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Zero to One Billion:Demystifying The Unicorn

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Table of ContentsZero To One Billion: Demystifying The Unicorn 3

Roughly 170 Paper Unicorns & Counting 4

Approx. 90 U.S. Tech Paper Unicorns Minted Since 2009 5

Median Paper Unicorn Age at Birth: 66 Months 6

Approx. 70 Real U.S. Tech Unicorn IPOs & Acquisitions Since 2009 9

VC Batting Average Increased for Unicorns Founded 2005-2009 12

Roughly 30% Paper Unicorns Likely to Lose Status 16

Quick Note About Data Sources, Assumptions, & Caveats 17

Appendix 18

Contact Us 19

For more information on transacting in the private market: 19

For information on research and analysis: 19

Disclaimer 20


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Zero To One Billion: Demystifying The UnicornSince the Great Recession, the global private tech ecosystem has witnessed a remarkable paradigm shift. The

advent, growth and proliferation of “Unicorns” have led to a fundamental change in the way all stakeholders

in the tech ecosystem inter-operate. While this unicorn phenomenon has been in the making for the past 6-7

years, ongoing private investing and fundraising trends seem to imply that it could be another decade for the

unicorn gold dust to settle. And, another 5 years for all the stakeholders to fully realize lessons learned from

this fundamental paradigm shift.

Our game plan at SharesPost Research is to continuously analyze the drivers and market conditions leading

up to the creation & proliferation of unicorns, to debate for and against the “Unicorn Bubble”, and to review

fundamental investment trends and issues at well-known unicorns. While doing so, we plan to analyze the

current state of tech ecosystem and understand the motivations and biases of all stakeholders, including

CEOs/Founders, employees, VCs, and non-traditional private investors. While we have no interest in joining

the long list of crystal ball gazers, it is clear to us that an objective, analytical, and data-driven framework is

likely to yield valuable insights and lead to spirited debates.

With this backdrop, in our first white paper, we provide a big picture snapshot of unicorns today. We analyzed

trends in VC Investments & unicorn creation since 2009. Key takeaways from our analysis are as follows:

Globally 170 Paper Unicorns & CountingToday, Fortune magazine tracks 174, CB Insights’ identifies 169, and TechCrunch has a list of 168 companies.

Approximately 52% or 90 out of the 170-ish Paper Unicorns (i.e., companies closing financings implying a

value of $1B or more) are U.S.-based tech companies. This compares to roughly 70 U.S.-based Real Unicorns

“minted” since 2009 (i.e., VC-backed tech companies with $1B or larger liquidity events i.e. IPO or M&A.)

Zero To One Billion in 66 MonthsThe median duration for a VC-backed company to reach $1B valuation since incorporation is roughly 66

months. U.S.-based tech unicorns tend to reach this status a tad later at 76 months. Non-U.S. tech companies

that have become unicorns do so at a median pace of 57 months after incorporation, with typical Chinese

Paper Unicorns reaching this milestone in 53 months, or 4.5 years.

VC Batting Average Increased For Unicorns Founded 2005-2009We estimate roughly 22,000 U.S. tech companies were founded & received VC funding since 1995, resulting

in roughly 40 Public, 30 Acquired, and 90 Paper Unicorns. Excluding outlier years with very high (1996 & 2005)

and very low (1999 & 2000) batting averages, we estimate a normalized VC batting average ranges between

80-100 at-bats (VC-backed startups) for each unicorn “home run” (or approximately 1.5%). And, recent Paper

Unicorn proliferation implies that VC batting average increased 25% year over year for companies founded

between 2005 and 2009.

Roughly 30% Of Paper Unicorns Likely To Lose StatusOur analysis involved applying a normalized VC batting average and adjusting for growing investment velocity

to the current crop of Paper Unicorns. As a result, we’d expect roughly 30% of the current crop of the roughly

90 U.S. tech Paper Unicorns (and a likely greater proportion of international Paper Unicorns) to have sub $1B

liquidity outcome. We’d, however, expect a still significant inflow into the asset class from 2010-2015 cohort

of VC-backed companies, given that more than 13,000 U.S. tech companies received VC funding since 2010

versus fewer than 8,000 combined from 1995 through 2009.


