PREQIN and FIRST REPUBLIC UPDATE: US VENTURE CAPITAL in Q3 2019 PREQIN and FIRST REPUBLIC UPDATE: US VENTURE CAPITAL in Q3 2019 Contents

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PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q3 2019 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q3 2019 Contents

3 Foreword

4 Deals & Exits

8 Fundraising

11 Funds in Market

13 Micro Venture Capital

16 Performance

18 Fund Managers

20 Investors

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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 (investment, 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 October 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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Venture capital deal activity in the US slowed slightly in Q3 2019, dropping to 1,027 deals and $22bn in capital deployed. In spite of this, full-year deal activity is on track to set a new annual record for venture capital in the US. Early-stage investments (seed and series A) played a significant part in the activity, accounting for 51% of completed deals and 19% of total deal value.

The exit environment is also healthy – 418 exits were valued at an aggregate $65bn as of the end of Q3 – and may exceed the total dollar value of exits in 2018. Samir Kaji Senior Managing Director, First Republic Bank Fundraising for venture capital remains robust, as nearly 300 funds have closed through Q3 (raising a funds. The median return across this vintage range total $35bn). Only two expansion/late-stage funds stands at 14.9%, significantly higher than 9.0% for closed in Q3 for a combined $295mn, a steep decline non-US-based venture capital funds. Vintage 2011 in comparison with previous quarters. Early-stage venture capital funds are performing better than recent funds, in particular, enjoyed success on the road, with vintage years; funds that would have invested their first the average fund closing at or above target. With 1,027 proportion of capital in 2011 have generated higher funds seeking a total $98bn in capital, the market for returns than later years. new fundraises remains active. West Coast-based managers continue to lead the US Managers of micro venture capital funds have already venture capital scene, with only two of the 10 largest secured nearly 80% of the total capital they raised in US-based managers located outside of California. With 2018 ($7.8bn), having secured $6.1bn in the first three $4.5bn, Sequoia Capital is estimated to hold the most quarters of 2019. By year end, 2019 is likely to outpace dry powder of all US-based venture capital firms as of last year. September 2019.

Vintages 2010-2016 are posting median IRRs in the double digits, with a high of 18.7% for vintage 2011

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Venture capital deal activity is set to reach a new annual record

Venture capital deal activity in the US slowed in Q3 The exit environment for US venture capitalists 2019, but full-year activity is on track to set a new remains healthy. The aggregate value of exits in 2019 annual record. During Q3, 1,027 deals were completed is keeping pace with the record set in 2018 ($88bn), for a total $22bn – the lowest total value in any quarter as seen in Fig. 5. As of the end of Q3 2019, there have this year – but so far in 2019 there have been 3,347 been 418 exits so far this year; these exits are valued at deals amounting to $78bn in aggregate value (Fig. an aggregate $65bn, which represents 74% of the 2018 1), and this represents 77% of the total value of US total. venture capital deals in 2018. IPOs have been more frequent in the market this year Venture capitalists in the US prioritize investment and could well outpace 2018 in terms of total number. in early financing rounds and in the information As in years prior, trade sales have been the most technology (IT) sector. Early-stage investments (Series common exit type, accounting for 73% of all exits of A and earlier) accounted for 51% of deals in Q3 2019 US-based portfolio companies in 2019 YTD. In fact, and 19% of total value (Fig. 2). IT represented 54% of three of the five largest exits in Q3 2019 were trade deals and half of deal value in Q3 2019 (Fig. 4), and sales, at an aggregate value of $5.8bn (Fig. 6), led by six of the 10 largest venture capital deals in the US the $2.6bn trade sale of Acacia Communications to in Q3 2019 were for IT companies (Fig. 3), the largest Cisco Systems in July 2019. of which was the $370mn Series G funding round for Urban Compass Inc. back in July 2019.

Fig. 1: Venture Capital Deals* for US-Based Companies, 2009 - 2019 YTD

8,000 120

6,776 Aggregate Deal Value ($bn) 7,000 6,461 6,079 6,278 100 6,000 5,499 5,341 5,541 5,069 80 5,000 4,196 4,000 3,518 3,347 60

No. of Deals 3,000 40 2,000 20 1,000

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD

No. of Deals Aggregate Deal Value ($bn) Source: Preqin Pro. Data as of September 2019 *Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases.

