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White Paper: Venture Capital Performance

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From the venture capital power law to ‘unicorn’ exits of the greatest magnitude, we have spent a lot of time digging into and analyzing data around venture capital performance and quality. …

From the venture capital power law to ‘unicorn’ exits of the greatest magnitude, we have spent a lot of time digging into and analyzing data around venture capital performance and quality.

This free 36-page white paper provides a data-driven look at 'unicorn' exits and venture capital firms.

More information and a table of contents is available here: https://www.cbinsights.com/blog/white-paper-venture-capital-performance

Published in: Business, Economy & Finance

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  • 1. http://www.cbinsights.com  @cbinsights  info@cbinsights.com
  • 2. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Research Brief Page The Exceedingly Rare Unicorn VC 3 The Unicorn VCs Are Increasing Their Early Stage Investment Focus 7 What Does It Take to Raise a Financing Round at a $1B Valuation? 10 The VC Power Law – Analyzing the Largest 100 U.S. VC-backed Tech Exits 15 Are Top Venture Firms Making More Bets Outside of California? 21 Which VC Firms See the Highest Share of IPOs? 24 The Top Healthcare VCs – Which Firms See the Highest Share of IPOs? 27 The Top Corporate VCs – Which Firms See the Highest Share of IPOs? 30 The Most Capital Efficient Venture Capital-backed Exits of 2013 33
  • 3. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Startups that exit for more than $1 billion are a rarity. So are the VCs who invest in them. Here is the data. Startups that exit for over $1 billion are a rarity. They’re so rare that folks have come up with nicknames to describe these rare beasts (unicorns and thunder lizards to name two). Since building a billion dollar company or unicorn is so hard and so rare, it naturally follows that identifying and investing in them is also pretty difficult. And the data on VC exits shows that there are, in fact, very few unicorn VCs. While venture capitalists talk about wanting to identify and invest in billion dollar companies, the reality is that few VC investors actually do. Even when they do, very few are able to do it again highlighting the challenges that Ashby Monk of Stanford describes in his essay about bringing scale to venture capital. Moreover, for those who were astute enough to get into these big exits, getting in early is even rarer, highlighting the paucity of firms who can truly see around corners and who have access to truly superior dealflow. As we work with Limited Partners, this is an area of increasing interest to them because performance persistence in venture capital is very real. In other words, in venture capital, it has been shown by studies that past performance actually is an indicator of future performance. Of course, performance persistence must be considered alongside other factors like network centrality and investment discipline and brand strength which have been shown to be indicators of VC performance as well. Combined, these factors create a Mosaic (note: only for LPs) which provides a holistic view into VC firm quality. The Data Using CB Insights venture capital data, we identified 45 venture-backed U.S.- based tech companies that exited (via either an IPO or an acquisition) between 2004 and 2013 YTD with a valuation of over $1B. We did not include companies that have not exited but which have rumored valuations as there is little certainty that they will be able to maintain those valuations (see Fab.com as one example).
  • 4. http://www.cbinsights.com  @cbinsights  info@cbinsights.com We then analyzed the investors in these 45 billion dollar plus exits to understand and identify the trends among the Unicorn VCs. The Results 104 VCs invested in these 45 billion dollar companies prior to their exits. 68 of them (65%) invested in only a single billion dollar exit. Andy Dunn of Bonobos asked in his scathing “Dear Dumb VC” blog post, “How many companies are in your portfolio that have reached $1 billion in enterprise value? If the answer isn’t two, you are not good yet.” Below is the answer. The following chart breaks down these investors by the number of billion- dollar companies they had invested in. The first bubble represents the 68 VCs who only invested in one billion-dollar company, which amounts to 14% of all active VCs. As we move to the next bubble – VCs that invested in exactly two billion-dollar companies – this number drops sharply to 17 (only 3.5%). The far end of the spectrum is comprised of the three VCs who had remarkably invested in 8 billion-dollar plus exits and who thus represent 0.6% of all active VCs. The number of large exits in an investor’s portfolio does not necessarily correlate with the investment’s returns as the largest returns from a company’s exit usually go to the investors who jumped in earliest. In addition, just counting the number of large exits would serve to reward logo or trophy chasing VCs who invest in high-flyers late in the game presumably to say they were investors in the company and benefit from the halo effect that said participation might offer.
