PREQIN AND FIRST REPUBLIC UPDATE: US IN 2018 February 2019 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

CONTENTS

2 Foreword 3 Deals & Exits 6 Fundraising 9 Funds in Market 11 Micro Venture Capital 14 Performance 16 Fund Managers 18 Investors

Preqin partnered with First Republic Bank to prepare this information regarding US Venture Capital. This report is for information purposes only and is not intended as an offer, solicitation, advice (, legal, tax, or otherwise), or as the basis for any contract. First Republic Bank has not independently verified the information contained herein and shall not have liability to any third party in any respect for this report or any actions taken or decisions made based upon anything contained herein. This information is valid only as of January 2019 and neither Preqin nor First Republic Bank will undertake to update this report with regard to changes in market conditions, information, laws, or regulations after the date of this report. This report may not be further reproduced or circulated without the written permission of Preqin and First Republic Bank.

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FOREWORD

n another strong year for US venture capital, 2018 reached industry record highs across multiple metrics, continuing a nearly decade-long growth trend. As highlighted throughout this report, the US venture capital market remains buoyed by a Inumber of factors including widespread technological adoption across verticals, along with a healthy exit and fundraising environment.

Some of the highlights of 2018 include: ■■ US-based venture capital funds raised $47bn MIKE SELFRIDGE in the year on 365 fund closures, representing Chief Banking Officer, First Republic Bank nearly 3x the amount of capital raised by US venture capital funds in 2009. Despite the second lowest deal total over the past seven venture capital vehicle over 2017’s $3.3bn fund years, $98bn was deployed in venture-backed from NEA.1 This latest fund makes Tiger Global companies, up 26% from 2017’s previous record the largest venture capital fund manager in high. This is directly correlated to the growth in the country by both funds raised in the past 10 the number of $100mn+ ‘mega rounds.’ years and estimated dry powder. ■■ Exit volume by dollar was also quite robust in 2018, totalling $87bn in aggregate exit value – Based on very strong secular trends around the largest figure recorded since the dot-com technology creation and adoption, along with era. That being said, the total number of exits in continued tailwinds for venture capital dry powder the US was the lowest since 2009, with four exits and fundraising, 2019 appears to be poised for accounting for a combined $29bn: another robust year. »» AveXis, Inc. ($8.7bn) »» Qualtrics, LLC ($8.0bn) »» GitHub, Inc. ($7.5bn) »» Tesaro, Inc. ($5.1bn) ■■ A record 239 micro venture capital funds closed in 2018, securing an all-time high of $7.2bn, 4x the amount raised in 2009. Of the capital raised in 2018, 39% was secured by 88 first-time funds. Early-stage strategies (including seed) account for the largest proportion of micro venture capital funds in market (63%) and the largest proportion of capital targeted (60%). ■■ 2018 crowned a new title holder for largest venture capital firm. Tiger Global Management closed the 11th fund in its flagship series for $3.75bn, becoming the largest US-based

1 Please note, growth funds are excluded from venture capital analysis and as such Sequoia Capital Global Growth Fund III ($8bn closed in 2018) is not included in the dataset.

Preqin defines ‘growth’ as: funds typically taking significant minority positions in companies without the use of leverage. Targeting profitable, but still maturing, investee companies with significant scope for growth. Investment horizons are mid-to-long term, similar to those seen with funds.

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DEALS & EXITS

record $98bn in venture capital was invested capital deal recorded in the US in 2018 was the in US-based companies across 5,223 deals $1.25bn Series A funding round for Epic Games, Inc., announced or completed in 2018 (Fig. 1). the company behind popular video game Fortnite, While the annual number of deals has been with KKR and Vulcan Capital participating as lead on the decline since the previous record of investors (Fig. 4). Software was the most targeted A6,700 set in 2014, aggregate venture capital deal value industry for US-based venture capital investment for US-based companies reached a record high in in 2018, representing 30% of deals and 27% of deal 2018. value (Fig. 3).

