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10

May

2013

VentureScape by the Numbers PDF Print E-mail

Emily Mendell

Written by Emily Mendell   
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NVCA's VentureScape by the Numbers

600+ Attendees at the Westin San Francisco on May 14-15 ...

200+ Venture capital firms sending delegates ...

160+ Entrepreneurs at The World’s Largest Office Hours...

100+ Cities from across the country and around the world represented...

80+ Mentors meeting with startup companies ...

40 Years of NVCA

25+ Journalists covering venture capital and entrepreneurship...

6 Deep Dives focused on your business...

5 Outstanding leaders giving powerful keynotes on May 15th...

4 LPs Ranting and Raving about the VC asset class in a "no holds barred" session

3 VC bands opening for Train lead singer Pat Monahan at NVCA Live! at the Great American Music Hall...

2 Days devoted to celebrating venture capital...

1 Opportunity each year to come together as a collective voice...

Be counted.  Be there.

Register here.
 

19

Apr

2013

Putting Q1 MoneyTree in Context PDF Print E-mail

John Taylor

Written by John Taylor   
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Earlier today, we released results for first quarter US venture investment activity. The release shows a 12% decline in dollars from the prior quarter (4Q2012) to $5.9 billion. This is the lowest dollar total since 2010. The commentary in the release highlights the tough funding environment for new life science companies, some pull back in energy and clean technology -- especially in capital-intensive business models, the strong position of IT in preferred sectors, and a step up in the percentage of the dollars (38%) going to later-stage companies.

But there are four factors driving these statistics that are worth noting:

  • There are definite ecosystem stresses keeping investment levels down – While there have been selected bright spots in the exit scene in the past few years, favorable exit markets have been out of reach for many fine companies still in venture portfolios. In a different environment, these same companies would have gone public 2, 3, or 4 years ago, but are still awaiting the opportunity to obtain badly-needed new capital. With slow exits, many venture firms have not been able to distribute meaningful proceeds to their investors from existing funds. Nor have they been able to generate a deep track record. This, in turn, puts raising capital for future investments out of reach of many. For now, this is stressing capital available for investment.
  • Mature portfolio companies are looking ahead to IPOs – The step up in 4Q2012 and 1Q2013 in percentage of dollars going to later-stage companies suggests that venture capital investors are positioning these companies for IPOs, perhaps later this year. And why not? Public equity markets are at near-record levels, and several provisions of the JOBS Act have enabled companies to go public with less friction. Stay tuned.
  • Deal flow is very strong – We regard venture capital firms making 1,000-1,300 first-time investments annually to be in the healthy range. There were 263 first-time fundings in 1Q2013, which is within this range. Further, more than half of all venture deals are in seed- and early-stage companies – historically very high. This has been true for six of the past seven quarters. Prior that that, you have to go back to 1996 to see proportions above 50%.  Despite constrained capital, VCs are very much focused on the next generation of great companies.
  • Capital efficiency is king – The biggest stresses are in sectors that are typically capital intensive, such as Energy and Clean Technology and the Life Sciences. Both areas are facing challenges on the policy side and we continue to work tirelesssly at NVCA to help foster an environment supportive of investing in these areas.  IT investing reamins very strong. We’ve been asked how we can say that tech is capital efficient when Pinterest, for example, is on our top 10 deals of the quarter list at $200M. It is important to distinguish the amount of capital necessary to get a basic organization in place and get to proof of concept from the amount of capital committed to building up a winning company once the VCs are comfortable in a high-probability opportunity. We saw similar activity in Facebook as it approached its IPO.

All of these factors, of course, impact performance.  We intend to release year end 2012 VC return data in mid-May once it is compled by our partners at Cambridge Associates. Stay tuned.

 

 

18

Apr

2013

Senate Gang of 8 Releases Immigration Bill PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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This week the group of bipartisan senators who have been working since January behind closed doors on a comprehensive immigration bill released their bill, The Border Security, Economic Opportunity, and Immigration Modernization Act.  The bill overhauls both legal and illegal immigration as well as addresses border security issues and the most controversial issues around agricultural and guest worker programs that have halted any forward movement in recent years on immigration legislation.

Of particular importance to the venture capital industry and our entrepreneurs is the creation of a new startup visa for immigrant entrepreneurs, called an INVEST Visa. The INVEST Visa provides a pathway both for foreign born entrepreneurs who are already in the U.S. and for entrepreneurs who want to come to the U.S. to start businesses.  Entrepreneurs can qualify for the INVEST Visa if they meet certain criteria around raising funds and creating jobs within certain time periods.  An entrepreneur can also qualify for the INVEST Visa if they have an advanced STEM degree and raise a certain about of funds from a qualified investor.

The bill also revamps the H-1B Visa for high-skilled workers by increasing the cap from the current number of 65,000 to 110,000 and increasing the current cap for STEM graduates with advanced degrees from 20,000 to 25,000 per year, with a market demand mechanism built-in to fluctuate in times of excessive demand. Companies that use of the H-1B program would also be subject to new fees as well as recruitment and wage requirements.

