Upload
others
View
8
Download
0
Embed Size (px)
Citation preview
Plus Special Guest Contributors:Ariadne Capital
Content Includes:
Performance
Have venture capital returns turned a corner? Venture capital outperforms private equity according to the latest one-year horizon IRR data.
Investors
Exclusive survey results reveal LP sentiment towards venture capital investment.
Fundraising
Venture capital fundraising on the rise: latest statistics.
Deals
Venture capital deals and exits see record highs in 2014 YTD.
Preqin Special Report: Venture Capital
November 2014
alternative assets. intelligent data.
2
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
Contents
CEO’s Foreword - Mark O’Hare p3.
The Turning Point for Venture Capital? p4.
How Corporates Can Build Their Digital P&L By Partnering With Digital “Enablers” - Ariadne Capital p7.
Venture Capital Investor Survey Results p8.
Venture Capital Investors p9.
Venture Capital Fundraising p10.
Venture Capital Deals p11.
Key Facts
$22.2bn
$9.5bn
North America Europe
$Asia
Rest of World$1.3bn$1 3b
Diversified Multi-Regional
Venture Capital Fundraising by Primary Geographic Focus, 2014 YTD
One-year rolling horizon IRR to March 2014 data shows venture capital outperforming all private equity.
56% of venture capital investors surveyed intend to make a commitment to a venture capital fund before the end of 2015.
59% (3,214) of LPs are interested in venture capital investments.
Aggregate quarterly venture capital deal value reached an all-time high in Q2 2014, at $23bn.
3
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
Venture capital is a core part of the global private capital universe, both in terms of its longevity and also the sheer scale, reach and impact of its activities. Out of a total of 8,256 PE/VC fi rms profi led on Preqin’s databases, no fewer than 4,754 are venture capital fi rms, 57% of the total; nearly 4,000 venture funds have closed over the past decade, or are currently on the road fundraising; and with over 50,000 VC deals listed on Preqin’s databases over the past seven years, the impact of venture capital funds and fi rms in funding start-up and growing businesses is profound. The industry has also become increasingly global, expanding outside its West Coast US roots to develop clusters of venture capital fi rms and activity across the US and internationally.
The Achilles Heel for venture capital funds since the turn of the millennium has, of course, been performance, lagging well behind other private equity strategies. Despite this, many LPs have “stuck with the program” – with over 3,000 of the 5,500 active private equity LPs listed on Preqin’s databases either having invested in venture capital funds, or having an interest in doing so. Put simply, the argument for venture capital over this period has been: sure, average returns have been disappointing, but the performance of the best funds has been excellent, so if you can identify and get into those funds, you can do well; plus, venture capital gives the investor access to a segment of the economy that you cannot invest in through any other route, so brings vital diversifi cation/effi cient frontier benefi ts. These arguments are valid, but can start to wear thin after so many years in which the asset class as a whole has under-performed.
Is this now changing? Has venture turned the corner?
Starting in 2011, there has been a marked improvement in venture capital fund returns, so much so that the net returns they have delivered to LPs are now on a par with the ‘All PE’ benchmark over three years, and the best-performing strategy over one year. Whether this improvement persists does, of course, remain to be seen – but the arguments for venture capital are starting to resonate ever more strongly with LPs: diversifi cation + average returns looking attractive + opportunity for signifi cant outperformance through good fund selection. As a result, LP attitudes are starting to turn more positive towards venture capital (see page 6), boding well for the 581 venture capital funds currently on the road looking for capital.
The turnaround in venture capital fortunes is both welcome and highly signifi cant for the industry, and especially for LPs looking for opportunities to deploy capital. Preqin will be following developments over the coming months through all the key metrics showing the state of the venture capital industry – capital raising, deals, exits, fund performance and LP interest.
Thank you,
Mark O’Hare
CEO’s Foreword
Preqin’s Venture Capital Data: A Vital Tool
Preqin’s Private Equity Online contains detailed information on all aspects of the private equity and venture capital industry.
Access in-depth data for over 5,900 venture capital funds and over 4,700 venture capital fund managers, as well as detailed profi les for more than 3,200 investors that have a preference for investing in venture capital.
Plus, examine over 72,000 venture capital deals and view individual performance data for over 1,500 venture capital funds.
For more information, please visit:
www.preqin.com/venture
4
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
A Chequered Past
Following a rapid reversal of fortunes at the turn of the millennium, the venture capital industry has experienced largely lacklustre returns which have led to tough fundraising conditions for all but a select group of top-tier managers. However, more recently there have been some encouraging signs across the industry, with market conditions becoming more favourable, returns improving and fundraising picking up as investors take note. Is this the turning point for venture capital?
