Fri 20 Jan 2012 |
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| Today the NVCA and PwC released its Q4 and Year End 2011 MoneyTree venture capital investment report with data from Thomson Reuters. It reports statistics on US venture capital investment rounds into American companies.
A year-over-year comparison showed that 2011 total dollars invested were 22% over 2010 levels to $28.4 billion. While up, this is still below the levels seen in 2007 and 2008. By contrast, the number of deals went up only 4%, which of course means larger deals. The larger deal size is driven by a few factors: (1) more money went into larger, later stage deals which still occur at a rate above historical averages; (2) there was some overall increase in deal valuations in a number of sectors, particularly IT; and (3) within the life sciences, where the deals tend to be more capital intensive, there was a shift to investing in the later stages.
A few interesting points:
First rounds into life science companies are decreasing because of uncertainty over the future ability to move new drugs and devices efficiently through the FDA approval process. However, there were a number of large rounds into later stage life science companies already in portfolios.
First time fundings overall were up from 1,047 in 2010 to 1,159 in 2011. This shows that the US venture capital industry is very much open for business. A rule-of-thumb is that a healthy ecosystem funds 1,000-1,200 new companies each year.
In Q4 2011, 53% of deals were into seed and early stage companies. This is the highest quarterly proportion since 1995. Typically, seed and early stage deals make up 40% of the mix. For full year 2011, 49% of deals were seed and early stage. Again this is the highest annual proportion since 1995.
Clean tech investment continued to increase, although it was noted that these deals are structured to be less capital intensive than what we saw a few years ago.
The press release, list of largest deals for the year, and national and regional data can be found on the NVCA website. |
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Tue 03 Jan 2012 |
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In this morning’s Exit Poll release by the NVCA and Thomson Reuters, we were deliberate in making the point that despite the Q4 momentum, the venture-backed IPO market did not recover in 2011. In fact, it still has quite a way to go before we declare a healthy IPO market. Here at NVCA, we are focused on the NUMBER of offerings rather than the total offer amount as our country needs MORE public companies – not necessarily bigger ones.
Aside from the need for more IPO volume, here are a few other trends that 2011 data suggests:
Bulge Bracket Banks Still Dominate: Morgan Stanley served as the book manager or co-manager for the most venture-backed IPOs in 2011 at 17 followed by Goldman Sachs and JP Morgan (14 each), BofA Merrill Lynch (11), and Barclays Capital, Citi and Deutsche Bank (10). Boutique banks had a smaller showing with 1 or 2 IPOs apiece.
Continued Competition Among the Exchanges: The NVCA views competition among the exchanges as a positive and 2011 did not disappoint. The NYSE listed 33 percent of the offerings in 2011 including Renren, Kosmos Energy and LinkedIn. This compares to 36 percent of the listings in 2010 but 12 percent in 2007. NASDAQs biggest offerings of the year were Yandex, Zynga, GroupOn and HomeAway.
Foreign IPOs Still a Presence, Though Less So than in 2010: The largest IPO of the year was Russian company Yandex, at $1.3 billion followed by U.S.-based Zynga at $1 billion. Foreign IPOs accounted for one quarter of the 2011 listings compared with 37 percent of the listing in 2010. The drop in percentage was driven by fewer Chinese companies listing this year (9) versus last year (25).
Domestic IPOs Bring Economic Promise to Regions: Domestically, the most IPOs came from California-based companies with 21 followed by Illinois, Texas and Massachusetts (3 each), and Indiana and Colorado (2 each). Other states that had an IPO were Connecticut, Washington, Iowa, New Jersey and Utah. It can’t be stressed enough how important these IPOs are to a region’s economy.
Promise Abounds for 2012: The pipeline is full with 60 venture-backed companies cuurently in registration. If all of these companies actually go out we will need another 40 or more to join them to declare a strong IPO year for 2012.