Early-stage (Series A and earlier) High valuations in the venture capital market led to accounted for 54% of 2018 venture capital deals and a record year for exit value in the industry: 634 exits 22% of capital invested (Fig. 2). The largest venture were completed for $87bn in 2018, the highest annual

Fig. 1: Venture Capital Deals* for US-Based Companies, 2009 - 2018

8,000 120 6,700

6,421 Aggregate Deal Value ($bn) 6,044 6,127 98 100 6,000 5,309 5,021 5,253 5,059 76 80 4,188 78 4,000 3,501 62 66 60 42 No. of Deals 31 40 2,000 38 39 27 20 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 No. of Deals Aggregate Deal Value ($bn) Source: Preqin Pro

Fig. 2: Venture Capital Deals for US-Based Companies in 2018 by Stage

30% 29% 25% 25% 25% 19% 20% 18% 18% No. of Deals 15% 15% 8% 8% Aggregate 10% 7% 6% 7% 6%

Proportion of Total Deal Value 5% 3% 2% 3% 1% 0% 0% 0% 0% PIPE Grant Angel/Seed Expansion and Later Add-on & Other / Series A/Round 1 A/Round Series Series C/Round 3 Series B/Round 2 Series D/Round 4

Source: Preqin Pro * Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases.

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total value on record (Fig. 5). Trade sales remain the Fig. 3: Venture Capital Deals* for US-Based most common method of exit, accounting for 75% Companies in 2018 by Industry of all exits of US-based portfolio companies in 2018, 3% despite the total number decreasing from 2017. Eight 30% of the 10 largest exits in 2018 were trade sales, led 2% by the $8.7bn trade sale of AveXis, Inc. to Novartis 20% International AG in April 2018 (Fig. 6). 1% 10% Proportion of Total % The number of US-based IPOs increased year over 0% year, with 78 venture-backed IPOs recorded in 2018,

compared with 60 in 2017. Furthermore, the number Other Internet Other IT Telecoms Cleantech Consumer of sale-to-GP transactions reached an all-time high ealthcare Discretionary in 2018 of 69. The largest sale-to-GP exit of the year Business Services Business Food & Agriculture Food & was the sale of Apptio, Inc. to Vista Equity Partners for Related Software & No. of Deals Aggregate Deal Value $1.94bn. Source: Preqin Pro

Fig. 4: Largest Venture Capital Deals* for US-Based Companies in 2018

Portfolio Deal Deal Size Total Known Primary Stage Investor(s) Company Date (mn) Funding (mn) Industry Altimeter Capital Management, aXiomatic Gaming, LLC, Iconiq Capital, KKR, Caufield Epic Games, Inc. Series A/Round 1 26-Oct 1,250 USD 1,250 USD Gaming & Byers, Lightspeed Venture Partners, Smash Ventures, Ventures West Capital, Vulcan Capital View, Inc. Unspecified Round 2-Nov 1,100 USD 1,833 USD SB Investment Advisers Cleantech Lucid Motors, Inc. Unspecified Round 17-Sep 1,000 USD 1,131 USD Public Cleantech CPP Investment Board, DFJ Growth, DivcoWest, Greenoaks Capital, HCM, Khosla Ventures, Navitas Katerra Inc. Series D/Round 4 24-Jan 865 USD 1,130 USD Software Capital, SB Investment Advisers, Soros Fund Management, Tavistock Group Consumer JUUL Labs, Inc. Unspecified Round 9-Jul 650 USD 762 USD** Tiger Global Management Products Fidelity Management & Research Company, Lyft, Inc. Series I/Round 9 27-Jun 600 USD 4,913 USD Telecoms Senator Investment Group Maplebear Inc. Series F/Round 6 16-Oct 600 USD 1,896 USD D1 Capital Partners Internet Balyasny Asset Management, Felix Capital, Fidelity Investments, Kleiner Perkins Caufield & Byers, NBC Peloton Interactive, Series F/Round 6 2-Aug 550 USD 1,007 USD Universal, Technology Crossover Ventures, Tiger Software Inc. Global Management, True Ventures, Wellington Management, Winslow Capital Management GIC, SB Investment Advisers, Sequoia Capital, DoorDash, Inc. Series D/Round 4 1-Mar 535 USD 972 USD Internet Wellcome Trust Cambridge Mobile Unspecified Round 19-Dec 500 USD 500 USD SB Investment Advisers Software Telematics Inc. Source: Preqin Pro * Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases. ** JUUL Labs, Inc.’s total funding is $13.6bn including a corporate M&A deal in which Altria Group, Inc. acquired a 35% stake for $12.8bn in December 2018. The total funding only from venture capital investments is $762mn. US-based investor

5 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

Fig. 5: Venture Capital-Backed Exits of US-Based Companies by Type, 2009 - 2018

1,200 100 Aggregate Exit Value ($bn) 1,000 80 800 60 600

No. of Exits 40 400

200 20

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Trade Sale Sale to GP IPO Write-off Aggregate Exit Value ($bn) Source: Preqin Pro