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Roughly 170 Paper Unicorns & Counting Renowned tech investor, Aileen Lee coined the term “Unicorns” in Nov 2013, and estimated 39 such unicorns

existed back then. The original unicorn definition was as follows: U.S.-based software or internet companies

started since 2003 and valued at over $1 billion by public or private market investors. Since then, unicorn

definition has evolved into: VC-backed private tech companies with a private valuation of $1B or higher. Ms.

Lee’s original list included 14 private companies (as of Nov 2013). And, today, about 32 months later, Fortune

magazine tracks 174 unicorns globally, CB-Insights has 169 unicorns updated in real-time, and TechCrunch

tracks 168 private tech companies with a reported valuation exceeding $1B. TechCrunch also maintains an

“Emerging Unicorn” leaderboard featuring 46 companies with a private valuation between $500MM and $1B.

Today’s Paper Unicorns have an aggregate market capitalization of roughly $600B versus roughly $100B

in combined market cap of private unicorns as of Nov 2013. This translates to a 500% growth in market

capitalization of late-stage private growth tech companies in just two and a half years.

In order to learn more about market conditions that led to the creation and proliferation of such unicorns,

we analyzed data available on PitchBook, Preqin, & National Venture Capital Association as well as publicly

available information from news articles, company websites, CrunchBase, LinkedIn, Wikipedia and public

market data on Yahoo! Finance.

Since 2009, CB Insights has tracked 169 private tech companies with valuations exceeding $1B. From 2010

through 2013, there were about 8 unicorns minted per year. However, as illustrated below, this trend clearly

stepped up in 2014 and 2015. On a 2016 YTD basis, the rate at which unicorns are minted has ticked lower,

with roughly 20 net new unicorns minted so far in 2016. Nonetheless, this YTD rate of unicorn creation

appears to be roughly in-line with 2014 levels, and clearly a step above the levels observed in 2011 through

2013.

1 19 7 7

45

80

19

2009

20102011

20122013

20142015

2016

One Paper Unicorn minted, on average, every 9 days in 2014,

and every 5 days in 2015

Exhibit 1: Global Paper Unicorns Minted Since Great Recession

Source: NVCA, PitchBook, Dow Jones Venture Source, CrunchBase, SharesPost Research; 2016 data through Q2 ’16


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Approx. 90 U.S. Tech Paper Unicorns Minted Since 2009There has been a gradual shift towards non-U.S.-based Paper Unicorns in the past 24-30 months. At the end

of 2013, more than 70% of global Paper Unicorns were U.S. headquartered companies. During the Paper

Unicorn proliferation era of 2014-2016, 44% of Paper Unicorns minted were international companies. Out of

the 170-ish Paper Unicorns today, 98 companies or 58% of all Paper Unicorns are U.S.-based (i.e. HQ in U.S.),

and remaining 72 are international companies. For the purposes of this white paper, we have excluded 11 U.S.

Healthcare/Biotech unicorns due to our primary research focus on traditionally defined tech companies. Out

of the 72 non-U.S.-based Paper Unicorns, 33 are Chinese companies, followed by 12 in Western Europe (incl.

U.K., France, Germany, Sweden), and 7 in India.

0

10

20

30

40

50

60

70

80

90

2009 2010 2011 2012 2013 2014 2015 2016

US International

6 5 6

28

45

7

32 1

17

35

12

Exhibit 2a: Number of U.S. vs. International Paper Unicorns Minted Since Great Recession



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Median Paper Unicorn Age at Birth: 66 Months As a next step, we rank-ordered all Paper Unicorns by age. Our objective was to look for signs of a “bubble”

i.e. to determine whether there were any pockets of unusual emergence of Paper Unicorns over the past

couple of years. As illustrated in Exhibit 1, we witnessed one Paper Unicorn minted every 9 days in 2014,

and one unicorn minted every 5 days during 2015. Below we have rank ordered global Paper Unicorns by

founding year. The oldest Paper Unicorn in the current crop of 170-ish companies was founded in 1995. There

are 3 Paper Unicorns less than 2 years old (i.e. founded in 2015). During the early days of Paper Unicorn

phenomenon, VCs were investing in approximately 4-6 companies per year that would later become Paper

Unicorns. For instance, SurveyMonkey was founded in 1999, and became a Paper Unicorn in 2011 (or 153

months later). Palantir was founded in 2004, and became a unicorn in 2011 too (or about 89 months later).

