Soup to Nuts PresentationMarch 3, 2001
Presented by:
John Gabbert
Director of Research
VentureOne
VentureOne Research
VentureOne tracks companies from their initial round
of venture financing until they achieve liquidity,
become profitable with no plans for future financing,
or go out of business.
Three Key Elements for
a Robust Venture
Industry Fundraising
Investment
Liquidity
Fundraising
Contributions to Venture Capital ($B)
VC Fundraising Dollars Double From 1999
$69.1
$34.5
$19.7
$11.3$10.2$6.1
$2.1 $1.1 $2.7 $4.6 $6.1
$0
$10
$20
$30
$40
$50
$60
$70
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Source: VentureOne
Contributions to Venture Capital ($B)
Fundraising Continues at Historical
Highs Through 2000$18.1
$17.3
$19.1
$14.5$14.8
$7.9
$6.1$5.7$6.1
$4.6$4.6$4.3
$0
$4
$8
$12
$16
$20
1Q98 2Q98 3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00Source: VentureOne
Median VC Fund Size ($M)*
Median VC Fund Size Stable in 2000
$138$135
$115
$85
$58$64
$57$70
$100
$0
$25
$50
$75
$100
$125
$150
1992 1993 1994 1995 1996 1997 1998 1999 2000Source: VentureOne
* Funds greater than $20M
VC Funds Under Management by Size ($M)
Majority of VC $ Are Now in Large Funds
0%
20%
40%
60%
80%
100%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
$1B+ $500M-$999M $250M-$499M $100M-$249M Under $100M
Fundraising Summary
New commitments to venture capital are at record
levels.
Over half of VC dollars are in funds greater than
$500 million.
Capital under management per VC partnership
continues to rise.
Greatest amount of VC money in history available
to invest in entrepreneurship.
Investment
$38.2
$14.9$11.6
$9.1$6.3$4.6$4.0
$68.83317
20461841
1676
1166943 1049
4107
$0
$10
$20
$30
$40
$50
$60
$70
1993 1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Total Invested ($B) Total # of Venture Deals
2000 Investment Far Ahead of 1999’s Record
Deals and Amount Invested
$4.2$5.1
$8.3 $9.0
$15.8
$19.4$18.9
$16.8$13.7
853879
112011971090
832817
578540
$0
$4
$8
$12
$16
$20
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
0
200
400
600
800
1,000
1,200
Amount Raised ($B) Number of Deals
Investment Declines Throughout 2000
Deals and Amount Raised
$0.8$2.7 $4.3
$7.9
$29.6
$56.9
570
207
760
1085
2418
3197
$0
$10
$20
$30
$40
$50
$60
1995 1996 1997 1998 1999 2000
Source: VentureOne
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Total Invested ($B) Total # of Internet Deals
Internet Investment in 2000 Exceeds 1999 Total
Deals and Amount Invested in Internet Companies
$2.4$3.4
$6.0$7.0
$13.3
$16.6$15.6
$13.7$11.0
628
705
894970
850
617587
364318
$0
$3
$6
$9
$12
$15
$18
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
0
200
400
600
800
1,000
Amount Raised ($B) Number of Deals
Lower Internet Investment Contributes to Overall
Decline
Deals and Amount Raised by Internet Companies
Internet Steadily Declines in 2000 as Percentage of Overall
Investment
67%
78%84% 86% 83% 82% 80%
57%
72%
0%
20%
40%
60%
80%
100%
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Percentage of Investment Dedicated to Internet
Median Amount Invested Per Round ($M)
More Money Placed in the Hands of Entrepreneurs
$3.5$3.1$3.0$2.9$2.5
$4.0$5.0
$7.0
$11.0
$0
$3
$6
$9
$12
$15
1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
Median Amount Raised Leveling Off Across Round
Classes
$0
$5
$10
$15
$20
$25
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
Source: VentureOne
Seed First Second Later
Median Amount Raised by Round Class ($M)
Shipping-Stage Companies Raise Bulk of Venture
Investment
$0
$3,000
$6,000
$9,000
$12,000
$15,000
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
Source: VentureOne
Startup Product Development Shipping Profitable
Total Amount Raised by Development Stage ($M)
Median Premoney Valuation by Year ($M)
Valuations Rise Substantially in 2000
$11.4$9.5$10.7
$8.5$8.1
$13.2$15.5
$22.5
$29.9
$0
$5
$10
$15
$20
$25
$30
$35
