NVCA JSTSWVF.ppt

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NVCA JSTSWVF.ppt

  1. 1. Southwest Venture Forum Venture Capital Industry Update January 10, 2002 John Taylor Vice President of Research
  2. 2. NVCA Research Activities ...
  3. 3. Dramatic new developments: <ul><li>NVCA & Venture Economics join forces with PricewaterhouseCoopers MoneyTree™ </li></ul><ul><li>Economic Impact of Venture Capital Study by DRI-WEFA </li></ul><ul><li>Research powers & empowers NVCA public policy efforts </li></ul><ul><li>Data available to participating NVCA members through new VentureXpert ™ interface </li></ul><ul><ul><li>Free trial </li></ul></ul><ul><ul><li>Discounted annual subscriptions </li></ul></ul>
  4. 4. Research A-Team <ul><li>Since 1998 NVCA & VE have been collecting survey data and publishing </li></ul><ul><li>Starting immediately (4Q and full year 2001) investment data will be called MoneyTree™ </li></ul><ul><ul><li>PricewaterhouseCoopers </li></ul></ul><ul><ul><li>Thomson Venture Economics </li></ul></ul><ul><ul><li>National Venture Capital Association </li></ul></ul>
  5. 5. Industry Benefits <ul><li>Single designated survey for venture firms to fill out </li></ul><ul><ul><li>Governed by NVCA board’s Appropriate Use and Disclosure Policy </li></ul></ul><ul><ul><li>Processed by Venture Economics research team in NY and SF </li></ul></ul><ul><ul><li>Local survey and results contacts through PwC’s national technology team (150 professionals) deployed in local PwC offices </li></ul></ul>
  6. 6. Industry Benefits (continued) <ul><li>Single set of results provided nationally and locally through major media </li></ul><ul><li>Unprecedented data completeness and accuracy for public policy efforts </li></ul><ul><li>Basic data available on PwC MoneyTree site </li></ul><ul><li>Analytics and detailed profiles are rolled up from detail through powerful Oracle engine </li></ul>
  7. 7. Is your survey in yet??? <ul><li>Fax surveys directly to Venture Economics research team at 973-622-1421 </li></ul><ul><li>Questions to NVCA, VE, or local PwC offices </li></ul>
  8. 8. The Economic Impact of Venture Capital on the US Economy ...
  9. 9. Methodology <ul><li>Study commissioned by the NVCA and conducted by WEFA in Q1 – 2001 </li></ul><ul><li>Database of originally ventured companies mapped against D&B database </li></ul><ul><li>Determined 2000 revenues and jobs represented by those companies </li></ul><ul><li>Data cut by geographic region and industry </li></ul>Source: DRI-WEFA (analysis as of 8/2001
  10. 10. DRI-WEFA Study <ul><li>Commissioned by NVCA </li></ul><ul><li>Venture funded firms now account for: </li></ul><ul><ul><li>7.6 million employees </li></ul></ul><ul><ul><li>Annual revenues of $1.3 trillion, </li></ul></ul><ul><li>These figures represent: </li></ul><ul><ul><li>5.9% of US payroll </li></ul></ul><ul><ul><li>13.1% of US GDP </li></ul></ul><ul><ul><li>7.9% of US company revenue </li></ul></ul>Source: DRI-WEFA (analysis as of 8/2001
  11. 11. Key Findings <ul><li>For every dollar invested in 1970-1999, there was $9 in revenue during 2000 </li></ul><ul><li>For every $21,627 of venture capital investment in 1970-1999, there was one job in the year 2000 </li></ul><ul><li>Not bad for an industry which was: </li></ul><ul><ul><li><1.0% in 1970-1995 </li></ul></ul><ul><ul><li>2.1% in past 5 years </li></ul></ul>Source: DRI-WEFA (analysis as of 8/2001
  12. 12. States with the Most Venture Backed Jobs in 2000 (000s) <ul><li>California 1,400 </li></ul><ul><li>Texas 676 </li></ul><ul><li>Pennsylvania 425 </li></ul><ul><li>Tennessee 382 </li></ul><ul><li>Massachusetts 381 </li></ul><ul><li>New York 369 </li></ul><ul><li>Georgia 338 </li></ul><ul><li>Washington state 264 </li></ul><ul><li>New Jersey 260 </li></ul><ul><li>Florida 244 </li></ul>Source: DRI-WEFA 2001 study
  13. 13. States with the Most Venture Backed Revenues in 2000 ($B) <ul><li>California 270 </li></ul><ul><li>Texas 158 </li></ul><ul><li>Washington State 75 </li></ul><ul><li>New York 66 </li></ul><ul><li>Georgia 63 </li></ul><ul><li>Pennsylvania 58 </li></ul><ul><li>Massachusetts 49 </li></ul><ul><li>Illinois 41 </li></ul><ul><li>Mississippi 39 </li></ul><ul><li>New Jersey 38 </li></ul>Source: DRI-WEFA 2001 Study
  14. 14. Fundraising
  15. 15. Venture Capital Fundraising Was Strong Through 2000 Source: VentureXpert™ Database by VE & NVCA This does not include money available for investment by Corporate Venture groups.
