11. • Public markets depressing multiples…
• But the venture market is increasingly competitive
among venture firms who are raising a constant
amount of dollars
• Net effect: relative stability in the fundraising market
Two Forces in Tension
15. 2010 Cohort
Segment
Average ROIC Median ROIC
ROIC <= 2 1.04 1.00
ROIC > 2 13.5 4.80
Certain segments are unbelievably capital
efficient
16. • Recent IPOs are 2x more VC dollar efficient as their
older brothers
• Outliers require negligible capital before IPO
because of more efficient avenues of customer
acquisition
• Net effect: startups need to raise less capital and will
require a different pattern of financing
Startups are far more capital efficient than
they used to be
24. • VCs have 4x’ed the size of a traditional angel-only
seed round
• VC dollars have created a new category of seed
investment, the MegaSeed which has replaced the
Series A
• Net effect: Series A investment sizes have
increased because capital startups are further along
than before
Competition in the VC market has pushed
VCs to invest in seeds
28. Metric Angel Seeds VC Seeds
Series A Success Rate 33% 54%
Mean Seed Raised $M 1.3 1.6
Median Seed Raised $M 1.2 1.5
Mean Series A Raised $M 7.3 7.4
Median Series A Raised
$M
5.3 6.0
Raising seed from VCs increases seed
round size but no impact on Series A
29. Metric
Insider VC
Leads A
All VC Seeds
Mean Seed Raised
$M
1.6 1.6
Median Seed Raised
$M
1.5 1.5
Mean Series A
Raised $M
7.2 7.4
Median Series A
Raised $M
5.8 6.0
Signaling risk is zero for companies who
are able to raise Series A
30. Q4 is the least attractive time to raise a
seed
31. • Raise more than $900k
• Easier to do with VC involvement. Typical round has
1.6 VCs
• Raise earlier in the year if you can
Best practices for raising a seed
38. • Series A investment up 200%, responding to
increase in company formation and seed companies
• Series B flat, creating a crunch for follow-ons
• Clear winners able to delay IPO/M&A for years
because of IPO-sized rounds available in the private
markets
• Net effect: Winners have access to tons of capital.
Others may struggle with the Series B crunch.
Series A and B and later rounds are in flux
> let me tell you a bit about redpoint
highlights of the portfolio companies
lots of enterprise investments, about 80% of our investments in our latest fund are enterprise
> thanks for having me today. my goal is
Dollars entering VC not anywhere close to the bubble
Operating at or below median for the past 5 years
2014 strong start. Q1 figure is 8B. Holding the same pace would imply $32B which would be the second highest year since the bubble
Dollars going out is relatively constant
So the fund raising market is relatively stable
In contrast there has been quite a bit of public market volatility
Mean share price is down 25% in consumer tech over the past six months
Trend has been broad-based across all different industries. Real Estate is the only sector that has out-performed relatively speaking.
Same story but worse in enterprise. Here is a basket of about 30 publicly traded software companies, down 40%.
Again all of these companies have been hard hit.
Historical TEV/NTMR for software in the mid-aughts has been 4-5x. We’ve seen run-up and then a correction. It’s unclear what the “right” or long term multiple is.
But SaaS in particular, huge opportunity. Only 2-3% of all IT spend dollars are spent on SaaS. At least a 10x upside from here.
http://tomtunguz.com/the-hardest-round-to-raise/
> let me tell you a bit about redpoint
highlights of the portfolio companies
lots of enterprise investments, about 80% of our investments in our latest fund are enterprise
> thanks for having me today. my goal is