Why Invest in Venture Capital?
The venture capital asset class has long featured in many investors’ portfolios for a variety of reasons, including portfolio diversifi cation, fulfi lling mandate objectives, the chance to capitalize on the emergence of promising start-up companies and to boost local economies. In certain jurisdictions, the existence of a favourable legislative environment and policies is also a draw. In a survey of 100 venture capital investors conducted by Preqin in October 2014, we found that 51% of respondents commit to venture capital funds primarily for outsized returns.
So what kind of returns have venture capital commitments produced? Fig. 1 shows the private equity horizon IRRs of the main strategies over one-, three-, fi ve- and 10-year periods. The horizon IRRs are calculated using the fund’s net asset value as a negative outfl ow at the beginning of the period, with any cash paid or received during the period and the fund’s residual value as a positive infl ow at the end of the period. The pattern for venture capital returns shows clear underperformance relative to other strategies over 10 years, with an improving picture more recently. Most notably, the last three- and one-year periods
show venture capital horizon IRRs improving from 12.7% for the three-year period to March 2014 to 27.0% for the one-year period to March 2014, outperforming all other strategies.
Post Dot-Com Performance: 2001 – 2007
To provide an insight into how venture capital performance has progressed over time, we can assess horizon IRR fi gures at year/quarter ends (Fig. 2). In the one-year period to December 2000, venture capital was still riding high on the dot-com boom with a horizon IRR of 38.1%. Following the subsequent bursting of the internet bubble at the turn of the millennium, the one-year horizon IRR of venture capital plummeted to -34.3%, and did not recover into the black until 2004. Performance peaked again in 2007 before tumbling once more into the negative, as with all other fund types bar mezzanine, this time as a result of the global fi nancial crisis.
It is important to note that some funds, in the face of wider industry underperformance, still generated exceptional returns and multiples. Examples include Union Square Ventures (vintage 2004, net IRR 70.6%); Avalon Ventures VIII (2007, 58.1%); Emergence Capital Partners II (2007, 52.9%); Grotech Partners VII (2007, 46.5%) and CHAMP Ventures Investments Trust No. 5 (2002, 42.7%).
More Recent Performance: 2008 – 2011
Fig. 3 uses top quartile boundary net IRR data taken from Preqin’s Performance Analyst module, and outlines the improvement in venture capital returns for more recent vintage funds following the dot-com slump. Fig. 3 illustrates the reversal of fortune for venture capital returns. In stark contrast to the venture capital
0%
5%
10%
15%
20%
25%
30%
1 Year toMar 2014
3 Years toMar 2014
5 Years toMar 2014
10 Years toMar 2014
All Private Equity
Buyout
Venture
Fund of Funds
Mezzanine
DistressedPrivate Equity
Fig. 1: Private Equity Horizon IRRs as at 31 March 2014
Source: Preqin Performance Analyst
Ho
rizo
n IR
R (
%)
-60%
-40%
-20%
0%
20%
40%
60%
80%
1 Y
ea
r to
De
c 2
000
1 Y
ea
r to
De
c 2
001
1 Y
ea
r to
De
c 2
002
1 Y
ea
r to
De
c 2
003
1 Y
ea
r to
De
c 2
004
1 Y
ea
r to
De
c 2
005
1 Y
ea
r to
De
c 2
006
1 Y
ea
r to
De
c 2
007
1 Y
ea
r to
De
c 2
008
1 Y
ea
r to
De
c 2
009
1 Y
ea
r to
De
c 2
010
1 Y
ea
r to
De
c 2
011
1 Y
ea
r to
De
c 2
012
1 Y
ea
r to
De
c 2
013
1 Y
ea
r to
Ma
r 201
4
All
Buyout
Venture
Fund of Funds
Mezzanine
Real Estate
Fig. 2: One-Year Rolling Horizon IRRs by Fund Type
Source: Preqin Performance Analyst
On
e-Y
ea
r Ho
rizo
n IR
R (
%)
The Turning Point for Venture Capital?
Although much maligned for sub-par performance since the dot-com crash, venture capital returns for more recent funds have picked up signifi cantly – one-year horizon returns are among the best in the entire private equity industry. Preqin’s latest special report examines the drivers of this recent success, and uncovers the impact of improved performance on LP attitudes towards the asset class and the prospects for future fundraising.
5
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
funds of vintage 2002, which have a top quartile margin that lags far behind all private equity, 2011 vintage venture capital funds (excluding early stage) surpassed the top quartile boundary net IRR of all private equity by 220 basis points.
