Venture Capital Report - Dow Jones

Venture Capital Report

U.S. | 4Q | 2014


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 2014 include: U.S. venture capital fundraising rose both in number of funds and amount invested;

Venture capital investment into U.S. companies experienced a quarter-over-quarter increase; Median pre-money valuation increased 30% from 3Q 2014 and more than doubled the 2013 value;

Amounts raised through both Initial public offerings (IPOs) and mergers and acquisitions (M&As) experienced an increase from the previous quarter.

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Venture Fundraising Increases in U.S. during 4Q 2014

FUNDRAISING

85 funds garnered $8.1 billion in 4Q 2014, a 25% increase in the amount raised and also a 4% rise in number of funds from the prior quarter. Venture capital funds have raised a total of almost $33 billion across 332 funds in 2014, up 62% from the total amount raised in 2013 and 27% in number of funds.

Tiger Global Private Investment Partners IX LP was the largest U.S. venture capital fund of 4Q 2014 raising $2.5 billion and accounting for 31% of the total amount raised during the quarter.

Median U.S. fund size was $110 million in 2014.

U.S. VC Fundraising (2011 – 2014) Based on multiple closings

90

$12.00

80 $10.00 70 60

$8.00

50 $6.00 40 30

$4.00

20 $2.00 10 0 Amount Raised ($B) Number of Funds

4Q'11

1Q'12

2Q'12

3Q'12

4Q'12

1Q'13

2Q'13

3Q'13

4Q'13

1Q'14

2Q'14

3Q'14

4Q'14

$7.23

$7.45

$6.57

$5.03

$3.07

$4.60

$6.69

$4.03

$5.03

$10.4

$7.98

$6.48

$8.13

56

55

46

54

57

59

56

64

82

83

82

82

85

$0.00

3


Largest VC Funds Raised in 4Q 2014

FUNDRAISING

Firm Name

Fund Name

Amount ($M)

City

State

Offering Status

Fund Type

Fund Category

Closing Type

Tiger Global Management LLC

Tiger Global Private Investment Partners IX LP

$2,500.00

New York

NY

Closed

MulD-‐stage venture capital

Venture Capital

Final

Canaan Partners

Canaan X LP

$675.00

Menlo Park

CA

Open

Early-‐stage venture capital

Venture Capital

First

FormaDon8 Partners LLC

FormaDon8 Partners Fund II LP

$500.00

San Francisco

CA

Closed

Early-‐stage venture capital

Venture Capital

Final

Polaris Partners

Polaris Partners VII LP

$465.00

Waltham

MA

Closed


Venture Capital

Final

Vivo Capital

Vivo Capital Fund VIII LP

$427.65

Palo Alto

CA

Closed


Venture Capital

Final

4


U.S. Venture Investment on the Rise in 4Q 2014

FINANCING

U.S.-based companies raised $13.8 billion from 814 venture capital deals in 4Q 2014, an increase in capital (24%) despite deal flow dropping 12% from the previous quarter. Compared to the same period in 2013, number of deals decreased 20%, while amount invested registered a 44% increase.

In 2014, 3682 deals have been completed raising $52 billion, a respective 4% decrease and 47% increase on figures posted in 2013.

Equity Financings into U.S. – based, VC-backed Companies (2011 – 2014)

$16.00

1200

$14.00

1000

$12.00 800

$10.00 $8.00

600

$6.00

400

$4.00 200

$2.00 $0.00

4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14

0

Amount Raised ($B) $8.19 $7.76 $9.62 $7.99 $9.27 $7.63 $8.73 $9.47 $9.64 $12.09 $15.00 $11.19 $13.84 Number of Deals

918

898

1018

937

932

913

953

958

1013

945

995

928

814

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Venture Capital Report FINANCING

Equity Financings into U.S.–based, VC–backed Companies, by Round Class (Quarter over Quarter, 2011 – 2014) Number of Deals

