State of the Venture Capital Industry MARKET ANALYSIS Spring 2020
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Table of Contents
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2019: (Another) Year of the VC Boom This report analyzes the most significant trends in the venture industry in 2019, highlighting the key takeaways and statistics our readers should remember most about last year’s last year’s fundraising and investing activities, valuations, and exits. While the first half of 2019 was marked by the same ebullient market and key trends of the prior year, the second half of 2019 saw significant shifts in investor sentiment that led many to take a more cautious stance, especially as it relates to the IPO market. This cautiousness has since evolved to nervousness as COVID-19 has substantially changed the outlook for 2020, but this report is a snapshot meant to take a detailed look at trends through 2019. In addition to looking back at over-arching trends in 2019, in this year’s report, we are also delving deeper into the factors that are driving innovation and investing in top sectors (enterprise, fintech, consumer, and healthcare) and regions (Europe and Latin America) in order to share our most valuable insights with readers and preview what to watch for in the venture industry going forward.
“2018 was a year of excess. 2019 was a year of reality checks. Let’s see what 2020 has in store.” – Polina Marinova, FortuneTerm Sheet
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Fundraising Moderated but Remained Historically High The fundraising environment for venture remained strong in 2019. The total number of dollars raised during the year was the second highest (behind 2018) since the Internet bubble, even as the number of funds raised dropped to the lowest level since 2014.
Total U.S. Venture Capital Raised $70 294
299 300 259
These statistics indicate fund sizes are growing – the median fund size has increased 162% over the last five years – and point to the emergence of mega-funds. Mega-funds over $1 billion allow venture capitalists to follow-on and support their best performing companies, particularly as those companies stay private longer. Mega-funds also enable investors to offer “full stack” funding across all stages of a startup’s life cycle, an important differentiator and advantage for firms in a hyper-competitive venture industry.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*
U.S. VENTURE FUNDS
Capital raised ($B)
Pitchbook as of December 31, 2019
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Appetite for Venture Stayed Strong â&#x20AC;&#x153;Fears of too much money being raised in the VC space are consistently based on historical levels, rather than future potential. When put into context, the amount of money raised in VC represents a fraction of the market value of the industries being disrupted by many venturebacked companies, and a fraction of the total addressable markets of emerging business categories being created by VC.â&#x20AC;? - Cambridge Associates
Fundraising for venture capital remained elevated in 2019 in part due to the enormous opportunity for venture capitalists to fund the launch, growth, and scaling of truly disruptive technology companies. Limited partners in venture funds continue to be optimistic about these companies and their potential to generate attractive returns that are accretive to their overall portfolios in a low interest rate environment. As the charts on this slide suggest, limited partners have benefitted from strong performance, rising NAVS, and positive net cash flow from their portfolios and have steadily increased their allocations to venture capital in recent years.
U.S. VC Cash Flows
Mean Venture Capital Allocation (%) 16
6 2019 2019* YTD
4 2 0 2009
-$40 Contributions ($B)
Net cash flow
All Other Endowments & Foundations Mean
Top Decile Mean
Pitchbook as of March 31, 2019.
Cambridge Associates as of June 30, 2019. 2020 State of Ve nture Cap ital | 5
Robust Investing Kept Pace with the Prior Year Investors were as active in 2019 as they were in 2018. Deal volume across all stages increased 2% year-over-year, while invested capital dipped 3% from a record high the prior year. Deal count split by stage was relatively steady compared to the prior year, with angel/seed accounting for 42% of deals, early stage contributing 34%, and late stage making up 24%. The past five years, however, tell a different story â&#x20AC;&#x201C; over that time frame, angel/seed deal count has dropped by 17%, while early and late stage deal count has increased by 14% and 27%, respectively. 2020 State of Ve nture Cap ital | 6
Total US Venture Capital Raised
$160 10684 $140
10777 10326 10542
Deal value ($B)
Pitchbook as of December 31, 2019. 2020 State State of of Ve Venture nture Cap Capital ital || 66 2020
Deal Sizes Grew as the Industry Evolved Despite the decrease in number, seed rounds have been growing larger in recent years due to several related trends. Seed stage companies today are often more mature in terms of age, users, and revenue thanks to the growing importance of incubators and accelerators in the industry. Seed stage investors also increasingly want to write larger checks and maximize ownership when they see initial traction. This strategy is in response to growing competition in the seed market as new/active seed managers enter the industry, more traditional Series A VCs dip down into seed, and individual executives and founders engage in more meaningful seed stage funding. Larger rounds of financing have also driven late stage activity in recent years. Companies are staying private longer, fueled by readily available capital from traditional VCs with more dry powder, cross-over players looking to capitalize on startupsâ&#x20AC;&#x2122; growth in the private markets, and sovereign wealth entities with large coffers. That said, mega-rounds of $100 million or more were slightly less prevalent in 2019, as evidenced by the 3% year-over-year decrease in late stage deal value, even as late stage deal count increased by 14%.
