Venture Capital Report U.S. 3Q 2018
The following report presents Dow Jones VentureSource s quarterly findings for U.S. venture capital fundraising, investment, valuation, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market. Highlights for 3Q 2018 include: U.S. venture capital fundraising decreased during 3Q 2018, both in terms of funds raised and number of closings, but the level of activity is still considerable when compared with the same quarter last year. Venture capital investment in U.S. companies hit an all-time record, eclipsing the dot-com bubble peak by 17%. Both the number of IPOs and M&A deal values decreased compared to the previous quarter. 2
VENTURE FUNDRAISING DECREASES IN U.S. DURING 3Q 2018 FUNDRAISING 148 venture capital funds collected $12.81 billion in 3Q 2018, which represents a 27% decrease in the amount raised from the prior quarter and a 9% drop in the number of funds. 200 160 U.S. VC Fundraising (2015 2018) Based on multiple closings $20.00 $16.00 Insight Venture Partners X LP, a venture capital fund that closed at $6.3 billion, was the largest of 3Q 2018, raising 120 $12.00 $2.69 billion in its final closing, which accounted for 21% of the total VC financing raised during the quarter. 80 $8.00 40 $4.00 0 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Amount Raised ($B) $5.76 $9.15 $14.35 $11.91 $8.79 $9.58 $8.20 $14.38 $9.85 $5.65 $9.00 $17.61 $12.81 Number of Funds 78 104 131 119 117 149 174 160 120 142 148 162 148 $- 3
LARGEST VC FUND CLOSINGS IN 3Q 2018 FUNDRAISING Firm Name Fund Name Amount ($M) City State Offering Status Fund Type Fund Category Closing Type Insight Venture Partners Insight Venture Partners X LP $2,689.79 New York NY Closed Multi-stage venture capital Venture Capital Final Lightspeed Venture Partners Lightspeed Venture Partners Select III LP $1,050.00 Menlo Park CA Closed Late-stage venture capital Venture Capital Final Foundry Group LLC Foundry Group Next 2018 LP $750.00 Boulder CO Closed Multi-stage venture capital Venture Capital Final Lead Edge Capital Management LLC Lead Edge Capital IV LP $520.00 New York NY Closed Multi-stage venture capital Venture Capital Final Ribbit Capital LP Ribbit Capital V LP $420.00 Palo Alto CA Closed Early-stage venture capital Venture Capital Final 4
U.S. EQUITY INVESTMENT HITS ALL-TIME RECORD FINANCING Investment in U.S. companies surged 14% in 3Q 2018 from the previous quarter, hitting a new record for the second consecutive quarter. Total funding now exceeds the peak of the first dot-com bubble (1Q 2000) by 17%, although the number of deals is 26% lower compared to that era. Deal volume also fell on a quarter-over-quarter basis, dropping 8%. Median deal sizes actually decreased 14% from 2Q, indicating that the jump in total funding was concentrated in a handful of extremely large rounds. When compared to last quarter, financing rose most noticeably in the Business & Financial Services, Consumer Goods, and Consumer Services sectors; IT and Healthcare fell slightly. $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Equity Financings in U.S.- Based, VC-Backed Companies (2015 2018) 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Amount Raised ($B) $23.18 $23.78 $16.33 $19.34 $19.62 $14.20 $19.49 $21.48 $23.59 $21.87 $26.87 $27.61 $31.53 Number of Deals 1308 1376 1289 1293 1349 1206 1396 1433 1376 1293 1476 1498 1377 1600 1400 1200 1000 800 600 400 200 0 5
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, BY ROUND CLASS (QUARTER OVER QUARTER, 2015 2018) FINANCING Number of Deals 500 450 400 350 300 250 200 150 100 50 0 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Seed 108 133 117 89 120 107 145 165 150 147 147 181 155 First 384 385 348 361 366 333 337 342 274 266 315 361 282 Second 217 234 225 233 209 189 219 201 223 179 228 221 198 Later 429 432 422 415 453 379 442 402 419 406 473 438 424 Restart 3 2 4 4 3 1 6 1 4 0 2 0 4 6
