PREQIN AND FIRST REPUBLIC US UPDATE: Q3 2018 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

CONTENTS

3 Deals & Exits 12 Performance 6 Fundraising 14 Fund Managers 8 Funds in Market 16 Investors 9 Micro Venture Capital

FIRST REPUBLIC BANK

First Republic and its subsidiaries offer private banking, private business banking and private wealth management, including investment, trust and brokerage services. First Republic specializes in delivering exceptional, relationship-based service, with a solid commitment to responsiveness and action. Services are offered through preferred banking or wealth management offices primarily in , Palo Alto, Los Angeles, Santa Barbara, Newport Beach and San Diego, ; Portland, Oregon; , ; Palm Beach, Florida; Greenwich, Connecticut; New York, New York; and later in 2018, Jackson, Wyoming. First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans.

For more information, visit: www.firstrepublic.com

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 2018 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.

All rights reserved. The entire contents of Preqin and First Republic US Venture Capital Update: Q3 2018 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin and First Republic US Venture Capital Update: Q3 2018 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent financial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin and First Republic US Venture Capital Update: Q3 2018. 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 US Venture Capital Update: Q3 2018 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 US Venture Capital Update: Q3 2018 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.

2 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

DEALS & EXITS

2018 YTD has seen over $71bn in venture capital Early-stage investments (Series A and earlier) invested in US-based portfolio companies across accounted for 50% of venture capital deals in Q3 4,116 deals (Fig. 1). Q3 alone saw 1,533 completed 2018 and 20% of capital invested (Fig. 2). Software deals valued at a total of $27bn, the highest quarter was the most active industry for US-based venture recorded for 2018. While the number of deals has capital investment, representing 28% of deals and been on the decline since the record (6,672) seen in 25% of deal value in Q3 2018 (Fig. 3). 2014, deal activity in 2018 may break this trend: deal activity as of the end of Q3 2018 already equates to As of the end of Q3 2018, there have been 461 exits 83% of the number of deals completed and 92% of valued at an aggregate $57bn, the highest value on aggregate deal value in the whole of 2017. record since 2014 (Fig. 5). The exit environment is showing signs of improvement: aggregate exit value

Fig. 1: Venture Capital Deals* for US-Based Companies, 2009 - 2018 YTD (As of September 30 2018)

8,000 100 6,672 7,000 6,414 Aggregate Deal Value ($bn) 6,029 6,080 80 6,000 5,062 5,236 4,951 5,000 4,186 4,116 60 4,000 3,504 40

No. of Deals 3,000 2,000 20 1,000 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD No. of Deals Aggregate Deal Value ($bn) Source: Preqin Pro

Fig. 2: Venture Capital Deals for US-Based Companies in Q3 2018 by Stage

30% 26% 28% 25% 24% 19% No. of Deals 20% 17% 16% 15% 14% 10% Aggregate 8% 9% 8% 10% 6% Deal Value Proportion of Total 3% 5% 3% 2% 1% 3% 0.2% 1% 1% 0% PIPE Grant Angel/Seed Growth and Later and Venture Add-on & Other Add-on SeriesA/Round 1 SeriesC/Round 3 SeriesB/Round 2 SeriesD/Round 4 Capital/Expansion Source: Preqin Pro

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

3 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

in 2018 has already surpassed the final figures seen Fig. 3: Venture Capital Deals* for US-Based Companies in 2017 ($52bn). Moreover, 60 IPOs recorded in 2018 in Q3 2018 by Industry YTD is on par with final figures seen in 2017 and is on the heels of 2015 levels (82). 30% 25% 20% As in years prior, trade sales have been the most 15% common exit type in 2018 YTD, accounting for 75% 10% 5% of all exits of US-based portfolio companies. Nine of Proportion of Total 0% the 10 largest exits in Q3 2018 were trade sales, with

an aggregate exit value of $7.6bn, led by the $2.4bn Other Internet Other IT Telecoms Consumer Industrials trade sale of Duo Security to Cisco Systems in August Healthcare 2018 (Fig. 6). Discretionary Business Services Business Food & Agriculture Food & Software & Related Software & No. of Deals Aggregate Deal Value Source: Preqin Pro

Fig. 4: Largest Venture Capital Deals* in the US in Q3 2018

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

Lucid Motors Inc. Unspecified Round Sep-18 1,000 USD 1,131 USD Public Investment Fund Cleantech

