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THE SHIFTING VC 
LANDSCAPE 
Mark Suster - @msuster
2 
To read my full blog post about this 
presentation and watch the video see 
links in description below.
2014 appears to be the most active for LPs 
the since recession 
$23.1 
$34.6 
$36.0 
$29.5 
$12.6 
$19.5 
$24.7 
$20.3 
$18.4 
$40 
$35 
$30 
$25 
$20 
$15 
$10 
$5 
Source: 2Q 2014 Pitchbook US Venture Industry Datasheet . Annualized 2014 fundraising based on 49 funds closed in Q1. PwC “Asset 3 Management 2020” 
$8.8 
159 
183 
164 171 
102 
121 
97 
132 
147 
~200 
250 
200 
150 
100 
50 
0 
$- 
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Est 
Capital Raised ($B) # of Funds Closed 
Q1
The Dot Com 
skepticism from 
LPs has finally 
thawed, but 
some things 
have changed…
Seed funds now a well accepted norm (67% 
of all funds). Starting to hear talk of “seed co-investment 
or opportunity funds” 
33% 
Share of VC funds raised < $50M 
40% 
*As of Q1 2014. Source; Q2 2014 PitchBook US Venture 5 Industry Data Sheet 
54% 
67% 
2008 2010 2012 2014* 
Represents 6% of total $ raised
But overall LP capital has continued to 
concentrated in later-stage funds with 66% 
of all money in big funds 
Share of VC $ funds raised > $500M 
39% 43% 
*As of Q1 2014. Source; Q2 2014 PitchBook US Venture 6 Industry Data Sheet 
59% 
66% 
2008 2010 2012 2014*
Traditional VC is what has been impacted 
the most decreased in dollars and funds 
44% 
# of Funds (%) 
$100M - $500M 
33% 
23% 
18% 
2008 2010 2012 2014* 
53% 
$ Funds Raised (%) 
$100M - $500M 
*As of Q1 2014. Source; Q2 2014 PitchBook US Venture Industry Data 7 Sheet, Atelier Advisors 
45% 
32% 
26% 
2008 2010 2012 2014*
Some obvious factors driving later stage LP 
investment 
8 
q Pension funds & other large asset managers 
need to write big checks 
q FoFs need to show they have access to the 
top historical winners 
q Continued perception / narrative of “the best 
and the rest” 
But this is too simplistic
The market is actually bifurcating 
9
The structure of the startup / venture 
market has started to change 
10 
1. Startups staying private longer prior to IPO 
2. More value captured by private investors 
3. VC funds thus raising more growth & 
opportunity funds to back pro-rata in winners
Companies are raising larger amounts of 
capital before going public 
$49 
Median amount raised prior to IPO ($M) 
$43 
Source: Dow Jones Venture 11 Source 2014 via EY 
$72 
$83 $78 
$101 
2008 2009 2010 2011 2012 2013
Capital sources for late-stage private 
companies up dramatically 
• Hedge funds 
• Mutual funds 
Traditional 
VC investors 
12 Source: CB Insights 
Traditional 
public investors 
• Growth 
funds 
• Opportunity 
funds 
Moving 
Later 
Moving 
Earlier 
New 
Corporate 
VC Entrants 
• Google 
• Rakuten 
• Alibaba
IPOs are happening, they’re just being 
delayed 
2 3 2 2 2 1 
Source: NVCA 2014 Yearbook 13 - Thomson Reuters 
21 
17 
9 13 
2008 2009 2010 2011 2012 2013 
No. of IPOs with market cap > $1B 
No. of IPOs with market cap > $10B
So private investors capture more value, 
encouraging greater pre-IPO funding. Early 
investors want to capture pro-rata 
Current market cap: 
$125B+ 
$150B+ $340B+ 
$0.2 $0.4 $0.8 
$4.3 
$18 
$104 $150+ 
Cisco Amazon Microsoft LinkedIn Twitter FB Alibaba 
(est) 
Market Capitalization at IPO ($B) 
Previous Tech Cycle New Tech Cycle 
Source: Quigley Report 14 2011, FLAG Capital
But this is not 2000. 
