1. State of Venture Capital
& Angel Markets 2016
STARTUP
CAPITAL VENTURES
2. The Venture Capital Funding Cycle
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2
VCs
Invest In
Startups
Startups
Exit Via
M&A or
IPO
VCs
return
capital to
LPs
LPs
Invest In
VCs
Silicon Valley Honolulu
3. Significant Changes From Last Year &
Curves Ahead
• Strong LP investment in VC
• Early stage venture investment declining
• Valuations declining in all segments
• Silicon Valley & software still dominate
• Strongest angel market in 15 years
• Angel investing is out of sync. with VC
• Exit market in a funk due to macro issues
Silicon Valley Honolulu
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9. $59B Of Venture Capital Invested In 2015
Is Highest Since 2000
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Source: Thomson Reuters / PwC / NVCA
10. However Early Stage Deals In Decline
Since Last Year
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Source: Pitchbook
11. Deal Sizes Are Close To .com Highs
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Source: Thomson Reuters / PwC / NVCA
12. Silicon Valley Dominates US VC With CA
Making Up Almost 60% of Total $
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Source: Thomson Reuters / PwC / NVCA
LA / Orange County
13. Hawaii Rebooting After Act 221 Era
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Source: Thomson Reuters / PwC / NVCA
< Act 221 Era >
14. Software Is Eating The $ While Consumer
Products Bumped Up
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Source: Thomson Reuters / PwC / NVCA
15. Valuations (All Rounds Combined)
Dropped Significantly In Q4
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Source: Dow Jones VentureSource
16. Round To Round Price Growth Is Falling
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x
Note: one Series B deal had a price increase of over 3,000%. Excluding this
datapoint, the price increase is 132% marked as “x”
Source: Fenwick
17. But Round to Round Price Growth
Is Healthy Vs. The Long Run*
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Source: Fenwick
* All series combined
18. Intriguingly, Down-Rounds Are Declining
(But Protective Provisions Increasing)
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Source: Fenwick
19. VC Is Correcting From Highest Level Of
Funding Since .com era
Caution is the watch word
• Exit markets are weak & IPOs are closed
• Valuations are normalizing from unusual highs
• Good companies will get funded and get exits
• Most funded companies have revenue and growth
• Investing sectors are more tech. heavy (e.g.
software, cloud) vs. internet and media
• Business models are more sophisticated AND
more capital-efficient
Silicon Valley Honolulu
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21. Technology Angel Funding Strong But
Disconnected From Venture
Angel funding at highest levels in years
• $1.65B invested in 870 deals
Deal size and valuations strong but also falling
But disconnected from venture capital
• Investing in different sectors than VC
• Most active angel syndicates are outside major
VC markets
Silicon Valley Honolulu
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22. Crowdfunding Industry Still Dominated By
Project & Lending Sectors
Project funding (e.g. Kickstarter: $2.2B funded to
date) and lending (e.g. Lending Club) dominate
Angel.co is largest equity funder at $160M in 2015
• Evolving into a fund / fund-of-funds
SEC unaccredited investor equity crowdfunding
regulations finally clarified
• Still nascent with no dominant platform yet
Silicon Valley Honolulu
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23. Tech. Angel Round Size
At All Time High
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Source: ARI Halo Report
24. Tech. Angel Valuations At All Time High
(2013 Median Was $2.5M)
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Source: ARI Halo Report
2015
25. Tech. Angel Dollars More Democratic Than
CA-Centric Venture Capital
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Source: ARI Halo Report
26. Angel Dollars Are Less Software & More
Healthcare, Commercial & Other Than VC
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Source: ARI Halo Report
27. Why Are Tech. Angels Investing
Differently Than Venture?
Many possibilities or combinations
• Investing in concepts angels understand
• Investing proportional to applicant pool
• Angels unaware of VC funding patterns
• News making consumer tech. IPOs (FB,
TWTR, STRP) create observational bias
• ?
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29. Macro Risk Factors Casting A Shadow Over
Exit Markets
Public markets are nervous and flat / down
Numerous macro risk factors
• China debt & growth issues (ongoing)
• Low oil prices hurting economies
• Brexit risk (June 23)
• US Presidential election (November 8)
• Russian aggression
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30. Page 30
Venture M&A Market Is Off Highs And
Venture IPO Market Was Zero Last Quarter
Silicon Valley Honolulu
Source: Thomson Reuters / PwC / NVCA
31. FB acquisition of
WhatsApp for
$19.5BN
VC-backed Exit Valuations
Are Also Down
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Source: Thomson Reuters / PwC / NVCA
33. VCs Invested
$59B In
Portfolio
~$90B In
Venture Exits
(IPO + M&A)
LPs
Invested
$20B In VCs
VCs Invested More In Startups Than LPs
Invested Back Into VC In 2015
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Sources: NVCA, Thomson Reuters, Cambridge
Silicon Valley Honolulu
LP investment strengthening which is a good sign
34. Better Angel & VC Investing Synchronicity
Could Improve Angel Returns
Startups and angels are dependent upon
follow-on venture funding
Angel investing patterns do not appear to
influence VC investing patterns
VCs are focused on investing in active exit
markets
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35. What About Hawaii?
SCV is tracking 150 Hawaii startups from concept to near venture ready
• ~8 Companies could be close (but as always, not all will make it)
Hawaii is 0.3% of US population so we believe there is long-run potential
for 5-10 fundable deals / year
• State is doing the right things to reboot ecosystem after 221
• Potential for significant & sustainable high-wage job growth
Vertical experience is key to world-class startups: Need more
startups from Hawaii’s centers of excellence & more engagement from
these corporate leaders
• Energy, agriculture, travel & tourism, healthcare IT, dual use (i.e.
cybersecurity, networking)
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