John Gabbert's Presentation


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John Gabbert's Presentation

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