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PREQIN AND FIRST REPUBLIC UPDATE: US IN Q1 2019 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

CONTENTS

3 Foreword 4 Deals & Exits 7 Fundraising 10 Funds in Market 12 Micro Venture Capital 15 Performance 17 Fund Managers 19

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 April 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.

All rights reserved. The entire contents of Preqin and First Republic Update: US Venture Capital in Q1 2019 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 Update: US Venture Capital in Q1 2019 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 Update: US Venture Capital in Q1 2019. 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 Update: US Venture Capital in Q1 2019 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 Update: US Venture Capital in Q1 2019 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.

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FOREWORD

ollowing a record 2018, venture capital activity in the US is off to a robust start: in the first quarter of 2019, 1,026 deals were completed for an aggregate $28bn, up from $19bn in Q1 2018. Continuing Fthe trend of mega-rounds, the top five deals of the quarter accounted for $6.2bn, or 22% of the total amount of venture capital invested.

Some of this quarter’s highlights include: ■■ Early-stage (Series A and earlier) MIKE SELFRIDGE accounted for 49% of venture capital deals and Chief Banking Officer, First Republic Bank secured 20% of the aggregate capital invested in Q1 2019, and Series B investments constituted 23% of capital invested. Software represented ■■ The 10 largest US-based venture capital fund 36% of deals and 28% of deal value, making it the managers have raised $73bn over the past 10 most active industry for US-based venture capital years. Although the top 10 US fund managers investment in the quarter. cover a range of investment stages, only Sequoia ■■ As of the end of Q1 2019, there were 129 exits Capital and Bessemer Venture Partners have valued at an aggregate $18bn, led by exits for seed-stage-focused funds. Lyft, Auris Health and SendGrid. Ten venture ■■ Six of the most active investors in US venture capital-backed companies went public in Q1 2019 capital are pension funds, led by – and with the IPO window opening, many more Employees’ Retirement System which has 65 companies are expected to file in 2019. known commitments to vintage 2009-2019 ■■ A record 405 US-based venture capital funds venture capital funds. The largest proportion closed in 2018, raising $46bn. Based on Q1 of investors active in US-based micro venture 2019’s fundraising statistics, 2019 is expected capital funds, however, are to be an equally strong year, and 96 funds have managers and family offices. brought in an aggregate $12bn so far. ■■ Marking a 22% increase from a year ago, there are a record 952 US-based venture capital funds in market at the start of Q2 2019, seeking an aggregate $89bn. Thirty-six percent of these funds are being raised by first-time managers and target $22bn. ■■ The first quarter of 2019 alone recorded more micro venture capital fund closures than in 2009 (63 vs. 64 respectively), and four of the top seven performing US-based venture capital funds are micro vehicles. In 2018, 63% of the micro funds closed had managers with prior institutional investing experience, and in Q1 2019 that figure was up to 72% – though, it is worth noting that this number includes managers that raised a prior fund under the same brand (Fund II or later).

3 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

DEALS & EXITS

ollowing a record 2018, venture capital activity (Fig. 2). Software was the most active industry for in the US got off to a positive start in 2019: US-based venture capital investment in the quarter, 1,026 deals were completed for an aggregate representing 36% of deals and 28% of deal value. $28bn in Q1 2019 (Fig. 1), up from $19bn in Q1 2018, and the top five deals of the quarter In Q1 2019, there were 129 venture capital-backed Faccounted for 22% ($6.2bn) of the total amount exits for US-based companies, valued at an aggregate of venture capital invested in US-based portfolio $18bn (Fig. 5). The number of exits in Q1 2019 has companies. declined compared to the same period last year (146); however, the aggregate exit value has increased Early-stage investments (Series A and earlier) compared to the exit value seen in Q1 2018 ($12bn). accounted for 49% of venture capital deals in the US in Q1 2019 and 20% of capital invested, and Series As seen in previous periods, trade sales were the B investments constituted 23% of capital invested most common exit type in Q1 2019: they accounted

