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Final vcj conference oct 2011

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Final vcj conference oct 2011

  1. 1. The State of the Venture Capital Markets Mark Suster VCJ Venture Alpha Conference – October 2011 @msuster
  2. 2. What is the State of the VC Market? What Comes After Social Networking?
  3. 3. <ul><li>Accenture (software dev) </li></ul><ul><li>BuildOnline (’ 99) </li></ul><ul><li>Koral (’ 05) </li></ul><ul><li>VP Product Mgmt, Salesforce.com </li></ul><ul><li>Largest VC firm in Southern California </li></ul>Both Sides of The Table This Week in VC
  4. 4. The Set Up What is Driving Change?
  5. 5. It Is Dramatically Cheaper to Start a Company Open source Cloud Developers Start Companies 2000 $5m $500k 2005 $50k 2009 $5k 2011
  6. 6. Amazon & Ycombinator Have Fueled the Market <ul><li>90% reduction in cost </li></ul><ul><li>Faster time-to-market </li></ul><ul><li>Great ability to experiment </li></ul>
  7. 7. So Founders Much Younger, More Technical
  8. 8. Huge Explosion in Tech Startup Creation Seed Deals / Incubation
  9. 9. While The Total Number of VCs Has Right-Sized
  10. 10. The Opportunities are Much Bigger 2001 2011 100 2,000 <ul><li>Always On </li></ul><ul><li>Higher Speed </li></ul><ul><li>Payment Ready </li></ul><ul><li>Socially Linked </li></ul>Millions Online
  11. 11. Conditions Actually Bode Really Well for VCs Active VCs Seed Deals Revenue Potential +
  12. 12. So What Exactly Is Changing in our Industry? Some Goods, Some Bads
  13. 13. Mentorship-Led Investing Has Captured Enormous Talent Pool Access to Deals
  14. 14. Great New Focused & Disciplined VCs Created Super Early Territory Topic Area (i.e. big data) Early or Classic A Thrive
  15. 15. Some Traditional VCs Now Doing Many Seed Deals Seed C-E Round A, B Round
  16. 16. This is Driven by FOMO (Fear of Missing Out) <ul><li>High volume, small deals </li></ul><ul><li>No oversight </li></ul><ul><li>Purely an “option” </li></ul><ul><li>Not smart strategy for VC or founders </li></ul>
  17. 17. In H1 2011 80% of LP Money Went to Just 7 Firms. The Billion Dollar Club. 7 Firms Total $6.3 $8.1 VC Money Raised ($ billion)
  18. 18. Which Begs the Question of Whether It’s Venture Capital or Growth Equity Seed C-E Round A, B Round
  19. 19. Fund Size + FOMO Driving Separation from Price & Underlying Value Time $ Historic Value Today’s Market
  20. 20. People are Paying Growth Prices for Market Risk Time Valuation Product Risk Growth / Scale Risk Monetization / Competition Risk Market Risk
  21. 21. Probably Less Traditional VCs Being Funded Lately. Seed C-E Round A, B Round $25-75m Typical Fund Size $200-300m $500m-$1bn
  22. 22. Traditionally VCs Have Focused on Few Companies & Deep Commitments 1-2 deals per partner / year Many deals / year
  23. 23. Two great firms have reinvented model by focusing on the “group collective” Ops Support <ul><li>Founder friendly </li></ul><ul><li>High volume </li></ul><ul><li>CEO Summits </li></ul><ul><li>Founder Email Lists </li></ul><ul><li>X-Company Equity Sharing </li></ul><ul><li>Heavy focus on “second round capital” </li></ul>Winning Follow On $$
  24. 24. Some of Best Returns Seem to Be Driven By “Right-Sized” Traditional VCs <ul><li>Public </li></ul><ul><li>Accessible </li></ul><ul><li>Though-Leaders </li></ul>
  25. 25. Public Openness Helps With Every Major Stage of the VC Lifecycle Access to Deals Winning Follow On $$ Exits Top end of funnel much wider Founders want to work with you VCs work with others they know, like & respect Awareness with buyers for your portfolio
  26. 26. So What is the Next Big Investment Opportunity on the Internet? Television. Yes, really.
  27. 27. Americans watch 5.3 hours of TV / Day TV Reading < 1 Hour 5.3 Hours Media Patterns Online 3 Hours
  28. 28. You Tell Me What the Future of the Internet Is?
  29. 29. But VCs Hate Investing in Content – Hits Driven Business?
  30. 30. It’s Not Just Dogs on Skateboards Anymore
  31. 31. A Disruptive Breed of Digital Content Producer Has Emerged UGC Network TV YouTube TV Production Costs / Minute $100-400 $6,000-8,000
  32. 32. These 4 LA Companies Alone Doing > 3 Billion Video Views / Month YouTube TV Costs / Minute
  33. 33. YouTube is the New Comcast … And Notice the Change in Branding
  34. 34. With YouTube Content Distribution is Much More Predictable Viewer <ul><li>Subscribers </li></ul><ul><li>Email Lists </li></ul><ul><li>Facebook Connect </li></ul>YouTube Producer
  35. 35. Youth Demo Already 1/3 rd of Time Online Watching Video Streaming Video Other Surfing
  36. 36. And Revenue Becoming Substantive
  37. 37. How Mainstream? 86% of All Internet Watch Online Video
  38. 38. Aug 11 42 billion views 185 million viewers 228 videos / person 17 hours
  39. 39. 91% of Households Still Pay for TV (91%)
  40. 40. This Market Disruption Will Be Enormous – And It’s Arriving Now
  41. 41. </end> Thank you