US Angel/Seed Deal Activity (#) by Size
US Late State Deal Activity ($) by Size 100%
Pitchbook as of December 31, 2019.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Pitchbook as of December 31, 2019.
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Valuations Across All Stages Climbed Higher (Again) With the exception of late stage valuations in 2013, pre-money valuations across angel/ seed, early stage, and late stage financings have increased every year since 2009. The climb has been steady for angel/seed valuations over that time period, while early and late stage valuations have accelerated since 2016. The number of unicorns, or companies valued at over $1 billion, has also surged in parallel with the recent swell in late stage valuations. 2019 was no exception – angel/seed valuations increased 14%, early stage valuations spiked 18%, late stage valuations jumped 16%, and a record number of unicorns were minted.
Valuation Increases Between 2009 and 2019
+138% +254% +193%
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Trends Driving Valuation Highs Endure Median Angel/Seed & Early Stage Pre-Money Valuations ($M) $35
$25 $20 $15 $7.0 $8.0
$10 $5 $0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Angel & seed
Startups that were funded at the angel/seed stage in 2019 were nearly one year older than the same cohort five years ago. It is no surprise that their valuations have been on the rise given the growing importance of incubators, accelerators, and pre-seed funders, as well as the abundance of capital chasing seed stage companies. Similarly, as traditional Series A investors continue to demand more proof points and traction, Series A companies are also older and more mature than they were five years ago, which in turn is driving higher early stage valuations. While late stage valuations did not see as dramatic an increase in 2019 as they did in 2018, the long-term trend is still clear. An abundance of available private capital has enabled companies to stay private longer and scale outside of the public purview, thereby driving up late stage capital invested and valuations. Reflecting on current valuations, more founders today (over two-thirds, according to First Round Capital’s State of Startups report) think we are in a bubble for tech companies, the highest survey number since 2005.
Pitchbook as of December 31, 2019
“We have a large number of private companies whose valuation expectations are anchored in a time when venture investors were very confident that the public markets would place a premium on growth. Now that the world has changed a bit, we are going to have to reckon with how to appropriately value some companies whose valuations no longer match the new market reality.” – Charles Hudson, Precursor Ventures
Median Late Stage Pre-Money Valuations ($M) $100
$80 $60 $40 $20 $0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* Pitchbook as of December 31, 2019
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The IPO Market (Almost) Had a Blockbuster Year The year began with record anticipation and a wide open IPO window, and ended with disappointment and uncertainty about how the IPO market in 2020 would unfold. 2019 was a pivotal year for the venture industry, with more U.S. unicorns going public (13) than in any prior year. Many of the industry’s most valuable and high-profile startups went public during the first half of the year, as Lyft, Uber, Zoom, Pinterest, Slack, Beyond Meat, Datadog, Peloton, and others made their debuts. In the second quarter alone, venture-backed IPOs generated more exit value – $138.3 billion – than they have in any full year for the past decade. While 2019 was a record-breaking year for exits generally – including M&A events and buyouts – IPOs stood out. IPOs accounted for 78% of the total exit value last year, despite the fact that the actual number of IPOs decreased slightly compared to 2018.
