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National Venture Capital Association YEARBOOK 2016 NATIONAL VENTURE CAPITAL ASSOCIATION INCLUDING STATISTICS FROM THE PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters 2016 National Venture Capital Association Yearbook | 1 March 2016 Dear Reader: We are delighted to present the 19th edition of NVCA’s annual Yearbook, which docu- ments trends and analyses from the past year and summarizes the recent history of the venture capital ecosystem in the United States. Since the very first edition, the ecosystem has evolved and much has changed. One thing that has not changed, however, is NVCA’s commitment to bringing accurate and responsible transparency to this powerful economic force called venture capital. This publication provides commitment, investment, and exit activity data on the ecosys- tem to tell the story and convey the impact of venture capital in the United States. For the entrepreneurial ecosystem, highlights from 2015 include: • Venture capital firms raised $28 billion through 236 funds, 93 of which were new funds; • Nearly $60 billion in venture capital was deployed across 4,380 deals, with more than 1,400 companies receiving venture investment for the first time; • Venture capital investment spanned 133 Metropolitan Statistical Areas across 46 states and the District of Columbia; • Corporate venture groups deployed over $7.7 billion in 930 deals; • Growth equity deals attracted over $20 billion through 460 investments; and • Seventy-seven venture-backed companies went public, raising an aggregate of $9.4 billion. The ecosystem remains robust, covering a vast range of stages, geographies, sectors, and players. Though it continues to evolve, the industry’s goal remains the same: to create fast-growing and sustainable companies and introduce new technologies across a range of sectors, while providing an attractive return to those who trust the industry with their capital. As always, your feedback and suggestions are welcome. Please feel free to contact us at [email protected] or 202.864.5920. Bobby Franklin Maryam Haque NVCA President and CEO NVCA Vice President of Research NVCA THOMSON REUTERS 2 | 2016 National Venture Capital Association Yearbook NVCA BOARD OF DIRECTORS 2015-2016 EXECUTIVE COMMITTEE Jon Callaghan Venky Ganesan Chairman Chairman-Elect True Ventures Menlo Ventures Scott Kupor John Backus Treasurer Secretary Andreessen Horowitz New Atlantic Ventures Maria Cirino Tim Curt At-Large At-Large .406 Ventures Warburg Pincus Ross Jaffe At-Large Versant Ventures AT-LARGE Alexis Borisy Mike Carusi Third Rock Ventures Lighstone Ventures Christy Chin Jeff Clavier Draper Richard Kaplan Foundation Norwest Venture Partners Michael Dixon John Drew Sequoia Capital Technology Crossover Ventures Claudia Fan Munce Jan Garfinkle IBM Venture Capital Group Arboretum Ventures Mark Gorenberg Jason Green Zetta Venture Partners Emergence Capital Partners Jim Healy Mark Leschly Sofinnova Ventures Rho Capital Partners Mary Meeker Kate Mitchell Kleiner, Perkins, Caufield and Byers Scale Venture Partners Ashton Newhall Deepa Pakianathan Greenspring Associates Delphi Ventures Art Pappas Brian Rich Pappas Ventures Catalyst Investors Carmichael Roberts Sue Siegel North Bridge Venture Partners GE Ventures Alberto Yepez Trident Capital THOMSON REUTERS NVCA 2016 National Venture Capital Association Yearbook | 3 2016 National Venture Capital Association Yearbook For the National Venture Capital Association Prepared by Buyouts Insider Copyright 2016 Thomson Reuters The information presented in this report has been gathered with the utmost care from sources believed to be reliable, but is not guaranteed. Buyouts Insider disclaims any liability, including incidental or consequential damages arising from errors or omissions in this report. NVCA THOMSON REUTERS 4 | 2016 National Venture Capital Association Yearbook National Venture Capital Association 2016 Yearbook National Venture Capital Association Thomson Reuters Buyouts Insider 25 Massachusetts Avenue NW, Suite 730 3 Times Square 9 East 38th St. Washington, DC 20001 New York, NY 10036 11th Floor Telephone: 202-864-5920 (646) 223-4000 New York, NY 10016 Fax: 202-864-5930 www.thomsonreuters.com (646) 356-4509 www.nvca.org www.buyoutsinsider.com Global Head of Contributions President and CEO Stephen N. Case II President Bobby Franklin Jim Beecher Head of Deals and [email protected] Vice President of Administration Private Equity Operations (646) 356-4501 Roberta Catucci Katarzyna Namiesnik Executive Editor Vice President of Government Affairs Team Leader for Private Equity David Toll Jeff Farrah Adrian Carlos Manipol Avellanosa [email protected] Vice President of Government Affairs Director of Deals Intelligence VCJ Editor Justin Field Matthew