400

300

200

100

0 Restart

4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 11

11

14

11

18

7

7

8

10

8

8

6

6

Later

290

253

307

286

283

264

284

275

281

289

349

287

283

Second

150

142

181

146

160

146

203

197

210

184

218

194

166

First

319

309

354

325

313

340

308

332

368

318

329

340

292

Seed

104

138

121

122

108

121

120

108

91

102

55

67

40

6


Equity Financings into U.S.–based, VC–backed Companies, by Round Class (Year over Year, 2004 – 2014 ) Number of Deals

1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0

2004

2005

2006

Restart

2007

2008

177

175

Later

789

826

2009

2010

2011

2012

2013

2014

147

118

100

95

63

62

54

32

28

902

952

937

965

1110

1144

1129

1104

1208

Second

492

487

593

601

628

643

628

630

629

756

762

First

723

863

911

1114

1091

788

970

1228

1301

1348

1279

Seed

105

106

168

215

207

181

267

447

489

440

264

7


Equity Financings into U.S.–based, VC–backed Companies, by Round Class (2011 – 2014) Amount Raised ($B)

$12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00

4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14

Restart

$0.08 $0.09 $0.16 $0.24 $0.69 $0.08 $0.18 $0.08 $0.10 $0.29 $0.17 $0.06 $0.10

Later

$4.72 $4.19 $5.42 $4.70 $4.51 $4.48 $4.93 $5.22 $5.25

$6.80 $9.99 $5.99 $8.57

Second

$1.49 $1.10 $1.64 $1.26 $1.38 $1.31 $1.75

First

$1.53 $1.46 $1.98 $1.43 $1.73 $1.50 $1.36 $1.74 $1.99 $1.62 $1.91 $2.04 $2.16

Seed

$0.10 $0.10 $0.10 $0.10 $0.09 $0.08 $0.09 $0.09 $0.08 $0.09 $0.07 $0.08 $0.04

$1.57 $1.88 $1.94 $2.64 $1.88 $2.51

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Equity Financings into U.S.-based, VC-backed Companies, Median Deal Size ($M) (2011 – 2014) Median Equity Deal Size ($M)

$8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Median Equity Deal Size ($M)

4Q'11

1Q'12

2Q'12

3Q'12

4Q'12

1Q'13

2Q'13

3Q'13

4Q'13

1Q'14

2Q'14

3Q'14

4Q'14

$4.00

$3.80

$4.58

$3.66

$4.17

$4.00

$4.44

$3.64

$4.18

$4.15

$6.27

$5.00

$6.80

9


Equity Financings into U.S.-based, VC-backed Companies, by Industry Group (4Q 2014)

FINANCING

Consumer Services saw the largest investment allocation, with 159 deals garnering almost $3.8 billion and accounting for 27% of total equity investment. Information Technology (IT) raised the second highest proportion of investment for 4Q’14. IT companies drew $3.3 billion across 245 deals, up 52% and 13% from respective 3Q’14 figures. Business and Financial Services placed third with $3.2 billion in 206 deals, increasing 4% from the $3.1 billion accumulated in the previous quarter, despite a 23% drop in number of deals. $2.5 billion were raised by the Healthcare sector in 143 deals, down both in capital invested and deal flow (8% and 23%, respectively). In 2014 as a whole, Business and Financial Services took a 26% share of investment ($13.7 billion), IT a 24% ($12.3 billion), Consumer Services a 23% ($11.9 billion), and Healthcare a 21% ($11 billion).