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, BY ROUND CLASS (QUARTER OVER QUARTER, 2015 2018) FINANCING $18,000.00 $16,000.00 $14,000.00 $12,000.00 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $0.00 Amount Raised ($B) 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Seed $126.79 $177.54 $193.61 $154.44 $163.40 $202.78 $268.47 $417.22 $347.13 $396.55 $426.15 $525.26 $488.11 First $2,855.0$3,054.1 $2,201.9$2,367.4$3,179.11 $2,168.8 $3,447.9$3,234.8$2,263.9$3,521.9$4,237.9$3,686.2$4,033.3 7 1 0 5 4 7 7 4 5 5 3 9 Second $3,213.7 $3,253.1$2,233.9 $2,710.1 $2,445.1$2,053.2$4,102.8 $3,097.3$3,676.5 $3,132.0$4,868.6$3,615.6 $5,288.2 5 0 5 8 6 0 8 3 4 3 6 5 9 Later $14,938. $16,174. $10,158. $9,575.3$11,646.1 $7,772.1 $10,083. $12,670. $14,512.1 $12,788. $14,859. $16,959. $16,886. 4 8 8 6 6 9 2 2 8 3 3 Restart $55.49 $16.20 $61.84 $41.80 $543.60 $11.00 $82.85 $11.00 $40.58 $0.00 $29.60 $0.00 $35.10 7
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, MEDIAN DEAL SIZE (2015 2018) FINANCING Median Equity Deal Size ($M) $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Median Equity Deal Size ($M) $5.00 $5.00 $4.40 $4.21 $4.50 $4.70 $5.00 $5.22 $5.03 $5.76 $6.00 $7.00 $6.00 8
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, BY INDUSTRY GROUP (3Q 2018) FINANCING Business & Financial Services companies (which includes SaaS) received the lion s share of funding in 3Q, taking $7.55 billion across 299 deals. The amount invested was up 21% over the previous four-quarter average, while the number of deals fell 9%. The IT sector dropped to second place, with $7.20 billion in 410 rounds. This represented an increase of 25% in funding but a 5% dip in deal volume compared 3Q 2018 Industry Breakdown By Number of Deals 410 58 291 299 85 204 22 Business & Financial Services Consumer Goods Consumer Services Energy & Utilities Healthcare Industrial Goods & Materials Information Technology to the previous four-quarter average. Healthcare companies placed a strong third, securing $6.90 billion through 291 deals. These figures were up 7% and 3% in total funding and deal volume, respectively, compared to the previous four-quarter average. For the year to date, Healthcare is in the lead so far, with a total of $21.30 billion raised across 870 transactions. 3Q 2018 Industry Breakdown By Amount Raised ($B) 3% 23% 24% 8% Business & Financial Services Consumer Goods Consumer Services Energy & Utilities Healthcare 22% 1% 19% Industrial Goods & Materials Information Technology 9
TOP DEALS FOR VC-BACKED COMPANIES (3Q 2018) FINANCING Company Name Location Industry Code Industry Segment Industry Group Brief Description Close Date Round Type Raised ($M) Lucid Motors Inc. NewTV Newark, CA Los Angeles, CA Power Supplies Broadcasting Electronics & Computer Hardware Media & Content Information Technology Consumer Services Provider of energy and electric drive (EV) solutions for electric vehicle applications. Developer of series with short, Youtubelength episodes. Round Investors (* denotes lead) 9/17/2018 Other Equity 1000.00 Saudi Arabia Public Investment Fund 8/7/2018 VC 1 st 1000.00 Warner Media LLC, Walt Disney Co., Viacom, Sony, NBC Universal Inc., Metro-Goldwyn-Mayer Studios Inc., Madrone Capital Partners*, Lionsgate Entertainment, Liberty Global, JPMorgan Chase & Co., ITV, Goldman Sachs Group Inc., Entertainment One Ltd., Alibaba Capital Partners, 21st Century Fox Inc. JUUL Labs Inc. San Francisco, CA Sports/Leisure Goods Personal Goods Consumer Goods Provider of electronic cigarettes. 7/10/2018 VC 2 nd 650.00 Tiger Global Management LLC* Peloton Interactive Inc. New York, NY Sports/Leisure Goods Personal Goods Consumer Goods Provider of an interactive stationary exercise bike. 8/2/2018 VC 6 th 550.00 Tiger Global Management LLC, Technology Crossover Ventures*, GGV Capital Ambatana Inc. New York, NY Shopping Facilitators Consumer Information Services Consumer Services Provider of a mobile application to buy and sell used goods locally. 8/8/2018 VC 4 th 500.00 Naspers Ventures* 10