Fig. 6: Largest Venture Capital-Backed Exits of US-Based Companies in 2018

Initial Total Known Exit Portfolio Exit Exit Acquiror Primary Investment Investors (Entry) Funding Value Company Type Date (Exit) Industry Date (mn) (mn) Adage Capital Management, Boxer Capital, Deerfield Management, Foresite Capital, Janus Capital Trade Novartis AveXis, Inc. Sep-15 Group, QVT funds, RA Capital, 75 USD Apr-18 8,700 USD Biotechnology Sale International AG Roche Venture Fund, Rock Springs Capital, RTW Investments, T Rowe Price, Venrock Qualtrics, Accel, Insight Venture Partners, Trade Apr-17 400 USD Nov-18 SAP SE 8,000 USD Software LLC Sequoia Capital Sale Andreessen Horowitz, Institutional Trade GitHub, Inc. Jul-15 Venture Partners, Sequoia Capital, 350 USD Jun-18 Microsoft 7,500 USD Software Sale SV Angel, Thrive Capital Ally Bridge Group, Deerfield Capital Management, Future Fund, InterWest Partners, Johnson & GlaxoSmithKline Johnson Innovation, Kleiner Perkins Trade Tesaro, Inc. Apr-16 326 USD Dec-18 Pharmaceuticals 5,100 USD Pharmaceuticals Caufield & Byers, Leerink Partners, Sale Limited New Enterprise Associates, Oracle Capital Partners, Pappas Capital, T Rowe Price Benchmark Capital, Geodesic Capital, GV, Index Ventures, Lead Edge Capital, Meritech Capital Duo Partners, Radar Partners, Redpoint Trade Cisco Systems, Security, Oct-17 122 USD Aug-18 2,350 USD IT Security Ventures, Resonant Venture Sale Inc. Inc. Partners, The Michigan Economic Development Corporation, True Ventures, Workday, Inc. Source: Preqin Pro US-based investor/acquiror

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FUNDRAISING

total of 365 US-based venture capital funds or surpassed the $1bn landmark, versus three that achieved a final close in 2018, securing a post- closed in 2017 (Fig. 9). Of the 70 venture capital mega dot-com-boom high of $47bn in aggregate funds that have ever been raised in the US, half capital (Fig. 7). Following a dip in 2017, the were raised by the same eight fund managers; this level of capital raised and the average venture indicates a top-tier class of venture capitalists that can Acapital fund size in 2018 increased by 37% and 12% consistently attract enough LP interest to close $1bn+ respectively. vehicles.

US-based managers raised more venture capital New York-based Tiger Global Management held mega funds (funds securing $1bn or more) in 2018 the largest fundraise of 2018 (Fig. 8). Tiger Global compared to the previous year: six funds reached Private Investment Partners XI – which makes global

Fig. 7: Annual US-Based Venture Capital Fundraising, 2009 - 2018

400 50 357 365 Aggregate Capital Raised ($bn) 337 47 40 300 280 285 43 26 211 34 34 30 200 32 18 119 125 173 20

No. of Funds Closed 100 129 19 15 16 10 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year of Final Close No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Pro

Fig. 8: Largest US-Based Venture Capital Funds Closed in 2018

Fund Firm Fund Size (mn) Fund Type Geographic Focus Tiger Global Private Investment Partners XI Tiger Global Management 3,750 USD Venture Capital (General) China, Global, India, US Bessemer Venture Partners X Bessemer Venture Partners 1,850 USD Early Stage Global, India, , US General Catalyst Group IX General Catalyst Partners 1,375 USD Venture Capital (General) US H.I.G. Strategic Partners Fund H.I.G. BioHealth Partners 1,275 USD Venture Capital (General) US GGV Capital VII GGV Capital 1,090 USD Venture Capital (General) China, US Global, India, Israel, Lightspeed Venture Partners Select III Lightspeed Venture Partners 1,050 USD Expansion/Late Stage North America, US Battery Ventures XII Battery Ventures 800 USD Venture Capital (General) Asia, North America Foundry Group Next 2018 Foundry Group 750 USD Expansion/Late Stage US Flagship Pioneering Special Opportunities Flagship Pioneering 700 USD Venture Capital (General) US Fund II Sequoia Capital India VI Sequoia Capital 695 USD Expansion/Late Stage ASEAN, India Source: Preqin Pro

7 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

venture capital investments across internet, media steady in recent years, 2018 saw the average fund and telecoms sectors – closed in Q4 2018 on $3.75bn. close within 17 months of inception, slightly up on the This makes it the largest US-based venture capital 15-month average seen in 2017 but in line with the fund ever raised, taking the title from New Enterprise five-year trend. Associates 16, which closed in 2017 having secured $3.3bn. Of the 365 US-based venture capital fund closures in 2018, 156 (43%) invest across multiple rounds of In 2018, US-based venture capital funds continued financing (Fig. 11). These funds raised $22bn in capital, their streak of strong fundraising by securing, on the most of all venture capital strategies. Early-stage average, 102% of their initial target (Fig. 10). In terms funds followed closely with 141 vehicles securing of time spent on the road, which has been relatively $15bn.

