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Venture Capital & Angel Investing Market 2014

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Startup Capital Ventures' annual analysis of the US venture capital and angel investing market for startups, VCs and institutional investors

Startup Capital Ventures' annual analysis of the US venture capital and angel investing market for startups, VCs and institutional investors

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  • 1. US VC & Angel Investing Climate 2014
  • 2. 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
  • 3. 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  
  • 4. Agenda •  LP Investments In VC •  VC Investing Activity •  Angel, Accelerator & Crowdfunding •  Exit Activity •  Conclusions • Silicon Valley • Honolulu      Page  4  
  • 5. VC Moneys Raised Declined In 2013 But Up Well In Q1 2014    Page  5   • Silicon Valley • Honolulu Source: Thomson Reuters / PwC / NVCA
  • 6. Number Of Funds Raised Increased Slightly • Silicon Valley • Honolulu " Page 6" Source: Thomson Reuters / PwC / NVCA
  • 7. Growing % of New Vs. Follow-On Funds So Far In 2014 • Silicon Valley • Honolulu " Page 7" Source: Thomson Reuters / PwC / NVCA
  • 8. Agenda • Silicon Valley • Honolulu      Page  8   •  LP Investments In VC •  VC Investing Activity •  Angel, Accelerator & Crowdfunding •  Exit Activity •  Conclusions
  • 9. $29B Of Venture Capital Invested In 2013 Is At Post .com High • Silicon Valley • Honolulu " Page 9" Source: Thomson Reuters / PwC / NVCA
  • 10. VC Dollars Concentrating In Software, Biotech. & Media / Entertain • Silicon Valley • Honolulu " Page 10" Source: Thomson Reuters / PwC / NVCA
  • 11. Number Of Deals Also Concentrating In Software • Silicon Valley • Honolulu " Page 11" Source: Thomson Reuters / PwC / NVCA
  • 12. California Makes Up Over 50% of US VC $ • Silicon Valley • Honolulu " Page 12" Source: Thomson Reuters / PwC / NVCA LA / Orange County
  • 13. 2013 Saw More Expansion Rounds While Seed Stage Rounds Continued To Fall • Silicon Valley • Honolulu " Page 13" Source: Thomson Reuters / PwC / NVCA
  • 14. Q1 Seed Deal Size Fell After a “Big” 2013 While Later Round Sizes Grew • Silicon Valley • Honolulu " Page 14" Source: Thomson Reuters / PwC / NVCA
  • 15. 71% Of New Venture Financings Were Up-Rounds… • Silicon Valley • Honolulu Source: Fenwick " Page 15"
  • 16. …But Less Than 40% of Series-C Or Later Deals Were Up-Rounds • Silicon Valley • Honolulu " Page 16" Source: Fenwick
  • 17. Media And Software Have Greatest % Of Uprounds (i.e. lower risk) • Silicon Valley • Honolulu " Page 17" Source: Fenwick
  • 18. 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  
  • 19. Agenda • Silicon Valley • Honolulu      Page  19   •  LP Investments In VC •  VC Investing Activity •  Angel, Accelerator & Crowdfunding •  Exit Activity •  Conclusions
  • 20. 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
  • 21. Average Tech. Angel Round Size Remains Flat • Silicon Valley • Honolulu " Page 21" Source: SVB / Angel Resource Institute
  • 22. Adding Co-investors To Angels Substantially Increases Round Size • Silicon Valley • Honolulu " Page 22" Source: SVB / Angel Resource Institute $ M
  • 23. Healthcare Draws Largest Angel / Coinvestor Rounds (But Is Most Capital-Intensive) • Silicon Valley • Honolulu " Page 23" Source: SVB / Angel Resource Institute $ M
  • 24. Angel Investing Mix Different From Venture Funding: Software Just 4% • Silicon Valley • Honolulu " Page 24" Source: SVB / Angel Resource Institute
  • 25. Angel Funding Is Balanced Vs Population • Silicon Valley • Honolulu " Page 25" Source: SVB / Angel Resource Institute
  • 26. 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
  • 27. 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  
  • 28. Agenda •  LP Investments In VC •  VC Investing Activity •  Angel, Accelerator & Crowdfunding •  Exit Activity •  Conclusions • Silicon Valley • Honolulu      Page  28  
  • 29. " Page 29" VC-Backed Exit Market Is Strong With IPOs At Highest Level Since 2007 • Silicon Valley • Honolulu Source: Thomson Reuters / PwC / NVCA
  • 30. VC-backed IPO and M&A Valuations Remain Robust • Silicon Valley • Honolulu " Page 30" Facebook, Groupon, Twitter, Zynga Source: Thomson Reuters / PwC / NVCA
  • 31. 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)
  • 32. • VC Returns Continue to Outperform • Public MarketsVC Returns Typically Exceed Public Markets Over Long Term Source: NVCA, Cambridge Associates • Silicon Valley • Honolulu      Page  32  
  • 33. Agenda •  LP Investments In VC •  VC Investing Activity •  Angel, Accelerator & Crowdfunding •  Exit Activity •  Conclusions • Silicon Valley • Honolulu      Page  33  
  • 34. 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
  • 35. 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
  • 36. 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
  • 37. www.startupcv.com

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