The 2018 Tech IPO Pipeline. December 7, 2017

Transcription

1 The 08 Tech IPO Pipeline December 7, 07

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4 Table of contents Welcome remarks A look at the private tech market today 08 Tech IPO Pipeline financing trends Sector breakdown Top Tech IPO Pipeline investors Methodology #IPOPIPELINE

5 Welcome remarks Today, the state of private tech investing in the US features many extraordinary characteristics. While overall tech VC deals have fallen, the number of private tech mega-rounds ($00M+) has rebounded as investors pile into potential winners. Mutual funds and hedge funds have pulled back from these deals, but the world s largest private equity fund, the SoftBank Vision Fund, is just getting started. Sensing opportunity, other private equity firms including the likes of Vista Equity Partners have become more active in acquiring later-stage venture-backed software companies. Meanwhile, 07 has seen VC-backed tech IPOs rebound from a lackluster 0 with companies including Stitch Fix, SendGrid, MongoDB, Okta, Cloudera, Snap, and Roku deciding to go public. 08 could be significantly bigger. In October, Union Square Ventures co-founder Fred Wilson wrote, Based on everything I am seeing, hearing, and reading, 08 and 09 will be bumper years for tech IPOs, assuming the markets behave. This is the th annual edition of the CB Insights Tech IPO Pipeline Report. This year s Tech IPO Pipeline features 355 of the most promising and highly valued private venture and private equitybacked technology companies in the United States. As always, it is worth remembering that not all (and perhaps few) of these 355 companies will IPO next year. Many have just crossed the $00M valuation threshold. Others continue to tap into creative sources of capital in the private markets. And some will get out-executed and may never see a liquidity event. CB Insights is a Pilot Growth and National Science Foundation backed software-as-a-service company that uses data science, machine learning and predictive analytics to help our customers predict what's next their next investment, the next market they should attack, the next move of their competitor, their next customer, or the next company they should acquire. For more information, visit: Onward to 08. #IPOPIPELINE 5

6 First, a look at the tech IPO market. Fewer tech IPOs as companies stay private longer. Meanwhile, M&A isn t picking up the slack 3. Instead, mega-rounds allow companies to stay private. Big private equity funds mega-rounds: Vista, SoftBank #IPOPIPELINE

7 The median time between first funding and IPO for US VC-backed tech companies that went public in 03 was.9 years #IPOPIPELINE 7

8 The median time between first funding and IPO for US VC-backed tech companies that went public in 07 YTD was 8.9 years 07 YTD is through //07 #IPOPIPELINE 8

9 IPOs of VC-backed US tech companies 0 07 YTD (/0/07) US tech IPOs rebound in 07, but remain below 0 peak So far in 07 YTD, IPOs by venture capitalbacked US tech companies have already outpaced those in all of 0 by 5%. These include consumer tech IPOs including Redfin, Snap, Blue Apron, and Stitch Fix (YTD) However, annual tech IPO totals remain well below recent multi-year highs. #IPOPIPELINE 9

10 Breakdown of Tech M&A by Fortune 500 Corporations VC-backed only, 0 07 (through 08/0/07) 07 YTD M&A from tech and nontech incumbents isn t picking up the slack There has been no surge in M&A of VC-backed tech companies to make up for the lack of tech IPOs over the past three years. While non-tech incumbents have been getting more active in tech M&A, tech firms in the Fortune 500 are still more likely to acquire a venture-backed tech company than their nontech counterparts. #IPOPIPELINE 0

11 Buyers of VC-backed US companies for $B+ Tech vs. non-tech, VC-backed only, YTD (//07) Lack of large M&A for VC-backed tech companies While non-tech incumbents have become active as buyers in the some of the largest VC-backed tech M&A since the start of 0, the overall tally of billiondollar deals has not grown materially. #IPOPIPELINE

12 FAMGA M&A activity has slowed down M&A by Facebook, Microsoft, Google, Apple, Amazon, 0 07 YTD (/0/07) YTD Internet giants on pace for four-year low in total M&A FAMGA (Facebook, Google, Microsoft, Apple, Amazon), which in recent years has spurred big acquisitions like Instagram, WhatsApp, Twitch, and Waze, has not been especially active in the M&A market broadly in 07 YTD. Amazon Apple Facebook Google Microsoft #IPOPIPELINE