Fig. 9: US-Based Venture Capital Funds Closed by Size, 2009 - 2018

100% 2% 1% 5% 1% 3% 2% 3% 1% 2% 3% 7% 5% 3% 4% 5% 7% 4% 5% 3% 5% 9% 7% $1bn or More 14% 14% 11% 8% 12% 10% 10% 11% 80% 17% 12% 21% $500-999mn 22% 16% 24% 22% 26% 19% 18% 60% 17% 17% 6% 14% 15% $250-499mn 18% 18% 8% 14% 18% 40% $100-249mn

50% 54% 53% 52% 52% 48% $50-99mn Proportion of Funds Closed 20% 42% 43% 44% 44% Less than $50mn 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year of Final Close Source: Preqin Pro

Fig. 10: US-Based Venture Capital Fundraising Success, 2009 - 2018

25 120% Proportion of Target Size Achieved 103% 103% 103% 20 94% 96% 99% 102% 20 91% 19 19 100% 17 17 17 87% 14 14 15 80% 15 81% 13 60% 10 40% 5 20% Time Spent on Road (Months) 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year of Final Close Average Time Spent on Road (Months) Average Proportion of Target Size Achieved

Source: Preqin Pro

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In terms of geographic focus, 86% of US-based Fig. 11: US-Based Venture Capital Fundraising in venture capital funds closed in 2018 invest 2018 by Strategy domestically, followed by Asia-focused funds 180 25 Aggregate Capital Raised ($bn) representing 11% (Fig. 12). Nine of the 10 largest 160 156 21.6 141 funds closed target investment in North America, 140 20 120 15.0 while Sequoia Capital India VI targets Southeast Asia 15 100 and India. 80 8.3 10 60 41 No. of Funds Closed 40 27 5 20 1.7 0 0 Seed Early Stage Expansion/ Venture Late Stage Capital (General) No. of Funds Closed Aggregate Capital Raised ($bn)

Source: Preqin Pro

Fig. 12: US-Based Venture Capital Funds Closed in 2018 by Primary Geographic Focus

86% 1% EUROPE 11% 0% NORTH AMERICA MIDDLE EAST ASIA & ISRAEL

0% LATIN AMERICA 2%

DIVERSIFIED MULTI-REGIONAL

Source: Preqin Pro

9 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

FUNDS IN MARKET

s of January 2019, there are 892 US-based In line with the long-term trend, the vast majority venture capital funds seeking to raise an of US-based venture capital funds on the road are aggregate $79bn, a 37% increase from the focused on domestic investments (Fig. 15). That $58bn targeted at the beginning of 2018 (Fig. being said, the largest fund currently seeking capital 13). is Texas-based TPG’s The Rise Fund II which targets A investment in emerging markets including North The 10 largest funds currently in market are all Africa and South Asia. TPG’s second fund in its Rise targeting at least $1bn (Fig. 16), accounting for over Fund series is targeting $3.5bn and is dedicated to 20% of the total capital being sought. Within this social impact investments. group, Vy Capital Holdings is the only first-time fund, while the majority are flagship funds with experienced managers.

Fig. 13: US-Based Venture Capital Funds in Market over Time, 2009 - 2019

1,000 100 79 Aggregate Capital Targeted ($bn) 800 80 58 600 48 50 60 48 40 892 400 34 40 24 27 25 23 722

No. of Funds Raising 545 200 350 429 20 241 226 178 139 177 181 0 0 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Pro. Data as at January 2019

Fig. 14: US-Based Venture Capital Funds in Market by Strategy

500 50 Aggregate Capital Targeted ($bn) 398 38.4 400 356 40

300 30 22.8 200 20 13.5

No. of Funds Raising 93 100 4.4 45 10 0 0 Seed Early Stage Expansion/ Venture Capital Late Stage (General) No. of Funds Raising Aggregate Capital Targeted ($bn) Source: Preqin Pro. Data as at January 2019

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Fig. 15: US-Based Venture Capital Funds in Market by Primary Geographic Focus