Toole Alastair Goldfisher [email protected] Vice President of Research Senior Content Specialist Maryam Haque Michael D. Smith Graphic Designer Allison Brown Vice President of Development Senior Content Specialist Jessica Straus Paul Pantalla Creative Director Janet Yuen-Paldino Vice President of Communications and Marketing Content Specialist Ben Veghte Francis S. Tan Buyouts Insider Sales Robert Raidt Director of Conferences and Events Senior Analyst [email protected] Allyson Chappell Angellyn Ko (646) 356-4502 Director of Business Development and Marketing Contributor Relations Hannah Veith Donald Fleurantin Coordinator of Public Affairs ThomsonONE.com Sales: Hannah Eckstein 1-877-365-1455 THOMSON REUTERS NVCA 2016 National Venture Capital Association Yearbook | 5 TABLE OF CONTENTS What is Venture Capital? ..................................................................6 Executive Summary.. .9 Industry Resources . ............................ 16 Methodology . ..................... .. 16 Capital Commitments . .................... 22 Methodology . .................................................... .22 Investments.. .. .. .26 Methodology . ......................................... .26 Exits: IPOs and M&As . .. ............................................... .62 Methodology . .......................................... .62 Growth Equity Investments . ................................... .77 Methodology . ......................................... .77 Appendix A: Glossary. ............................................. 83 Appendix B: MoneyTree Report Criteria . ......................................... .96 Appendix C: MoneyTree Geographical Definitions . .................................. .97 Appendix D: Industry Codes (VEICs). ................................... 98 Appendix E: Industry Sector VEIC Ranges . .. ................................ .102 Appendix F: Stage Definitions . .. ............................. .104 Appendix G: Data Sources and Resources. .. ........................... 106 Appendix H: International Convergence. ........................... .108 Appendix I: US Accounting Rulemaking and Valuation Guidelines . .. ..................... .110 Appendix J: Non-US Private Equity . ........................................................113 NVCA THOMSON REUTERS 6 | 2016 National Venture Capital Association Yearbook WHAT IS VENTURE CAPITAL? Venture capital has enabled the United States to support its entre- Five Largest Public Companies by Market Capitalization1 preneurial talent and appetite by turning ideas and basic science into products and services that are the envy of the world. Venture capital Rank Company VC- Market Employees backed? Capitalization ($B) funds build companies from the simplest form – perhaps just the en- trepreneur and an idea expressed as a business plan – to freestanding, 1 Apple Yes 646 93,000 mature organizations. 2 Google Yes 449 54,000 3 Berkshire Hathaway 356 316,000 Risk Capital for Business 4 Microsoft Yes 351 128,000 Venture capital firms are professional, institutional managers of 5 Exxon Mobil 314 75,000 risk capital that enable and support the most innovative and promising companies. This money funds new ideas that could not be financed Note: Market capitalization and number of employees are from Thomson One as of August 28, 2015. with traditional bank financing, that threaten established products and services in a corporation, and that typically require five to eight years team is common. This limits the number of startups in which any one to reach maturity. Venture capital is quite unique as an institutional fund can invest. Few entrepreneurs approaching venture capital firms investor asset class. When an investment is made in a company, it is for money are aware that they essentially are asking for 1/6 of a person! an equity investment in a company whose stock is essentially illiquid Yet that active engagement is critical to the success of the fledgling and worthless until a company matures five to eight years down the company. Many one- and two-person companies have received fund- road. Follow-on investment provides additional funding as the com- ing, but no one- or two-person company has ever gone public! Along pany grows. These “rounds,” typically occurring every year or two, are the way, talent must be recruited and the company scaled up. Ask any also equity investment, with the shares allocated among the investors venture capitalist who has had an ultra-successful investment and he and management team based on an agreed “valuation.” But, unless a or she will tell you that the company that broke through the gravity company is acquired or goes public, there is little actual value. Venture evolved from the original business plan concept with the
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