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The State of Venture Investing and Observations on the IndustryJune 6, 2013
Mark G. HeesenNVCA President
The Number of US VC Firms Has Peaked .. Thankfully
At Year End
# Active Firms
Capital Managed
1970 28 $1B 1980 87 $4B 1990 100 $28B
2000 1,053 $224B 2012 522 $199B
Source: 2013 NVCA Yearbook, prepared by Thomson Reuters, figure 1.04
$0
$20
$40
$60
$80
$100
$12019
88
1989
1990
1991
1992
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1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1Q13
$ B
illi
on
Inve
ste
d
VC Investment Peaked in 2000; Industry is Smaller Now; $27B in 2012
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters
$105b
$32b
$27b
$6b
Clean Tech Deal Sizes Have Declined – All Sectors Driving Toward Capital Efficiency
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13
Ave $M CT 11.7 6.4 6.9 3.9 5.3 6.4 11.8 11.6 13.6 10.2 12.8 13.1 12.3 6.0
0
2
4
6
8
10
12
14
16
Average Clean Tech Deal Size $M
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters
First Fundings - VCs Continue To Invest in Promising Companies –
1,000-1,300 Considered Healthy; Life Sci particularly slow now
-
500
1,000
1,500
2,000
2,500
3,000
3,500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13# Cos 1,430 2,469 3,390 1,234 850 776 975 1,076 1,280 1,417 1,305 828 1,086 1,325 1,203 263
# F
irst
Tim
e F
undi
ngs
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters
The Number of First Fundings of Life Sciences Companies is Way Down…
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13
# LS FF 153 193 203 167 191 170 178 168 190 205 275 270 256 173 188 180 140 20
0
50
100
150
200
250
300
Note: For this chart, biotech, pharmaceuticals, med devices, and therapeutics are included. HC services is not.
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters
Investment Trends from NVCA 2013 Yearbook
• A record 48 states and DC reported venture deals in 2012• That said, a record 53% of the $ went to CA cos• In 2012, 522 traditional and CVC groups invested vs 1,053 in
bubble• In 2012, 10 largest funds raised 48% of capital leaving 173
funds with the other 52%• # of IPOs down from 2011 to 2012, but total IPO valuation
$122.3 (hi since 1986) and proceeds of 21.5B• Corporate VC 8.2% of dollars and engaged in 15.2% of
deals• 51.8% of deals are seed and early – highest since 1985
Source: NVCA 2013 Yearbook, prepared by Thomson Reuters
A Closer Look at Recent Minnesota Investing
Note that data “cuts” can be done from the historical trend data section of www.pwcmoneytree.com or from the
National Aggregate Spreadsheet which can be downloaded from that site.
Minnesota investing – recent pressure and slow first quarter
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13
$M Inv 257 340 617 951 475 343 208 388 274 305 413 485 285 145 291 253 40
# Deals 89 77 84 106 87 58 57 52 43 46 61 52 39 31 49 30 10
0
20
40
60
80
100
120
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$ M
illion
s I
nto
Com
pan
ies
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters
Recent Minnesota Financings Are Follow-On Rounds into Life Science Companies
(Not shown: Recent first fundings $ heavily into Software, not LS!)
Med Dev50%
Bio23%
SW17%
Ind/Energ5%
HC Svcs2%
Other3%
VC Dollar Investment – 2Q 2011 to 1Q 2013
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters
The Exit Scene - the importance of acquisitions has become clear
over the past several years
but the IPO market remains the key!
IPO Levels Overall Below What is Needed; 2012 Numbers Driven by Facebook & friends ($16.0B)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13
$Offer B 5.8 4.2 24.0 27.4 4.1 2.3 2.0 10.3 5.1 7.1 12.4 0.8 2.0 7.7 10.7 21.5 0.7
Count 141 79 280 238 37 24 26 83 59 68 92 7 13 69 51 49 8
0
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0.0
5.0
10.0
15.0
20.0
25.0
30.0
Nu
mb
er o
f IP
Os
Off
er
$B
Source: Thomson Reuters/National Venture Capital Association
M&A Activity
Source: Thomson Reuters/National Venture Capital Association
Venture Exit Counts- IPOs and M&A by Year
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13
#M&A 97 116 143 189 227 380 384 363 323 402 443 485 488 422 360 545 498 469 77
#IPO 202 270 141 79 280 238 37 24 26 83 59 68 92 7 13 69 51 49 8
0
100
200
300
400
500
600
700
Nu
mb
er
of
Iss
ue
s
#M&A
#IPO
Source: Thomson Reuters/National Venture Capital Association
2012 Was First Post-Bubble Year That Distributions Exceeded Contributions in the US
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Dist/Contrib 149% 226% 92% 35% 42% 64% 96% 71% 95% 47% 47% 94% 94% 162%
0%
50%
100%
150%
200%
250%
US VC - Ratio of LP Distributions to LP Contributions
Source: Cambridge Associates, NVCA
Recent Battles
• J.O.B.S. Act of 2012• VC fund registration/regulation• Taxation of long term capital gains taken as carried
interest• FDA reform• Clean technology science funding/supportive
policies (ARPA-E support)• Healthcare• Internet regulation• Preserving investment company accounting