US Venture Capital Climate 2015 including Angel Investing. The emerging disconnect between angel investors and VCs reduces returns for angels and the chance for startups to succeed.
1. State of Venture Capital
& Angel Markets 2015
STARTUP
CAPITAL VENTURES
2. What’s Going On In The US VC Cycle?
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2
VCs
Invest In
Startups
Startups
Exit Via
M&A or
IPO
VCs
return
capital to
LPs
LPs
Invest In
VCs
Silicon Valley Honolulu
3. Strongest Venture Investing, Exit
& Angel Market In A Decade
• Strong LP investment VC asset class
• VCs investing more actively than in the
past 15 years (although at just 40%
of .com era)
• Strong exit market producing good returns
• Strongest angel market in 15 years
• Challenge: angel investing concentrated in
different sectors than venture
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10. $49B Of Venture Capital Invested In 2014
Is Highest Since 2000
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Source: Thomson Reuters / PwC / NVCA
2015 = Q1 annualized
For comparison: Apple 2015Q1 revenue $74.6B
11. US Corporate VC Also at a Decade High
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Source: PWC Moneytree Report
12. Number of US VC Deals Remains
Essentially Flat For 15 Years
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Source: Thomson Reuters / PwC / NVCA
2015 = Q1 annualized
13. Silicon Valley Dominates US VC With CA
Making Up Almost 60% of Total $
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Source: Thomson Reuters / PwC / NVCA
LA / Orange County
14. Software Is Eating The $ While Industrial &
Energy Is Bouncing Back
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Source: Thomson Reuters / PwC / NVCA
15. Software Represents Nearly 50%
Of Deals With Biotech #2 and Down To ~10%
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Source: Thomson Reuters / PwC / NVCA
16. Seed Stage Rounds Continued To Decline
As Series A & B Rounds Increase
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Source: Thomson Reuters / PwC / NVCA
17. Seed And Expansion Stage
Deal Sizes Close To .com highs*
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Source: Thomson Reuters / PwC / NVCA
* Driven by two billion $ deals and
several multi-hundred $ deals
18. 79% Of Round Valuations Were Up While
Just 6% Were Down-Rounds
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Source: Fenwick
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19. Software & Internet / Media Had Greatest % Of
Up-Rounds With Life Science Continuing To Lag
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Source: Fenwick Q4 2014 * Cleantech & Other were statistically
insignificant with two deals each
20. Round To Round Price Increases At
Post .com Record Levels
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Source: Fenwick
21. Bullish VC Sentiment As Measured By Low
Senior Liquidation Preferences
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Source: Fenwick
22. Venture Investment Environment Is At
Highest Levels Since .com Era
However the comparison is unfair
• Still just 40% of .com highs
• Most funded companies have revenue and
strong growth
• Investing sectors are more tech. heavy (e.g.
software, cloud) vs. internet and media
• Business models are more sophisticated AND
more capital-efficient
• Cheap cloud services (e.g. AWS) reduce capital
needed
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24. Technology Angel Funding Strong But
Disconnected From Venture
Angel funding at highest levels in years
• $1.65B invested in 870 deals
Deal size and valuations very strong
But disconnected from venture capital
• Investing in different sectors than VC
• Most active angel syndicates are outside major
VC markets
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25. Crowdfunding Industry Still Dominated By
Project & Lending Sectors
Project funding (e.g. Kickstarter: $1.4B funded to
date) and lending (e.g. Lending Club) dominate
Angel.co is largest equity funder at $100M in 2014
SEC has still not finalized unaccredited investor
equity crowdfunding regulations
• Adverse selection remains an unresolved issue
• e.g. crowdfunders mostly get the deals rejected by
angels, accelerators & VCs
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26. Average Tech. Angel Round Size
At All Time High
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Source: ARI Halo Report
27. Tech. Angel Deal Size
Up Across All Sectors
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Source: ARI Halo Report
28. Tech. Angel Valuations At All Time High
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Source: ARI Halo Report
29. Tech. Angel Deals Approximately
Proportional To Population
(Different Than CA-Centric VC)
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Source: ARI Halo Report
30. Angel Investing Continues To Be Centered On
Consumer & Mobile Internet
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Source: ARI Halo Report
31. Big Takeaway: Angels Invest (Much) More
In Consumer & Less In Software Than VCs
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Source: Thompson-Reuters NVCA, ARI Halo Report
32. Why Are Tech. Angels Investing So
Differently Than Venture?
Many possibilities or combinations
• Investing in concepts they understand
• Investing proportional to applicant pool
• Consumer internet has lower tech. barriers
• Angels unaware of VC funding patterns
• Newsmaking consumer IPOs (TWTR)
create observational bias vs. broad exit
market (7X more M&A than IPO, etc.)
• ?
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37. VCs Invested
$49B In
Portfolio
~$100B In
Venture Exits
(IPO + M&A)
LPs
Invested
$30B In VCs
VCs (Still) Investing More In Startups Than
LPs Are Investing Back Into VC
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Sources: NVCA, Thomson Reuters, Cambridge
Silicon Valley Honolulu
38. Better Angel & VC Investing Synchronicity
Could Improve Startup & Angel Yields
Startups and angels are dependent upon
subsequent venture funding
Angel investing patterns do not appear to
influence VC investing patterns
– Angel investing sectors has stayed
consistent for 5 years whereas VC
investing evolves with market
VCs are focused on investing in active exit
markets
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39. Page 39
Author: Tim Dick
General Partner, Startup Capital Ventures
– Boards: PlayFab, SilverTail (acquired by EMC), TuneIn, Adama
Materials, TagArray (acquired MXIM)
Investor / Founder / CEO:
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 (advisor, acquired by Amazon), Grassroots Enterprise
(Founding President, acquired by Edelman), Hawaii Superferry
(founding CEO), Dali Wireless (turnaround CEO)
Boston Consulting Group – cofounded West Coast technology practice
Beckman Instruments: invented first “instrument on a chip” & first ICU
usable speech synthesizer for intubated patients
MBA, Stanford University, BSEE, University of California