Preqin’s data further demonstrates that this improvement is not just reserved for top performing funds. As shown in Fig. 3, bottom quartile venture capital funds have also seen a marked improvement, recently moving into the black for the fi rst time. This was unseen even at the height of the dot-com boom and serves as further evidence of the turnaround seen in industry performance. Vintage 2010 venture capital funds have the highest top quartile IRR boundary (23.7%), while the median net IRR for vintage 2008 - 2010 vehicles has risen to between 10% and 15%. Given the precarious economic conditions of the time, the metrics for vintage 2008 venture capital funds are very encouraging.
A Surge of Exits
The improvement in performance refl ects the high portfolio valuations and the favourable exit opportunities that are evidently being found by venture capital fund managers. It is also testament to the ability of these GPs to strategize and source companies with good potential to generate outsized returns and exceed public market equivalents.
Fig. 5 shows the annual statistics for venture capital exits from 2007 to 2014. The rise in both number of exits and aggregate exit value is clear, with particularly strong momentum for exit value in the periods 2008 to 2010, and 2013 to Q3 2014. A breakdown by exit type shows that trade sales consistently comprise the majority of all venture capital exits. There has also been a steady rise in initial public offerings with year-on-year increases from 127 in 2011 to 161 in the fi rst three quarters of 2014, refl ecting the strength of public equity markets of late.
Where is the Money Going?
The record distributions that investors are currently seeing, which Preqin described in the September 2014 issue of Private Equity Spotlight, should bode well for future venture capital fundraising. Preqin’s latest fundraising fi gures reveal that the total amount of capital secured by venture capital vehicles in 2014 YTD ($38bn) has already outstripped the total secured in 2013 ($31bn), and
looks set to eclipse the total raised for a number of years (Fig. 6). The split between types of venture funds shows that 50% of funds closed in 2007 to 2014 YTD invest generally across all rounds, 11% are focused on expansion/late stage venture capital and the remaining 39% are specialized in early stage, encompassing seed and start up investments.
Analysis of funds closed split by primary geographic fund focus is provided in Fig. 17 (page 10). While North America consistently continues to account for the largest proportion of total capital raised by venture capital funds, the share represented by Asia-focused vehicles has shot up in the past year. Of all venture capital funds closed in 2013, 11% were primarily targeting Asian investments, but in 2014 YTD, this proportion more than doubled to 25%, thus indicating that Asia has overtaken Europe to become the second most popular investment destination for venture capital.
These fundraising statistics should be considered alongside venture capital deal activity. Fig. 7, which uses data from Preqin’s Venture Deals Analyst, shows a signifi cant overall rise in annual deal numbers and aggregate value since 2009. Signifi cantly, aggregate deal value for the fi rst three quarters of 2014 has already reached $60bn, eclipsing full year total values since 2007. The internet, software, healthcare, telecoms and
0%
5%
10%
15%
20%
25%
30%
35%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
All Private Equity
Venture CapitalExcluding EarlyStage
Early Stage
Fig. 4: Top Quartile Boundary Net IRRs by Fund Type and Vintage
Source: Preqin Performance Analyst Vintage Year
Ne
t IR
R s
inc
e In
ce
ptio
n
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Top QuartileIRR Boundary
Median NetIRR
BottomQuartile IRRBoundary
Fig. 3: Venture Capital - Median Net IRRs and Quartile Boundaries by Vintage Year
Source: Preqin Performance Analyst
Ne
t IR
R s
inc
e In
ce
ptio
n
0
20
40
60
80
100
120
0
100
200
300
400
500
600
700
800
900
1,000
2007
2008
2009
2010
2011
2012
2013
Q1-
Q3
2014
IPO Write OffSale to GP Trade SaleAggregate Exit Value ($bn)
Fig. 5: Global Number and Aggregate Value of Venture Capital Exits by Type and Aggregate Exit Value, 2007 - Q3 2014
Source: Preqin Venture Deals Analyst
No
. of
Exits
Ag
gre
ga
te Exit V
alu
e ($b
n)
6
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
media industries are the sectors which have seen the highest level of investment in 2014 YTD. As expected, North America comprises the biggest proportion of global venture deal value by a signifi cant margin; however, other markets such as Israel and India are also showing positive signs of growth. See page 11 for further analysis.
Effect on LP Attitudes
As venture capital performance improves and translates into higher returns for LPs, investor confi dence in the venture capital industry has started to return. October 2014 saw the highest number of funds in market in the period 2007 - 2014 YTD (Fig. 16, page 10), in addition to the fact that the proportion of venture capital funds failing to meet their targets is currently at a record low of 30% (Fig. 18, page 10).
