venture capital & angel investing market 2014

US VC & Angel Investing Climate 2014

What’s Going On In The US VC Cycle?

VCs Invest In Startups

Startups Exit Via M&A or

IPO

VCs return

capital to LPs

LPs Invest In

VCs

• Silicon Valley • Honolulu

An Outstanding Market For Entrepreneurs & VCs

•  US VC fundraising returning to strength in 2014 on back of strong exit markets

•  Highest level of VC investment since 2003 •  Highest levels of IPO activity since 2003 •  Investment shifted from seed to later stages •  California & software sector taking growing

share of VC $ and deals •  Angel investors concentrating on different

sectors than VC, presenting challenges to entrepreneurs


Agenda

•  LP Investments In VC

•  VC Investing Activity

•  Angel, Accelerator & Crowdfunding

•  Exit Activity

•  Conclusions • Silicon Valley • Honolulu

VC Moneys Raised Declined In 2013 But Up Well In Q1 2014


Source: Thomson Reuters / PwC / NVCA

Number Of Funds Raised Increased Slightly

• Silicon Valley • Honolulu "

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Growing % of New Vs. Follow-On Funds So Far In 2014


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Agenda






•  Conclusions

$29B Of Venture Capital Invested In 2013 Is At Post .com High


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VC Dollars Concentrating In Software, Biotech. & Media / Entertain


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Number Of Deals Also Concentrating In Software


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California Makes Up Over 50% of US VC $


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LA / Orange County

2013 Saw More Expansion Rounds While Seed Stage Rounds Continued To Fall


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Q1 Seed Deal Size Fell After a “Big” 2013 While Later Round Sizes Grew


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71% Of New Venture Financings Were Up-Rounds…


Source: Fenwick

" "

…But Less Than 40% of Series-C Or Later Deals Were Up-Rounds


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Source: Fenwick

Media And Software Have Greatest % Of Uprounds (i.e. lower risk)


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Source: Fenwick

Venture Investment Environment Is Evolving

•  “Seed and early stage financing numbers are down, but expansion stage dollars invested are up. This was to be expected when you consider the domination by seed and early stage deals in 2012 and 2013” - Bobby Franklin, CEO NVCA

•  “Investments into the Software sector continue to remain healthy as investors look for companies with disruptive technology.” - Mark McCaffery, PwC


Agenda






•  Conclusions

Tech. Angel Funding Is More Difficult To Decipher

•  UNH Angel report estimates 2013 angel funding grew 5% to $24B for ~70,000 companies funded – However many companies are not tech. – Average deal size of $342,000

•  TechCrunch estimates Just $700M was invested in technology angel deals [which feels low – Ed.]


Source: UNH Angel Report, TechCrunch, NVCA

Average Tech. Angel Round Size Remains Flat


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Source: SVB / Angel Resource Institute

Adding Co-investors To Angels Substantially Increases Round Size


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$ M

Healthcare Draws Largest Angel / Coinvestor Rounds

(But Is Most Capital-Intensive)


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$ M

Angel Investing Mix Different From Venture Funding: Software Just 4%


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Angel Funding Is Balanced Vs Population


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Accelerators Funded Over 1,000 Companies In 2013


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High risk: just 36% of portfolio companies received additional funding within 3 years

Crowdfunding Industry Reported Few Numbers for 2013…

Deloitte estimates over $700M was raised from product crowdfunding in 2013 (e.g. Kickstarter) SEC has still not finalized equity crowdfunding rules Last industry numbers from 2012 •  $2.8B worldwide according to Massolution •  $300M equity worldwide (crowdfunding.org)


Agenda






" "

VC-Backed Exit Market Is Strong With IPOs At Highest Level Since 2007



VC-backed IPO and M&A Valuations Remain Robust


"

Facebook, Groupon, Twitter, Zynga


18% Of VC M&A Produces 10X Returns While 22% Produces < 1X *


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Source: Thomson Reuters / PwC / NVCA * Excludes unvalued deals (70% of total)

• VC Returns Continue to Outperform • Public Markets VC Returns Typically Exceed Public

Markets Over Long Term

Source: NVCA, Cambridge Associates


Agenda






VCs Invested $29B In Portfolio

$134B In Venture Exit

Liquidity (IPO + M&A)

LPs Invested

$16B In VCs

Despite Strong Returns VC Is Not Receiving Enough Capital To Sustain

Today’s Venture Market

Sources: NVCA, Thomson Reuters, Cambridge


Market Equilibrium Will Return (One Way Or Another)

•  Good exit markets create strong returns for LPs

•  VCs continue to fund new deals at high levels

•  LP funding declining and lagging VC investment

Venture capital shrinks to match LP

investment in VC

VC funding grows as LPs increase VC

funding


Author: Tim Dick •  General Partner, Startup Capital Ventures

–  Boards: SilverTail (acquired by EMC), TuneIn, Adama Materials, TagArray

•  Entrepreneur, angel and advisor has raised over $300M in early stage capital with over $1.2B of exits –  Match.Com (Angel, acquired by IAC) –  WorldPages.com (Founder, CEO, IPO NYSE:WPZ acquired by BT) –  TRUSTe.org / Privacy Assured (Internet privacy standard) –  Accept.com (mentor capitalist, acquired by Amazon) –  Grassroots Enterprise (Founding President, acquired by Edelman) –  Hawaii Superferry (founding CEO) –  Dali Wireless (turnaround CEO)

•  Boston Consulting Group •  Beckman Instruments: invented first “instrument on a chip” (1985) &

first ICU usable speech synthesizer for intubated patients (1981) •  MBA, Stanford University •  BSEE, University of California

www.startupcv.com

venture capital & angel investing market 2014

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