4Q’14 Industry Breakdown By Amount Raised ($B)

4Q'14 Industry Breakdown By Number of Deals Business and Financial Services 206

245

Business and Financial Services 23%

24%

Consumer Goods

Consumer Goods

Consumer Services 25

Consumer Services 2%

2% Energy & Utilities

Energy & Utilities

23 Healthcare 143

159 13

Industrial Goods & Materials Information Technology

Healthcare

18% 27% 4%


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Equity Financings into U.S.-based, VC-backed Companies, by Industry Group (2014)


2014 Industry Breakdown By Number of Deals

2014 Industry Breakdown By Amount Raised ($B)

Business and Financial Services 966

Business and Financial Services 24%

991

26%

Consumer Goods

Consumer Goods

Consumer Services

Consumer Services 2%

91

135

Healthcare 731

700 58

2%

Energy & Utilities


Energy & Utilities Healthcare

21% 23% 2%


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Top 5 Deals into VC-backed Companies (4Q 2014)

FINANCING Co. Name

Loca@on

Uber San Francisco, Technologies CA Inc.

Industry Group

Consumer Services

Industry Segment

Travel and Leisure

Industry Code

Brief Descrip@on

TransportaDon Services

Provider of an on-‐demand transportaDon service plaYorm.

Close Date

12/4/2014

Round Type

6th

Raised ($M)

Round Investors (* denotes lead)

$1200.00

Lone Pine Capital, New Enterprise Associates Inc., Qatar Investment Authority, Valiant Capital Management LP

Magic Leap Inc.

Dania Beach, FL

InformaDon Technology

Electronics and Computer Hardware

Displays

Developer of an augmented reality visual compuDng system.

10/21/2014

2nd

$542.00

Andreessen Horowitz, Google Inc.*, Kleiner Perkins Caufield & Byers, Kohlberg Kravis Roberts & Co. LP, Legendary Entertainment Inc., Obvious Ventures Management LLC, Qualcomm Inc., Vulcan Capital

Snapchat Inc.

Venice, CA

Consumer Services

Consumer InformaDon Services

Email/Messaging

Provider of an ephemeral messaging mobile applicaDon.

12/31/2014

4th

$485.63

Kleiner Perkins Caufield & Byers*, Yahoo!

Later

$355.00

Benchmark Capital, Goldman Sachs Group Inc.*, Harvard Management Co., JPMorgan Chase & Co., T. Rowe Price Group Inc.*, Wellington Management Co. LLP*

First Round

$250.00

Franklin Square Capital Partners*, Triangle Peak Partners LP

WeWork Business and New York, NY Companies Inc. Financial Services

Sunnova Houston, TX Energy Corp.

Energy and UDliDes

Financial InsDtuDons and Services

Real Estate

Renewable Energy

Solar Energy

Provider of shared office space.

12/15/2014

Provider of residenDal solar 11/20/2014 services.

12


Most Active Investors for U.S.-based, VC-backed Companies (4Q 2014)

25 21

20

20

18

17 15

15

10

5

0 New Enterprise Associates Inc.

Khosla Ventures

Andreessen Horowitz

Kleiner Perkins Caufield & Byers

Sequoia Capital

13

Venture Capital Report FINANCING Alaska/ Islands Mid-Atlantic Midwest Central Midwest East Mountain New England Northern California Pacific Northwest South Central South East Southern California

Number of Deals in 4Q 2014 by Primary Region

Number of Deals by Primary Region

Amount Raised ($B) by Primary Region

4Q 2014

4Q 2014

0 155 14 56

$0.00 $1.85 $0.12 $0.57

41 87 284 29 33 50

$0.39 $1.28 $5.64 $0.46 $0.62 $1.13

65

$1.08

Amount Raised ($B) in 4Q 2014 by Primary Region

Alaska/Islands

Alaska/Islands

Mid-Atlantic

Mid-Atlantic

Midwest Central

Midwest Central

Midwest East

Midwest East

Mountain

Mountain

New England

New England

Northern California

Northern California

Pacific Northwest

Pacific Northwest

South Central

South Central

South East

South East

Southern California

Southern California

14


San Francisco Bay Area Boston Metro New York Metro Potomac Los Angeles Metro San Diego Metro Orange County Seattle Metro Austin Metro Dallas-Fort Worth Chicago Metro

Number of Deals by subregion

Amount Raised ($B) by subregion

4Q 2014

4Q 2014 281 78 104 28 33 17 14 21 10 12 22

Subregion Breakout Amount Raised ($B)

