News > Venture Capital

VC exit activity remains strong despite rising valuations
<p>U.S. VC exit activity has slowed this year. 2014 exits harkened back to the dot-com days, though last year’s total was partially skewed by the massive $22 billion sale of WhatsApp. Absent that deal, 2014 was still a post-2000 record by both count and value, so a slowdown isn’t surprising. What has changed over the past five years is the sheer number of exits happening, topping out at 986 last year. Through 1H, 2015 totals aren’t too far behind at 427, and capital exited levels should compare favorably to prior years, as well.</p> <p>IPO activity, on the other hand, is well off last year’s pace. 121 VC-backed companies went public in 2014 versus only 42 companies through June of this year. Market volatility will likely dictate IPO activity through the rest of the year, though the number of still-private unicorns hints at stronger IPO numbers—at some point. Until then, acquisitions remain the exit of choice for VC, with another 385 sales finalized in 1H totaling $23 billion in value. M&amp;A made up 90% and 85% of VC exit counts and value, respectively, through the first half.</p> <p>Large exits ($500M+) accounted for the lion’s share (58%) of total capital exited in 1H, down slightly from 63% in 2014. Most years going back to 2006 saw $500M+ exits account for 40% or less of total exit value, and sometimes as little as 21% (in 2009).</p> <p>This article is an excerpt originally posted on ValueWalk. </p> <p>&nbsp;</p>
How to break into the VC world
<p>Venture capitalists are the cool kids of the finance high school world. But it's not easy to get to the top.</p> <p>As one VC said, people have this "wry notion that it [venture] means automatic fun, wealth and thrills, sorry...it's just not that way," writes Inc. If you're willing to put in the hours, the effort, and have a traditional finance background, here's what else VCs recommend you have to join their ranks:</p> <p> Be an entrepreneur. Success or failure, having experience building and selling companies can make you a VC's dream entrepreneur-in-residence. If you're not a business starter, work for a startup. Startup experience can give valuable insight for investing in new companies later.<br /> Invest. Make a track record by investing in an angel deal or two with your own money. Added bonus? Sit on a startup's advisory board.<br /> Network, network, network. It's vital to know and be known in the startup community. Attend events, blog, and utilize your current job's connections. Make your contact list irreplaceable.<br /> Be smart and analytical. Be able to critically look at companies, analyze their potential, and know their finances. Good old fashioned finance skills are essential here.<br /> Think about alternative career paths. Few people jump into their dream careers. It's unlikely you'll intern at a VC firm and work your way up the ladder. Consider gaining operating experience. Work in business development at a tech company. Join an angel group or family office in an investor role.</p> <p>Photo: Michael</p>
Uh Oh! Looks like Tesla might have a Chinese rival
<p>Well it was bound to happen wasn't it? Just as taxi app Uber must now contend with Didi Kuaidi, or the way Xiaomi has shaken up the smartphone space, a lean new Chinese electric car start-up - NextEV - is trying to muscle in on Tesla's turf.</p> <p>Not only that, it just raised a round led by Silicon Valley venture capital giant Sequoia Capital, according to Fortune. Other investors include Uber-backers Hillhouse Capital. Ok, but it's in China, right? It's not like the start-up is moving into Tesla's backyard or anything? Well, actually, it just opened a new 85,000-square-foot R&amp;D center in north San Jose, California.</p> <p>Its not the first rival Tesla has had to deal with. The US incumbent, which was backed early on by Draper Fisher Jurvetson, DBL Investors, and Technology Partners - among others,  has already inspired a slew of copycats. That said, it looks like the electric car space has just got a little bit more crowded.<br /> Photo: Thomas Hawk</p>
Women and VC: The aftermath of Ellen Pao vs KPCB
&nbsp; Last week we saw Ellen Pao finally throw in the towel and drop her appeal after losing her sexism case against former employers Kleiner Perkins Caulfield and Byers, a Silicon Valley-based venture capital. In article published in Re/code, the former Reddit CEO draws a line under her three-year-long battle, detailing exactly what she was up against, and why she
Video: The most important factor that can tell you whether a startup will succeed or fail
<p>Bill Gross has launched tons of startups. Some have done brilliantly. But not all. In this video, Gross analyzes what is most important in determining success. The answer that the founder of Idealab comes up with may surprise you. The answer really surprised Gross.</p> <p>From TED.</p>
Venture capitalists are keeping a list of unicorns most likely to die. What would be on your list?
<p>There's been a lot of chatter about the burgeoning number of unicorns out there. In fact, unicorns are giving way to what Re/Code calls "decacorns" --startups valued at more than $10 billion.</p> <p>Well, now venture capitalists are creating lists out there predicting the death of many of these unicorns, Fortune is reporting. Who is on the list? Mum's the word. CB Insights has a list of dying startups -- but it will cost you $6,895 to access it. A bargain basement price for a list that could save you millions.</p> <p>Is a bubble about to burst? VC par excellence Marc Andreessen declared last year that many startups will "vaporize."</p> <p>Some might argue there was never a bubble -- just a pretty good illusion of one. Those billion-dollar valuations? They may have been real for only a handful of investors who were promised that they would be first in line when a company went public or got sold: If the benighted unicorn sold for less than $1 billion, the VC would still get paid as if it had sold for $1 billion.</p> <p>Now that's what I call magic.</p> <p>According to a survey of 37 deals by Silicon Valley law firm Fenwick and West, if the company does even better than expected? You guessed it. The benighted investors get a larger share of the profit.</p> <p>Fortune keeps a list of unicorns. You can find it here. Any on it that you think deserve to be on the deathwatch?<br /> Photo: yosuke muroya<br /> &nbsp;</p> <p>&nbsp;</p>
Will VC valuations come down to earth?