Fig. 1: Venture Capital Deals* for US-Based Companies, 2009 - Q1 2019

8,000 120

7,000 6,434 6,725 Aggregate Deal Value ($bn) 6,054 6,173 100 6,000 5,361 5,104 5,272 5,056 80 5,000 4,189 4,000 3,503 60

No. of Deals 3,000 40 2,000 1,026 1,000 20 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019

No. of Deals Aggregate Deal Value ($bn)

Source: Preqin Pro

Fig. 2: Venture Capital Deals for US-Based Companies in Q1 2019 by Stage

40% 32% 30% 26% No. of Deals 23% 23% 20% 17% 16% 13% Aggregate 9% 9% Deal Value Proportion of Total 10% 7% 7%6% 3% 2%3% 4% 1%0% 0%0% 0% PIPE Grant Angel/Seed Expansion and Later Venture 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, and secondary purchases.

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for 81% of all venture capital-backed exits of US-based Fig. 3: Venture Capital Deals* for US-Based portfolio companies, as well as eight of the 10 largest Companies in Q1 2019 by Industry exits for an aggregate $9.8bn, which was led by the 40% $3.4bn trade sale of Auris Health, Inc. to Ethicon, Inc. 30%

Ten venture capital IPOs took place in Q1 2019; 20% headlining these was the much-anticipated IPO for 10% Lyft, Inc. for $2.34bn, the third largest exit of the Proportion of Total 0% quarter (Fig. 6). Other Internet Other IT Other Telecoms Industrials Healthcare BusinessServices FoodAgriculture & SoftwareRelated& ConsumerDiscretionary No. of Deals Aggregate Deal Value

Source: Preqin Pro

Fig. 4: Largest Venture Capital Deals* for US-Based Companies in Q1 2019

Portfolio Deal Deal Size Total Known Primary Company Stage Date (mn) Funding (mn) (s) Industry WeWork Companies Hotels and Unspecified Round Jan-19 2,000 USD 7,486 USD SoftBank Inc.** Offices Government of Rwanda, Grupo Salinas, OneWeb LLC Unspecified Round Mar-19 1,250 USD 3,400 USD Internet Qualcomm Ventures, SoftBank Cherubic Ventures, DST Global, Founders Fund, SB Flexport, Inc. Unspecified Round Feb-19 1,000 USD 1,302 USD Software Investment Advisers, SF Express, Susa Ventures Verily Life Sciences Unspecified Round Jan-19 1,000 USD 1,800 USD Ontario Teachers' Pension Plan, Silver Lake Healthcare IT LLC Nuro, Inc. Unspecified Round Feb-19 940 USD 1,032 USD SB Investment Advisers High-Tech .com, Inc., Geodesic Capital, Greylock Aurora Innovation, Partners, , Lightspeed Venture Series B/Round 2 Feb-19 530 USD 623 USD High-Tech Inc. Partners, Reinvent, , Shell Ventures, T Rowe Price Clover Health Inc. Series E/Round 5 Jan-19 500 USD 825 USD Greenoaks Capital Software , Dragoneer Investment DoorDash, Inc. Series F/Round 6 Feb-19 400 USD 1,372 USD Group, DST Global, GIC, SB Investment Advisers, Internet Sequoia Capital, Temasek Holdings, Alphabet, Andreessen Horowitz, Ventures, Bling Capital, Coatue Management, Neutron Holdings, DCM, Fidelity Investments, Ventures, FJ Series D/Round 4 Feb-19 310 USD 777 USD Telecoms Inc. Labs, GGV Capital, GIC, GR Capital, GSV Capital, GV, Institutional Venture Partners, St. Augustine Capital Partners Clear Creek Unspecified Round Jan-19 300 USD 300 USD EnCap Flatrock Midstream Oil & Gas Midstream Source: Preqin Pro * Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases. ** Softbank is a recurring investor in WeWork Companies. The capital invested by Softbank did not come from its ‘Vision’ fund. US-based investor

