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Posts Tagged ‘CB Insights’

 

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We’ll make it up in volume
Hi there,

Ever wonder which VCs are the best at spotting unicorn companies earliest? Wonder no more. See who the unicorn whisperers are below.

e-Commerce’s big three
When it comes to eCommerce investment, it’s China, India, the US and then everyone else. The 3 markets account for 62% of global deal activity and 71% of total funding.

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Speaking of e-Commerce – this will be interesting

Jet.com, the startup founded by Diapers.com alumni Marc Lore, launched today and although it projects big losses and competition from Amazon, it is also rumored to be in talks to raise financing at a valuation of 3 unicorns.

So we wanted to anonymously ask you and 88,000 of our closest friends what you think of Jet’s prospects. Simply click below and we’ll report the results in the next newsletter.
Will Jet.com live upto the hype and become a credible competitor to Amazon?

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Google Ventures is slowing down

For our corporate VC benchmarking webinar next week, we’ve been digging into the performance of several notable corporate VCs. Today, we refreshed our Google Ventures teardown and see the CVC arm of Google is slowing down their investment pace while exits have ticked up as the company’s portfolio matures. More graphs and charts about their industry and geographic strategy than you’ll know what to do with.

 

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Quotable & Notable

We’re the most trusted source for VC and startup data by the media (seriously).

And it’s always good to see how our data intersects with larger stories our media friends are working on. Here are a couple that recently caught our eye.

Connie Loizos of TechCrunch highlights how startup employees are wising up.

“This week, a Bay Area founder was taken aback when an engineer being recruited by his startup asked for both its cap table and information regarding the liquidation preferences of its venture backers.”

Bloomberg’s Adam Satariano & Jing Cao discuss how fear is trumping greed for Valley VCs.

“While Silicon Valley heatedly debates whether technology valuations have risen to excessive levels, the investors who helped fuel the boom aren’t waiting for an answer. Venture capital firms are starting to take steps to protect themselves in the event of a downturn.”

Paul Mozur of The New York Times digs into Asia’s startup boom.

“Across Asia, investments in technology start-ups have escalated at the same swift pace and to the same heights as in the United States.”

Sarah Lacy of Pando says we need to stop talking about the sharing economy.

“Without Uber, the sharing economy would be an economy like Greece is an economy. You only have to look at the numbers to realize just how much the rest of the so-called “sharing economy” is left– comparatively– in the dust.”

The unicorn whisperers

Which investors are in the most unicorn companies and more importantly, which investors got into these companies earliest? Your daily dose of unicorn data is here.

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Article from SFGate.

It’s suddenly a lot harder for venture capitalists and startups to raise funds, as investors fed up with low returns turn their backs on the sector.

Most industry observers agree that lots of young firms will simply not be able to raise their next round of funding, commencing a period of belt tightening, consolidation and closures. At a minimum, it seems to mark the beginning of a more level-headed investment climate in Silicon Valley, after years of insatiable lust for all things mobile and social.

But if the drop-off is too sudden and steep, this new austerity could spill over into an economy highly dependent on the tech sector. Indeed, as The Chronicle reported last week, the industry has an enormous impact, with each tech job creating 4.3 indirect jobs in the community, according to a Bay Area Council Economic Institute report.

The investors and venture capitalists I spoke to insisted that we’re not on the verge of anything like the dot-com meltdown, characterizing the shift as a minor and healthy correction, or a “rationalization.” One suggested it was little more than the usual process of separating good and bad ideas in the marketplace.

But the numbers suggest something new is afoot. In the third quarter, the amount that U.S. companies raised in venture capital dropped 32 percent from the prior year, according to Dow Jones VentureSource. Venture capital funds themselves raised 17 percent fewer dollars from the second to third quarter, even as the number of funds grew, according to a joint report from Thomson Reuters and the National Venture Capital Association.

Economic uncertainty

Some partially blame the economic uncertainty surrounding the outcome of the election and the “fiscal cliff.” But the main problem seems to be that many of the “limited partners” that fund venture capital are pulling back after years of frustration.

Ever since a brief period in the late 1990s when venture capital burned bright, the industry has been delivering consistently weak returns on the whole.

In fact, despite requiring greater risks and larger capital outlays, venture capital has been underperforming the stock market over the past decade, according to a report this year by the Ewing Marion Kauffman Foundation.

Joe Dear, chief investment officer for CalPERS, told Reuters this summer that venture capital “has been the most disappointing asset class over the past 10 years as far as returns.” The huge pension fund for California’s public employees didn’t return repeated calls from The Chronicle.

Investment horizons have steadily spread out, from five to 10 to sometimes 15 years, as exit opportunities like acquisitions and initial public offerings fail to materialize. This has sometimes forced investors to put in more money to protect their initial funds.

