VOLUME 13, ISSUE 5 ■ JUNE 2017 alternative assets. intelligent data. PRIVATE EQUITY & VENTURE CAPITAL SPOTLIGHT OVERACHIEVERS: GPS SEEING IN THIS ISSUE SUCCESS ON THE ROAD Preqin’s data shows a key trend in the value of prior fundraising experience in reaching a first close quickly. Managers that have previously raised at least $5bn are those that have most often exceeded their target size by 25% or more. FEATURE 3 Overachievers: GPs Find out more on page 3 Seeing Success on the Road FEATURE 8 Venture Capital Exits ‘Snap’ Back in North VENTURE CAPITAL EXITS ‘SNAP’ America BACK IN NORTH AMERICA INDUSTRY NEWS 12 The North American venture capital exit environment in 2016 was anchored by 11 notable transactions, each of THE FACTS which was valued at more than $1bn. ■ Private Equity in 14 Canada ■ Sovereign Wealth 17 Find out more on page 8 Funds Investing in Private Equity 19 ■ Micro Venture Capital CONFERENCES 22 REVIEW FUND WEALTH SOVEREIGN PREQIN 2017 THE RECENTLY RELEASED: THE 2017 PREQIN SOVEREIGN WEALTH FUND REVIEW 2017 PREQIN SOVEREIGN All data in this newsletter in association with WEALTH FUND REVIEW can be downloaded to alternative assets. intelligent data. Excel for free Order Your Copy Download Sample Pages Sign up to Spotlight, our free monthly newsletter, providing insights into performance, investors, deals and fundraising, powered by Preqin data: Alt Credit Intelligence European and US Fund Services Awards: Best Data and Information Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s Award for Enterprise: International Trade | HedgeWeek Global Awards: Best Global Hedge SIGN UP Fund Research Provider | CAIA Corporate Recognition Award www.preqin.com/contact | [email protected] Enter the world’s gateway to Asia. 25 - 28 September 2017 JW Marriott Hotel, Hong Kong https://finance.knect365.com/superreturnasia/?vip_code=FKR2433PRQS Dear Spotlight reader, We are very pleased to offer a10% discount to Spotlight readers for registrations to SuperReturn Asia in Hong Kong, 25 – 28 September 2017. Bringing together private equity leaders from around the world, you can expect to meet and network with: • 750+ top private equity and venture capital attendees • 400+ local and international LPs, including decision makers from pension plans, family offices, sovereign wealth funds, foundations and fund of funds • 300+ of the world’s most influential GPsfrom 5 continents As well as offering you the perfect opportunity to connect with LPs via a networking app and other facilities, the con- ference will dig deeper into venture capital, co-investments and explore the current dynamics of the LP/GP relation- ship plus cover the hottest topics in private equity. Please visit the website for full event details. I hope to see you there! Kindest regards Mark O’Hare Managing Director, Preqin For all bookings & enquiries, please contact the SuperReturn Asia Team Quote VIP: FKR2433PRQS for your 10% discount Tel: +44 (0) 20 7017 7200 Email: [email protected] Or register online here. OVERACHIEVERS: GPS SEEING SUCCESS ON THE ROAD OVERACHIEVERS: GPs SEEING SUCCESS ON THE ROAD In this month’s feature article, we examine how recent distributions and increased LP appetite for private equity has affected the fundraising landscape, providing insight into which managers have enjoyed a successful time on the road. 2016 marked the fourth consecutive year Fig. 1: Average Time Spent on the Road by Private Equity Funds and Average Fund Size, in which private equity fundraising has 2008 - 2017 YTD (As at May 2017) surpassed $300bn; an aggregate $378bn 25 700 was raised by 948 private equity funds, 20 20 625 600 ($mn) Size Fund Average the highest level of capital secured since 20 18 18 18 18 the Global Financial Crisis. A driving 17 500 force behind this increase in fundraising 15 15 15 456 400 activity has been the high levels of 427 12 distributions recorded in recent years. In 372 388 389 300 Preqin’s December 2016 survey of over 10 323 273 283 200 investors active in private equity, 248 200 95% of respondents reported that their 5 100 investments had met or exceeded their expectations, and nearly half (48%) of on Road Spent (Months) Time Average 0 0 investors surveyed planned to increase 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 their allocations to the asset class over the YTD Year of Final Close longer term. Average Time Spent on Road (Months) Average Fund Size ($mn) PRIVATE EQUITY: ANNUAL AMOUNT Source: Preqin Private Equity Online CALLED-UP AND DISTRIBUTED With LPs receiving strong returns on focus and manager experience can affect 472 their private equity investments, many investor demand, a fund’s time