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VALUATIONS+ TRENDS
VC
Median Valuations set new highs at the late stage,
continuing unabated. Page 6
Amount Acquiredin Series A financings increases
across the board in 2015. Page 9
Corporate, Hedge and Mutual Funds
and the current landscape. Page 17
2015 Annual Report
Sourced from nearly 30,000 U.S. valuations in the PitchBook Platform.
Credits & ContactPitchBook Data, Inc.
JOHN GABBERT Founder, CEO
ADLEY BOWDEN Vice President,
Market Development & Analysis
Content
GARRETT JAMES BLACK Senior Analyst
BRIAN LEE Data Analyst
JENNIFER SAM Senior Graphic Designer
JESS CHAIDEZ Graphic Designer
Contact PitchBook pitchbook.com
RESEARCH
EDITORIAL
SALES
COPYRIGHT © 2016 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.
Introduction 3
Overview 4–5
Median Valuations 6
Series Seed 7-8
Series A 9-10
Series B 11-12
Series C 13-14
Series D and Later 15-16
Corporate, Hedge & Mutual Fund
Participation17-18
Valuation Step-Ups, Changes & Time
Between Rounds19-20
Contents
2 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
The conversation has changedIntroduction
Since so much has changed in the venture industry since the last installment of
this report, we had to choose whether or not to use datasets from our typical
timeframe, which would have been through the end of 2015, or to include data
from last month. To achieve a balance, in the following report we’ve updated
overall U.S. venture activity and valuations through the end of February 2016.
In addition, we expanded datasets covering the impacts of corporate venture
capital, hedge and mutual funds on the venture landscape, elaborating on how
the increases in activity by each type of investor has helped transform VC trends
of the past few years.
This revamp of the report was mainly done to better reflect exactly how
the downturn in U.S. VC activity over the past several months has affected
overall valuations. It’s clear the conversation has changed, at the behest of
macroeconomic concerns and volatility in public equity markets. Especially as
things have taken a turn for the better in recent days, however, in what some are
still calling a bearish rally and others a calming of unwarranted fears, venture
investors must still identify signals from the noise. Given the tentatively positive
signs, many are forecasting a recalibration of investment levels that could
prove milder than what was originally feared. Others state that the extent of
overheating in the venture markets was severe enough that we are actually in
the early stages of a correction that is still ongoing. Continued mixed forecasts
regarding U.S. economic health, especially on a sector-by-sector basis, only
complicate matters further for VCs assessing risk levels. Regardless of your
current views, we hope the data and analysis in the following pages proves
informative and useful.
GARRETT JAMES BLACK
Senior Analyst
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3 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
An ongoing resetOverview
Late-stage numbers have weathered the downturn the best
U.S. VC activity by quarter
Source: PitchBook
*As of 2/29/2016
2016 is looking more like 2013 or 2012, although it’s early days yet
U.S. VC activity by year
Source: PitchBook
*As of 2/29/2016
0
500
1,000
1,500
2,000
2,500
3,000
$0
$5
$10
$15
$20
$25
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q*
2010 2011 2012 2013 2014 2015 2016
Capital invested ($B) # of rounds closed
Angel/Seed Early VC
Late VC
0
2,000
4,000
6,000
8,000
10,000
12,000
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90Capital invested ($B) # of rounds closed
Angel/Seed Early VC
Late VC
The term “reset” has been frequently
used to describe the VC landscape
over the past month. That is likely due
to the fact the number of completed
U.S. financings has fallen steeply—even
if a quarter-end boost occurs, the
decline is significant—while capital
invested has remained somewhat
healthy, potentially reaching a level
akin to 3Q 2014 in 1Q 2016. Investors
have clearly dialed back the pace
of investment, in light of ongoing
liquidity concerns, yet of the deals
being completed, it’s clear many are
justifying hefty sums. Hence the choice
of words to describe the shift, as the
degree of increase in caution still
places it firmly within the bounds of
wariness, rather than apprehension.
4 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Average age of late-stage U.S. VC-backed startups
U.S. VC activity (#) by stage and quarter
Average age of early-stage U.S. VC-backed startups
Median % acquired by series and year in U.S.
