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Trends in Terms of Venture Financings in Silicon Valley — Fourth Quarter 2011

Posted in Uncategorized, tagged , , on February 28, 2012| Leave a Comment »

Article by Fenwick and West. For more information, please contact Barry Kramer and Michael Patrick (bkramer@fenwick.com).

“We analyzed the terms of venture financings for 117 companies headquartered in Silicon Valley that reported raising money in the fourth quarter of 2011.

Overview of Fenwick & West Results

  • Up rounds exceeded down rounds in 4Q11, 70% to 16%, with 14% of rounds flat. This showed continued strong valuations in the venture environment, consistent with 3Q11, and was the tenth quarter in a row in which up rounds exceeded down rounds.
  • The Fenwick & West Venture Capital BarometerTM showed an average price increase of 85% in 4Q11, an increase from 69% in 3Q11. Series B rounds were exceptionally strong, with an average increase of 164% since the last round.

Anecdotally, we attribute the Series B results in part to the increased number of smaller, relatively low valuation, Series A financings undertaken by micro VC firms. When the investee companies in these financings make good progress, it can result in a significant percentage increase in valuation in the Series B round – and if these companies do not make good progress, and do not raise a Series B financing, they will not appear in the Barometer statistics because there is no transaction to report, as described under “Methodology” below.

If Series B financings were excluded from the Barometer calculation (which we believe would be over compensating for this anomaly) the Barometer would have been 50%. Along these lines we note that Dow Jones VentureSource (“VentureSource”) reported that the three most prolific venture investors in 4Q11 were 500 Startups, SV Angel and First Round Capital, all early stage investors, with a combined 77 investments in 4Q11.

The results by industry are set forth below. In general, consistent with recent quarters, the internet/ digital media and software (which includes many of the “big data” and “cloud” companies) industries were the valuation leaders, and cleantech and life science lagged.

Overview of Third Party Data

In 2011 we saw a generally improving venture environment, with venture investment, fundraising, valuations, M&A and IPOs all up compared to 2010. But there were some anomalies:

  • Fundraising by venture funds was up in dollar terms, but the number of funds raising money declined.
  • Venture capitalists invested healthy amounts at healthy valuations, and showed gains in their portfolios, but venture capitalist confidence has been down three quarters in a row.
  • Some industries are concerned about a bubble (internet/digital media and software), while others are having a tough time (cleantech and life science).
  • Venture capitalists again raised significantly less money than was invested in venture-backed companies.
  • Although 2011 was strong, the fourth quarter showed some weakness with venture investment and M&A down in 4Q11 compared to 3Q11.
  • The number of venture funds is decreasing, while the number and importance of angel investors is increasing, and secondary market activity is expanding.

Venture Capital Investment. Highlights:

  • Venture investment was moderately lower in 4Q11 than 3Q11.
  • Venture investment was significantly higher in 2011 than 2010.
  • Average deal size increased in 2011.
  • Internet and software industries lead in 2011, although both saw declines in investment in 4Q11.
  • Silicon Valley received 41% of all U.S. venture investment in 2011, and 46% in 4Q11.

Data:

Venture capitalists (including corporation-affiliated venture groups) invested $7.4 billion in 803 deals in the U.S. in 4Q11, a 12% decrease in dollars from the $8.4 billion invested in 765 deals in 3Q11 (as reported in October 2011), according to VentureSource. For all of 2011 venture capitalists invested $32.6 billion in 3209 deals, a 25% increase in dollars from 2010, when $26.2 billion was invested in 2799 deals (as reported in January 2011).

The PwC/NVCA MoneyTreeTM Report based on data from Thomson Reuters (the “MoneyTree Report”) reported similar results. Venture investment in 4Q11 declined 6% in dollars compared to the 3Q11 results (as reported in October 2011), with investment of $6.6 billion in 844 deals in 4Q11, compared to $7.0 billion in 876 deals in 3Q11. For all of 2011 venture capitalists invested $28.4 billion in 3673 deals, a 30% increase from 2010 when $21.8 billion was invested in 3277 deals (as reported in January 2011).