TOP DEALS FOR VC-BACKED COMPANIES (3Q 2018) FINANCING Company Name Location Industry Code Industry Segment Industry Group Brief Description Close Date Round Type Raised ($M) Uber Technologies Inc. San Francisco, CA Transportation Services Travel & Leisure Consumer Services Provider of an ondemand ridesharing and food delivery service. 8/27/2018 Corporate Equity Round Investors (* denotes lead) 500.00 Toyota Motor Corp.* Zoox Inc. Foster City, CA Automobiles Vehicles & Parts Consumer Goods Developer of selfdriving cars. 7/17/2018 VC 2 nd 500.00 Primavera Capital Group*, Mike Cannon-Brookes*, Lux Capital Management LLC, Draper Fisher Jurvetson, Blackbird Ventures Samumed LLC San Diego, CA Biotechnology Therapeutics Biopharmaceuticals Healthcare Developer of therapeutics for tissue-level regeneration. 8/6/2018 VC 2 nd 438.00 Vickers Venture Partners, Starling Ventures LLC 11
MOST ACTIVE INVESTORS FOR U.S.-BASED, VC-BACKED COMPANIES (3Q 2018) FINANCING 35 30 31 25 25 20 19 19 17 17 15 10 5 0 Alumni Ventures Group Y Combinator GV New Enterprise Associates Andreessen Horowitz Sequoia Capital 12
NUMBER OF DEALS/AMOUNT RAISED BY PRIMARY REGION (3Q 2018) FINANCING Number of Deals by Primary Region Amount Raised ($B) by Primary Region Number of Deals in 3Q 2018 by Primary Region Mid-Atlantic Midwest Central Midwest East Mountain New England Northern California 3Q 2018 3Q 2018 Pacific Northwest South Central Mid-Atlantic Midwest Central Midwest East Mountain New England Northern California Pacific Northwest South Central South East Southern California 296 35 102 77 120 438 55 59 77 111 $6.32 $0.45 $1.04 $1.07 $2.65 $14.28 $0.80 $0.57 $0.89 $3.38 Amount Raised ($B) in 3Q 2018 by Primary Region South East Southern California Mid-Atlantic Midwest Central Midwest East Mountain New England Northern California Pacific Northwest South Central South East Southern California 13
NUMBER OF DEALS/AMOUNT RAISED BY METRO REGION (3Q 2018) FINANCING Number of Deals by Metro Region Number of Deals by Metro Region 3Q 2018 Amount Raised ($B) by Metro Region 3Q 2018 Austin 29 $0.29 Boston 109 $2.61 Chicago 33 $0.46 Dallas-Fort Worth 12 $0.07 Los Angeles 66 $2.14 New York 199 $5.36 Orange County 15 $0.25 Potomac 38 $0.61 San Diego 24 $0.89 San Francisco Bay Area 434 $14.21 Seattle 44 $0.68 Metro Region Breakout Number of Deals San Francisco Bay Area New York Boston Los Angeles Seattle Potomac Chicago Austin San Diego Orange County Dallas-Fort Worth San Francisco Bay Area New York Metro Region Boston Breakout Los Angeles Amount San Diego Raised ($B) Seattle Potomac Chicago Austin Orange County Dallas-Fort Worth 15 12 33 29 24 44 38 66 $2.61 $2.14 $0.89 $0.68 $0.61 $0.46 $0.29 $0.25 $0.07 109 199 Amount Raised ($B) by Metro Region $5.36 $14.21 434 14
VENTURE M&A AND IPO MARKET ACTIVITY IN THE U.S. DURING 3Q 2018 LIQUIDITY Exit Opportunities for U.S. VC Backed Companies (2015 2018) In 3Q 2018, deal values for mergers and acquisitions of VC-backed companies declined by 12% when compared with the previous quarter. During the same period, the number of IPOs declined by 32% to a total of 21 listings for venture-backed companies. While this represents a significant decrease when compared with 2Q 2018 s record quarter, it still comes in 163% higher than the number of listings in 3Q 2017. Capital raised decreased by 53% from 2Q, reaching $2.26 billion. 3Q'18 2Q'18 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16 3Q'16 2Q'16 1Q'16 4Q'15 3Q'15 0 50 100 150 200 250 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 IPOs 14 16 6 11 13 8 7 20 8 25 16 31 21 M&As 174 164 148 162 162 148 165 170 182 186 182 190 202 15
U.S. VC-BACKED M&As (2015-2018) LIQUIDITY U.S. VC-Backed M&A Activity (2015-2018) 202 M&As of venture-backed companies in the U.S. collected $33.02 billion during 3Q 2018. Compared to 2Q 2018, when a total of 190 transactions accumulated $37.48 billion, the number of deals increased by 6% while amount raised decreased by 12%. The largest deal of the quarter was Cisco Systems s acquisition of Duo Security Inc. for $2.35 billion, announced on August 2. The deal accounted for approx. 7% of the total amount paid in 3Q 2018 for M&As. $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $- 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Amount Paid ($B) $27.37 $26.96 $23.10 $23.59 $26.40 $18.39 $20.22 $21.18 $21.80 $27.10 $32.00 $37.48 $33.02 Number of M&As 174 164 148 162 162 148 165 170 182 186 182 190 202 250 200 150 100 50 0 16