2009 2010 2011 2012 2013 2014 2015 2016

US International

0%

10%

20%

30%

40%

50%

60%

70%

80%

100%

90%

Exhibit 2b: Percent of U.S. vs. International Paper Unicorns Minted Since Great Recession



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When we categorized Paper Unicorns by geography, interesting themes began to emerge. We illustrate the

general breakdown with respect to U.S.-based and international Paper Unicorns ordered by “founding year”

in the chart below. Digging deeper in the data, we came across the following interesting observations:

1. During 1995 through 2005, few international tech companies were founded and funded per year that would become unicorns later in their respective lifetimes;

2. From a U.S. unicorn perspective, 2006, 2007, and 2009 were probably the best years to incorporate a “unicorn-to-be” as such companies had the highest likelihood to become a unicorn. During each of these three years, more than 10 Paper Unicorns were founded.

3. The median age of Paper Unicorns from the cohort before 2014, i.e. from 2010 to 2013 is roughly 72 months or 6 years. Median age of the 2014 cohort is 58 months whereas 2015 cohort companies became Paper Unicorns roughly 71 months after incorporation.

4. Currently, there are 11 Paper Unicorns on the list that reached $1B valuation level in less than 24 months since incorporation with 5 being U.S.-based companies.

5. During the Paper Unicorn proliferation era of 2014-2015, 115 Paper Unicorns were minted. Roughly 70 out of 115 (or 60%) were U.S.-based companies and 30% were either Chinese or Indian companies.

More Unicorns likely will emerge from this cohort, given age today

12 2

43

5

3

6 6

3

18

16

12

17

20

15

13 13

7

3

0

20162015

20142013

20122011

20102009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1997

1996

1998

Exhibit 3: Global Paper Unicorns by Year Company Founded



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Finally, we illustrate the overall summary of this analysis in the chart below. The headline is that a typical Paper

Unicorn was minted after being in business for roughly 66 months (median duration). U.S.-based unicorns are

a tad older, reaching a $1B paper valuation after being in business for about 76 months. On the other hand,

international tech companies have typically reached the $1B valuation level in less than 5 years. Chinese

tech unicorns are among the fastest at 53 months on average, probably hinting at a greater likelihood of a

“bubble” in international unicorns, particularly the ones that reached this status during 2015. Finally, in order

to provide additional context, the average duration after which a company has become a unicorn is roughly

79 months versus 66 months median duration. This discrepancy in median vs. mean can largely be attributed

to few “really old” unicorns. i.e. more than 150 months old. We’d rely on the median in the sample set as the

distribution around the median is relatively uniform, as more than 70% of unicorns occur within one standard

deviation of the median age of 66 months.

US International

0

5

10

15

20

1 21 1

23

2

54

1

1113

6

14

97

68

21

3 1

2

1

12

2

7 3

6

311

8

75

5

3

1995

1997

1998

1999

2000

20012002

2003

2004

2005

2006

2007

2008

2009

20102011

20122013

20142015

2016

Exhibit 4: U.S. vs International Paper Unicorns by Year Company Founded

NVCA, PitchBook, Dow Jones Venture Source, CrunchBase, SharesPost Research; 2016 data through Q2 ’16


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Approx. 70 Real U.S. Tech Unicorn IPOs & Acquisitions Since 2009As a next step, we decided to compare/contrast this ongoing Paper Unicorn creation with Real Unicorns (i.e.

tech companies with $1B+ liquidity outcomes). We gathered data on VC-backed exits with value exceeding

$1B within a variety of tech sectors. Because data available for such transactions prior to 2008-09 is quite

limited, inaccurate or required us to make a lot of assumptions, we decided to do this analysis with data

starting 2009.

