Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Notable
Portfolio
Unicorns
30 683 33
VC Fund
Investments
Underlying Portfolio
Companies
Countries
Isomer is a private inve...
The European Opportunity in Technology Venture Capital
Source:: Atomico, Cambridge Associates as at Q1 2019, Dealroom.co
5...
VC Secondaries Market Growing in Size and Attractiveness
Secondary Market Annual Volume = Total Stock * %Trading
• Total S...
Seed A B C LATER-STAGE IPOs / Big ExitsSTAGE
TIME
LIQUIDITY
C
A
A
A
B
B
3Y2Y1Y 4Y 5Y 6Y 9Y8Y7Y 10Y + beyond
Buy fund secon...
3Y 4Y2Y1Y 5Y 6YTIME 7Y 8Y 11Y 12Y10Y9Y 13Y 14Y 15Y
7 year vehicle
1X
Faster return
of principal
10-15 year vehicle
Better
...
What’s the Difference between Fund Secondary and Company Secondary?
DIVERSIFIED: less risk exposure
LESS COMPETITIVE: less...
Why are Discounts BIGGER for Fund Secondary than Company Secondary?
D
C
B
Fewer Buyers, More Arbitrage
Because there are f...
LPs and GPs need
liquidity and partners
for multiple reasons
(not just distress).
Why do LPs and GPs Sell Winning Portfoli...
Secondary Market Growth: Venture Capital vs. Private Equity
PE Secondary: 10x Growth from 2000 to 2020
VC Secondary: 10x G...
EV/LTMMultiple(Median)
PVC SaaS Index Shows SaaS Multiples Expanding
6.0x
6.5x
6.0x
5.7x
4.6x
4.9x
5.8x
6.4x
6.8x 7.3x
7.2...
SaaS Performance 2020 YTD
YOYgrowth
FCF margin
40%
40%
300%
80%
20% 60%-20% 0%
0%
“SaaS Rule of 40”
– Brad Feld et al.
A s...
SaaS Performance 2020 YTD
An entire public index is trading above the “Rule of 40.”
YOYgrowth
FCF margin
40%
40%
300%
80%
...
Source: PVC analysis of US Retail Spending data from the US Commerce Department eCommerce
Sales (www.digitalcommerce360.co...
SaaS: Large, Underpenetrated Market
Source: Flexera 2020 “State of Tech” report
• SaaS / cloud-spend just 25% of total IT ...
Drivers of Market Expansion
* Federal Release H.4.1 — Factors Affecting Reserve Balances; Table 1
** https://fred.stlouisf...
Tech and Venture Capital in the Time of Corona
Tech and Venture Capital in the Time of Corona
Tech and Venture Capital in the Time of Corona
Tech and Venture Capital in the Time of Corona
Tech and Venture Capital in the Time of Corona
You’ve finished this document.
Download and read it offline.
Upcoming SlideShare
What to Upload to SlideShare
Next
Upcoming SlideShare
What to Upload to SlideShare
Next
Download to read offline and view in fullscreen.

3

Share

Tech and Venture Capital in the Time of Corona

Download to read offline

Overview of Venture Capital in 2020 (Europe vs. US, Secondary Market, SaaS multiples, etc)