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
0%
5%
10%
15%
20%
25%
30%
35%
2008 2009 2010 2011 2012 2013 2014 2015 2016*
Seed Series A Series B
Series C Series D+
0% 20% 40% 60% 80% 100%
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q*
2013
2014
2015
‘16
Angel/Seed Early VC Late VC
1.41.7 1.5 1.4 1.4 1.6 1.7
2.1 2.12.5 2.3
3.2 3.5 3.4 3.4 3.5 3.3 3.53.9 3.9
4.2
4.74.4
4.9 4.8 5.05.4
5.0
5.85.5 5.7 5.6 5.7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Seed Series A Series B
6.06.3 6.4 6.5
5.9
6.7 7.1 6.9 7.2 7.3 7.17.38.1 8.3 8.4 8.5 8.2 8.6
9.2 9.38.8
10.3
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Series C Series D+
But which is more warranted?
Investors have used the reset
in order to shift terms already,
particularly at the late stage, as
evidenced below by the metric of
percentage of ownership acquired.
Why they are angling for more
downside protection is, in part, due to
the average ages of venture-backed
startups broken out below by series.
It’s no secret that companies have
been staying private for longer and
longer for a variety of reasons, ranging
from the availability of private capital
to the disincentive to go public over
the past several months. Illiquidity
requires a premium, which investors
are commanding more emphatically,
after multiple years of founder-friendly
financings. But as dollars invested
persist at a fairly high if less frequent
level, it’s clear that even in the current
environment of unease, VC firms are
willing to pay up in the right cases.
Investors are still going long, in other
words, albeit with further hedges built
into their bets. It’s all about perceived
risk for now; hence the counterintuitive
increase in proportionate late-stage
financing seen below—late-stage
fundings do possess less risk than
other venture stages, after all. The
breakdown of perceived risk at each
series will become a more important
factor moving through at least the
first half of 2016. Venture funds are
amply stocked, and consequently will
be looking for opportunities to invest,
but the correction—or recalibration—
will continue to work its way through
the financing cycle, likely resulting in
more investor-friendly terms, cooling
of valuations and round sizes, and a
sustained plateau of activity.
5 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Only Series B valuations have seen a slide, albeit modest
Median early-stage pre-money valuations ($M) by year in U.S.
A surge that apparently continues unabated into 2016
Median late-stage pre-money valuations ($M) by year in U.S.
A peak or a plateau?Median valuations
$3 $1$4 $3 $3 $4 $4 $5 $5
$6 $7$7 $7 $7 $6 $7 $7 $8 $9$12 $14
$17$19
$21 $20$18
$19 $21 $21
$26
$33
$41$38
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Seed Series A Series B
$38 $46 $42
$30
$38$50 $50 $56 $60
$74
$96
$72 $79 $77$51
$66$84 $92 $99
$135
$180
$229
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Series C Series D+
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
On the surface, overall median
valuations seem to indicate that
nothing much has changed, across
every stage, since the last installment
of this report. Only the median of
Series B valuations has seemed to
decline, and even so, hardly by much.
Every other stage of financing is up,
with Series D and later rounds seeing
a truly mammoth $229 million median
valuation in the first two months of
2016.
However, looks can be deceiving,
which is why these numbers must
be analyzed in the context of declining
VC activity. When one considers that
the only startups to receive funding
in today’s uncertain climate are the
ones best primed in VCs’ judgment
to survive any potential economic
downturn, the level of confidence as
expressed by valuations makes sense.
It remains to be seen whether these
still-lofty numbers represent a peak
or a plateau at an elevated level—the
latter is more likely. Furthermore, the
datasets to the right illustrate the
twin feedback effects at both ends
of the venture financing cycle that
have characterized VC activity over
the past half-decade: the entrance
of nontraditional venture firms at the
late stage, and the broadening of the
seed financing market. The former
may have helped drive the latter in
some part, but of more import has
been the intensifying flow of limited
partner commitments into seed
investors. And, with an abundance of
both VC and nontraditional VC dollars
chasing returns—as well as public
market comparables’ surge and a slew
of massive, high-profile successes—
exuberance in valuations was bound to
occur.
6 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Constrained by perception of riskSeed valuations and trends
The rise in seed valuations has been relatively slow and steady
Median seed valuations ($M) by sector
Source: PitchBook
2015 saw a veritable explosion in the median round
size across all sectors
Median seed round size ($M) by sector
Sector disparities are likely due to varying input costs
and attendant risk
Median % acquired at seed by sector
$0
$1
$2
$3
$4
$5
$6
$7
2010 2011 2012 2013 2014 2015
All Software Commercial services Healthcare svcs/supp./sys.