Consumer JUUL Labs, Inc. Unspecified Round Jul-18 650 USD 762 USD - Products

Felix Capital, Fidelity Investments, Kleiner Perkins Caufield & Byers, NBC Universal, Peloton Interactive, Series F/Round 6 Aug-18 550 USD 1,007 USD Technology Crossover Ventures, Tiger Global Software Inc. Management, Wellington Management, Winslow Capital Management

Uber Technologies, Unspecified Round Aug-18 500 USD 14,741 USD Toyota Motor Corporation Telecoms Inc.

Zoox Inc. Unspecified Round Jul-18 500 USD 790 USD Grok Ventures, Primavera Capital High-Tech

Samumed, LLC Series A/Round 1 Aug-18 438 USD 451 USD Vickers Venture Partners, Starling Group Biotechnology

Baillie Gifford,Dragoneer Investment Group, , Series H/Round 8 Aug-18 427 USD 1,217 USD General Atlantic, Sands Capital Ventures, Telecoms Inc. T Rowe Price, Wellington Management

Open Door Labs, Inc. Unspecified Round Sep-18 400 USD 1,180 USD SB Investment Advisers Internet

Fidelity Investments, Institutional Venture Partners, Qatar Investment Authority, Urban Compass, Inc. Series F/Round 6 Sep-18 400 USD 1,143 USD Internet SB Investment Advisers, Wellington Management

Mulberry Health Inc. Unspecified Round Aug-18 375 USD 1,268 USD Alphabet

Source: Preqin Pro

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

4 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

Fig. 5: Venture Capital-Backed Exits of US-Based Companies by Type, 2009 - 2018 YTD (As of September 30 2018)

1,200 80

1,000 70 Aggregate Exit Value ($bn) 60 800 50 600 40

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

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 Q3 2018

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

Benchmark Capital, Geodesic Capital, GV, Index Ventures, Lead Edge Capital, Meritech Capital Partners, Radar Duo Security, Cisco 2,350 Aug-10 Partners, Redpoint Ventures, Resonant 122 USD Trade Sale Aug-18 IT Security Inc. Systems, Inc. USD Venture Partners, The Michigan Economic Development Corporation, True Ventures, Workday, Inc.

Datorama, Cedar Fund, Innovation Endeavors, . Jun-12 51 USD Trade Sale Jul-18 800 USD Software Inc. Lightspeed Venture Partners, Marker com, Inc.

Court Square Ventures, CRV, Nauta GreatCall, Capital, NXT Capital Venture Finance, Best Buy Co., Aug-07 82 USD Trade Sale Aug-18 800 USD Telecoms Inc. Steelpoint Capital Partners, Sumitomo Inc. Mitsui Banking Corporation

Battery Ventures, henQ Invest, Prime Mendix Inc. Nov-06 38 USD Trade Sale Aug-18 Siemens AG 696 USD Software Ventures

AME Cloud Ventures, Dentsu, INCJ, Treasure Jul-11 IT-Farm, SBI Holdings, Scale Venture 48 USD Trade Sale Jul-18 Arm Limited 600 USD Software Data, Inc. Partners, Sierra Ventures

Source: Preqin Pro

US-based investor/acquiror

5 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

FUNDRAISING

s of the end of Q3 2018, 242 US-based The largest proportion of funds closed by US-based venture capital funds have reached a final managers have typically fallen into the micro VC close, securing $29bn in aggregate capital (sub-$100mn) category, accounting for 62% of (Fig. 7), with 64 funds closed for an aggregate vehicles closed since 2009 and 64% of vehicles $8.5bn in Q3. Fundraising levels as of the closed in 2018 YTD (Fig. 8). At the other end of the Aend of Q3 are on par with the final figures seen in spectrum, just 1% of US-based funds have reached a 2017, accounting for 77% of funds closed and 84% of final close on $1bn or more in 2018 thus far. capital raised respectively.

