SCV's annual State Of Venture Capital for this year.

1. State Of US Venture Capital
Q1 2013
www.startupcv.com
twitter: @dicktim

2. Startup Capital Ventures
• Early stage enterprise-focused venture
capital in Silicon Valley & Hawaii
• Top decile fund performance
• We like technology, IP and the cloud
• We love insanely curious domain-expert
entrepreneurs
• Silicon Valley • Honolulu
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2

3. What’s Going On In The US VC Cycle?
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3
VCs
Invest In
Startups
Startups
Exit Via
M&A or
IPO
VCs
return
capital to
LPs
LPs
Invest In
VCs
• Silicon Valley • Honolulu

4. Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu
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4

5. US Venture Capital Raised Is Stable At
Around $19B
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5
.com boom
& bust
Source: NVCA
• Silicon Valley • Honolulu

6. The Number Of US Venture Funds Raised Is
Also Stable
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6
Source: NVCA
• Silicon Valley • Honolulu

7. Follow-On Vs. New Funds Raised Is About
70 / 30 Split
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
"
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8. Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu
Page
8

9. $26B Of Venture Capital Invested Is Well
Above $19B Of Inflow To Funds
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
"
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10. Software & Biotech. & Cleantch Are The
Largest Investment Sectors
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
"
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11. IT Venture Investment Is Thriving
• “Life sciences investment was suppressed due
in part to the impact of the regulatory
environments
• Clean tech investors began moving towards
deals less dependent on government support
• Investment in information technology flowed, as
far fewer obstacles impeded success in those
sectors”
- Mark Heesen, President NVCA
• Silicon Valley • Honolulu
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11

12. Early Stage Investing Has Returned While
Seed Stage Declines
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
"
Page 12"

13. Silicon Valley Continues To Dominate US
Venture Capital Investment
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
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14. Early Stage Deal Size Is Decreasing As
Startups Become More Capital Efficient
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
"
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15. Crowdsourced Equity Is Mostly Small
Tranches From Angels
• Silicon Valley • Honolulu
Source: Massolution, Crowdsource.org
"
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16. "
Page 16"
Up-Rounds Continue To Constitute Most
Financings
Source: Fenwick & West
• Silicon Valley • Honolulu

17. Up-Round Valuation Increase Continues
About +85%
• Silicon Valley • Honolulu
Source: Fenwick
the fenwick & west venture capital barometer™ (magnitude of price change)—Set forth below
percentage change between the price per share at which companies raised funds in a quarter, compa
price per share at which such companies raised funds in their prior round of financing. In calculating
rounds (up, down and flat) are included, and results are not weighted for the amount raised in a fina
The Barometer results by series are as follows:
100% *
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
30%
52%
52%
71% 78%69%
85% 85%
99%
Barometer Combined Total
Redemption
168%
142%
**
116%
90%
64%
38%
12%
-14%
-40%
Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12
Software
Hardware
Life Science
Internet/Digita
Cleantech
Barometer Percentage Change By Series
*One software company had a 1460% up round and one internet/digital media company had a 1190% up r
If these were excluded the Barometer result for 2Q12 would have been 70%. "
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18. Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu
Page
18

19. "
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IPO and Especially M&A Activity Is Strong
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu

20. VC-backed IPO and M&A Valuations
Remain Robust
Source: Thomson Reuters / NVCA
• Silicon Valley • Honolulu
"
Page 20"
2012 is ex Facebook
(avg. would be $5B)

21. • VC Returns Continue to Outperform
• Public MarketsVC Returns Currently Untypically Lagging
Booming Stock Markets
.com boom
.com bust
Source: NVCA, Cambridge Associates
• Silicon Valley • Honolulu
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21

22. Medium Size Funds Produce Best Returns
• Confidential To Recipient
Page 22"
• Source: Cambridge Associates, NVCA
0
5
10
15
20
25
30
35
Funds < $50M $50-$150M >$150M
FundIRR(%)
Fund Size ($)
US Venture Capital Fund Returns (1998-2008)

23. Agenda
• LP Investments In VC
• VC Investing Activity
• Exit Activity
• Conclusions
• Silicon Valley • Honolulu
Page
23

24. The Venture Market Is Moving Nicely
• Plenty of deals are getting funded
• Deal quality is solid with good revenue and
profitability
• Exit activity is good in both number of
deals and valuation
• LPs continue to invest in VC albeit not at
the level VCs are investing in startups
• Silicon Valley • Honolulu
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24

25. VCs Invested
$26B In Portfolio
$210B In
Venture Exits
(IPO + M&A
proceeds)
LPs Invested
$19B In VCs
2012 Venture Funding Cycle Created Good
Returns For LPs But Still Imbalanced
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25
Sources: NVCA, Thomson Reuters, Cambridge
• Silicon Valley • Honolulu

26. Market Equilibrium Will Return
(One Way Or Another)
• Good VC exit markets create strong returns for LPs
(better than public markets)
• Healthy funding levels at all stages
• VCs solidly funding new deals
• LP funding growing but still lagging VC returns
Page
26
Venture capital shrinks
to match LP
investment in VC
VC funding grows as
LPs return to VC
sector
• Silicon Valley • Honolulu

27. • Copyright © 2010 Startup Capital Ventures Page 27
Author: Tim Dick
• General Partner, Startup Capital Ventures
– Boards: SilverTail (acquired EMC), TuneIn, Adama Materials,
TagArray
• Entrepreneur, angel and advisor has raised over $300M in early stage
capital with over $1.2B of exits
– Match.Com (Angel, acquired by IAC)
– WorldPages.com (Founder, CEO, IPO NYSE:WPZ acquired by BT)
– TRUSTe.org / Privacy Assured (Internet privacy standard)
– Accept.com (mentor capitalist, acquired by Amazon)
– Grassroots Enterprise (Founding President, acquired by Edelman)
– Hawaii Superferry (founding CEO)
– Dali Wireless (turnaround CEO)
• Boston Consulting Group
• Beckman Instruments: invented first “instrument on a chip” (1985) &
first ICU usable speech synthesizer for intubated patients (1981)
• MBA, Stanford University
• BSEE, University of California

28. www.startupcv.com
tdick@startupcv.com