198.7B 2020 State of Ve nture Cap ital | 10
IPO Sentiment Shifted from Growth to Profitability Number & Median Market Capitalization of IPOs
“In 2020, we’ll see a return to a more balanced growth and profitability structure in the companies that do go public…we will see more lower-growth companies with core profitability going out than we would have historically. Ultimately, a greater number of IPOs with $5B market caps will create a much healthier, deeper market than a handful of high-flying companies with $100B caps.”
80 $1,500 60 $1,000
– Jason Green, Emergence Capital
20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 *
IPO # # IPO
IPO Value ($M) IPO Value (M)
Pitchbook as of December 31, 2019
As the year progressed, newly minted public companies reported mixed results, public market appetite for unprofitable companies waned, and some IPOs were pulled. As the colossal ride-hailing companies Lyft and Uber (valued at $24.3 billion and $82.4 billion at IPO, respectively) struggled in post-debut trading and the WeWork debacle led to the cancellation of its massive IPO, public market sentiment shifted. Investors began to value profitability and business model sustainability over growth at all costs. Even shares of well-performing IPOs suffered following WeWork’s fall from grace, leaving some investors underwater at year-end. These disappointments put a damper on what otherwise would have been a truly exceptional year for the IPO market. As we enter 2020, Airbnb, DoorDash, Postmates, Snowflake, and other companies that remain in the IPO pipeline not only face elevated scrutiny but also a closed IPO window due to the COVID-19 pandemic and related stock market declines. Time will tell whether these companies can access the public markets later in 2020 as the economy begins to recover, or whether they will be pushed out to 2021 and beyond.
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Trends » Enterprise Software Unbundled » Fintech Becomes More Ubiquitous » Innovation in Consumer Tech Impacts Women » Healthcare Models Evolve to Meet Customer Needs » European Venture Capital Ecosystem Is As Strong As Ever » Latin America Is on the Rise
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Enterprise Software Unbundled
» Increase in DevOps tools shorten system processes » Rise of communication and productivity software strengthens networks » Unbundling of human resources software provides clear direction
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Over the past few years, society has transitioned from one that is largely “bundled” to one that is relatively “unbundled.” For example, many consumers now prefer to purchase TV channels à la carte instead of buying full cable packages, and many learners are enrolling in massive open online courses on specific topics instead of (or in addition to) traditional, broad-based classroom instruction. Enterprise software has been unbundled as well, producing a large number of specialized applications across the enterprise landscape, especially in productivity, communication, human resources, and infrastructure. This unbundling has allowed providers to focus on creating best-in-class products in specific areas, as opposed to focusing on building sub-par products across many areas. As a result, the number of vertical and horizontal SaaS providers and applications has grown meaningfully over time, and today, companies of all sizes are adopting more best-of-breed SaaS applications to solve various business challenges. Two companies that are capitalizing on the unbundling trend are Loom and LogDNA.
Loom is a work communication tool leveraging instantly shareable video. With Loom, users can capture their screen, record their front-facing camera, and narrate video all at once without switching apps or needing to upload video files. Whether it’s training new teammates or replying to a customer inquiry, Loom enhances the way people communicate at work by allowing them to send the next best thing to being there. LogDNA provides detailed insights into a company’s production environment, enabling engineering and DevOps professionals to easily and quickly gather all systems and application logs so they can get back to focusing on what is most important: building great products.