  • 5. http://www.cbinsights.com  @cbinsights  info@cbinsights.com So to assess a venture capital’s investment selection proficiency, it is important to look at what stage they made their first investment in a company. The next chart breaks down the investors based on the stage they invested in the companies. For example, let us consider the three investors – Sequoia Capital, Greylock Partners, and New Enterprise Associates (NEA) – with 8 >$1B exit each. In all, they represent 24 investments (3 investors × 8 exits, where an investment refers to the aggregate amount invested regardless of how many/which rounds the investor participated in). Of these, 12 investments or 50% were in a Series B or prior rounds. This percentage decreases as one moves backwards across the chart. Of the 68 VCs that only had one >$1B exit, only 38% were first made in a Series B or prior round. In other words, 62% of the first investments made by the VCs into these firms were after the Series B stage highlighting how hard it is for VCs to identify and invest early in winners. When narrowing the early stage criteria to only include Series A and seed rounds, the difference between a “lucky” VC and a “great” VC becomes much more stark. Only 18% of the investors who had only 1 billion dollar plus exit got in at the Series A or earlier. Farhad Manjoo’s recent piece on Snapchat suggested that kids are not reliable predictors of technology trends. Based on the fact that most VCs don’t invest in the big winners early, can the same be said for VCs?
  • 6. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Methodology / Notes For companies that exited via M&A, the valuation is simply the amount that the company got acquired for. For a company that went public, the exit valuation was calculated using the closing stock prices on the day of the IPO. The data comprised of exits that occurred between January 1, 2004, and on or before October 15, 2013.
  • 7. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Since 2010, unicorn VCs have invested in at least half of their portfolio companies at or before the Series A stage. And it looks like their appetite for early stage deals is increasing. In our previous piece on tech’s Unicorn VCs, we talked about two critical levers in understanding VC performance – one, a history of consistent big exits, and two, a proclivity for making early investments into these breakout companies (what we call Selection Aptitude). A lot of readers were curious about the investors who met these criteria so we decided to dig in a little deeper to see what stage they’re getting into companies and how this might be changing over time. The Data We used two criteria to identify the best VCs – first, they have had three or more billion dollar tech exits since 2004 in our tech Unicorn VC analysis, and second, they have received grades of “AAA” or “AA” in CB Insights’ Investor Mosaic models. These models are used by LPs to monitor and select VC firms. AAA-rated firms are the top 2% of firms and AA represent the top 10%. With these two criteria, 12 VCs remained on the list. We then looked at all companies these VCs first invested in each year since 2010, and broke these investments down by the stage at which their first investment was made. We also tracked the stage breakdown over the past four years to see if there has been a shift in the VCs’ focus. Breakdown by Stage The chart below shows the breakdown of investments made by these 12 investors since 2010 by the stage at which they were first made. Early-stage
  • 8. http://www.cbinsights.com  @cbinsights  info@cbinsights.com rounds, which we defined here as Seed and Series A rounds, are in shades of blue. The investor with the highest proportion of early stage investments is Charles River Ventures, who invested in 90% of their portfolio at the Seed or Series A rounds. Closely following Charles River Ventures is Andreessen Horowitz (A16Z), with 84% of their investments since 2010 made at the early stage rounds. Interestingly, A16Z has indicated a shift away from this early stage focus. Union Square Ventures, with 74% early stage investments, rounds out the top three. At the other end of the spectrum is Kleiner Perkins Caufield & Byers, who invested in 51% of their portfolio at the early-stage. While this includes Seed/Series A investments in notable startups like Coursera and Flipboard among others, the early-stage share of Kleiner Perkins Caufield & Byers’ overall portfolio remains lower than the other VCs on our list. Sequoia Capital and Bessemer Venture Partners round out the bottom three with 52% and 56% of their portfolio at the early-stage, respectively. Changes in Early-Stage Investments In addition to the overall stage breakdown, we looked at whether any of the firms is increasing or decreasing their involvement at the early stages. With