1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
Median Premoney Valuation by Quarter ($M)
Despite Investor Caution, Valuations Remain High Through
4Q
$27
$30
$25
$30
$24
$16 $16$19
$23 $22
$0
$5
$10
$15
$20
$25
$30
$35
3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Predominance of Internet Companies Affects Overall
Valuations
3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
$0
$10
$20
$30
$40
Source: VentureOneOverall Internet
Median Premoney Valuation ($M)
Median Pre-Money Valuations Remain Relatively Stable
$0
$30
$60
$90
$120
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
Source: VentureOne
Seed First Round Second Round Later
Median Pre-Money Valuations ($M)
Valuations Differ Markedly by Industry
$0
$5
$10
$15
$20
$25
$30
$35
$40
3Q98 4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Healthcare IT Products and Services
Median Premoney Valuation by Industry ($M)
Venture Commitments by Industry Sector, Quarterly
Products & Services Investment Continues Decline
in 4Q’00
0%
20%
40%
60%
80%
100%
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Information Technology Products & Services Healthcare
Percentage of Internet Investment by Dimension
Infrastructure Rises as E-Commerce Falls in 2000
0%
20%
40%
60%
80%
100%
1996 1997 1998 1999 2000
Source: VentureOne
Business Services Content/Pubs Software/DBISPs Infrastructure E-Commerce
Infrastructure, Software Hold Steady as Other Internet Sectors
Shrink
$0
$3,000
$6,000
$9,000
$12,000
$15,000
$18,000
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Software/Database Infrastructure ContentE-Commerce ISPs Business Services
Quarterly Internet Investment by Dimension ($M)
Investment in Early vs. Later-Stage Companies
Early-Stage Investment Decreases
in Late 2000
0%
20%
40%
60%
80%
100%
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Seed and First Rounds Second and Later Rounds
Percentage of Venture Deals Involving Corporations
Corporate Involvement in Venture Deals Accelerates
18%16%
12%10%9%
23%
27%
0%
5%
10%
15%
20%
25%
30%
1994 1995 1996 1997 1998 1999 1H00Source: VentureOne
Despite Year-End Deceleration, 2000 is a Banner
Year
$0
$10
$20
$30
$40
$50
$60
$70
1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
Information Technology Products & Services Healthcare
Venture Commitments by Industry Sector ($B)
Regional Investment
Regional Venture Capital Investment in the U.S.
*“Hot Spots” include Austin, Boston, New York, Potomac, Research Triangle, and Southern
California
Venture Capital Concentrated in Bay Area and
Key Regional Hot Spots*
0%
20%
40%
60%
80%
100%
1996 1997 1998 1999 2000
Source: VentureOne
Bay Area Hot Spots Other
$1.8$2.7
$3.9$5.0
$15.1
$25.4
535
378
619711
12111341
$0
$7
$14
$21
$28
1995 1996 1997 1998 1999 2000
Source: VentureOne
0
400
800
1,200
1,600
Amount Raised ($B) Number of Deals
VC Investment in the Bay Area
Number of Deals and Amount Raised
Bay Area Investment Summary
Investment in the Bay Area fell 26% during the
fourth quarter. Deal flow fell 12%.
In 2000 as a whole, Bay Area investment is ahead
of 1999’s total by 68%. Investment was at its peak
during 3Q’00.
Due to a sharp decline in consumer and business
services, investment in communications
companies now leads, followed by software.
Financing Summary
Despite quarterly declines, VC investment in 2000 nearly doubled 1999’s record.
Internet investment declined from its record high in 1Q’00, but still comprised 83% of overall investment in 2000.
The drop off in consumer and business services investment drove the decline; investment in Internet infrastructure and software/database companies remains strong.
IT receives the most VC investment of any industry. Products & Services absorbed the brunt of the Internet decline, while healthcare investment is at a record high.
The Bay Area still sees bulk of investment, but capital is also concentrated in select “hot spots.”