Founded: 2015 Location: San Francisco, CA Investors: Fuel Capital, Khosla Ventures, Thrive Capital, Y Combinator, Tiger Global, Burst Capital, 137 Ventures, Shasta Ventures, Soma Capital, Upshift Capital, Advisors Fund, SV Angel While several human resource software providers have focused on creating full-suite solutions, Lattice is specifically focused on building performance management software for forwardthinking organizations. Traditionally, companies have performed periodic (e.g., annual or semi-annual) employee reviews, which reduces the accuracy of feedback and slows the pace of improvement. Lattice enables companies to embed continuous employee feedback into their cultures and run real-time people analytics based on this feedback. This helps organizations ensure that employees are constantly receiving the constructive commentary they need to regularly improve and the positive reinforcement they need to remain engaged, resulting in better overall company performance. 2020 State of Ve nture Cap ital | 15
Fintech Becomes More Ubiquitous
» Virtual banking services expand
» Mobile payment sector proliferates and consolidates
» AI increases in importance
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Investments in fintech companies continue to reach new records. Excluding Ant Financial’s record deals, VC-backed fintech funding hit a global record in 2019, with $34.5 billion in venture capital invested in companies focused on financial sector technological innovation. In addition to neobanks such as Chime, N26, and Monzo, new companies are entering the fintech space to provide real-time, online financial services to small businesses and individuals, including investments, loans, and insurance. Examples include Greensill, which provides banking capital finance for companies, and Brex, which offers corporate credit card solutions to startups. Neobanks will need to develop differentiated technologies and services in order to stand out and compete in this crowded market.
Founded: 2013 Location: San Francisco, CA Investors: Spark Capital, Google Ventures, NEA, Andreessen Horowitz, Index Ventures, Goldman Sachs Investment Partners, Kleiner Perkins, Felicis Ventures
Consumers are increasingly utilizing fintech applications and non-card payments to manage their savings and spending. With no “face to face” interaction between consumers and virtual fintech companies, these startups will need to prioritize transparency to establish trust. Fintech companies are also leveraging artificial intelligence to enhance the consumer experience (e.g., chatbots), improve speed and efficiency (e.g., robotic process automation), and reduce the risks of fraud. As competition in the fintech industry ramps up, companies’ success at implementing AI will determine their competitive advantage.
The founders of Plaid originally intended to develop financial management products, such as budgeting and bookkeeping tools. But when they realized how difficult it was to connect bank accounts with these types of products, they pivoted and built the current Plaid platform to solve this pain point. Today, Plaid offers APIs that connect individual bank accounts to financial applications like Venmo, Robinhood, Coinbase, and Gemini. With over 15,000 banks in the U.S. and Canada using the platform, as well as an estimated one in four U.S. consumers, Plaid is poised for massive growth. In early 2020, Visa announced that it would buy Plaid for $5.3 billion, two times its last private valuation. 2020 State of Ve nture Cap ital | 17
Innovation in Consumer Tech Impacts Women
» Femtech attracts investor interest
» Non-discretionary consumer tech concepts emerge
» Consumers want more social media
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In 2019, we saw increasing momentum behind startups that are innovating in consumer technology and developing novel solutions to broken legacy systems, especially in ways that increase the conversation around equity for women. The surge in femtech is poised to unlock the potential of women in society, providing them with new tools to advance their careers, build financial acumen and net wealth, take control of their health, and change the narrative around women’s issues. More broadly, innovations in the consumer sector have the potential to fundamentally reshape society by influencing how we build community and care for each other. 2019 saw a burst of investment in femtech, a broad category that includes everything from birth control prescriptions to co-working spaces for women, and from direct-to-consumer razor brands to fertility financing solutions. In disruptive and diverse ways, femtech products and services are rewriting narratives on women’s health, enhancing women’s ability to participate in the workforce, helping women establish online and offline communities and support networks, and empowering women with greater financial security.
Non-discretionary consumer tech companies that are challenging legacy institutions like preschools and nursing homes broke onto the scene in 2019. Inadequate childcare solutions have historically hindered women in the workforce, and as the senior population rises rapidly, elderly care responsibilities may also disproportionately fall on women. The expansion of VCbacked dependent care solutions for children and seniors – including exciting companies such as Zum, Wonderschool, and Umbrella – will help to make dependent care more manageable and efficient, and empower women with more career and family options. With legacy players dominating social media, many thought there was little room for newcomers. However, the massive success of platforms such as TikTok and VSCO has shown that consumers are still craving innovation in social media platforms, especially niche online communities and new forms of expression, although the bar for product virality is very high.