1,000 80

69.1 Aggregate Capital Targeted ($bn) 825 70 800 60 600 50 40 400 30

No. of Funds Raising 20 200 4.5 4.6 10 9 1.0 34 24 0 0 North America Europe Asia Rest of World

No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Pro. Data as at January 2019

Fig. 16: Largest US-Based Venture Capital Funds in Market

Fund Firm Target Size (mn) Fund Type Geographic Focus Emerging Markets, The Rise Fund II TPG 3,500 USD Venture Capital (General) North Africa, South Asia Asia, Europe, Global, Deerfield Private Design Fund IV Deerfield Management 2,500 USD Venture Capital (General) North America Technology Crossover Ventures X Technology Crossover Ventures 2,500 USD Expansion/Late Stage Europe, North America, US Sequoia Capital China Yuan Fund Sequoia Capital 10,000 CNY Venture Capital (General) China NovaQuest Capital NovaQuest Pharma Opportunities Fund V 1,500 USD Venture Capital (General) Europe, US Management Vivo Capital Fund IX Vivo Capital 1,500 USD Expansion/Late Stage China, US Vy Capital Holdings Vy Capital 1,200 USD Venture Capital (General) US Khosla Ventures VI Khosla Ventures 1,000 USD Venture Capital (General) US Europe, North America, US, OrbiMed Private Investments VII OrbiMed Advisors 1,000 USD Venture Capital (General) West Europe Y Combinator Continuity Affiliates Fund I Y Combinator 1,000 USD Expansion/Late Stage US Source: Preqin Pro. Data as at January 2019

11 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

MICRO VENTURE CAPITAL

S-based micro venture capital (sub-$100mn) US-based micro venture capital funds closed in 2018 fundraising has continually reached peak secured an average of 98% of their target capital, a levels over the course of the past decade. slight decline from the averages seen in the prior In 2018, a record 239 micro venture capital three fundraising years (Fig. 18). Fundraising periods funds closed, securing an all-time high of returned to the longer-term trend with micro funds U$7.2bn, 4x the amount raised in 2009 (Fig. 17). Of the closed in 2018 spending an average of 18 months capital raised by US-based micro funds in 2018, 39% on the road; this compares to a speedier 15 months was secured by the 88 first-time funds to reach a among funds closed in 2017. final close, setting a new annual fundraising record of $2.8bn. First-time US-based managers were able to reach a final close quicker than the wider market, spending

Fig. 17: Annual US-Based Micro Venture Capital Fundraising, 2009 - 2018

300 8 7.2 Aggregate Capital Raised ($bn) 6.4 7 250 5.9 5.5 6 200 4.4 4.2 5 150 4 2.4 2.7 239 100 231 223 3 1.8 1.7 187 170 No. of Funds Closed 144 2 50 106 63 71 72 1 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year of Final Close No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Pro

Fig. 18: US-Based Micro Venture Capital Fundraising Success, 2009 - 2018

25 120% Proportion of Target Size Achieved 102% 102% 96% 101% 98% 91% 95% 100% 20 84% 87% 83% 80% 15 60% 20 10 19 19 18 18 17 17 16 40% 14 15 5 20% Time Spent on Road (Months) 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year of Final Close Average Time Spent on Road (Months) Average Proportion of Target Size Achieved

Source: Preqin Pro

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an average of 15 months on the road for funds capital funds. Geographically, just 7% of US micro closed in 2018. However, the average first-time fund venture capital funds seeking capital are focusing reached 92% of its target, whereas experienced fund on investments outside North America; these funds managers – while taking longer to fundraise overall – account for $2.2bn, or 9%, of targeted capital, of which closed on 101% of their targeted capital. 56% is earmarked for Asian investments (Fig. 21).

Early-stage strategies (including seed) account for While eight of the 10 best performing micro venture the largest proportion of US-based micro venture capital funds (vintages 2007-2015) target investment capital funds currently in market (63%) and the in the US, the top performing fund over these vintages largest proportion of capital targeted (60%, Fig. (CRCM Ventures’ Opportunity Fund) implements a 20). Expansion/late-stage funds comprise a mere diversified multi-regional strategy (Fig. 22). 2% of total vehicles in market and only 3% of the aggregate $23bn targeted by US-based micro venture

Fig. 19: Most Active Investors in US-Based Micro Venture Capital Funds by Number of Known Fund Commitments (Vintages 2009-2018)