  16. 16. The US Venture Industry Has Grown Source: 2000 NVCA Yearbook
  17. 17. Sources of Venture Funds Source: VentureXpert™ Database by VE & NVCA for 2000
  18. 18. Corporate Venture Capital Groups Have Become Very Involved Source: VentureXpert™ Database by VE & NVCA
  19. 19. Corporate VC Groups are Involved in more than 1/4 of all Deals Source: VentureXpert™ Database by VE & NVCA
  20. 20. Investment Marches On - Rumors that the Venture Industry has stopped investing are greatly exaggerated
  21. 21. The VC Industry has Grown Dramatically in the Past Few Years Source: VentureXpert™ Database by VE & NVCA
  22. 22. A Close-up Analysis of Recent Activity Shows Slowing Source: VentureXpert™ Database by VE & NVCA
  23. 23. A Close-up Analysis Shows Slowing Source: VentureXpert™ Database by VE & NVCA
  24. 24. The VC Industry has Grown Dramatically in the Past Few Years Source: VentureXpert™ Database by VE & NVCA
  25. 25. Recent Quarters Portend a Return to Traditional Activity Levels Source: VentureXpert™ Database by VE & NVCA
  26. 26. Industry Splits Source: VentureXpert™ Database by VE & NVCA for 3Q 2001
  27. 27. Texas Venture Capital Investment -- More than a tale of two cities
  28. 28. Venture Investment in Texas Source: VentureXpert™ Database by VE & NVCA
  29. 29. Number of Texas Companies Receiving Investment Source: VentureXpert™ Database by VE & NVCA
  30. 30. Texas Investment in 3Q2001 Source: VentureXpert™ Database by VE & NVCA
  31. 31. Texas - An Attractive Place to Invest <ul><li>In 2000, Texas companies attracted capital from 34 states and DC </li></ul>Source: VentureXpert™ Database by VE & NVCA
  32. 32. The Exit Scene - the strong emergence of acquisition successes in a volatile IPO market
  33. 33. After setting records in 1999 and 2000, IPO Markets are Quiet Now Source: VentureXpert™ Database by VE & NVCA
  34. 34. Acquisitions are an increasingly important exit strategy Source: VentureXpert™ Database by VE & NVCA
  35. 35. Nine Month VB Acquisition Counts Have Not Dropped As Much Source: VentureXpert™ Database by VE & NVCA
  36. 36. Performance measurement
  37. 37. Private Equity Returns - Over the Long Haul VC Returns 20-25% As of 6/30/2001 - Source: VentureXpert™ Database by VE & NVCA
  38. 38. Calculation of Number of VC Firms in US by the Wall Street Journal <ul><li>Approximately 700 VC firms per NVCA/VE </li></ul><ul><li>Every one of them claims to be in top quartile </li></ul><ul><li>Therefore total # VC firms must be 2,800 </li></ul>
  39. 39. Five Year Performance Trends US Venture vs Buyouts vs Stocks
  40. 40. US Private Equity Funds Formed 1980-2000 Net IRRs to Investors as of 30-JUN-2001
  41. 41. No one has repealed the business cycle … Factors affecting the short term
  42. 42. Investment Food Chain Not All Segments are Healthy $ Markets Leadership (VC & Mgt) Customers Revenue Profits Liquidity (IPOs, Acqs)
  43. 43. Venture Capitalists Continue to Fund Early and Seed Stage Companies - Future Pipeline Source: VentureXpert™ Database by VE & NVCA
  44. 44. No one has repealed the business cycle … The Long Term View (whatever that means)
  45. 45. The Inevitable Business Cycle ... <ul><li>In times of great commercial prosperity there has been a tendency [toward] over-speculation on several occasions [after that]. The success of one project generally produces others of a similar kind. Popular imitativeness will … drag a community too anxious for profits into an abyss … </li></ul><ul><li>Charles Mackay </li></ul><ul><li>1841 </li></ul>