5 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

Fig. 5: Venture Capital-Backed Exits of US-Based Companies by Type, 2009 - Q1 2019

1,200 100 Aggregate Exit Value ($bn) 1,000 80 800 60 600 40 No. of Exits 400

200 20

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019

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

Source: Preqin Pro

Fig. 6: Largest Venture Capital-Backed Exits of US-Based Companies in Q1 2019

Initial Total Known Exit Portfolio Investment Funding Exit Exit Acquiror Value Primary Company Date Investors (Entry) (mn) Type Date (Exit) (mn) Industry Coatue Management, , Highland Capital, Highland Capital Partners, Auris Health, Management, Mithril Capital Management, NaviMed Trade Jun-09 783 USD Feb-19 Ethicon, Inc. 3,400 USD Healthcare Inc. Capital, Partner Fund Management, Section 32, Sale Senator Investment Group, , Wellington Management 500 Startups, , Bessemer SendGrid, Venture Partners, Founders Fund, Foundry Group, Trade Aug-09 80 USD Jan-19 Twilio, Inc. 3,000 USD Software Inc. Highway 12 Ventures, TechStars, Techstars Ventures, Sale AB, Alibaba Group, Andreessen Horowitz, AutoTech Ventures, Baillie Gifford, CapitalG, Chromo Invest, Coatue Management, Didi Chuxing, , Fidelity Management & Research Company, Flat World Partners, Floodgate, Fontinalis Partners, Fortress Investment Group, Founders Fund, General Motors, Glade Brook Capital Partners, Graphene Lyft, Inc. Jul-08 Ventures, Icahn Enterprises, InMotion Ventures, 4,913 USD IPO Mar-19 - 2,340 USD Telecoms Janus Capital Group, K9 Ventures, Kingdom Holding Company, KKR, Machine Shop Ventures, Magna International, , , Ooga Labs, Public Sector Pension Investment Board, Rakuten, Inc., Senator Investment Group, SharesPost, Tencent, Third Point Management, UTA Capital Certify, Inc./ Chrome River Argentum, Argentum Group, Bain Capital Ventures, Chrome River Technologies, May-12 152 USD Merger Mar-19 1,000 USD Software First Analysis, Great Hill Partners Technologies, Inc. Inc. Nginx e.ventures, Merchant Banking Trade Software, Oct-11 Division, Index Ventures, MSD Capital, New 84 USD Mar-19 F5 Networks 670 USD Software Sale Inc. Enterprise Associates, Runa Capital, Telstra Ventures Source: Preqin Pro

US-based investor/acquiror

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FUNDRAISING

record 405 US-based venture capital funds many of which raise multiple funds concurrently closed in 2018, raising an aggregate $46bn. instead of one large, flagship vehicle. For example, Based on Q1 2019’s fundraising statistics, closed Accel Growth Fund V in Q1 2019 in 2019 is poised to be an equally strong year, addition to its two venture capital funds, Accel XIV and with 96 funds bringing in an aggregate $12bn Accel Leaders Fund II, securing a total $2.5bn. Ain the first quarter (Fig. 7). US-based venture capital funds spent around 17 Technology Crossover Ventures was the only US- months in market in 2018, which is generally average based venture capital firm to close a mega fund* in for venture capital fundraising over the past decade Q1 2019 (Fig. 8). Despite this, the 10 largest funds (Fig. 10). Managers have successfully planned their closed were all raised by experienced managers, fundraising strategies: the average fund achieved

Fig. 7: Annual US-Based Venture Capital Fundraising, 2009 - Q1 2019

500 50 Aggregate Capital Raised ($bn) 405 400 374 360 40

300 282 291 30 212 200 125 172 20 119 130

No. of Funds Closed 96 100 10

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 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 Q1 2019