14%
16%
18%
20%
22%
24%
26%
28%
30%
32%
2010 2011 2012 2013 2014 2015
All Software
Commercial Services Healthcare Svcs/Supp./Sys.
Source: PitchBook
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
2010 2011 2012 2013 2014 2015
All Software Commercial services Healthcare svcs/supp./sys.
Source: PitchBook
Owing to multiple factors, the seed
stage has undergone a marked
shift in the past half-decade. More
micro VC funds (funds under $50
million in size) have been raised across
that time than at any other point in
the decade, while angel syndicates
have proliferated, broadening the seed
stage and helping create the pre-seed
environment. Seed investment levels
soared to a peak in 2014 by count,
while round sizes followed suit a year
later. As that surge in median round
sizes coincided with a plateau in angel/
seed financing activity in number, it’s
clear investors were exercising a bit
more caution in their investments, yet
still, when cutting checks, keeping
pace with overall venture inflation.
7 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Median seed round size and pre-money valuation ($M)
by year in commercial services
Median seed round size and pre-money valuation ($M)
by year in software
Median seed round size and pre-money valuation ($M)
by year in healthcare services, supplies & systems
Median seed round size and pre-money valuation ($M)
by year
$3.3
$4.1 $4.0
$4.7$4.9
$5.8
$0.5 $0.6 $0.5 $0.6 $0.8$1.2
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$3.2
$3.9 $4.0
$4.7$4.9
$5.5
$0.5 $0.5 $0.5 $0.5$0.8
$1.1
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$3.0
$5.2
$4.0
$4.7
$3.7
$6.0
$0.6 $0.5 $0.5 $0.4 $0.5
$1.4
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$3.2
$3.6$3.4
$4.9
$5.5
$4.9
$0.5 $0.5 $0.5 $0.5$0.8
$1.2
2010 2011 2012 2013 2014 2015
Pre-money valuation
Round size
Source: PitchBook
Source: PitchBook Source: PitchBook
Source: PitchBook
What’s particularly interesting
about that surge in 2015 is how,
relative to other financing stages, the
seed stage experienced a significant
increase in median valuations relatively
quickly. After all, the respective
increases in round sizes from 2013 to
2015 were $3.4 million to $5.0 million
for Series A and $7.1 million to $12.4
million for Series B. The median seed
financing, in that same span, more than
doubled to $1.1 million. This, more than
anything else, illustrates the extent to
which the pre-seed and seed financing
market has diversified and deepened,
with a surge in competitors looking to
put money to work. This is attributable
not only to aforementioned factors
but also increased traditional VC
activity at seed, as well as a greater
number of sophisticated institutional
seed investment firms either forming
or ramping up activity. It’s a bit
difficult to forecast the extent to
which a reset in valuations will affect
seed-stage activity, given that same
preponderance of institutional seed
firms. An exodus of early-stage VCs
could occur, if Series A financings
deflate somewhat back to historical
norms, while seed investors are likely
to dial back their investment paces
more in 2016, so activity should
diminish by a fair amount. How much
valuations and round sizes may slide
accordingly will by and large be due
more to the supply of viable startups
than anything else, as available capital
remains ample.
