Highlights from prominent regions are explained below. These are merely top-down snapshots that serve to demonstrate that in the face of heightening competition for local deals, VCs can look abroad for more ambitious bets. Funds increasingly have scouts working remotely in these regions, rewarding the brave with earlier round entrances. The state of venture capital in Africa is promising. Kenya, Nigeria, and South Africa are the most burgeoning markets for venture capital opportunities.
As of , 18 unicorns have been minted across the region, with fintech, marketplaces, and logistics being of particular importance sectorally. There is already a wide ecosystem of local investors, but larger foreign ones predominantly from the USA and Spain are increasingly entering to help Series A rounds onwards.
Grab and Go-Jek have demonstrated innovation excellence by combining mobility with wider eCommerce and fintech propositions. There are a number of elements that make emerging economies like Vietnam , Indonesia , and the Philippines intriguing from an investment perspective.
Small AUMs and purely angel, seed and the occasional Series A round investment in hyperlocal locations with high-touch interaction.
Despite the focus on mega rounds and funds, micro investing remains an important stakeholder for cultivating the next successful batch of startups. On an overall basis this excellent analysis shows that their returns on an aggregate level are not staggering, but they tend to thrive in focused areas:. Many micro-VCs in the US have generated a lot of buzz and have good brands but often the good performances are driven by unrealized marks, stale prices, and market exuberance.
In Europe, the story is different. Seed stage investing is less competitive and the demand is bigger than supply. Opportunity exists here to capitalize upon the uptick in round valuations that has occurred over the past decade in neglected areas. Median seed valuations have increased by a CAGR of This accelerated round uptick can be attributed to the seed market largely staying the same structurally, while later rounds have faced the inflation brought on by increased capital influx.
This may appease micro investors, as the valuation uptick is working in their favor. Where Micro VCs tend to struggle from a returns perspective is through maintaining enough ownership for their winners to have a material impact on fund returns. The larger and dilutive later round valuations make it difficult for micro VCs to exercise pro-rata rights.
This can end up being a scotch tape affair of raising opportunity fund SPVs to raise follow-on financing outside of their original fund. The neglection of seed also presents sectoral opportunities for brave investors to find quality deals in industries that are away from the core focus of larger funds. VC William Hurley highlighted the risks faced by these tertiary markets, which in itself presents an opportunity for micro funds investing in seed:. As much as there is opportunity in the venture capital industry, there are also lingering issues that need to either be addressed outright or plotted a course around.
Valuations rising is only good for VCs if they can ride the wave long enough to exit in time. If they have to pay more for deals at higher valuations, then they are increasing risk, lowering governance influence and relying on growth and margin expansion rising. Growth in valuations has overtaken the pace of revenue growth, and consequently, there has been a widening of enterprise value to revenue multiple ratios. The common rationale for this is that private companies have more growth opportunities; the investor is paying a premium for growth upside potential.
But for public markets to accept an IPO and upwardly propel its price thereafter, there will need to be signs of considerable revenue growth between final private rounds and early life as a public company. As has been observed in , some disappointing IPO entrances from Uber and Lyft highlighted that public markets are a different beast to private rounds.
Traditionally, IPO investors were distinct to private ones, yet in recent years, mutual funds and the like have been allocating capital between the two indiscriminately. This has resulted in less clamor for IPO allocations from such large investor entities. The need to IPO nowadays is not to find new capital sources, but instead to provide liquidity to earlier investors for crystalizing their gains. Yet in recent years, companies going public have still not yet settled on stable business models; consequently, the percentage of companies going public with negative earnings has now reached peak dot-com bubble territory.
The sheer volume of private capital available has blurred the focus on private startups to find sustainability quicker. When they do eventually debut, it can seem like they are limping over the line, instead of galloping onwards. If there is still clear growth upside, then it can be an acceptable trade-off to consider, but if it is tapering off, public investors will reject the stock.
This trend is a threat for VCs going forward because alienating or taking liberties with the public markets may ultimately lead to their doors closing. By alienation, this refers to not leaving enough growth on the table to provide a compelling investment for the price, but also in terms of how the startup markets itself. This S-1 is so devoid of meaningful information despite its length that it makes me wonder what, if anything, Uber is trying to hide.
