Jonathan Rubens, November 18, 2009

VC fundraising to lowest point in 16 years in the third quarter. 17 funds raised $1.6 billion Q3 2009; smallest number of funds raising money since Q3 1994, and smallest amount raised since 1Q 2003 ($938 million).  Largest funds raised Q3 2009: Khosla Ventures III, $750 million (for an early stage fund); Draper Fisher Jurvetson X, $196 million. (Source: NVCA/Thomson Reuters)

YearSilicon Valley TotalNational Total 1999$ 17,289,188,300$ 51,474,502, $ 32,409,005,700$ 100,662, 20, $ 12,161,613,900$ 38,692,099, $ 6,871,319,600$ 21,045,474, $ 6,429,811,000$ 19,164,811,200

Silicon Valley TotalNational Total 2004$ 7,826,760,000$ 21,998,609, $ 8,177,639,900$ 22,944,951, $ 9,565,899,800$ 26,438,886, $10,859,086,400$ 30,538,555, $10,782,144,100$ 27,958,705, (through Q3 only) $ 4,916,818,100$ 12,246,954,800

RegionQ1 2009Q2 2009Q Q1 – Q3 Silicon Valley $1,310,784,800$1,372,075,400$2,234,007,900$4,916,686,100 LA / OC$ 223,917,200$ 179,578,100$ 39,182,000$ 642,677,300 San Diego $ 91,974,300$ 251,879,000$ 63,328,500$ 580,181,800 Sac’o/ NoCal $ 7,000,000$ 9,865,000$ 1,950,000$ 18,815,000 CA - total $1,633,676,300$1,813,397,500$2,711,468,400$6,158,542,200

Seed investments as a percent of total investment 2.1%4.0%4.6%4.7%5.6%10.7%

 Q1 + Q2 2009, five IPOs raised $967 million.  Q IPOs raised $5.8 billion  10 VC-backed IPOs Jan 1 -Oct. 20, (Source: NVCA)

 I-Bank concentration: fewer boutique banks and fewer companies willing to use them  Longer time to IPO: 2008 median company age of 9.6 years vs. 4.5 years 1998  90’s: 80% of IPOs smaller than $50M; 2000s: 20% of IPOs smaller than $50M;

 2008 vs. 2007: Angel $ down 26% to $19.2 B; VC total investment down 8% to $30.9 B  Q1-Q2 09 vs. 08: 27% less $, slightly more deals vs same time last year, down overall.  19% less money invested at the earliest stages: 27% seed/startup, 58% post-seed.  More follow-on investing? Less risk-tolerant angels? More institutionalized angel investing? (UNH – CVR)

 Kereitsu Forum – invests after $500K to $1.5 million seed round, often in a Series A alongside another institutional investor  Band of Angels – recently more follow-on than seed investing; often “lead a syndication of $2-3 million”

 Angels Forum: “focus is seed and early stage companies seeking $100K to $1 million”  Sand Hill Angels: “as little as $100K to more than $500K”

Round/year/qtrEarlyABC+ 2006Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Total invested – millions of $ Source: CrunchBase

Total invested – millions of $

Round/year/qtrEarly RoundsABC+ 2006Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Number of Rounds recorded – Crunchbase sampling

Round / year / qtrEarlyABC+ 2006Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Average Round Size millions $

Average Round Size millions $

Average Round Size Millions $

Round/year/qtrEarlyABC+ 2006Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Median Round Size

 Combination of incubator services, mentoring, microinvestments, for 2-8%  Seed investment plus RFR A round by affiliate later- stage fund  Examples:YCombinator, TechStarts, SeedCamp, LaunchBox, DreamIt Ventures, Highland Capital Partners, Bay Partners

 UNH study: 13.4 of IPOs had angels as only investors  Companies with angel-only financing reached IPO sooner than purely VC-backed companies  IPOs with angel-only backing may tend to generate higher proceeds than VC-only IPOs  UMD: angel-only or VC-only companies were less likely to fail and more likely to have a successful liquidity event; companies that were backed by both angels & VC funds had inferior outcomes