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Accel Connect 2016 talk for portfolio founders & CEOs

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This November, we gathered our global founders and CEOs in San Francisco for our Accel Connect event. For part of the day, we discussed the current environment, independent of founders’ stage, as well as the changing requirements for building great, enduring companies. It’s a day we look forward to each year.

It’s also where we (Accel) attempted to synthesize a year’s worth of our own thinking: what’s happened in the markets, what trends caught our attention, and how have our own theses evolved. If successful, we ground our founders in the current state of affairs, while keeping an eye on what’s to come in 2017.

We’ve been talking to folks around our community about the discussion at Connect. Based on feedback, we wanted to share some of the presentation. Though it’s slightly “dated” (the material was built pre-election) and curated (for Accel’s global CEOs), we hope there are some nuggets of wisdom that can be useful in your own thinking — whether as a founder, employee, investor, or just an interested observer.

The summary to accompany the slides can be found here: https://medium.com/@Accel/reflecting-on-2016-and-looking-ahead-to-2017-6e6efe224224#.wl0y72oor

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Accel Connect 2016 talk for portfolio founders & CEOs

  1. 1. State of the Union
 Accel’s Perspective of the Current 
 Technology Landscape November 1, 2016
  2. 2. State of the Union 2 1. Global interconnectedness ~30% Revenue outside of initial home market in Accel portfolio companies (at age = 5 years) 0.5b 2001 10% 3.6b 2016 25% global internet population* broadband penetration global smartphone penetration ~1% 40% *Internet Telecom Union
  3. 3. 1960 19901970 1980 2000 2010 2020 State of the Union 3 Mainframe 1MM units Minicomputers 10MM units PCs 100MM units Desktop Web 1B+ units Mobile/Smartphone/IoT 10B+ units Autonomous Vehicles Robotics & Drones2. Acceleration of open, 
 digital platforms Satellites and Space Tech *Morgan Stanley, IDC, Gartner
  4. 4. State of the Union 4 3. Data centrality and applied AI/ML 0101010010101010101 0101010010101010101010100 01010100101 010101001010101 01010100101010101 0101010010 0110010100101010101010101001010101011010101 010101001010101010101010010101010110101 01010100101100101010101010010101010110101010101010110101 0110010100101010101010101001010101011010101 010101001010101010101010010101010110101 010101001010101010101100100101010101101010101010110101 01010100101010101 01010100101 010101001010101 01010100101010101 0101010010 90%of the world’s data has been created in the past 2 years Rich, proprietary data around users/ customers stored ad infinitum Widely accessible, 
 GPU-enabled compute Openly available ML algorithms Rich data network effects powering data-driven software and services * *IBM Big Data Report
  5. 5. State of the Union 5 4. Readily available building blocks (the power of NIH) Cloud platforms Abundance of Open Source Distribution Platforms </> Vocal & Viral Communities TESTER </> </> </> Scalable APIs APIs APIs APIs APIs 98% of Accel teams are accelerating development via cloud or APIs in 2016 (<10%, 2006)
  6. 6. State of the Union 6 Advantage New Tech Entrants Accelerating Platforms xConnected Global Markets Pre-Existing Building Blocks </> APIs x xData Centrality 01010101010 01010101010 01010101010 01010101011 01011101010
  7. 7. New players taking the lead
  8. 8. State of the Union 8 Changing of the guard? New GuardOil Finance Old(er) Tech & Telecom Industrial & CPG * CapIQ: Represents the most valuable 20+ companies of S&P 500 over the last 20 years
  9. 9. State of the Union 9 ‘New Guard’ rapid rise to the Top 5 Top 25 S&P Companies By Market Cap 2008 2009 2010 2011 2012 2013 2014 2015 2016 *CapIQ
  10. 10. State of the Union 10 Market cap of the top 5 Top 5 Global Companies By Market Cap 2001 2006 2011 2016 $425B $239B $289B $250B $250B $405B $378B $392B $339B $610B $542B $289B $263B $457B$292B $219B $231B $348B $334B $271B *CapIQ: Market Caps Average Over Respective Years $2.3T cumulative value of top 5 in 2016 $1.4T cumulative value of top 5 in 2001