It also goes without saying that corporate investors, or those who are not investing money ring-fenced in closed-ended fund structures, could cause contagion risk to the VC market if there is a cash crunch in the wider economy.
Regulation is a stereotypical topic that would appear under such a section of threats. Most good-natured managers will just see it as the price to pay within the context of great returns, but others may look for a way around it.
Such as:. Private early-stage equity investing can actually be a good hedge against economic downturns. During such periods, certain costs become cheaper and talent more readily available. The timing also allows for younger startups to plan their go-to-market more thoroughly during the aftermath lull.
Yet, an escalation of geopolitical events could have severe knock-on effects globally for venture capital investors and their investments. Current topics of interest here are:. Existential regulatory threats to the life of a startup are prevalent factors for certain industries like biotech and fintech, but those in the consumer space tend to find means of navigating around them unscathed think: Uber. So, to distill this report into six brief lines, this is what has happened recently in the VC market:.
As is known , venture capital investing can be more art than science. Agrawal invests in internet companies across all stages and joined Battery Ventures in He is also present in many other companies as a board member, for example, Sprinklr and Bazaarvoice. He has ranked in the Forbes Midas List for the past ten consecutive years.
Twitter: NeerajVC. The company focuses on seed, early and late-stage investment. Kirsten has been a founding partner at Forerunner Ventures since where she made investments in Glossier and Warby Parker. Prior to this, she was a senior accountant at Deloitte. Twitter: kirstenagreen.
So far the firm has made investments in companies such as HotelTonight , and Venmo. Paley serves as managing partner at Founder Collective and he has been at the company since He is in the top 10 tech investors in coming in at number nine and helped Founder Collectives seed investment into Uber.
Twitter: epaley. This venture fund was originally named the Floodgate Fund, and was founded in by Mike Maples Jr.
They invest in companies in Silicon Valley that are related to the technology industry. A few of their previous investments include Okta and Chegg. Maples has been a partner at Floodgate since He has been on the Forbes Midas list for eight years and was also mentioned in Fortune Magazine's "8 rising stars". Some of his investment include Twitter and Bazaarvoice. Twitter: m2jr. Miura-Ko co-founded Floodgate in She holds a Ph.
Twitter: annimaniac. They invest in technology companies at seed, early stage and growth stage with a focus in consumer and healthcare industries. A few of their notable investments include Skype , Spotify , and LinkedIn. Since , Deeter has been an active partner at Bessemer Venture Partners. He focuses on cloud, mobile, and other technology-related companies.
Twitter: bdeeter. Apart from being a partner at Bessemer Venture Partners since , Levine is a board member at Pinterest and Wikia He also led the investment in LinkedIn from to In recent years, his focus has been on companies outside the USA.
Twitter: jeremyl. They focus on many different staged companies from seed to growth category. Their investments include Alibaba Group , Pandora , Slack. Tung has been at GGV Capital for more than eight years and is now managing partner. Next to the venture firm he is also a board member at musical. For two years, he was an associate at Bessemer Venture Partners. He is currently number ten on the Forbes Midas List.
Twitter: hanstung. Their previous investments include companies such as Wish and Assembly. Lonsdale is among the early investors of Wish and Synthego. He was listed in the Forbes Midas List in and and was the youngest member ever to be listed at the time.
He is co-founder at Palantir, a multi-billion dollar software company specializing in data analytics. Twitter: JTLonsdale. Andreessen Horowitz was founded in and is based in Menlo Park, California. The firm invests in industries such as gaming, mobile, and e-commerce. Among their portfolio companies are Airbnb , BuzzFeed and Facebook. Apart from founding Andreessen Horowitz, he is also a board member of directors at Facebook and eBay. Horowitz, along with Andreessen, founded Andreessen Horowitz in He also co-founded one of the first widely used web-browsers, Netscape.
Twitter: pmarca. Jordan has been a managing partner at Andreessen Horowitz. He is actively present as a member of the board at Airbnb , Pinterest and more. Back in , he was the president of PayPal until He is ranked number 20 of the top tech investors in according to Forbes. Levine is a general partner at Andreessen Horowitz, investing in enterprise.