Fig. 2: Venture Capital Deals for US-Based Companies in Q3 2019 by Stage

35% 30% 29% 25% 26% 25% 20% 16% 16% 15% 14% 15% 9% 11% 10% 7% 8% 6% 5% 6% 3% Proportion of Total Proportion 5% 2% 2% 1% 0% 0% 0% PIPE Grant Round 1 Round 3 Round 2 Series A/ Series Series C/ Series Series B/ Series Angel/Seed Expansion and Later and Venture Debt Venture Add-on & Other & Add-on Growth Capital/ Series D/Round 4 D/Round Series

No. of Deals Aggregate Deal Value

Source: Preqin Pro

Fig. 3: Largest Venture Capital Deals* in the US in Q3 2019

Deal Total Known Portfolio Deal Size Funding Primary Company Stage Date (mn) (mn) Investor(s) Industry

Radiology Growth Capital/ Jul-19 700 USD 1,865 USD Starr Investment Holdings Healthcare Partners, Inc. Expansion Wafra Partners, Mori Trust Group, ITOCHU Corporation, Mercuria Investment, Newmark Unspecified Knotel, Inc. Aug-19 400 USD 555 USD Knight Frank, Norwest Venture Partners, Real Estate Round The Sapir Organization, Bloomberg Beta, Rocket Internet SE Urban SB Investment Advisers, Glynn Capital Information Compass, Series G/Round 7 Jul-19 370 USD 1,513 USD Management, Dragoneer Investment Group, Technology Inc. CPP Investment Board DST Global, Coatue Management, Drive Root Capital, Redpoint Ventures, Ribbit Capital, Information Insurance Series E/Round 5 Aug-19 350 USD 512 USD Scale Venture Partners, Tiger Global Technology Company Management Financial & Robinhood DST Global, Ribbit Capital, New Enterprise Series E/Round 5 Jul-19 323 USD 862 USD Insurance Markets, Inc. Associates, Sequoia Capital, Thrive Capital Services Automattic Information Series D/Round 4 Sep-19 300 USD 491 USD Salesforce Ventures Inc. Technology Samsara Tiger Global Management, Dragoneer Information Networks Series F/Round 6 Sep-19 300 USD 530 USD Investment Group, Andreessen Horowitz, Technology Inc. General Catalyst Partners Information Wish Series H/Round 8 Aug-19 300 USD 879 USD General Atlantic Technology Y Combinator, Data Collective, Felicis Ventures, iGlobe Partners, OS Fund, Vast Ginkgo Ventures, Viking Global Investors, Allen & BioWorks, Series E/Round 5 Sep-19 290 USD 725 USD Healthcare Company, Baillie Gifford, Cascade Investment Inc. LLC, Senator Investment Group, General Atlantic, T Rowe Price Goldman Sachs, Iconiq Capital, Adage Capital Management, Alkeon Capital Management, Altimeter Capital, Capital Group, Coatue Information GitLab Inc. Series E/Round 5 Sep-19 268 USD 434 USD Management, D1 Capital Partners, Franklin Technology Venture Partners, Light Street Capital Management, Tiger Management, Two Sigma Investments, Tiger Management Advisors

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

Fig. 4: Venture Capital Deals* for US-Based Companies in Q3 2019 by Industry

60% 54% 50% 50% 40% 30% 19% 20% 17% 11% 10% 9% 7% Proportion of Total Proportion 10% 3% 3% 2% 2% 2% 1% 2% 1% 1% 1% 0% 2% 0% Utilities Services Media Energy & Business Services Insurance Industrials Healthcare Financial & Real Estate Technology Information Telecoms & Telecoms Consumer Natural Discretionary Resources Raw Materials & Materials Raw

No. of Deals Aggregate Deal Value

Source: Preqin Pro

Fig. 5: Venture Capital-Backed Exits of US-Based Companies by Type, 2009 - 2019 YTD

1,200 100

90 Aggregate Exit Value ($bn) 1,000 80 70 800 60 600 50

No. of Exits 40 400 30 20 200 10 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD

Trade Sale Sale to GP IPO Write-off Aggregate Exit Value ($bn)

Source: Preqin Pro. Data as of September 2019

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

Fig. 6: Largest Venture Capital-Backed Exits of US-Based Companies in Q3 2019

Total Initial Known Portfolio Investment Funding Exit Exit Acquiror Exit Value Primary Company Date Investors (Entry) (mn) Type Date (Exit) (mn) Industry