The MoneyTree Report also noted that the internet and software industries saw the largest increase in investment in 2011, increasing 68% and 38% respectively over 2010, although both saw declines in investment from 3Q11 to 4Q11. Silicon Valley received 41% of all venture funding in 2011, followed by New England and New York at 11% and 9.5% respectively.

Merger and Acquisition Activity. Highlights:

  • M&A activity declined significantly in dollar terms in 4Q11 compared to 3Q11.
  • M&A activity increased significantly in dollar terms in 2011 compared to 2010.
  • Average deal size was up significantly in 2011, as the number of deals was flat to down.

Data:

Acquisitions (including buyouts) of U.S. venture-backed companies in 4Q11 totaled $9.4 billion in 107 transactions, compared to $13 billion in 122 transactions in 3Q11 (as reported in October 2011), a 28% decline in dollars, according to Dow Jones. For all of 2011, 477 venture-backed companies were acquired for $47.8 billion, compared to 468 acquisitions for $35.8 billion in 2010 (as reported in January 2011), an increase of 34% in dollar terms.
Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 92 acquisitions in 4Q11 compared to 101 in 3Q11 (as reported in October 2011), and 429 in all of 2011, compared to 420 in 2010 (as reported in January 2011).

IPO Activity. Highlights:

  • IPOs increased in both 4Q11 and 2011 overall. o    63% of IPOs were in the IT industry. o    Groupon and Zynga accounted for 31% of IPO money raised in 2011. Data:

Dow Jones reported 10 U.S venture-backed company IPOs raising $2.4 billion in 4Q11, close to 5x higher in dollars from the 10 IPOs that raised $0.5 billion in 3Q11. In all of 2011, 45 venture-backed companies went public raising $5.4 billion, compared to 46 IPOs in 2010 raising $3.3 billion, a 64% increase in dollar terms.
Similarly Thomson/NVCA reported a 5x increase in IPO dollars raised from 3Q11 to 4Q11, and a 41% increase in dollars raised from 2010 to 2011. Thomson/NVCA also reported that approximately 63% of the companies going public in both 4Q11 and 2011 overall were IT companies, and that 75% of the companies going public in 2011 were based in the U.S., with 54% of the U.S. companies based in California.

To read the complete report, please visit Fenwick & West website here.

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Wunderbar! Why millions are flocking to Wunderlist

Posted in Board Of Intellectual Capital, tagged , , , , on February 23, 2012| Leave a Comment »

Article from GigaOm.

Om has called 6wunderkinder “one of his favorite new companies”, and there’s good reason. The startup is one of the leading lights in the burgeoning Berlin scene, and impressive take-up claims for its first app could spell good news for its second, more fully-featured offering.

Despite being only a year and a half old, the company already has two core task management products. 6wunderkinder said this week that Wunderlist has amassed two million users in the 15 months since launching, but so far they’re keeping schtum on uptake for the still-in-beta Wunderkit — a fuller project management platform that could have enterprise as well as consumer appeal.

Wunderlist’s adoption seems to be accelerating: six months ago, 6wunderkinder said the app had drawn a million users over nine months. Those are the sort of numbers that drew in $4.2 million of funding from Skype founder Niklas Zennström’s Atomico last November.

Part of the acceleration, however, may be down to the fact that the company has taken the app to more platforms. While it began as an iOS, PC, Mac and web-app affair, with an Android version built on the Titanium platform, it has since then expanded to Linux and BlackBerry while gaining a less-kludgy native Android iteration. A Windows Phone version is also on the horizon.

