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State of Venture Report - Technology
January 2020
Meet F-Prime Capital
2
3
Our Global Platform
Infrastructure
Note: Not an exhaustive list
4
F-Prime Capital’s Technology Portfolio
F IN T E C H P ORT F OL IO
Insurance
Wealth Management
Payments
E N T E R P R IS E P ORT F OLIO
H E A LT H IT & S E RV IC E S P ORT F OLIO
Real Estate
Capital Markets
DevOps
SaaS / Enterprise
Security
AV/Robotics
Data analytics
Payers/At-Risk Providers Employer Solutions Provider Solutions Life Sciences IT
State of Venture in Technology
5
6
2019 pace expected to slow slightly from 2018, though we are
still at historic levels
§ 2018 crossed the $100B watermark for the first time since the height of the dot-com boom in 2000.
§ H1 2019 continued at a similar clip to 2018; however, venture deployment slowed in Q3, driven by a decrease in
deal volumes. Valuations remain at historically elevated levels.
§ FinTech market has continued to explode, with funding totals expected to grow 50% YoY. Growth driven by an
increase in mega-rounds ($100M+); FinTech has grown from 5-10% of Tech VC in 2010 to 10-20% in 2019.
U.S. Venture Investments in Technology 1 U.S. Venture Investments in Financial Technology
Mega rounds ($100M+)
accounting for ~60% of
total funding
(1) Excludes Hardware and Biotech; Categories not mutually exclusive. Actuals through 10/20/2019
Source: Pitchbook; Team analysis
7
Robust deal volume and continued growth in deal sizes and
prices
Note: As of 10/22/2019
Source: Pitchbook; Team analysis
U.S. VC Pre-Money Valuation by StageU.S. VC Deal Size by Stage
26x
9x8x
20x
19x
15x 12x
19x
5x
15x
10x
8x
8
Multiples have increased sharply in the last few years
*Data through H1 2019, multiple represents pre-money valuation multiple.
Source: Pitchbook; Team analysis
2016 2017 2018 2019
8x 14x
11x
17x
20x
14x
19x
18x
9.9
9.0
7.3 7.2 7.7
8.8
7.5 7.3
10.5
12.5
Avg. 2019 YTD F-Prime
deals seen: ~18x
Series A
Series B
Series C
22x
4x
10x
14x
16x
Company 1
Company 4
Company 5 Company 11
Company 3
Company 2
Company 6
Company 7
Company 12
Company 13
Company 24
Company 25
Company 18
Company 19
Company 8
Company 9
Company 14
Company 15
Company 20
Company 21
Company 22
Company 23
Company 17
Company 10 Company 16
Cybersecurity Enterprise CloudFinTech DevOps Healthcare IT MarTech Vertical SaaS
Sample F-Prime SaaS Deals Seen
Median Industry-wide Tech VC Revenue Multiple
9
Venture funding shifted towards later stage in 2014, though
has remained mostly constant over last five years
(1) Excludes Hardware and Biotech; Categories not mutually exclusive. Actuals through 10/20/2019
Source: Pitchbook; Team analysis
U.S. Venture Investments in Technology1
10
2019 capital raised by VC’s still historically high, but below
2018 peak
.23
2018 was a 10-year high for fundraising;
2019 levels more in line with 2014-2017
First-time funds also experienced
return to pre—2018 levels
Source: Pitchbook; Team analysis
Megafund fundraising
returning to normal levels
11
2019 exits nearly tripled from 2018 levels, driven by long-awaited
unicorn IPOs
Facebook: $81B
market cap at
IPO
IPO value*
Last round
valuation
Total prior
funding
N12M multiple
at IPO
Uber $75.7B $70.0B $20.1B 5.1x
Lyft $24.0B $15.1B $5.0B 6.5x
Slack $23.3B $7.1B $1.2B 28.7x
Pinterest $10.0B $12.3B $2.9B 11.7x
Zoom $9.2B $1.0B $0.5B 29.7x
Peloton $8.1B $4.2B $1.1B 4.4x
Datadog $7.8B $0.6B $0.2B 25.4x
Crowdstrike $6.7B $3.3B $0.6B 38.6x
Cloudflare $4.4B $1.8B $0.4B 15.6x
Medallia $2.6B $1.3B $0.3B 11.7x
PagerDuty $1.8B $1.3B $0.1B 24.3x
Total $175B $33B
11 Unicorn IPOs in 2019, Totaling ~$175B2019 exits nearly tripled 2018 numbers
§ Against ~$460B of fund deployment, over $790B of exit
value since 2010, with over 200 unicorn companies still
privately held
§ Massive exit volumes in 2019 could soften the impact of
a public market correction as liquidity is rolled back into
new funds
*Based on initial offering share price
Source: Pitchbook; S-1 Filings; Team analysis
Up round
Performance of recent IPOs indicate public markets value strong
underlying unit economics
Note: Stock price measured as of 10/22/2019
Source: CapitalIQ
Companies with <50% gross
margins have seen a decline in
stock value
Stock has appreciated
since IPO
Stock has depreciated
since IPO
2019 IPO Cohort Stock Price & Gross Margins
Postmates and WeWork postponed
IPOs, in part due to lack of appetite
for lower margin businesses
Tech M&A activity also increased in 2019, driven primarily by
mega-cap deals ($2.5B+). Potential for outsized exits is growing
Note: Actual data through 10/20/2019
Source: Pitchbook; S-1 Filings; Team analysis
US Technology M&A Activity ($) US Technology M&A Activity (# Exits)
~60% of
exits in
2019 were
>$100M
(compared
to ~20% in
2010)
Questions or comments?