TOP 3 U.S. M&As (3Q 2018) LIQUIDITY Company Name Location Brief Description Industry Code Industry Segment Industry Group Close Date Round Type Amount Paid ($M) Acquirer Duo Security Inc.* Ann Arbor, MI Provider of two-factor authentication services. Network / Systems Management Software Software Information Technology 8/2/2018 Acquisition $2,350.00 Cisco Systems (Nasdaq: CSCO) Datorama Inc. New York, NY Provider of a software-asa-service (SaaS) based big data management platform for advertisers. Advertising / Marketing Business Support Services Business and Financial Services 7/16/2018 Acquisition $800.00 Salesforce.com (NYSE: CRM) Mendix Inc.* Boston, MA Provider of platform-asa-service (PaaS) back- Business Applications Software end integration services. Software Information Technology 8/1/2018 Acquisition $730.00 Siemens AG (ETR: SIE) *Deal pending regulatory approval 17
U.S. VC-BACKED IPOs (2015-2018) LIQUIDITY U.S. VC-Backed IPO Activity (2015-2018) 21 venture-backed companies raised $2.26 billion through public offerings in 3Q 2018. Both the number of deals and the capital raised dropped significantly from last quarter. Tenable Holdings Inc. s IPO was the biggest listing, raising $250.70 million. The company, now quoted on the Nasdaq Stock Exchange under the TENB ticker symbol, was valued at $2.55 billion. $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 35 30 25 20 15 10 5 $- 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 Raised ($B) through IPO $1.63 $1.36 $0.38 $0.79 $0.99 $0.69 $3.95 $2.04 $0.62 $2.65 $1.75 $4.78 $2.26 Number of IPOs 14 16 6 11 13 8 7 20 8 25 16 31 21 0 18
TOP 3 U.S. IPOs (3Q 2018) LIQUIDITY Company Name Location Brief Description Industry Code Industry Segment Industry Group Close Date Round Type Raised through IPO ($M) Exchange Tenable Holdings Inc. Columbia, MD Provider of cyber security solutions. Network / Systems Management Software Software Information Technology 7/26/2018 IPO $250.70 NASDAQ: TENB Eventbrite Inc. San Francisco, CA Provider of online event management and ticketing services. Shopping Facilitators Consumer Information Services Consumer Services 9/20/2018 IPO $230.00 NYSE: EB Sonos Inc. Santa Barbara, Provider of wireless speakers. CA Consumer Electronics Electronics and Computer Hardware Information Technology 8/2/2018 IPO $83.33 NASDAQ: SONO 19
ABOUT US Dow Jones VentureSource helps venture capitalists, corporate development executives, investment bankers, and service providers find deal and partnership opportunities, perform comprehensive due diligence, and examine trends in venture capital investment, fundraising, and liquidity. It provides accurate, comprehensive data on venture-backed companies including their investors and executives in every region, industry, and stage of development throughout the world. The investment figures included in this release are based on aggregate findings of Dow Jones' proprietary research and are contained in VentureSource. This data was collected through surveys of professional firms, interviews with company executives, and from secondary sources. These venture capital statistics cover institutional equity investments in early stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. Figures contained throughout the report are current at the time of publication but are subject to change without notice. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice. 20
ABOUT DOW JONES Dow Jones is a global provider of news and business information, delivering content to consumers and organizations around the world across multiple formats, including print, digital, mobile and live events. Dow Jones has produced unrivaled quality content for more than 125 years and today has one of the world s largest newsgathering operations globally. It produces leading publications and products including the flagship Wall Street Journal, America s largest newspaper by paid circulation; Factiva, Barron s, MarketWatch, Financial News, DJX, Dow Jones Risk & Compliance, Dow Jones Newswires, and Dow Jones VentureSource. MEDIA CONTACT: Colleen Schwartz 212.416.3583 Colleen.Schwartz@dowjones.com 21