No. of Known Investor Type Active VC Mandate? Commitments Retirement Plans of Duke University Private Sector 14 Likely Grantham Foundation Foundation 9 No Prudential Financial Company 8 Likely Industry Ventures Manager 8 Yes Cendana Capital Private Equity Fund of Funds Manager 8 Yes Kapor Center for Social Impact Foundation 8 No Sobrato Family Holdings Single- 7 Yes New York State Common Retirement Fund Public Pension Fund 7 Likely Commonwealth Financing Authority of Pennsylvania Government Agency 7 No University of Texas Investment Management Company Endowment Plan 6 Likely Naver Corporate Investor 6 Likely TIFF Private Equity Fund of Funds Manager 6 Yes Source: Preqin Pro

13 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

Fig. 20: US-Based Micro Venture Capital Funds in Fig. 21: US-Based Micro Venture Capital Funds in Market by Strategy Market by Primary Geographic Focus

350 14 Aggregate Capital Targeted ($bn) 600 25

546 Aggregate Capital Targeted ($bn) 300 291 11.6 12 21.2 500 20 250 8.6 10 204 400 200 8 15 150 6 300 10 100 77 4 200 No. of Funds Raising 2.3 No. of Funds Raisng 50 0.8 2 14 100 5 0 0 1.2 4 0.2 20 16 0.8 Seed Early Stage Expansion/ Venture 0 0 Late Stage Capital North Europe Asia Rest of World (General) America No. of Funds Raising Aggregate Capital Targeted ($bn) No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Pro. Data as at January 2019 Source: Preqin Pro. Data as at January 2019

Fig. 22: Top Performing US-Based Micro Venture Capital Funds (Vintages 2007-2015)

Fund Size Geographic Net IRR Date Fund Firm Vintage Fund Type (mn) Focus (%) Reported Diversified Multi- CRCM Opportunity Fund CRCM Ventures 2013 38 USD Early Stage: Start-up 133.0 31-Dec-17 Regional Vertical Venture Vertical Venture Partners Fund I 2014 51 USD Early Stage: Start-up US 114.6 31-Mar-18 Partners Foresite Capital Fund I Foresite Capital 2012 100 USD Expansion/Late Stage US 66.5 31-Mar-18 Social Leverage Venture Capital Social Leverage Capital Fund II 2015 20 USD US 59.3 30-Jun-18 Capital (General) Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed US 58.7 31-Dec-16 Venture Capital NCT Ventures Fund II NCT Ventures 2013 34 USD US 56.8 30-Sep-16 (General) Brightstone Venture Venture Capital Brightstone Venture Capital Fund 2013 20 USD US 51.0 30-Sep-18 Capital (General) IA Venture Strategies Fund I IA Ventures 2010 50 USD Early Stage US 50.3 31-Mar-18 Cottonwood Cottonwood Technology Fund I 2010 17 USD Early Stage: Start-up US 46.0 30-Jun-18 Technology Fund Middle East & YL Ventures II YL Ventures 2013 38 USD Early Stage: Start-up 42.1 31-Mar-18 Israel Source: Preqin Pro

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PERFORMANCE

ooking at the list of top performing US-based Financial Crisis (GFC), although venture capital funds funds of vintages 2007-2015 (Fig. 25), we see a of vintages 2010-2015 have consistently posted healthy split between micro and larger funds median net IRRs over 10%. within the top 10: five are micro venture capital vehicles, including CRCM Opportunity Fund The level of capital flowing between investors and US- Lwhich posts a net IRR of 133.0%. based venture capital fund managers has increased over the past decade, with fund managers calling a Column Group II has been the strongest performer record $44bn in 2017 (Fig. 24). This activity followed a for US-based venture capital funds in the vintages post-GFC record level of distributions in 2016, as US- examined, returning a net IRR of 408%, driven by based managers distributed $57bn, creating a positive investments in biotech start-ups such as Flexus net cash flow to investors of $19bn. Following years of Biosciences and Arcus Biosciences. successful fundraising and investor demand, greater levels of capital continue to flow through the US- US-based venture capital funds have posted based venture capital market as fund managers put consistent and strong returns over the past decade an increasing amount of committed capital to work (Fig. 23). Performance dipped slightly for funds and continue to distribute to investors. beginning their investment period during the Global

Fig. 23: US-Based Venture Capital Funds: Median Net IRRs and Quartile Boundaries by

40% 35% Top Quartile Net 30% IRR Boundary 25% 20% Median Net IRR 15% 10% Bottom Quartile Net IRR since Inception 5% Net IRR Boundary 0% -5% 2007 2008 2009 2010 2011 2012 2013 2014 2015