13 Private companies are choosing mega-rounds instead of IPOs #IPOPIPELINE 3

14 US VC-backed tech financing trend 0 07 YTD (/0/07) Overall tech VC deals are down as investors look to pile into winners Total deals to US VCbacked tech companies are on pace to fall, although total funding in 07 is set to rise slightly on a year-over-year basis. $8.0 $. $37. $.5 $3. $ YTD Disclosed Funding ($B) Deals #IPOPIPELINE

15 US VC-backed tech IPOs vs. $00M+ private tech financing rounds YTD (/0/07) YTD But private tech megarounds are still booming The number of $00M+ private financings to US venture-backed tech companies are on the rise. While private tech megarounds fell 5% yearover-year in 0, 07 YTD has since seen a rebound in $00M+ deals with close to 70 this year already. $00M+ Fundings IPOs #IPOPIPELINE 5

16 Deep-pocketed investors fund mega-rounds and allow companies to stay private longer #IPOPIPELINE

17 Vista Equity active in venture market Investments or M&A into VC-backed companies, 0 07 YTD (/0/07) Company Description Type Date Select Investors Managed services Enterprise management software for Apple products Event management software Software testing and user feedback Restaurant management software Social media software Governance, risk & compliance solutions Acquisition Investment (bought out early investors) Acquisition Investment Acquisition Acquisition October 07 September 07 August 07 July 07 May 07 September 0 Identity management Acquisition June 0 Business optimization software Acquisition (merged with Autotask) Acquisition October 07 January 0 General Catalyst, Technology Crossover Ventures Dell Technologies Capital, GSV Capital, Summit Partners Ludlow Ventures, Storm Ventures Longworth Venture Partners, Scale Venture Partners, Egan- Managed Capital, MassVentures First Round Capital, Index Ventures, Shasta Ventures, NextView Ventures Benchmark, NEA, Emergence Capital Partners, Shasta Ventures Bain Capital Ventures DFJ, Fidelity Ventures, General Catalyst, Sapphire Ventures Edison Partners, RedShift Partners Private equity descends on later-stage VCbacked tech companies One group that has become more active in investing and acquiring private venture-backed tech companies are private equity firms. Since the start of 0 alone, tech-focused Vista Equity Partners has acquired venture-backed companies including Datto, Lithium Technologies, Ping Identity, and Applause. #IPOPIPELINE 7

18 US tech portfolio investments by SoftBank Group 0 07 YTD (/0/07) 5 5 SoftBank: The market disruptor? The biggest (literally) investor entrant in the US private tech market is SoftBank, which went from zero private tech investments in 0 to investing billions into the likes of WeWork, MapBox, Slack, Kabbage, and Nauto in 07 YTD YTD Softbank's US tech investments #IPOPIPELINE 8

19 In Q3 7 alone, Softbank participated in 7 of the top 0 largest US tech deals totaling $.9 billion in equity financing #IPOPIPELINE 9

20 0 Select hedge and mutual fund participation in VC-backed US tech companies 0 07 YTD (/0/07) YTD *Includes deals by Altimeter Capital, Balyasny Asset Management, BlackRock, Coatue Management, Discovery Capital Management, Dragoneer Investment Group, Fidelity Investments, Glade Brook Capital, Hartford Funds Management Group, Lone Pine Capital, Maverick Capital, Passport Capital, T. Rowe Price, Third Point, Tiger Global Management, Valiant Capital Partners, Wellington Management. Mutual funds and hedge funds in contrast step back from fray Hedge funds and mutual funds which have been actively investing in US private tech companies including Fidelity Investments, T. Rowe Price, BlackRock, Coatue Management, and Tiger Global Management made fewer investments into VC-backed tech companies in 0 and have remained less active in 07 YTD. #IPOPIPELINE 0

21 Our 07 IPO Pipeline predictions how they fared Our 07 Tech IPO Pipeline identified 39 tech companies that represented the cream of the crop within VC and private equity portfolios. Here are how our predictions did: 39 tech IPO pipeline companies in 07 % exited* or raised financing 3 companies exited via IPO or M&A 9 went public companies raised additional financing in 07 $.5B in financing raised *Includes one 0 exit which occurred post-publication of report #IPOPIPELINE

