The Venture Climate James Gelfer, Lead Venture Analyst - PowerPoint PPT Presentation

The Venture Climate James Gelfer, Lead Venture Analyst James.Gelfer@pitchbook.com

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VC Deal Activity United States

Angel: only individual investors or angel syndicates; no PE or VC firms involved Seed: self-described “seed” investments, often using convertible debt or equity deals <$500k with a government filing. Early Stage: Series A or B, as indicated either by the series of stock Late Stage: 4 Series C or later *Data as of 6/3/2019 *Data as of 6/3/2019

V C D e a l A c t i v i t y The e VC VC i industry h has fundamen entally c changed over er t the l e last d t dec ecade Category (medians) Early Stage in 2009 Seed in 2019 Stage Typical Maturity Milestone in 2020 Deal Size $3.0M $2.1M Seed Minimum viable product (MVP) Pre-Valuation $8.3M $8.0M prepared and working on product/ Company Age 2.6 years 3.1 years market fit. Have launched or are preparing to go to market Series A Achieved working product/market fit Category (medians) Late Stage in 2009 Early Stage in 2019 and have paying customers Deal Size $6.2M $6.5M Series B+ Mitigated many business risks (e.g. Pre-Valuation $30.0M $29.4M product, market, financial, team etc.) and are focused on accelerating Company Age 7.7 years 3.5 years growth 5

V C D e a l A c t i v i t y US US V VC deal al a activ ivit ity by y year ar US VC deal count and $160 12000 value have continued 10777 their charge into record territory. $120 8000 The vast amount of available capital $80 resources continues to drive growth in deal sizes 4000 and valuations across $40 nearly all stages of $136.5 venture capital. $0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Deal value ($B) Deal count 6 *data as of Q4 2019. *Data as of 6/3/2019

V C D e a l A c t i v i t y Ear arly US ly US VC b by s stag age ( (#) Ear arly US ly US VC b by s stag age ( ($) 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Angel/Seed Early VC Later VC Angel/Seed Early VC Later VC 7

U S V C D e a l s Region ional V VC a activ ivity a as p prop oportion ion of n nation ional t al total 8

V C D e a l A c t i v i t y Median Distance (miles) between lead investor and target company by stage 600 527.7 500 456.4 400 334.1 323.0 300 200 92.4 100 65.5 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Angel/Seed Early VC Later VC *data as of Q4 2019. 9

U S V C D e a l s Most A Active C CSAs SAs* Combined Statistical Area (CSA) is a US Office of Management and Budget (OMB) term for a combination of adjacent metropolitan (MSA) and micropolitan statistical areas (µSA) 10

U S V C D e a l s VC VC e ecosystem ems w with m most/ t/lea east p t participation from l local i inves estors For more information on the methodology, access the full research report here 11

V C D e a l A c t i v i t y US VC VC d dea eal activity f for fem emale f e founded c companies es “The gradual rise in female-founded startups can be traced to several factors, including market awareness of the gender imbalance, stronger mentorship networks for women and more women entering the venture side of entrepreneurship.” All Raise: Women in the VC Ecosystem report 12 *data as of Q4 2019. *Data as of 6/3/2019

V C D e a l A c t i v i t y Femal male-founded ed c companies es as a a proporti tion of to total U US VC VC d deal acti tivity ( (# & & $) 13 *data as of Q4 2019.

Venture Debt United States

V C D e a l A c t i v i t y Venture Debt US VC VC Deb ebt Venture debt is simply defined as lending to VC-backed companies, or debt financing used in lieu of VC financing. Venture debt providers have become increasingly flexible in the structure and terms of loans, with diverse constructions used for different industries and investment stages, and warrants helping mitigate the risk involved while allowing lenders to participate in the upside of a borrower’s growth. This includes but is not limited to: convertible debt notes, term loans, monthly recurring revenue (MRR) lines of credit, and/or revenue-based investment products acting unlike equity-based financings due to repayment terms or claims on future equity. More information is available in our Venture Debt Overview 15 *Data as of 6/3/2019

V C D e a l A c t i v i t y US VC VC Deb ebt 4097 Estimates of the total size of the venture debt market run around 10% to 15% of the total VC capital invested during a given year 3145 $20.6 $13.8 $14.5 $9.7 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Debt value estimate $B (high) Debt value estimate $B (low) Debt financing count estimate *data as of Q3 2019. 16

Angel & Seed Deal Activity United States

V C D e a l A c t i v i t y Angel & & Seed ed U US VC VC dea eal a activity by y yea ear $10 8000 $8 5743 6000 4541 4556 $6 4000 $4 2000 $2 $6.8 $9.2 $9.1 $0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Deal value ($B) Deal count 18 *data as of Q4 2019.

V C D e a l A c t i v i t y Angel & & Seed ed U US VC VC quarti tile b e brea eakdowns ( (dea eal size & pre-valuati tion) $12.0 $2.9 Pre-valuation ($M) Deal size ($M) $10.0 $2.6 $8.0 $7.0 $5.0 $4.2 $1.1 $1.1 $0.3 $0.3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 75th Percentile Median 25th Percentile 75th Percentile Median 25th Percentile 19 *data as of Q4 2019.

V C D e a l A c t i v i t y Serial Entrepreneurs Median angel & & seed ed U US dea eal s size ( e ($M) ) by e entrep epreneu eur c class Our research has found that the prior $3 experience of a founder has a material impact on VC fundraising. Specifically, $2.5 $2.5 serial entrepreneurs can raise more capital, more quickly and on better terms. We classify founding teams as follows: $2.0 $2 • Serial Entrepreneurs: have successfully $1.5 exited at least one business and have subsequently launched another business $1.0 $0.9 $1 • Unproven Serials: have founded at least two businesses but have not yet seen a successful exit • Novice: first-time founders $0 More information and analysis can be 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* found on our note, Serial Entrepreneurs: Does Lightning Strike Twice? Novice Unproven Serial *data as of 11/14/2019. 20 *Data as of 6/3/2019

V C D e a l A c t i v i t y Pre-Seed Quartile d e distribution o of a angel el & seed ed y yea ears s since f e founding 6 As the seed stage has matured, the “pre-seed” stage has emerged to 5 provide capital at the pre-product stage or even before a company is incorporated. 4 Self-described pre-seed investors 3 have generally classified deals at this stage as sized under $1 million, with 2 pre-money valuations ranging from $3 million to $5 million. 1 More information on the pre-seed strategy can be found in our full 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 research note, The Emergence of Pre- Seed 75th Percentile Median 25th Percentile 21 *data as of Q4 2019. *Data as of 6/3/2019

V C D e a l A c t i v i t y Angel & & Seed ed U US VC VC by s sec ector ( (# a and $) 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 22

V C D e a l A c t i v i t y Quarterly A Angel el & & S Seed eed U US VC VC deal c count ( t (#) b ) by ver erticals 180 160 140 120 100 80 60 40 20 0 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 Q4 Q1 Q2 Q3 Q4 2011 2012 2013 2014 2015 2016 2017 2018 2019 AI/ML FinTech HealthTech Life Sciences E-Commerce CleanTech 23

Early Deal Activity United States

V C D e a l A c t i v i t y Ear arly US ly US VC d deal al activ ivit ity b y by y year ar $50 4000 3722 3624 3240 $40 3000 $30 2000 $20 1000 $10 $25.7 $43.3 $42.3 $0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Deal value ($B) Deal count 25 *data as of Q4 2019.