Fall
• Silicon Valley • Honolulu "
Page 13"
Source: Thomson Reuters / PwC / NVCA
Q1 Seed Deal Size Fell After a “Big” 2013 While Later Round Sizes Grew
• Silicon Valley • Honolulu "
Page 14"
Source: Thomson Reuters / PwC / NVCA
71% Of New Venture Financings Were Up-Rounds…
• Silicon Valley • Honolulu
Source: Fenwick
" Page 15"
…But Less Than 40% of Series-C Or Later Deals Were Up-Rounds
• Silicon Valley • Honolulu "
Page 16"
Source: Fenwick
Media And Software Have Greatest % Of Uprounds (i.e. lower risk)
• Silicon Valley • Honolulu "
Page 17"
Source: Fenwick
Venture Investment Environment Is Evolving
• “Seed and early stage financing numbers are down, but expansion stage dollars invested are up. This was to be expected when you consider the domination by seed and early stage deals in 2012 and 2013” - Bobby Franklin, CEO NVCA
• “Investments into the Software sector continue to remain healthy as investors look for companies with disruptive technology.” - Mark McCaffery, PwC
• Silicon Valley • Honolulu Page 18
Agenda
• Silicon Valley • Honolulu Page 19
• LP Investments In VC
• VC Investing Activity
• Angel, Accelerator & Crowdfunding
• Exit Activity
• Conclusions
Tech. Angel Funding Is More Difficult To Decipher
• UNH Angel report estimates 2013 angel funding grew 5% to $24B for ~70,000 companies funded – However many companies are not tech. – Average deal size of $342,000
• TechCrunch estimates Just $700M was invested in technology angel deals [which feels low – Ed.]
• Silicon Valley • Honolulu Page 20
Source: UNH Angel Report, TechCrunch, NVCA
Average Tech. Angel Round Size Remains Flat
• Silicon Valley • Honolulu "
Page 21"
Source: SVB / Angel Resource Institute
Adding Co-investors To Angels Substantially Increases Round Size
• Silicon Valley • Honolulu "
Page 22"
Source: SVB / Angel Resource Institute
$ M
Healthcare Draws Largest Angel / Coinvestor Rounds
(But Is Most Capital-Intensive)
• Silicon Valley • Honolulu "
Page 23"
Source: SVB / Angel Resource Institute
$ M
Angel Investing Mix Different From Venture Funding: Software Just 4%
• Silicon Valley • Honolulu "
Page 24"
Source: SVB / Angel Resource Institute
Angel Funding Is Balanced Vs Population
• Silicon Valley • Honolulu "
Page 25"
Source: SVB / Angel Resource Institute
Accelerators Funded Over 1,000 Companies In 2013
• Silicon Valley • Honolulu "
Page 26"
High risk: just 36% of portfolio companies received additional funding within 3 years
Crowdfunding Industry Reported Few Numbers for 2013…
Deloitte estimates over $700M was raised from product crowdfunding in 2013 (e.g. Kickstarter) SEC has still not finalized equity crowdfunding rules Last industry numbers from 2012 • $2.8B worldwide according to Massolution • $300M equity worldwide (crowdfunding.org)
• Silicon Valley • Honolulu Page 27
Agenda
• LP Investments In VC
• VC Investing Activity
• Angel, Accelerator & Crowdfunding
• Exit Activity
• Conclusions • Silicon Valley • Honolulu
Page 28
" Page 29"
VC-Backed Exit Market Is Strong With IPOs At Highest Level Since 2007
• Silicon Valley • Honolulu
Source: Thomson Reuters / PwC / NVCA
VC-backed IPO and M&A Valuations Remain Robust
• Silicon Valley • Honolulu "
Page 30"
Facebook, Groupon, Twitter, Zynga
Source: Thomson Reuters / PwC / NVCA
18% Of VC M&A Produces 10X Returns While 22% Produces < 1X *
• Silicon Valley • Honolulu "
Page 31"
Source: Thomson Reuters / PwC / NVCA * Excludes unvalued deals (70% of total)
• VC Returns Continue to Outperform • Public Markets VC Returns Typically Exceed Public
Markets Over Long Term
Source: NVCA, Cambridge Associates
• Silicon Valley • Honolulu Page 32
Agenda
• LP Investments In VC
• VC Investing Activity
• Angel, Accelerator & Crowdfunding
• Exit Activity
• Conclusions • Silicon Valley • Honolulu
Page 33
VCs Invested $29B In Portfolio
$134B In Venture Exit
Liquidity (IPO + M&A)
LPs Invested
$16B In VCs
Despite Strong Returns VC Is Not Receiving Enough Capital To Sustain
Today’s Venture Market
Page 34
Sources: NVCA, Thomson Reuters, Cambridge
• Silicon Valley • Honolulu
Market Equilibrium Will Return (One Way Or Another)
• Good exit markets create strong returns for LPs
• VCs continue to fund new deals at high levels
• LP funding declining and lagging VC investment
Page 35
Venture capital shrinks to match LP
investment in VC
VC funding grows as LPs increase VC
funding
• Silicon Valley • Honolulu
Page 36
Author: Tim Dick • General Partner, Startup Capital Ventures
– Boards: SilverTail (acquired by 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