Fig. 7: US-Based Venture Capital Fundraising, Fig. 8: US-Based Venture Capital Fundraising by Fund 2009 - 2018 YTD (As of September 30 2018) Size, 2009 - 2018 YTD (As of September 30 2018)

400 50 Aggregate Capital Raised ($bn) 100% 336 $1bn or More 350 313 40 300 279 274 80% $500-999mn 242 250 211 30 200 173 60% $250-499mn 150 118 125 128 20 40% $100-249mn 100

No. of Funds Closed 10 $50-99mn 50 20%

0 0 Proportion of Funds Closed Less than $50mn 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018YTD Year of Final Close 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018YTD No. of Funds Closed Aggregate Capital Raised ($bn) Year of Final Close Source: Preqin Pro Source: Preqin Pro

Fig. 9: Largest US-Based Venture Capital Funds Closed in Q3 2018

Fund Firm Fund Size (mn) Fund Type Geographic Focus

Global, , , Lightspeed Venture Partners Select III Lightspeed Venture Partners 1,050 USD Expansion/Late Stage North America, US

Foundry Group Next 2018 Foundry Group 750 USD Expansion/Late Stage US

Sequoia Capital India VI Sequoia Capital 695 USD Expansion/Late Stage ASEAN, India

Sequoia Capital China Venture Fund VII Sequoia Capital 550 USD Early Stage China

Lead Edge Capital IV Lead Edge Capital 520 USD Venture Capital (General) Europe, US

Scale Venture Partners VI Scale Venture Partners 400 USD Venture Capital (General) US

Westlake Village BioPartners Fund I Westlake Village BioPartners 320 USD Venture Capital (General) US

Crosslink Ventures VIII Crosslink Capital 275 USD Early Stage US

Felicis Ventures VI Felicis Ventures 270 USD Early Stage Global, US

Credit Suisse NEXT Investors II Credit Suisse NEXT Investors 261 USD Venture Capital (General) US

Source: Preqin Pro

6 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

California-based Lightspeed Venture Partners raised Fig. 10: US-Based Venture Capital Fundraising Success, the largest venture capital fund closed in Q3 2018, 2009 - 2018 YTD (As of September 30 2018) Lightspeed Venture Partners Select III, an expansion fund concentrating on later-stage investments across 25 120% Proportion of Target Size a diverse range of industry sectors (Fig. 9). The fund 20 100% 80% Achieved secured nearly $1.1bn at its final close in July 2018. 15 60% 10 22 22 20 (Months) 18 19 19 17 40% US-based venture capital funds have, on average, 14 15 17 5 20% met or exceeded their target size for the past four Time Spent in Market 0 0% years, with funds closed in 2018 YTD securing an average of 100% of their initial targets (Fig. 10). 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018YTD Funds closed in 2018 YTD on average have spent Year of Final Close slightly more time on the road than funds closed in Average Time Spent in Market (Months) 2017 (20 months vs. 17 months respectively). Average Proportion of Target Size Achieved Source: Preqin Pro

The majority (52%) of funds closed in Q3 2018 were early-stage vehicles: 33 early-stage funds secured Fig. 11: US-Based Venture Capital Fundraising in almost $3.3bn, including six seed funds that raised Q3 2018 by Strategy $0.4bn (Fig. 11). Twenty-five general venture vehicles closed securing $2.5bn collectively, and six 30 27 2.9 2.7 3.0 Aggregate Capital Raised 25 2.5 expansion/late-stage funds raised $2.7bn. 25 2.5

20 2.0 ($bn) As in 2017, the largest proportion (90%) of US- 15 1.5 10 1.0 based venture capital funds target investment 6 0.4 6

No. of Funds Closed 5 0.5 opportunities in North America, followed by 4% that 0 0.0 are Asia focused (Fig. 12). Eight of the 10 largest funds closed in Q3 2018 are targeting opportunities Seed LateStage Early Stage Early in North America, while Sequoia Capital India VI and Expansion/ (General)

Sequoia Capital China Venture Fund VII are targeting VentureCapital investments in India and China respectively. No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Pro

Fig. 12: US-Based Venture Capital Fundraising in 2018 YTD by Primary Geographic Focus (As of September 30 2018)

Europe Asia North America 1% 4% Middle East & Israel 90% Diversified 1% Multi-Regional Latin America 2% 1%

Source: Preqin Pro

7 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

FUNDS IN MARKET

S-based venture capital fundraising has Fig. 13: US-Based Venture Capital Funds in Market over continued to break its own records for Time, 2009 - 2018 (As of September 30 2018) both the number of funds in market and

the aggregate target size of these vehicles 1,000 100 Aggregate Capital Targeted ($bn) since 2013 (Fig. 13). 2018 has been no 800 80 Udifferent, with 908 funds on the road seeking $81bn in capital as of the start of October; compared to one 600 60 year prior, there are 40% more vehicles in market 400 40 targeting 42% more in aggregate capital.