As a first step, we counted global billion-dollar IPOs since January 2009. We estimate there were roughly

100 IPOs globally with company values exceeding $1B at IPO since 2009. About 70% of these unicorn IPOs

were U.S.-based companies, or U.S.-domiciled IPOs. 51 out of 100-ish Global IPOs were U.S. tech companies.

39 out of 51 U.S. tech IPOS can be regarded as IPOs of VC-backed companies. For instance, our count of 39

IPOs included companies such as Facebook, Twitter, Tableau, Zynga, Groupon, etc. However, we excluded

IPOs such as Alibaba, Nielsen, Gogo, and Level 3 Communications since we believe that they either did not

have VC investors or their public offerings were primarily for existing investors to sell shares.

6676

57

8793

67

Global Unicorns

Age when joined the “Unicorn Club” (in months) Age today (in months)

US-based Unicorns Non-US based Unicorns

Exhibit 5: Median Age Of U.S. Unicorns is More Than Non-U.S. Unicorns by 18 Months



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Along similar lines, we counted global M&A transactions with consideration exceeding $1B since 2009. This

exercise turned out to be a significantly arduous one. There have been roughly 500 billion-dollar plus M&A

transactions since 2009. Approximately 326 of the 500-ish unicorn M&A deals have been with U.S. based

companies. Roughly 120 of these can be regarded as tech acquisitions. We believe fewer than 30 of these

120 tech acquisitions can be regarded as “exits of VC-backed companies”. We’d highlight that we have NOT

included acquisitions of public companies that had VC investments prior to going public. Our rationale in

doing so is that we wanted to avoid double counting of liquidity events or VC exits. For instance, we have not

included Priceline’s acquisition of Kayak since this unicorn liquidity event would be counted under IPO (i.e.

Kayak IPO event is a unicorn liquidity outcome event). All in, we haven’t included 23 total acquisitions of such

VC-backed but public companies such as LinkedIn, Marketo, HomeAway, Trulia, OpenTable, Active Network,

etc. Rest assured, we have included all these companies in our count of IPOs of VC-backed companies.

39

101 Global Billion Dollar IPOs

70 U.S. Billion Dollar IPOs

51 U.S. Tech Billion Dollar IPOs

39 U.S. Tech VC-Backed Billion Dollar IPOs39

51

70

101

39

493 Global Billion Dollar M&A Transactions

326 U.S. Billion Dollar M&A Transactions

120 U.S. Tech Billion Dollar M&A Transactions

28 U.S. Tech VC-Backed Billion Dollar M&A Transactions

28

120

326

493

Exhibit 6: Real Unicorn Trends - $1B or Higher IPOs Since 2009

Exhibit 7: Real Unicorn Trends - $1B or Higher M&A Transactions Since 2009

Source: NVCA, PitchBook, Dow Jones Venture Source, CrunchBase, SharesPost Research



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Below, we illustrate the overall trends in VC-backed U.S.-based tech IPOs and M&A trends since 2009. Key

takeaways: 1) There have been 6-8 IPOs of VC-backed tech companies every year over the past several

years. This annual run rate has largely stayed within this range since the Great Recession; 2) There have

been 4-5 M&As of VC-backed tech companies every year, except 2014.

2009 2010 2011 2012 2013 2014 2015 2016

Public U.S. Tech Unicorns Acquired U.S. Tech Unicorns

2

86

78

7

1

0

00

04

5

11

4

4

0

2

4

6

8

10

12

14

16

18

20

Exhibit 8: Real Unicorn Trends - $1B or Higher IPOs and M&A Transactions Since 2009


Finally, we rank ordered all Real Unicorns by their respective founding dates. The overall trend is

somewhat similar to Paper Unicorns, as highlighted in Exhibit 4. In particular, the 2005-09 cohort of VC-

funded tech companies appear to have had a relatively higher likelihood of a $1B outcome versus prior

two cohorts- 1996-2000 or 2001-2005. In addition, we have witnessed just four Real Unicorn outcomes

from VC-backed companies founded since 2010. In a normalized scenario, we’d expect at least 5 unicorn

exits per year. Or, we would have expected roughly 20 unicorn IPOs or M&A transactions of VC-backed

companies founded since 2010. In fact, we have witnessed only four unicorn exits so far. Given the roughly

10 unicorn liquidity outcome events per year of VC-backed companies, we wouldn’t be surprised if another

15 VC-backed companies founded since 2010 have real $1B liquidity outcome events over the next couple

of years.