Related Books

Free with a 30 day trial from Scribd

See all

Related Audiobooks

Free with a 30 day trial from Scribd

See all

Tech and Venture Capital in the Time of Corona

  1. Notable Portfolio Unicorns 30 683 33 VC Fund Investments Underlying Portfolio Companies Countries Isomer is a private investment firm based in London and focused exclusively on European Venture Capital. We back technology-enabled entrepreneurs across Europe through primary and secondary investments in venture capital funds and company co-investments. www.isomercapital.com
  2. The European Opportunity in Technology Venture Capital Source:: Atomico, Cambridge Associates as at Q1 2019, Dealroom.co 5.57% 7.57% 13.48% 36.41% 58.64% Bloomberg Barclays Capital Government/Credit Bond Index Russell 2000 Index US Private Equity Index US Venture Capital Index US Venture Capital - Early Stage Index Venture Capital Delivered Strong Returns Over 25 Years (as of Q4 2019) Companies newly exceeding $1bn valuation in this year Ongoing unicorns Strong Growth in European $bn+ Startup Generation, Despite Lower Funding Rates 3 4 6 8 11 22 32 48 59 85 2 2 3 11 10 16 11 26 14 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 8.7% 14.0% 10.5% 14.3% 10.9% 5.0% 12.5% 19.3% 14.2% 16.1% 11.0% 8.0% 1-Year 3-Year 5-Year 10-Year 15 - Year 20-Year Cambridge Associates US VC Index Cambridge Associates Europe Developed VC Index European Venture is Outperforming US Over 20 Years Horizon Pooled Return (Net) US vs Europe (as of Q4 2019) Rising Activity & Deal Value
  3. VC Secondaries Market Growing in Size and Attractiveness Secondary Market Annual Volume = Total Stock * %Trading • Total Stock of assets • The sum of all fund and company interests. • This has been increasing each year as the VC market grows, and holding periods lengthen • % of Assets Trading • The amount of total asset stock bought and sold • This has also been increasing due to sectoral and cyclical factors • Sophisticated liquidity tool: LPs increasingly use the secondary market to rebalance • Timing and Staging: early investors seek monitisation before full exit • Cyclically: in economic down cycles investors rebalance and consolidate more Secondaries During Covid-19 • Increased opportunities as some LPs look for short-term liquidity. Many currently testing market pricing, investigating options • Discounts at 20-30% NAV, possibly to increase over the coming year • Specialist knowledge needed to purchase these assets wisely, uncover key asset/special situation details
  4. Seed A B C LATER-STAGE IPOs / Big ExitsSTAGE TIME LIQUIDITY C A A A B B 3Y2Y1Y 4Y 5Y 6Y 9Y8Y7Y 10Y + beyond Buy fund secondary @ 25-50% discount D C B D “Buy Unicorns on Sale” Invest in VC funds that are already winning “Skip the J-Curve” Avoid the first 5 years of risky bets FUNDS COMPANIES VALUE RISK
  5. 3Y 4Y2Y1Y 5Y 6YTIME 7Y 8Y 11Y 12Y10Y9Y 13Y 14Y 15Y 7 year vehicle 1X Faster return of principal 10-15 year vehicle Better performance 0.5X 3-5X 1-2X VC Fund Secondary Typical VC Fund Benefits: Faster Growth, Faster Liquidity
  6. What’s the Difference between Fund Secondary and Company Secondary? DIVERSIFIED: less risk exposure LESS COMPETITIVE: less activity, fewer buyers BIGGER DISCOUNTS: 25 - 50% D B D C B C Company (Direct) SecondaryFund Secondary CONCENTRATED: more risk exposure MORE COMPETITIVE: more buyers and sellers SMALLER DISCOUNTS: 0 - 20% FUND COMPANIES SLICE of LP interests across PORTFOLIO Equity stake in a SINGLE COMPANY D C B PVC advantage
  7. Why are Discounts BIGGER for Fund Secondary than Company Secondary? D C B Fewer Buyers, More Arbitrage Because there are fewer buyers specializing in Fund Secondary and because many sellers are competing for liquidity, buyers have greater leverage relative to sellers. Fund Secondary is a buyer’s market. Basket of Assets, Harder to Value Fund Secondary is often heavily discounted because it’s more complex to evaluate a basket of assets than just a single company. As former managers and LPs in over 40 venture funds, PVC has extensive experience evaluating multi-asset portfolios. Fund Secondary is a buyer’s market… but only for buyers who know what they’re doing. Unicorns Matter, Horses Discounted Larger companies close to IPO or acquisition are in greater demand; smaller companies that are still growing are in less demand. Multi-asset portfolios are valued primarily based on current unicorns; future unicorns and other non-IPO winners are more heavily discounted.