  • 9. http://www.cbinsights.com  @cbinsights  info@cbinsights.com many firms raising growth equity funds and the longer timeframes to exit, are the top investors shifting their investment allocation away from the early stages? What we see among the tech VC elite is actually an increase in share going to early-stage investment. The next chart shows the change in early-stage investments (as a percentage of their portfolio for the year) from 2010 to 2013 YTD. Benchmark Capital has seen the biggest relative increase as compared to other investors. Early-stage investments comprised only 39% of their investments in 2010 versus 64% in 2013 (a 2500 basis point increase). But as can be seen below, 10 of the 12 AAA and AA-rated VCs have actually seen increases in their proportion of early stage investment since 2010 (more competition for seed VC funds potentially adding to their woes) The two investors that are heading in the opposite direction are Union Square Ventures and Accel Partners, whose early-stage investments have seen a net change of -5 and -9 percentage points respectively. While the share of seed and Series B investments in their portfolio went up, Union Square Ventures this year saw a dip in Series A investments (55% currently from 78% in 2010). That said, Union Square Ventures remains atop the list in terms of their focus on early-stage deals (as can be seen in graph 1). Similarly, Accel Partners have made a higher proportion of mid- and later-stage (including growth equity) investments in 2013.
  • 10. http://www.cbinsights.com  @cbinsights  info@cbinsights.com On average, unicorns-in-training, take five rounds of financing and over $200M in aggregate financing before hitting the billion dollar valuation threshhold. Among VCs, Sequoia Capital leads the way having invested in 10 companies in the billion-dollar startup club globally. Raising financing at a billion-dollar plus valuation has gotten a lot more common. With corporations, hedge funds and mutual funds increasingly investing in private tech companies along with VCs, the hunt for unicorns is on in a big way. As a friendly reminder, most VCs are not very good at identifying unicorns, but that’s a story for another day. In this analysis, we wanted to look at billion dollar financing valuations and what it takes to get there. Many of the companies as you might imagine are part of our Tech IPO Pipeline. But not all of them, as some companies that got the billion dollar distinction have fallen from grace. Fab.com and LivingSocial being two primary examples. These companies highlight that these gains are mostly on paper as David Hornik of August Capital points out: “We have all seen high flying companies go out of business before they reach liquidity. As a VC, I have no intention of taking a victory lap until I actually deliver results to my LPs. To my mind, these interim financings have gotten far too much fanfare.” Using CB Insights venture capital data, we identified 47 venture capital- backed private companies that have raised a funding round at a $1B+ valuation. (Note: the list of companies is below). We then analyzed these unicorns-in-training to understand:  How quickly these companies were able to reach a $1B valuation?
  • 11. http://www.cbinsights.com  @cbinsights  info@cbinsights.com  How much money do you need to raise before you hit the $1B valuation mark?  Which VCs have the most wannabe unicorns in their portfolio? Geographic Breakdown From enterprise firms like MongoDB and Nutanix to hot consumer apps including Uber and Snapchat, the 47 venture-backed companies that make up the billion dollar club span a diverse lot. But geographically, the US still dominates which should not be surprising. 30 of the companies are headquartered in the U.S. 9 are based in China while Sweden counts two billion-dollar startups. Within the U.S., 77% of the billion-dollar startups are based in California and primarily in Silicon Valley. As a testament to the rise of NY’s tech VC ecosystem, 14% of the companies are headquartered in NY including MongoDB, AppNexus and Gilt Groupe.