8 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
An abundance of supply is shifting termsSeries A valuations and trends
Median Series A pre-money valuations ($M) by sector
Source: PitchBook
Commercial services saw the steepest increase from
2014 to 2015
Median Series A round size ($M) by sector
Leverage in fundraising negotiations changed from
2014 to 2015, across every sector
Median % acquired at Series A by sector
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
15%
20%
25%
30%
35%
40%
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
$0
$1
$2
$3
$4
$5
$6
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
The Series A stage has been
subject to feedback from both the
explosion in angel/seed financing
activity and the late-stage boom. The
surge in angel/seed activity has been
more consequential, for reasons of
proximate supply. With more and
more angels and seed investors
funding companies over the past
few years, the crop of startups vying
for Series A dollars has exploded in
size. Venture investors have plenty
of options to pick and choose from;
couple that overabundance of supply
with healthy demand given fundraising
levels and inflation of round sizes
and valuations at later stages, and
price increases at Series A are all but
inevitable. It’s telling, however, that
9 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Median Series A round size and pre-money valuation
($M) by year in commercial services
Median Series A round size and pre-money valuation
($M) by year in software
Median Series A round size and pre-money valuation
($M) by year in healthcare services, supplies & systems
Median Series A round size and pre-money valuation
($M) by year
$6.5$7.3
$8.2$9.3
$12.3
$14.4
$2.5 $2.6 $3.0 $3.4$4.0
$5.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook
$6.7$7.6
$8.5
$10.2
$12.7
$16.1
$2.5 $2.8 $3.0$3.8 $4.0
$5.1
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$5.0
$6.1 $6.4
$7.5
$9.3
$10.4
$2.6 $2.5 $2.6 $2.5
$3.6 $3.7
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$6.0
$7.6 $7.9 $7.6
$11.7
$14.2
$2.0$2.5
$2.0$3.0
$3.6
$4.9
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook Source: PitchBook
Source: PitchBook
at this stage, as opposed to others,
the median percentage acquired
increased from 2014 to 2015, across
every sector. Furthermore, among the
overall decline in venture activity in
the U.S. over the past several quarters,
Series A rounds have declined sizably
in number. Capital invested has
remained fairly strong, even though
round counts are down, which is
to be expected when the supply
of companies seeking funding and
capital to invest are both abundant,
yet investors are wary. Through the
end of 2015, after all, both round sizes
and valuations remained more than
healthy, particularly in software. The
extent of the reset in U.S. venture
financing conversations is yet to
be determined, but the effects are
likely to be more pronounced in
the Series A field, simply due to risk
levels. As opposed to fundings later
in companies’ development, capital
invested may fall more steeply. VCs
will still fund businesses with promise,
but as opposed to later stages where
larger sums are justified by positioning
to scale, the early stage will see more
calls for tightening of the belt, due
to the fact most companies looking
for Series A financing have yet to
demonstrate histories of key growth
and sustainability metrics. Founding
teams will have to show either
considerable promise or demonstrated
success or both.
10 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
A middle ground between early and late stageSeries B valuations and trends
Series B has experienced some of the most striking valuation increases
Median Series B pre-money valuations ($M) by sector
IT hardware saw its increases in financing size level off
the most, while commercial services’ boomed
Median Series B round size ($M) by sector
The environment has been trending founder-friendly
for quite some time, to plateau a bit in recent years
Median % acquired at Series B by sector
$0
$10
$20
$30
$40
$50
$60
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
15%
17%
19%
21%
23%
25%
27%
29%
31%
33%
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
$0
$2
$4
$6
$8
$10
$12
$14
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
Even as the nomenclature of venture
rounds has shifted as a result of the
venture boom, with Series B financings
in many cases usurping the role of
inflection point played by Series C,
it can still be constituted as the last
of the intermediate development
stages for a company. Consequently,
coupled with the effects of blending
Series B and C fundings, some of the
more striking inflation of round sizes
and valuations has occurred at Series
B. After all, the median valuation
more than doubled between 2010
and 2015, rising inexorably from 2013
to last year from what now seems a
modest $25 million to exceed $40
million. Companies in the final stages
of product development or already
11 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Median Series B round size and pre-money valuation
($M) by year in commercial services
Median Series B round size and pre-money valuation
($M) by year in software
Median Series B round size and pre-money valuation
($M) by year in healthcare services, supplies & systems
Median Series B round size and pre-money valuation
($M) by year
$19.2$21.1 $21.1
$25.7
$33.5
$41.1
$7.0 $7.2 $7.3 $7.1$10.0
$12.4
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook
$17.6
$24.1 $22.7
$30.2
$35.1
$49.3
$6.9 $7.3 $8.0 $8.6$10.5
$12.5
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook
$18.1
$14.4$16.2
$18.0
$21.5
$29.5
$6.0 $5.5 $5.8$6.8 $7.4
$10.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook
$14.5
$19.5
$24.5$21.6
$32.1
$38.2
$5.5 $6.1 $6.7 $6.1$8.6
$10.8
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook
positioning to scale were able to raise
massive sums, and, of course, they did
so. Perhaps the most drastic inflation
in valuations occurred in software,
much of which can be chalked up to
the sheer rapidity with which a select
tier of companies was able to execute
on proliferating a product, as well as
the quick pervasion of SaaS models.
