North Carolina North Carolina Council for Entrepreneurial Development Council for Entrepreneurial Development The State of Venture Capital The State of Venture Capital February 1, 2007 February 1, 2007 Mark G. Heesen Mark G. Heesen President President
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North Carolina Council for Entrepreneurial Development The State of Venture Capital February 1, 2007 Mark G. Heesen President.
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North Carolina North Carolina
Council for Entrepreneurial DevelopmentCouncil for Entrepreneurial Development
The State of Venture CapitalThe State of Venture Capital
February 1, 2007February 1, 2007
Mark G. HeesenMark G. Heesen
PresidentPresident
Fundraising & ResourcesFundraising & Resources
Typically Buyout Funds Outraise Typically Buyout Funds Outraise Venture 2x-3xVenture 2x-3x
Year
VC Raised $B BO/Mezz Raised $B
1998 30 60
2000 105 77
2003 11 30
2004 17 52
2006 29 102
Source: Thomson Financial / National Venture Capital Association – News release 1/16/2007 and prior releases
At Year End
# Venture Firms
Capital Under Mgt
1970 28 $1B 1980 89 $4B 1990 398 $31B
2000 887 $223B 2001 949 $252B 2005 866 $259B
The Number of US VC Firms Has The Number of US VC Firms Has Peaked .. ThankfullyPeaked .. Thankfully
Source: 2006 NVCA Yearbook, prepared by Thomson Financial, page 18
VC Fundraising Was Strong Thru 2000 - VC Fundraising Was Strong Thru 2000 - Recent Uptick Way Below Bubble Levels Recent Uptick Way Below Bubble Levels
Source: VentureXpert™ Database by VE & NVCADoes not include Corporate Venture groups.
Largest 24% of Funds Attract Largest 24% of Funds Attract 74% of Capital74% of Capital
2005 Funds by Size:2005 Funds by Size:$0-$25M$0-$25M 5757$25.1M-50M 14$25.1M-50M 14$50.1M-$250M 42$50.1M-$250M 42$250.1M+ 43$250.1M+ 43
0%
20%
40%
60%
80%
Pct of Money Going to Funds $250M & Up
1996 2000 2005Source: VentureXpert™ Database by VE & NVCA
Sources of Venture FundsSources of Venture Funds
Pension Funds42%
Endow & Found21%
Individ & Fam10%
Corps (as LPs)
2%
Financial & Ins25%
Source: 2003 data from 2004 NVCA Yearbook, prepared by Thomson Financial, page 22
Investment Marches On -Investment Marches On -Rumors that the Venture Industry Rumors that the Venture Industry has stopped investing are greatly has stopped investing are greatly
exaggeratedexaggerated
VC Investment Peaked in 2000; VC Investment Peaked in 2000; Recently 20-23% of Peak; 2006 Recently 20-23% of Peak; 2006
HigherHigher
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$ M
illi
on
In
ve
ste
d
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
Total Number of NC Deals Tracks Total Number of NC Deals Tracks National Trend National Trend
But Grew In 2006 Greater Than National 10%But Grew In 2006 Greater Than National 10%
$0
$20
$40
$60
$80
$100
$120
$140
$160
# Deals 83 104 156 93 85 74 55 54 65
1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
National 18.0% 10.0% 10.0% 2.0% 2.0% 8.0% 19.0%
NC 21.7% 21.4% 14.9% 8.7% 6.8% 5.6% 5.1%
Bio Comm Med Dev HC SvcsFin
SvcsSemi SW
Life Sciences Are Strong in NCLife Sciences Are Strong in NC(2006 MoneyTree Sectors)(2006 MoneyTree Sectors)
Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
The Exit Scene - The Exit Scene - the importance of acquisitions the importance of acquisitions has become clear over the past has become clear over the past
Recent Median IPO Valuations Are Recent Median IPO Valuations Are Consistently Higher than Pre-1999 Consistently Higher than Pre-1999 But Capital Efficiency is Still KeyBut Capital Efficiency is Still Key
Source: Thomson Financial/National Venture Capital Association
0
50
100
IPOs Done 29 93 56 58
In Reg on last day 31 57 16 36
2003 2004 2005 2006
What’s in the IPO Pipeline?What’s in the IPO Pipeline?IPOs During Period and Registration Counts at Period IPOs During Period and Registration Counts at Period
EndEnd
Source: Thomson Financial/National Venture Capital Association
IPO Markets Require More Maturity -- AgainIPO Markets Require More Maturity -- Again
[1999=4.3y. 2004=8.1y. Sample was very small for 2001-2003][1999=4.3y. 2004=8.1y. Sample was very small for 2001-2003]
0
2
4
6
8
Med
ian
Age
at
IPO
(Y
ears
)
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: Thomson Financial/National Venture Capital Association
0
100
200
300
400
# VB Acq 164 209 239 317 353 318 291 339 347 335
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
VB Acquisition Counts Don’t VB Acquisition Counts Don’t Change Much …Change Much …
Source: Thomson Financial/National Venture Capital Association
$0
$20
$40
$60
$80
Acq $B 7 9 38 68 17 8 8 15 16 17
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
M&A Proceeds Vary Greatly As the M&A Proceeds Vary Greatly As the Mix between “Good” Exits and Mix between “Good” Exits and
Fire Sales ShiftFire Sales Shift
Source: Thomson Financial/National Venture Capital Association
Trends and issues Trends and issues from beyond Palo from beyond Palo Alto and Alto and WashingtonWashingtonLatest thinking and Latest thinking and insightsinsightsIndustry, CFO, Industry, CFO, Young VC, Legal, Young VC, Legal, Corporate VC Corporate VC BreakoutsBreakouts