Although sentiment has been improving, investor confi dence in the asset class is still mixed and returns will need to prove to be more consistent before attitudes change fully. Preqin’s October 2014 venture capital investor survey still found that over half of investors (53%) named performance as a key issue for the industry in 2014 and the year ahead. Nonetheless, anecdotal evidence demonstrates that investors’ attitudes to venture capital performance have improved in recent times, with one US-based investor specifying: “The past has been disappointing but our current active portfolio is mostly living up to expectations.” In fact, for 62% of investors surveyed, venture capital fund investments in the past 12 months have met expectations, while 16% had their expectations exceeded, compared to 22% that felt that their investments in the sector had fallen short.
Comparing these statistics to those revealed in Preqin’s latest Investor Outlook survey, a biannual study of LPs across all private equity, shows that a larger proportion of venture capital investors felt their fund investments exceeded expectations (16% vs. 12%) and a larger proportion felt their commitments fell short (22% vs. 14%) compared to all other private equity fund types. This conveys the more extreme polarities that exist in the venture capital industry, hinting at those ‘home run’ investments that can generate outsized returns at one end of the spectrum, and those ‘strike outs’ that perform poorly with very small or
even negative IRRs at the other. The high standard deviation of venture capital fund performance, particularly within early stage-focused vehicles, demonstrates the mixed performance the industry has seen over time and reinforces the importance of good fund selection in venture capital.
Encouragingly for those seeking capital or planning to launch a new vehicle, the results from previous Investor Outlook surveys show a small but sure growth in appetite for venture capital commitments. When asked the fund types that they are seeking to invest in over the next 12 months, 18% of LPs surveyed in H2 2013 stated venture capital, 25% in H1 2014 and 29% in H2 2014. In terms of specifi c favoured areas for investment, the US and information technology emerged as the front runners. Pages 8 and 9 of this report provide further analysis of the survey results, including intended timelines for next venture capital commitments.
A Brighter Future?
A recovery is well underway for the venture capital industry and investors are exhibiting signs of increased confi dence, as refl ected in the rising amounts of capital secured by venture capital funds, and deal and exit activity is growing. However, conditions are still tough, and venture capital fund managers seeking capital commitments need to continue to demonstrate to prospective investors that they have a strong strategy and deal pipeline, and a good alignment of interests. Fig. 11 (page 8) provides a breakdown of factors that investors surveyed consider the most important when looking for a venture capital fund manager.
Overall, the global venture capital landscape is currently seeing favourable conditions that are pointing to a healthy fundraising market and a strong deals environment. However, fund managers still face challenges in securing capital as investors are wary of the asset class, given the largely disappointing returns in the past 10 years, and will need to see more consistent performance over time. The recent uptick in venture capital performance confi rms the market is at a real turning point. Should these trends continue, more investors will take notice and we could see a rejuvenated market.
0
10
20
30
40
50
60
70
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2007 2008 2009 2010 2011 2012 2013 Q1-Q32014
No. of Deals Aggregate Deal Value ($bn)
Fig. 7: Number and Aggregate Value of Venture Capital Deals, 2007 - 2014 YTD (As at 14 October 2014)
Source: Preqin Venture Deals Analyst
No
. of
De
als
Ag
gre
ga
te D
ea
l Va
lue
($bn
)
463
341
244
196
256
301307
361367
260249278
298274
220
7743
15 13 28 37 44 48 5227 26 42 38 31 38
0
50
100
150
200
250
300
350
400
450
500
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
YTD
No. of FundsClosed
AggregateCapitalRaised ($bn)
Fig. 6: Annual Venture Capital Fundraising, 2000 - 2014 YTD (As at 14 October 2014)
Source: Preqin Funds in Market Year of Final Close
7
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
How Corporates Can BuildTheir Digital P&L By Partnering
With Digital “Enablers”- Julie Meyer, CEO & Chairman of Ariadne
Capital & Managing Partner of Ariadne Fund
The ‘story’ of European venture capital is really a story of how high-growth businesses have been built over the past 25 years. It is always instructive to look at the outcomes of an industry and its drivers as well as the key players to anticipate where it may end up. In short, what’s the end game for the European venture capital world?
Most European venture capital partners’ play book is relatively thin. They are essentially looking to identify the best entrepreneurs, and fi gure out how to sell them to a US technology platform fi rm as soon as possible. Or they sell their positions early or strangle the companies they back.