Liquidity
M&As vs. IPOs
Venture-Backed Liquidity Shifts Toward M&As
0%
20%
40%
60%
80%
100%
1995 1996 1997 1998 1999 2000
Source: VentureOne
IPOs M&As
$5.5
$12.8$8.2
$15.3
$43.9
$23.1$19.0
$9.9
67
9497107
797581
54
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
0
25
50
75
100
125
Amount Paid ($B) Number of Deals
M&As Decline in the Fourth Quarter
Deals and Amount Paid in M&As
$9.9
$26.4
$13.1 $14.2
$41.7
$95.8
365289
235234204
149
$0
$20
$40
$60
$80
$100
1995 1996 1997 1998 1999 2000
Source: VentureOne
0
100
200
300
400
Amount Paid ($B) Total # of M&As
Despite a 4Q Decline, M&A Dollars
More Than Double in 2000
Deals and Amount Paid in M&As
$1.3
$5.1$5.6
$7.1 $7.3
$3.2
$6.6
$1.4
16
70
40
677478
72
20$0
$1
$2
$3
$4
$5
$6
$7
$8
1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
0
20
40
60
80
100
120
Amount Raised ($B) Venture-Backed IPOs
IPO Volume Falls Sharply in 4Q’00
Deals and Amount Raised Through IPOs
$9.5
$5.4
$4.2
$19.1 $18.4
193
244
77
135
231
$0
$4
$8
$12
$16
$20
1996 1997 1998 1999 2000
Source: VentureOne
0
50
100
150
200
250
300
Amount Raised ($B) Venture-Backed IPOs
Despite 4Q’00 Shortfalls, IPO Activity for 2000 Is
Strong
Deals and Amount Raised Through IPOs
Percentage of IPOs by Industry
Healthcare Continues to Increase as Percentage of
Overall IPOs
0%
20%
40%
60%
80%
100%
1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
Information Technology Healthcare Products & Services
IPOs, Internet vs. Non-Internet
Internet IPOs Lose Ground as Percentage of Total in 2000
0%
20%
40%
60%
80%
100%
1995 1996 1997 1998 1999 2000
Source: VentureOne
Non-Internet Internet
Median Amount Raised at IPO ($M)
Median Amount Raised at IPO Reaches Record High in 2000
$77
$63
$19
$32 $33 $32
$44
$0
$20
$40
$60
$80
$100
1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
Median Venture-Backed Pre-IPO Valuation ($M)
Pre-IPO Valuations Continue to Climb in 2000
$366
$317
$45$67 $79
$105
$174
$0
$100
$200
$300
$400
1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
Median Venture-Backed Pre-IPO Valuations ($M)
Pre-IPO Valuations Remain Stable in 4Q’00
$320$349$333
$474
$386
$309$270$264
$214
$0
$100
$200
$300
$400
$500
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00
Source: VentureOne
2.92.82.7
3.13.1
4.24
0
1
2
3
4
5
1994 1995 1996 1997 1998 1999 2000
Source: VentureOne
Younger Companies IPO Since Mid-90s
Time (Years) From Initial VC Funding to IPO
Liquidity Summary
Both the IPO and M&A markets for venture-backed companies saw substantial decreases in 4Q’00.
IPO volume in 4Q was at its lowest since 4Q’98. Strong activity earlier in 2000, however, kept annual totals high.
Due to strong interest in biopharmaceuticals, healthcare IPOs raised a record amount in 2000 and saw the largest number of offerings since 1996.
Despite the 4Q’00 decline, 2000 was a record year for M&As. Much of the increase is due to the high number of multi-billion-dollar transactions that took place during the year.
Conclusions
Despite caution, continued liquidity and high valuations will drive VC returns and should continue to fuel an overall healthy VC/entrepreneurship climate in the United States. Overall is not all.
Investors in the US, Europe, and Israel are increasingly pursuing opportunities outside their own borders--opportunities which include co-partnering as well as independent investment.
For more information or details, please contact [email protected].
VentureOne Products & Services
Online Databases
VentureSourceOnline database of venture capital information with more than 11,000 venture-backed companies, nearly 4,000 investors—including more than 1,100 traditional and corporate venture firms with over 2,200 funds—and nearly 31,000 financing transactions and 80,000 key executives.
CompensationProOnline salary, bonus, and equity consultant with compensation information from over 800 venture-backed companies.
VentureOne Products & Services
Venture Capital Conferences The Summit (Spring, San Francisco)
Best of breed in venture capital
The Exchange (Summer, Boston)
Outstanding East Coast companies
The Premiere (Fall, Washington DC & San Jose)
The nation’s best seed-stage companies
Venture Capital Europe (Spring, Paris & Winter,
London)
Strategies for Europe’s private equity community
VentureOne Products & Services
Industry Publications
VentureEdge (quarterly)
VentureMail news (weekly)
Venture Capital Industry
Report (annual)
Venture Capital Sourcebook
(annual)
Executive Compensation at
Privately Held Startup
Companies (semi-annual)
Customized Research
Comparable Valuation
Reports
To help determine a
company’s relative value
Custom report services
To address specific
business challenges