Subregion Breakout Number of Deals

Amount Raised ($B) by subregion

Number of Deals by Subregion 281 San Francisco Bay Area

San Francisco Bay Area Boston Metro

78

New York Metro Potomac

28 33

Orange County

17 14 21

Seattle Metro

$5.63

Boston Metro 104

Los Angeles Metro San Diego Metro

$5.63 $1.11 $1.33 $0.33 $0.78 $0.16 $0.12 $0.40 $0.13 $0.08 $0.42

$1.11

New York Metro Potomac

$1.33 $0.33 $0.78

Los Angeles Metro San Diego Metro

$0.16

Orange County

$0.12

Seattle Metro

$0.40

Austin Metro

10

Austin Metro

$0.13

Dallas-Fort Worth

12

Dallas-Fort Worth

$0.08

Chicago Metro

22

Chicago Metro

$0.42

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Venture Capital Report VALUATIONS

Equity Financings into U.S. – based, VC-backed Companies, Median Pre-money Valuation ($M) (2011 – 2014)

$60.00

$50.00

$40.00

$30.00

$20.00

$10.00

$0.00

4Q'11

1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14

Median Pre-money Valuation ($M) $21.28 $18.05 $18.63 $29.10 $39.51 $17.75 $24.20 $15.80 $21.63 $24.63 $50.50 $35.00 $45.60

16


Venture M&A and IPO Market Activity in the U.S. during 4Q 2014

LIQUIDITY

Mergers and acquisitions (M&As) of venture-backed companies increased by 60% from 3Q 2014, with 102 deals garnering $32 billion. Initial public offering (IPO) activity increased in 4Q 2014 raising $3 billion, up 134% from the previous quarter.

Exit Opportunities for U.S. VC-backed Companies (2011 – 2014)

4Q'14 3Q'14 2Q'14 1Q'14 4Q'13 3Q'13 2Q'13 1Q'13 4Q'12 3Q'12 2Q'12 1Q'12 4Q'11 0 IPOs

4Q'11 10

20 1Q'12 20

2Q'12 12

40 3Q'12 10

M&As

142

114

125

108

60 4Q'12 1Q'13 8 9 126

100

80 2Q'13 20

3Q'13 25

93

125

100 4Q'13 20 131

120 1Q'14 2Q'14 38 24 128

121

140 3Q'14 22 132

160 4Q'14 21 102

17


U.S. VC-backed M&As (2011-2014)

LIQUIDITY

102 M&As raised $32 billion during 4Q 2014, a 60% increase in M&A valuations despite the number of deals decreasing 23% compared to the previous quarter, when 132 M&As garnered $20 billion. The largest M&A of the quarter was WhatsApp Inc., which was acquired by Facebook (NASDAQ: FB) for $19 billion. 483 M&As were completed for venture-backed companies in the U.S. during 2014, up 8% from the 449 completed during 2013 and 2% from the 473 seen during 2012.

U.S. VC-backed M&A Activity (2011 - 2014)

$35.00

160

$30.00

140 120

$25.00

100 $20.00 80 $15.00 60 $10.00

40

$5.00 $0.00

20

4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14

0

Amount Paid ($B) $9.66 $10.35 $11.77 $11.75 $8.49 $5.63 $9.15 $12.44 $14.09 $16.16 $11.15 $20.13 $32.31 Number of M&As

142

114

125

108

126

100

93

125

131

128

121

132

102

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Top 3 U.S. M&As (4Q 2014)

LIQUIDITY

Company Name

Loca@on

Brief Descrip@on

Industry Code

Industry Segment

Industry Group

Close Date

Round Type

Amount Paid ($M)

Acquirer

WhatsApp Inc.

Santa Clara, CA

Developer of cross-‐ plaYorm mobile applicaDon soiware.

CommunicaDons Soiware

Soiware

InformaDon Technology

10/6/2014

AcquisiDon

$19.000.00

Facebook Inc.