22 Our 08 Tech IPO Pipeline by the numbers There are 355 venture capital and private equity-backed technology companies in the 08 Tech IPO Pipeline. These companies demonstrate significant momentum based on our private company Mosaic ratings. Below is a breakdown of trends observed across these firms: $0.B Equity financing raised to-date by Tech IPO Pipeline companies 5 vs. 5 New York IPO pipeline companies versus Massachusetts $95M Average amount raised by 08 pipeline companies, a jump from $M last year 9 The number of Tech IPO Pipeline companies in California, representing 5% of all companies in the pipeline. Mega-rounds ($00M+) raised by Tech IPO pipeline companies in 07, up from 5 in 0. SV Angel Has the most 07 Tech IPO Pipeline companies valued at $B or more; 0 in total, of which they were an early investor in 80%. 55 Tech IPO Pipeline companies which raised their first round of funding in 0 or later (%). #IPOPIPELINE

23 A Selection of 08 Tech IPO Pipeline Companies #IPOPIPELINE 3

24 Top 5 IPO prospects ranked by Mosaic Score We used our proprietary company rating algorithm, Mosaic, to identify a select group of companies that are most likely to go public in 07. The list is below: Company Mosaic Score (max,000) Total Funding ($M) Last Round Select Investors 930 $00 $80M Accel Partners, Insight Venture Partners, Sequoia Capital 900 $95 $00.5M Series E Benchmark, BlackRock, TPG Growth, Credit Suisse, Canyon Partners 880 $39 $3M Corp. Minority Khosla Ventures, WPP Digital, Silicon Valley Bank, Venrock, Microsoft 870 $3 $5M Series F Benchmark, BlackRock, Greylock Partners, Index Ventures 830 $39 $75M Growth Equity Tiger Global, Valinor Management, Viking Global Investors, capitalg, Ribbit Capital Mosaic was built with a grant from the National Science Foundation. Using non-traditional public signals ranging from customer signings to hiring activity to media sentiment to web traffic and mobile app data, Mosaic scores provide a rigorous, data driven way to understand the health and momentum of private companies. To learn more about Mosaic, visit #IPOPIPELINE

25 Tech IPO Pipeline financing trends #IPOPIPELINE 5

26 In 07, Tech IPO Pipeline companies raised: $3 billion in equity financing #IPOPIPELINE

27 08 Tech IPO Pipeline investment activity YTD (/0/07) $0.B raised by Tech IPO Pipeline companies $3 $9 $90 $ $,0 $,9 $5,0 $,9 $8, $,50 $3, The 355 companies in the pipeline have raised over $0B across more than,900 deals since 000. Companies on the 08 Tech IPO Pipeline have raised more than $75B since the start of 05 as investors continue to pile in large investments, despite fewer deals on an annual basis. Disclosed Funding ($M) Deals #IPOPIPELINE 7

28 08 Tech IPO Pipeline $00M+ equity financing rounds YTD (/0/07) Mega-rounds to IPO pipeline companies bounce back after 0 drop After falling 33% yearover-year in 0, $00M+ private financing rounds to pipeline companies is on pace to surpass 05 s high YTD #IPOPIPELINE 8

29 08 Tech IPO Pipeline geographic breakdown California sees most companies in the IPO Pipeline 9 California leads all US states with 9 (5%) of all 08 Tech IPO Pipeline Companies. New York comes in second with 5 companies (%) Utah stays ahead of Washington and Texas for another year with companies. #IPOPIPELINE 9

30 08 Tech IPO Pipeline total funding by state IPO pipeline companies in New York dominate Massachusetts by total funding CA $5B NY $7.B MA $3.7B New York-based pipeline companies have raised over x the amount of total funding as pipeline companies in Massachusetts. TX $.3B FL $B California has received the lion s share of aggregate funding for Tech IPO Pipeline companies, with $5B. #IPOPIPELINE 30

31 YTD When did Tech IPO Pipeline companies first raise funding? YTD (/0/07) % of all IPO pipeline companies raised first funding in 0 or 0 58% of 08 Tech IPO Pipeline companies raised their first financings since the start of 0. 0 saw the greatest number of first funding rounds with 5. #IPOPIPELINE 3

32 When did 08 Tech IPO Pipeline companies first become unicorns? 0 07 YTD (/05/07) Fewer new unicorns minted since of the Tech IPO Pipeline companies entered the billion-dollar club in 05. Since then, fewer than 0 reached their first $B+ valuation in either 0 or 07 YTD YTD 7 #IPOPIPELINE 3