  • 12. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Financing Requirements The chart below breaks down the history of rounds it took for the 30 U.S. billion-dollar private companies to achieve a $1B+ valuation. While a handful of the U.S.-based firms took just a couple of rounds and others more than seven, notching a billion-dollar valuation, on average, took five rounds of financing. Firms that raised three or fewer rounds prior to a $1B+ valuation include Wayfair, which recently raised a $150M Series C at a $2B valuation and Automattic, which raised two rounds before a secondary deal from Tiger Global at a $1B valuation. Of course, Wayfair bootstrapped itself to $380 million in 2010 revenue before it took outside financing so they’re a unique beast.
  • 13. http://www.cbinsights.com  @cbinsights  info@cbinsights.com In terms of total funding, getting to the billion dollar mark requires a decent chunk of change. Just two of the current companies took fewer than $100M leading to their $1B+ valuation, which include NEA and Venrock-backed CloudFlare and WordPress parent Automattic, which raised funding from investors including Polaris Partners and True Ventures. On average, the companies took $237M prior to getting their $1B+ valuation.
  • 14. http://www.cbinsights.com  @cbinsights  info@cbinsights.com The Investors Two indicators of venture capital investor performance we are actively tracking in our Investor Mosaic models are selection aptitude and illiquid portfolio strength. Specifically, selection aptitude highlights each investor’s ability to source and ultimately select high quality investments and then shepherd them to favorable outcomes. Illiquid portfolio strength measures the quality of current, non-exited companies in an investor’s portfolio and also looks at the investor’s entry point into the company. So who has backed or taken stakes in the most billion dollar valuation companies is an important measure in the Mosaic models. And based on this analysis, that distinction goes to Sequoia Capital which has backed 10 of the companies globally including four at the Series A stage or earlier. Two VCs count seven of the companies in their portfolio including New Enterprise Associates and Andreessen Horowitz. Digital Sky Technologies and Goldman Sachs have also taken stakes in seven of the firms, respectively. The chart below highlights the 12 firms who are in five or more of the companies that have raised prior funding at a $1B+ valuation. 7 are VCs, while the rest are made up of hedge funds, mutual funds, investment banks and holdings companies.
  • 15. http://www.cbinsights.com  @cbinsights  info@cbinsights.com The full list of companies who we looked at that raised a round at a billion dollar valuation are below. As mentioned earlier, not all companies on the list have maintained the billion dollar valuation.  AirBnB  AppNexus  Automattic  Bloom Energy  Box  CloudFlare  Coupons.com  Deem  Dianping  Dropbox  Evernote  Fab.com*  Fanatics  Flipkart  Gilt Groupe  Good Technology  Woodman Labs  Jawbone  JD.com  Kakao Corp.  Klarna  Lashou Group  Legendary Entertainment  Lending Club  LivingSocial*  Mobileye  MongoDB  Nutanix  Palantir Technologies  Pinterest  Pure Storage  Shopify  Snapchat  Sogou  Space Exploration Technologies  Spotify  Square  Stripe  Trendy Group Intl.  Uber  UCWeb  VANCL
  • 16. http://www.cbinsights.com  @cbinsights  info@cbinsights.com  Vente Privee  Wayfair  Xiaomi  Zalando  Zhaogang
  • 17. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Of the 100 largest VC-backed tech exits since 2009, Sequoia Capital invested in a remarkable 22 of them. Benchmark Capital invested in the highest percentage at the early stage. Venture capital returns are often said to follow a power law. Simplistically, the best investment returns more money than the rest of the investments combined. We analyzed the largest 100 U.S.-based tech M&A or IPO exits since 2009 to see whether the power law actually holds and who the most frequent investors in those companies are. The data below. Top 100 VC-Backed U.S. Exits Since 2009 – Valuation Distribution Curve The chart below highlights the distribution of top U.S.-based exits since 2009 by valuation at the day of IPO or M&A exit. The largest, by far, was Facebook’s IPO in May 2012 initially valuing the company at $104 billion. In power law fashion, the dropoff after Facebook is significant with a handful of exits in the $10B to $20B range – think Groupon, WhatsApp, etc.
