PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 In association with INDUSTRY-LEADING ALTERNATIVE ASSETS INSIGHTS. FOR FREE. EXPLORE industry reports and newsletters looking at key trends BENCHMARK alternative assets funds and assess the relative performance of private capital asset classes with our index TRACK the latest stats on fundraising, deals, dry powder, industry AUM, investors and more DOWNLOAD charts, league tables and slide decks from Preqin presentations at conferences Gaining full access is easy. To register for free please visit: www.preqin.com/research DOWNLOAD DATA PACK: www.preqin.com/FRUSVC17 CONTENTS p4 Fundraising p6 Funds in Market p7 Fund Managers p8 In Focus: Micro Venture Capital p10 Deals p12 Exits p13 Performance p14 Investors FIRST REPUBLIC BANK First Republic and its subsidiaries offer private banking, private business banking and private wealth management, including investment, trust and brokerage services. 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While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confirm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin and First Republic Update: US Venture Capital in 2017 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 and First Republic Update: US Venture Capital in 2017 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication. 3 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 FUNDRAISING 2017 was a successful fundraising year for Fig. 1: US-Based Venture Capital Fundraising, 2007 - 2017 US-based venture capital fund managers: 350 259 funds reached a final close, raising 316 $34bn in aggregate capital (Fig. 1). 300 263 259 Although fundraising activity declined 252 250 slightly compared to 2016 figures, both the 207 number of funds closed and capital raised 200 171 171 in 2017 were above the annual average 156 150 for the period 2007-2017 (196 funds and 119 123 123 $27bn). 100 43 California-based New Enterprise 50 28 31 26 33 33 34 15 16 18 19 Associates raised one of the largest 0 venture capital funds closed in 2017: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New Enterprise Associates 16 secured Year of Final Close $3.3bn and reached a final close in June, No. of Funds Closed Aggregate Capital Raised ($bn) achieving 110% of its initial target (Fig. 3). Source: Preqin Headline commitments came from a mix of new and returning investors, including a Fig. 2: US-Based Venture Capital Fundraising by Fund Size, 2010 - 2017 $300mn commitment from California State 100% 1% 1% 2% 1% 5% 5% 3% 3% 3% Teachers’ Retirement System (CalSTRS) 7% 3% 5% 4% 5% 7% 5% 90% 9% 10% 9% and a $200mn commitment from Teacher 15% 12% 8% 13% 11% 80% 17% Retirement System of Texas. The fund will 12% 23% 70% 17% 23% 23% 26% 20% target early-stage investments in US-based 60% 17% 19% IT, energy, technology and healthcare 7% 14% 50% 18% 9% 15% 18% sectors. 40% 30% The largest proportion of funds closed by 48% 53% 52% 49% 49% 20% 42% 42% 42% US-based managers have typically fallen Proportion of Funds Closed 10% into the micro VC (sub-$100mn) category, 0% accounting for 62% of vehicles closed since 2010 2011 2012 2013 2014 2015 2016 2017 2007 and 63% of vehicles closed in 2017 Year of Final Close (Fig. 2). At the other end of the spectrum, Less than $50mn $50-99mn $100-249mn just 1% of US-based funds reached a $250-499mn $500-999mn $1bn or More Source: Preqin Fig. 3: Largest US-Based Venture Capital Funds Closed in 2017 Fund Firm Fund Size (mn) Fund Type Geographic Focus New Enterprise Associates 16 New Enterprise Associates 3,300 USD Venture (General) US Emerging Markets, The Rise Fund TPG 2,100 USD Venture (General) North Africa, South Asia Institutional Venture Partners XVI Institutional Venture Partners 1,500 USD Expansion/Late Stage US Clarus Ventures IV Clarus Ventures 910 USD Venture (General) US Sequoia Capital India IV Sequoia Capital 850 USD Expansion/Late Stage Asia Mithril II Mithril Capital Management 850 USD Expansion/Late Stage Global Canaan Equity XI Canaan Partners 800 USD Early Stage India, Israel, US Europe, North America, Summit Partners Venture Capital Fund IV Summit Partners 730 USD Early Stage US Bain Capital Life Sciences Fund Bain Capital 720 USD Venture (General) Global, US Flagship Ventures Fund VI Flagship Pioneering 618 USD Venture (General) US Source: Preqin 4 © Preqin Ltd. 2018 / www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/FRUSVC17 final close on $1bn or more in 2017, the Fig. 4: US-Based Venture Capital Fundraising Success, 2007 - 2017 smallest proportion since 2013. 25 120% Proportion of Target Size Achieved 101% 102% 102% 102% 97% 100% US-based venture capital funds have, on 94% 93% 100% 20 91% 89% average, met or exceeded their target size 83% in each of the past four consecutive years, 80% securing an average 102% in 2017 (Fig. 4). 15 When looking at the average time spent on 60% 22 22 the road, 2017 saw a decline to 19 months 10 19 19 19 19 compared to 22 months in 2016. 17 40% 15 14 15 5 11 20% Generalist venture capital vehicles Time Spent in Market (Months) dominate the US-based venture capital 0 0% fundraising market: 100 such funds 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 closed in 2017 and secured $17bn, almost Year of Final Close double the amount of capital secured Average Time Spent in Market (Months) Average Proportion of Target Size Achieved by early-stage funds (Fig. 5). Early-stage Source: Preqin funds raised $10.7bn in 2017, of which the majority ($9.3bn) was accounted for by broader early-stage strategies, whereas Fig. 5: US-Based Venture Capital Fundraising in 2017 by Strategy seed funds secured $1.4bn. 120 100 100 Few US-based funds target regions outside 100 North America, accounting for just 9% 80 of funds closed in 2017, of which 4% are focused on opportunities in Asia and 3% 60 are Europe focused (Fig. 6). 40 40 19 20 17.3 9.3 6.0 1.4 0 Seed Early Stage Expansion/ Venture Late Stage (General) No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Fig. 6: US-Based Venture Capital Funds Closed in 2017 by Primary Geographic Focus North America Europe Asia 237 4 10 Rest of World 8 Source: Preqin 5 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 FUNDS IN MARKET s previously mentioned, US-based Fig. 7: US-Based Venture Capital Funds in Market over Time, 2007 - 2018 Afundraising has grown substantially (As at April 2018) over the past decade. A record number 900 70 64 Aggregate Capital Targeted ($bn) (769) of venture capital funds are currently 800 60 in market as at the start of Q2 2018, 700 48 49 50 seeking an aggregate $64bn in capital 48 50 600 (Fig.