Venture

Outlook 2013
Bullpen LP Mee+ng 2012

VC Industry
Lets go to the videotape!

Remember This? Its Back!!

R.I.P. FOMO Deals (FOMO = Fear Of Missing Out)

Beginning of End, or End of Beginning?

Glass Half Full
VC Returns Rising VC Fundraising Rising VC Investments Rising NASDAQ outperforming Enterprise IPOs

Glass Half Empty

VC Consolida+on VC Inves+ng Trending Down Faceplant Exits, Follow-On Down Series A Crunch

12 December 2012

Venture Returns Improving

Index returns:
10 yr: 5.3% 3 yrs: 12.7%

Median returns:
10 yr: (4.6%)

VC Fundraising Best Since 2008

VC Investments Rising

2012 Softening vs. 2011

Source: PwC Q3 survey as reported by Fenwick & West

Another Tech Bubble is Blowing

Naz >> S&P Aint all AAPL

Enterprise is Back!
(But it never left )
Enterprise IPOs:
40% of venture-

funded IPOs in 2012

Up from 25% in 2011 Steadier income than

Consumer
Tend to hold up beder

in aeer-market

Source: CBInsight; Reuters; peHub Analysis

VC Consolidating
The Barbell
700 funds listed as extant 97 funds inves+ng over $1m

The Quick Flip

Mean exit is $70M # of 2x+ exits constant, In VC golden age, IPOs

in four straight quarters

outsized winners decreasing outpaced M&A, now ipped

# of LPs decreasing VC no longer an asset class

but an access class

IPO Performance Since Peak

Faceplant!!

Down Rounds Increasing

Source: Fenwick & West

Tech M&A Value is Down

Number is steady

VC-backed Companies Slowing Acquisitions

Series A Crunch in Tech Deals

2000 1800 1600 1400 1200 1000 800 600 400 200 0 2009
Source: Cbinsight as reported by Dan Primack

# Deals

Seed Series A

2010

2011

2012

Compare Last Years Seed to This Years A

Series A Cli

2000 1800 1600 1400 1200 1000 800 600 400 200 0 2009

Seed shifted one year out, comparing the year after when they seek A rounds

# Deals

Seed Series A
Series A estimated for next year, flat to past two years

The Cliff

2010

2011

2012

2013

Source: Cbinsight as reported by Dan Primack

Series A Crunch in Internet Deals

More seed deals:
1009 in 4Q10-3Q11 1708 in 4Q11-3Q12

Same A deals:
696 in 4Q10-3Q11 717 in 4Q11-3Q12

Fewer Series B/C/D:

305 in 3Q11 207 in 3Q12

Source: NVCA; UNH Center for Venture Research; Cbinsight; Term Sheet (Dan Primack)

Angels Have No Institutional Memory

Angels Invest
>300,000 angels Angels place $20B/yr 2000 angel deals/yr We see the same ideas:

VCs Fear To Tread

<300 ac+ve VC VC place $20B in all rounds 200-250 angel deals pass the

seed fund lter

Seed funds remain thesis

Tried in 2010, failed Tried in 2011, failed Tried again in 2012

driven, skip failed ideas

NVCA Sees No Series A Crunch

They do not account for angel/seed well

Source: NVCA

Sectors
FOMO Lives!

21

The Debate
Go Enterprise
WSJ: Consumer deals down 42%

Stay Consumer
Fred Wilson: Dropo is in later

in rst 3 quarters of 12 vs. 11 future" with capital-intensive Enterprise deals

stages (the Crunch!)

Mainline VCs: Back-to-the-

Momentum investors moving

from Consumer to Enterprise

Enterprise IPOs

Dave McClure: Consumer s+ll

showing fast pops on winners and Mobile is harder than Web

Transi+on from Web to Mobile,

Source: WSJ; Fred Wilson (http://www.avc.com/a_vc/2012/11/what-has-changed.html?)

12 December 2012

22

Social Has Imploded

Then
Video Instagram!! Viddy gets $370M value

Now
Socialcam sold for $60M Video app trac down 95%

Local!!

Foursquare heading for down

round (ask: $760M, bid: $300M?)

Private Social Networks!

Path has grown from 250K to

800K MAU, not barn burning

Source: Christina Cordova, reported in Business Insider; WSJ

12 December 2012

Enterprise: M&A Holding Steady

Enterprise/ SaaS drives Deal Value (49% of total) SaaS M&A is steady, other sectors down SaaS may now drop no more Autonomys!

Source: 451 M&A Knowledgebase; Ernst & Young as reported by VentureBeat

Has the E-Commerce Bubble Burst?

General VC view that e-com deals are over-priced, but:
Amazon bought Zappos for 2-3x sales in 2009 Warby Parker raised at 10x revenue Fab raised $105M at 4x sales $600M, not the $700M ask Zulily raised $85M at close to $1B value

Thats a burs+ng bubble?

Source: Bloomberg; Business Insider

Zynga Has Not Poisoned The Game Sector

Mobile Games Hot

Games Funded Lean

Implications for Bullpen

We Love Our Posi+on

Seed Still Small vs Traditional VC

Traditional VC Trends Skew Numbers

Source: PwC Q3 survey as reported by Fenwick & West

Median Deal Size Smaller

Source: PwC Q3 survey as reported by Fenwick & West

Lean Growth Round Arbitrage

Lean Seed Rounds Pricing 2x Higher Lean Growth Round Pricing Steady

Source: WSGR Data; Eric ver Pleog analysis

Why We Love our Position

Incubato rs Super An gels

We fund the $1.5-3M lean growth round

Micro VC s

Deal pace up
See > 5000 deals per year

Round size down Follow-on funding

harder to get avid angels

Seed funds lter

eed $1M s
ngel 250K a $