He joined in and has been active ever since. Horowitz is a co-founder of Andreessen Horowitz. Prior to this, he was the vice president and general manager at Hewlett-Packard and president, CEO at Opsware for over eight years. He is number four on the Forbes Midas list in Twitter: bhorowitz.
General Atlantic is one of the leading growth firms, founded in Since its existence, they have many representative investments such as Facebook and Lenovo. He focuses on investments in media, internet, and technology.
The firm had made investments in Facebook and Eventbrite. Shleifer joined Tiger Global Management in and was a managing director until becoming a partner in He specializes in private equity. Fixel has been a partner at Tiger Global Management for 13 years investing in startups related to software and the internet. He has led investments for LinkedIn and Facebook but his most notable deal was with Spotify.
He now is an investor at his own firm Addition. Twitter: leefixel. They are focused on companies in the early stage related to healthcare, biotechnology, cleantech, computing etc. In total, they have had 87 exits including Guardant Health and Okta. Khosla founded Khosla Ventures in He prefers to invest in startups related to cleantech, information technology but also robotics. Prior to founding his own venture firm, he worked at Kleiner Perkins for over 18 years. Twitter: vkhosla. Weiden joined Khosla Ventures in as a founding partner and managing director.
Prior to this he was an analyst at Morgan Stanley and has been on the Midas List ten times before dropping off in The company is based in New York, NY. Representative investments include Tumblr and the Alibaba Group. Parekh has been at Insight Venture Partners since and is a managing director. He invests in consumer internet, e-commerce, and data. He has been selected by the U. Senate to become a member of the board on the Overseas Private Investment Corporation.
Twitter: djparekh. Foresite Capital was founded in by James B. Tananbaum and is based in San Francisco, California. Among their notable investment are 10x Genomics. Twitter: JTananbaum. They have made investments in internet and software companies such as Airbnb , Facebook , and Spotify , and financial tech companies like Payoneer. Marshall has operated as a general partner at TCV since and serves as an investor at Airbnb and Spotify where he has been a board member since He primarily focuses on fintech and entertainment industries.
Twitter: woodymarshall. Ansari is a general partner at TCV, having joined in first as an associate. He focuses on investments in fintech, healthcare, IT, and software. Redpoint Ventures was founded in in Menlo Park, California. Among their investments, you can find Netflix , JustEat , and Answers.
Yang has been a founder and partner at Redpoint Ventures since He is also a board member at Scribd and also worked as a board member at MySpace in for less than a year. Dharmaraj is a managing director at Redpoint Ventures and invests in companies related to consumer tech and enterprise. Twitter: satishd. General Catalyst was established in Taneja has been a managing director at General Catalyst since and has supported companies such as Airbnb and Warby Parker.
For over three years he has been a board member at Grammarly. He is number 31 on the Forbes Midas List for Twitter: htaneja. Now a managing partner, Cutler joined General Catalyst in Twitter: jcut. Foundry Groups was founded in and is based in Boulder, Colorado. The firm focuses on investments in the technology industry.
They have invested in companies like Fitbit and Zynga. Feld co-founded Foundry Group, Techstars in and is managing director at companies Intensity Ventures since and Mobius Venture Capital since Prior to this he was a president at Feld Technologies. He has also written books on venture capital investing and entrepreneurship. Twitter: bfeld. The firm is based in Menlo Park, California. They have invested in Giphy , Skype , Twitter and many more. Glein has been a part of DFJ since as a partner and is a co-founder.
He prefers to invest in companies related to technology and media and he was an investor at Twitter for four years, and at Tumblr for two years, as well as a notable investment in SpaceX. Twitter: rglein. Throughout these years they made many investments and have notable exits such as Uber and Lending Club.
Crowe is a managing partner at Norwest Venture Partners where he has worked since For six consecutive years, Crowe has made the Forbes Midas List, but has since fell off in He has over 20 years CEO and executive experience under his belt. Twitter: jeffmcrowe. The firm is based in Silicon Valley, California. They have invested in Fitbit , Duo Security , Ring and many more.