Vintage Year Source: Preqin Pro

15 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

Fig. 24: US-Based Venture Capital Funds: Annual Amount Called up, Distributed and Net Cash Flow, 2007 - 2017

70 60 57 50 44 39 38 40 34 36 36 34 29 31 30 26 28 25 25 27 25 30 21 23 23 23 20 12 10 0 -10 -20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn) Source: Preqin Pro

Fig. 25: Top Performing US-Based Venture Capital Funds (Vintages 2007-2015)

Fund Size Geographic Net IRR Date Fund Firm Vintage Fund Type (mn) Focus (%) Reported Column Group II The Column Group 2014 322 USD Early Stage US 408.0 31-Mar-18 Diversified CRCM Opportunity Fund CRCM Ventures 2013 38 USD Early Stage: Start-up 133.0 31-Dec-17 Multi-Regional Vertical Venture Vertical Venture Partners Fund I 2014 51 USD Early Stage: Start-up US 114.6 31-Mar-18 Partners Foresite Capital Fund I Foresite Capital 2012 100 USD Expansion/Late Stage US 66.5 31-Mar-18 Venture Capital DCM Hybrid RMB Fund DCM 2011 150 USD Asia 65.4 30-Jun-18 (General) DCM Ventures China Fund (DCM Venture Capital DCM 2014 330 USD Asia 62.6 30-Jun-18 VII) (General) Social Leverage Venture Capital Social Leverage Capital Fund II 2015 20 USD US 59.3 30-Jun-18 Capital (General) Venture Capital OrbiMed Private Investments V OrbiMed Advisors 2013 735 USD US 58.8 30-Jun-18 (General) Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed US 58.7 31-Dec-16 Venture Capital NCT Ventures Fund II NCT Ventures 2013 34 USD US 56.8 30-Sep-16 (General) Source: Preqin Pro

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FUND MANAGERS

he 10 largest US-based venture capital for the largest proportion of overall capital raised in managers by the amount of capital raised in the year at 46%, followed by early-stage funds which the past 10 years have collectively secured secured nearly a third (32%, Fig. 28). $70bn since 2009, with each of these GPs having closed at least one mega fund (Fig. 26). Across US-based venture capital fundraising in 2018, TWhile California is home to eight of these managers, women-owned funds raised $2.6bn, up from the New York-based Tiger Global Management overtook $1.5bn secured in 2017. The number of women- New Enterprise Associates for the top spot when it owned venture capital funds reaching a final close closed Tiger Global Private Investment Partners XI on continues to grow on an annual basis, increasing from $3.75bn in October 2018, the largest ever US-based six funds closed in 2009 to 32 in 2018. Scale Venture venture capital fundraise. This brings total funds Partners, which has secured $1.3bn over the past 10 raised for Tiger Global Management over the past 10 years, is the top women-owned fund (Fig. 29), having years to $13bn. An experienced venture capital fund closed the $400mn Scale Venture Partners VI in July manager investing in media, internet and telecom 2018. Thanks to the $360mn close of Forerunner companies, Tiger Global Management has had seven Partners IV and the $5mn close of Forerunner Friends of its venture capital funds close on over $1bn since IV, Forerunner Ventures returned to the top 10 2008. women-owned firms, with $663mn raised over the past 10 years. Overall, US-based fund managers secured $47bn in 2018, with generalist venture capital funds accounting

Fig. 26: Largest US-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last Fig. 27: Largest US-Based Venture Capital Fund 10 Years Managers by Estimated Dry Powder

Total Funds Estimated Dry Firm Headquarters Firm Headquarters Raised in Last Powder ($bn) 10 Years ($bn) Tiger Global Management New York, NY 4.6 Tiger Global Management New York, NY 13.0 Sequoia Capital Menlo Park, CA 3.9 New Enterprise Associates Menlo Park, CA 11.5 Apple Advanced Cupertino, CA 3.4 Sequoia Capital Menlo Park, CA 10.2 Manufacturing Fund Andreessen Horowitz Menlo Park, CA 6.5 Lightspeed Venture Partners Menlo Park, CA 2.9 Kleiner Perkins Caufield New Enterprise Associates Menlo Park, CA 2.4 Menlo Park, CA 5.5 & Byers GGV Capital Menlo Park, CA 2.2 Lightspeed Venture Partners Menlo Park, CA 5.3 Bessemer Venture Partners Larchmont, NY 2.0 Bessemer Venture Partners Larchmont, NY 5.1 Norwest Venture Partners Palo Alto, CA 1.9 GGV Capital Menlo Park, CA 4.7 Access Technology Ventures New York, NY 1.7 Institutional Venture Menlo Park, CA 4.7 Deerfield Management New York, NY 1.6 Partners Source: Preqin Pro Accel Palo Alto, CA 3.9 Source: Preqin Pro

