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John Gabbert's Presentation

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  • 1. The State of Venture Capital
    • March 2, 2002
    • John Gabbert
    • Sr. Director, Worldwide Research
    • VentureOne Corporation
  • 2. Three Key Elements for a Robust Venture Industry
    • Fundraising
    • Investment
    • Liquidity
  • 3. Fundraising
  • 4. Venture Capital Fundraising Healthy in 2001 Commitments to Venture Capital Funds Funds Raised ($B) Source: VentureOne
  • 5. But Momentum is Slowing Commitments to Venture Capital Funds Funds Raised ($B) Source: VentureOne
  • 6. Fundraising Far Outpaces Investment in 2001 Fundraising vs. Amount Invested Amount Invested ($B) Source: VentureOne
  • 7. Fundraising Summary
    • Commitments to venture capital were flat in 4Q01; however, 2001 fundraising was still well above the norm.
    • Fundraising is becoming more difficult, especially for newer or unproven funds.
    • Over half of VC dollars are now in funds greater than $500 M.
    • Greatest amount of VC money in history available to invest in entrepreneurship.
  • 8. Investment: Overall
  • 9. 2001: A Sharp Contrast to 2000’s Boom Equity into Venture-Backed Companies Amount Invested ($B) Number of Deals Source: VentureOne
  • 10. Investment Levels Off at Year’s End Equity into Venture-Backed Companies Amount Invested ($B) Number of Deals Source: VentureOne
  • 11. Median Round Size Gets a Boost in 4Q’01 Median Amount Invested Per Round Median Amount Invested ($M) Source: VentureOne
  • 12. Positively Affecting Later-Stage Rounds Median Amount Invested by Round Class Median Amount Invested ($M) Source: VentureOne
  • 13. Investment Shifts to Second & Later Rounds Deal Flow by Round Class % of Deals Source: VentureOne
  • 14. IT Dominates, Healthcare Recaptures Investor Interest Equity Investment by Industry Sector % of Investment Source: VentureOne
  • 15. IT Investment Still Falling Equity Investment in Information Technology Companies Amount Invested ($B) Number of Deals Source: VentureOne
  • 16. Communications, Software Are Cornerstones of IT IT Investment by Sector % of Internet Investment Source: VentureOne
  • 17. Investment: Valuations
  • 18. 2001 Valuations Fall Below 1999 Levels Median Premoney Valuation by Year Median Premoney Valuation ($M) Source: VentureOne
  • 19. Valuations Recover Somewhat in 4Q’01 Median Premoney Valuation Median Premoney Valuation ($M) Source: VentureOne
  • 20. Later-Round Valuations Boost Overall Numbers Median Premoney Valuations by Round Class Median Premoney Valuation ($M) Source: VentureOne
  • 21. Healthcare Valuations Up Significantly Median Premoney Valuations by Industry Median Premoney Valuation ($M) Source: VentureOne
  • 22. Investment: Regions
  • 23. Texas Edges Out Boston for #3 Spot 2001 Regional Investment in the US Source: VentureOne
  • 24. Bay Area Investment Stabilizes Investment in Bay Area Venture-Backed Companies Amount Invested ($B) Source: VentureOne
  • 25. Equity Financing Summary
    • Equity financing into venture-backed companies leveled off in 4Q’01.
    • Overall equity investment in 2001 was still the third highest amount on record.
    • Valuations and median round sizes recovered slightly at year’s end.
    • Early-stage venture financing has fallen more rapidly than later-stage.
    • The time between financing rounds is expanding.
  • 26. Liquidity
  • 27. M&As Continue to Slip Transactions and Amount Paid in M & As Amount Paid ($B) Source: VentureOne Number of Transactions
  • 28. IPO Liquidity Up Marginally in 4Q01 … Deals and Amount Raised Through IPOs Amount Raised ($B) Venture-Backed IPOs Source: VentureOne
  • 29. Liquidity Summary
    • The IPO and M&A markets for venture-backed companies continued their dramatic declines from the record levels of 1999 and early 2000.
    • IPO volume in 2001 was at its lowest in years.
    • The amount paid in M&A transactions declined throughout 2001, falling to the lowest level since 1995.
    • IPO companies in 2001 were more mature, but the time from initial funding to M&A is still falling.
  • 30. Conclusions & Implications
    • The bad news:
      • Liquidity is extremely difficult
      • VCs are investing much more slowly and cautiously
      • Valuations are down across the board
      • Many VC-funded companies will fail to raise more $
    • The good news:
      • Liquidity windows open and close
      • VCs do have money to invest
      • Expectations are much more realistic
      • Those companies that succeed in raising $ will have more board involvement, better resources, lower costs and less competition
      • Truly great companies will emerge from this period
  • 31. More Information
    • For a copy of this presentation, contact corpcomm@ventureone.com or call +1 (415) 538-2658.
    • Email products@ventureone.com for:
      • VentureSource: Instant access to venture capital intelligence
      • VentureOne Publications: VentureSource News (daily) and the Venture Capital Industry Report (annual).
      • Custom Report Services: Comparable Valuation Reports and specialized queries