The bill is more than 800 pages and we plan to relase a full summary once our review is complete.  We have posted letters of support to Senator Bennet (D-CO) and the Gang of 8 in recognition of their leadership in this process.

Lawmakers are pledging to move the bill through “regular order” meaning the legislation would move through the Senate Judiciary Committee where two hearing are scheduled to take place April 19th and 22nd. The committee review and floor consideration by the full Senate will likely take several weeks; a vote by the full Senate is not expected before the end of May or early June.

The introduction of a comprehensive bill in the Senate that contains a unique visa for entrepreneurs is a great recognition of the power of the entrepreneurial ecosystem in bringing innovation and job creation to the broader U.S. economy.  Of course, introducing a bill is not the same as having a measure signed into law by the President.  And, in this instance there are many miles to go and many pitfalls to avoid to reach that goal.  But, the goal will never be reached without a start, and the Senate has provided the momentum for forward progress.  The House of Representatives, where negotiations are expected to be even more contentious, must also act.   We will keep NVCA members updated on the progress in both chambers.

 

11

Apr

2013

2013 NVCA Yearbook Now Available PDF Print E-mail

John Taylor

Written by John Taylor   
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The 2013 NVCA Yearbook is now available! You can click here to download and view a treasure trove of venture capital data through 2012.

This publication, prepared by Thomson Reuters, is the 16th iteration of a series launched in early 1998 by NVCA and what is now Thomson Reuters. In 2001, we joined forces with PricewaterhouseCoopers to provide you the best possible information on venture capital deals across all 50 states. This investment information is tracked and reported by the PricewaterhouseCoopers/NVCA MoneyTree TM Report based on data from Thomson Reuters. As a sign of the times, the book is produced and distributed as a PDF file only this year.

Some interesting facts and highlights from the 2013 Yearbook:

• 2012 saw investment in a record number of states (48 plus DC). It also saw the highest concentration of dollars going to California at 53%.

• In 2012, the 10 largest venture funds raised 48% of the capital with 173 funds raising the other 52%

• The number of IPOs was down slightly in 2012, but a few high-profile IPOs pushed the combined IPO valuation to $122.3 billion, which is the highest amount since 1986

• The presence of corporate venture capital continues to increase by providing 8.2% of the invested capital and participating in more than 15% of the deals

• The Exits chapter has been expanded to include new tables on valuation and exit sizes

• Appendix H has been written which describes the current status of harmonizing/converging US and international accounting rules

• Appendix I has also been rewritten to highlight the most recent portfolio company reporting valuation guidelines, and it reviews the history of valuation and peer-created guidelines over time

This Yearbook is but one of our tools to effectively tell the unique story of venture capital and explain what’s needed to continue creating great, leading-edge companies. Note that in 2009, Cambridge Associates became the official venture capital benchmarks provider for NVCA. Year end 2012 performance benchmarking statistics will be posted separately on the NVCA website.

Questions and comments are always welcome at research@nvca.org.
 

10

Apr

2013

NVCA Response to Obama Budget PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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Today President Obama unveiled his budget which, once again, included a provision to change the capital gains tax treatment for carried interest.  This inclusion is entirely consistent with the President's previous proposals, as is his lack of distinction between the asset classes that employ carry.  While we remain disappointed in the President's disconnect between support for venture capital and the startups we fund and a tax proposal that discourages long term investment in these critical companies, we are steadfast in our position that carried interest for venture is a capital gain and continue to advocate for our ecosystem.

It is important to understand that the President's budget submission is largely symbolic and will not be enacted into law.  The federal budget process and fundamental tax reform discussions are expected to continue on Capitol Hill for some time and NVCA is engaged with policy makers on these issues.  We will certainly keep you informed of any developments.

 

 

05

Apr

2013

WSJ Op-Ed on Carry Needed Clarity on VC Funds PDF Print E-mail

Jennifer Dowling

Written by Jennifer Connell Dowling   
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Tuesday's op-ed by John Steele Gordon about carried interest tax treatment in Wall Steet Journal failed to make a number of clarifications specifically about venture capital funds.  We posted the following comment on the piece, but want to share these broader points here at NVCAccess as a reminder of our position.  

The piece... needs some clarification in three areas as it relates to venture capital funds, which also receive carried interest when the companies in which they invest succeed long term:

1.       Venture capitalists do put their own money at risk, alongside the institutional investors with which they partner, to invest in companies.  They absolutely have a downside should their companies fail.

2.       Venture capitalists do work side by side with company founders offering the same type of sweat equity as the entrepreneurs.  Partners at venture capital funds are intimately involved in the operations of their companies, particularly at the earlier stages when hands on experience is needed most.  Venture capital firms do not have “staff” that handles these functions as the author suggests hedge funds do.

3.       Venture capitalists work with an entrepreneur to create and grow a capital asset – a company -- from the ground up, over many years.  This is exactly the type of behavior that long term capital gains tax policy is meant to encourage.

It is unclear whether the author’s assertions included venture capital funds – but regardless, it is important for readers to understand the distinction.

 

 

Last Updated on Friday, 05 April 2013 12:08
 
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