15 
This is not 2000
The Kauffman Report was wrong. It’s 
morning in VC 
50x more internet users: 2.4B in 2012, 44M in 1995 
120x faster online speeds: 6.7 mbps US average today 
vs. 56k modems 
People are mobile: Personal, location aware. US has 164M 
smartphone users & 119M tablet users in 2014. 
People are socially connected: 1.3B+ MAU on FB, 
250M+ on TWTR, 300M+ on LNKD. 
Credit cards on file: 1B+ digital shoppers and $1.5T 
ecommerce spend globally. $35B Apple app store in 2014 
Sources: U.S. Bureau of the Census, World Bank. As of Q2 June 2012. Akamai. 2014 Statista forecasts, 16 : eMarketer, WSJ
Public company startups are significantly 
more mature than their 1.0 counterparts. 
Years to IPO 
(from 1st financing) 
3.1 
7.4 
IPO in '00 IPO in '13 
Revenue ($M) 
$35 
$102 
IPO in '00-01 IPO in '13-'14 
Valuation/Revenue 
13.3x 
Multiple 
Source: Age from NVCA 2014 Yearbook – Thomson Retuers, Revenue & Multiples from Pitchbook Tech Valuations Presentation 17 (June 2014) 
5.3x 
IPO in '00-01 IPO in '13-'14
But late-stage private financing still 
produces some lofty late-stage valuations 
When a concept works the competition is 
fierce 
More seed rounds as 
costs decline & sources 
of capital increase 
Seed Stage Early Stage Later Stage 
Source: Graphic 18 from Bullpen Capital 
Larger 
later stage 
rounds after 
Traditional VC validation 
Today’s VC
Thus late-stage valuations have risen fastest 
in past 4 years. That’s the trend to watch 
carefully 
Median Pre-Money Valuation ($M) 
$3.2 
$6.7 
$19.9 
$1,000 
$100 
$10 
2010 to 2014 CAGR 
Source: Source; Q2 2014 PitchBook US Venture Industry Data Sheet, 19 * As of Q1 2014 
$37.1 
$66.1 
$5.9 
$11.3 
$28.1 
$62.3 
$155.0 
$1 
17% 14% 
9% 
14% 
24% 
Seed Series A Series B Series C Series D+ 
2014* 
2010
THE SHIFTING VC 
LANDSCAPE 
Mark Suster - @msuster

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The Changing Structure of the Venture Capital Industry

  • 1. THE SHIFTING VC LANDSCAPE Mark Suster - @msuster
  • 2. 2 To read my full blog post about this presentation and watch the video see links in description below.
  • 3. 2014 appears to be the most active for LPs the since recession $23.1 $34.6 $36.0 $29.5 $12.6 $19.5 $24.7 $20.3 $18.4 $40 $35 $30 $25 $20 $15 $10 $5 Source: 2Q 2014 Pitchbook US Venture Industry Datasheet . Annualized 2014 fundraising based on 49 funds closed in Q1. PwC “Asset 3 Management 2020” $8.8 159 183 164 171 102 121 97 132 147 ~200 250 200 150 100 50 0 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Est Capital Raised ($B) # of Funds Closed Q1
  • 4. The Dot Com skepticism from LPs has finally thawed, but some things have changed…
  • 5. Seed funds now a well accepted norm (67% of all funds). Starting to hear talk of “seed co-investment or opportunity funds” 33% Share of VC funds raised < $50M 40% *As of Q1 2014. Source; Q2 2014 PitchBook US Venture 5 Industry Data Sheet 54% 67% 2008 2010 2012 2014* Represents 6% of total $ raised
  • 6. But overall LP capital has continued to concentrated in later-stage funds with 66% of all money in big funds Share of VC $ funds raised > $500M 39% 43% *As of Q1 2014. Source; Q2 2014 PitchBook US Venture 6 Industry Data Sheet 59% 66% 2008 2010 2012 2014*
  • 7. Traditional VC is what has been impacted the most decreased in dollars and funds 44% # of Funds (%) $100M - $500M 33% 23% 18% 2008 2010 2012 2014* 53% $ Funds Raised (%) $100M - $500M *As of Q1 2014. Source; Q2 2014 PitchBook US Venture Industry Data 7 Sheet, Atelier Advisors 45% 32% 26% 2008 2010 2012 2014*