Commonwealth Capital Ventures, Acacia Egan Managed Trade Cisco Information Communications Dec-11 Capital, 23 USD Jul-19 2,600 USD Sale Systems, Inc. Technology Inc. MassDevelopment, Matrix Partners, Summit Partners .406 Ventures, Accomplice, Atlas Venture, Blackstone Group, Evolution Equity Partners, Founders Carbon Black Trade Information Sep-05 Circle Capital, 191 USD Aug-19 VMware 2,100 USD Inc. Sale Technology Highland Capital Partners, Kleiner Perkins Caufield & Byers, Sequoia Capital, Top Tier Capital Partners Camelot Venture Group, Clayton SmileDirectClub, Dubilier & Rice, Jun-14 380 USD IPO Sep-19 Unknown 1,346 USD Healthcare LLC Kleiner Perkins Caufield & Byers, Spark Capital Balyasny Asset Management, Bullish Partners, Felix Capital, Fidelity Investments, GGV Capital, Grace Beauty Capital, Kleiner Perkins Caufield & Byers, L Catterton, Peloton NBC Universal, Consumer Dec-12 1,010 USD IPO Sep-19 Unknown 1,160 USD Interactive, Inc. QuestMark Discretionary Partners, Technology Crossover Ventures, Tiger Global Management, True Ventures, Wellington Management, Winslow Capital Management Andreessen Horowitz, CRV, General Catalyst Trade Information SignalFx, Inc. Apr-13 178 USD Aug-19 Splunk Inc. 1,050 USD Partners, Sale Technology Tiger Global Management

Source: Preqin Pro

Bold denotes US-based investor

Strong growth means 2019 is set to outpace 2018

2018 was a record-breaking year for US-based venture Fig. 7: Annual US-Based Venture Capital capital funds, and 2019 is poised to overtake it in Fundraising, 2009 - 2019 YTD terms of both the number of funds closed and amount 500 463 60 of capital raised. At the end of Q3, 299 funds have Aggregate Capital Raised ($bn) 450 already closed this year, raising an aggregate $35bn 388 50 400 378 299 – a significant leap from the same period last year, 350 298 40 in which 242 funds secured $29bn (Fig. 7). The fourth 300 284 quarter typically accounts for a large portion of the 173 250 214 30 annual fundraising, so this is a strong indication that 200 133 20 2019 will be another successful year for US venture 150 119 123 No. of Funds Closed No. of Funds 100 capital managers. 10 50 As with last quarter, the 10 largest funds closed in Q3 0 0 2010 2013 2019 are run by experienced managers. Of particular 2009 2011 2012 2014 2015 2016 2017 2018 note, Coatue Management closed its first pure venture

Year of Final Close 2019 YTD capital fund, Coatue Early Stage Fund, in the quarter. No. of Funds Closed Aggregate Capital Raised ($bn) The fund, the third largest closure in Q3, blew past Source: Preqin Pro. Data as of September 2019 its target of $500mn, raising $700mn to invest in technology start-ups (Fig. 9). The firm has a successful track record in the hedge fund industry and had some $3.9bn. Of these, one of the funds closed was a micro limited exposure to venture capital through its hybrid fund: Benhamou Global Venture Opportunity Fund, hedge fund/venture capital series before raising their which closed on $70mn this July. first dedicated venture capital fund this year. Fundraising for other venture capital stages is for the Funds are taking just slightly more time to close in most part unchanged in comparison to Q2. Managers 2019 than in past years, spending an average of 17.6 raising early-stage funds enjoyed particular success, months in market (Fig. 10). For the sixth year in a obtaining an average of just over 100% of targeted row the majority of funds are exceeding their target, capital for vehicles closed in Q3. The average for all demonstrating the ease with which managers have other strategies was below 100%, implying a good been able to secure capital. number of funds closed below target.

In stark contrast to previous quarters, the number As ever, US-based venture capital managers directed of expansion/late-stage funds closed by US-based most of their capital to domestic investments in Q3, managers declined steeply in Q3. Only two such funds with 96% raised to be invested in the US (Fig. 12). closed in Q3, bringing in a combined $295mn (Fig. 11), Capital targeting other regions was split evenly across compared to seven funds closed in Q2 for a total of Europe, Asia and the Middle East.

Fig. 8: US-Based Venture Capital Fundraising by Fund Size, 2009 - 2019 YTD

100% 90% 80% 70% 60% 50% 40% 30% 20% Proportion of Funds Closed of Funds Proportion 10% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Year of Final Close Less than $50mn $50-99mn $100-249mn $250-499mn $500-999mn $1bn or More

Source: Preqin Pro. Data as of September 2019

Fig. 9: Largest US-Based Venture Capital Funds Closed in Q3 2019

Fund Firm Fund Size (mn) Fund Type Geographic Focus

Oak HC/FT Partners Fund III Oak HC/FT Partners 800 USD Venture Capital (General) North America DCVC V Data Collective 725 USD Early Stage North America Coatue Early Stage Fund Coatue Management 700 USD Early Stage US Vida Ventures II Vida Ventures 600 USD Venture Capital (General) India, US Fifth Wall Ventures II Fifth Wall Ventures 503 USD Venture Capital (General) US Lux Ventures VI Lux Capital Management 500 USD Early Stage US Foundation Capital IX Foundation Capital 350 USD Venture Capital (General) US RA Capital Nexus Fund RA Capital 308 USD Early Stage US Flare Capital Partners II Flare Capital Partners 255 USD Early Stage US VMG Catalyst VMG Partners 250 USD Early Stage North America, US