Fund Firm Fund Size (mn) Fund Type Geographic Focus Technology Crossover Ventures X Technology Crossover Ventures 3,000 USD Expansion/Late Stage , North America, US Special Opportunities Flagship Pioneering 824 USD Venture Capital (General) US Fund II Kleiner Perkins Caufield & Byers XVIII 600 USD Early Stage US Caufield & Byers Accel XIV Accel 525 USD Early Stage US Accel Leaders Fund II Accel 500 USD Venture Capital (General) Global, US Eclipse Ventures Fund III Eclipse Ventures 500 USD Early Stage US The Inflection Fund 500 USD Expansion/Late Stage US MPM BioVentures 2018 MPM Capital 400 USD Venture Capital (General) Global, US Lightspeed China Partners IV Lightspeed Venture Partners 360 USD Venture Capital (General) China 5AM Ventures VI 5AM Ventures 350 USD Seed US Source: Preqin Pro

* Preqin defines ‘mega funds’ as vehicles that secure $1bn or more.

7 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

101% of its targeted amount in 2018, and 99-102% of Fund ($500mn), two of the largest funds closed in the its target each year since 2014. quarter.

Venture capital funds focused on seed investments Almost all (95% of) US-based venture capital funds are the least common, with only 10% of funds closed closed in the past three months are focused on in Q1 2019 dedicated to this investment stage (Fig. domestic investments (Fig. 12); however, veteran 11). Meanwhile, only five expansion-stage funds manager Lightspeed Venture Partners closed a managed to secure a third of all capital raised in the set of China-focused funds bringing in $560mn, first quarter, thanks to the closure of Technology representing a significant portion of the capital raised Crossover Ventures X ($3.0bn) and The Inflection to invest abroad.

Fig. 9: US-Based Venture Capital Funds Closed by Size, 2009 - Q1 2019

100% $1bn or More 80% $500-999mn

60% $250-499mn

40% $100-249mn

$50-99mn Proportion of Funds Closed 20% Less than $50mn 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Year of Final Close Source: Preqin Pro

Fig. 10: US-Based Venture Capital Fundraising Success, 2009 - 2018 25 120% Average Proportion of Target Size 20 20 20 100% 17 17 19 17 16 80% 14 14 Achieved 15 12 60% 10 40% 5 20%

Average 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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Fig. 11: US-Based Venture Capital Fundraising in Q1 2019 by Strategy

50 3.7 3.7 4 45 Aggregate Capital Raised ($bn) 3.3 40 3 32 30 2 20

No. of Funds Closed 9 0.7 1 10 5

0 0 Seed Early Stage Expansion/Late Stage Venture Capital (General)

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

Source: Preqin Pro

Fig. 12: US-Based Venture Capital Funds Closed in Q1 2019 by Primary Geographic Focus

EUROPE 0%

95% 2%

1% ASIA NORTH AMERICA MIDDLE EAST & ISRAEL

1%

AFRICA

1%

AUSTRALASIA

Source: Preqin Pro

9 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

FUNDS IN MARKET

arking a 22% increase from this time last Eleven funds in market are mega funds targeting $1bn year, there are a record 952 US-based or more, comprising 26% of the total capital sought venture capital funds in market in April by all US-based venture capital funds on the road. At 2019 seeking an aggregate $89bn (Fig. the head of these mega funds is the newly announced 13). Thirty-six percent of these funds are SoftBank Innovation Fund, which is poised to break Mbeing raised by first-time managers and are targeting the record for the largest US-headquartered venture a total of $22bn, a slight decrease from the proportion capital fund ever raised with a target of $5bn (Fig. 16). of first-time funds one year ago when 39% of all US- If SoftBank reaches its target, it would dethrone Tiger based venture capital funds sought $17bn. Global Private Investment Partners XI which raised $3.8bn in Q4 2018.