<p>Is the U.S. VC market in bubble territory? There’s no shortage of commentary on the subject, but the conversation was more theoretical before the stock market dipped in late August. For startups and their investors, high valuations feel more uncertain today than they did 12, six, even three months ago. Most of the data in this report is through the first half of 2015, before the stock market lost its footing. As such, they could represent a high point in round sizes and valuations across any—or all—stages. Even if stock prices recover over the next few months, it wouldn’t be surprising to see valuations come down to earth as the year progresses.</p> <p>Through June, however, valuations kept climbing. Seed valuations hit a median $6.1 million, a record. Markups at the seed stage have pushed up Series A and B valuations to $15.1 million and $41.4 million, respectively, up from already high medians of $12.6 million and $35.3 million in 2014. Later stage trajectories were even steeper, and arguably more vulnerable to the latest downturn in public markets. At a median $184 million, valuations at Series D and later stages are the most likely to get hit in the coming quarters. So-called “unicorns”, startups valued at $1 billion or higher, are set to get the most scrutiny. As we detail on page 13, the number of U.S.-based unicorns has almost doubled this year. Another 31 startups joined the club through August, on top of 32 new unicorns minted last year. It’s taken less time for this year’s unicorns to reach billion-dollar status; the time between their prior rounds and unicorn rounds fell to a median 1.1 years, and median valuation step-ups from those prior rounds fell to 2.1x compared to 10x in 2012.</p> <p>One reason for the rise in unicorns (and high valuations in general) has been a steady migration of mutual fund investors into the asset class. We dove into that trend on page 15 and found some interesting results. Late stage rounds with mutual fund participation skyrocketed in 2014 (no surprise there) and stayed high through 1H 2015. Starting this year, however, mutual funds have crowded into earlier stages, as well, causing the median early stage valuation (Series B and prior) to jump to $56 million. The 2014 median was a much more modest $13.6 million, about half of what it was in 2007.</p> <p>If U.S. VC activity is in for a correction, it’s going out on a high note. $21.8 billion worth of investments were inked in 2Q, yet another post-crisis record. The past five quarters have either nearly hit or eclipsed the $15 billion mark, compared to zero prior to 2Q 2014. At the same time, the number of rounds has steadily waned since the 2,200 seen in 1Q 2014. This past quarter’s total fell to 1,767, a 20% drop by count. The sharpest slowdown continues to be in later stage activity, tallying only 338 rounds in the second quarter versus 548 in 2Q 2014. Depending on investor sentiment, we might see further slowdown at the Series C and D stages, or at least a leveling off if VC firms are pressured to finance future pre-IPO rounds.</p>
A multi-billion dollar fight: The insanity of Uber and Didi Kuaidi
<p>China ride hailing app Didi Kuaidi has just upped the ante in its fight against rival Uber, raising $3 billion from the likes of China Investment Corp, Capital International Private Equity Fund, Ping An Ventures, joining investors Alibaba Group, Tencent Holdings, Temasek and Coatue Management.</p> <p>This is days after Uber China raised $1.2 billion in a round led by Baidu. According to the Financial times, the battle for dominance has already cost both firms over a $1 billion in marketing and incentives for drivers and passengers.</p> <p>Burning obscene amounts of cash can be important for start-ups in a nascent industry for obtaining economies of scale, even more so when you have to beat away competition.</p> <p>But, increasingly it looks like this can only go one way. A recent article in Forbes showed that Didi Kuaidi has a 78.3% market share in China vs Uber's 10%. Its not just in China that Uber is struggling to take market share from local rivals.</p> <p>Will Uber snag enough market share to recoup it losses in China? Looking at Didi Kuaidi dominance - and the fact it has the resources and backers to easily match Uber’s war chest - it is difficult not to feel the US-firm is on a hiding to nothing.<br /> Photo: Gary Paulson</p>
Sequoia, Legend back Baidu’s online education platform
<p>The Chinese internet giant Baidu is about to spin-off its “after school” education platform Zuoyebang, attracting investments from two of the world’s largest venture capital firms.</p> <p>According to TechCrunch, Zuoyebang has just completed a Series A funding round with Sequoia China and Legend Capital, though how much the two invested into the former student Q&amp;A site is currently unclear.</p> <p>It’s probably a lot though. Zuoyebang reportedly boasts 50 million registered users, 3 million of which use it on a daily basis to rifle through the 950 million questions and answers the platform currently has on file. It can also be used within 113 schools around China, a huge plus against Tencent and Alibaba in the current war for control over China’s online education market.</p> <p>This isn’t the first time Baidu spun-off one of its subsidiaries; Baidu Takeout Delivery raised $70 million from the Japanese noodle chain Ajisen Ramen and the Chinese private equity firm The Hina Group earlier this year, while 91 desktop – Baidu’s desktop theme app – was also purged from the mothership in a move widely seen as a promotion of the startup culture.</p> <p>This is what they had to say regarding the spin-offs:<br /> “This strategy aims to promote the independent quality assets, and to foster Baidu’s open ecosystem.”<br /> Photo: 드림포유</p>