1. VC Survey Results
January 2017
1
Mark Suster, @msuster
Chang Xu, @_changxu

2. “It’s a great time to be a startup raising money”
2
Mark Suster, March 2017

3. 3
Let’s get the good news out of the way! VCs are dramatically more optimistic about
funding startups than they were a year ago. 2017 should be kind to startups raising money.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
2%
9%
60%
9%
27%
50%
11%
32%
Q. Which of the following statements best describes your personal mood heading into…?
Hugely bullish
Very concerned
Don’t feel compelled to do
deals given uncertainty
Generally optimistic
2%

4. 4
VCs are clearly more excited about the investment environment than they
were a year ago with almost no VCs expecting to cut their pace.
Source: Upfront Ventures survey of VCs (N=115 and N=159, respectively), Jan 2017, Jan 2016
2016 vs. 2015 2017 vs. 2016
23%
11%
68%
66%
9%
23%
Fewer new investments
More new investments
(excluding follow-ons)
About the same pace
Q. Do you think your firm is likely to make more investments in…?

5. VC experienced
a “mild winter” in 2016
5

6. 6
Heading into 2016 many VC’s had been forecasting a slower investment pace but
that didn’t materialize for most with 2/3rds keeping pace or increasing investments.
31%
53%
16%
More new investments
(excluding follow-ons)
Fewer new investments
About the same pace
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
Q. What was your deal activity like in 2016 vs. 2015?

7. 7
And while valuations have cooled off slightly it has much less significant than
the industry had expected. 30% expected big drops yet only 3% have seen it.
Prediction in 2016 Reflection in 2017
8%
16%
8%
73%
61%
3%
30%
Increased
Significantly dropped
Marginally came down
About the same
2017Q. Would you say valuations in
2016 were higher, lower or remained
about the same vs. 2015?
2016Q. Do you expect valuations in Q1
/ Q2 2016 to go up, down or remain
about the same as previous quarters?
Source: Upfront Ventures survey of VCs (N=115 and N=159, respectively), Jan 2017, Jan 2016

8. 8
Amongst the more mature startups who have raised a lot of capital VCs are clearly
guiding startups to cut costs and value fiscal discipline over “growth at any cost”
2016 2017
1%4%
24%
35%
64%
62%
11%
Q. Which statement best describes the spending behavior at most of the
more mature companies in which you are on the board or observe?
Planning to cut costs
Not concerned
No change
Cut costs in previous 12 months
Source: Upfront Ventures survey of VCs (N=115 and N=159, respectively), Jan 2017, Jan 2016

9. 9
The biggest shift is sentiment amongst VCs is that last year they were pushing for
valuation drops. Most believe the market has normalized and don’t expect further drops.
2016 vs. 2015 2017 vs. 2016
5%
55%
8%
38%
62%
2%
30%
Q. Do you expect valuations in ____ to go up, down or remain about the same?
Increase
Significant drop
Slightly decrease
About the same
Source: Upfront Ventures survey of VCs (N=115 and N=159, respectively), Jan 2017, Jan 2016

10. 10
VCs aren’t expecting 2017 to be a floodgate of IPOs for unicorns with more realistic
options getting out via M&A or restructuring to become healthier businesses.
7%
8%
34% 36%
15%
Many more will IPO
None of the above
More restructuring
M&A
No realistic options, will cut burn
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
Q. Of the unicorns minted in the past 2-3 years, what do you think 2017 will hold for them?

11. 11
VCs attribute the “mild winter” to the low interest rates and also the huge
influx of capital from big funds, new funds, corporate funds & foreign money.
Low interest rate environment
Late-stage VC funds raising larger funds
Many new VC funds
Increases in corporate VC arms
Increases in Chinese money
Increases in Sovereign Wealth Funds
Increases in LPs making direct investments
Mutual funds and hedge funds 14%
21%
25%
30%
32%
54%
54%
58%
Note: Survey asked respondents to rate each item on a scale of 1-5. Above chart indicates percent of respondents that rated 4 (relevant) or 5 (most relevant).
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
Q. In 2016 many investors warned “Winter is Coming” referring to a slowdown in venture markets. That slowdown
happened but was very short lived. Which of the following are relevant in influencing why “Winter was Mild”?

12. VCs expect to be raising less money
themselves in 2017
12

13. 13
2016 was a huge year for VCs looking to raise money from LPs. Many expect 2017 will cool a bit
or keep pace. Very few expect increased fund raising. (maybe it’s a good time to be raising?) :)
3%
40%
45%
13%
Same as 2016
Fewer than 2016
Don’t know
More
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
Q. Do you expect VCs raising funds from LPs to increase in 2017?

14. 14
Almost half of VCs think it will be harder to fundraise from LPs in 2017 - but
this is strangely at odds with what LPs told us in their surveys.
47%
48%
5%
Same
Harder
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
Easier
Q. Do you expect VCs raising funds from LPs to be easier or harder in 2017?

15. 15
VCs who make the effort to reach out internationally have seen a dramatic increase in interest from foreign
sources of capital. Perhaps those who expect a tough 2017 should rack up some international miles?
35%
5%
60%
Yes
No
Don’t know
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
Q. In the last fund you raised, did you see increased interest from international sources of
capital to invest as LPs in your fund?