Source: Preqin Pro

Fig. 10: US-Based Venture Capital Fundraising Success, 2009 - 2019 YTD

25 120% Proportion of Target Size Achieved

100% 20

80% 15 60% 10 19.5 19.3 18.3 17.6 16.8 17.3 15.8 17.2 40% 13.0 14.2 14.4 5 20% Time Spent in Market (Months) Time Spent in Market

0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD

Average Time Spent in Market (Months) Average Proportion of Target Size Achieved Source: Preqin Pro. Data as of September 2019

Fig. 11: US-Based Venture Capital Fundraising in Q3 2019 by Strategy

50 7 Aggregate Capital Raised ($bn) 45 45 5.7 6 40 35 32 5 30 3.7 4 25 20 3 15 2

No. of Funds Closed No. of Funds 10 10 1 5 0.4 2 0.3 0 0 Seed Early Stage Expansion/ Venture Capital Late Stage (General)

No. of Funds Closed Aggregate Capital Raised ($bn)

Source: Preqin Pro. Data as of September 2019

Fig. 12: US-Based Venture Capital Fundraising in 2019 by Primary Geographic Focus

96%

North America 2% 2% Asia Europe 1% Proportion of Aggregate Capital Raised 1% Middle East & Israel Latin America

Source: Preqin Pro

Venture capital fundraising has been steady over each quarter this year

Final fundraising figures for 2019 look set to outpace steep drop in the number of expansion/late-stage those of 2018: 299 funds have already closed and a funds closed in Q3, the 65 still in market show there is further 1,027 are in market, targeting an aggregate potential to reach normal fundraising levels by the end $98bn (Fig. 13). The pipeline of funds in market of 2019 (Fig. 14), and that managers are still interested continues to grow, yet the pace of growth has slowed in raising vehicles focused on this investment stage. from 40% between 2017 and 2018 (October to October) to 13% between 2018 and 2019. Most capital from US funds is dedicated to domestic investments, although a significant portion is There are currently 11 mega funds in the market earmarked for investment in both Asia and Rest ($1bn+ in target size, Fig. 16), which has remained of World (Fig. 15). SoftBank Innovation Fund is unchanged from H1 2019. Each of these funds is run responsible for a large portion of this non-US capital: by an experienced manager with the exception of Vy the largest US-based venture capital fund in market, it Capital Holdings, the debut fund of Vy Capital. The is raising $5bn to invest across Latin America. US- majority of mega funds in market will dedicate their based venture capital firms do not have a significant capital to the US, but a few are targeting other regions interest in European ventures. Of the 11 mega funds in including Latin America and emerging markets. market, none have Europe as their primary focus.

Fundraising focused on each stage of venture capital has remained steady quarter over quarter in 2019. Although there was (unusually for the US market) a

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

1,200 100 Aggregate Capital Targeted ($bn) 90 1,000 80 70 800 60 600 50 40 400

No. of Funds Raising No. of Funds 30 20 200 10 0 0 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 Oct-19

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

Source: Preqin Pro

Fig. 14: US-Based Venture Capital Funds in Fig. 15: US-Based Venture Capital Funds in Market by Strategy Market by Primary Geographic Focus

500 471 60 Aggregate Capital Targeted ($bn) 1,200 90

83.1 Aggregate Capital Targeted ($bn) 450 49.6 80 50 400 381 1,000 953 70 350 40 300 800 60 250 28.1 30 50 600 200 40 20 150 110 14.9 400 30 No. of Funds Raisng Raisng No. of Funds

100 65 Raisng No. of Funds 10 20 50 5.1 200 9.2 0 0 4.3 10 12 1.0 34 28 Seed Early Expansion/ Venture 0 0 Stage Late Stage Capital North Europe Asia Rest of (General) America World No. of Funds Raising Aggregate Capital Targeted ($bn) No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Pro. Data as of September 2019 Source: Preqin Pro. Data as of September 2019

