Venture Capital Report U.S. 4Q 2017
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 4Q 2017 include: U.S. venture capital fundraising decreased in amount invested while the number of funds increased; Venture capital investment in U.S. companies declined; Amount raised through Initial public offerings (IPOs) tripled in the fourth quarter of 2017, mergers and acquisitions (M&As) fell in comparison with the previous quarter. 2
VENTURE FUNDRAISING DECREASES IN THE U.S. DURING 4Q 2017 FUNDRAISING 121 venture capital funds raised $4.75 billion in 4Q 2017, a 51% decrease in the amount raised though number of funds were up 3% from the prior quarter. Flagship Pioneering Fund VI LP was the largest U.S. venture capital fund of 4Q 2017, raising $618 million and accounting for 13% of the total venture capital financing raised during the quarter. 180 160 140 120 100 80 60 U.S. VC Fundraising (2014 2017) Based on multiple closings $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 40 $4.00 20 $2.00 0 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Amount Raised ($B) $9.37 $9.01 $13.70 $5.76 $9.13 $14.19 $11.72 $8.78 $9.42 $8.12 $14.27 $9.74 $4.75 Number of Funds 114 80 113 77 102 128 116 116 143 166 153 117 121 $- 3
LARGEST VC FUNDS RAISED IN 4Q 2017 FUNDRAISING Firm Name Fund Name Amount ($M) City State Offering Status Fund Type Fund Category Closing Type Flagship Pioneering Flagship Pioneering Fund VI LP $618.00 Cambridge MA Closed Early-stage venture capital Venture Capital Final Andreessen Horowitz AH Bio Fund II LP $450.00 Menlo Park CA Closed Early-stage venture capital Venture Capital Final Frazier Healthcare Partners Frazier Life Sciences IX LP $418.93 Seattle WA Closed Early-stage venture capital Venture Capital Final Icon Ventures Icon Ventures VI LP $265.00 Palo Alto CA Closed Early-stage venture capital Venture Capital Final Vida Ventures LLC Vida Ventures LLC $254.80 Boston MA Closed Multi-stage venture capital Venture Capital Final 4
U.S. VENTURE INVESTMENT IN 4Q 2017 DECREASES FINANCING U.S.-based VC-backed companies received $18.88 billion in 957 equity deals in 4Q 2017, which is at a similar level to the capital raised in the third quarter of 2017. During the same period, the number of deals decreased 10%. $25.00 $20.00 Equity Financings into U.S.- Based, VC-backed Companies (2014 2017) 1400 1200 1000 Consumer Services received the highest amount of investment, accounting for 25% of the total capital raised. $15.00 800 The sector experienced a sharp rise of 78% from the last quarter, up 90% when compared to the same period last year. $10.00 $5.00 600 400 200 $0.00 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Amount Raised ($B) $18.70 $16.80 $19.90 $20.83 $20.14 $13.96 $18.17 $14.14 $11.18 $17.37 $17.85 $19.06 $18.88 Number of Deals 1115 1094 1231 1097 1139 1058 1050 1056 965 1122 1121 1059 957 0 5
EQUITY FINANCINGS IN U.S. BASED, VC BACKED COMPANIES, BY ROUND CLASS (QUARTER ON QUARTER, 2014 2017) FINANCING Number of Deals 500 400 300 200 100 0 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Restart 7 6 5 3 2 4 4 4 2 6 1 4 0 Later 311 300 350 315 312 291 301 307 256 310 253 247 203 Second 206 242 266 219 240 232 231 202 197 224 193 206 165 First 410 377 422 395 398 369 372 367 349 335 311 247 211 Seed 99 87 110 96 113 95 67 97 81 120 153 139 133 6
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, BY ROUND CLASS (QUARTER ON QUARTER, 2014 2017) FINANCING Amount Raised ($B) $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Restart $0.13 $0.04 $0.09 $0.06 $0.02 $0.06 $0.04 $0.55 $0.03 $0.08 $0.01 $0.04 $0.00 Later $11.95 $10.22 $12.01 $12.37 $13.30 $8.22 $8.37 $7.50 $5.04 $8.13 $10.05 $10.82 $9.90 Second $3.06 $3.24 $3.81 $3.66 $3.09 $2.24 $2.74 $2.34 $2.46 $3.88 $2.96 $3.50 $2.88 First $2.85 $2.41 $2.63 $2.96 $2.99 $2.48 $2.50 $3.12 $2.31 $3.92 $2.95 $2.03 $2.48 Seed $0.12 $0.10 $0.14 $0.12 $0.14 $0.15 $0.11 $0.13 $0.12 $0.21 $0.39 $0.33 $0.35 7
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, MEDIAN DEAL SIZE ($M) (2014 2017) FINANCING Median Equity Deal Size ($M) $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Median Equity Deal Size ($M) $5.51 $5.00 $5.00 $5.50 $5.37 $5.00 $5.00 $5.00 $5.00 $5.00 $6.00 $5.40 $6.50 8
