Venture Capital Report U.S. | 4Q | 2018 VENTURE CAPITAL REPORT VENTURE CAPITAL REPORT The following report presents Dow Jones VentureSource’s quarterly findings for U.S. venture capital investment, fundraising, and liquidity. The included charts and graphs offer a comprehensive view of the trends currently affecting the venture capital market. Highlights for 4Q 2018 include: • A long-building tsunami of VC cash crested in 4Q, obliterating all quarterly and annual records for equity investment. • VC fundraising surged again with the fourth-largest quarter on record, helping to end 2018 with the biggest annual haul in 18 years. • The M&A market had its second-best quarter on record, catapulting 2018 as the top year ever for both the number of M&A transactions and the amounts paid. • VC-backed companies going public had a more mixed quarter, but ended 2018 as the best year for IPOs since 2014. • The San Francisco Bay area took 61% of all capital invested into U.S. companies in 4Q, by far the most extreme regional concentration ever seen. (The Bay Area average dating back to 1992 is 33%.) VENTURE CAPITAL REPORT 2 UNPRECEDENTED QUARTER AND YEAR BREAKS RECORDS FOR U.S. EQUITY INVESTMENT FINANCING Equity Financings in U.S.-Based, In a year when every single quarter set a new all-time VC-Backed Companies (2015–2018) record for equity investment, the final quarter managed to $45.00 1600 leap 33% above 3Q’s already staggering figure for capital raised. Altria Group’s $12.8 billion financing for Juul Labs $40.00 1400 $35.00 Inc. played a critical role in this, comprising nearly 30% of 1200 4Q’s total. Indeed, the Juul deal ranks as the largest equity $30.00 1000 round in a VC-backed company ever. $25.00 Although the number of rounds dipped 14% since 2Q’s 800 $20.00 high-water mark (the most active quarter since 2Q 2000), a 600 relatively small number of mega deals pushed the $15.00 400 investment totals to ever-increasing heights. $10.00 2018 ended the year with $130.39 billion in all, a 50% $5.00 200 increase from the previous year, and breaking the record $0.00 0 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 set in 2000 during the dot-com bubble. Amount Raised ($B) $23.67 $16.48 $19.36 $19.76 $14.21 $19.66 $21.46 $23.82 $22.10 $27.03 $28.13 $32.22 $43.01 Number of Deals 1397 1316 1319 1378 1246 1436 1462 1434 1336 1534 1555 1451 1343 VENTURE CAPITAL REPORT 3 TOP ROUNDS FOR VC-BACKED COMPANIES (4Q 2018) FINANCING Round Investors Company Name Location Industry Code Industry Segment Industry Group Brief Description Close Date Round Type Raised ($M) (* denotes lead) Electronics & Provider of nicotine San Francisco, Consumer Information Corporate Juul Labs Inc. Computer vaporizers with 12/20/2018 $12,800.00 Altria Group Inc.* CA Electronics Technology Equity Hardware temperature control. Consumer Vulcan Capital, Smash Ventures, Lightspeed Venture Consumer Provider of various Growth Epic Games Inc. Cary, NC Entertainment Information 10/26/2018 $1,250.00 Partners, Kohlberg Kravis Roberts & Co. LP*, Kleiner Perkins Services video games. Equity Services Caufield & Byers, Iconiq Capital LLC, aXiomatic Building Industrial Manufacturer of large- Materials/ Machinery and View Inc. Milpitas, CA Goods and scale architectural 11/2/2018 VC Later $1,100.00 SoftBank Vision Fund* Construction Industrial Goods Materials glass. Machinery Operator of a local Consumer Maplebear Inc. San Francisco, Shopping Consumer grocery shopping Other Valiant Capital Management LP, Tiger Global Management Information 10/16/2018 $871.00 (DBA Instacart) CA Facilitators Services application and Equity LLC, D1 Capital Partners*, Coatue Management LLC Services delivery service. Provider of mobile telematics and Cambridge Mobile Communications Information analytics for usage- Cambridge, MA Software 12/19/2018 VC 1st $500.00 SoftBank Vision Fund* Telematics Inc. Software Technology and behavior-based programs for road and driver safety. VENTURE CAPITAL REPORT 4 INFORMATION TECHNOLOGY TAKES THE LION’S SHARE OF INVESTMENT IN 4Q FINANCING 4Q 2018 Industry Business & Financial Services Breakdown 294 Consumer Goods Information Technology companies received the largest share of equity deals By Number of Deals 428 and dollars for both 4Q and 2018 as a whole. This marks the first year since 2014 Consumer Services that IT held the lead among industry groups. The $12.8 billion corporate equity 86 Energy & Utilities deal for Juul Labs, in the consumer electronics sector, represented 61% of the Healthcare 55 205 quarter’s total for IT. Industrial Goods & Materials 248 19 Companies in the Consumer Services group were in second place for 4Q in terms Information Technology of capital raised, securing $6.42 billion in 205 deals. The top deal in this space was a $1.25 billion growth equity round for Epic Games, a video game provider. 