No. of Funds Raising 200 20

New York-based is raising 0 0 the largest fund currently in market, Tiger Global

Private Investment Partners XI* (Fig. 16). The general Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Oct-18 venture vehicle is targeting $3bn in capital and will No. of Funds Raising Aggregate Capital Targeted ($bn) invest in internet, media and telecoms sectors in the Source: Preqin Pro US and globally.

Fig. 14: US-Based Venture Capital Funds in Market by Fig. 15: US-Based Venture Capital Funds in Market by Strategy (As of September 30 2018) Primary Geographic Focus (As of September 30 2018) Aggregate Capital Targeted ($bn) 500 43.0 50 1,000 73.0 80

388 Aggregate Capital 834 382 Targeted ($bn) 70 400 40 800 60 300 30 21.5 600 50 200 20 12.4 40 94 100 4.5 44 10 400 30 No. of Funds Raising 20 0 0 No. of Funds Raising 200 6.4 10 9 0.9 40 251.1 Seed 0 0

LateStage North Europe Asia Rest of World Early Stage Early Expansion/ (General) America VentureCapital No. of Funds Raising Aggregate Capital Targeted ($bn) No. of Funds Raising Aggregate Capital Targeted bn Source: Preqin Pro Source: Preqin Pro

Fig. 16: Largest US-Based Venture Capital Funds in Market (As of September 30 2018)

Fund Firm Target Size (mn) Fund Type Geographic Focus

Tiger Global Private Investment Partners XI* Tiger Global Management 3,000 USD Venture Capital (General) Global, US

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

GGV Capital VII GGV Capital 1,880 USD Venture Capital (General) China, US

Bessemer Venture Partners X Bessemer Venture Partners 1,600 USD Venture Capital (General) Global, US

Source: Preqin Pro *This fund has reached a final close in early Q4 2018.

8 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

MICRO VENTURE CAPITAL

icro venture capital (sub-$100mn) 79% of the number of funds closed in 2017 and 76% fundraising has grown substantially of capital raised. over the past decade: 205 funds closed in 2017, securing a record $6.3bn in New York-based Rosecliff Ventures closed its second aggregate capital, representing a 230% micro venture capital fund in July, Rosecliff Venture Mand 252% increase in the number of funds closed Partners II, on $75mn, achieving 150% of its initial and aggregate capital raised respectively compared target. The firm also recently launched its third fund with 2009 (Fig. 17). in the series, Rosecliff Venture Partners III, which is targeting $250mn and will focus on US growth Micro venture capital fundraising as of the end of Q3 companies in a variety of sectors. 2018 will likely be on par with 2017 levels, with 162 funds closed for an aggregate $4.8bn, representing

Fig. 17: US-Based Micro Venture Capital Fundraising, 2009 - 2018 YTD (As of September 30 2018)

250 7 Aggregate Capital Raised ($bn) 216 205 6 200 186 163 162 5 144 150 4 106 100 3 71 72 62 2 No. of Funds Closed 50 1 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Year of Final Close No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Pro

Fig. 18: US-Based Micro Venture Capital Fundraising Success, 2009 - 2018 YTD (As of September 30 2018)

25 105% Proportion of Target Size Achieved

20 100% 95% 15 90% 10 20.5 19.8 19.1 19.4 17.7 16.8 17.0 16.5 85% 13.9 12.3 5 80% Time Spent in Market (Months) 0 75% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Year of Final Close Average Time Spent in Market (Months) Average Proportion of Target Size Achieved Source: Preqin Pro