33 Sector breakdown #IPOPIPELINE 33

34 Sector breakdown of Tech IPO Pipeline Internet Mobile & Telecommunications 0 Computer Hardware & Services 3 Software (non-internet/mobile) 5 Electronics 3 Consumer Products & Services 3 7 Internet sector continues to dominate IPO pipeline Internet companies make up 9% of the 08 Tech IPO Pipeline, down slightly from 73% last year. Like last year, Mobile & Telecom comes in a distant second, with 0 companies. Healthcare 3 Other #IPOPIPELINE 3

35 Top 0 Internet sub-industries Monitoring & Security Business Intelligence, Analytics & Performance Mgmt Collaboration & Project Management Advertising, Sales & Marketing HR & Workforce Management Customer Relationship Management Education & Training Marketplace Accounting & Finance Database Management Apparel & Accessories News & Discussion Advertising Network or Exchange Application & Data Integration Real Estate Health & Wellness Asset & Financial Management & Trading Healthcare Data Storage Billing, Expense Management and Procurement Security tops the list of Internet IPO pipeline companies Monitoring & security counts the highest number of 08 Tech IPO Pipeline companies in the Internet sector, after BI, analytics & performance management saw the highest number of pipeline companies for the last three prior years. Collaboration & project management rounds out the top three most popular sub-industries for Internet pipeline companies in 08. #IPOPIPELINE 35

36 Geographic breakdown by sector California 7% New York 90% Massachusetts 5% Utah 75% % 3% % 8% 8% 8% 8% %3% % % % 8% 8% Internet sector dominates New York for another year Continuing the trend from last year, 9 out of 0 New York-based Tech IPO Pipeline companies fall under the Internet sector. Utah also sees a strong contingent of Internet software companies in the pipeline. Washington 55% 7% 9% 9% Internet Mobile & Telecommunications Computer Hardware & Services Software (non-internet/mobile) Electronics Other #IPOPIPELINE 3

37 Top 08 Tech IPO Pipeline investors #IPOPIPELINE 37

38 KPCB, GV, AZ, and NEA count highest number of Tech IPO Pipeline companies in their portfolios Top ranked investors in the 08 Tech IPO Pipeline Rank Investor 07 Position YoY Change Kleiner Perkins Caufield & Byers 5 Google Ventures Andreessen Horowitz - New Enterprise Associates 5 5 Sequoia Capital 3 - Accel Partners Goldman Sachs Institutional Venture Partners Tiger Global Management 5 0 Lightspeed Venture Partners ICONIQ Capital SV Angel -0 Founders Fund - Battery Ventures 8 5 Index Ventures 5 Fidelity Investments - 5 capitalg 8 Salesforce Ventures - 8 Spark Capital 8 Wellington Management Greylock Partners - 8 Khosla Ventures Bessemer Venture Partners General Catalyst GV, the investment arm of Google, makes a notable move up to second on the list of investors with the most investments in Tech IPO Pipeline companies this year. Andreessen Horowitz, NEA, and Sequoia Capital remain in the top 5, while Kleiner Perkins moves up five spots. Investors that made the list after not appearing last year include ICONIQ Capital, Index Ventures, and Spark Capital. #IPOPIPELINE 38

39 SV Angel, AZ, Sequoia Capital lead investors by unicorns in the pipeline Investor Top ranked investors in the unicorn club Number of $B+ Companies % Investor Got in Seed/ Series A SV Angel 0 80% Andreessen Horowitz 9 3% Sequoia Capital 8 50% Tiger Global Management 5 7% Wellington Management 0% Google Ventures 9% Kleiner Perkins Caufield & Byers 3 5% capitalg 3 0% Goldman Sachs 7% Fidelity Investments 0% T. Rowe Price 0% Khosla Ventures % Thrive Capital 0 0% Founders Fund 0 30% Y Combinator 9 89% Institutional Venture Partners 9 0% New Enterprise Associates 9 % Greylock Partners 9 33% ICONIQ Capital 9 0% Benchmark 9 5% GGV Capital 9 0% SV Angel topped all investors with the highest number of billion-dollar Tech IPO Pipeline companies in their portfolio, with 0. Andreessen Horowitz takes second place and first invested in 3% of its pipeline companies in the billion-dollar club at the seed or Series A stage. Sequoia Capital rounds out the top three. #IPOPIPELINE 39