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VC Batting Average Increased for Unicorns Founded 2005-2009 According to Major League Baseball’s official definition, batting average means number of hits divided by

at-bats. In the context of this research, we were trying to determine an answer to this question: how many

startups do VC investors have to back on average to create a $1B+ outcome?

Back in 2009, Union Square Ventures’ Fred Wilson noted that VC’s try to optimize a target batting average

around “1/3, 1/3, 1/3”. In other words, 1/3rd of VC investments tend to be money losers, 1/3rd of investments

tend to return invested capital (1x return), and bulk of the entire fund’s return comes from remaining 1/3rd of

invested companies. With the emergence of unicorns, the size of potential return has clearly been amplified.

Effectively, we’d guess that VCs now tend to feel comfortable if a larger proportion of their investments end

up being money-losers or return invested capital on a pro rata basis, so long as there is a unicorn outcome

among the rest of their investments. Our guess is that VCs try to optimize around a target batting average

as “33%, 33%, 31%, and 2%”. In other words, 1/3rd investments are money losers, 1/3rd investments tend to

return invested capital (1x), and <1/3rd investments return about 1.5x to 2x capital. But the bulk of the fund’s

returns come from 1-2% of VC investments, so called “home runs”.

In order to determine VC batting average over the past 15-20 years, we need two inputs: 1) number of

VC-backed companies started in U.S. within tech sector every year (denominator); and 2) number of those

companies that became unicorns from those investments (numerator).

Per PitchBook, there are roughly 22,000 to 24,000 such companies (i.e. VC-backed U.S.-based tech

companies founded since 1995 ). For context, CrunchBase has roughly 32,000 U.S.-based companies

0

2

4

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8

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12

1995

1996

1997

1998

1999

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20012002

2003

2004

2005

2006

2007

2008

2009

20102011

20122013

20142015

2016

Expect more real Unicorn outcomes from 2010-2015 cohort of VC-backed companies

Acquired U.S. Tech Unicorns (By Year Founded)Public U.S. Tech Unicorns (By Year Founded)

Exhibit 9: Real U.S. Tech Public & Acquired Unicorns Trends (By Year Founded)



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founded since 1995 and have at least one funding round from VCs, but this list includes peripheral sectors,

and likely a greater margin of error given CrunchBase is a crowd-sourced database.

Next, we simply added up the number of unicorn IPOs, unicorn M&A transactions, and Paper Unicorns over

the past five years. We added up the annual totals illustrated in charts in Exhibit 4 and Exhibit 9. We illustrate

this trend in the chart below, and this would become the numerator in our calculation of VC batting average.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

1995

1996

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20012002

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20102011

20122013

20142015

2016

1995

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2009

20102011

20122013

20142015

20160

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14

16

18

20

Public U.S. Tech Unicorns Acquired U.S. Tech Unicorns Paper U.S. Tech Unicorns

Exhibit 10: Number of VC-Backed Tech Companies in U.S.

Exhibit 11: Total U.S. Tech Unicorns – Public, Acquired & Paper (By Year Founded)




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Finally, we divided the number of unicorns created in any given year by the number of VC-backed companies

in the corresponding year. The headline here is that the likelihood of a VC investment turning into a unicorn

has generally stayed within 1.0% and 1.5% on an annual basis over the past 10-15 years. There have been

certain periods of troughs and peaks over the past couple of decades, as one would expect.

Key observations include:

Cohort 1: 1996 to 1998Prior to the onset of the dot-com bust from 1996-1998, VC batting average was consistently above 2.0%.