  • 18. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Top 100 VC-Backed U.S. Exits Since 2009 – Top Investors Sequoia Capital’s exit of WhatsApp was just 1 of 7 exits out of the 100 that counted just a single institutional investor. But whether going it alone or with others, being part of large exits is old hat for Sequoia. In fact, Sequoia Capital portfolio companies made up a remarkable 22 of the top 100 tech exits. NEA and Accel Partners, respectively, participated in 13 of the exits each, while late-stage VC Meritech Capital Partners counted 12. The chart below highlights the 15 investors who invested in 7 or more of the top 100 U.S. tech exits since 2009. (Note: Investments by way of secondary transactions were not included in the chart below.)
  • 19. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Top 100 VC-Backed U.S. Exits Since 2009 – Top Investors By Stage of First Investment Of course, simply “getting in” on a big exit does not guarantee strong investment returns as the nature of VC is such that those investors who jumped in earliest are most richly rewarded. So to assess a venture capital’s investment selection aptitude, it is important to look at what stage they made their first investment in a company. The next chart breaks down the top 15 investors based on the stage they invested in the companies. Benchmark Capital backed the highest percentage of its exits at the early-stage (Series B or earlier), followed by Accel and Norwest Venture Partners. Conversely, Technology Crossover Ventures and Meritech Capital Partners saw under 10% of their first investments at the Series B stage or earlier, which is unsurprising given their late-stage focus.
  • 20. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Methodology/Notes For companies that exited via M&A, the valuation is simply the amount that the company got acquired for. For a company that went public, the exit valuation was that on the day of the IPO. Tech sectors include internet, mobile, software, computer hardware and electronics (chips & semis). The time period covered ranges from January 1, 2009 to February 24, 2014.
  • 21. http://www.cbinsights.com  @cbinsights  info@cbinsights.com The data suggests that the later-stage you go, the further from California and other major venture hubs you look. In March we examined the venture capital power law to understand the distribution of exits in VC across the 100 largest exits in tech. We also identified the VC investors who had invested in the greatest # of these 100 companies. They can be seen below. Of these top investors, we wanted to see where they were investing from a geography perspective. Specifically, we wanted to look at their investments in the three major US venture hubs (California, NY and Massachusetts) versus other regions. While California was unsurprisingly the overwhelming leader, some of the investors, especially some of the more later-stage or
  • 22. http://www.cbinsights.com  @cbinsights  info@cbinsights.com growth equity firms, have looked outside the main venture hubs. Others such as Sequoia Capital and Benchmark Capital are sticking to California. VCs Focused On California & Major Markets Just under half of the investors (7 of 15) do over 75% or more of their deals in California. While other investors on the list have substantial figures for other markets outside of NY, MA, and CA, Sequoia Capital, Andreessen Horowitz, and DAG Ventures are incredibly focused on the major markets, which account for 91%, 90%, and 89% of their investments respectively. New York When looking at investments in New York, Battery Ventures, Accel Partners, Bessemer Venture Partners, and Institutional Venture Partners led the pack with between 15-16% of their investments taking place in the Big Apple. The Bay State Massachusetts-based investments did not account for more than 17% of any of the Power Law investor’s portfolios. Technology Crossover Ventures led the way with the aforementioned 17%, with Bessemer Venture Partners
  • 23. http://www.cbinsights.com  @cbinsights  info@cbinsights.com (11%) and Battery Ventures (9%) placing 2nd and 3rd for investment in the state. Technology Crossover Ventures Diversifies Geographically The funds least-heavily invested in California were Technology Crossover Ventures, Battery Ventures, and Insight Venture Partners, all with under half of their investments being sourced out of the Golden State. While TCV was the most-heavily invested in Massachusetts, they also invested in other regions outside of CA, MA, and NY more than any other investor on the list, with almost half of their deals coming from outside of the major tech markets in the US. The most recent non-major market deal was last week’s $42M Series E deal for Act-On Software, an Oregon-based marketing automation software company, while previous years saw investments in TOA Technologies, based in Ohio, as well as Alarm.com (Virginia), and iPipeline (Pennsylvania).