For more IPO data and information, feel free to contact NVCA. |
Wed 14 Dec 2011 |
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Today the NVCA and Dow Jones VentureSource released results from our 2012 Venture View predictions survey. It's hard to believe that we have been doing this survey for six years -- but less hard to believe that this year's results reflect an ecosystem that is far less optimistic than last year. For those who may recall, last year there was hope among VCs and CEOs alike that investments would increase, IPOs would improve, and the economy would begin to recover in 2011. As we all know now, the optimists were disappointed in a number of ways as we will end 2011 with fewer IPOs than 2010 and signs an economic rebound remains elusive. While VC investment in certain sectors will increase this year from 2010, namely consumer, business and healthcare IT, other industries such as life sciences and clean tech will see declines. The optimists could have been correct had the year ended August 15th but the ensuing U.S. debt crisis and S&P downgrade knocked us off our path towards recovery and no one is sure when or for long we will be able to resume forward momentum.
That is, no doubt, why predictions from VCs and CEOs are far less sanguine than last year. All one needs to do is read the individual predictions from the VCs to understand the consensus regarding industry contraction and a slower recovery. Reality has hit home and the industry recognizes that we do not operate in a vacuum. But despite it all, both VCs and CEOs anticipate some very positive growth - particularly with VC-backed companies where 86 percent of CEOs forecast an increase in headcount and 69 percent plan to increase their global activity in 2012. And the better our companies do, the more healthy the VC industry is. Challenges may be heavy but in venture capital and entrepreneurship, optimism has a way of always prevailing.
So perhaps the respondents to this year's survey are keeping expectations low for a reason. Rather than being disappointed at this time next year, perhaps they are setting themselves up to be pleasantly surprised. Given all the political and market uncertainty, the pendulum could swing either way in 2012. Here at the NVCA we are prepared for "down" but enthusiastically rooting for "up".
Click here to view predictions from CEOs |
Mon 21 Nov 2011 |
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This morning the NVCA and Dow Jones VentureSource released the results from the 2011 Venture Census survey which measured the demographics of nearly 600 professionals working in the venture capital industry. This census is the second we have done with the last one completed in 2008. The results have not changed in any dramatic way. The industry is still dominated by white males, although the younger, newer professionals are trending to be a more diverse group. And non-investing positions such as the CFO and Marketing/Communications Directors are comprised by a majority of women. Still, the numbers show a industry that remains relatively homogeneous in nature.
Much has been said, analyzed, conjectured and reported about the low percentage of women in the venture capital industry. NVCA members universally recognize that increasing this percentage over time is good for the industry, good for entrepreneurs, and good for business. Yet, the venture industry remains challenged to move the dial quickly due to a number of structural factors at play including the smaller pool of women in the science and technology fields from which many venture capitalists enter the asset class. Our hope continues to be that, over time, we will see more women and minority investors to better reflect the influencers and customers with whom we partner to grow companies. But, like the venture capital process itself, progress will likely be over the long term.
The 2011 Venture Census shows an asset class that is comprised of extremely bright and motivated professionals who exhibit a great deal of commitment to their jobs. The NVCA feels it is important to track these demographic trends ongoing as the industry continues to contract so we can monitor the changes that result. As the industry gets smaller, tiny shifts can have large impacts. We would like to thank all those who took the time to complete the survey and help us deliver accurate and timely statistics on the industry.
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Tue 25 Oct 2011 |
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NVCA and Cambridge Associates released June 30, 2011 benchmark statistics for the U.S. venture capital industry which show modest improvement from returns seen the past few quarters. What is not clear, however, is what effect an IPO market which stalled after the June 30 reporting date will have on returns in the next few quarters. Remember that we had seen increased IPO activity in the first seven months of 2011. As the second quarter ended, it appeared that the large number of later stage, mature, eligible companies with sights set on an IPO would finally be able to access the levels of capital the public equity markets provide. Then a series of events occurred including the federal budget impasse and US credit downgrading which depressed public markets. Optimism turned to caution.
The press release summarizing these results as well as a detailed year-by-year report on the US venture capital industry performance is available on the NVCA website. As you will read, the U.S. venture capital returns for the second quarter was 7.0%. The most recent five years produced an overall return of 7.4% IRR. Longer term, the 20 year return is 27.4%. Historically, the U.S. venture capital industry has returned 18%-24% to its investors. This performance is at least double that of the major economic indices such as the DJIA, NASDAQ Composite or S&P 500.