  11. 11. State of the Union 11 Average age of the top 5 2001 2016 109 yrs 39 yrs 90 yrs 26 yrs Age in 2001 41 yrs 40 yrs 18 yrs 22 yrs 12 yrs Age in 2016 189 yrs est. 1892 est. 1975 est. 1911 est. 1812 est. 1962 est. 1976 est. 1998 est. 1975 est. 1994 est. 2004 1. 5. 3. 2. 4. 26average age of companies in 2016
  12. 12. State of the Union 12 Rising from Asia… $256B market cap #10 $254B market cap #11 $235B market cap #13 19 years old18 years old17 years old *CapIQ Current Market Cap Estimates globally globally globally
  13. 13. Navigating the disruption Catalyzing strategic dialogue from incumbents
  14. 14. State of the Union 14 # of M&A Deals > $500 mm DealCount 0 18 35 53 70 DealValue($inbillions) $0 $75 $150 $225 $300 2009 2010 2011 2012 2013 2014 2015 2016 67 64 54 43 51 29 26 13 $240 $133 $181 $104$97 $29$43$41 13 26 29 51 43 54 64 67 Example Transactions Goldman Sachs - Tech M&A Report, Pitchbook, Venturesource Resurgence of Technology M&A
  15. 15. State of the Union 15 Non-tech incumbents responding $7b+aggregate acquisition value, TTM from non-tech $1b $3.3b $1b $500m $475m Pitchbook
  16. 16. State of the Union 16 IPO window is open for durable companies Tech IPO Issuances Globally ($inbillions) $0 $23 $45 $68 $90 2013 2014 2015 2016 Capital Raised IPO Market Capitalization $27 $83$79 $50 $5 $21$16$8 Representative IPOs Goldman Sachs - Tech M&A Report, Pitchbook, Venturesource $5
  17. 17. Changing conditions…
  18. 18. State of the Union Capital invested via VC & IPOs Company Fundraising via Private and Public Capital, 1980-2016 ($inbillions) $0 $30 $60 $90 $120 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1Q 2016 Private IPO Peak - $100B Local Max - $50B Avg Past 20 Years - $20B New Steady State? $30-40B 18NVCA, CapitalIQ
  19. 19. State of the Union 19 Zooming in on recent quarters Venture Dollars invested in Core IT Categories, All Stages, 2012-2016 ($inbillions) $0 $6 $12 $18 $24 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q $10.5 $23.4 $14.0 $13.3 $15.4 $13.7 $14.4$14.8 $10.8 $14.6 $9.0$8.7 $7.5 $6.6$6.7 $5.6 $6.5 $7.3 $5.3 2012 2013 2014 2015 2016 Q3 2016 - 30% vs year- ago, reset underway Surge in VC activity in early 2014 NVCA, CapitalIQ
  20. 20. State of the Union 20 Navigating the funding climate Keeping an eye on milestones for follow-on funding Seed Series A Series B-C Late Stage Strong teams with 
 crisp end-market understanding, chasing large, urgent markets Early key metrics that demonstrate deep, recurring user value signs of an efficient GTM; team beginning to cement Clear capital efficiency + unit economics; line of sight to business model converging, story to $100m ARR or 100m MAUs Last dollars needed, just crossing to profitability (or line of sight to it), demonstrable exit path Very active Active Very Selective Selective
  21. 21. State of the Union 21 Growth (%) + FCF (%) The Rule of 50 (% of annual revenue growth) + (EBITDA as a % of revenue) should be ≥ 50 Trading Range (NTM) Trading Range (NTM) Trading Range (NTM) 4-6x 6-8x 8-10x CapIQ & Public Company Filings Growth (%) + FCF (%) Growth (%) + FCF (%) ~50%~35%~20%
  22. 22. State of the Union 22 A New Definition of “Product” Product as the sum of the core app or service AND how its distributed CapIQ & Public Company Filings Product ≠ Customer Acquisition Marketing and Sales Software Bits Retention + Success Product = Customer Acquisition Marketing and Sales Software Bits Retention + Success
  23. 23. Customer Diversification: the “Caltrain test” 23 Companies need to diversify their customer base beyond just neighboring startups
  24. 24. State of the Union 24 41K companies since 2000 that have raised venture 66 have ever achieved an exit >$1b (realized unicorn)** 440 have ever achieved an exit >$100m Rare air Mattermark, Crunchbase, CB Insights, VentureSource** 175 unrealized unicorns but onlyy 66 realized
  25. 25. State of the Union 25 $6b $10b $3.3b $3b $1.2b $5b $390m Accel-led Series A +$150b market cap $500m $750m $700m IPOs M&A $1.5B $1B Since 2013 Since 2013 $700m $400m $1.2b $475m $700m Thank you $800m $1.6m

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