EQUITY FINANCINGS IN U.S.-BASED, VC-BACKED COMPANIES, BY INDUSTRY GROUP (4Q 2017) FINANCING Consumer Services took first place with a 25% of total investment, accumulating $4.74 billion through 141 deals. While the number of deals declined compared to the number of deals in 3Q 17, the amount raised almost doubled (up 78%). 4Q'17 Industry Breakdown By Number of Deals 310 203 50 Business and Financial Services Consumer Goods Consumer Services Energy & Utilities Healthcare kept its second place with $4.71 billion raised through 214 deals. Compared to the performance of this sector in the previous quarter, the numbers signify a 3% decrease in deal flow, yet a 16% rise in amount raised. The sector s 23 214 12 141 Healthcare Industrial Goods & Materials Information Technology investment figures represent approximately 25% of total equity investment in U.S. VC-backed companies for the quarter. Information Technology placed third this quarter in terms of equity financing, accounting for 24% of all 4Q 17 investment. The 310 deals drew $4.53 billion, an increase of 33% in capital raised compared to the previous quarter. 4Q 17 Industry Breakdown By Amount Raised ($B) 24% 1% 16% 8% Business and Financial Services Consumer Goods Consumer Services Energy & Utilities Healthcare 25% 1% 25% Industrial Goods & Materials Information Technology 9
TOP 4 DEALS INTO VC-BACKED COMPANIES (4Q 2017) FINANCING Co. Name Location Industry Code Industry Segment Industry Group Brief Description Close Date Round Type Raised ($M) Round Investors (* denotes lead) Lyft Inc. San Francisco, CA Transportation Services Travel and Leisure Consumer Services Provider of an ondemand ridesharing service platform. 10/19/2017 Later $1,500.00 CapitalG*, Fidelity Management & Research Co., Ontario Teachers' Pension Plan Board, Undisclosed Investor(s) NextEV Ltd. San Jose, CA Automobiles Vehicles and Parts Consumer Goods Provider of electric and autonomous vehicles. 11/8/2017 5th $1,000.00 Baillie Gifford & Co. Ltd., China Asset Management Co. Ltd., CITIC Capital Holdings Ltd., Lone Pine Capital, Russia-China Investment Fund, Tencent Holdings Ltd.* Urban Compass Inc. New York, NY Real Estate Financial Institutions and Services Business and Financial Services Provider of a real estate purchase and rental platform. 12/7/2017 6th $550.00 Fidelity Investments*, IVP, SoftBank Vision Fund, Wellington Management Co. LLP Magic Leap Inc. Dania Beach, FL Displays Electronics and Computer Hardware Information Technology Developer of an augmented reality visual computing system. 10/17/2017 5th $502.00 Alibaba Group Holding Ltd., EDB Investments, Fidelity Management & Research Co., Google Inc., Grupo Globo, Janus Henderson Investors, JPMorgan Chase & Co., T. Rowe Price Group Inc., Temasek Holdings Pvt. Ltd.* 10
MOST ACTIVE INVESTORS FOR U.S.-BASED, VC-BACKED COMPANIES (4Q 2017) FINANCING 30 28 25 21 20 15 14 13 12 12 12 10 5 0 New Enterprise Associates Inc. Keiretsu Forum Y Combinator GV Sequoia Capital Intel Capital Accel Partners 11
NUMBER OF DEALS/AMOUNT RAISED BY PRIMARY REGION (4Q 2017) FINANCING Number of Deals by Primary Region Amount Raised ($B) by Primary Region Number of Deals in 4Q 2017 by Primary Region Mid-Atlantic Midwest Central Midwest East Mountain New England Northern California 4Q 2017 4Q 2017 Pacific Northwest South Central Mid-Atlantic Midwest Central Midwest East Mountain New England Northern California Pacific Northwest South Central South East Southern California 212 18 61 48 88 326 42 38 45 75 $3.67 $0.34 $0.64 $0.43 $2.01 $9.46 $0.44 $0.22 $0.87 $0.81 Amount Raised ($B) in 4Q 2017 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 12
NUMBER OF DEALS/AMOUNT RAISED BY SUBREGION (4Q 2017) FINANCING Number of Deals by Subregion Number of Deals by subregion 4Q 2017 Amount Raised ($B) by subregion 4Q 2017 Austin Metro 17 $0.11 Boston Metro 79 $1.97 Chicago Metro 26 $0.32 Dallas-Fort Worth 5 $0.05 Los Angeles Metro 39 $0.36 New York Metro 147 $2.41 Orange County 10 $0.04 Potomac 29 $0.66 San Diego Metro 22 $0.35 San Francisco Bay Area 327 $9.02 Seattle Metro 31 $0.29 Subregion Breakout Number of Deals Seattle Metro San Francisco Bay Area San Diego Metro Potomac Orange County New York Metro Los Angeles Metro Dallas-Fort Worth Chicago Metro Boston Metro Austin Metro Seattle Metro San Francisco Bay Area Subregion San Diego Metro Breakout Potomac Amount Orange County Raised ($B) New York Metro Los Angeles Metro Dallas-Fort Worth Chicago Metro Boston Metro Austin Metro 5 10 17 22 31 29 26 $0.29 39 $0.35 $0.66 $0.04 $0.36 $0.05 $0.32 $0.11 79 $1.97 $2.41 147 Amount Raised ($B) by subregion $9.02 327 13