9 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

In terms of fundraising success, micro venture capital targeted (Fig. 20). Funds focusing on regions outside funds have, on average, achieved 100% or more of the US are targeting $2.3bn; nearly half of these their target size for the past three years (Fig. 18). funds are targeting investment opportunities in Asia The average time spent in market for micro venture (Fig. 21). capital funds reached a record low of 12 months among funds closed in 2017. Micro funds closed in Moreover, seven of the top performing micro 2018 YTD have spent an average of 19 months on venture capital funds of vintages 2007-2015 are the road, which is just above the 17-month historical early-stage vehicles, led by Vertical Venture Partners average for the 2009-2017 period. Fund I with a net IRR of 151.9% (Fig. 22). The 2014 start-up vehicle dedicates 20% of its capital to the Among micro venture capital funds, early-stage wholly owned Triton Technology Fund, which focuses strategies (including seed) account for the largest on commercializing innovations coming out of UC proportion (61%) of micro venture capital funds in San Diego within the software, communications and market, and the largest proportion (58%) of capital medical devices sectors.

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

Investor Type No. of Known Commitments Active VC Mandate?

Retirement Plans of Duke University Private Sector 12 No

Cendana Capital Manager 8 Yes

Industry Ventures Private Equity Fund of Funds Manager 8 Yes

Sobrato Family Holdings Single- 7 Yes

Grantham Foundation Foundation 6 No

Naever Corporate Investor 6 Yes

Oregon Growth Board Government Agency 6 No

Prudential Financial Insurance Company 6 Yes

TIFF Private Equity Fund of Funds Manager 6 Yes

Accolade Partners Private Equity Fund of Funds Manager 5 No

Source: Preqin Pro

10 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

Fig. 20: US-Based Micro Venture Capital Funds in Market Fig. 21: US-Based Micro Venture Capital Funds in Market by Strategy (As of September 30 2018) by Primary Geographic Focus (As of September 30 2018)

350 14 600 562 25 Aggregate Capital Targeted ($bn) 28911.7 Aggregate Capital 22.1

300 12 Targeted ($bn) 250 223 9.4 10 500 20 200 8 400 150 6 15 100 80 2.5 4 300

No. of Funds Raising 50 13 0.8 2 10 0 0 200 No. of Funds Raising 100 5 Seed 1.2 5 0.3 21 17 0.8 0 0 Late StageLate Early StageEarly Expansion/ General North America Europe Asia Rest of World Venture Capital No. of Funds Raising Aggregate Capital Targeted bn No. of Funds Raisng Aggregate Capital Targeted bn Source: Preqin Pro Source: Preqin Pro

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

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

Vertical Venture Partners Fund I Vertical Venture Partners 2014 51 USD Early Stage: Start-up North America 151.9 31-Dec-17

Diversified CRCM Opportunity Fund CRCM Ventures 2013 38 USD Early Stage: Start-up 122.8 31-Mar-18 Multi-Regional

Expansion/Late Foresite Capital Fund I Foresite Capital 2012 100 USD North America 66.5 31-Mar-18 Stage

Venture Capital Social Leverage Capital Fund II Social Leverage Capital 2015 20 USD North America 59.3 30-Jun-18 (General)

Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed North America 58.7 31-Dec-16

IA Venture Strategies Fund I IA Ventures 2010 50 USD Early Stage North America 50.1 31-Mar-18

Cottonwood Technology Cottonwood Technology Fund I 2010 17 USD Early Stage: Start-up North America 46.0 30-Jun-18 Fund

Middle East & YL Ventures II YL Ventures 2013 38 USD Early Stage: Start-up 42.1 31-Mar-18 Israel

Brightstone Venture Capital Brightstone Venture Venture Capital 2013 20 USD North America 42.0 31-Mar-18 Fund Capital (General)

Signal Peak Ventures II Signal Peak Ventures 2014 113 USD Early Stage North America 34.8 31-Dec-17

Source: Preqin Pro

11 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

PERFORMANCE

S-based venture capital funds have posted Column Group II leads vintage 2007-2015 US-based relatively strong returns for vintages 2007- venture capital funds with a net IRR of 408.0% 2015, with a median net IRR of 13% (Fig. (Fig. 25). The 2014 vintage early-stage fund targets 23). When looking at median net IRRs and investments in the biotechnology industry and quartile boundaries, 2010-2013 vintage received commitments from Hartford HealthCare Ufunds have tended to perform better than those that Pension and Endowment Fund, Regents of the began investing in the years leading up to the Global University of California and Texas County & District Financial Crisis (vintages 2007-2009). Retirement System. Six of the 10 best performing US-based funds are micro venture capital funds, Venture capital managers continue to distribute including four early-stage vehicles, one late-stage significant sums of capital to investors: cash outflows and one general venture capital fund. from US-based venture capital funds reached a record high of $56bn in 2016, as fund managers returned capital faster than they called it up (Fig. 24).

