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Venture Capital

Venture Capital is Getting Huge

August 19, 2019

Venture Capital Fundraising

According to data out of private equity and venture capital data provider Pitchbook, the first half of 2019 saw quite robust fundraising.  Although slightly slower than 2018’s massive fundraising year, the first half of 2019 saw almost $21 billion in total funding raised.  Behind the $21 billion were 103 funds closed, 9 mega-funds (funds with $500 million or more raised), and 10 new general partners securing funding. 

The top fundraisers were TVC at $3.2 billion, followed by Andreessen Horowitz at $2.1 billion, Lightspeed Venture Partners at $1.4 billion, Flagship Pioneering at $824 million, and a second Andreessen Horowitz at $791 million. 

Venture capital is big, and it’s getting bigger.

Source: Pitchbook

Fewer Deals but More Capital

The interesting thing of the venture capital boom is the recent shift towards more capital flowing into fewer deals. 

In the first half of 2019, a total of $66 billion was deployed by the venture capital sector.  Of this $66 billion, 44.6% came from mega-deals (deals with $100million or more).  This 44.6% is up a lot from 2014’s 25.4%.

In dollar terms, $20.9 billion of venture capital investment went into late-stage venture capital investments, well ahead of the 754 early-stage venture capital deals that summed to just $8.9 billion.  At the bottom end of the dollar spectrum was angel/seed investment deals, with Pitchbook reporting $1.7 billion invested across 1,001 deals.

This trend of fewer deals but more capital may be a trend the venture capital is moving towards long term.  Hmm.

Source: Pitchbook

The Second Quarter of 2019 Saw the Largest Quarterly Exit Value Ever

The last point here on the state of venture capital is that unicorns are turning to public markets.  The second quarter of 2019 was the largest ever for exit value, with Uber ($68 billion), Slack ($23 billion), Pinterest ($9 billion). Zoom ($9 billion), and CrowdStrike ($6 billion) turning to the public markets for funding. 

The total exit value in the second quarter reached almost $189 billion, of which almost three-fourths (73.4%) came from these five massive unicorns. 

The venture capital world is changing, and it’s changing quickly.

Source: Pitchbook

Conclusion

Venture capital investment activity is booming.  Exit activity from venture capital investors saw its largest quarterly exit value ever in Q2 2019.  Fundraising for venture capital funds is still expanding.  Overall, there’s no evidence that love for what venture capital does will slow down anytime soon.  To sum up, venture capital is, once again, a cool industry to be in.

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2019 Could be a Record-Breaking Year for Venture Capital

April 29, 2019

Friday’s GDP report was somewhat of a shocker.  Gross domestic product grew by 3.2%. Quite healthy by most any measure.  Contrary to popular economic opinion, economic growth is strong.  There is absolutely no evidence yet of a recession.

Could the strength in the overall economy show up in venture capital markets?  The answer is yes. 

Last year venture capital blew through the roof at a massive $132 billion, breaking historical records.  Fascinatingly, 2019 could continue the booming. 

Here are 4 charts, produced by private equity data provider Pitchbook, that show the picture of VC through the first quarter of 2019.

#1 VC Deal Activity

The first figure is on US venture capital deal activity.  Activity is booming.  The first quarter of 2019 saw deal volume of almost $33 billion and deal count at 1,853.  The deal volume figure is almost 25% of what we saw in 2018, suggesting we’re roughly on pace to match the record-breaking year of 2018.  Amazing strength.

Source: Pitchbook

#2 VC Quarterly Investments

In the first quarter of 2019, we saw the second-highest quarterly capital investment in the past 10 years.  The only quarter to surpass the awesome start to 2019?  An almost unimaginable fourth quarter of 2018, which came in at more than $40 billion.

Source: Pitchbook

#3 The Massive Deals are Taking Over

The third figure showing the incredible state of venture capital today is the breakdown of VC deals (measured in dollars) by size of the deal. 

In orange are deals worth over $50 million.  The next largest deal size is $25 million to $50 million in light blue.  The remaining colors are for deal values less than $25 million. 

Fascinatingly, deals have become massive.  The deals worth more than $50 million accounted for more than 60% of all deals in the first quarter of 2019.  The beats even 2018, which saw massive deal values reach just shy of 60% of all deal values.  Again, amazing.

Source: Pitchbook

#4 Series D Pre-Money Valuations Reach a Record

The fourth figure on the state of venture capital is pre-money valuations.  Almost unbelievably, pre-money valuations for the top 75th percentile reached above $1 billion for the first time at $1.1 billion.  This set a record and far surpassed the previous record we saw in 2018 at $756 million.

Source: Pitchbook

Conclusion

Overall, venture capital in 2019 could continue the record-setting pace the world saw in 2019.  With the exception of perhaps the end of the 20th century and the first few years of the 21st century, there has perhaps never been a better time to be involved in venture capital than now.

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Who are the 25 Most Valuable Startups in the U.S.?

January 7, 2019

Every now and then we enjoy looking at the most valuable startups in the U.S.  It provides perspective and sometimes inspires awe at the state of American ingenuity.  Without further adieu, the list follows.

But, before looking, can you guess which companies show up in the top 5?  Where would you guess the most valuable startups are headquartered?  Take your guess now, because the tops of the list follows.

