PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL 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 Investors 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 (investment, 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. 2 ©Preqin Ltd. / www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/FRUSVCQ119 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 investments (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 San Francisco – 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 fund of funds 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 Debt Add-on & Other Growth Capital/ 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, venture debt and secondary stock purchases. 4 ©Preqin Ltd. / www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/FRUSVCQ119 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 Business Services Food Agriculture & Software & Related 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) Investor(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.