  46. 46. Companies Receiving First Venture Round (Series A) During Last Downturn (1/1990-6/1992) <ul><li>Artisoft </li></ul><ul><li>Starbucks </li></ul><ul><li>Intuit (FKA ChipSoft) </li></ul><ul><li>McAfee </li></ul><ul><li>Xpedite </li></ul><ul><li>Palm Computing </li></ul><ul><li>Cutter & Buck </li></ul><ul><li>RF Micro Devices </li></ul><ul><li>eFax.com </li></ul><ul><li>Shiva Corporation </li></ul><ul><li>Wind River Systems </li></ul><ul><li>FTP Software </li></ul><ul><li>CheckFree </li></ul><ul><li>SPSS </li></ul>
  47. 47. Venture Capital Affects The Entire Country <ul><li>NVCA/VE research team captures deals in areas previously unreported </li></ul><ul><li>In 2000 ... </li></ul><ul><ul><li>Venture investment was made in 48 states & DC </li></ul></ul><ul><ul><li>No Cal got 33% of money (28% of cos) </li></ul></ul><ul><ul><li>Calif got 41% of money (37% of cos) </li></ul></ul>
  48. 48. Challenges ...
  49. 49. The care and feeding of existing portfolio companies ...
  50. 50. Is there sufficient capital for follow-on financing? <ul><li>Dry powder (“overhang”) estimated at $45B as of 9/30/2001 </li></ul><ul><li>How much additional fundraising is needed? </li></ul>Source: VentureXpert™ Database by VE & NVCA
  51. 51. Changing LP picture ...
  52. 52. Limited Partners in VC Funds Pension Plan Role is Decreasing Source: VentureXpert™ Database by VE & NVCA
  53. 53. Is there enough science going on in the US? What will it mean for the coming decades?
  54. 54. Venture Financing Exceeds Federal Non-Defense R&D Budget Exceeded Total Federal R&D Budget In 2000 ! Federal Non-Defense R&D Source: VentureXpert™ Database by VE & NVCA & AAAS Report Citing 2002 Federal Budget. Note Federal R&D statistics are constant 2001 dollars
  55. 55. Scaling the Industry While Maintaining Excellent Service Levels ...
  56. 56. Many Options to Choose From <ul><li>Entrepreneur Personal Funds </li></ul><ul><li>“ Friends and Family” </li></ul><ul><li>Personal credit card and other borrowings </li></ul><ul><li>Angel investors </li></ul><ul><li>Venture capital </li></ul><ul><li>Corporate direct investment </li></ul><ul><li>Venture leasing </li></ul><ul><li>Mezzanine Financing </li></ul><ul><li>Merger and Acquisition </li></ul><ul><li>Initial Public Offering </li></ul><ul><li>Secondary/Follow-on Public Offering </li></ul><ul><li>Private Placements – Debt & Equity </li></ul><ul><li>Buyout/Acquisition Financing </li></ul><ul><li>Corporate Debt </li></ul>
  57. 57. Growth in VC Principals Has Not Kept Up With Growing Fund Sizes Source: VentureXpert™ Database by VE & NVCA
  58. 58. Venture Principals are Busier than Ever! Source: VentureXpert™ Database by VE & NVCA
  59. 60. Scaling the Exit Markets ...
  60. 61. Limitation - Future liquidity? <ul><li>As VC becomes a $100B a year industry, need to ensure future liquidity for exits </li></ul><ul><li>BOTEC example </li></ul><ul><ul><li>$100B at 30% IRR grows to $286B after four years </li></ul></ul><ul><ul><li>In the first 10 months of 2000, $291B in new money was invested in stock mutual funds </li></ul></ul><ul><li>Opportunity for further analysis </li></ul>
  61. 62. Where do I go for more specific information? <ul><li>NVCA 2001 Yearbook </li></ul><ul><li>VentureXpert </li></ul><ul><li>www.nvca.org </li></ul><ul><li>What’s happening in my state/city? </li></ul><ul><ul><li>State specific histories: www.ventureeconomics.com/statshome. htm (choose left tab for Statistics) </li></ul></ul><ul><li>NVCA staff </li></ul>
  62. 63. Www.nvca.org www.aeeg.org

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