VENTURE M&A AND IPO MARKET ACTIVITY IN THE U.S. DURING 4Q 2017 LIQUIDITY Exit Opportunities for U.S. VC backed Companies (2014 2017) Mergers and acquisitions (M&As) for venture-backed companies decreased 28% in value from 3Q 2017, with 135 deals getting $14.05 billion. The number of IPOs in 4Q 2017 more than tripled during the same period. The amount raised was $2.03 billion, a 228% increase from the previous quarter. 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16 3Q'16 2Q'16 1Q'16 4Q'15 3Q'15 2Q'15 1Q'15 4Q'14 0 20 40 60 80 100 120 140 160 180 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 IPOs 23 13 29 12 16 6 11 13 8 7 18 8 24 M&As 140 156 114 149 141 147 160 160 146 166 154 145 135 14
U.S. VC-BACKED M&As (2014-2017) LIQUIDITY U.S. VC-backed M&A Activity (2014-2017) 135 M&As of venture-backed companies in the U.S. amounted to $14.05 billion during 4Q 2017. Compared to 3Q 2017, when a total of 145 transactions accumulated $19.62 billion, both the number of deals and the amount raised decreased by 7% and 28%, respectively. The largest M&A of the quarter was musical.ly Inc. which was valued at $500 million in its last round from 2016. In December this year the company was acquired for $1 billion by Beijing Byte Dance Telecommunications Co. Ltd. $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $- 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Amount Paid ($B) $35.44 $11.88 $10.23 $15.01 $16.15 $22.18 $22.06 $24.85 $18.93 $24.16 $18.59 $19.62 $14.05 Number of M&As 140 156 114 149 141 147 160 160 146 166 154 145 135 180 160 140 120 100 80 60 40 20 0 15
TOP 3 U.S. M&As (4Q 2017) LIQUIDITY Company Name Location Brief Description Industry Code Industry Segment Industry Group Close Date Round Type Amount Paid ($M) Acquirer musical.ly Inc. Santa Monica, CA Provider of a lip-syncing app for smartphones. Communications Software Software Information Technology 12/19/2017 Acquisition $1,000.00 Beijing Byte Dance Telecommunicati ons Co NeoTract Inc. Pleasanton, CA Provider of minimally invasive devices focused on urological and gynecological disorders. Therapeutic Devices (Minimally Invasive / Noninvasive) Medical Devices and Equipment Healthcare 10/2/2017 Acquisition $725.00 Teleflex Rimini Street Inc. Las Vegas, NV Provider of a third-party enterprise software support and maintenance services in United States and Canada. IT Consulting Business Support Services Business and Financial Services 10/11/2017 Reverse Merger $638.00 GP Investments Acquisition Corp. 16
U.S. VC-BACKED IPOs (2014-2017) LIQUIDITY U.S. VC-backed IPO Activity (2014-2017) 24 venture-backed companies raised $2.03 billion through public offerings in 4Q 2017. Both the number of deals and capital raised grew dramatically from the last quarter. The largest IPO of 4Q 2017 raised almost twice as much as the largest listing from the previous quarter. Denali Therapeutics Inc. (NASDAQ: DNLI) raised $ 250 million in an Initial Public Offering which valued it at $ 1.7 billion. The company was backed by investors such as ARCH Venture Partners and F- Prime Capital. $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Raised ($B) through IPO $3.15 $0.93 $2.57 $1.60 $1.36 $0.38 $0.79 $0.99 $0.69 $3.95 $1.75 $0.62 $2.03 Number of IPOs 23 13 29 12 16 6 11 13 8 7 18 8 24 35 30 25 20 15 10 5 0 17
TOP 3 U.S. IPOs (4Q 2017) LIQUIDITY Company Name Location Brief Description Industry Code Industry Segment Industry Group Close Date Round Type Raised through IPO ($M) Exchange Denali Therapeutics Inc. South San Francisco, CA Developer of therapies for neurodegenerative diseases. Biotechnology Therapeutics Biopharmaceuticals Healthcare 12/8/2017 IPO $250.00 NASDAQ: DNLI MongoDB Inc. New York, NY Provider of an open-source, non-relational database. Data Management Services Business Support Services Business and Financial Services 10/19/2017 IPO $192.00 NASDAQ:MDB Apellis Pharmaceuticals Inc. Crestwood, KY Developer of therapeutic compounds for autoimmune and inflammatory diseases. Biotechnology Therapeutics Biopharmaceuticals Healthcare 11/9/2017 IPO $150.00 NASDAQ: APLS 18
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, fund-raising 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 equity investments into early stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. Figures contained throughout the report current at time of editorial 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. 19
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 20