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

Target Size Fund Firm (mn) Fund Type Geographic Focus

Argentina, Brazil, Softbank Latin America Central America, Chile, SoftBank Innovation Fund 5,000 USD Venture Capital (General) Ventures Colombia, Mexico, South America New Enterprise Associates New Enterprise 3,600 USD Venture Capital (General) US 17 Associates Emerging Markets, The Rise Fund II TPG 2,500 USD Venture Capital (General) North Africa, South Asia Deerfield Private Design Asia, Europe, Global, Deerfield Management 2,500 USD Venture Capital (General) Fund IV North America NovaQuest Pharma NovaQuest Capital 1,500 USD Venture Capital (General) Europe, US Opportunities Fund V 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 Deerfield Healthcare Deerfield Management 1,000 USD Venture Capital (General) US Innovations Fund II Khosla Ventures VI Khosla Ventures 1,000 USD Venture Capital (General) US OrbiMed Private Investments Europe, North America, OrbiMed Advisors 1,000 USD Venture Capital (General) VII US, West Europe Y Combinator Continuity Y Combinator 1,000 USD Expansion/Late Stage US Affiliates Fund I

Source: Preqin Pro. Data as of September 2019

Micro venture capital funds are set to beat the 2018 record

US-based micro venture capital funds (sized at $100mn capital funds ($689mn) in the past decade is at almost or less) had a record year in 2018, raising $7.8bn $1bn. And this trend is only more evident so far in 2019, across 316 vehicles (Fig. 17), a record that may well be where 82% of capital raised by women-led venture broken this year. With $6.1bn raised in the first three capital firms was for seed or early-stage funds. quarters of 2019, micro venture capital fund managers have already secured 78% of the total capital raised in Although 2018 was a record year for micro venture the whole of 2018. capital fundraising, most funds failed to reach their target and achieved an average of 96% – the smallest Since January 2019, early-stage micro venture capital proportion since 2014 (Fig. 18). So far this year, the funds have collected 51% of aggregate micro venture average has risen to 102%, accompanied by a shorter capital, raising $3.1bn across 89 funds and outpacing average time spent on the road at 16.2 months the $1.9bn secured by the 81 general venture capital (significantly lower than 18.3 months in 2018 and the funds that have closed this year. third-lowest average in a decade). That said, both averages are for 2019 YTD and may therefore even out In the venture capital industry overall, Preqin data by the end of the year. shows that women-owned firms prioritize early-stage venture capital investment. And in the micro fund Of the 596 micro venture capital funds currently in space, this trend holds true. The gap between capital market – which are targeting an aggregate $25bn (Fig. raised by women-led early-stage micro venture capital 20) – just 12% are women led, targeting a total $3.1bn. funds ($1.6bn) and women-led general micro venture Focusing on this subset of funds again shows the

Fig. 17: Annual US-Based Micro Venture Capital Fundraising, 2009 - 2019 YTD

350 9 316 Aggregate Capital Raised ($bn) 300 8 252 261 206 7 250 182 6 192 200 147 5 150 4 69 107 3 100 63 77 No. of Funds Closed No. of Funds 2 50 1 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Year of Final Close No. of Funds Closed Aggregate Capital Raised ($bn)

Source: Preqin Pro. Data as of September 2019

preference for early-stage investment: at 41 vehicles, Funds of funds dominate the top 10 most active more funds are in market for this strategy than for investors in micro venture capital funds (Fig. 19); all any other. As Q4 2019 begins, we anticipate continued four of these investors also have active mandates interest in early-stage vehicles among both women-led for the wider venture capital sector. Only one top firms and across the overall market. 10 investor is a pension fund: Retirement Plans of Duke University has 12 known commitments to micro Returning to overall US-based micro venture venture capital funds. The only government agency in capital, CRCM Opportunity Fund is the current the the top 10 is Oregon Growth Board, with eight known top performer over vintages 2008-2016, recording commitments. an IRR of 129% as of 31 December 2018 (Fig. 22). While the vintage-2013 start-up vehicle has already made distributions, unrealized value is reported as approximately 164% of invested capital. The fund targets multiple geographic regions (including US and China) and invests across a variety of industries.

Fig. 18: US Based Micro Venture Capital Fundraising Success, 2009 - 2019 YTD

25 120% Proportion of Target Size Achieved

100% 20

80% 15 60% 10 20.3 18.7 19.6 18.3 17.7 17.1 17.0 17.2 16.2 40% 14.5 16.1 5 20% Time Spent in Market (Months) Time Spent in Market 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD Year of Final Close Average Time Spent in Market (Months) Average Proportion of Target Size Achieved

Source: Preqin Pro. Data as of September 2019

Fig. 19: Most Active Investors in US-Based Micro Venture Capital Funds by Number of Known Fund Commitments (Vintages 2009-2019)

No. of Known Investor Type Commitments Active VC Mandate?

