PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 In association with PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 FOREWORD ith this report, the New England Venture Capital Association (NEVCA) is thrilled to welcome Preqin as our 2018 Data Partner. While WNEVCA quarterly reports have traditionally examined general regional activity with an eye toward portfolio-related data, Preqin’s depth of information and expertise in both the fund performance and LP space enables a new approach. This report, and subsequent 2018 quarterly publications, will feature a tighter focus on fund performance, investor activity and fundraising, with sector-specific breakouts and highlights. The return of NEVCA quarterly reports is a component of a larger organizational initiative to bring awareness to the scale and success of the regional venture capital industry, while also providing meaningful insight for those within the ecosystem. Some initial takeaways from the data: ■ New England skews Seed, with 31% of funds closed in the past decade raising under $100mn. ■ New England fundraises above weight class, accounting for nearly a quarter of national venture capital commitments since 2007. ■ And appetite is growing, with a record 70 firms currently fundraising (in stark contrast to the 10-year average of 40). ■ Continuing trend: cash invested on the rise as deal counts fall. While each of the above bullets is expounded upon in the following report, there is a wealth of data yet to be leveraged. As you read further, consider areas to expand: What additional data would be useful? Is anything extraneous? What components should be further developed? Your feedback is welcome! Sincerely, Jody Rose President, New England Venture Capital Association PREQIN’S VENTURE CAPITAL DATA AND INTELLIGENCE Preqin tracks all aspects of the venture capital industry, with comprehensive data on institutional investors, fundraising, fund managers, fund terms and conditions, fund performance, deals and exits, service providers and more. Our dedicated teams of analysts are strategically placed in key industry centres across the globe, ensuring our venture capital data is up to date and of the highest quality. Preqin’s platform can be used to: ■ Identify potential LPs for funds and as a powerful investor relations and fund marketing tool. ■ Conduct market analysis and track industry trends. ■ Carry out competitor analysis. ■ Conduct due diligence, with net-to-LP returns showing how well individual fund managers have performed over time. Get in touch today to find out how Preqin’s venture capital data can help you: www.preqin.com/venturecapital All rights reserved. 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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 NEVCA Update: New England Venture Capital in 2017 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. 2018 / www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/NEVCA17 CONTENTS p4 Fundraising p6 Funds in Market p8 Fund Managers p10 Deals p12 In Focus: Healthcare p14 Exits p15 Performance p16 Investors DEFINITIONS EARLY STAGE: SEED Allows a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing. EARLY STAGE Start-up - Supports a non-commercial company’s product development and marketing. EXPANSION/LATE STAGE Invests in companies towards the end of the venture stage cycle. Provides capital injections for expansion into a position of stable profit streams. GENERALIST Provides capital to new or growing businesses with perceived, long-term growth potential. KEY FACTS $7.1bn 70 $73bn was invested in New England-based New England-based venture capital has been raised by New England- portfolio companies in 2017. funds are currently in market based venture capital managers (As at April 2018). in the past 10 years. 3 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 FUNDRAISING 2017 was a successful year for New Fig. 1: Annual Venture Capital Fundraising: All US- vs. New England-Based Firms, England-based venture capital fundraising: 2008 - 2017 42 funds reached a final close, raising 350 50 Aggregate Capital Raised ($bn) a record $12.9bn in capital (Fig. 1). New 300 England-based managers accounted for 40 more than a third (38%) of aggregate 250 capital raised by US venture capital firms 200 30 that closed a fund in 2017 – the largest 150 proportion since 2009 (48%). 20 100 Massachusetts-based Clarus Ventures No. of Funds Closed 10 50 raised one of the largest venture capital funds closed in 2017: Clarus Ventures IV 0 0 secured $910mn at its final close in July 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 from a mix of new and returning Year of Final Close investors, including a $7.5mn commitment All US: No. of Funds Closed New England: No. of Funds Closed from Alpha Associates, achieving over All US: Aggregate Capital Raised ($bn) New England: Aggregate Capital Raised ($bn) 120% of its initial target (Fig. 5). The fund Source: Preqin will target North America-based early- and late-stage investments in the healthcare Fig. 2: New England-Based Venture Capital Fundraising by Fund Size, 2008 - 2017 and life sciences sectors. 100% 7% 5% 7% 4% 3% 6% 3% 3% 17% 3% 15% 10% 90% 10% 7% 11% 9% 15% 18% The largest proportion of funds closed 17% 5% $1bn or More 80% 17% by New England-based managers have 19% 23% 15% 25% 15% typically fallen into the sub-$100mn range, 70% 25% 23% $500-999mn accounting for 31% of vehicles closed on 60% 24% 20% 11% 15% 16% 24% $250-499mn average over the past 10 years, and 41% 10% 50% 50% 7% 15% 18% in 2017 (Fig. 2). At the other end of the 29% 10% $100-249mn 40% 16% 6% spectrum, 21% of New England-based 25% 26% 13% funds reached a final close on $500mn or 30% $50-99mn 13% 10% more in 2017 – the largest proportion of 20% 43% 41% Proportion of Funds Closed 38% 39% 32% Less than $50mn the past decade; this growth was driven by 25% 26% 28% 10% 17% 20% vehicles within the $500-999mn bracket. 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Aside from post-GFC dips (2009-2010), New Year of Final Close England-based funds have, on average, Source: Preqin achieved or exceeded their targets in nearly every year of the past decade, and Generalist venture vehicles dominate the Few New England-based funds target spent an average of 19 months on the New England-based fundraising market: regions outside North America, accounting road – one month less when compared to 25 funds secured $10.1bn in 2017, 4x for just 17% of funds closed in 2017, of all US-based venture capital funds closed more capital than early stage (Fig. 4). The which 10% are focused on opportunities over the same period. Improving on the majority ($2.0bn) of early-stage capital in Asia. 10-year moving average in 2017, New was accounted for by broader early-stage England-based venture capital funds took strategies, compared with early stage: an average of just 16 months to reach seed ($406mn) and early stage: start- 100% of their target size (Fig. 3). up ($405mn), while one late-stage fund secured $3.1mn. 4 © Preqin Ltd. 2018 / www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/NEVCA17 Fig. 3: New England-Based Venture Capital Fundraising Success, Fig. 4: New England-Based Venture Capital Fundraising in 2017 2008 - 2017 by Strategy 35 140% Proportion of Target Size Achieved 45 1 118% 40 30 109% 120% 106% 103% 106% 98% 100% 100% 25 100% 35 Expansion/ 16 80% Late Stage 20 75% 80% 30 33 25 15 60% All Early 23 20 Stage 10 21 20 22 40% 16 14 14 14 15 5 20% 9 25 Venture Capital Time Spent in Market (Months) 2.8 10 (General) 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5 10.1 Year of Final Close 0 Average Time Spent in Market (Months) No.