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

1,000 952 100 Aggregate Capital Targeted ($bn) 780 800 80

600 563 60 475 400 303 347 40 229 No. of Funds Raising 175 162 183 200 141 20

0 0 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19

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

Source: Preqin Pro

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

500 60 429 Aggregate Capital Targeted ($bn) 48.5 400 373 50 40 300 24.5 30 200 20 11.9 No. of Funds Raising 97 100 4.4 53 10 0 0 Seed Early Stage Expansion/Late Stage Venture Capital (General)

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

Source: Preqin Pro. Data as of April 2019

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Funds taking a stage-agnostic investment approach While US-based venture capital funds continue to are dominating the fundraising market: 373 vehicles primarily focus on domestic investments, large funds are targeting an aggregate $49bn, 54% of the total such as SoftBank Innovation Fund and The Rise capital sought (Fig. 14). The current pool of funds in Fund II, which concentrate on opportunities in Latin market has an average fund size of $115mn – a 12% America and emerging markets respectively, are increase from April 2018 ($103mn). raising the profile of emerging markets investment in the venture capital industry.

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

879 900 73.6 80 Aggregate Capital Targeted ($bn) 800 70 700 60 600 50 500 40 400 300 30 No. of Funds Raising 20 200 9.9 4.6 100 11 1.1 35 27 10 0 0 North America Europe Asia Rest of World No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Pro. Data as of April 2019

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

Fund Firm Target Size (mn) Fund Type Geographic Focus Argentina, Brazil, Central SoftBank Innovation Fund Softbank Latin America Ventures 5,000 USD Venture Capital (General) America, Chile, Colombia, Mexico, South America New Enterprise Associates 17 New Enterprise Associates 3,600 USD Venture Capital (General) US Emerging Markets, The Rise Fund II TPG 3,500 USD Venture Capital (General) North Africa, South Asia Asia, Europe, Global, North Deerfield Private Design Fund IV Deerfield Management 2,500 USD Venture Capital (General) America NovaQuest Pharma Opportunities Fund V NovaQuest Capital Management 1,500 USD Venture Capital (General) Europe, US Vivo Capital Fund IX Vivo Capital 1,500 USD Expansion/Late Stage China, US Sequoia Capital China Yuan Fund Sequoia Capital 10,000 CNY Venture Capital (General) China Vy Capital Holdings Vy Capital 1,200 USD Venture Capital (General) US VI Khosla Ventures 1,000 USD Venture Capital (General) US Europe, North America, OrbiMed Private Investments VII OrbiMed Advisors 1,000 USD Venture Capital (General) US, West Europe Y Combinator Continuity Affiliates Fund I Y Combinator 1,000 USD Expansion/Late Stage US Source: Preqin Pro. Data as at April 2019

11 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

MICRO VENTURE CAPITAL

ver the past decade, US-based micro A trend is visible among the micro venture capital venture capital funds (those worth less funds closing each year, whereby experienced than $100mn) have gained traction in managers are raising these vehicles more often than the market. In addition to the increasing first-time managers looking to make a name for number of micro venture capital funds themselves. Among funds closed in 2011, the split Oreaching a final close, the aggregate capital secured between micro funds that were raised by experienced by these funds has steadily risen each year, reaching and first-time managers was an even 50% – but in a record $7.4bn across 268 vehicles in 2018 (Fig. 17). 2018, 63% of micro funds closed were managed by In the first quarter of 2019 alone, 64 micro venture experienced firms, and in Q1 2019 that figure was capital funds closed, neatly surpassing the 63 micro up to 72%. This shows that there is a clear place for venture funds closed during the entirety of 2009. smaller funds within the offerings of larger venture capital fund managers.

Fig. 17: Annual US-Based Micro Venture Capital Fundraising, 2009 - Q1 2019

300 268 10 Aggregate Capital Raised ($bn) 246 240 250 8 200 189 175 145 6 150 105 4 100 63 71 74 64 No. of Funds Closed 50 2 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Year of Final Close No. of Funds Closed Aggregate Capital Raised ($bn)

Source: Preqin Pro

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

30 120% Average Proportion of Target Size 100% 20 19 20 19

20 80% Achieved 18 17 17 16 16 14 60% 10 40% 20%

Average 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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Early-stage funds, including seed funds, account (Fig. 22). Managed by CRCM Ventures, the fund for 64% of US-based micro venture capital funds in implements a diversified approach and, like seven of market and 66% of targeted capital. General venture the top 10 performing US-based micro venture capital capital investing follows, with 199 vehicles in the funds, targets early-stage investments. market target an aggregate $9.1bn (Fig. 20). North America is the targeted destination for the majority (76%) of US-based micro venture capital funds on the road, followed by Asia (14%, Fig. 21).

