Category: capital
June 1, 2017 Tomer Dean via TechCrunch : The meeting that showed me the truth about VCs
Ninety-five percent of VCs aren’t actually returning enough money to justify the risk, fees and illiquidity their investors (LPs) are taking on by investing in their funds. (read more…)
May 17, 2017 Christoph Janz @ Point Nine Capital : The growing dissonance between two business models (SaaS and VC)
For VCs, the question is how many of these companies can become large enough to make the (admittedly somewhat weird) business model of venture capitalists work. Large VCs need multiple unicorns just to survive. In SaaS, that means companies that get to $100M in ARR and keep growing fast beyond that mark. With a ~$60M fund, we at Point Nine may not need unicorns to survive, but we won’t generate a great return if we don’t have exits north of $100M either. (read more…)
March 29, 2017 CB Insights : The Venture Capital Funnel
What we found:
- There was a 2 percentage point increase from 46% to 48% in companies raising a first follow-on round in our updated analysis.
- 30% of seed funded companies exited through an IPO or M&A, up by 2 percentage points from last year.
- 67% of companies end up either dead, or become self-sustaining (maybe great for the company but not so great for investors). This was a 3 percentage point decrease since our last analysis. It is hard to know the exact breakdown for these companies as funding announcements get a significant amount of fanfare but cash flow positivity or profitability does not. Also, some companies stumble on as zombie companies for years before calling it quits. Not to mention, the death of companies generally happens without any official announcement, i.e. there is no such thing as a “startup death certificate” (although increasingly, startups are willing to share their failure post-mortems).
- Not surprisingly the odds of becoming a unicorn remained low in our new analysis, hovering around 1% (1.07%), with 12 companies reaching that status. Some of these companies are the most-hyped tech companies of the decade, including Uber, Airbnb, Slack, Stripe, and Docker.
- 13 companies exited for over $500M, including leading companies within their categories like Instagram, Zendesk, and Twilio.
CATEGORY: capital, valuation, VC
March 4, 2017 National Venture Capital Association : NVCA 2017 Yearbook: The Go-To Resource on the Venture Ecosystem
The Yearbook is filled with facts and insights on the industry. Five interesting highlights include:
- In 2016, data shows 898 venture firms in existence, managing 1,562 active venture funds and translating to approximately $333 billion in U.S. venture capital assets under management.
- At the end of 2016, 334 venture firms managed $50 million or less. By comparison, only 68 firms managed $1 billion or more of U.S. venture capital assets under management.
- Last year, 2,105 venture firms—including corporate venture groups—participated in at least one investment in a U.S.-based startup. Of those, 738 participated in a startup’s first round of institutional funding.
- The U.S. continues to attract a majority of global venture fundraising, investment, and exit dollars; however, its share has dropped compared to levels a decade ago. The U.S.’s share of global VC investment dropped from 81% in 2006 to 54% in 2016.
- The median size of a venture fund reached $75 million in 2016, the highest median since 2008. Outside of California, Massachusetts and New York, VC fund sizes remained relatively small, with a median 2016 fund size of $23.5 million.
February 7, 2017 Industry Ventures : The Venture Capital Risk and Return Matrix
Generally speaking, we found that the likelihood of achieving expected returns is not simply a function of high multiples. In fact, it varies depending on risk profile. For direct investments, loss rates and holding periods play a significant role. For venture fund counterparts, the same holds true, but exit strategies – whether through IPO or M&A – and capital-deployment timing also matter a great deal. Beginning with the summary below, we explore the various alternatives and how we think about risk and target returns. (read more…)
January 31, 2017 CB Insights : 2016 Global Tech Exits Report
TOTAL TECH EXITS DROPPED IN 2016, BUT IPOs UP. Globally, there were 3260 M&A exits and 98 IPOs in 2016. Total tech exits saw a 4% decline over 2015, which saw 3421 M&A exits and 90 IPOs. Overall, exit activity was up in the second half of 2016 with 1726 exits compared to 1632 exits in the first half of 2016. (read more…)
January 19, 2017 Pitchbook : 2016 Annual US PE Breakdown
If 2014 was a record-setting year for PE, and 2015 a turning point, then 2016 can be characterized as the first step toward normalcy. Buyout activity receded amidst the growing concerns about global trade, rising populism and central bank policies that we know all too well. It must be noted, however, that PE transactions occur on a deal-by-deal basis, not a global basis. As such, managers have continued to find pockets of growth and opportunity, particularly in the tech and energy sectors. (read more…)
December 22, 2016 Bryce Roberts via Medium : Meaningful Exits For Founders
Lifetimes of work and risk lie between a Seed round and a Series D round. And, despite increasing the value of the underlying business 7x, the dollars at exit for the founder remain roughly the same. It is also worth noting that an exit at $210M would not even qualify as a home run for even the smallest fund in Sam’s examples. (read more…)
CATEGORY: alternative financing, capital, profitability
December 17, 2016 Samuel Gil via Medium : Meaningful VC Exits
Some VCs will only aim at potential home-runs, knowing that some of those investments will most likely end up being “just” meaningful exits, and some VCs will mainly aim at potential meaningful exits, expecting that 1 or 2 of those investments will end up being home-runs (read more…)
CATEGORY: capital, VC, winner take all
October 8, 2016 Scaleworks via Medium : Company Valuations
Valuing a company is typically done based on either Value Pricing or Market Pricing. Value Pricing is what mature, stable, normally profitable businesses are bought on, and how Private Equity evaluate companies. Market Pricing is VC’s (and founders) set a price using external factors. Scaleworks Venture Equity sits in the middle with a Growth Pricing method.
Obviously there’s a ton of depth and complexity in the details of how to value companies, and people far more expert than I am have spent years doing it, and written extensively on the subject. My goal here is to write about how Venture Equity (what we call the Scaleworks Fund model) fits in the macro landscape between value and market pricing.
(read more…)CATEGORY: capital, valuation, VC