  • 24. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Intel Capital and Accel Partners have seen the most exits in the last five years while New Enterprise Associates (NEA) and Venrock have seen the highest percentage of IPO exits. Micro VCs, as expected, see more M&A exits than IPOs. With the venture-backed IPO market hitting its stride in both the healthcare and tech sectors, we wanted to take a look back and see which VCs have had the most exits over the last five years and how do these exits break down between acquisitions (M&A) and IPOs. Top Venture Capital Investors By Number of Exits Since 2009 There are 22 corporate venture or venture capital investors who have recorded 40 or more M&A/IPO exits since the start of 2009. Intel Capital tops the list with over 100 exits in the period. It’s also not surprising to see a slew of mega-funds round out the top 5 including Accel Partners, New Enterprise Associates, Kleiner Perkins and Sequoia Capital (which has gotten in early to a slew of home run exits including WhatsApp and LinkedIn over the period). Perhaps more surprising is that smaller VC funds (aka Micro VCs) including First Round Capital, SV Angel and Felicis Ventures make it onto this list. While micro VC funds are clearly of varying quality, these are clearly a few of the elite ones.
  • 25. http://www.cbinsights.com  @cbinsights  info@cbinsights.com IPO versus M&A When we analyze each investor by looking at IPO versus M&A exits, we see NEA and Venrock on top, each with over 1/4 of their exits during the period occurring via IPO. Mega VCs Kleiner Perkins, Sequoia, Greylock as well as “coattail” fund DAG Ventures which co-invests in later stage financings saw nearly 1/4 of their exits come through the public markets. Given fund arithmetic, micro VCs can see strong returns with more modest exits and so don’t necessarily require IPOs. And so as might be expected, the micro VCs on the list, SV Angel, Felicis Ventures and First Round Capital, generally see a higher share of M&A exits. Of course, this doesn’t mean those M&A exits are necessarily small. As an example, Felicis saw portfolio company Meraki get acquired by Cisco for $1.2 billion and fellow portfolio company The Climate Corporation get snapped up by Monsanto for $930 million in cash.
  • 26. http://www.cbinsights.com  @cbinsights  info@cbinsights.com
  • 27. http://www.cbinsights.com  @cbinsights  info@cbinsights.com MPM Capital has seen the highest number of M&A or IPO exits in the healthcare sector since the start of 2009. But Cambridge- based Flagship Ventures sees the highest share of its exits come via healthcare IPOs. The biotech market has seen an upswing in venture-backed IPO activity in 2013 and hasn’t shown signs of slowing in 2014 as well. So which healthcare venture capital firms have racked up the most healthcare exits and of these firms, who has seen the highest share of exits via IPOs vs. M&A exits. The data below. Top 15 Healthcare VC Investors By M&A/IPO Exits Since 2009 Since the start of 2009, MPM Capital has realized the highest number of M&A or IPO exits in the healthcare sector (biotech, pharma, drug, medical devices), followed by fellow life sciences & healthcare-focused venture investors, Domain Associates and Alta Partners. Each has seen over 20 exits over the past five years. Outside of pure-play healthcare-focused firms, we see multi-sector funds such as Kleiner Perkins Caufield & Byers, Venrock and New Enterprise Associates (a unicorn VC within the sector) also among the top investors ranked by healthcare exits.
  • 28. http://www.cbinsights.com  @cbinsights  info@cbinsights.com The Top 15 Healthcare VC Investors By Share of IPO/M&A Exits But of these 15 venture capital investors, who has seen the highest share of healthcare IPO exits relative to M&A exits over the period? Below is a breakdown of the top 15 by highest share of healthcare IPO exits. Interestingly, the top 15 is led by Cambridge-based firm Flagship Ventures, who has seen a notable over 80% of its 11 healthcare exits come via public issuances. Other investors who have seen 60%+ of their healthcare exits come via IPOs over the period are Advanced Technology Ventures, Venrock, Polaris Partners and Arch Venture Partners. It’s worth noting that NEA and Venrock are at the top of this list when looking at venture capital overall.
