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• Public markets depressing multiples…
• But the venture market is increasingly competitive among venture firms who are raising a constant amount of dollars • Net effect: relative stability in the fundraising market Two Forces in Tension
IPO Cohort Average ROIC Median
ROIC Count 1998 0.82 0.82 2 2002 1.05 0.88 6 2006 1.78 1.15 13 2010 2.00 1.24 15 Startups today require half the capital to go public compared to 12 years ago
2010 Cohort Segment Average ROIC
Median ROIC ROIC <= 2 1.04 1.00 ROIC > 2 13.5 4.80 Certain segments are unbelievably capital efficient
• Recent IPOs are 2x
more VC dollar efficient as their older brothers • Outliers require negligible capital before IPO because of more efficient avenues of customer acquisition • Net effect: startups need to raise less capital and will require a different pattern of financing Startups are far more capital efficient than they used to be
• VCs have 4x’ed the
size of a traditional angel-only seed round • VC dollars have created a new category of seed investment, the MegaSeed which has replaced the Series A • Net effect: Series A investment sizes have increased because capital startups are further along than before Competition in the VC market has pushed VCs to invest in seeds
Metric Angel Seeds VC Seeds
Series A Success Rate 33% 54% Mean Seed Raised $M 1.3 1.6 Median Seed Raised $M 1.2 1.5 Mean Series A Raised $M 7.3 7.4 Median Series A Raised $M 5.3 6.0 Raising seed from VCs increases seed round size but no impact on Series A
Metric Insider VC Leads A
All VC Seeds Mean Seed Raised $M 1.6 1.6 Median Seed Raised $M 1.5 1.5 Mean Series A Raised $M 7.2 7.4 Median Series A Raised $M 5.8 6.0 Signaling risk is zero for companies who are able to raise Series A
• Raise more than $900k
• Easier to do with VC involvement. Typical round has 1.6 VCs • Raise earlier in the year if you can Best practices for raising a seed
• Series A investment up
200%, responding to increase in company formation and seed companies • Series B flat, creating a crunch for follow-ons • Clear winners able to delay IPO/M&A for years because of IPO-sized rounds available in the private markets • Net effect: Winners have access to tons of capital. Others may struggle with the Series B crunch. Series A and B and later rounds are in flux
> let me tell you a bit about redpoint highlights of the portfolio companies lots of enterprise investments, about 80% of our investments in our latest fund are enterprise > thanks for having me today. my goal is
Dollars entering VC not anywhere close to the bubble Operating at or below median for the past 5 years 2014 strong start. Q1 figure is 8B. Holding the same pace would imply $32B which would be the second highest year since the bubble
Dollars going out is relatively constant
So the fund raising market is relatively stable
In contrast there has been quite a bit of public market volatility Mean share price is down 25% in consumer tech over the past six months
Trend has been broad-based across all different industries. Real Estate is the only sector that has out-performed relatively speaking.
Same story but worse in enterprise. Here is a basket of about 30 publicly traded software companies, down 40%. Again all of these companies have been hard hit.
Historical TEV/NTMR for software in the mid-aughts has been 4-5x. We’ve seen run-up and then a correction. It’s unclear what the “right” or long term multiple is.
But SaaS in particular, huge opportunity. Only 2-3% of all IT spend dollars are spent on SaaS. At least a 10x upside from here.
http://tomtunguz.com/the-hardest-round-to-raise/
> let me tell you a bit about redpoint highlights of the portfolio companies lots of enterprise investments, about 80% of our investments in our latest fund are enterprise > thanks for having me today. my goal is