Callaghan founded True Ventures in and has been in the Venture Capital arena since He is an expert in general management and holds a degree from Harvard Business School.
He focuses primarily on early-stage tech companies. Twitter: jcal7. Conrad is a member of the founding team at True Venture and is a partner since He invests in startup businesses, technology-related companies, and the consumer internet.
He is a board director at Automattic Wordpress. Twitter: tonysphere. OrbiMed Advisors is based in New York, and was founded in with the purpose of investing in companies related to healthcare.
They have invested in Alector , Harpoon Therapeutics , Avedro and many more. Gordon serves as a general partner at OrbiMed Advisors. He joined the firm in , and invests in biotech and pharmaceutical companies, as he holds a Ph. Silverstein has been at the firm OrbiMed for over 22 years.
He is the managing partner and the co-head of private equity. He focuses on investment that are related to healthcare, biotechnology, and medical devices. The firm made notable investments in Chia and Button. Chao is a general partner and a co-founder at DCM Ventures. He uses his experience at Apple to guide his portfolio companies through product marketing and corporate strategies.
Aspect Ventures was founded in and is located in Palo Alto, California. The founders are Jennifer Fonstad and Theresia Gouw.
Prior to becoming a founding partner at Aspect Ventures, Gouw was a managing partner at Accel Partners for 15 years. In , she left Aspect to co-found Acrew Capital.
She invests in security software and mobile software. Twitter: tgr. In Mike Harden and Stuart Peterson founded AV with the purpose of investing in seed, early and late-stage companies. Mentionable investments include Facebook and YouTube. Peterson has been part of Artis Ventures since as a co-founder and managing partner. Among the investments are Facebook, Etsy, and Datalogix. Prior to becoming the CEO and founder of Breyer Capital, he was an assistant product manager at Apple for a year, an investor and board member at Marvel Entertainment , a board member at Walmart , Dell and 21st Century Fox.
For over 28 years he worked at Accel Partners. Since , he has been an investor and board member at Facebook. Twitter: jimihendrixlive. IVP has existed since , founded by Reid Dennis. Chaffee has been at IVP since where he works as a managing director and partner. He has notable investments under his belt such as Twitter , Netflix , and Yahoo.
Twitter: tclaytonchaffee. Maltz has been an investor at IVP since He invests in software and internet companies. He is also an investor at Slack and Dropbox. He has been on the Forbes Midas List for three consecutive years and serves as board observer at Grammarly. Twitter: JulesMaltz. The firm has made investments in Fitbit , Eventbrite and many other companies. For over 14 years, Clavier has worked at Uncork Capital, and is a managing partner and founding member.
He was educated in France and has a Masters degree in Computer Science. He mainly focus on mobile, cloud and consumer services related companies. Twitter: jeff. Mayfield Fund was founded in , and is based in Menlo Park, California. Some notable investments include ServiceMax and Crunchbase. Chaddha has worked at the Mayfield Fund since and is managing director.
Prior to this, he founded companies such as VXtreme that was acquired by Microsoft. He also worked at Microsoft as Chief Architect and Director. He is number 5 on the Forbes Midas List in Bain Capital Ventures is the venture arm of Bain Capital. They are based in Boston, Massachusetts. The firm focuses on investments in software-related companies. Notable deals include Jet. Deshpande has been a Managing director at Bain Capital Ventures for seven years and left in In effect, venture capitalists focus on the middle part of the classic industry S-curve.
They avoid both the early stages, when technologies are uncertain and market needs are unknown, and the later stages, when competitive shakeouts and consolidations are inevitable and growth rates slow dramatically. Consider the disk drive industry. In , more than 40 venture-funded companies and more than 80 others existed. Today only five major players remain. Growing within high-growth segments is a lot easier than doing so in low-, no-, or negative-growth ones, as every businessperson knows.
In other words, regardless of the talent or charisma of individual entrepreneurs, they rarely receive backing from a VC if their businesses are in low-growth market segments. What these investment flows reflect, then, is a consistent pattern of capital allocation into industries where most companies are likely to look good in the near term.