Founded: 2016 Location: New York, NY Investors: Sequoia Capital, Kleiner Perkins, NEA, Serena Ventures, Google Ventures, Upfront Ventures, Able Partners, Trail Mix Ventures, BBG Ventures, Brand Foundry Ventures, Brooklyn Bridge Ventures The Wing is a co-working community for women that encapsulates the femtech trends of 2019. Membership to The Wing includes access to in-person social networks as well as a thriving digital community. By providing women with a kind and empowering space to work and other resources to succeed, The Wing is femtech’s answer to co-working. Audrey Gelman, The Wing’s electric and highly accomplished CEO, has become a leading figure in women’s empowerment. As of October 2019, The Wing had about 15,000 members and 500,000 Instagram followers, indicating strong potential for the brand, especially now that it is independent of WeWork. 2020 State of Ve nture Cap ital | 19
Healthcare Models Evolve to Meet Customer Needs
» Healthcare delivers in more convenient places and mediums » Digital mental health and wellness solutions multiply » AI pushes forward diagnostic and therapeutic capabilities
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2019 was a year of market affirmation for the business models of next-generation insurance, telemedicine, and primary care providers, which have matured and gained traction in recent years. Health-tech investment in the U.S. and Europe increased by over a billion dollars, from $6.4 billion in 2018 to $7.5 billion in 2019, while the healthcare sector as a whole (health-tech, biopharma, diagnostics, and medical devices) invested nearly $33 billion in VC deals. Meanwhile, regional consumer health insurance juggernauts Oscar, Devoted Health, and Bright Health have each raised fundraising rounds at multi-billion-dollar valuations in the past 12-18 months. Exits in the sector were also robust, with diabetes management platform Livongo and clinic/care platform One Medical debuting in public markets with market capitalizations over $2 billion. The U.S. has a shortage of primary care doctors, while demand is soaring as age demographics and chronic diseases increasingly strain our existing healthcare model. These acute issues highlight the need for improved efficiency and early/preventative care, as well as the huge opportunity for startups that can use data to identify and optimize around systemic inefficiencies. New stratified care models (e.g., concierge clinics, telemedicine, remote prescription approvals) are beginning to provide solutions. Tech-enabled (usually web or mobile) solutions to wellness, education, and mental health are now accessible to millions, effectively multiplying the efforts of in-person care providers and sometimes replacing the need for them altogether. In the absence of sufficient numbers of mental health professionals both domestically and abroad, mobile has become the medium for society’s renewed focus on personal wellness and mental health. There are now hundreds of smartphone apps with the potential to transform a patient’s device into a monitoring and therapeutic platform, cementing mobile’s place in the wellness ecosystem. Progress is being made inside the lab, too. 2019 may very well be remembered as the year that precision medicine officially arrived, with genome-focused drug development now a routine focus at drug companies big and small, and two FDA-approved gene therapies currently in market (Zolgensma and Kymriah, targeting muscular atrophy and leukemia, respectively). AIintensive discovery platforms like Verge Genomics and Recursion Pharmaceuticals as well as image/data-parsing diagnostics like Viz.ai will play an increasingly important role in how we treat high-mortality conditions.
Founded: 2015 Location: Minneapolis, MN Investors: Bessemer Venture Partners, NEA, Flare Capital Partners, Meritech Capital Partners, Greycroft, Redpoint Ventures, e.ventures, Australia Future Fund, Cross Creek, Waterline Ventures, Oxeon Partners Bright Health is a health insurance service platform that partners with health systems and providers to streamline the healthcare experience. Focused primarily on individual/family and Medicare Advantage policy coverage, the company empowers users to access affordable healthcare through an intuitive, straightforward product interface and novel “narrow network” strategy. By working hand-inhand with physicians in local communities, Bright Health proactively engages with members, including those with high-risk or chronic conditions, to improve health outcomes through in-network care. Bright Health currently serves 22 markets across 12 states.
