us early stage startup funding report

US EARLY-STAGE TECH REPORTEarly-stage financing trends, most active investors, well-funded companies, and more.

The technology market intelligence platform.CB Insights software lets you predict, discuss, and communicate emerging technology trends using data in ways that are beyond human cognition.

www.cbinsights.com 2

www.cbinsights.com 3See what other customers have to say at http://www.cbinsights.com/customer-love

A FEW OF OUR HAPPY CUSTOMERSThe most publicly reference-able customers of anyone in the industry

Pat GradySequoia Capital, Partner

“Think of the fundamental value chain of venture capital … If we play the clock forward, the finding and assessing of investments will be almost entirely done by technology, not human beings. And the company that is today positioned to be the market leader in that evolution is CB Insights."


From the NY Times to Bloomberg, CB Insights data is used by hundreds of leading media outlets every week

“ACCORDING TO CB INSIGHTS…”

CB INSIGHTS NEWS MENTIONS PER YEAR

62 9 16

211

490

1200

1600

2010 2011 2012 2013 2014 2015 2016(YTD)

SUMMARY OF FINDINGS


$2.2 BILLION ACROSS 810 DEALS IN Q3’16: US-based early-stage (Seed and Series A) technology companies saw a 12% increase in deal activity on a quarterly basis in Q3’16 with 810 deals completed across $2.2 billion in funding. Despite an increase in Q3’16, deal activity is down 21% when compared the same quarter in Q3’15 which saw 1,028 deals.

NEA MOST ACTIVE US EARLY-STAGE VC IN 2016: New Enterprise Associates was the most active early-stage VC firm in 2016 (through Q3’16) with investments in Catalytic, Paysa, VividCortex, and Virtru. The second spot was a tie between SV Angel and 500 Startups with other well knows names such as Andreessen Horowitz, Social Capital, and Upfront Ventures in the top 10.

INTERNET DOMINATING, MOBILE ON THE DECLINE: In Q3’16, the internet sector accounted for 62% of deal share and that has been consistent for several years. In contrast, mobile/telecom deal share dropped from 27% in Q3’14 to 22% in Q3’15 to 21% in Q3’16. Consumer products & services is on the rise accounting for 6% of deal share in Q3’16.

EARLY-STAGE DEALS MORE CONCENTRATED GEOGRAPHICALLY: In Q3’16, California, New York, and Massachusetts together accounted for 63% of deal share, an 11-quarter high.

EARLY-STAGE MEAN AND MEDIAN DEAL SIZES DOWN IN Q3’16: Q3’16 saw early-stage median deal sizes decrease 26% while mean deal size dropped 12% on a quarterly basis. Despite the declines compared to Q2’16, Q3’16 mean deal size reached the second-highest total in the 11-quarter trend with $3.2 million.

APPLOVIN WAS THE LARGEST EARLY-STAGE TECH EXIT IN 2016: Applovin, the San Francisco-based advertising technology company, raised just $4 million in disclosed funding before exiting for $1.4 billion in September 2016. Other large early-stage exits in 2016 include BlazeMeter, Orbitera, and EyeVerify, each of which were acquired for $100 million.

FOLLOW-ON MARKET TIGHTENING: Our analysis shows that it’s getting harder for seed and Series A-stage companies to obtain further financings, with the percentage of seed companies obtaining follow-on deals dropping from 57% in 2010 to 49% in 2013.

NOTE ON REPORT METHODOLOGY: Deals in this report only include technology Angel, Seed, and Series A fundings of companies with headquarters in the US. Funding analysis excludes deals from accelerators and incubators, as well as debt deals, into private companies. For questions regarding this methodology reach out to [email protected].

TABLE OF CONTENTS8

16

19

27


Overall venture capital trends

Follow-on equity funding trends

Top deals in specific categories (IoT, AI, Digital Health, etc.)

Most active VCs and top early-stage exits


Early-stage US tech funding in 2016:

$6.9 BILLIONacross

2,488 DEALS

Early-Stage Venture Capital TrendsEarly-stage financing activity, deal share, deal size, and more.