  8. LPs and GPs need liquidity and partners for multiple reasons (not just distress). Why do LPs and GPs Sell Winning Portfolios Early? • HNWIs and family offices need liquidity when change happens (death, divorce, retirement) • Corporate LPs change strategy every few years, just as CEOs/CFOs come and go • LPs may need liquidity when purchasing a major asset (e.g., real estate) • Market volatility and uncertainty may increase the need for cash Non-institutional LPs may sell because: • Sell a portion to show realized gains as they raise their next fund • Sell to generate cash for operational expenses, recycling, or distributions • Sell to hedge and take (some) money off the table • Partner (raise capital) to exercise pro-rata rights • Partner (co-invest) to increase investment in follow-on rounds Early-stage GPs may sell (or partner):
  9. Secondary Market Growth: Venture Capital vs. Private Equity PE Secondary: 10x Growth from 2000 to 2020 VC Secondary: 10x Growth from 2010 to 2030 2000 2020201520102005 2025 2030 $10B $100B$100B $36B$26B Dot-com crash US financial crisis EUR sovereign debt crisis China-US Trade War / CFIUS / Coronavirus $10B Company Secondary (Direct) VC Fund Secondary
  10. EV/LTMMultiple(Median) PVC SaaS Index Shows SaaS Multiples Expanding 6.0x 6.5x 6.0x 5.7x 4.6x 4.9x 5.8x 6.4x 6.8x 7.3x 7.2x 8.1x 9.0x 9.3x 7.3x 9.1x 9.4x 9.1x 8.4x 7.3x 10.7x 6.6x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017 2018 2019 2020 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x
  11. SaaS Performance 2020 YTD YOYgrowth FCF margin 40% 40% 300% 80% 20% 60%-20% 0% 0% “SaaS Rule of 40” – Brad Feld et al. A software company’s growth rate plus its operating margin should add up to 40% (i.e., 10-20x multiples on revenue). Faster growth mean less profitability.
  12. SaaS Performance 2020 YTD An entire public index is trading above the “Rule of 40.” YOYgrowth FCF margin 40% 40% 300% 80% 20% 60%-20% 0% 0%
  13. Source: PVC analysis of US Retail Spending data from the US Commerce Department eCommerce Sales (www.digitalcommerce360.com/article/us-ecommerce-sales) Groceries • Personal Care • Medication • Teleheath • Office Supplies • Electronics • School Supplies / Education US eCommerce has leapt forward by 5 years. Bankruptcies Winners 6.4% 7.2% 8.0% 8.8% 9.7% 10.7% 11.8% 13.2% 14.4% 16.0% 25-30% 0% 5% 10% 15% 20% 25% 30% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E Ecommerce: Large, Underpenetrated Market
  14. SaaS: Large, Underpenetrated Market Source: Flexera 2020 “State of Tech” report • SaaS / cloud-spend just 25% of total IT spend as at end 2019; COVID is accelerating market share gains • SaaS > on-premises software • Generational leap in SaaS model: • Gen 1 (Salesforce, Oracle, ServiceNow) – sell seats to people at Fortune 200; displacing ASPs. Gated by enterprise decision-making. • Gen 2 (DocuSign, Zendesk, Zoom, Asana, Slack) – sell streamlined subscriptions at lower prices, allowing micro-adoption; expanded TAM to mid-market • Gen 3 (Twilio, Stripe, Anaplan, Zuora) – APIs shift the competitive frontier to transaction-based pricing, automating processes inside of companies and mini-departments • Ceiling could be 50%? 60%? Or higher? Cloud-based IT spend is still growing. 25% total IT spend Other SaaS IaaS / PaaS 22% 53% 7% 18% On-Premises Software
  15. Drivers of Market Expansion * Federal Release H.4.1 — Factors Affecting Reserve Balances; Table 1 ** https://fred.stlouisfed.org/series/FYFSGDA188S $0 $1 $2 $3 $4 $5 $6 $7 $8 1-Aug-07 1-Feb-08 1-Aug-08 1-Feb-09 1-Aug-09 1-Feb-10 1-Aug-10 1-Feb-11 1-Aug-11 1-Feb-12 1-Aug-12 1-Feb-13 1-Aug-13 1-Feb-14 1-Aug-14 1-Feb-15 1-Aug-15 1-Feb-16 1-Aug-16 1-Feb-17 1-Aug-17 1-Feb-18 1-Aug-18 1-Feb-19 1-Aug-19 1-Feb-20 1-Aug-20 Total Assets Held by the US Federal Reserve * Trillions(USD) 2008 2009 2010 2019 2018 2012 2016 2013 2014 2015 2017 2020 -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2011 -5.1% -0.3% -1.4% -4.9% -3.2% -0.6% -1.6% 1976 1980 1984 2016 2012 1992 2004 1996 2000 2008 2020 1988 1968 1972 1960 1964 Federal Deficit as a % of GDP ** -0.3% US recession GDP peak to trough GDP
  • JamalAgayev

    Mar. 9, 2021
  • ssuser5b93c6

    Nov. 12, 2020
  • ujjualbaburaj

    Sep. 28, 2020

Overview of Venture Capital in 2020 (Europe vs. US, Secondary Market, SaaS multiples, etc)

Views

Total views

1,914

On Slideshare

0

From embeds

0

Number of embeds

7

Actions

Downloads

16

Shares

0

Comments

0

Likes

3

×