  • 29. http://www.cbinsights.com  @cbinsights  info@cbinsights.com
  • 30. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Intel Capital has seen the most IPO or M&A exits since the start of 2009. But SAP Ventures has seen the highest share of its exits come via IPOs. Armed with big balance sheets and a need to stay ahead of emerging tech trends, corporations are increasingly diving into venture investing for both strategic gain and financial returns. Using CB Insights data, we took a look at which corporate venture capital arms have racked up the most exits since 2009 and of these firms, who has seen the highest share of exits via IPOs vs. M&A. The data below. Top 15 Corporate VC Investors By M&A/IPO Exits Since 2009 Since the start of 2009, Intel Capital has realized the highest number of M&A or IPO exits of any investor (corporate or pure-play VC), followed by Cisco Investments and Motorola Solutions Venture Capital. Note: Exits by Comcast Interactive Capital that took place over the period were included under Comcast Ventures.
  • 31. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Top 15 Corporate VC Investors By Share of M&A/IPO Exits Since 2009 Of these corporate venture arms, we see that SAP Ventures has notched the highest share of IPO exits including Criteo, Violin Memory and Control4, followed by healthcare corporate VC Novartis Venture Funds. Qualcomm Ventures and Samsung Ventures also saw 1/5 of their exits over their past five years come via public offerings. Google Ventures, the most prolific CVC from a deals perspective over the period, counted RetailMeNot, HomeAway and SilverSpring Networks among the IPOs in its portfolio.
  • 32. http://www.cbinsights.com  @cbinsights  info@cbinsights.com
  • 33. http://www.cbinsights.com  @cbinsights  info@cbinsights.com From Veeva Systems to Tableau Software, the top 15 tech exits by value creation in 2013 saw an aggregate valuation of $18.57B on total funding of just $471.5M. As the year quickly comes to an end, we wanted to take a look at a few of the top venture-backed tech exits of 2013 as measured by “value creation”. Specifically, we examined the top 15 IPO or M&A exits with a disclosed exit valuation at or over $100M based on their valuation (real or rumored) at time of exit and compared to the amount of financing they’d received prior to exit. Analyzing value creation or capital efficiency is helpful in understanding Selection Aptitude in our LP-focused Investor Mosaic models. Selection Aptitude measures the ability of investors to source and ultimately select high quality investments and then shepherd them to favorable outcomes. Below are some high-level trends and data observed among the top 15 U.S.- based tech exits calculated by value creation including the sectors they operate in and their geographies. While the typical 2014 Tech IPO Pipeline company has raised over $100 million in financing, the list below are companies who were judicious in raising financing raising average of $33 million prior to exit. The Data The top 15 exits by value creation in 2013 saw an aggregate valuation at time of exit of $18.57B and raised total financing of just $471.5M. Cloud- based life sciences software firm Veeva Systems tops the list of venture- backed exits by value creation, netting a valuation of over $4B in its IPO on just $4M of financing from Emergence Capital Partners. The top 3 was rounded by NEA-backed big data analytics firm Tableau Software and U.S. Venture Partners-backed cybersecurity specialist Trusteer (acquired by IBM).
  • 34. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Silicon Valley takes 40% of the exits on the list, while Washington saw two of the exits in Zulily and Tableau. Massachusetts also notched three of the top 15 tech exits by value creation.
  • 35. http://www.cbinsights.com  @cbinsights  info@cbinsights.com Interestingly, the chart below shows that just under a third of the top VC- backed exits by value creation went to companies in the hardware sector including the likes of 3D printing firm MakerBot. There are three investors who invested in or bought private market secondary shares in more than one of the top 15 exits detailed above. They include Norwest Venture Partners (ScaleIO, FireEye) and later-stage investors Meritech Capital Partners (Zulily, Tableau) and JAFCO Ventures (MoPub, FireEye). Another interesting tidbit is that two of the top M&A exits calculated by “value creation” were 2013 acquisitions by Twitter (MoPub, Crashlytics).
  • 36. http://www.cbinsights.com  @cbinsights  info@cbinsights.com

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