With a net IRR of 129.0%, CRCM Opportunity Fund is the current top performing US-based micro venture capital fund over the 2008-2016 vintage range

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

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

13 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

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

11.9 600 557 25 30 12 Aggregate Capital Targeted ($bn) 22.1 Aggregate Capital Targeted ($bn) 303 500 300 9.1 10 20 20 . 400 199 15 200 300 10 10 4 200 100 0

No. of Funds Raising No. of Funds Raising 4.1 2 100 5 0 10. 2.2 5 19 16 0.9 0 0 0 0 Seed Early Stage Expansion/ Venture North Europe Asia Rest of World Late Stage Capital America General No. of Funds Raising Aggregate Capital Targeted bn No. of Funds Raising Aggregate Capital Targeted ($bn)

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

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

Fund Size Geographic Net IRR Date Fund Firm Vintage (mn) Fund Type Focus (%) Reported Diversified CRCM Opportunity Fund CRCM Ventures 2013 38 USD Early Stage: Start-up 129.0 31-Dec-18 Multi-Regional Foresite Capital Fund I Foresite Capital 2012 100 USD Expansion/Late Stage US 66.5 31-Mar-18 Vertical Venture Vertical Venture Partners Fund I 2014 51 USD Early Stage: Start-up US 65.8 30-Sep-18 Partners Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed US 58.7 31-Dec-16 IA Venture Strategies Fund I IA Ventures 2010 50 USD Early Stage US 51.0 30-Sep-18 Social Leverage Venture Capital Social Leverage Capital Fund II 2015 20 USD US 48.4 31-Dec-18 Capital (General) Cottonwood Cottonwood Technology Fund I 2010 20 USD Early Stage: Start-up US 46.0 31-Dec-18 Technology Fund Brightstone Venture Venture Capital Brightstone Venture Capital Fund 2013 20 USD US 45.0 30-Sep-18 Capital (General) Cervin Ventures II Opportunities Cervin Ventures 2016 14 USD Early Stage US 43.5 30-Sep-18 Fund 500 Durians II 500 Startups 2016 27 USD Early Stage: Seed Asia 43.1 30-Jun-18 Source: Preqin Pro

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PERFORMANCE

t has been a very strong decade of performance US-based venture capital funds have performed for US venture capital funds, and the home-run- well over the vintage range displayed in Fig. 23, hitting nature of the asset class means that strong consistently posting double-digit median net IRRs performance is clear at the very top. Column from vintage 2010 through 2016. This is a strong Group II leads the way for vintage 2008-2016 bounceback for the asset class since the Global IUS-based venture capital funds, with a substantial Financial Crisis, with five of the available seven vintage net IRR of 408.0% (Fig. 25). The early-stage fund years from 2010 onwards posting median IRRs targets investments in the biotechnology industry upwards of 15%. and received commitments from Hartford HealthCare Pension and Endowment Fund, Regents of the As a result of strong performance, venture capital University of California and Texas County & District managers have rewarded their investors with great Retirement System. liquidity over the past few years. In fact, US-based managers distributed a record $57bn in 2016, having Returns in the venture capital industry typically range called up only $38bn over the same period (Fig. 24). far across the size spectrum. Among the top seven This marks one of seven years since 2007 in which performing US-based venture capital funds, four are venture capital has returned a positive cash flow to its micro venture capital, three are early-stage vehicles investors, with average distributions of $34bn to LPs and one targets late-stage investments. each year since 2010.