Retirement Plans of Duke University Private Sector Pension Fund 12 No Industry Ventures Private Equity Fund of Funds Manager 9 Yes Cendana Capital Private Equity Fund of Funds Manager 8 Yes Oregon Growth Board Government Agency 8 No Sobrato Family Holdings Single-Family Office 7 Yes Grantham Foundation Foundation 6 No Naever Corporate Investor 6 Yes Prudential Financial Insurance Company 6 Yes TIFF Private Equity Fund of Funds Manager 6 Yes GCM Grosvenor Private Equity Fund of Funds Manager 6 Yes

Source: Preqin Pro

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

350 14 Aggregate Capital Targeted ($bn)

304 600 562 25 Aggregate Capital Targeted ($bn) 12.0 22.9 300 12 500 250 10 20 8.8 400 200 189 8 15 150 6 300 10 100 84 4 200

No. of Funds Raising No. of Funds 3.0 No. of Funds Raisng Raisng No. of Funds 50 1.2 2 5 19 100 5 0 0 0.3 15 0.9 14 0.9 Seed Early Expansion/ Venture 0 0 Stage Late Stage Capital North Europe Asia Rest of (General) America World No. of Funds Raising Aggregate Capital Targeted ($bn) No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Pro. Data as of September 2019 Source: Preqin Pro. Data as of September 2019

Fig. 22: Top Performing US-Based Micro Venture Capital Funds (Vintages 2008-2016)

Fund Size Geographic Net IRR Fund Firm Vintage ($mn) Fund Type Focus (%) Date Reported

CRCM Opportunity Early Stage: Diversified CRCM Ventures 2013 38 USD 129.0 31-Dec-18 Fund Start-up Multi-Regional Tusk Venture Early Stage: Tusk Ventures 2016 36 USD North America 71.4 30-Sep-19 Partners I Start-up Foresite Capital Expansion/Late Foresite Capital 2012 100 USD North America 67.5 30-Jun-19 Fund I Stage Vertical Venture Vertical Venture Early Stage: 2014 51 USD North America 65.5 31-Dec-18 Partners Fund I Partners Start-up IA Venture Strategies IA Ventures 2010 50 USD Early Stage North America 50.6 31-Mar-19 Fund I Social Leverage Social Leverage Venture Capital 2015 20 USD North America 48.4 31-Dec-18 Capital Fund II Capital (General) Cottonwood Cottonwood Early Stage: 2010 20 USD North America 46.0 30-Jun-19 Technology Fund I Technology Fund Start-up Brightstone Venture Brightstone Venture Venture Capital 2013 20 USD North America 45.0 30-Sep-18 Capital Fund Capital (General) Early Stage: Middle East & YL Ventures II YL Ventures 2013 38 USD 42.1 31-Mar-18 Start-up Israel Middle East & Cognitiv Ventures I Cognitiv 2015 12 USD Early Stage 41.0 31-Mar-18 Israel

Source: Preqin Pro

Venture capital managers return capital at an impressive rate

US-based venture capital funds have continued to Among vintage 2008-2016 US-based venture capital perform well across all vintages since the Global funds, Column Group II is the top performer with a Financial Crisis. Vintages 2010-2016 are posting net IRR of 393.6% as of 31 December 2018 (Fig. 25). median IRRs in the double digits, with a high of 18.7% The 2014 vintage fund has invested 83% of committed for vintage 2011 funds (Fig. 23). The median return capital, primarily in the biotechnology industry, and across this vintage range stands at 14.9%, significantly reports a DPI and RVPI of 109% and 120% respectively. higher than 9.0% for non-US-based venture capital Among these top 10 performing funds, five are early- funds. stage vehicles, four are general venture capital funds and one targets late-stage investments. Venture capital managers have continued to return capital to investors at an impressive rate, with $43bn distributed over 2018 – this represents a 25% increase compared to 2017 (Fig. 24). Net cash flow remained negative at -$8.9bn, although this was caused by record-high investment of $52bn over 2018, which was more than double the amount invested in 2013. There are clearly significant opportunities for fund managers in the current market environment.