$1.0

39

$1,5

46

$1,1

77

$1,1

58

$1,1

78

$1,5

20

$1,5

42

$1,4

68

$1,5

48

$1,5

74

$1,6

87

$1,7

64

$1,8

74

$2,5

10

$2,1

48

$2,4

51

$2,0

04

$2,5

91

$2,4

03

$2,2

72

$2,2

80

$2,3

40

$2,2

90

548

635578

598

753

891856

791

885 910955

844

987 995

1087958

941993

1028

819957

721810

2011 2012 2013 2014 2015 2016

Investment ($M) Deals

EARLY-STAGE DEAL ACTIVITY SLIGHTLY IMPROVES IN Q3’16

On a quarterly basis, deal activity increased 12% in Q3’16, after falling to a 17-quarter low in Q2’16.

Funding slightly fell to $2.29B in Q3’16, a 2% decline over the previous quarter.


EARLY-STAGE US TECH INVESTMENTS DEALS AND DOLLARSQ1’11 – Q3’16

$0.9 $1.1 $1.0

$1.5

$1.0

$1.5

$1.1

$1.5

$0.7

$1.6

$1.2

$2.2

$2.9

$2.4

$2.8

$2.4

$2.9 $2.7

$3.1

$2.6

$3.6

$3.2

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Median Deal Size ($M) Mean Deal Size ($M)

BOTH MEAN AND MEDIAN DEAL SIZES DECLINE IN Q3’16

Overall mean deal size among early-stage US tech companies declined 11% on a quarterly basis in Q3’16, but was still the second-highest quarter by deal size since Q1’14.

Median deal size to early-stage US tech companies fell by 25% in Q3’16 to $1.2M.


EARLY-STAGE US TECH DEAL SIZE TRENDQ1’14 – Q3’16

$1.0

$0.8

$1.1

$0.7 $0.7

$0.9 $1.0

$1.2

$1.0

$0.8 $0.7

$1.8

$1.5

$2.0

$1.4

$1.1

$1.5 $1.6 $1.6

$1.5

$2.0

$1.4

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Angel Median Deal Size ($M)

ANGEL MEAN & MEDIAN DEAL SIZES PLUMMET

Median deal size for angel deals to US-based companies fell to $700K in Q3’16, the lowest quarterly total since Q1’15.

Mean deal size fell as well, decreasing to $1.4M, the lowest quarterly total since Q1’15.


US TECH ANGEL DEAL SIZE TRENDQ1’14 – Q3’16

$0.1

$0.3

$0.4

$0.8

$0.1

$0.5

$0.1

$0.7

$0.1

$0.5

$0.2

$0.7

$0.9 $0.8

$1.1

$0.8

$1.0 $0.9

$1.2

$0.8

$1.2

$1.0

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Seed Median Deal Size ($M) Seed Mean Deal Size ($M)

MEAN DEAL SIZE STAYS AT OR ABOVE $1M FOR TWO STRAIGHT QUARTERS

Both mean and median seed deal size to US-based tech companies fell in Q3’16. Mean deal size fell by 17% while median deal size fell by 60% on a quarterly basis.


US TECH SEED DEAL SIZE TRENDQ1’14 – Q3’16

$4.0

$5.0 $5.0 $5.0 $5.6

$5.3 $5.8

$5.5 $5.3

$6.0 $6.0 $5.9

$7.2

$6.3 $6.4 $7.0 $7.1 $7.1 $7.0

$7.3

$8.5 $8.3

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Series A Median Deal Size ($M) Series A Mean Deal Size ($M)

SERIES A MEDIAN DEAL SIZE STAYS FLAT IN 2016

In Q3’16, median deal size to US-based Series A-stage companies remained level at $6M.

Mean deal size slightly declined to $8.3M in Q3’16.


