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State of Venture, Technology

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At the end of the year, we often reflect on the current state of the venture market in technology. We are sharing it with our broader community in the hope that someone will find it informative, interesting or at least entertaining.

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State of Venture, Technology

  1. 1. State of Venture Report - Technology January 2020
  2. 2. Meet F-Prime Capital 2
  3. 3. 3 Our Global Platform
  4. 4. Infrastructure Note: Not an exhaustive list 4 F-Prime Capital’s Technology Portfolio F IN T E C H P ORT F OL IO Insurance Wealth Management Payments E N T E R P R IS E P ORT F OLIO H E A LT H IT & S E RV IC E S P ORT F OLIO Real Estate Capital Markets DevOps SaaS / Enterprise Security AV/Robotics Data analytics Payers/At-Risk Providers Employer Solutions Provider Solutions Life Sciences IT
  5. 5. State of Venture in Technology 5
  6. 6. 6 2019 pace expected to slow slightly from 2018, though we are still at historic levels § 2018 crossed the $100B watermark for the first time since the height of the dot-com boom in 2000. § H1 2019 continued at a similar clip to 2018; however, venture deployment slowed in Q3, driven by a decrease in deal volumes. Valuations remain at historically elevated levels. § FinTech market has continued to explode, with funding totals expected to grow 50% YoY. Growth driven by an increase in mega-rounds ($100M+); FinTech has grown from 5-10% of Tech VC in 2010 to 10-20% in 2019. U.S. Venture Investments in Technology 1 U.S. Venture Investments in Financial Technology Mega rounds ($100M+) accounting for ~60% of total funding (1) Excludes Hardware and Biotech; Categories not mutually exclusive. Actuals through 10/20/2019 Source: Pitchbook; Team analysis
  7. 7. 7 Robust deal volume and continued growth in deal sizes and prices Note: As of 10/22/2019 Source: Pitchbook; Team analysis U.S. VC Pre-Money Valuation by StageU.S. VC Deal Size by Stage
  8. 8. 26x 9x8x 20x 19x 15x 12x 19x 5x 15x 10x 8x 8 Multiples have increased sharply in the last few years *Data through H1 2019, multiple represents pre-money valuation multiple. Source: Pitchbook; Team analysis 2016 2017 2018 2019 8x 14x 11x 17x 20x 14x 19x 18x 9.9 9.0 7.3 7.2 7.7 8.8 7.5 7.3 10.5 12.5 Avg. 2019 YTD F-Prime deals seen: ~18x Series A Series B Series C 22x 4x 10x 14x 16x Company 1 Company 4 Company 5 Company 11 Company 3 Company 2 Company 6 Company 7 Company 12 Company 13 Company 24 Company 25 Company 18 Company 19 Company 8 Company 9 Company 14 Company 15 Company 20 Company 21 Company 22 Company 23 Company 17 Company 10 Company 16 Cybersecurity Enterprise CloudFinTech DevOps Healthcare IT MarTech Vertical SaaS Sample F-Prime SaaS Deals Seen Median Industry-wide Tech VC Revenue Multiple
  9. 9. 9 Venture funding shifted towards later stage in 2014, though has remained mostly constant over last five years (1) Excludes Hardware and Biotech; Categories not mutually exclusive. Actuals through 10/20/2019 Source: Pitchbook; Team analysis U.S. Venture Investments in Technology1
  10. 10. 10 2019 capital raised by VC’s still historically high, but below 2018 peak .23 2018 was a 10-year high for fundraising; 2019 levels more in line with 2014-2017 First-time funds also experienced return to pre—2018 levels Source: Pitchbook; Team analysis Megafund fundraising returning to normal levels
  11. 11. 11 2019 exits nearly tripled from 2018 levels, driven by long-awaited unicorn IPOs Facebook: $81B market cap at IPO IPO value* Last round valuation Total prior funding N12M multiple at IPO Uber $75.7B $70.0B $20.1B 5.1x Lyft $24.0B $15.1B $5.0B 6.5x Slack $23.3B $7.1B $1.2B 28.7x Pinterest $10.0B $12.3B $2.9B 11.7x Zoom $9.2B $1.0B $0.5B 29.7x Peloton $8.1B $4.2B $1.1B 4.4x Datadog $7.8B $0.6B $0.2B 25.4x Crowdstrike $6.7B $3.3B $0.6B 38.6x Cloudflare $4.4B $1.8B $0.4B 15.6x Medallia $2.6B $1.3B $0.3B 11.7x PagerDuty $1.8B $1.3B $0.1B 24.3x Total $175B $33B 11 Unicorn IPOs in 2019, Totaling ~$175B2019 exits nearly tripled 2018 numbers § Against ~$460B of fund deployment, over $790B of exit value since 2010, with over 200 unicorn companies still privately held § Massive exit volumes in 2019 could soften the impact of a public market correction as liquidity is rolled back into new funds *Based on initial offering share price Source: Pitchbook; S-1 Filings; Team analysis Up round
  12. 12. Performance of recent IPOs indicate public markets value strong underlying unit economics Note: Stock price measured as of 10/22/2019 Source: CapitalIQ Companies with <50% gross margins have seen a decline in stock value Stock has appreciated since IPO Stock has depreciated since IPO 2019 IPO Cohort Stock Price & Gross Margins Postmates and WeWork postponed IPOs, in part due to lack of appetite for lower margin businesses
  13. 13. Tech M&A activity also increased in 2019, driven primarily by mega-cap deals ($2.5B+). Potential for outsized exits is growing Note: Actual data through 10/20/2019 Source: Pitchbook; S-1 Filings; Team analysis US Technology M&A Activity ($) US Technology M&A Activity (# Exits) ~60% of exits in 2019 were >$100M (compared to ~20% in 2010)
  14. 14. Questions or comments? Reach us on twitter @FPrimeCapital 14

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