Fig. 23: US-Based Venture Capital Funds: Median Net IRRs and Quartile Boundaries by 40%

30%

20%

10%

Net IRR since Inception 0%

-10% 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

15 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

Fig. 24: US-Based Venture Capital Funds: Annual Amount Called up, Distributed and Net Cash Flow, 2007 - H1 2018

60 57 50 44 39 38 40 36 36 34 34 31 28 29 27 30 30 26 25 23 25 23 25 23 21 23 20 20 12 10 0 -10 -20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 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 Date Fund Firm Vintage (mn) Fund Type 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 129.0 31-Dec-18 Multi-Regional Foresite Capital Fund I Foresite Capital 2012 100 USD Expansion/Late Stage US 66.5 31-Mar-18 Vertical Venture Vertical Venture Partners Fund I 2014 51 USD Early Stage: Start-up US 65.8 30-Sep-18 Partners Venture Capital DCM Hybrid RMB Fund DCM 2011 150 USD Asia 65.4 30-Jun-18 (General) Venture Capital DCM Ventures China Fund (DCM VII) DCM 2014 330 USD Asia 62.6 30-Jun-18 (General) Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed US 58.7 31-Dec-16 Venture Capital Flagship Ventures Fund IV Flagship Pioneering 2010 269 USD US 56.4 31-Dec-17 (General) Venture Capital OrbiMed Private Investments V OrbiMed Advisors 2013 735 USD US 56.1 30-Sep-18 (General) Spark Capital II Spark Capital 2008 360 USD Early Stage: Start-up US 51.6 30-Sep-18 Source: Preqin Pro

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FUND MANAGERS

he 10 largest US-based venture capital fund quarterly funding these funds have ever received, four managers have collectively raised $73bn over percentage points greater than the 2% recorded in the past 10 years (Fig. 24); eight of these fund 2014. US-based seed fundraising, the smallest capital managers are based in California and two are market share, has raised $10bn over the past 10 years headquartered in New York. A new entry to – a fraction of the $148bn that general venture capital Tthis elite list is Technology Crossover Ventures, which funds have amassed since 2009. leapt into seventh position thanks to its $3bn close on Technology Crossover Ventures X in January 2019. New York-based is estimated to hold the largest amount of dry powder Although the top 10 US fund managers cover a ($4.3bn) of all US-based venture capital firms (Fig. 27). range of investment stages, only Sequoia Capital and The firm invests in both public and private markets Bessemer Venture Partners have seed-stage-focused across the globe, with its venture capital exploits funds. This disparity is reflected in the aggregate focused on early-stage and growth investments capital raised in Q1 2019: just 6% of the $12bn raised across a range of sectors. In total, the top 10 firms is for seed investments, while the remaining 93% of account for over $28bn of venture capital dry powder capital is divided nearly equally among fundraising for as of April 2019. early stage ($3.8bn), expansion ($3.7bn) and general venture capital ($3.8bn, Fig. 28). The $0.7bn raised for US-based venture capital firms owned by women seed funds in Q1 2019 marks the largest proportion of have raised $10bn over the past decade, $637mn

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 Raised in Last 10 Estimated Dry Firm Headquarters Years ($bn) Firm Headquarters Powder ($bn) Tiger Global Management New York, NY 13.0 Tiger Global Management New York, NY 4.3 Technology Crossover New Enterprise Associates Menlo Park, CA 11.5 Menlo Park, CA 4.3 Ventures Sequoia Capital Menlo Park, CA 10.2 Sequoia Capital Menlo Park, CA 3.6 Andreessen Horowitz Menlo Park, CA 6.5 Apple Advanced Kleiner Perkins Caufield Cupertino, CA 2.9 Menlo Park, CA 6.1 Fund & Byers Lightspeed Venture Partners Menlo Park, CA 2.7 Lightspeed Venture Partners Menlo Park, CA 5.9 New Enterprise Associates Menlo Park, CA 2.3 Technology Crossover Menlo Park, CA 5.5 Ventures Accel Palo Alto, CA 2.2 Bessemer Venture Partners Larchmont, NY 5.1 GGV Capital Menlo Park, CA 2.0 Accel Palo Alto, CA 4.9 Bessemer Venture Partners Larchmont, NY 1.9 GGV Capital Menlo Park, CA 4.7 Palo Alto, CA 1.8 Source: Preqin Pro Source: Preqin Pro