16. VC views on
emerging investment areas
16

17. 17
Most VCs are most excited about AI & Machine Learning as their most
important investment theme for the coming 5-10 years.
AI / ML IoT AR / VR Blockchain Bots-based
2%
9%
20%
9%
58%
15%
16%
23%42%
27%
30%
42%
23%
30%
8%
40%
26%33%
18%
7% 13%7%1%1%
Deeply skeptical
Too hyped
Similar to other areas
Some interesting investments
Most important for next 5-10yrs
Q. How do you feel about the following investment areas?
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
commerce

18. 18
VCs believe there are many near-term opportunities are in AI & Machine Learning
and seem to feel AR/VC + Blockchain markets will take a bit longer to develop.
AI / ML IoT AR / VR Blockchain Bots-based
45%
27%23%
54%
61%
31%
37%47%
27%
27%
15%
27%
27%
14%
9% 9%9%3%5%3%
10+ years
5-10 years
3-5 years
Next 3 years
Q. What do you think is the timeframe for interesting investments in the following investment areas?
Source: Upfront Ventures survey of VCs (N=115), Jan 2017
commerce

19. How did VCs feel
about Trump — before
the inauguration?
19

20. 20
VCs we polled in an anonymous survey were very anti-Trump. One brave soul did feel he was the right person to lead
our country but then again we asked this prior to the inauguration. Nearly 75% were deeply offended or anti Trump.
VCs 40%34%11%14%1%
Right leader Fine, too much drama Dislike, but irrelevant Anti-Trump Deeply offended
Q. How do you personally feel about a Trump presidency?
Source: Upfront Ventures survey of VCs (N=115), Jan 2017

21. 21
Two-thirds of VCs were shared some concerns about Trump’s social policies affecting the startup
ecosystem with 20% deeply worried. This was before inauguration. We imagine a re-polling on this
question if done today might yield even bigger concerns.
VCs 20%27%24%28%2%
Right direction No impact Discourage from entering tech Concerned Deeply worried
Q. How will a Trump presidency impact startup companies and tech company employment & social policies
including ethnic diversity, immigration, religious tolerance, gender equality and transgender rights?
Source: Upfront Ventures survey of VCs (N=115), Jan 2017

22. 22
On policy issues VCs overwhelming shared concerns in this survey and at the Upfront
Summit in person that Trump’s policies would not be good for the technology sector.
China relations Surveillance / Immigration Offshore development
3%1%
6%6%
16%9%
41%
25%17%
22%
41%
36%38%
55%
12%
30%29%
13%
Very concerned
Worried
No impact
Good
Very positive
Q. Do you believe a Trump Presidency could have an impact on the following areas?
/ manufacturing cyber security
Source: Upfront Ventures survey of VCs (N=115), Jan 2017

23. 23
However, two-thirds of VCs polled felt that in the end Trump wasn’t likely to
affect the industry too strongly. Maybe this was when we were told to “take him
seriously but not literally?” Unfortunately we now need to take him literally, too.
VCs 4%23%51%15%7%
Very beneficial No impact Uncertainty but limited impact Concerned Deeply worried
Q. Considering all these issues (offshore development, H1-B, M&A, surveillance, China
relations / manufacturing, etc.), how will a Trump presidency impact venture capital?
Source: Upfront Ventures survey of VCs (N=115), Jan 2017

24. Appendix
Annual Upfront VC Survey Participants
115 respondents in January 2017*
159 respondents in January 2016
24
* In 2017, we split out corporate VCs (CVC) into a separate survey so that we could ask a range of CVC
specific questions so they weren’t included in this report.

25. 2017 VC respondent demographics (I)
25
Fund type
0
20
40
60
Angel Seed VC (Early) VC (Mid) VC (Late) PE
1
99
38
54
2
Fund size ($ million)
0
13
27
40
$1-20 $20-100 $100-300 $300-999 $1000+ Evergreen
4
10
19
3233
17
New investments per partner per year (excl. follow-on’s)
0
17
33
50
1 2 3-4 5-10 10+
12
26
40
34
3
Number of board or observer seats per partner
0
13
27
40
0 1-3 4-6 7-10 11-14 15+
32
3536
32
7
Source: Upfront Ventures survey of VCs (N=115), Jan 2017

26. 2017 VC respondent demographics (II)
26
Survey respondent geography
0
30
60
SF/Bay Area SoCal New York Boston Other US ROW
46
2
23
29
51
Position
0
40
80
120
Partner / MD Analyst to Principal Sole proprietor/personal investor
1
8
106
How long has your firm existed (years)
0
30
60
0-3 3-10 10-20 20+
17
26
48
23
Personal investment experience (years)
0
20
40
0-3 3-6 6-10 10-15 15+
31
18
31
25
10
Source: Upfront Ventures survey of VCs (N=115), Jan 2017

27. 2016 VC respondent demographics (I)
27
New investments per partner per year (excl. follow-on’s)
0
20
40
60
1 2 3-4 5-10 10+
8
38
53
50
9
Number of board or observer seats per partner
0
25
50
75
0 1-3 4-6 7-10 11-14 15+
34
36
62
38
15
Source: Upfront Ventures survey of VCs (N=159), Jan 2016
Fund type
0
25
50
75
Angel Seed VC (Early) VC (Mid) VC (Late) PE Corp (blank)
11
96
19
47
60
7
Fund size ($ million)
0
20
40
60
$1-20 $20-100 $300-999 $100-300 $1000+ Evergreen Personal
779
28
33
47
19

28. 2016 VC respondent demographics (II)
28 Source: Upfront Ventures survey of VCs (N=159), Jan 2016
Survey respondent geography
0
40
80
Norcal SoCal NE US Other US ROW (blank)
1
78
24
31
79
Position
0
47
93
140
Partner / MD Analyst to Principal Sole proprietor/personal investor
79
134
How long has your firm existed (years)
0
35
70
0-3 3-10 10-20 20+
22
36
61
31
Personal investment experience (years)
0
25
50
0-3 3-6 6-10 10-15 15+
41
23
43
30
13