US TECH SERIES A DEAL SIZE TRENDQ1’14 – Q3’16

65% 64% 61% 61% 63% 61% 62% 63% 66% 61% 62%

24% 24%27% 25% 25% 24% 22% 21% 21%

23% 21%

2% 3% 2% 3% 3%4% 3% 5%

5% 7% 6%

6% 4% 5% 6% 7% 8% 8% 8% 4% 6% 7%2% 3% 3% 3% 2% 2% 2% 2% 2% 2% 3%2% 2% 2% 2% 1% 1% 2% 2% 1% 1% 2%

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Internet Mobile & TelecommunicationsConsumer Products & Services Software (non-internet/mobile)Computer Hardware & Services Electronics

INTERNET DOMINATES, CONSUMER PRODUCTS ON THE RISE

The internet and mobile sectors accounted for 83% of deal share to early-stage US-based technology companies in Q3’16.

The consumer products & services sector reached quarterly highs in Q2’16 (7%) and Q3’16 (6%) across the 11 quarter trend.


US EARLY-STAGE TECH INVESTMENTS BY SECTORQ1’14 – Q3’16

40% 41% 39% 39% 41% 38% 41% 40% 36% 38% 43%

15% 13% 16% 17% 14% 14% 15% 16%15% 14%

14%

6% 6% 5% 5% 7% 6%5% 5%

5% 5%6%

39% 40% 40% 40% 38%42%

38% 38%43% 42%

37%

Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

California New York Massachusetts Other

THE THREE LARGEST US MARKETS ACCOUNT FOR MOST DEAL SHARE IN LAST 11 QUARTERS

In Q3’16, early-stage deal share in California was responsible for 43% of all deals in Q3’16. California accounted for more deal share than the next 47 states combined.

New York and Massachusetts accounted for 14% and 6%, respectively.


US EARLY-STAGE TECH INVESTMENT SHARE BY TOP STATEQ1’14 – Q3’16

Follow-On TrendsShare of companies that raised follow-on equity funding after their initial Seed or Series A round.


SEED COMPANIES SEE FOLLOW-ON FUNDING RATES FALL OVER THE LAST FOUR YEARSThe percentage of US-based seed-stage companies to raise follow-on equity funding has steadily declined. Of companies raising in 2013, 49% of companies raised funding after their seed round. That proportion was much higher at 57% in 2010.


% OF COMPANIES THAT RAISED EQUITY AFTER AN INITIAL SEED ROUND2010 – 2016 YTD (11/10/2016)

57% 58% 48% 49% 42%* 34%* 11%*

2010 2011 2012 2013 2014 2015 2016

2010 2011 2012 2013 2014 2015 2016 *It may take 18 months or more to raise follow-on equity funding.

FOLLOW-ON SERIES A FUNDING SHOWING SIGNS OF SLIGHT TIGHTENING67% of companies raised follow-on equity funding after raising Series As in 2011 and 2012. Since then, the number has stayed relatively consistent but dropping to 64% in 2013, with 2014 showing signs of a lower rate with 58% of companies raising follow-on equity financing so far.


% OF COMPANIES THAT RAISED EQUITY AFTER AN INITIAL SERIES A ROUND2010 – 2016 YTD (11/10/2016)

70% 67% 67% 64% 58%* 34%* 5%*

2010 2011 2012 2013 2014 2015 2016

2010 2011 2012 2013 2014 2015 2016*It may take 18 months or more to raise follow-on equity funding.

Top DealsThe largest US-based early-stage deals in AI, digital health, IoT, and more.


TOP EARLY-STAGE DEALS TO US TECH COMPANIES IN Q3’16

The top 10 US-based early-stage deals span a number of industries including cybersecurity, data storage, e-commerce, and fintech, among others.


$77M // Series A

$40M // Series A

$34M // Series A

$32M // Series A

$30M // Series A

$29M // Series A

$20M // Series A

$20M // Series A

$17M // Seed VC

Company Amount/Round Industry

Monitoring & Security

Security Software

Monitoring & Security

Data Storage

Application Development

CRM

Food & Grocery

Apparel & Accessories

Asset & Financial Management$18M // Series A

Email

TOP EARLY-STAGE DEALS IN AI


Q3’16

Amount / Round: $9M / Series A

HQ: Sunnyvale, CA

Select Investor: Nexus Venture

Partners

Mezi is an artificially intelligent virtual

assistant for personal shopping and

travel needs.