Legend has it that the VCs that backed Racal Telecom (which became Vodafone) sold their position due to the end of their fund’s life – perhaps understandable, but short-sighted nonetheless. So, as a European technology entrepreneur, you hear around you the call to Palo Alto for your funding – ‘it’ll be so much easier out there’, but if you don’t go to Palo Alto at the beginning you go to Palo Alto at the end.
And a large sucking sound of value across the Atlantic westward doesn’t seem to bother too much the general partners of European venture capital funds. They pocket their cash, forget to incentivize the associates who did all the work on the portfolio anyway, and move to Switzerland.
Should it? It is critical to understand how companies are being built right now and how technology is a layer driving growth across all industries to make sense of the fork in the road.
The platform companies are cleaning up. The Gang of Four (Amazon, Apple, Facebook and Google) are the biggest winners here. They organise the economics for their sectors, and compete ruthlessly with each other. Crucially, they use the infrastructure of others without really paying a toll, or negotiating terrifi c rates. Indeed, this is what the entire net neutrality debate is about.
So, if you are an infrastructure fi rm, a bank, a telecommunications company, a hospital, a school – with assets that touch ground, with regulation and taxes, and with legacy issues, you must migrate upwards and open up to becoming a platform. This is not easy. You must rethink how you engage with your industry and you must be concerned about the growth and profi ts of your industry, not just your business. You will have smaller margins, with more players in your business model, but your revenues will grow, and the growth will move from linear to exponential. You will by defi nition be a company leveraging cloud technology with application platform interfaces (APIs) with strong data analytics capabilities.
What does this have to do with the European venture capital industry? We haven’t created many platform companies in Europe.
In key sectors like those occupied by Amazon, Apple, Facebook and Google, there simply won’t be a European equivalent. Notwithstanding the rise of Rocket Internet, whose operational abilities are exceptional, the underlying thinking of the business model is very 2007. Value is accruing to the mostly US-based platform companies because they are providing the dominant ‘highway’ for US and European digital entrepreneurs to go to market. So European start-ups go to Palo Alto once again for their distribution, scale, audience and reach and do a deal with an App Store to put their car on the highway.
So, does it matter if we just make the toppings of the pizza, and not the pizzas or ovens themselves? Actually it does! You have to look hard and consider deeply the ‘successes’ of the European venture capital scene. Elaia Partners backed Criteo, a leader in predictive advertising, which listed on Nasdaq, now with a market capitalization of more than $2bn. I’ll bet it gets taken out by Google within a year. Autonomy, which wasn’t backed by venture capitalists anyway, had the capacity to be a platform company, and we all know what happened there. Despite being able to offer their shareholders’ liquidity, Autonomy’s management did a deal with HP which is mired in controversy, and a once great player has disappeared in a mist.
Ebuzzing, a $100mn revenue video advertising company, has acquired nine businesses, and might go public in 2015. Led by Pierre Chappaz, the entrepreneur who built Kelkoo and sold it to Yahoo, he won’t stop for small change. DN Capital has raised a new $200mn venture fund recently, and had seven exits in their last fund. They have emerged as a signifi cant homegrown venture capital fund in Europe, but their companies are not creating ecosystems or becoming platforms, they are being sold. Again, it is great for the limited partners, but not for the capacity for European economies and societies to disproportionately reap the benefi ts and profi ts of the intellectual capital of its talent.
The future of European venture capital lies in integrating established corporates with the digital “enablers”. This will help the corporates build their digital P&Ls and would give start-ups a “highway” to accelerate their growth.
Ariadne Capital
Ariadne Capital is an investment fi rm founded in 2000 by Julie Meyer which has a portfolio of digital technology investments in retail fi nancial services and media. It is backed by leading entrepreneurs and pioneered the ‘Entrepreneurs Backing Entrepreneurs’ model of fi nancing entrepreneurship syndicating more than £350mn of investments over the past 14 years.
www.ariadnecapital.com
8
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
In October 2014, Preqin interviewed 100 investors that have a current interest in investing in, or have previously committed to, the venture capital asset class.