The Top 5

The most valuable private company in the U.S. at the end of 2018 was Uber.  The ride-sharing service had a private value of $72 billion.

In second place was airbnb.  The housing-sharing service had a private valuation of $31 billion at the end of 2018.

In third place is SpaceX.  Elon Musk’s brainchild had an estimated private value at the end of 2018 at $25 billion.

Fourth place belongs to wework.  Wework had a private valuation of $21 billion at the end of 2018.

Rounding out the top 5 was Palantir at about $21 billion.

That’s $170 billion in private value for the most valuable startups in the U.S.  Not bad, not bad at all.

1 Source: Pitchbook

The Remaining Members of the Top 25

Which companies take up the remaining 20 spots on the 25 most valuable startups in the U.S.?  Here’s the list.

#6: stripe.  The payments company had an estimated value of $20 billion in 2018.

#7: lyft: the Uber-competitor had a value of less than a fourth of Uber, although still quite healthy at $15 billion.

#8: samumed: the company had a private value of $12 billion in 2018.

#9: Pinterest: the picture and storytelling service beloved by women had an estimated value in 2018 of $12 billion.

#10: coinbase: the crypocurrency platform was ripe in value, worth an estimated $8 billion in 2018.

#11: instacart: the grocery delivery service company found a niche in this competitive area, with an estimated 2018 value of $8 billion.

#12: slack: the messaging and communications platform had an estimated 2018 value of $7 billion.

#13: moderna: the company grew to an estimated value of $7 billion in 2018.

$14: Tanium: Tanium had an estimated 2018 value of almost $7 billion in 2018.

#15: magic leap: the virtual reality company, whose product is just now testing the public market, had an estimated 2018 value of $6 billion.

#16: robinhood: the innovative trading company, which allows users to trade stocks for $0 commission, had an estimated 2018 value of almost $6 billion.

#17: MachineZone: the company grew to an impressive private value of $5 billion.

#18: Compass: the company founded in 2012 grew to just over $4 billion in value in 2018.

#19: SoFi: the financial services company had an estimated value in 2018 of over $4 billion.

#20: Poloton: the company surpassed $4 billion in private value in 2018.

#21: Intarcia: Intarcia reached a surprising value of a little over $4 billion this past year.

#22: houzz: the real estate company amassed a value of an even $4 billion in 2018.

#23: wish: the private value of wish also reached at clean $4 billion this past year.

#24: Doordash: the delivery service used by some of America’s most well-known restaurants grew to an even $4 billion in value in 2018.

#25: credit karma: lastly, the financial reporting and services company credit karma reached $4 billion in value in 2018.

2 Source: Pitchbook

Conclusion

Overall, the private markets continue to be an important source of growth for the American economy.  In total, the top 25 most valuable startups in the U.S. have values well over $250 billion.  Life is good if you’re innovative, and perhaps a little lucky.

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Private Equity Firms in China Stumble

August 20, 2012

China Daily is reporting the Chinese venture capital and private equity industry has hit a major stumbling block as Asian economic growth grinds lower. While stories of an economic slowdown in China have been rather frequent over the last few months, this is among the first indications that investment is actually declining in what remains […]

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The 2 and 20 Private Equity Compensation Model

July 1, 2012

VC and private equity compensation is typically paid out using a 2 percent annual management fee on capital committed to the fund and 20 percent of the profits each time a portfolio company is sold. It is known as the 2 and 20 model. According to National Venture Capital Association, 2-and-20 has indeed stood the […]

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The Shape of Today’s Venture Capital Industry

March 8, 2010

To get a quick snapshot of the venture capital sector right now, check out “Business Exits in the Current Economic Environment.” It’s a summary of a panel discussion sponsored recently by the Wharton Entrepreneurial Program. Wharton management professor Raphael (Raffi) Amit highlighted the major shifts in the sector. No surprise in the steep decline in […]

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A New Breed of Venture Capitalists

August 19, 2009

A new crop of venture capitalists is springing up that not only want to earn a profit but also to invest in ventures that make the world a better place. One of them, a firm called Good Capital, even sponsors an annual conference to gather like-minded investors, employers and venture capital job seekers together in […]

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Venture Capital Jobs – Marketing

August 5, 2009

Marketing is critically important in the venture capital world, yet it plays a different role depending on whether you’re working at the venture capital firm or the start-up companies in which they invest. Smaller VC firms may hire outside consultants or marketing firms, while a larger, more established VC firm may have the resources to […]

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Tools to Helps Your Venture Capital Job Search

July 15, 2009

ONLINE RESOURCES VentureBeat.com Founder Matt Marshall covered venture capital for the San Jose Mercury News until he left in Sept. 2006 to launch VentureBeat as an independent company. In 2008, the New York Times called VentureBeat one of the “best blogs on the Web,” and now the NYT runs VentureBeat’s articles on its Web site. […]

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Crafting a Venture Capital Job Resume

May 20, 2009

While an Ivy League MBA will open doors in private equity and investment banking, in venture capital, experience in a particular industry that relates to the venture capital firm’s area of focus may be even more valuable. Your venture capital job resume should emphasize your relevant experience and successful track record, if possible, with early […]

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