Venture Capital Research Report Q4 2017 As of February 9, 2018
Executive Summary VC market in the US Regional share of investment VC market in the SF Bay Area Annual VC investment in the SF Bay Area VC allocation by company growth stage Comparison of VC allocation: SF and the US Investment in the SF Bay Area: top cities Investment in the SF Bay Area: by industry VC firm breakdown VC firms investing in US companies VC firms with HQs in the SF Bay Area Most active VC firms in the US Largest VC deals in the US
Executive Summary: The U.S. VC activity across the country remains steady and strong between Q3 2017 and Q4 2017. - The number of deals was 1,157 in Q4 17, decreased, vs 1,296 in Q3 17. - Quarterly investments regressed from $19.2B in Q3 17 to $18.7B in Q4 17. - VC investments and number of deals decreased slightly from last quarter. As in Q3 2017, VC investments are still geared toward established companies. - Expansion and later-stage companies accounted for 71% of total VC investments. Seed and early-stage companies accounted for 19%. - The number of deals indicates that mature companies tended to account for fewer VC deals (33%) but with a larger amount invested (Median U.S. later-stage deal size is $30M versus $6.5M for early-stage). - San Francisco Bay Area continues to be the dominant region for VC funding at all stages. California captured 48% of national investments in Q4 2017 (vs 42% in Q3 2017). - California was distantly followed by New York with 15%, and Massachusetts with 11%.
Executive Summary: SF Bay Area San Francisco Bay Area continues to be the largest recipient of VC investment in the U.S. - 28% of national VC investment and 87% of California VC investment were in the Bay Area; followed by the New York metro area (15%) and New England (11%). - The Bay Area also had the largest number of deals of any US region, accounting for 357 out of 1,158 total US deals. - Despite the decline in the number of deals in the region, more VC investments went to the Bay Area. Mobile & Telecommunications was the most prevalent industry in VC funding. - Mobile & Telecommunications accounted for $2.5B of VC investments, followed by Internet ($2.3B), and Healthcare ($1.2B). Conclusions - Compared to last quarter - VC investments increased, while the number of deals decreased. - Mature startups continue to receive the majority of venture capital investments.
Executive Summary VC market in the US Regional share of investment VC market in the SF Bay Area Annual VC investment in the SF Bay Area VC allocation by company growth stage Comparison of VC allocation: SF and the US Investment in the SF Bay Area: top cities Investment in the SF Bay Area: by industry VC firm breakdown VC firms investing in US companies VC firms with HQs in the SF Bay Area Most active VC firms in the US Largest VC deals in the US
VC market in the US VC activity in the US decreased in Q4 2017, both in the number of deals and in the amount invested. In comparison to Q3 17, the average value of investments increased. Amount invested Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 $ 12.6 B $ 14.7 B $18.9 B $19.2 B $ 18.7 B % change Q4 2016-17 + 48 % Number of deals 1,196 1,287 1,208 1,299 1,158-4 % Average deal value $ 10.5 M $11.4 M $15.6 M $ 14.8 M $ 16.2 M +54 % While the number of deals declined by 4% over the year, VC investments jumped by about 48%. The average deal value also increased by 54% Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report based on data from Thomson Reuters
Regional share of investment in the US The San Francisco Bay Area is the single largest region for venture capital activity, receiving approximately 42% of all national investment. Southeast 6% Northwest 2% Midwest 4% Other 5% 100.00% 90.00% 80.00% The San Francisco Bay Area attracted 87% of total VC investment within California, and 42% of the national share. New England 13% California 48% 70.00% 60.00% 50.00% 40.00% 30.00% DC/Metroplex 7% 20.00% 10.00% New York 15% 0.00% Bay Area LA/ Orange County Sacramento/ N. Cal San Diego Source: MoneyTree Report
Executive Summary VC market in the US Regional share of investment VC allocation by company growth stage VC market in the SF Bay Area Annual VC investment in the SF Bay Area VC allocation by company growth stage Comparison of VC allocation: SF and the US Investment in the SF Bay Area: top cities Investment in the SF Bay Area: by industry VC firm breakdown VC firms investing in US companies VC firms with HQs in the SF Bay Area Most active VC firms in the US Largest VC deals in the US
VC market in the SF Bay Area While the number of VC deals closed in the Bay Area has decreased from last quarter, the average deal value and the amount of VC money invested has increased. Amount invested Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 $ 4.1 B $ 6.4 B $ 8.3 B $ 6.4 B $ 7.8 B % change Q4 2016-17 + 90 % Number of deals 360 397 370 428 357-1 % Average deal value $ 11.3 M $ 16.2 M $ 22.4 M $ 15.1 M $ 21.9 M + 94% Over the yearly period, the number of deals has dropped by 1%. The amount invested in the SF Bay Area increased by 90%, and the average deal value also increased by 94%. Source: MoneyTree Report