Venture Capital Investor Survey Results
24%
24%
8%
9%
36%
2014
H1 2015
H2 2015
Longer Term
Not Sure
Fig. 9: Timeframe for Investors’ Next Intended Commitment to a Venture Capital Fund
Source: Preqin Venture Capital Investor Survey, October 2014
8%
9%
10%
18%
18%
20%
33%
37%
40%
47%
64%
75%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Materials
Real Estate
Industrials
Food & Agriculture
Infrastructure
Consumer Discretionary
Energy & Utilities
Clean Technology
Business Services
Telecoms, Media & Comms
Healthcare
Information Technology
Fig. 10: Industry Sectors Venture Capital Investors View as Having the Most Attractive Opportunities at Present
Source: Preqin Venture Capital Investor Survey, October 2014 Proportion of Respondents
41%
27%
20%
7%5%
Team
Past Performance
Strategy
Length of TrackRecord
Alignment ofInterest
Fig. 11: Factors Investors Consider to Be the Most Important When Looking for a Venture Capital Fund Manager
Source: Preqin Venture Capital Investor Survey, October 2014
6%
15%
16%
17%
18%
23%
42%
53%
0% 10% 20% 30% 40% 50% 60%
Consolidation
Transparency
Volatility
Regulation
Fees
Liquidity
Economic Environment
Performance
Fig. 8: Key Issues the Venture Capital Industry Faces in 2014/2015
Source: Preqin Venture Capital Investor Survey, October 2014 Proportion of Respondents
Fig. 7: Regions Investors Are Targeting for Venture Capital Investments
US62%
Europe45% Asia
28%
Latin America7%
Africa2%
Source: Preqin Venture Capital Investor Survey, October 2014
of respondents are looking to make a commitment to a venture capital fund by the end of 2015.
75%of venture capital investors view information technology as having the most attractive opportunities at present.
56%
9
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
View in-depth profi les for all 3,214 institutional investors with an appetite for venture capital funds on Preqin’s Investor Intelligence, including past fund commitments, geographic preferences, future investment plans and much more. For more information, please visit: www.preqin.com/ii
Venture Capital Investors
13%
2%
6%
7%
11%
16%
16%
22%
24%
46%
12%5%
15%
12%
20%
24%
29%
31%
31%
59%
0% 10% 20% 30% 40% 50% 60%
Other
Cleantech
Mezzanine
Growth
Fund of Funds
Distressed Private Equity
Venture Capital
Secondaries
Large to Mega Buyout
Small to Mid-Market Buyout
Fund Types Investors Are Seeking to Invest in over the Next 12 Months
Fund Types Investors View as Presenting the Best Opportunities
Fig. 12: Investor Attitudes towards Different Fund Types at Present
Source: Preqin Investor Interviews, June 2014
Proportion of Respondents
Fig. 15: Sample of Investors Looking to Commit to Venture Capital Funds in the Next 12 Months
Investor Type Location Investment Plans for the Next 12 Months
MAHLE Corporate Investor Germany
MAHLE will commit a total of €10mn across one or two new private equity funds in the coming year; the typical amount it will commit will be between €5mn and €10mn. It will invest in venture capital vehicles and is open to investing in funds that focus on Europe, North America and Asia. For its forthcoming fund commitments, the corporate investor is open to re-upping with existing managers from within its investment portfolio, as well as forming new GP relationships.
Multilateral Investment Fund
Government Agency US
Multilateral Investment Fund (MIF) anticipates making four new commitments to private equity in the next 12 months. It will look to commit $5mn per fund, committing $20m in total. It will continue to target early stage seed venture capital vehicles focused on investing in South America.
Nanjing Venture Capital
Investment Company China
Nanjing Venture Capital (NJVC) plans to make new private equity fund commitments over the next 12 months and will continue to invest in China-focused venture vehicles. The investment company is likely to focus on vehicles investing in Chinese cities, including Xi’an, but will avoid those targeting the most western part of China. It holds a preference for the clean technology, internet, technology and biomedical sectors. NJVC expects its allocation to private equity to increase over the longer term.
Source: Preqin Investor Intelligence
14%12%
11%
9% 9%7%
6% 6% 6% 6%4% 4%
6%
Fou
nd
atio
n
End
ow
me
nt
Pla
n
Priv
ate
Se
cto
r Pe
nsio
nFu
nd
Ban
ks &
Inve
stm
en
tBa
nks
Pu
blic
Pe
nsio
n F
un
d
Priv
ate
Eq
uity
Fu
nd
of
Fun
ds
Ma
na
ge
r
Fam
ily O
ffic
es
We
alth
Ma
na
ge
r
Co
rpo
rate
Inve
sto
r
Insu
ran
ce
Co
mp
an
y
Ass
et
Ma
na
ge
r
Go
vern
me
nt
Ag
en
cy
Oth
er
0%2%4%6%8%
10%12%14%16%
Fig. 14: Breakdown of Investors with a Preference for Venture Capital Funds, by Investor Type
Source: Preqin Investor IntelligenceInvestor Type
Pro
po
rtio
n o
f In
vest
ors
19%
21%
27%
9%
15%
9%
Less than $250mn
$250-999mn
$1-4.9bn
$5-9.9bn
$10-49.9bn
More than $50bn
Fig. 13: Breakdown of Venture Capital Investors by Assets under Management
Source: Preqin Investor Interviews, June 2014
North America accounts for the majority (56%) of venture capital investors, followed by Europe (25%) and Asia (11%).