We believe this was the “golden era” of early stage VC investing. Clearly, the pre-dot-com euphoria likely

fueled the early stage valuations and directly impacted VC batting average. Additionally, we’d guess there

were significantly fewer players in the game 20 years ago. We’d highlight that the number of companies that

received VC funding was less than 20% of today’s annual run rate. For instance, from 1996 through 2000,

VCs invested in fewer than 1,600 companies combined. Compare that to a range of 1,900 to 3,000 VC-

backed companies every year for the past 6 years.

Cohort 2: 1999 to 2001We noticed that VC batting average of companies founded in 2001 was the lowest observed in the past

couple of decades. And, so far, there hasn’t been a single Real Unicorn – either public or acquired – from the

2001 cohort of VC-backed companies.

Cohort 3: 2002 to 2006During the 5-year period following the dot-com bust, we estimate VC batting averages increased consistently

on a year over year basis. During this period, roughly 74 unicorns were founded and funded out of 2,800

total VC-backed companies. This translated into a healthy 1.9% batting average. This includes 18 Public, 10

Acquired, and remaining 32 Paper Unicorns.

Cohort 4: 2007 to 2009 (& beyond)Around the onset of the Great Recession, the proportion of VC-backed companies that remain Paper

Unicorns has gradually increased. For instance, 19 Public or Acquired Unicorns were funded/founded during

this 3-year period versus 27 Paper Unicorns. While the annual run-rate of unicorns increased during this

period, the overall VC batting average modestly declined to 1.6%, apparently due to the uptick in number of

VC-backed companies founded/funded per year.


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Companies founded in 1996 & 2005 had a high likeli-hood & those founded in 2000 & 2001 had a low

likelihood to become a Unicorn (so far)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

199

6

199

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199

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Since 2010, VC batting average appears low as we expect several more Unicorns to be “minted” in the coming years

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1996-1998(Dot-Com Boom)

1996-1998(Dot-Com Bust)

2002-2006(Post Dot-Com

Bust)

2007-2009(Great Recession

Onset)

1996-2009(All Companies)

1996-2009(Ex-Outliers)

2.3%

0.7%

1.9%

1.6%1.7%

1.5%

Exhibit 12: VC Batting Average – Number of Unicorns Divided by VC-Backed Companies

Exhibit 13: VC Batting Averages for Cohorts


Source: NVCA, PitchBook, Dow Jones Venture Source, CrunchBase, SharesPost Research; * Outliers include 1996, 1999, 2000, and 2005


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Roughly 30% Paper Unicorns Likely to Lose Status Finally, we tried to answer this question – what proportion of Paper Unicorns is likely to have a sub-$1B

outcome? In order to estimate this number, we made a simplifying assumption by applying a somewhat

conservative batting average (ranging from 1.30% to 1.50%) to the number of VC-backed companies founded/

funded from 2002 to 2009. As a result, we estimate that roughly 20-30 of today’s Paper Unicorns are likely

to have a sub-$1B outcome. We illustrate the range of unicorn outcomes for a range of batting averages in

the chart below.

Again, there are a lot of caveats to this analysis. For instance, this analysis assumes that only Paper Unicorns

are likely to have a sub-$1B outcome from here on out. It is quite likely that some Public Unicorns (i.e.,

VC-backed companies that had a $1B+ IPO valuation) today will lose value, and end up becoming non-

unicorns. However, this is at least partially offset by those VC-backed companies that went public with

valuations below $1B, but ended up becoming Public Unicorns in the future. Also, arguably, VC batting

average could have deteriorated as the number of investments increased. On the flip side, VC batting

average could have improved with scale, largely driven by larger end-market opportunities or lower

cost to scale tech businesses. For instance, the latest cohort of companies will likely benefit to a greater

degree from the emergence of cloud computing and mobile internet, and all the new resulting business

opportunities for early movers. In addition, arguably, VC batting average for overseas investments could

be higher than U.S. investments, largely due to lack of incumbents or early mover advantages. Regardless,

we believe that roughly 30% of today’s Paper Unicorns will have a sub-billion-dollar outcome in the future.

Put in a more positive light, 70% of today’s Paper Unicorns are likely to become Real Unicorns.

