venture capital strategic view jan 2015

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A VENTURE CAPITAL PERSPECTIVE GAMIEL GRAN JANUARY 2015

ENTREPRENEURS (Starting and Building

Companies)

VENTURE CAPITALISTS (Finding and Funding

Entrepreneurial Companies)

The Venture Capital Process

INSTITUTIONAL INVESTORS (Limited Partners – e.g.

Endowments, Pension Funds)

•  Long-term funders of VC firms (10-year contract, funds flow slowly)

•  Need out-sized returns (DJIA+5); Want access to best firms; Comp issues

•  Can drive cyclicality •  Past 12 months very constrained

•  Some “Super Angel” funds may have just individual limited partners, not institutions

•  Equity investors (Not lenders); strike deals

•  Pick winners and add value; wide variety of outcomes

•  Firms often specialize and have multiple funds

•  Long-term funds, but liquidity focused

•  Disintermediation – “crowd funding”

•  Defining and focusing the pursuit of an opportunity

•  Marshalling resources / maintaining control

•  Attempting to create “virtuous cycle of success”

•  Outcomes vary widely, thus creating “inefficient market” for VC’s

•  1958 Small Business Administration •  1960 Venrock •  1962 Draper •  1964 Sutter Hill •  1972 Kleiner Perkins •  1974 ERISA killed •  1978 ERISA renewed VC flow:

•  1977 $39M •  1978 $570M

•  1981 Capital Gains down to 20%

For every dollar of venture capital invested from 1970 to 2010, $6.27 of revenue was generated Annual venture investment equals less than 0.2 percent of U.S. GDP. Annually, VC-backed companies have generated revenue equal to 21 percent of U.S. GDP

History of Venture Capital

Historical View: Correlation to Tax Policy

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Venture Benchmark Performance

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Crowdfunding

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Company   Raise(M)   Offer$   Opening$   Current$  

Alibaba   22,000   $68     $92     $108    

King  Digital   $500     $22     $20     $16    

GoPro   $425     $24     $31     $57    Virgin  America   $306     $23     $27     $33    

GrubHub   $200     $26     $40     $35    OnDeck  Capital   $200     $20     $26     $25    

Coupons.com   $168     $16     $32     $15    

Zendesk   $100     $9     $11     $24    

Truecar   $70     $9     $9     $22    

$64B raised in Tech IPOs in 2014 As hedge funds, mutual funds, corporates, sovereign wealth and private equity investors piled into U.S. tech companies in 2014, the 588 companies in the pipeline have raised a whopping $64.27B across more than 2,700 financing deals. $24B (38.4%) of that funding came in 2014.

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The billion dollar valuation club spikes •  The number of Tech IPO Pipeline

companies that entered the billion-dollar valuation club skyrocketed in 2014

•  160%+ increase from the number of companies that first raised at a $1B+ valuation in 2013

•  There are 42 companies in the $1B+ IPO pipeline

•  Actfiio •  AirBnB •  AppDynamics •  AppNexus •  Automattic •  Box •  Cloudera •  CloudFlare

•  CreditKarma •  Deem •  Docusign •  Eventbrite •  Evernote •  Fanatics •  Gilt •  Good Technology •  Houzz

•  Insidesales.com •  Jasper

Technologies •  Jawboine •  JustFab •  Kabam •  Lookout •  MongoDB •  Nutanix

•  Palantir •  Pinterest •  PureStorage •  Qualtrics •  Razer •  Slack •  Snapchat •  SpaceX •  Square

•  Stripe •  Survey •  Monkey •  Tango •  Uber •  Unity Tech •  Vice Media

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•  Insert new bullets

•  Insert new bullets

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Historical: VC Deals# and Funding $’s

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VC Funding …

http://www.bothsidesofthetable.com/2010/07/22/want-to-know-how-vcs-calculate-valuation-differently-from-founders/

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© 2014 SOASTA. All rights reserved. May 4, 2015 33

Forrester: Top Technology Trends "for 2014 And Beyond

1. Digital convergence erodes boundaries Physical and digital worlds are converging. As a result consumers expect uniform service whether they are in the physical world or if they are in the digital world. 2. Digital experience delivery makes (or breaks) firms Forrester makes the point that “A great digital experience is no longer a nice-to-have; it’s a make-or-break point for your business as we more fully enter the digital age.”

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WE ARE INCREDIBLY LUCKY

We have the opportunity to build (and manage) the “vast, silent, unseen Second Economy” “By 2025 the Second Economy will be as large as the 1995 physical economy”

W. Brian Arthur, Santa Fe Institute – McKinsey Quarterly, Oct 2011; http://www.mckinsey.com/insights/strategy/the_second_economy

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THE

50 – 50 MARKET of 2020

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50 – 50

Billion Devices Times the Data

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NEW TECHNOLOGIES ARE TRANSFORMING WORK A NEW TYPE OF DIGITAL ENTERPRISE IS EMERGING

Some client voices on Digital: CXOs “Advances in technology and shifts in customer expectations show no signs of abating. They bring in their wake both disruption and opportunity. We need to recognize that banking is a digital business.”

Every business is a digital business. Every customer is a digital customer. AIG must evolve to compete

Robert Benmosche, CEO, AIG

Simon McNamara, CAO, RBS

Martin Sorrell, CEO, WPP

"We increased our target for digital to 40%-45% of our business. If you asked — what do I regret about the past

five or ten years? We didn't go fast enough."

The mobile revolution is being televised

The mobilization of everything

1991 Radio Shack ad All items now available with a standard smart phone. $3,465.06 for entire ad $6,229.82 in real terms

Facebook can watch you fall in love…. “During the 100 days before the relationship starts, we observe a slow but steady increase in the number of timeline posts shared between the future couple.”

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Some key trends

• Snapchat: Social communications •  Tinder: Social connections • AirBnB: Shared economy • Spotify: On Demand Music • Oculus: Virtual Reality • Quanergy: Self-driving in a chip • Houzz: Digital Remodel •  Instacart: Local but Digital retail • Pinterest: Share Ad model v2 • Bitcoin: New currency • Github: Community Programmer •  Invensense: Contextual chips

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GAMIEL GRAN JANUARY 2015