Two out of every three institutional investors in venture capital have assets under management of less than $5bn.
10
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
Venture Capital Fundraising
Fig. 19: Top Five Venture Capital Funds in Market by Target Size (As at 23 October 2014)
Fund Firm Fund Type Target Size (mn) Location FocusInvention Investment Fund III Intellectual Ventures Early Stage: Seed 3,000 USD US
Tiger Global Private Investment Partners IX Tiger Global Management Venture (All Stages) 1,500 USD Global
Khosla Ventures V Khosla Ventures Venture (All Stages) 1,000 USD USRiverwood Capital Partners II Riverwood Capital Venture (All Stages) 1,000 USD China, Emerging Markets,
USIndia Inclusive Innovation Fund National Innovation Council Venture (All Stages) 55,000 INR India
Source: Preqin Funds in Market
444 452431
468
371 375
458
581
85 88 81 9154 47 45 59
0
100
200
300
400
500
600
700
2007 2008 2009 2010 2011 2012 2013 2014YTD
No. of FundsRaising
AggregateTarget Capital($bn)
Fig. 16: Venture Capital Funds in Market over Time, 2007- 2014 YTD (As at 23 October 2014)
Source: Preqin Funds in Market
0
10
20
30
40
50
60
2007 2008 2009 2010 2011 2012 2013 2014YTD
Diversified Multi-Regional
Rest of World
Asia
Europe
North America
Fig. 17: Aggregate Capital Raised by Venture Capital Funds by Primary Geographic Focus, 2007 - 2014 YTD (As at 23 October 2014)
Source: Preqin Funds in MarketYear of Final Close
Ag
gre
ga
te C
ap
ital R
aise
d (
$bn
)
37%47%
63%
48%38%
45%37%
30%
21%
22%
22%
18%
19%
24%
22%29%
42%31%
15%
35%43%
31%41% 41%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014YTD
Exceeded Target
Met Target
Below Target
Fig. 18: Fundraising Success of Venture Capital Funds, 2007 - 2014 YTD (As at 23 October 2014)
Source: Preqin Funds in MarketYear of Final Close
Pro
po
rtio
n o
f Fu
nd
s
Preqin’s Funds in Market module contains detailed profi les on all 5,903 venture capital funds closed historically. Profi les include capital raised, interim closes and geographic focus. For more information, please visit: www.preqin.com/fim
Highest number of funds in market than any year in the period 2007-2014 (As of 23 October 2014).
Proportion of venture capital vehicles closed at or above their target in 2014 YTD.
70%
581
11
Preqin Special Report: Venture Capital
© 2014 Preqin Ltd. / www.preqin.com
Download the data pack:www.preqin.com/VC14
Venture Capital Deals
0
5
10
15
20
25
0
500
1,000
1,500
2,000
2,500
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2007 2008 2009 2010 2011 2012 2013 2014
No. of Deals Aggregate Deal Value ($bn)
Fig. 20: Number and Aggregate Value of Venture Capital Deals, 2007 - Q3 2014*
Source: Preqin Venture Deals Analyst
No
. of
De
als
Ag
gre
ga
te D
ea
l Va
lue
($bn
)
Fig. 24: Five Largest Venture Capital Deals in 2014 YTD (As at 14 October 2014 )
Portfolio Company Name
Deal Date Stage Deal
Size Investor(s) Location Primary Industry
Uber Technologies, Inc. Jun-14 Series D/Round 4
1,200 USD
BlackRock, Fidelity Equity Partners, Google Ventures, Kleiner Perkins Caufi eld & Byers, Menlo Ventures, Summit Partners, Wellington Management US Telecoms
Flipkart Jul-14 Unspecifi ed Round
1,000 USD
Accel Partners, DST Global, GIC Private Limited, Iconiq Capital, Morgan Stanley Alternative Investment Partners, Naspers, Sofi na, Tiger Global
ManagementIndia Internet
Cloudera Mar-14 Series F/Round 6
740 USD Intel Corporation US Software
Beingmate Group Co., Ltd Aug-14 PIPE 615 NZD Fonterra Ltd. China Consumer
Products
Airbnb Aug-14 Unspecifi ed Round
475 USD
Andreessen Horowitz, Dragoneer Investment Group, Sequoia Capital, T Rowe Price US Internet
Source: Preqin Venture Deals Analyst
26%
20%
15% 15%
8%
3% 3% 3% 2% 2% 2% 1%
29%
19%
12%16%
7%3% 3% 3% 3%
2%1% 1%
0%
5%
10%
15%
20%
25%
30%
35%
Inte
rne
t
Soft
wa
re &
Re
late
d
Tele
co
ms
& M
ed
ia
He
alth
ca
re
Oth
er I
T
Co
nsu
me
rD
isc
retio
na
ry
Busin
ess
Se
rvic
es
Cle
an
Te
ch
no
log
y
Ind
ust
rials
Sem
ico
nd
uc
tors
&El
ec
tro
nic
s
Foo
d &
Ag
ricu
lture
Oth
er
No. of Deals Aggregate Deal Value
Fig. 22: Proportion of Number and Aggregate Value of Venture Capital Deals by Industry, 2014 YTD (As at 14 October 2014)*
Source: Preqin Venture Deals Analyst
Pro
po
rtio
n o
f To
tal
0