HQ: Seattle, Washington

Select Investor: Wildcat Venture

Partners

Amount / Round: $7.8M / Series A

HQ: San Jose, California

Select Investor: Khosla Ventures

Amplero is a customer lifetime value

management platform that enables

marketers to leverage machine

learning for customer lifetime value

and loyalty.

PatternEx is a threat prediction

cybersecurity platform powered by

artificial intelligence.

Docent Health is a health analysis

software provider that measures

patient results over time.

TOP EARLY-STAGE DEALS IN DIGITAL HEALTH


Avizia is a healthcare management

platform that focuses on

telemedicine solutions.


HQ: Boston, MA

Select Investors: Bessemer

Venture Partners, New Enterprise

Associates, Maverick Ventures

Amount / Round: $8.5M/ Series A

HQ: Denver, CO

Select Investors: Norwest Venture

Partners, Point B Capital

NextHealth Technologies offers an

analytics platform that drives

down medical costs.

AristaMD is a referral

management software platform.


HQ: Reston, VA

Select Investor: Blue Heron Capital


HQ: La Jolla, CA

Select Investors: Avalon Ventures,

Correlation Ventures

Q3’16

Sense is a home monitoring system

that lets users understand the

energy output of every appliance

and device.

TOP EARLY-STAGE DEALS IN IOT


FogHorn offers software solutions

for industrial and commercial IoT

applications.


HQ: Cambridge, MA

Select Investors: Shell Technology

Ventures, Energy Impact Partners


HQ: United States (Stealth)

Select Investor: True Ventures

Brava creates a suite of connected

hardware products for the kitchen.


HQ: Mountain View, CA

Select Investors: March Capital

Partners, GE Ventures

Q3’16

Civil Maps provides 3D mapping technology for autonomous vehicles.

TOP EARLY-STAGE DEALS IN AUTO TECH


Amount / Round: $6.6M / Seed

HQ: Berkeley, CA

Select Investor: Motus Ventures


HQ: Ann Arbor, MI

Select Investors: GlenRock Israel, YL Ventures, Fontinalis Partners

Karamba Security is an autonomous security platform that protects a car’s external connected components.

Connected Signals brings real-time traffic light information to drivers while they are on the road.

Amount / Round: $990K / Seed

HQ: Eugene, OR

Select Investors: Tech Coast Angels, AutoTech Ventures

Q3’16

Cyence is an analytics platform that quantifies the financial impact of cyber risk.

TOP EARLY-STAGE DEALS IN INSURANCE TECH



HQ: San Mateo, CA

Select Investors: New Enterprise Associates, Institutional Venture Partners


HQ: Los Angeles, CA

Select Investors: ff Venture Capital, Romulus Capital

Estify offers a software platform that helps auto body shops create estimates on repairs for auto insurers.

Quilt is an online insurance provider for life, renters, and pets coverage.

Amount / Round: $3.3M / Seed

HQ: Boston, MA

Select Investors: Founder Collective, NextView Ventures, Titan Ventures, Eniac Ventures, Basset Investment Group

Q3’16

TOP EARLY-STAGE DEALS IN CYBERSECURITY


Virtru provides e-mail and file

encryption software.


HQ: Sunnyvale, CA

Select Investors: Sequoia Capital

Israel, Shlomo Kramer

SafeBreach simulates hacks on

companies systems to help them

identify weaknesses in their

security systems.

ThinAir Labs offers enterprises a

set of automated protection

capabilities and alerts to keep

data safe and under control.


HQ: DC, WA

Select Investor: Bessemer Venture

Partners


HQ: Palo Alto, CA

Select Investors: Workday

Ventures, Y Combinator

Q3’16

Top VCs & ExitsMost active early-stage technology VC firms and some of the largest exits that last raised early-stage rounds before exiting.