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

40% 35% 30% Top Quartile Net IRR Boundary 25% 20% Median Net IRR 15% 10% Bottom Quartile Net IRR Boundary

Net IRR since Inception 5% 0% -5% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Vintage Year Source: Preqin Pro

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

60 56 50 39 40 35 35 35 36 38 32 29 31 30 26 27 25 25 28 26 24 21 23 20 22 20 12 10 0 -10 -20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Annual Called up ($bn) Annual Distributed ($bn) Net Cash Flow ($bn) Source: Preqin Pro

12 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

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

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

Column Group II The Column Group 2014 322 USD Early Stage North America 408.0 31-Mar-18

Vertical Venture Partners Vertical Venture Partners 2014 51 USD Early Stage: Start-up North America 151.9 31-Dec-17 Fund I

Diversified CRCM Opportunity Fund CRCM Ventures 2013 38 USD Early Stage: Start-up 122.8 31-Mar-18 Multi-Regional

Foresite Capital Fund I Foresite Capital 2012 100 USD Expansion/Late Stage North America 66.5 31-Mar-18

Social Leverage Capital Fund II Social Leverage Capital 2015 20 USD Venture Capital (General) North America 59.3 30-Jun-18

Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed North America 58.7 31-Dec-16

OrbiMed Private Investments V OrbiMed Advisors 2013 735 USD Venture Capital (General) North America 54.0 31-Mar-18

Spark Capital II Spark Capital 2008 360 USD Early Stage: Start-up North America 51.5 31-Mar-18

Avalon Ventures VIII Avalon Ventures 2007 150 USD Early Stage: Seed North America 50.4 31-Dec-17

IA Venture Strategies Fund I IA Ventures 2010 50 USD Early Stage North America 50.1 31-Mar-18

Source: Preqin Pro

13 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

FUND MANAGERS

he 10 largest US-based venture capital Fig. 26: Aggregate Capital Raised by US-Based Venture managers have collectively raised over $70bn Capital Fund Managers by Strategy in 2018 YTD in capital over the past 10 years (Fig. 27), and (As of September 30 2018) have nearly $22bn available to invest (Fig. 28). California is home to the majority of the top 14 12.0 TUS managers in terms of both capital raised (74%) 12 and estimated dry powder (66%). 10 9.1 8 New Enterprise Associates is the most active venture 6.2 6 capital manager with $11.5bn raised in the past 10 4 years and $3.2bn available to invest. California-based 2 1.6 Sequoia Capital holds the most dry powder ($4.3bn), Aggregate Capital Raised ($bn) and is currently raising Sequoia Capital US Venture 0 Fund XVI, which targets early-stage investments in Seed Early Stage Expansion/ Venture Capital Late Stage (General) US-based technology and software companies. Source: Preqin Pro

Fig. 27: Largest US-Based Venture Capital Fund Fig. 28: Largest US-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Managers by Estimated Dry Powder Years (As of September 30 2018) (As of September 30 2018)

Firm Headquarters Total Funds Raised Firm Headquarters Estimated Dry in Last 10 Years (bn) Powder (bn)

New Enterprise Sequoia Capital Menlo Park, CA 4.3 USD Menlo Park, CA 11.5 USD Associates New Enterprise Menlo Park, CA 3.2 USD Associates Sequoia Capital Menlo Park, CA 11.1 USD Deerfield Management New York, NY 2.5 USD Tiger Global New York, NY 10.5 USD Lightspeed Venture Management Menlo Park, CA 1.9 USD Partners Kleiner Perkins Menlo Park, CA 6.7 USD Caufield & Byers Andreessen Horowitz Menlo Park, CA 1.8 USD Tiger Global Andreessen Horowitz Menlo Park, CA 6.5 USD New York, NY 1.8 USD Management Lightspeed Venture Menlo Park, CA 6.0 USD Partners TPG Fort Worth, TX 1.8 USD Institutional Venture Accel Palo Alto, CA 5.5 USD Menlo Park, CA 1.6 USD Partners Institutional Venture Menlo Park, CA 4.7 USD Technology Crossover Partners Menlo Park, CA 1.5 USD Ventures General Catalyst Cambridge, MA 4.1 USD General Catalyst Partners Cambridge, MA 1.4 USD Partners Deerfield Management New York, NY 3.7 USD Source: Preqin Pro Source: Preqin Pro