2
4
6
8
10
12
14
16
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2007 2008 2009 2010 2011 2012 2013 2014
North America Europe Greater China India Israel Other
Fig. 21: Aggregate Value of Venture Capital Deals by Region, 2007 - Q3 2014*
Source: Preqin Venture Deals Analyst
Ag
gre
ga
te D
ea
l Va
lue
($b
n)
0
5
10
15
20
25
30
35
40
45
0
50
100
150
200
250
300
350
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2007 2008 2009 2010 2011 2012 2013 2014
IPO Write OffSale to GP Trade SaleAggregate Exit Value ($bn)
Fig. 23: Global Number and Aggregate Value of Venture Capital Exits by Type and Aggregate Exit Value, 2007 - Q3 2014 YTD
Source: Preqin Venture Deals Analyst
No
. of
Exits
Ag
gre
ga
te Exit V
alu
e ($b
n)
Preqin’s Venture Deals Analyst online service provides comprehensive information on over 72,000 venture capital deals, including deal date, size, industry, stage and much more. For more information, please visit: www.preqin.com/vcdeals
*Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases
If you want any further information, or would like to request a demo of
our products, please contact us:
New York:
One Grand Central Place60 E 42nd Street
Suite 630New YorkNY 10165
Tel: +1 212 350 0100Fax: +1 440 445 9595
London:
3rd FloorVintners’ Place
68 Upper Thames StreetLondon
EC4V 3BJ
Tel: +44 (0)203 207 0200 Fax: +44 (0)87 0330 5892
Singapore:
One Finlayson Green#11-02
Singapore 049246
Tel: +65 6305 2200Fax: +65 6491 5365
San Francisco:
1700 Montgomery StreetSuite 134
San FranciscoCA 94111
Tel: +1 415 835 9455 Fax: +1 440 445 9595
Email: [email protected]: www.preqin.com
Preqin Special Report:Venture Capital
November 2014
With global coverage and detailed information on all aspects of the private equity and venture capital asset class, Preqin’s industry-leading Private Equity Online services keep you up-to-date on all the latest developments in the venture capital universe.
Source new investors for funds and co-investments
Find the most relevant investors, with access to detailed profi les for over 3,200 venture capital investors that have invested or would consider investing in venture capital opportunities, including their fund searches and mandates, direct contact information and fund portfolio details.
Identify potential investment opportunities
View in-depth profi les for over 580 venture capital funds currently in the market. Analyze fundraising over time by fund strategy, location and more.
Find fund managers active in the venture capital industry
Search for fi rms actively targeting venture capital investments around the world. View information on key contacts, fi rm fundraising and performance history, and applied strategies of the fi rm when investing in portfolio companies and assets.
See the latest venture capital deals and exits
View details of more than 72,000 venture capital deals, including deal value, buyers, sellers, debt fi nancing providers, fi nancial and legal advisors, exit details and more. Identify forthcoming exits and expected IPOs.
Benchmark performance
Identify which fund managers have the best track records, with performance benchmarks for private equity funds and performance details for over 7,200 individual named funds, including more than 1,500 venture capital funds.
Preqin: Venture Capital Data and Intelligence
Find out how Preqin’s range of venture capital products and services canhelp you:
www.preqin.com/venture
All rights reserved. The entire contents of Preqin Special Report: Venture Capital, November 2014 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin Special Report: Venture Capital, November 2014 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent fi nancial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin Special Report: Venture Capital, November 2014 .
While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confi rm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warrantythat the information or opinions contained in Preqin Special Report: Venture Capital, November 2014 are accurate, reliable, up-to-date or complete.
Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin Special Report: Venture Capital, November 2014 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.