MOST ACTIVE EARLY-STAGE VCS IN US TECH COMPANIES IN 2016

Some well-known names make our list of most active VC investors in 2016 through Q3’16. NEA took the number one spot with SV Angel and 500 Startups tied at the number two spot. Other investors include Andreessen Horowitz and Social Capital, among others.


RANK INVESTOR SELECT INVESTMENTS RANK INVESTOR SELECT INVESTMENTS

1 Catalytic, Paysa,VividCortex, Virtru

7Reflektive, Luma Home,

Within, Everlaw

2 Nucleus, SigOpt,B12, Sakara Life 10 AirMap, Front

Practice XYZ, Verifly

2 Embroker, Virool,ViralGains, Ripple 10

Loot Crate, Nima Sensor,Fame & Partners,

HopSkipDrive

4 Vettery, Shipt,PebblePost, HopSkipDrive 10 Gem, Booster Fuels,

Understory, GreatHorn

5 ShipBob, Skymind,Captain 401, AppZen 10 Lola Travel Company, B12,

AirMap, Ionic Framework

6 Inverse, Littlstar,AreaMetrics, Captiv8 10 Zendrive, Haven,

Troops, Arbor Technologies

7 LiveLike, Mozio,Wevorce, Wunder 10 AfterSchool, Robin,

Blispay, Cyberhaven

7 Catalytic, FourKites,Flywheel, Zipnosis

MOST ACTIVE VCS IN US EARLY-STAGE TECH COMPANIESQ1'16 - Q3'16

EXITED COMPANIES THAT LAST RAISED EARLY-STAGE FUNDING RANKED BY EXIT VALUE

Applovin, which was bootstrapped for the majority of its life, was the largest exit of a US-based tech company still at the early-stage in Q3’16. Other companies in the top 5 include BlazeMeter, Orbitera, and EyeVerify which each exited for $100M, respectively.


COMPANY EXIT VALUATION EXIT TYPE EXIT QUARTER

$1.4B Acquisition Q3'16

$185M Acquisition Q3'16





TOP COMPANIES THAT LAST RAISED EARLY-STAGE FUNDING BEFORE EXIT

EXITED COMPANIES THAT LAST RAISED EARLY-STAGE FUNDING RANKED BY EXIT VALUE

All five companies raised less than $12.2M in total disclosed funding before getting acquired for at least $100M+.

Some well-known acquirers of the companies here include Google, Salesforce, and Snap.


EARLY-STAGE COMPANIES WITH THE LARGEST VALUATION INCREASE When looking at early-stage valuation increases from Seed to Series A financing, we see that 3D printing company Formlabs, increased its valuation by more than 1680%. Other companies on the list include Stripe and Patreon, among others.


Seed Series A % Increase Current Status Description

$6 $1071683% Alive Designs and manufactures 3D printing systems.

$4 $68

1600% Alive Provider of mobile security solutions.

$10 $75650% Alive Offers a machine learning platform that helps

build predictive models.

$16 $104550% Dead

Infrastructure technology that allows subscribers access to vew live TV across any device or

platform.

$8 $51538% Alive Fundraising site that allows users to support

their favorite artists and creators.

$20 $100400% Alive/Unicorn Payment system that allows individuals and

businesses to accept payments over the internet.

(Swipe Labs)

$10 $50400% Alive Mobile application for watching a daily feed

of videos from the internet.

LARGEST EARLY-STAGE VALUATION INCREASE (DISCLOSED VALUATIONS)2011 - 2016 (Q3'16)

Where is all this data from?The CB Insights platform has details on all the 2016 early-stage deals included in this report


CLICK HERE TO SIGN UP FOR FREE

https://www.cbinsights.com/signup?utm_source=deck&utm_campaign=early-stage-deck-cta

CBINSIGHTS.COM@ cbinsights

+1(212)292-3148

us early stage startup funding report

Small Business & Entrepreneurship