17 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

Fig. 28: Aggregate Capital Raised by US-Based Venture Capital Fund Managers by Strategy in 2018

25 22 20 15 15

10 8

5 Aggregate Capital Raised ($bn) 2 0 Seed Early Stage Expansion/Late Stage Venture Capital (General)

Source: Preqin Pro

Fig. 29: Largest US-Based Women-Owned Venture Capital Firms by Aggregate Capital Raised in the Last 10 Years

Total Funds Raised in Last 10 Years Firm Headquarters ($mn) Scale Venture Partners Foster City, CA 1,290 Oak HC/FT Partners Greenwich, CT 1,100 Greycroft Partners New York, NY 799 Forerunner Ventures , CA 663 DBL Partners San Francisco, CA 551 Biomatics Capital Partners Seattle, WA 500 Canvas Ventures Portola Valley, CA 475 Arboretum Ventures Ann Arbor, MI 433 .406 Ventures Boston, MA 392 Floodgate Palo Alto, CA 356 Source: Preqin Pro

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INVESTORS

mong the 10 most active investors in US and public (14%) pension funds (Fig. 32). US-based venture capital by known commitments to venture capital funds attract investment from a range vintage 2009-2018 venture capital funds, of institutions as the favourable risk/return profile six are pension funds, led by San Francisco offered by venture capital investments plays an Employees’ Retirement System with 62 known important role in many investor portfolios. Acommitments (Fig. 30). The next most common investor type is endowment plans. Echoing the pattern of domestic activity that we have seen throughout US venture capital industry, However, in comparison with the 10 most active the majority (79%) of investors in US-based venture investors in US micro venture capital funds (page 12), capital funds are located in North America, followed just two pension funds are present: Retirement Plans by Europe (10%), Asia (9%) and Rest of World (2%, of Duke University with 14 known commitments, and Fig. 31). The majority (67%) of investors in US-based New York State Common Retirement Fund with seven venture capital funds have known commitments. over $1bn, with 13% managing over $50bn (Fig. 33). With the US a hotspot for start-ups and institutional Foundations account for the largest proportion (20%) capital, the US venture capital industry attracts a wide of investors in US-based venture capital funds of range of investors. vintages 2009-2018, followed by private sector (14%)

Fig. 30: Most Active Investors in US-Based Venture Capital Funds by Number of Known Fund Commitments (Vintages 2009-2018)

No. of Known Investor Type Active VC Mandate? Commitments San Francisco Employees' Retirement System Public Pension Fund 62 Likely MetLife Insurance Company Insurance Company 54 Likely Retirement Plans of Duke University Private Sector Pension Fund 49 Likely Texas County & District Retirement System Public Pension Fund 48 Likely University of Texas Investment Management Company Endowment Plan 47 Likely University of Michigan Endowment Endowment Plan 46 Likely Alaska Permanent Fund Corporation 44 Yes Industry Pension Insurance Private Sector Pension Fund 40 No Liberty Mutual Retirement Benefit Plan Private Sector Pension Fund 39 No Los Angeles Fire and Police Pension System Public Pension Fund 38 Likely Source: Preqin Pro

19 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2018

Fig. 31: Investors in US-Based Venture Capital Funds by Investor Location (Vintages 2009-2018)

79% 10% EUROPE 9% NORTH AMERICA ASIA

2%

DIVERSIFIED MULTI-REGIONAL

Source: Preqin Pro

Fig. 32: Investors in US-Based Venture Capital Funds by Investor Type (Vintages 2009-2018) 25% 20% 20% 14% 15% 14% 10% 10% 8% 8% 7% 7% 5% 4%

Proportion of Investors 5% 3% 0% Other Investor Firm Company Agency Insurance Fund Corporate Company Investment Foundation Managers Government Fund of Fund Private Equity Private Sector Pension Fund Public Pension Endowment Plan Source: Preqin Pro Fig. 33: Investors in US-Based Venture Capital Funds by Assets under Management (Vintages 2009-2018)

40% 36% 35% 30% 25% 23% 20% 18% 15% 10% Proportion of Investors 10% 6% 7% 5% 0% Less than $500mn $500-999mn $1-9.9bn $10-49.9bn $50-99.9bn $100bn or More

Source: Preqin Pro

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