  • 8. Some obvious factors driving later stage LP investment 8 q Pension funds & other large asset managers need to write big checks q FoFs need to show they have access to the top historical winners q Continued perception / narrative of “the best and the rest” But this is too simplistic
  • 9. The market is actually bifurcating 9
  • 10. The structure of the startup / venture market has started to change 10 1. Startups staying private longer prior to IPO 2. More value captured by private investors 3. VC funds thus raising more growth & opportunity funds to back pro-rata in winners
  • 11. Companies are raising larger amounts of capital before going public $49 Median amount raised prior to IPO ($M) $43 Source: Dow Jones Venture 11 Source 2014 via EY $72 $83 $78 $101 2008 2009 2010 2011 2012 2013
  • 12. Capital sources for late-stage private companies up dramatically • Hedge funds • Mutual funds Traditional VC investors 12 Source: CB Insights Traditional public investors • Growth funds • Opportunity funds Moving Later Moving Earlier New Corporate VC Entrants • Google • Rakuten • Alibaba
  • 13. IPOs are happening, they’re just being delayed 2 3 2 2 2 1 Source: NVCA 2014 Yearbook 13 - Thomson Reuters 21 17 9 13 2008 2009 2010 2011 2012 2013 No. of IPOs with market cap > $1B No. of IPOs with market cap > $10B
  • 14. So private investors capture more value, encouraging greater pre-IPO funding. Early investors want to capture pro-rata Current market cap: $125B+ $150B+ $340B+ $0.2 $0.4 $0.8 $4.3 $18 $104 $150+ Cisco Amazon Microsoft LinkedIn Twitter FB Alibaba (est) Market Capitalization at IPO ($B) Previous Tech Cycle New Tech Cycle Source: Quigley Report 14 2011, FLAG Capital
  • 15. But this is not 2000. 15 This is not 2000
  • 16. The Kauffman Report was wrong. It’s morning in VC 50x more internet users: 2.4B in 2012, 44M in 1995 120x faster online speeds: 6.7 mbps US average today vs. 56k modems People are mobile: Personal, location aware. US has 164M smartphone users & 119M tablet users in 2014. People are socially connected: 1.3B+ MAU on FB, 250M+ on TWTR, 300M+ on LNKD. Credit cards on file: 1B+ digital shoppers and $1.5T ecommerce spend globally. $35B Apple app store in 2014 Sources: U.S. Bureau of the Census, World Bank. As of Q2 June 2012. Akamai. 2014 Statista forecasts, 16 : eMarketer, WSJ
  • 17. Public company startups are significantly more mature than their 1.0 counterparts. Years to IPO (from 1st financing) 3.1 7.4 IPO in '00 IPO in '13 Revenue ($M) $35 $102 IPO in '00-01 IPO in '13-'14 Valuation/Revenue 13.3x Multiple Source: Age from NVCA 2014 Yearbook – Thomson Retuers, Revenue & Multiples from Pitchbook Tech Valuations Presentation 17 (June 2014) 5.3x IPO in '00-01 IPO in '13-'14
  • 18. But late-stage private financing still produces some lofty late-stage valuations When a concept works the competition is fierce More seed rounds as costs decline & sources of capital increase Seed Stage Early Stage Later Stage Source: Graphic 18 from Bullpen Capital Larger later stage rounds after Traditional VC validation Today’s VC
  • 19. Thus late-stage valuations have risen fastest in past 4 years. That’s the trend to watch carefully Median Pre-Money Valuation ($M) $3.2 $6.7 $19.9 $1,000 $100 $10 2010 to 2014 CAGR Source: Source; Q2 2014 PitchBook US Venture Industry Data Sheet, 19 * As of Q1 2014 $37.1 $66.1 $5.9 $11.3 $28.1 $62.3 $155.0 $1 17% 14% 9% 14% 24% Seed Series A Series B Series C Series D+ 2014* 2010
  • 20. THE SHIFTING VC LANDSCAPE Mark Suster - @msuster