Category: valuation
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
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…)
November 29, 2016 First Round Capital : State of Startups 2016
The bubble is deflating. We asked 700+ founders to answer one of the most frequently asked questions we receive: are we in a bubble? Last year 73% said we were. While this year the majority still say yes, it’s closer to a coin flip (57%), down 22% from 2015. Though the majority of founders say we’re in a bubble, 9 out of 10 founders believe that it’s a good time to be starting a company. All aboard! The unbridled optimism that drives founders is alive and well in tech: 18% of leaders say they’re certain they’ll build a billion dollar company. But that’s not to say there aren’t bumps along the way. The same percentage of leaders (18%) also report having executed a layoff in the last year. (read more…)
CATEGORY: downturn, valuation, VC
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
May 24, 2016 Inc.com : Steve Blank on the Tech Bubble: ‘VCs Won’t Admit They’re in a Ponzi Scheme
On a broader level, Blank argues the fundamental purpose of venture capital has changed, inasmuch as VCs used to care more about sales and profit. From their perspective, "there was an unspoken but pretty solid rule: We needed five consecutive quarters of profitability and increasing revenues to go public," he explains. "The role of venture capital was to teach you how to turn your idea into a profitable company. The role of venture capital now is the greater fool theory." (read more…)
CATEGORY: downturn, valuation, VC
March 24, 2016 Bloomberg : Hedge Funds Pumped Up Silicon Valley. Now They’re Pulling Out
In recent months, venture capital firms and mutual funds have become choosier about which technology startups they’re prepared to back. Now hedge funds, after helping push valuations to dot-com-era heights, are getting more picky, too. (read more…)
February 10, 2016 Techcrunch : Secondary Shops Flooded With Unicorn Sellers
As the fortunes of billion-dollar companies like Evernote have fizzled, however, so has their shareholders’ enthusiasm. Says the cofounder of one secondary shop who asked not to be named, “We aren’t seeing huge discounts yet in the top 10 names, but people are trying to dump them. It’s not just one person calling you about a particular company. It’s four.” Says another secondary investor, who also asked not to be identified for this story, “We’re seeing an enormous uptick in inbound selling interest.” (read more…)
CATEGORY: downturn, secondaries, valuation
January 15, 2016 National Venture Capital Association : $58.8 Billion in Venture Capital Invested Across U.S. in 2015, According to the MoneyTree Report
“With almost $60 billion deployed to startup companies in 2015, the venture capital ecosystem is strong and healthy, and committed to helping entrepreneurs get their breakthrough ideas off the ground and into the marketplace,” said Bobby Franklin, President and CEO of NVCA. “While a handful of unicorns and late-stage funding rounds by nontraditional investors continue to grab the headlines, more than half of all deals in 2015 went to seed and early stage companies, with more than 1,400 companies raising venture capital for the first time. Entrepreneurs in 46 states and the District of Columbia raised venture capital in 2015, a testament to the reach of the venture capital industry and the strength of startup ecosystems across America.” (read more…)
CATEGORY: capital, valuation, VC
September 27, 2015 Mark Suster via Medium : Why I Fucking Hate Unicorns and the Culture They Breed
If you’re fortunate enough to raise $100 million early-on to build your startup — congratulations. But to all of the 99.999% of other startups out there please know that this isn’t the success by which to measure yourself. Measure yourself in gym visits, in 3-yard gains, in sacrifice and dedication. Avoid the metaphorical parties and the alcohol and the extra pounds and know that your gains will come in lines of code and purchase orders and signed offer letters and repeat purchases. And during your year in the gym nobody may notice. It may have to wait until way down the road when you come out 80 pounds lighter. (read more…)
CATEGORY: leadership, resilience, valuation