Number of Deals Annual VC investment in the SF Bay Area 600 500 400 300 200 100 $ 12 $ 10 $ 8 $ 6 $ 4 $ 2 Investment (Billions) VC investment increases in Q4 17. However, Q4 17 saw an decrease in the number of deals. Globally, VC firms have favored bigger deals with established companies. Bay Area VC investments are on a positive trend due to a healthy macroeconomics environment, an anticipation of tax reduction and easy access to financing. 0 DEALS INVESTMENT $ 0 Nonetheless, the VC market would have to face the quandary of a surplus of liquidity compared to the number of new ideas. Source: MoneyTree Report
Company maturity VC allocation by company growth stage: SF Bay Area Compared with Q3 17, VC investments increased in the Later stage (+6 pts). Early stage startups remain constant, while seed startups and expansion stage declined. Seed startups received a very small percentage of the investments both locally and nationally. Percentage of total investment dollars 2% 15% 36% 41% 6% Although mature startups accounted for a much larger share of VC than earlierstage startups, they continue to have less deals. Startup/seed Early Expansion Later Other Seed companies had 63 deals and Earlystage companies had 108, compared to the 100 for Expansionstage firms and 42 for Later-stage firms. Time Source: MoneyTree Report
VC investment in the SF Bay Area: top cities Companies based in San Francisco received over $4 billion in VC investment, 66% of the Bay Area total. San Francisco firms also accounted for 183 of the 356 deals struck in the Bay Area. San Francisco 183 deals $4.46Bn South SF 9 deals $241M San Mateo 21 deals $302M Redwood City 22 deals $576M Menlo Park 16 deals $1.33Bn Palo Alto 37 deals $606M Mtn. View 29 deals $370M Sunnyvale 16 deals $216M San Jose 23 deals $344M Source: CB Insights
VC investment in the SF Bay Area: top 10 industries Mobile & Telecommunications, Internet and Healthcare were the three biggest industries for Bay Area VC investments in Q4 2017. Industry Mobile & Telecommunications Internet Amount Deals in Bay Invested in Area Bay Area Amount Invested in SF Deals in SF Industry as % of BA Investment % Increase in Amount Invested in SF, Q3 to Q4 $ 2,452 M 42 $ 2,162 M 29 31% 343.8% $ 2,273 M 160 $ 1,307 M 95 29% - 46.9% Healthcare $ 1,155 M 38 $ 634 M 22 15% - 2.6% Software (non- Internet/mobile) $ 540 M 36 $ 171 M 17 7% 111.8% The top industry Mobile & Telecommunications received one third of all VC investments in the Bay Area. This industry alone accounted for 42.9% (vs 11.6% in Q3 17) of total investments in SF. Computer Hardware and Services Industrial Financial Consumer Products & Services $ 325 m 19 $ 145 M 11 4% - 46.5% $ 315 M 12 $ 213 M 6 4% 6,543.8% $ 266 M 4 $ 231 M 3 3% 5,091% $ 186 M 17 $ 117 M 11 2% - 6.7% Electronics $ 145 M 9 $ 51 M 4 2% 57.7% Other $ 96 M 16 $ 75 M 10 1% 162.5% Energy & Utilities $ 76 M 4 $ 56 M 2 1% 23.2% Total $ 7,829 M 356 $ 5,162 M 210 99% - Approximately 2/3 of all Bay Area deals were made with San Francisco-based companies. The Q4 17 is marked by a decrease of the amount invested in SF by 1.2%. Source: MoneyTree Report
Millions Bay Area Investment by Industry: Q3 17 vs. Q4 17 There was an even split between increased and decreased VC investments throughout industry sectors in Q4 17. The Mobile & Telecommunications, Industrial, and Financial sectors saw the biggest increase. $ 3,500 $ 3,000 $ 2,500 $ 2,000 $ 1,500 $ 1,000 $ 500 $ 0 Q4 2017 Q3 2017 Source: MoneyTree Report
Executive Summary VC market in the US Regional share of investment VC market in the SF Bay Area Annual VC investment in the SF Bay Area VC allocation by company growth stage Comparison of VC allocation: SF and the US Investment in the SF Bay Area: top cities Investment in the SF Bay Area: by industry VC firm breakdown VC firms investing in US companies Most active VC firms in the US Largest VC deals in the US
Deals VC firms investing in US companies The SF Bay Area is home to about 76 percent of all VC deals in California. Midwest 7% Other 14% California 42% 400 350 300 357 Southeast 5% Nearly 30% of VC firms seek opportunities in CA 250 200 Northwest 4% 150 100 84 New England 9% DC/Metroplex 4% New York 15% 50 0 Bay Area LA/ Orange County 1 Sacramento/ N. Cal 28 San Diego Nationwide California Source: MoneyTree Report
Most active VC firms in the US San Francisco Bay Area is home to the top five most active VC firms in the US. Firm City Number of Deals New Enterprise Associates Menlo Park, CA 32 Intel Capital Santa Clara, CA 17 Plug and Play Ventures Sunnyvale, CA 15 Google Ventures Mountain View, CA 15 Lightspeed Venture Partners Menlo Park, CA 14 Source: MoneyTree Report
Largest VC deals in the US Two of the five largest VC deals in the US involved a San Francisco company Lyft with deals value of $1,000M and 500M each. Company Location Sector Value of Deal ($) Lyft San Francisco, CA Mobile & Telecommunications $1,000 M Magic Leap Plantation, FL Software (non-internet/ mobile) OneWeb Arlington, VA Mobile & Telecommunications $502 M $500 M Lyft San Francisco, CA Mobile & Telecommunications $500 M Compass New York, NY Internet $450 M Source: MoneyTree Report