Announcing its second milestone earlier this week the company gave some stats for Wunderlist’s usage so far:

 

  •          Eight million lists created
  •          75 million tasks created
  •          812 million syncs handled
  •          ‘App of the week’ in over 100 countries, with availability in 30 languages

But even though it’s now launched Wunderkit, 6wunderkinder says it won’t be abandoning its previous app. In a cute ‘love letter’ to its first app on Tuesday, 6wunderkinder stressed that Wunderlist may have lacked attention during the first weeks of Wunderkit’s existence, but the older child would not be left behind.

“You’ve probably been asking yourself: why is my sync not quite as reliable as it used to be? Why does Wunderkit get recurring tasks? We’d like to reaffirm our commitment to you. Over the coming year we’re going to make sure you get the attention you deserve. We’ll be rebuilding you from the ground up, making sure that you run faster, lighter and better than you ever have before. We’ll even be able to get you those new features you’ve been dying to have.”

As for how it intends to make money? Well, 6wunderkinder posted an interesting update last week. The original plan was to have a paid version of the service, at $4.99 a month, which would have been needed if the user wanted to collaborate with people outside of their own ‘workspace’.

But users responded by saying the platform’s adoption would probably be hindered by crippling its collaborative nature, and 6wunderkinder changed its mind and de-limited the free version. The $4.99-per-month Pro scheme still stands, but it’s now targeting heavy users who might want increased storage, for example.

6wunderkinder told GigaOM that Wunderlist saw a brief spike in takeup after Wunderkit went into public beta. The company has not disclosed Wunderkit’s adoption figures yet, but it did say 140,000 people had joined the waiting list for that beta, and it expected Wunderkit to hit the million-user mark as quickly — if not faster — than Wunderlist did.

Read more here.

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I am a Tag….not an number

Posted in Board Of Intellectual Capital, Inetellectual Property, Mobile, Tony Fish, tagged , on February 13, 2012| Leave a Comment »

Article by Tony Fish. Member of Gerbsman Partners Board of Intellectual Capital

In my book titled  “Mobile Web 2.0” (published in 2006) Ajit (co-author) and I identified that mobileweb2.0 holds that the mean and mechanism by which I was uniquely identified by and could be associated with, which was a number; no longer holds true.

The key aspect of this is that in the old world I was found, contacted utilising and was identified by numbers, this may have been a phone number or a passport number. In the new world I will be found and identified by tags, centred on who I am as identified by my name.  Further; it will not just be me, companies are identified by brands but we have to-date contacted or connected to them by numbers, now companies, using their brands and product names will be uniquely identified by these names.  Is there a real difference, in the consumers eyes; yes!, In deep technical aspects, probably not, since there will still be a mechanism for resolving names and numbers, but the value of resolving numbers (directories) and its controlling influence has passed.

What does all this mean for me as an individual ?

Image001

I am a tag not a number.  In the very old days I had one number, in fact it was not mine either, if was the shared Fish Family home phone number.  People could, if the so wished, call up directory enquiries or look up in the phone book this number. Eventually having only one number passed an in the modern age I have several numbers (mobile, Skypein, office, DDI, home, home office, to name a few)  If someone wants these numbers, they would need my business card, may be linked to Linkedin or Plaxo or could go to each of the service providers directory services and eventually get my numbers.

However, why did you want the numbers, why have I got some many numbers.  Because I can be reached in a variety of means, depending on where I am and the cost of telephony I wish to suffer.  In essence however, all you wanted to do was to “speak” with me.  Actually, all you wanted was to connect with Tony Fish or Ajit Joaker who wrote about mobileweb2.0 in London in June 06.

However, there is another way.  Instead of worrying about using the telcom operators directory search, not knowing which operator I am with, how about using a web search engine to connect.  Imagine, you type in my name, the search engine now responds with not a pile of numbers, but offers you a choice of what you would like to do.   Do you want to call, message, lowest call route (LCR), VoIP call. You click yes. The search engine has now become the telco, not by offering infrastructure but by offering the directory resolving feature, and I am now a name not a number.  So why tags?