‘Pretty grumpy’

“The industry definitely, for the last decade, has been a tough place to be,” said Ray Rothrock of Palo Alto venture capital firm Venrock. “We’re all pretty grumpy right now.”

Some of this is due to macroeconomic conditions outside the control of venture capitalists, notably the housing and banking crises. But at least some of it has to do with poor picks and herd mentality, funding companies with few real prospects and driving up the entry price for legitimately promising companies beyond what they could pay off.

“The market overfunded the number of companies in the system,” said Hans Swildens, founder of Industry Ventures in San Francisco. “There’s a glut.”

Even the grand promise of Web 2.0 companies that lured so much recent money hasn’t generated the hoped-for returns. The ones that managed to go public were often disappointments, including Facebook, Zynga and Groupon, in some cases leaving late-stage investors underwater on their holdings.

That was a final straw for some.

Last week, Forbes dug up figures from CB Insights that highlighted a wide and growing gap between the number of companies that raised initial funding and companies securing the follow-on investments, known as a Series A, generally necessary to keep going. This year, there have been 1,747 seed or angel rounds but only 688 Series A deals, underscoring the coming crunch.

Bad businesses

Based on as scientific a survey as the PR pitches in my inbox, there’s a tremendous number of silly, redundant and poorly executed companies out there that don’t warrant additional funding. The real problem isn’t that many of these companies won’t raise more money; it’s that they raised money in the first place.

For the venture capital industry to get back on track, it needs to embrace a renewed sense of discipline – on company picks, deal terms and total spending.

But hope springs eternal in Silicon Valley.

Rothrock stresses that the industry’s trend-line averages mask very strong results and ongoing investment at top firms, as well as growing venture capital activity among corporations like Google. Companies are just being more selective and looking beyond consumer Internet opportunities.

“We’re steady as she goes in terms of funding enterprise,” he said.

Secondary opportunity

Swildens oversees a secondary fund that buys shares from limited partners and venture firms looking to liquidate part of their holdings. He sees this period as a ripe opportunity for bold investors to get into promising companies at suddenly reasonable rates.

“Ours is one of the few firms aggressively putting money into these funds,” he said.

Mark Heesen, president of National Venture Capital Association, is similarly optimistic. He says the industry could be primed for a strong comeback in 2013, as long as the broader economy strengthens.

Above all, what the industry needs are some wins – acquisitions or initial public offerings that put investors clearly in the black and start to restore some lost confidence.

“If we see these exit markets start to generate good returns, I think you’ll see limited partners look at this asset class again,” he said.

James Temple is a San Francisco Chronicle columnist. E-mail: jtemple@sfchronicle.com Twitter: @jtemple

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Article from GigaOm.

There’s a lot of talk in Silicon Valley about a bubble in VC investing right now, with the $1 billion purchase of Instagram by Facebook seeming emblematic of high valuations for social apps without a clear revenue stream or inherently altruistic purpose. So many are wondering: could the tech industry shift toward more investment in startups that cure cancer or find solutions for clean energy? The answer depends who you ask.

A panel of investors and startup founders speaking at Venture Shift on Thursday debated whether there really is a bubble in venture capital right now, and whether the talent and money in the startup area is directed at solving the best problems.

Marcus Ogawa, a managing partner at Quest, said Instagram’s sale will absolutely inspire a proliferation of photo and video-sharing apps, perhaps more than most customers really need.

“It’s a complete and total waste of money. But I don’t want to live in a planned economy,” he said, pointing out the incredible amount of innovation and development that comes from the growth of those companies.

There’s certainly plenty of money going in that direction right now. A report from CB Insights this week found that the most recent quarter saw $8.1 billion in venture capital financing for 812 companies, the highest in both dollar amount and number of deals since the same quarter of 2001. And of that funding, 13 percent of deals were in the mobile sector with 30 percent of those companies involved in photo or video technology.

So are there more meaningful companies that aren’t getting funded because of the so-called Instagram effect?

“You see people graduating from top tech schools… and they’re starting companies in internet and mobile,” said Corey Reese, CEO and co-founder at Ness Computing. “They’re not starting companies to enhance the life expectancy, by and large.”

But Jessica Alter, founder of the startup Founder Dating, pointed out that one of the reasons so many social consumers apps are getting funded is that the costs associated with starting them are much lower. Cloud technology and open-source code have made it cheaper to start and launch those businesses, making them some of the more visible success stories compared to companies in the biotech or clean energy spheres, even if accelerator and incubator programs for health care startups do exist.

“It’s all going down, but nothing’s going down as much as the cost of starting a new consumer app,” she said.

Read more here.

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