56 62 68 73 79 85 90 96 101 106

50 44 38 33 27 21 16 10 5

20

40

60

80

100

120

1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9%

Estimated Unicorns with Sub-$1B Outcome

Estimated Unicorns with Real $1B Outcome

Exhibit 14: VC Batting Average Sensitivity Analysis on VC-Backed Cos in 2002 To 2009 Cohort



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Quick Note About Data Sources, Assumptions, & Caveats While analyzing macro-level data for the venture capital industry with specific focus on technology companies,

we relied on data available on a variety of sources. This included PitchBook, Preqin as well as publicly

available datasets prepared by CrunchBase, NVCA/Thomson Reuters, Dow Jones Venture Source, and Jay

Ritter’s blog on IPO trends. In order to analyze and draw conclusions from data, we made several simplifying

assumptions and tradeoffs. Below we have attempted to provide a list of caveats and assumptions in our

analysis. While we have fairly high level of confidence in the big picture conclusions in this report, we’d

highlight that relying on specific period or category data may not lead to accurate conclusions.

In order to calculate trends in VC batting average, we relied on the number of “information technology”

companies with headquarters in U.S., founded since 1995, and have at least one venture capital or angel

investments.

We gathered data for Software, Media & Entertainment, Telco, IT Services, etc. According to NVCA, VC

investors have done approximately 2,000 to 3,000 new investments in these sectors every year in the U.S.

Noteworthy outliers have been circa 2000 when there were more than 5,000 net new investments, and

circa 2009 with fewer than 1,500 tech or related investments. Over the past couple of years, the run rate has

clearly ticked higher to about 3,000 investments per year. We illustrate this trend in Exhibit 16 in the Appendix.

Per Preqin, approximately 8,000 to 10,000 VC deals are completed globally across all sectors every year.

Roughly 60-70% of these deals are categorized as Internet, Software, and other related IT companies. Roughly

30-40% of VC investments are completed in the U.S. with the rest in Europe and APAC. This proportion has

been slowly declining over the past 5-7 years

We noticed that several recent late-stage private tech deals were not categorized as “venture capital”

investments by public databases. But, we included such deals into our analysis.

We noticed that data for IPOs and VC investments prior to 2008 has been fairly inconsistent across public

industry sources, particularly around industry category and pre-IPO funding. We relied on CrunchBase data

for IPO & M&A trends, and cross-checked it with PitchBook.

In our analysis, we have assumed certain thresholds of funding or fundraises to indicate a certain stage

of company development or investment focus of a VC fund. We acknowledge that lines blur around these

thresholds, and hence we haven’t relied on precise numbers within a range or basket to draw conclusions.

We noticed that VC investment data for international markets has not been captured to similar levels of

historical accuracy as has been catalogued by NVCA/Thomson Reuters for the U.S. We have used U.S. VC

investment activity as a proxy for international unicorns, and then developed sensitivity analysis on top of

these assumptions.

We observed that there is a fundamental difference in the way industry data providers define or count

“deals” or “investments” in tech sectors within venture capital. For instance, NVCA tracks roughly 4,400

investments per year in the U.S. across all sectors, Preqin reported approximately 10,000 deals globally,

whereas PitchBook tracked approximately 8,000. We ended up making simplifying assumptions to gross

up the number of VC investments globally from Thomson Reuters data (NVCA), by assuming a general shift

toward international markets over the past 6-7 years.


18

Appendix

Computer & Peripherals IT Services Media & Entertainement

Semiconductors Software Telecommunications

1,000

2,000

3,000

4,000

5,000

6,000

1995

1996

1997

1998

1999

2000

20012002

2003

2004

2005

2006

2007

2008

2009

20102011

20122013

20142015

Exhibit 15: VC Investment Trends – Rising Since 2009; Still Significantly Below 2000-Levels



19

Contact Us

For more information on transacting in the private market:Jennifer PhillipsManaging Director, Private Securities Group

Email: [email protected]: 650.492.6885

For information on research and analysis:Rohit KulkarniManaging Director, Private Investment Research Group

Email: [email protected]: 650.273.7905


mailto:phillips%40sharespost.com?subject=

mailto:rkulkarni%40sharespost.com?subject=

20

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