Lets assume that as you read this, download the slides, look for the update of the book, you store this new data on your computer and you tag the information with something useful.  Suppose you tag it with Ajit or Tony.  Suppose, as I have tagged the same information on my computer with Ajit and Tony and Mobileweb2.0 etc etc.  Suppose also that I have tagged my contact details with my name.  Now a tag based search engine could resolve the search, and hence draw out the connection opportunities, and can even then set up the connection.  If would be possible that I have set preference for my location, and therefore you could be offered to meet me in the Starbucks on Berkeley Street, W1 opposite my office as I am in there at the moment!

What becomes evident is that none of this depends on knowing a number or how connection happens and it is certainly not fixed mobile convergence! There is someone who may perform the task, but nobody needs know.

Surly this all breaks down when you have many people with the same name! The simplicity of the tags is that everyone will uniquely tag is different ways, each of these will build unique identifies for people with the same name.

Now how does this extend to the corporate.  Corporate discovered many years ago that Vanity numbers worked.  This being 0800 Flowers etc.  There was no need to remember the phone number, you could type in the name on an alpha numeric key pad.  This developed into short codes on the mobile and is likely to introduce a whole new mobile vanity number opportunity.

It is possible that you will dial COKE, BMW or TAXI, FLOWERS and be connected.  A corporate will be able to remove the cost of reprinting different number for customer services or for competitions by geography.  Instead all one number.  But better, this number will be available from fixed, mobile and PC based origination devices.  Calls will automatically be least cost routed saving customer and supplier cash.

Mobile will be the first to drive these changes, and will be the driver.  It will be the there at the point of inspiration to capture ideas, but also there when you need to connect and find, without the requirements to have it all stored locally.

Read more here.

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5 stories to read this weekend

Posted in Board Of Intellectual Capital, Economy, FaceBook, Intellectual capital, internet, IPO news, Market research, tagged , , , , , on February 12, 2012| Leave a Comment »

Article from GigaOm.

Don’t get mad at me for not finding seven stories for you to read this weekend. I have been busy with some other stuff and as a result I have not been able to spend as much time reading as I normally do. Regardless, here is an abbreviated recommendation list. Hope you enjoy them.

Read more here.

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Akamai’s Blaze buy and what is says about today’s web

Posted in Board Of Intellectual Capital, FaceBook, Gerbsman Partners, google, tagged , , , , , , , , on February 8, 2012| Leave a Comment »

Article from GigaOm.

“Akamai said it purchased Canadian web site optimization company Blaze Wednesday, ahead of its financial results call. In acquiring Blaze, content-delivery network leader Akamai offers an excellent example of how the web is changing as we access it from more devices and as the nature of the web sites we visit changes. This small deal illustrates some big changes in the web.

Blaze, which was formed in 2010, offers a service that helps web sites load faster by optimizing the scripts running on the site. It also recommends clients add a content delivery network and complements the software and CDN mix with consulting services for folks that want to go further. The optimization happens on the backend on Blaze’s servers, so the consumer’s front end experience was faster and fitted to the device he was on at the time. Other companies in this space include Aptimize.

In buying Blaze, Akamai is acknowledging that web sites today are accessed in more places, something anyone who’s been in a Starbucks lately can tell you, but also that the sites themselves are different. They use richer media and offer links back to more applications. Things like sharing something on Twitter or liking it on Facebook via a simple button add seconds to load times and complexity to the overall site. Complicated CSS scripts and lagging ad networks don’t help either.

Blaze was a natural fit for Akamai in many ways as Akamai tries to take its CDN beyond the old days of static content delivery to delivering optimized advertising, helping bring content to mobile devices, and otherwise adapt to the application-heavy and real-time nature of the web. Where web sites were once comprised of fairly simple code optimized for one or two browsers, they’re now a mash up of many applications from different places being viewed on as many as 10 different browsers and platforms. Akamai is just trying to keep up.”

Read original post here.

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