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

40% 35% 30% 25% 20% 15% 10%

Net IRR since Inception Net IRR since 5% 0% -5% 2008 2009 2010 2011 2012 2013 2014 2015 2016 Vintage Year Top Quartile Net IRR Boundary Median Net IRR Bottom Quartile Net IRR Boundary

Source: Preqin Pro. Most Up-to-Date Data

Fig. 24: US-Based Venture Capital Funds: Annual Capital Called up, Distributed and Net Cash Flow, 2008 - 2018

70 60 57.1 51.7 50 39.1 44.2 42.8 36.3 36.2 38.1 40 33.8 32.5 34.4 28.2 29.6 30 24.9 23.2 25.3 27.1 25.2 21.0 21.2 22.5 20 12.0 10 0 -10 -20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn)

Source: Preqin Pro

Fig. 25: Top Performing US-Based Venture Capital Funds (Vintages 2008-2016)

Fund Size Geographic Net IRR Fund Firm Vintage (mn) Fund Type Focus (%) Date Reported

Column Group II The Column Group 2014 322 USD Early Stage North America 393.6 31-Dec-18 CRCM Opportunity ChinaRock Capital Early Stage: Diversified 2013 38 USD 129.0 31-Dec-18 Fund Management Start-up Multi-Regional Tusk Venture Early Stage: Tusk Ventures 2016 36 USD North America 71.4 30-Sep-19 Partners I Start-up Foresite Capital Expansion/Late Foresite Capital 2012 100 USD North America 67.5 30-Jun-19 Fund I Stage Vertical Venture Vertical Venture Early Stage: 2014 51 USD North America 65.5 31-Dec-18 Partners Fund I Partners Start-up DCM Hybrid RMB Venture Capital DCM 2011 150 USD Asia 65.4 30-Jun-18 Fund (General) DCM Ventures China Venture Capital DCM 2014 330 USD Asia 62.6 30-Jun-18 Fund (DCM VII) (General) OrbiMed Private Venture Capital OrbiMed Advisors 2013 735 USD North America 53.3 31-Mar-19 Investments V (General) Early Stage: Spark Capital II Spark Capital 2008 360 USD North America 51.7 31-Mar-19 Start-up Flagship Ventures Venture Capital Flagship Pioneering 2015 537 USD North America 51.1 31-Dec-18 Fund V (General)

Source: Preqin Pro

The US continues to dominate the venture capital space in 2019

West Coast-based managers continue to dominate spent an average of 11 months on the road. This is only the US venture capital scene, with only two of the slightly longer than the average nine months spent in 10 largest US-based managers located outside of market by the 10 largest venture capital fund managers California (Fig. 26). Although New York-based Tiger overall. Global Management remains top of the league table, it has no funds in market at the moment, while firms As seen in Fig. 28, California-based Sequoia Capital like Sequoia Capital and New Enterprise Associates are is estimated to hold the most dry powder ($4.5bn) of raising billion-dollar funds. all US-based venture capital firms as of September 2019 and is currently raising Sequoia Capital China Most venture capital GPs, especially the largest, take Principals Seed Fund I, which targets seed-stage a global approach to investment. GGV Capital, which investments in Chinese companies. broke into the 10 largest managers during Q3, has a series of funds dedicated to China-based investments to gain exposure to the market. Runner-ups in the top Fig. 26: Largest US-Based Venture Capital Fund 10 Sequoia Capital, Lightspeed Venture Partners and Managers by Aggregate Capital Raised in the Accel also employ this strategy. Last 10 Years

Total Funds Raised Barring Technology Crossover Ventures, which focuses in Last 10 Years on later-stage investments, the 10 largest fund Firm Headquarters ($bn) managers make venture capital investments across Tiger Global New York, NY 13.0 the life span of a company. As with its international Management investments, Sequoia Capital has separate fund Menlo Park, Sequoia Capital 12.3 series focusing on certain stages, including seed and CA growth stages. Other firms, such as New Enterprise New Enterprise Menlo Park, 11.5 Associates, make early- to late-stage investments Associates CA though their general venture capital flagship fund Menlo Park, Andreessen Horowitz 9.4 series – New Enterprise Associates is currently raising CA Lightspeed Venture Menlo Park, for New Enterprise Associates 17. 7.0 Partners CA Kleiner Perkins Menlo Park, In contrast to the largest firms overall, the largest US- 6.1 Caufield & Byers CA based women-owned firms are more geographically Deerfield New York, NY 5.5 diverse (Fig. 29), and focus on investments at specific Management stages. Women-owned venture capital firms have found Accel Palo Alto, CA 5.5 particular success by focusing on early-stage investing, Technology Crossover Menlo Park, 5.5 as four of the 10 largest firms employ this strategy: Ventures CA Arboretum Ventures, Biomatics Capital Partners, Menlo Park, GGV Capital 4.7 Canvas Ventures and defy.vc. Over the past 10 years all CA of these closed at, or above, their targeted capital and Source: Preqin Pro. Data as of September 2019

Fig. 27: Aggregate Capital Raised by US-Based Venture Capital Fund Managers by Strategy in 2019 YTD