Biotechnology TherapeuDcs

BiopharmaceuDcals

Healthcare

11/7/2014

AcquisiDon

$1750.00

Johnson & Johnson Inc.

10/9/2014

AcquisiDon

$981.00

Rakuten Inc.

Alios BioPharma Inc.

Ebates Inc.

Developer of medicines South San aimed at the treatment of Francisco, CA viral diseases.

San Francisco, Provider of online cash CA back shopping services.

Shopping Facilitators

Consumer Consumer Services InformaDon Services

19


U.S. VC-backed IPOs (2011-2014)

LIQUIDITY

21 venture-backed companies raised $3 billion through public offerings in 4Q 2014. Number of listings decreased by 5%, while capital raised more than doubled the amount from the previous quarter. The largest IPO of the quarter was LendingClub Corp. (NYSE: LC), which completed a $870 million IPO. 2014 saw the highest number of US VC-backed IPOs since 2000, when 210 were completed. During 2014,105 companies garnered a total of $9.2 billion, an increase of 42% and 12% from respective 2013 figures.

U.S. VC-backed IPO Activity (2011 - 2014) $9.00

40

$8.00

35

$7.00

30

$6.00

25

$5.00 20 $4.00 15

$3.00

10

$2.00

5

$1.00 $0.00

4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14

Raised ($B) through IPO $2.37 $1.42 $7.75 Number of IPOs

10

20

12

$0.81 $1.22 $0.64 $1.80 $2.22 $3.55 10

8

9

20

25

20

0

$2.94 $1.96 $1.30 $3.04 38

24

22

21

20


Top 3 U.S. IPOs (4Q 2014)

LIQUIDITY

Company Name

LendingClub Corp.

Wayfair Inc.

Loca@on

Brief Descrip@on

Operator of an online San Francisco, marketplace connecDng CA borrowers and lenders.

Boston, MA

Industry Code

Lending

Provider of an online retail Household Goods/ plaYorm for home Services Retailers furnishings and decor.

Juno Developer of medicines to Seakle, WA TherapeuDcs Inc. treat cancer.

Biotechnology TherapeuDcs

Industry Segment

Industry Group

Close Date

Financial InsDtuDons Business and 12/11/2014 and Services Financial Services

Round Type

Raised through IPO ($M)

Exchange

IPO

$870.00

NYSE: LC

Retailers

Consumer Services

10/2/2014

IPO

$319.00

NYSE: W

BiopharmaceuDcals

Healthcare

12/19/2014

IPO

$264.55

NASDAQ: JUNO

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Venture Capital Report ABOUT US

Dow Jones VentureSource helps venture capitalists, corporate development execu@ves, investment bankers and service providers find deal and partnership opportuni@es, 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 execu@ves – 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 execu@ves, and from secondary sources. These venture capital sta@s@cs cover equity investments into early stage, innova@ve companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. Figures contained throughout the report current at @me of editorial but are subject to change without no@ce. No statement herein is to be construed as a recommenda@on to buy or sell securi@es or to provide investment advice. About Dow Jones

Dow Jones & Company is a global provider of news and business informaDon, delivering content to consumers and organizaDons via newspapers, Web sites, apps, video, newslekers, magazines, proprietary databases, conferences, and radio. Dow Jones has produced unrivaled quality content for 125 years and today has one of the world’s largest news-‐gathering operaDons with nearly 2,000 journalists in more than 80 bureaus, including The Wall Street Journal, America’s largest newspaper by paid circulaDon. Other premier brands include FacDva, Barron’s, MarketWatch, DJX, Dow Jones Risk & Compliance, Dow Jones Newswires, and Dow Jones VentureSource. Dow Jones publishes in 13 languages and distributes content in 28 languages, combining technology with news and data to support business decision making. The company pioneered the first successful paid online news site and its industry leading innovaDon enables it to serve customers wherever they may be, via the Web, mobile devices, Internet-‐connected televisions, and tablets.

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