accel connect 2016 talk for portfolio founders & ceos

Accel Template Version 1.0 [Oct 2015]

State of the Union Accel’s Perspective of the Current Technology Landscape

November 1, 2016

State of the Union 2

1. Global interconnectedness

~30%Revenue outside of initial

home market in Accel portfolio companies (at age = 5 years)

0.5b2001

10%3.6b

2016

25%

global internet population*

broadband penetration

global smartphone penetration ~1% 40%

*Internet Telecom Union

1960 19901970 1980 2000 2010 2020


Mainframe

1MM units

Minicomputers

10MM units

PCs

100MM units

Desktop Web

1B+ units

Mobile/Smartphone/IoT

10B+ units

Autonomous VehiclesRobotics & Drones2. Acceleration of open,

digital platforms Satellites and Space Tech

*Morgan Stanley, IDC, Gartner


3. Data centrality and applied AI/ML

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10

90%of the world’s data has been created in the past 2 years

Rich, proprietary data around users/customers stored ad infinitum

Widely accessible, GPU-enabled compute

Openly available ML algorithms

Rich data network effects powering data-driven software and services

*

*IBM Big Data Report


4. Readily available building blocks(the power of NIH)

Cloud platforms Abundance of Open Source

Distribution Platforms

</>Vocal & Viral Communities

TESTER

</>

</>

</>

Scalable APIs

APIs

APIs

APIs

APIs

98% of Accel teams are accelerating development via cloud or APIs in 2016 (<10%, 2006)


Advantage New Tech Entrants

Accelerating Platforms

xConnected Global Markets

Pre-Existing Building Blocks

</>

APIs

x xData Centrality

01010101010 01010101010 01010101010 01010101011 01011101010

New players taking the lead


Changing of the guard?New GuardOil Finance

Old(er) Tech & Telecom Industrial & CPG

* CapIQ: Represents the most valuable 20+ companies of S&P 500 over the last 20 years


‘New Guard’ rapid rise to the Top 5Top 25 S&P Companies By Market Cap

2008 2009 2010 2011 2012 2013 2014 2015 2016

*CapIQ


Market cap of the top 5Top 5 Global Companies By Market Cap

2001 2006 2011 2016

$425B

$239B

$289B

$250B

$250B

$405B

$378B

$392B

$339B

$610B

$542B

$289B

$263B

$457B$292B

$219B

$231B $348B

$334B

$271B

*CapIQ: Market Caps Average Over Respective Years

$2.3Tcumulative value of

top 5 in 2016

$1.4Tcumulative value of

top 5 in 2001


Average age of the top 52001 2016

109 yrs

39 yrs

90 yrs

26 yrs

Age in 2001

41 yrs

40 yrs

18 yrs

22 yrs

12 yrs

Age in 2016

189 yrs

est. 1892

est. 1975

est. 1911

est. 1812

est. 1962

est. 1976

est. 1998

est. 1975

est. 1994

est. 2004

1.

5.

3.

2.

4.

26average age of

companies in 2016


Rising from Asia…

$256B market cap

#10 $254B market cap

#11 $235B market cap

#13 19 years old18 years old17 years old

*CapIQ Current Market Cap Estimates

globally globally globally

Navigating the disruption Catalyzing strategic dialogue from incumbents


# of M&A Deals > $500 mm

Deal

Cou

nt

0

18

35

53

70

Deal

Val

ue ($

in b

illion

s)

$0

$75

$150

$225

$300

2009 2010 2011 2012 2013 2014 2015 2016

6764

54

43

51

2926

13

$240

$133$181

$104$97

$29$43$41

13

2629

51

43

54

6467

Exam

ple

Tran

sact

ions

Goldman Sachs - Tech M&A Report, Pitchbook, Venturesource

Resurgence of Technology M&A


Non-tech incumbents responding

$7b+aggregate acquisition value, TTM from non-tech

$1b $3.3b $1b $500m $475m

Pitchbook


IPO window is open for durable companiesTech IPO Issuances Globally

($ in

billi

ons)

$0

$23

$45

$68

$90

2013 2014 2015 2016

Capital Raised IPO Market Capitalization

$27

$83$79

$50

$5$21$16$8

Repr

esen

tativ

e

IPOs

Goldman Sachs - Tech M&A Report, Pitchbook, Venturesource

$5

Changing conditions…

State of the Union

Capital invested via VC & IPOsCompany Fundraising via Private and Public Capital, 1980-2016

($ in

billi

ons)

$0

$30

$60

$90

$120

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1Q 2016

Private IPO

Peak - $100B

Local Max - $50B

Avg Past 20 Years - $20B

New Steady State? $30-40B

18NVCA, CapitalIQ


Zooming in on recent quartersVenture Dollars invested in Core IT Categories, All Stages, 2012-2016

($ in

billi

ons)

$0

$6

$12

$18

$24

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

$10.5

$23.4

$14.0$13.3

$15.4$13.7$14.4$14.8

$10.8

$14.6

$9.0$8.7$7.5

$6.6$6.7$5.6

$6.5$7.3

$5.3

2012 2013 2014 2015 2016

Q3 2016 - 30% vs year-ago, reset underway

Surge in VC activity in early 2014

NVCA, CapitalIQ


Navigating the funding climateKeeping an eye on milestones for follow-on funding

Seed Series A Series B-C Late StageStrong teams with crisp end-market

understanding, chasing large, urgent markets

Early key metrics that demonstrate deep,

recurring user value signs of an efficient GTM; team

beginning to cement

Clear capital efficiency + unit economics; line of sight

to business model converging, story to $100m

ARR or 100m MAUs

Last dollars needed, just crossing to profitability (or

line of sight to it), demonstrable exit path

Very active Active Very Selective Selective


Growth (%) + FCF (%)

The Rule of 50(% of annual revenue growth) + (EBITDA as a % of revenue) should be ≥ 50

Trading Range (NTM) Trading Range (NTM) Trading Range (NTM)

4-6x 6-8x 8-10x

CapIQ & Public Company Filings

Growth (%) + FCF (%) Growth (%) + FCF (%)

~50%~35%~20%


A New Definition of “Product”Product as the sum of the core app or service AND how its distributed

CapIQ & Public Company Filings

Product ≠ Customer Acquisition

Marketing and Sales

Software Bits

Retention + Success

Product = Customer Acquisition

Marketing and Sales

Software Bits

Retention + Success

Customer Diversification: the “Caltrain test”

23

Companies need to diversify their customer base beyond just neighboring startups


41Kcompanies since 2000 that have raised venture

66have ever achieved

an exit >$1b (realized unicorn)**

440have ever achieved

an exit >$100m

Rare air

Mattermark, Crunchbase, CB Insights, VentureSource** 175 unrealized unicorns but onlyy 66 realized


$6b

$10b

$3.3b

$3b

$1.2b

$5b

$390m

Accel-led Series A

+$150b market cap

$500m

$750m

$700m

IPOs

M&A

$1.5B$1B

Since 2013

Since 2013

$700m

$400m

$1.2b

$475m

$700m

Thank you

$800m

$1.6m