Duncan Davidson - Series A crunch
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Series A crunch by Duncan Davidson at Venture Shift 2013
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Duncan Davidson - Series A crunch
- 1. Vator Venture Shift, July 2013 Venture Outlook
- 2. Series A Crunch It’s real, it’s here!
- 3. Seed Funding vs. Series A 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2009 2010 2011 2012 Seed Series A Source: Cbinsight as reported by Dan Primack #Deals This is how the data is reported …
- 4. SeriesA Cliff 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2009 2010 2011 2012 2013 Seed Series A It matches until … Source: Cbinsight as reported by Dan Primack #Deals The Cliff This is the relevant comparison … Shift seed forward a year…
- 5. The FaceplantTrainWreck! Web 2.0 Era IPOs FOMO chills Series A slows down Seed triage, bridgi ng Angels fear to tread “Faceplant” Accelerators cut back on class sizes Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013
- 6. Down Rounds Spiked After Faceplant Source: Fenwick & West Faceplant Reaction (Ouch!)
- 7. TraditionalVC Flat So Far in 2013
- 8. Pitchbook Shows a Decided Downtrend
- 9. SeriesA Flat So Far in 2013 Slight Uptick (222 in Q1, 246 in Q2) Seasonally Expected
- 10. How Many Seed DealsWill Be Orphaned?
- 11. “Getting to Series A” is Fading as the Goal Seed Follow-On Financing: Traditional VC A Round “Bullpen” Style Follow-On Seed Vintage 2010, in 2011 45% 12% Vintage 2011, in 2012 27% 23% The Crunch The Alternative Source: Fenwick & West 2012 VC Survey
- 12. VC Industry Major ongoing disruption “The era of the gentleman VC is over”
- 13. VC Returns Sucked for a Decade
- 14. VC Industry Consolidated 33 54 77 118 79 81 86 83 6826 61 138 282 136 155 175 148 122 0 5 20 143 27 44 51 36 42 0 100 200 300 400 500 600 1993 1995 1998 2000 2003 2005 2008 2010 2013 $100M+ $20-100M $10-20M Source: Thompson Reuters; Menlo Ventures Analysis Active Venture Funds (Active = Over $1m in at least 5 deals)
- 15. “Lean” Disrupted theVenture Model Cloud storage, incubat ors Open source libraries, commoditized hardware Oracle license, large salaries, expensive machines
- 16. Lean Enabled “Option-Buying”VCs Old Model: “life cycle” VC New Model: option buying Smaller fund Hyper-active pace Small amounts at early stages Fail fast – start something better! Oversized reserves – double down on winners!
- 17. And a Much Faster Investment Pace (40 per year vs. traditional venture 4-5) Option Buying Pace
- 18. Smaller Deal Size Pushed BigVC Later Source: PwC Q3 survey as reported by Fenwick & West
- 19. Opening the Door to Funding Alternatives Accelerators Super-Angels Micro-VCs Crowd-funding Bullpen Secondary Markets > 5000 deals per year
- 20. Bullpen Formed as an Alternative to the SeriesA Bullpen saw disruption coming: Bullpen GPs were active angels & LPs in seed funds like First Round Capital The need: a seed follow-on round, below the A The result: bypassing the A with a “shovel-in” round Bullpen acknowledged as Series A Crunch thought leader
- 21. Prognosis New Wave of IPOs Coming! “FOMO = Fear Of Missing Out”
- 22. Venture Returns Improving Index returns: 10 yr: 5.3% 3 yrs: 12.7% Median returns: 10 yr: (4.6%) Source: Cambridge Associates; NVCA
- 23. Venture Liquidity Ratio Improving (Liquidity Ratio = Money Out vs. Money In) Source: Menlo Ventures
- 24. AnotherTech Bubble is Brewing
- 25. Tech M&AValues Increasing Year of Tech M&A Number Average Size ($MM) 2011 75 $512 2012 94 $717 Source: Tower Watson Quarterly Deal Performance Monitor Key Exits in 2012 • Kayak $1.8B • Kenexa $1.3B • Yammer $1.2B • Meraki $1.2B
- 26. Tech IPOs Increased in Q2
- 27. WSJ Headline:The NewWave of IPOs
- 29. Venture Disruption The Revolution is Broad-Based
- 30. VC Disruption is Part of the LargerTrend The Revolution Will Not Be Categorized Disruptive Deals Replace the Incumbents vs. Facebook vs. Hotels vs. PayPal
- 31. What’s Next?? Vertically-oriented incubators New instruments: capped converts, convertible equity Secondary liquidity Crowd-funding … who knows what’s next … Its the easiest time ever to start a company … but one of the hardest times ever to scale a winner!