It’s not just software, of course; it’s
striking that each segment profiled
below has seen considerable increases
in both financing size and valuation, at
least in the past three years. But the
current reset of the venture capital
environment may affect Series B
numbers more significantly than
those of later rounds. Even if recent
Series B financings have really been of
companies that exhibit more blended
Series B and C attributes, there simply
is more risk inherent at that stage. In
today’s environment, venture firms
will simply assess opportunities more
carefully, while founders will have to
spend longer on the fundraising trail
to make their case, which—among
other factors—will contribute to a slide
in activity. Capital invested numbers
may not fall in a proportionate fashion,
skewed by investors’ faith in what
companies they do fund. But the
competition for VC dollars should only
intensify, which is more than likely to
result in a gradual shift away from how
founder-friendly terms have been back
toward a more equitable playing field.
12 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
The inflection point may shift downwardSeries C valuations and trends
Series C represents the inflection point of late-stage inflation
Median Series C pre-money valuations ($M) by sector
Software medians reach a staggering $25 million in
2015, well over 2014 numbers
Median Series C round size ($M) by sector
Is the modest increase between 2014 and 2015 due to
investor sentiment?
Median % acquired at Series C by sector
$0
$20
$40
$60
$80
$100
$120
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
10%
12%
14%
16%
18%
20%
22%
24%
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
$0
$5
$10
$15
$20
$25
$30
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
Source: PitchBook Source: PitchBook
Series C financings typically
represent an inflection point of
sorts, where companies position
for scale, reallocating spending on
increasing market share, potentially
making acquisitions and more to
augment growth. Accordingly, it has
seen some of the more dramatic
increases at the late stage over the
past handful of years. The founder-
friendly climate at even this late
stage can also be evidenced by the
overall trend downward in median
percentages acquired across the same
timeframe. At least, that trend was
downward until just recently, with a
very modest uptick between 2014 and
2015. Such an occurrence goes hand
in hand with overall investor sentiment
nowadays.
13 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Median Series C round size and pre-money valuation
($M) by year in commercial services
Median Series C round size and pre-money valuation
($M) by year in software
Median Series C round size and pre-money valuation
($M) by year in healthcare services, supplies & systems
Median Series C round size and pre-money valuation
($M) by year
$38.1
$49.7 $50.0
$56.3$60.0
$74.0
$10.0$12.5 $12.0 $12.3
$15.0$20.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$26.5
$53.0$56.2
$67.7
$89.2
$104.0
$8.0 $10.0 $12.0 $15.0 $17.0$25.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$36.1
$28.1
$35.3
$45.6
$29.7
$61.0
$11.6 $11.7 $12.5$10.2 $9.1
$18.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook Source: PitchBook
Source: PitchBook
$54.7
$79.5
$40.6
$70.2
$50.4
$75.9
$10.3 $9.5 $8.3$12.3 $12.5
$17.5
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
Source: PitchBook
As noted earlier, the sheer amount
of venture capital raised has
rendered perceptions of what is a
more reasonable level of investment
all the more important. Hence, we’ve
observed a pullback if not a dramatic
decline, as firms still can justify
writing sizable checks, just on a less
frequent, more protected basis. The
size of the checks will likely decline
somewhat, particularly at Series C or
later stages. The types of numbers
seen for 2015 below will be viewed as
more of a high-water mark borne of an
overexuberant financing environment,
rather than a necessary new normal,
with investors and founders alike
exercising more discipline in spend.
As may be supposed by inspecting
the sector breakdown below, median
valuations may shift considerably for
specific niches with more complicated,
costly avenues to scaling. There’s
a difference between joining an IT
hardware startup’s Series B financing
in anticipation of an exit in a couple
years than subscribing to its Series C
financing as it positions to take away
market share from incumbents, for
example. Consequently, overall Series
C median valuations could decline
somewhat in tandem with overall
late-stage activity, as part of a general
reset, not a cataclysm.