40 Top 08 Tech IPO Pipeline investors By stage of entry We ve illustrated when the top investors first invested in a Tech IPO Pipeline company. Andreessen Horowitz and New Enterprise Associates each invested in 3 pipeline companies at the Series A stage.. Kleiner Perkins Caufield & Byers. Google Ventures Seed / Angel 3 Seed / Angel Series A 9 Series A 9 Series D Series E+ 7 Series D 0 3. Andreessen Horowitz. New Enterprise Associates Other Other Seed / Angel 7 Seed / Angel Series A 3 Series A 3 0 Series D 3 Series D Series E+ Series E+ #IPOPIPELINE 0

41 Top 08 Tech IPO Pipeline investors By stage of entry 5. Sequoia Capital. Accel Partners Other Other Seed / Angel 3 Seed / Angel 3 Series A Series A Series D Series D Series E+ 7. Goldman Sachs 8. Institutional Venture Partners Other Other Seed / Angel Series A Series A 7 5 Series D Series D Series E+ 8 Series E+ 7 #IPOPIPELINE

42 Top 08 Tech IPO Pipeline investors By stage of entry 9. Tiger Global Management 0. Lightspeed Venture Partners Other 3 Other Series A 5 Seed / Angel Series A Series D 5 Series E ICONIQ Capital. SV Angel Other Seed / Angel 7 Series A Series A 8 3 Series D 8 Series D Series E+ #IPOPIPELINE

43 Top 08 Tech IPO Pipeline investors By stage of entry. Founders Fund. Battery Ventures Seed / Angel 3 Seed / Angel Series A 5 Series A 7 9 Series D Series E+ 5. Index Ventures 5. Fidelity Investments Seed / Angel Other Series A 5 Series D Series D Series E+ 8 Series E+ #IPOPIPELINE 3

44 Top 08 Tech IPO Pipeline investors By stage of entry 5. capitalg 8. Salesforce Ventures Other Other Seed / Angel Series A Series D 7 5 Series E+ 7 Series D Series E+ 8. Spark Capital 8. Wellington Management Other Series A 3 Series D 7 Series E+ 8 Series D Series E+ 3 #IPOPIPELINE

45 Top 08 Tech IPO Pipeline investors By stage of entry 8. Greylock Partners 8. Khosla Ventures Seed / Angel Seed / Angel Series A Series A 5 Series D 3 Series E+ 8. Bessemer Venture Partners. General Catalyst Seed / Angel Other Series A Seed / Angel 3 5 Series A 3 7 Series D 3 Series E+ Series D #IPOPIPELINE 5

46 Methodology What s included? What s not? CB Insights encourages you to review the methodology and definitions employed to better understand the numbers presented in this report. If you have any questions about the definitions or methodological principles used, we encourage you to reach out to us directly. Additionally, if you feel your firm has been underrepresented please send an to info@cbinsights.com and we can work together to ensure your firm s investment data is upto-date. What is included: All financings to Tech IPO Pipeline companies. Investment activity is only equity investments and convertible debt, while total funding on a per company basis includes all types of funding including debt. Fundings of only private companies. Funding rounds raised by public companies of any kind on any exchange (including Pink Sheets) are excluded from our numbers even if they received investments by a venture firm(s). Only includes the investment made in each quarter for tranched investments. If a company does a second closing of its round for $5M and previously had closed $M in a prior quarter, only the $5M is reflected in our results. Round #s reflect what has closed not what is intended. If a company indicates the closing of $5M out of a desired raise of $5M, our numbers reflect only the amount which has closed. Only verifiable fundings are included. Fundings are verified via () various federal & state regulatory filings () direct confirmation with firm or investor or (3) press release. What is excluded: No contingent funding. If a company received a commitment for $0M subject to hitting certain milestones but first gets $8M, only the $8M is included in our data. No business development/r&d arrangements whether transferable into equity now, later, or never. If a company signs a $300M R&D partnership with a larger corporation, this is not equity financing nor is it from a venture capital firm. As a result, it is not included. No buyouts, consolidations, or recapitalizations. All three of these transaction types are commonly employed by private equity firms and are tracked by CB Insights. However, they are excluded for the purposes of this report. No private placements, even if made by a venture capital firm (s). These investments are also known as PIPEs (Private Investment in Public Equities). #IPOPIPELINE

47 For all data inquiries, CB Insights at #IPOPIPELINE 7