Reach us on twitter @FPrimeCapital
14

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State of Venture, Technology

  • 1. State of Venture Report - Technology January 2020
  • 4. Infrastructure Note: Not an exhaustive list 4 F-Prime Capital’s Technology Portfolio F IN T E C H P ORT F OL IO Insurance Wealth Management Payments E N T E R P R IS E P ORT F OLIO H E A LT H IT & S E RV IC E S P ORT F OLIO Real Estate Capital Markets DevOps SaaS / Enterprise Security AV/Robotics Data analytics Payers/At-Risk Providers Employer Solutions Provider Solutions Life Sciences IT
  • 5. State of Venture in Technology 5
  • 6. 6 2019 pace expected to slow slightly from 2018, though we are still at historic levels § 2018 crossed the $100B watermark for the first time since the height of the dot-com boom in 2000. § H1 2019 continued at a similar clip to 2018; however, venture deployment slowed in Q3, driven by a decrease in deal volumes. Valuations remain at historically elevated levels. § FinTech market has continued to explode, with funding totals expected to grow 50% YoY. Growth driven by an increase in mega-rounds ($100M+); FinTech has grown from 5-10% of Tech VC in 2010 to 10-20% in 2019. U.S. Venture Investments in Technology 1 U.S. Venture Investments in Financial Technology Mega rounds ($100M+) accounting for ~60% of total funding (1) Excludes Hardware and Biotech; Categories not mutually exclusive. Actuals through 10/20/2019 Source: Pitchbook; Team analysis
  • 7. 7 Robust deal volume and continued growth in deal sizes and prices Note: As of 10/22/2019 Source: Pitchbook; Team analysis U.S. VC Pre-Money Valuation by StageU.S. VC Deal Size by Stage
  • 8. 26x 9x8x 20x 19x 15x 12x 19x 5x 15x 10x 8x 8 Multiples have increased sharply in the last few years *Data through H1 2019, multiple represents pre-money valuation multiple. Source: Pitchbook; Team analysis 2016 2017 2018 2019 8x 14x 11x 17x 20x 14x 19x 18x 9.9 9.0 7.3 7.2 7.7 8.8 7.5 7.3 10.5 12.5 Avg. 2019 YTD F-Prime deals seen: ~18x Series A Series B Series C 22x 4x 10x 14x 16x Company 1 Company 4 Company 5 Company 11 Company 3 Company 2 Company 6 Company 7 Company 12 Company 13 Company 24 Company 25 Company 18 Company 19 Company 8 Company 9 Company 14 Company 15 Company 20 Company 21 Company 22 Company 23 Company 17 Company 10 Company 16 Cybersecurity Enterprise CloudFinTech DevOps Healthcare IT MarTech Vertical SaaS Sample F-Prime SaaS Deals Seen Median Industry-wide Tech VC Revenue Multiple
  • 9. 9 Venture funding shifted towards later stage in 2014, though has remained mostly constant over last five years (1) Excludes Hardware and Biotech; Categories not mutually exclusive. Actuals through 10/20/2019 Source: Pitchbook; Team analysis U.S. Venture Investments in Technology1
  • 10. 10 2019 capital raised by VC’s still historically high, but below 2018 peak .23 2018 was a 10-year high for fundraising; 2019 levels more in line with 2014-2017 First-time funds also experienced return to pre—2018 levels Source: Pitchbook; Team analysis Megafund fundraising returning to normal levels
  • 11. 11 2019 exits nearly tripled from 2018 levels, driven by long-awaited unicorn IPOs Facebook: $81B market cap at IPO IPO value* Last round valuation Total prior funding N12M multiple at IPO Uber $75.7B $70.0B $20.1B 5.1x Lyft $24.0B $15.1B $5.0B 6.5x Slack $23.3B $7.1B $1.2B 28.7x Pinterest $10.0B $12.3B $2.9B 11.7x Zoom $9.2B $1.0B $0.5B 29.7x Peloton $8.1B $4.2B $1.1B 4.4x Datadog $7.8B $0.6B $0.2B 25.4x Crowdstrike $6.7B $3.3B $0.6B 38.6x Cloudflare $4.4B $1.8B $0.4B 15.6x Medallia $2.6B $1.3B $0.3B 11.7x PagerDuty $1.8B $1.3B $0.1B 24.3x Total $175B $33B 11 Unicorn IPOs in 2019, Totaling ~$175B2019 exits nearly tripled 2018 numbers § Against ~$460B of fund deployment, over $790B of exit value since 2010, with over 200 unicorn companies still privately held § Massive exit volumes in 2019 could soften the impact of a public market correction as liquidity is rolled back into new funds *Based on initial offering share price Source: Pitchbook; S-1 Filings; Team analysis Up round
  • 12. Performance of recent IPOs indicate public markets value strong underlying unit economics Note: Stock price measured as of 10/22/2019 Source: CapitalIQ Companies with <50% gross margins have seen a decline in stock value Stock has appreciated since IPO Stock has depreciated since IPO 2019 IPO Cohort Stock Price & Gross Margins Postmates and WeWork postponed IPOs, in part due to lack of appetite for lower margin businesses
  • 13. Tech M&A activity also increased in 2019, driven primarily by mega-cap deals ($2.5B+). Potential for outsized exits is growing Note: Actual data through 10/20/2019 Source: Pitchbook; S-1 Filings; Team analysis US Technology M&A Activity ($) US Technology M&A Activity (# Exits) ~60% of exits in 2019 were >$100M (compared to ~20% in 2010)
  • 14. Questions or comments? Reach us on twitter @FPrimeCapital 14