Startup Capital Ventures annual analysis of the venture capital and angel investing markets for startups, VCs, LPs and angels.

1. State of Venture Capital
& Angel Markets 2016
STARTUP
CAPITAL VENTURES

2. What’s Going On In The US VC 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 &
Signs of Curves Ahead
• Strong LP investment in VC
• VCs investing more than at any time
since .com era
• Signs valuations & $ will decline
• California & software still dominate
• Exit market off highs but still strong
• Strongest angel market in 15 years
• Angels investing differently than VC
Silicon Valley Honolulu
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4. Agenda
LP Investments In VC
VC Investing Activity
Angel, Accelerator & Crowdfunding
Exit Activity
Conclusions
Silicon Valley Honolulu
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5. VC Fundraising Market Is Healthy
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.com boom
& bust
Silicon Valley Honolulu
Source: Thomson Reuters / PwC / NVCA

6. Number Of VC Funds Raised Declined
But Still Robust
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Source: Thomson Reuters / PwC / NVCA

7. New Funds Represent Over 30%
Of Total Funded
Source: Thomson Reuters / NVCA
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8. • VC Returns Continue to Outperform
• Public MarketsVC Returns Continue To Exceed
Public Market Returns
Source: NVCA, Cambridge Associates
Silicon Valley Honolulu
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9. Agenda
Silicon Valley Honolulu
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LP Investments In VC
VC Investing Activity
Angel, Accelerator & Crowdfunding
Exit Activity
Conclusions

10. $59B Of Venture Capital Invested In 2015
Is Highest Since 2000
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Source: Thomson Reuters / PwC / NVCA

11. $7B Of Corporate VC Is Highest in 10 Yrs
Focused On Software & Biotech
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Source: PWC Moneytree Report

12. Number of US VC Deals Remains
Essentially Flat For 15 Years
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Source: Thomson Reuters / PwC / NVCA

13. 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

14. Software Is Eating The $ While Consumer
Products Bumped Up
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Source: Thomson Reuters / PwC / NVCA

15. Software Represents 40%
Of Deals With Biotech #2 at ~10%
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Source: Thomson Reuters / PwC / NVCA

16. Seed Stage Investment Continues To Be
Scarce
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Source: Thomson Reuters / PwC / NVCA

17. Deal Sizes Close To .com Highs...
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Source: Thomson Reuters / PwC / NVCA
* Driven by two billion $ deals and
several multi-hundred $ deals

18. Valuations (All Rounds Combined)
Dropped Significantly In Q4
Silicon Valley Honolulu Page 18
Source: Dow Jones VentureSource

19. Venture Investment Environment Is At
Highest Levels Since .com Era
However the comparison is unfair
• Still just 50% of .com highs
• 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
• Cloud services (e.g. AWS) reduce capital needed
Silicon Valley Honolulu
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20. Agenda
Silicon Valley Honolulu
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LP Investments In VC
VC Investing Activity
Angel, Accelerator & Crowdfunding
Exit Activity
Conclusions

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
SEC unaccredited investor equity crowdfunding
regulations remain limiting
• Remains nascent with no dominant platform yet
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23. Average 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

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 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
• Consumer internet has lower entry barriers
• Angels unaware of VC funding patterns
• News making consumer IPOs (TWTR)
create observational bias
• ?
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28. Agenda
LP Investments In VC
VC Investing Activity
Angel, Accelerator & Crowdfunding
Exit Activity
Conclusions
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29. Page 29
Venture M&A and IPO Markets
Activity Are Off Highs
Silicon Valley Honolulu
Source: Thomson Reuters / PwC / NVCA
Slowest M&A
market since 2009

30. VC-backed IPO and M&A Valuations
Are Also Down
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Source: Thomson Reuters / PwC / NVCA
FB acquisition of
WhatsApp for
$19.5BN

31. Agenda
LP Investments In VC
VC Investing Activity
Angel, Accelerator & Crowdfunding
Exit Activity
Conclusions
Silicon Valley Honolulu
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32. VCs Invested
$59B In
Portfolio
~$90B In
Venture Exits
(IPO + M&A)
LPs
Invested
$20B In VCs
VCs Invested Far More In Startups Than
LPs Are Investing Back Into VC
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Sources: NVCA, Thomson Reuters, Cambridge
Silicon Valley Honolulu
VC will decline unless LP investment into VC grows

33. 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
Silicon Valley Honolulu
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34. www.startupcv.com
STARTUP
CAPITAL VENTURES