17 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

of which is seed-stage capital. The top 10 US-based, expansion-stage fund currently on the road managed women-owned firms have raised $6.6bn of the $10bn by a women-owned firm, Pear VC’s Pear Ventures raised by such firms (Fig. 29), primarily through multi- I Expansion, no women-owned firm has closed an stage and early stage strategies. expansion-stage fund since StarVest Partners II’s $244mn close in 2009. Expansion/late-stage funding reveals a gap not seen in the overall market. Although there is one

Fig. 28: Aggregate Capital Raised by US-Based Venture Capital Fund Managers by Strategy in Q1 2019

4.0 3.8 3.7 3.8 3.5 3.0 2.5 2.0 1.5 1.0 0.7 Aggregate Capital Raised ($bn) 0.5 0.0 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

Firm Headquarters Total Funds Raised in Last 10 Years ($mn) Foster City, CA 1,290 Oak HC/FT Partners Greenwich, CT 1,100 Partners New York, NY 799 Forerunner Ventures San Francisco, 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 , MA 392 Floodgate Palo Alto, CA 356 Source: Preqin Pro

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INVESTORS

ix of the most active investors in US venture followed by private sector (14%) and public pension capital are pension funds, led by San funds (13%, Fig. 32). Francisco Employees’ Retirement System which has 65 known commitments to vintage As in Q4 2018, the majority (79%) of investors in 2009-2019 venture capital funds (Fig. 30). US-based venture capital funds are located in North SThe largest proportion of investors active in US- America (Fig. 31), which is no surprise given the based micro venture capital funds, however, are historical preference for domestic venture capital private equity fund of funds managers – tied with managers among investors based in the region. This eight known commitments, Cendana Capital and is followed by Europe (10%), Asia (9%) and Rest of Industry Ventures are the largest. Of all investor types World (2%). The majority (70%) of investors in US- with known commitments to US venture capital, based venture capital have less than $10bn in assets foundations make up 19% of all investors and fund of under management, with only 6% managing $100bn funds managers just 8%. or more (Fig. 33). US-based venture capital firms continue to attract larger and more sophisticated Over 15 different LP types commit to US-based investors compared to managers in other regions, venture capital funds of vintages 2009-2019; reinforcing the strong preference for the market in foundations account for the largest proportion (19%), North America.

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 65 No MetLife Insurance Company Insurance Company 53 Yes Texas County & District Retirement System Public Pension Fund 50 No Retirement Plans of Duke University Private Sector Pension Fund 49 No University of Texas Investment Management Company Endowment Plan 48 No University of Michigan Endowment Endowment Plan 46 No Corporation 46 Yes Liberty Mutual Retirement Benefit Plan Private Sector Pension Fund 44 No Los Angeles Fire and Police Pension System Public Pension Fund 42 No Sherman Fairchild Foundation Foundation 40 No Industry Pension Insurance Private Sector Pension Fund 40 No Source: Preqin Pro

19 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2019

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% 19% 20%

15% 14% 13% 9% 10% 8% 8% 8% 7% 8% 4%

Proportion of Investors 5% 3%

0% Other Company Agency Insurance Fund Company Investment Foundation Managers Government Private Sector Pension Fund Fund of Funds Public Pension Endowment Plan Corporate Investor Corporate Private Equity Firm Source: Preqin Pro

Fig. 33: Investors in US-Based Venture Capital Funds by (Vintages 2009-2018)

40% 37%

30% 24%

20% 18%

Proportion of Investors 9% 10% 6% 6%

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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