During this adolescent period of high and accelerating growth, it can be extremely hard to distinguish the eventual winners from the losers because their financial performance and growth rates look strikingly similar.
Thus the critical challenge for the venture capitalist is to identify competent management that can execute—that is, supply the growing demand.
In this period of accelerated growth, the financials of both the eventual winners and losers look strikingly similar. Picking the wrong industry or betting on a technology risk in an unproven market segment is something VCs avoid. Genetic engineering companies illustrate this point. VC investments in high-growth segments are likely to have exit opportunities because investment bankers are continually looking for new high-growth issues to bring to market.
The issues will be easier to sell and likely to support high relative valuations—and therefore high commissions for the investment bankers. Thus an effort of only several months on the part of a few professionals and brokers can result in millions of dollars in commissions. As long as venture capitalists are able to exit the company and industry before it tops out, they can reap extraordinary returns at relatively low risk. Astute venture capitalists operate in a secure niche where traditional, low-cost financing is unavailable.
High rewards can be paid to successful management teams, and institutional investment will be available to provide liquidity in a relatively short period of time. There are many variants of the basic deal structure, but whatever the specifics, the logic of the deal is always the same: to give investors in the venture capital fund both ample downside protection and a favorable position for additional investment if the company proves to be a winner.
The preferred provisions offer downside protection. For instance, the venture capitalists receive a liquidation preference. In addition, the deal often includes blocking rights or disproportional voting rights over key decisions, including the sale of the company or the timing of an IPO.
The contract is also likely to contain downside protection in the form of antidilution clauses, or ratchets. Such clauses protect against equity dilution if subsequent rounds of financing at lower values take place. Should the company stumble and have to raise more money at a lower valuation, the venture firm will be given enough shares to maintain its original equity position—that is, the total percentage of equity owned.
That preferential treatment typically comes at the expense of the common shareholders, or management, as well as investors who are not affiliated with the VC firm and who do not continue to invest on a pro rata basis.
Alternatively, if a company is doing well, investors enjoy upside provisions, sometimes giving them the right to put additional money into the venture at a predetermined price. That means venture investors can increase their stakes in successful ventures at below market prices. How the Venture Capital Industry Works The venture capital industry has four main players: entrepreneurs who need funding; investors who want high returns; investment bankers who need companies to sell; and the venture capitalists who make money for themselves by making a market for the other three.
VC firms also protect themselves from risk by coinvesting with other firms. Rather, venture firms prefer to have two or three groups involved in most stages of financing. Such relationships provide further portfolio diversification—that is, the ability to invest in more deals per dollar of invested capital. They also decrease the workload of the VC partners by getting others involved in assessing the risks during the due diligence period and in managing the deal.
And the presence of several VC firms adds credibility. In fact, some observers have suggested that the truly smart fund will always be a follower of the top-tier firms. Funds are structured to guarantee partners a comfortable income while they work to generate those returns. If the fund fails, of course, the group will be unable to raise funds in the future. The real upside lies in the appreciation of the portfolio. And that compensation is multiplied for partners who manage several funds.
On average, good plans, people, and businesses succeed only one in ten times. These odds play out in venture capital portfolios: more than half the companies will at best return only the original investment and at worst be total losses. In fact, VC reputations are often built on one or two good investments. Those probabilities also have a great impact on how the venture capitalists spend their time. Instead, the VC allocates a significant amount of time to those middle portfolio companies, determining whether and how the investment can be turned around and whether continued participation is advisable.
The equity ownership and the deal structure described earlier give the VCs the flexibility to make management changes, particularly for those companies whose performance has been mediocre. They must identify and attract new deals, monitor existing deals, allocate additional capital to the most successful deals, and assist with exit options. Astute VCs are able to allocate their time wisely among the various functions and deals.
Assuming that each partner has a typical portfolio of ten companies and a 2,hour work year, the amount of time spent on each company with each activity is relatively small.
That allows only 80 hours per year per company—less than 2 hours per week. The popular image of venture capitalists as sage advisors is at odds with the reality of their schedules.
0コメント