14 ©Preqin Ltd. | www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/frusvcq318

In 2018 so far, US-based venture capital managers Fig. 29: Largest US-Based Women-Owned Venture have raised nearly $29bn as of the end of Q3 2018, Capital Fund Managers by Aggregate Capital Raised in with general venture vehicles accounting for the the Last 10 Years (As of September 30 2018) largest proportion (42%) of capital, followed by Firm Headquarters Total Funds Raised in broader early-stage strategies (31%, Fig. 26). Last 10 Years (mn)

The top women-owned venture capital firms in Scale Venture Partners Foster City, CA 1,290 USD the US have raised just a small portion (9%) of capital in the past 10 years compared to the top Oak HC/FT Partners Greenwich, CT 1100 USD 10 US-based managers overall. California-based Greycroft Partners New York, NY 793 USD Scale Venture Partners has secured the most capital ($1.3bn) among US-based women-owned firms in .406 Ventures Boston, MA 559 USD the past decade (Fig. 29). The firm primarily targets DBL Partners San Francisco, CA 551 USD investments in US telecoms, communication and internet sectors. Canvas Ventures Portola Valley, CA 475 USD

Arboretum Ventures Ann Arbor, MI 433 USD

Floodgate Palo Alto, CA 391 USD

Aspect Ventures San Francisco, CA 331 USD

Westlake Village Westlake Village, 320 USD BioPartners CA

Source: Preqin Pro

15 PREQIN AND FIRST REPUBLIC US VENTURE CAPITAL UPDATE: Q3 2018

INVESTORS

mong the 10 most active investors in US Fig. 30: Investors in US-Based Venture Capital Funds by venture capital, six are pension funds, led Investor Type (Vintages 2009-2018) by San Francisco Employees’ Retirement System with 60 known commitments to Foundation 21% vintage 2009-2018 US-based venture capital Private Sector Pension Fund 15% Afunds (Fig. 32). In comparison, just one pension Public Pension Fund 13% Endowment Plan 10% fund features among the top investors in US Fund of Funds Manager 8% micro venture capital funds of the same vintages: Corporate Investor 7% Retirement Plans of Duke University, with 12 known Insurance Company 7% Private Equity Firm 5% commitments to the space. Four of the top 10 US Government Agency 4% micro venture capital investors are private equity Investment Company 2% fund of funds managers, led by Cendana Capital with Other 7% eight known commitments to the space. 0% 5% 10% 15% 20% 25% Proportion of Investors Over 15 different LP types commit to US-based Source: Preqin Pro venture capital funds. Foundations account for the largest proportion (21%) of investors in US venture Fig. 31: Investors in US-Based Venture Capital Funds by capital, followed by private sector (15%) and public (Vintages 2009-2018) pension funds (13%, Fig. 30). 40% 36% The US venture capital industry tends to attract 35% larger, more sophisticated investors, with the 30% 25% 23% majority (68%) managing at least $1bn in assets, 19% 20% including 13% that manage at least $50bn (Fig. 31). 15% 10% To no surprise, the majority (80%) of investors in US 10% 6% 7% venture capital are North America based, followed by Proportion of Investors 5% 0% Europe (10%), Asia (9%) and Rest of World (2%). $100bn orMore $500mn $1-9.9bn Lessthan $10-49.9bn $50-99.9bn $500-999mn Assets under Management Source: Preqin Pro

Fig. 32: Most Active Investors in US-Based Venture Capital Funds by Number of Known Fund Commitments (Vintages 2009-2018)

Investor Type No. of Known Commitments Active VC Mandate?

San Francisco Employees' Retirement System Public Pension Fund 60 Likely

MetLife Insurance Company Insurance Company 55 No

Retirement Plans of Duke University Private Sector Pension Fund 49 No

University of Michigan Endowment Endowment Plan 48 Likely

Texas County & District Retirement System Public Pension Fund 46 Likely

Source: Preqin Pro

16 ©Preqin Ltd. | www.preqin.com [email protected] www.preqin.com