4Q 2018 Industry Business & Financial Services Breakdown 14% Business and Financial Services companies placed a strong third, securing $5.9 Consumer Goods By Amount billion through 294 rounds. Snowflake Computing, a provider of cloud-based data 3% Raised ($B) Consumer Services warehousing services, won the largest financing in this sector with a $450 million 49% 15% Energy & Utilities Series F deal. 1% Healthcare 13% Industrial Goods & Materials 5% Information Technology VENTURE CAPITAL REPORT 5 MOST ACTIVE INVESTORS FOR U.S.-BASED, VC-BACKED COMPANIES (4Q 2018) FINANCING 30 28 25 22 20 20 20 19 17 16 15 15 13 12 10 5 0 Y Combinator Keiretsu Forum Alumni Ventures Group Sequoia Capital New Enterprise Andreessen Horowitz Lightspeed Venture Initialized Capital GV Battery Ventures Associates Partners VENTURE CAPITAL REPORT 6 NUMBER OF DEALS/AMOUNT RAISED BY METRO REGION (4Q 2018) FINANCING Metro Region Breakout Metro Region Breakout Number of Deals Amount Raised ($B) Number of Deals by Metro Region Amount Raised ($B) by Metro Region San Francisco Bay Area 413 San Francisco Bay Area $26.13 New York 168 Boston $3.23 Boston 112 New York $2.87 Los Angeles 75 Los Angeles $1.77 Seattle 36 San Diego $0.77 Chicago 36 Potomac $0.69 Potomac 35 Chicago $0.57 San Diego 29 Orange County $0.42 Austin 26 Seattle $0.31 Orange County 20 Austin $0.20 Dallas-Fort Worth 11 Dallas-Fort Worth $0.12 VENTURE CAPITAL REPORT 7 NUMBER OF DEALS/AMOUNT RAISED BY PRIMARY REGION (4Q 2018) FINANCING Mid-Atlantic Number of 10% Deals in 4Q 2018 19% Midwest Central 7% by Primary Midwest East 4% Region 2% Mountain 4% Number of Deals Amount Raised ($B) New England 8% by Primary Region by Primary Region Northern California 6% Pacific Northwest 4Q 2018 4Q 2018 South Central 31% 9% South East 260 $4.26 Mid-Atlantic Southern California Midwest Central 29 $0.45 Midwest East 106 $1.05 7% Mountain 75 $0.93 Amount Raised 10% 1% Mid-Atlantic 6% 3% ($B) in 4Q 2018 1% Midwest Central New England 127 $3.33 1% 2% by Primary Midwest East Northern California 419 $26.18 8% Region Mountain Pacific Northwest 51 $0.51 New England South Central 50 $0.47 Northern California South East 90 $2.68 Pacific Northwest Southern California 127 $3.05 South Central 61% South East Southern California VENTURE CAPITAL REPORT 8 MEDIAN DEAL SIZE FOR EQUITY FINANCINGS IN U.S. COMPANIES FINANCING Median Equity Deal Size ($M) $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 Median Equity Deal Size ($M) $5.00 $4.29 $4.02 $4.48 $4.47 $4.78 $5.00 $5.00 $5.50 $5.50 $6.50 $6.00 $6.93 VENTURE CAPITAL REPORT 9 COUNT OF EQUITY FINANCINGS IN U.S. COMPANIES, BY ROUND CLASS FINANCING Number of Deals 500 450 400 350 300 250 200 150 100 50 0 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 Seed 139 123 92 122 119 147 168 160 155 163 191 169 125 First 388 353 369 376 340 342 359 289 275 326 376 293 317 Second 233 224 238 210 194 230 205 228 183 233 227 215 164 Later 435 425 411 457 377 443 401 418 404 475 447 441 412 Restart 3 4 4 3 1 6 2 4 0 2 0 4 0 VENTURE CAPITAL REPORT 10 AMOUNT RAISED IN U.S. COMPANIES, BY ROUND CLASS FINANCING Amount Raised ($B) $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 Seed $0.18 $0.20 $0.16 $0.17 $0.22 $0.28 $0.40 $0.37 $0.41 $0.44 $0.53 $0.54 $0.45 First $3.06 $2.24 $2.40 $3.23 $2.22 $3.46 $3.34 $2.23 $3.56 $4.35 $3.92 $4.86 $4.64 Second $3.26 $2.22 $2.82 $2.45 $2.09 $4.18 $3.07 $3.88 $3.15 $4.84 $3.57 $4.93 $3.25 Later $15.99 $10.22 $9.43 $11.66 $7.58 $10.09 $12.55 $14.48 $12.86 $15.00 $17.14 $17.36 $17.76 Restart $0.05 $0.06 $0.04 $0.54 $0.01 $0.08 $0.06 $0.04 $0.00 $0.03 $0.00 $0.04 $0.00 VENTURE CAPITAL REPORT 11 U.S.