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Fund II | Life Happens

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How high-performing startups keep their teams patient,
energized and focused on the long term.

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Fund II | Life Happens

  1. 1. LIFE HAPPENS 1 How high-performing startups keep their teams patient, energized and focused on the long term.
  2. 2. Via secondary stock sales which are standardizing as an employee retention tool 2
  3. 3. $3.6B+ Source: NASDAQ Private Market. 2014-1H’16 Aggregate Volume of Secondary Stock Sales Transacted on Nasdaq Private Market 3
  4. 4. 53%/47% $2.1B $363M Source: NASDAQ Private Market. 2014-1H’16 # of Deals 4 Avg Deal Size Avg # of Sellers Company vs. Third Party Buyers Avg Company Valuation Avg Company Funding 82 $43.9M 113
  5. 5. Mostly by Employees Selling Common Shares Source: NASDAQ Private Market, 2014-1H’16 1% 5
  6. 6. Among Mature Software/Consumer Companies Ave=8 Ave=436 Source: NASDAQ Private Market, 2014-1H’16 13-15 16+ 1% 1% 3% 4% 6
  7. 7. Why are companies increasingly organizing aligned liquidity programs? 7
  8. 8. Source: SVB (Dr. Jay Ritter, Univ. of Florida, U.S. Unicorns) Seeking Flexibility to IPO on Their Timing 8
  9. 9. Source: HackerLife While Retaining Their Most Valuable Asset 9 Average Tenure of Engineers
  10. 10. 10 As Deeper Pockets Try to Poach Their Team Source: The Information
  11. 11. Staying private longer allows companies to make the business even stronger 11
  12. 12. Growing Revenue is Primary Motivation Source: Andreessen Horowitz (Jay Ritter, Univ. of Florida) 12
  13. 13. Source: Andreessen Horowitz (Capital IQ) While Accruing Value in It’s Private Life 13
  14. 14. Median Return: -28% IPO Date: 2014 2015 2016 And Ensuring They Don’t Suffer the Post-IPO Fate Source: SVB (Capital IQ) 14
  15. 15. Which has ushered in the Private IPO (PIPO) 15
  16. 16. PIPOs Exceeding IPOs Source: SVB (CB Insights, S&P Capital IQ) 0 16 Private Financings Where the Funds Raised is Equivalent to Public Funds Raised
  17. 17. $1B+ PIPOs Exceeding $1B+ IPOs Source: Pitchbook 17
  18. 18. TotalRounds AverageRoundSize Primarily Funded by Crossover Publics Source: SVB (CBInsights) 18
  19. 19. Secondaries Increasing Along with PIPOs Sources: NASDAQ Private Market, Renaissance Capital, CB Insights 19 Secondary Tx Volume$ # of Secondary Tx’s # of Tech IPOs 20152014201320122011 60 50 40 30 20 10 0 $1800 $1600 $140 $1200 $1000 $800 $600 $400 $200 $0 $SecondaryVolume(mm) #ofTransactions
  20. 20. Resulting in a Decline Across All Exits Source: Pitchbook 20
  21. 21. Which is the backdrop to the vaunted Unicorn 21
  22. 22. 148 Members of the Billion Dollar Club Source: CB Insights 22
  23. 23. Private Companies with Reported $1B+ Valuations: Q1’14 – Q2‘16 Unicorn Market Value Concentration: June 2016 Concentrated Among Consumer Companies Source: SVB (Wall Street Journal) 23
  24. 24. Year End Unicorns 2013 Exits New Year End Unicorns 2015 Year End Unicorns 2014 Exits New Exits New June End Unicorns 2016 Unicorns Entering Faster Than Exiting Source: SVB (Wall Street Journal; S&P Capital IQ) 24
  25. 25. Unicorns are only a slice of the startup population eligible for secondary stock sales 25
  26. 26. 472 Source: Founders Circle Capital 26 Number of companies that could be public based upon today’s business performance, but are electing to stay private (148 of whom are Unicorns).
  27. 27. Companies are facilitating secondaries for their employees to help them solve for their life’s needs and reenergize them for the good work that lies ahead 27
  28. 28. 28

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