on the road 439 investors have returned to private equity and its ability to achieve its target. to re-invest their gains. This has not only 323 305295 led to more capital entering the private GEOGRAPHY 257 224 equity industry, but to managers spending Over the course of the past four years, the less time in market and raising larger funds average time taken for a private equity 129 (Fig. 1). fund to reach a final close has decreased, and this trend is generally seen across all This article will examine the impact of regions (Fig. 2). Europe-focused private 2013 2014 2015 H1 recent distributions on fundraising, and equity funds closed in 2016 were the 2016 how fund performance, geographic fastest to reach a final close, spending Capital Called-up Capital Distributed Fig. 2: Average Time Spent on the Road by Private Equity Funds Fig. 3: Average Size of Private Equity Funds by Geographic by Geographic Focus, 2008 - 2017 YTD (As at May 2017) Focus, 2008 - 2017 YTD (As at May 2017) 30 800 700 25 600 20 500 15 400 300 10 200 Average Fund Size ($mn) Size Fund Average 5 100 Average Time Spent on Road Spent (Months) Time Average 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD YTD Year of Final Close Year of Final Close North America Europe Asia Rest of World North America Europe Asia Rest of World Source: Preqin Private Equity Online Source: Preqin Private Equity Online 3 Private Equity & Venture Capital Spotlight | June 2017 © Preqin Ltd. 2017 / www.preqin.com OVERACHIEVERS: GPS SEEING SUCCESS ON THE ROAD an average of 14 months in market. This Fig. 4: Average Time Spent on the Road by Aggregate Capital Previously Raised, represents a change in the historical trend 2013 - 2017 YTD (As at May 2017) of North America-focused funds spending 100% 25 Months or the shortest amount of time raising 90% 16% 14% 18% More capital. However, North America-focused 33% 80% 14% funds regained the top spot in the first five 19% 15% 19-24 Months months of 2017, with 153 funds closed 70% 17% 60% 13% having spent an average of just nine 20% 15% months on the road, a significantly shorter 50% 13-18 Months 20% period than seen in any region historically 40% 16% 23% 30% – perhaps unsurprising given the majority 30% 6-12 Months (61%) of investors surveyed by Preqin in 17% Proportion of Funds Closed of Funds Proportion 20% 36% December 2016 saw North America as 27% 10% 24% Less than 6 presenting the best opportunities in the 14% Months current market. 0% Less than $500-999mn $1-4.9bn $5bn or More $500mn While private equity funds have been spending less time raising capital in recent Aggregate Capital Raised since 2013 years, the average size of funds entering Source: Preqin Private Equity Online the market has been increasing (Fig. 3). With the exception of Asia-focused funds, Fig. 5: Average Proportion of Target Size Achieved by Aggregate Capital Previously fund sizes stayed relatively level between Raised, 2013 - 2017 YTD (As at May 2017) 2013 and 2015. 2016, however, witnessed 100% 11% a spike in the size of Europe-focused funds. 90% 21% Three of the 10 largest Europe-focused 27% 125% or More 80% 38% private equity funds ever raised closed 25% 70% in 2016: Advent Global Private Equity 101-124% Funds VIII ($13bn), Ardian Secondary 60% 40% 24% 39% Fund VII ($10.8bn) and Apax IX ($9bn). 50% 100% 37% So far in 2017, it is North America- and 40% 50-99% Asia-focused funds that have attracted 30% 20% greater levels of capital than previously 33% 18% Proportion of Funds Closed of Funds Proportion 20% 11% Less than 50% seen. Three North America-focused funds 15% 10% 15% 12% have closed in 2017 so far, having secured 8% 0% 3% 1% 2% over $10bn: Silver Lake Partners V ($15bn), Less than $500-999mn $1-4.9bn $5bn or More KKR Americas Fund XII ($13.9bn) and Vista $500mn Equity Partners Fund VI ($11bn). Aggregate Capital Raised since 2013 Source: Preqin Private Equity Online MANAGER EXPERIENCE Perhaps unsurprisingly, the mega funds mentioned above were all raised by Fig. 6: Average Time Spent on the Road, Target Size Achieved and Average Fund Size by Fund Manager Rank, 2013 - 2017 YTD (As at May 2017) experienced managers, and are the latest funds in their respective, established 126% 116% 115% 112% series. As seen in Figs. 4 and 5, a manager’s 20 19 5 experience, measured by the amount ($bn) Size Fund Average 18 17 of capital raised since 2013, directly 16 4.4 4 correlates to fundraising success. The 14 13 3.6 majority (55%) of managers to have raised 12 3 9 $1bn or more since 2013 have spent an 10 (Months) 8 2 average of 12 months or less on the road, 6 1.7 1.7 compared with 31% of managers that have 4 1 raised less than $500mn.