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European Venture Capital Ecosystem Is As Strong As Ever
» Investments reach a record level with help from international capital » Europe has many homegrown billion-dollar success stories » Berlin is making a name for itself in the European tech scene
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Investors’ stance on Europe, traditionally an overlooked and under-invested VC market, has shifted dramatically over the last several years. Whether measured by the record-breaking $32+ billion in investments in 2019 – the result of larger deal sizes and an influx of international and alternative sources of capital – or the increase in the number of European unicorns, it’s obvious that Europe’s VC landscape is booming and successfully fostering sustainable technology companies. Founded: 2011
“It does feel like we are in a golden age for Europe now:
Location: London, United Kingdom
the quality of talent, the level of ambition and availability of
Investors: Index Ventures, LocalGlobe, Seedcamp, IA Ventures, Andreessen Horowitz
capital are at a completely different scale.” - Sonali de Rycker, Accel Elite U.S. venture capital firms have taken note of Europe’s success, and the money flowing to European tech is increasingly coming from firms such as Benchmark, Sequoia, Founders Fund, and NEA. In fact, 21% of all rounds in Europe in 2019 involved participation from a U.S. or Asian investor. There are now 170+ European tech companies that have scaled to a valuation of more than $1 billion, a 13x increase over Europe’s 13 unicorns a decade ago. The ecosystem has significantly matured over the past several years, including a handful of noteworthy exits from Spotify, Adyen, and Farfetch in 2018, although 2019 was a relatively lackluster year for exits. Fintech and enterprise software have taken the lion’s share of investment in Europe over the past five years. Europe’s largest tech communities can be found in London, Paris, and Berlin. London remains the central hub, while Paris is known for its tech talent, and Berlin’s ecosystem – defined by its relative maturity, open culture, and low cost of living – is garnering a lot of attention. Berlin may soon challenge London as the European VC epicenter, which explains why Forbes, together with TrueBridge, launched the Midas List Europe 2019 in Berlin.
TransferWise was founded to make international money transfers cheap, fair, and simple. Founders Kristo Käärmann and Taavet Hinrikus started the business after realizing how much money they were losing on fees when transferring money home to Estonia from the UK. The company boasts 6 million global customers across 59 countries, has been profitable for three years running, and moves $5 billion every month. TransferWise’s competitive advantage is its low-cost platform – global funds transfers on TransferWise are 80% to 90% cheaper and two to three times faster than competitors. And while the business started by focusing on consumers, it has since expanded to businesses and banks, a $200 billion revenue market. Currently valued at $3.5 billion, TransferWise is further proof that large, scalable, and global businesses can be built in the European ecosystem. 2020 State of Ve nture Cap ital | 23
Latin America Is on the Rise
» Foreign and local investor dynamics fuel fundraising » Neobanks become the future of consumer finance » Ex-Brazil startup ecosystems prosper
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2019 was a breakout year for Latin America’s venture capital industry. In March, SoftBank Group announced plans to launch a $5 billion innovation fund in Latin America. Soon thereafter, Kaszek Venture (an Argentina-based firm) closed two funds totaling $600 million, and Monashees (a Brazilbased firm) began raising a new $250 million fund.
Founded: 2013 Location: Sao Paolo, Brazil
A 2016 report from the Center for Global Development found that Latin American countries suffer from lower levels of financial inclusion than other countries in the same income brackets globally. Challenger banks, or neobanks, directly tackle this issue by leveraging technology to track consumers’ balance and spending and cut costs via branchless and mobile operations. As foreign and local capital commitments to Latin America increase, the startup ecosystems of ancillary sub-regions are also likely to prosper. However, it will take increased pressure from both outside and local investors to break down barriers to investment in the region, including volatile political dynamics and uncertainty around monetary and fiscal policy. Historically, Brazil has been the largest recipient of venture dollars in Latin America, which, according to Pitchbook, remained the case in 2019; over $2.0 billion was invested in Brazilian startups, making up nearly 60% of the $3.4 billion total invested across all of Latin America. However, according to Crunchbase and LAVCA data, Colombia edged out Brazil in venture dollars raised in the first half of 2019 due almost solely to on-demand delivery startup Rappi, which raised a $1 billion Series E at a $3.5 billion post-money valuation.