180 156.1 160 140 120 103.4 100 80 60 51.2 40

Aggregate Capital Raised ($bn) Raised Capital Aggregate 20 10.8 0 Seed Early Stage Expansion/ Venture Capital (General) Late Stage

Source: Preqin Pro. Data as of September 2019

Fig. 28: Largest US-Based Venture Capital Fund Managers by Estimated Dry Powder

Firm Headquarters Estimated Dry Powder ($bn)

Sequoia Capital Menlo Park, CA 4.5 Tiger Global Management New York, NY 3.8 Andreessen Horowitz Menlo Park, CA 3.7 Technology Crossover Ventures Menlo Park, CA 3.3 Accel Palo Alto, CA 2.3 Apple Advanced Manufacturing Fund Cupertino, CA 2.2 Lightspeed Venture Partners Menlo Park, CA 2.0 GGV Capital Menlo Park, CA 1.9 Bessemer Venture Partners Larchmont, CA 1.7 New Enterprise Associates Menlo Park, CA 1.7

Source: Preqin Pro. Data as of September 2019

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

Firm Headquarters Total Funds Raised in Last 10 Years ($mn)

Oak HC/FT Partners Greenwich, CT 1,900 Scale Venture Partners Foster City, CA 1,290 Greycroft Partners New York, NY 799 Forerunner Ventures San Francisco, CA 725 Arboretum Ventures Ann Arbor, MI 683 DBL Partners San Francisco, CA 551 Biomatics Capital Partners Seattle, WA 500 Canvas Ventures Portola Valley, CA 475 Defy.vc Woodside, CA 413 .406 Ventures Boston, MA 392

Source: Preqin Pro. Data as of September 2019

US venture capital benefits from pension fund interest

Among the most active investors in US venture preference for domestic managers as the majority capital, seven are pension funds, led once again by (77%) of investors in US-based venture capital funds San Francisco Employees’ Retirement System with 68 are based in North America. known commitments to vintage 2009-2019 funds (Fig. 30). San Francisco Employee’s Retirement System The US venture capital industry continues to attract and Texas County & District Retirement System larger, more sophisticated investors. The majority have notably upped their activity over the past year, (67%) manage at least $1bn in assets, including 13% committing to eight and seven new funds respectively that manage at least $50bn (Fig. 32). That said, smaller between Q3 2018 and Q3 2019. investors are still a sizeable presence in the space, with 33% managing less than $1bn. More than 10 different LP types commit to US-based venture capital funds on a global basis (Fig. 31). Foundations account for the largest proportion (19%) of the investor pool, followed by private sector (13%) and public (12%) pension funds. Investors retain a

Fig. 30: Most Active Investors in US-Based Venture Capital Funds by Number of Known Fund Commitments (Vintages 2009-2019)

No. of Known Active VC Investor Type Commitments Mandate?

San Francisco Employees' Retirement System Public Pension Fund 68 No Texas County & District Retirement System Public Pension Fund 53 Yes MetLife Insurance Company Insurance Company 53 No University of Texas Investment Management Company Endowment Plan 51 No Los Angeles Fire and Police Pension System Public Pension Fund 50 No Retirement Plans of Duke University Private Sector Pension Fund 49 No University of Michigan Endowment Endowment Plan 47 No Alaska Permanent Fund Corporation Sovereign Wealth Fund 47 No Liberty Mutual Retirement Benefit Plan Private Sector Pension Fund 44 No Sherman Fairchild Foundation Foundation 41 No Michigan Department of Treasury Public Pension Fund 41 Yes Industry Pension Insurance Private Sector Pension Fund 41 No

Source: Preqin Pro

Fig. 31: Investors in US-Based Venture Capital Funds by Investor Type (Vintages 2009-2019)

Foundation 19% Private Sector Pension Fund 13% Public Pension Fund 12% Endowment Plan 9% Fund of Funds Manager 8% Corporate Investor 7% Insurance Company 8% Private Equity Firm 7% Government Agency 4% Investment Company 3% Other 9%

0% 5% 10% 15% 20% 25%

Proportion of Investors

Source: Preqin Pro

Fig. 32: Investors in US-Based Venture Capital Funds by Assets under Management (Vintages 2009-2019)

40% 37% 35% 30% 25% 23%

20% 17% 15% 10% 10%

Proportion of Investors Proportion 7% 6% 5% 0% Less than $500-999mn $1-9.9bn $10-49.9bn $50-99.9bn $100bn $500mn or More Assets under Management

Source: Preqin Pro

Fig. 33: Investors in US-Based Venture Capital Funds by Investor Location (Vintages 2009-2019)

77%

North America 10% 11% Asia Europe Proportion of Investors

Rest of World Source: Preqin Pro

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