For vintage year funds 1981-2010, overall for every dollar put into funds by investors, $1.08 has been distributed back to the investors. Additionally, companies still in venture portfolios had a net asset value (NAV) on June 30 of 52 cents, bringing the total value for the the period to $1.60 for each investor dollar. This figure represents a collective pool of funds; individual firms achieve returns above and below this aggregate number, creating the quartiles the industry has come to use to measure individual fund performance relative to the overall asset class (“alpha”).
With a large number of companies awaiting a stronger IPO window, it is worth noting that more than 30% of the value of June 30 portfolio holdings is held by funds of vintage year 2002 and older. Recognizing the need for an improved IPO market, NVCA has been actively engaged in the IPO Task Force – a broad-based private sector group recommending reforms needed to restore emerging company access to the public capital markets. We are hopeful that the last months of 2011 will see a re-opening of the IPO window so companies can continue along their growth trajectories and create jobs, returns, and shareholder value for the country.
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Mon 24 Oct 2011 |
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While economic conditions in the United States continued to be turbulent in the third quarter, the year-to-date engagement of corporate venture capital groups remains strong relative to the post-bubble period, and significantly exceeds pre-bubble levels. For the first three quarters of 2011, corporate groups participated in more than 15% of the deals, and provided almost 9% of the capital. This corresponds to $1.9 billion invested in 419 deals. A full breakout of corporate venture investment can be found here.
In the seven reported quarters in 2010 and thus far in 2011, clean technology companies seem to be of keen interest to this group, which invested $1.1 billion into 118 clean tech deals during this 21-month period. This represents approximately 28% of the total corporate venture dollars deployed during this time. The clean technology category crosses traditional MoneyTree industry sectors where corporate venture investment is especially prevalent in life sciences (23% of all corporate VC for the last 7 quarters), industrial/energy (23% of CVC) and software (18% of CVC).
Corporate venture capital continues to be a critical component of U.S. venture investing and we are optimistic that these healthy percentages will hold as more companies are finding strategic value in entering the startup ecosystem. |
Wed 19 Oct 2011 |
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Today the NVCA along with PwC released the Q3 2011 MoneyTree venture capital investment numbers which are based on data from Thomson Reuters. Not surprisingly, quarterly investment is down overall from Q2 as the industry begins to adjust to the lackluster fundraising and exit markets. You can not invest money you don't have, and as more firms postpone raising follow-on funds, we can expect a continued slowing of investment.
Interestingly, the quarter saw significant decreases in both life sciences and clean tech investment, two sectors that are extremely sensitive to the public policy environment. The biotechnology and medical device sectors have been challenged by an unpredictable FDA regulatory process in recent years as demonstrated by our Vital Signs report which came out at the beginning of October. The long-term viability of clean tech sector has been questioned in light of a Congress that has offered little policy support over the last several years for emerging clean technologies. Both of these sectors represent exactly the types of companies in which the venture industry should be investing. The promise of innovation has never been greater and for that reason, life sciences and clean technology will continue to be key venture investment sectors, but not without challenges.
For those investing in IT which is booming, you are not immune to policy changes either. Government budget cuts will be inevitable in the coming year which will curtail federal, state and local government spending on your products. Patent reform will change the way you address IP issues. Immigration policy may prevent you from investing in foreign born entrepreneurs. And, maybe most importantly, the capital markets continue to be laden with regulatory burdens that impact all venture-backed companies’ ability to successfully go public or be acquired.
Never before has public policy been so poised to weak havoc on our industry and on the companies in which we invest. But never before has the industry been better poised to make our case for a policy environment that fosters company formation and job creation. The NVCA has been extremely active on Capitol Hill in the last year and our advocacy efforts will only increase in the areas of FDA reform, capital markets regulation, energy policy, immigration and tax issues. The future of U.S. investment in American innovation -- across all sectors - -depends upon it.
More MoneyTree information is available including:
National data, including breakouts by industry sector, stage and first time fundings
Regional data byMoneyTree region and state
Top 10 deal list for Q3
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