Investors: Sequoia Capital, Kaszek Ventures, QED Investors, Redpoint Ventures, Founders Fund, Tiger Global, Thrive Capital, Tencent Holdings Nubank is the leading neobank in Latin America, with a user base of over 10 million. As consumers seek mobile-centric and flexible banking solutions – especially in Latin America, where the number of under-banked consumers is relatively high – Nubank is changing the face of banking. Interchange and interest are Nubank’s primary revenue streams today, but as digitally native generations become a greater percentage of the professional workforce, Nubank has an opportunity to capture meaningful assets from legacy banks and develop digital solutions for other lucrative financial products, such as lending and credit, all under the same brand umbrella.
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Venturing Into the Unknown Most of the indicators in 2019 pointed to it being another boom year for the venture market. Fundraising was healthy, investment activity was high, valuations climbed, and the exit market was on a tear during the first half of the year. The second half of the year was less amenable for venture-backed IPOs, as appetite diminished in the wake of WeWork’s demise. The question on everyone’s mind at the start of 2020 was how the IPO story would unfold, particularly as several high profile companies were expected to make their debuts. Now a few months into 2020, the outlook for the IPO market – and society at large – is much more somber than anyone would have predicted. COVID-19 is now a pandemic that has sent shock waves through the stock market. March 11 marked the official end of the 11-year bull run. A bear market for stocks would most certainly close the IPO window, and depending on how long it lasts, could trigger the denominator effect for institutional investors, resulting in lower allocations to the venture asset class. At a minimum, fundraising will likely take longer for venture funds in 2020 due to restrictions on travel and meetings. The impact of the virus on the global economy, and the venture ecosystem specifically, will likely be significant and far-reaching. Sequoia’s Black Swan memo was quick to sound the alarm and tell its founders to prepare for turbulent times ahead. For some companies, this means adjusting for longer sales cycles, solving for disrupted supply chains, calibrating to more conservative growth plans, halting non-essential hiring, and conserving cash. For companies in need of capital, fundraising could take longer and valuations could compress.
"Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances.” “As Darwin surmised, those who survive ‘are not the strongest or the most intelligent, but the most adaptable to change.’” - Sequoia Capital
Our levels of uncertainty are high, but the venture industry will continue to move forward, albeit with caution. Innovation has proven to be ongoing and resilient – recall that some of today’s most iconic companies were started during the financial crisis of 2008 and 2009. So, while the short-term outlook for the venture industry could be challenging, we remain optimistic about the longer-term opportunity to participate in the growth of next-generation companies that will continue to change and improve the way we live and work.
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About TrueBridge Capital Partners Established in 2007, TrueBridge Capital Partners is an alternative asset management firm focused on generating superior returns in the venture capital industry. TrueBridge identifies and invests in high-performing, access-constrained venture capital opportunities that generate premium value for its partners. TrueBridge prides itself on a data-driven approach to investing in both venture funds and venture-backed companies. The firm regularly gathers, analyzes, and publishes information about the venture industry and trends at truebridgecapital.com. The firm is recognized for its longstanding partnership with Forbes to produce The Midas List, an annual ranking of technologyâ&#x20AC;&#x2122;s top investors, The Midas List Europe, and The Next Billion Dollar Startups List. The State of the Venture Capital Industry is an annual market analysis of key venture capital industry trends spanning fundraising, investments, valuations, exits, and returns. Follow @TrueBridgeCP for the latest updates and insights.
Investment Team Contacts Edwin Poston General Partner
Mel Williams General Partner
Rob Mazzoni Principal
Andrew Winslow Principal
Mindy Isenstein Vice President
Kate Simpson Vice President
Brent Westbrook Senior Analyst
Caleb Ollech Senior Analyst
Divya Dhulipala Analyst
Kris Martin Analyst
A note about the data referenced throughout this report: We acknowledge that there are numerous sources of industry data that may differ materially in methodology, breadth, and statistics. We regularly review these sources and, over time, may change the sources we cite. In this yearâ&#x20AC;&#x2122;s report, we primarily reference Pitchbook for fundraising, investing, valuation, and exit activity.
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