14 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Winnowing, not abandoning, the fieldSeries D and later valuations and trends
2015 recorded a peak in valuations across nearly all sectors
Median Series D+ pre-money valuations ($M) by sector
Software has been driving median round size inflation
for a few years now
Median Series D+ round size ($M) by sector
Sector-specific changes may well be skewed, but also
could be indicative of investor caution
Median % acquired at Series D+ by sector
$0
$50
$100
$150
$200
$250
$300
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
4%
6%
8%
10%
12%
14%
16%
18%
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
$0
$5
$10
$15
$20
$25
$30
$35
$40
2010 2011 2012 2013 2014 2015
All Software IT hardware Commercial services
Source: PitchBook
The Series D or later round of
financing represents the typical
apex of a company’s venture funding
lifecycle—or at least it is a serviceable
approximation. At this end of the
venture feedback cycle, the inflation of
round sizes and valuations is clearest,
with the median pre-money valuation
across all sectors rising from $99
million in 2013 to $180 million last
year. Round sizes kept pace, nearly
doubling across the same timeframe,
from $16 million to $31 million. In a way,
continued huge late-stage rounds even
in 2016 has been artificially propping
up numbers: Mature companies that
have been financed multiple times
have only so much equity to offer, yet
still need plenty of cash. Consequently,
financings that are still occurring
15 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Median Series D+ round size and pre-money valuation
($M) by year in commercial services
Median Series D+ round size and pre-money valuation
($M) by year in software
Median Series D+ round size and pre-money valuation
($M) by year in healthcare services, supplies & systems
Median Series D+ round size and pre-money valuation
($M) by year
Source: PitchBook
Source: PitchBook
Source: PitchBook
Source: PitchBook
$65.8
$83.5$92.1
$99.0
$135.0
$180.0
$12.5 $15.1 $16.2 $16.0$25.0
$31.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$51.0
$92.0 $95.2
$141.5
$217.5
$242.8
$10.0 $12.0 $15.3 $19.9$31.5 $35.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$44.9
$54.9 $57.8
$79.2 $82.1
$110.5
$15.0 $14.1 $16.2 $17.5 $18.7$15.0
2010 2011 2012 2013 2014 2015
Pre-money valuation Round size
$91.2
$57.0
$85.3
$131.0$139.5 $137.4
$10.0 $8.7 $7.5$16.4 $17.5
$25.0
2010 2011 2012 2013 2014 2015
Pre-money valuation
Round size
Median Nasdaq price vs. median U.S. Series D+ valuation by year
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Nasdaq composite
Series D+ median pre-money valuation
Source: PitchBook
*As of 2/29/2016
This dataset calculates the annual percentage change in median Nasdaq close prices as well as median Series D or later pre-money valuations, using 2005 values as a base set at 1.00.
are heightened. Investors are only
willing to invest at these levels if the
businesses are robust and liquidity can
be anticipated to be available relatively
soon. Hence the flight to quality, as
the only companies still even raising
at that level are the ones that enjoy
the most investor confidence—even
with an extra dose of downside
protection. Consequently, we’ve seen
an unceasing march of median Series
D+ valuations even into 2016, as the
relative Nasdaq composite has slid.
Investors are winnowing the field of
late-stage venture-backed companies
to finance, not abandoning it entirely.
16 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Is the VC vacation over?Corporate, hedge & mutual fund participation
Hedge funds’ participation is considerably off in 2016 so far
U.S. VC rounds with hedge fund participation
A flight to quality has helped keep median financing sizes elevated
Median U.S. round size ($M) with hedge fund participation
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
$1.3
$1.7
$2.0
$1.0
$0.7
$2.4
$1.1
$2.1
$7.0
$10.
8
43
66 61
27 30
42 42
63
117127
13
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Overall value of rounds ($B)
# of rounds closed with hedge fund participation
$0.5
$46
$35
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
One of the more pressing questions
is the extent to which “tourist”
VCs—nontraditional venture investors—
will dial back activity. The primary
reason why mutual fund markdowns
have been so publicized, after all,
is that their involvement has been
one of the more unprecedented
characteristics of the recent venture
boom. Mutual funds haven’t been
alone; the role of hedge funds has also
been key in much the same way. Take
the case of hedge fund Tiger Global
Management, whose torrid pace of
investment in venture rounds has been
one of the primary drivers behind the
stark increases in the charts to the left.
Tiger Global operates multiple private
equity strategies, but has garnered
the most headlines in the past couple
of years for its focus in backing
international startups such as Didi
Kuaidi, Flipkart and others. But the U.S.
has not escaped its attention, with its
more high-profile fundings including
those of Postmates and Avant. This
push to finance high-growth, private
companies—even paying premiums for
relatively illiquid holdings—has been
well documented, as has the ensuing
effect on the venture landscape as a
whole.
What hasn’t been well established,
however, is whether those
same players will keep investing in
the event of a general downturn
in venture valuations that could hit
even the sturdiest of players. The
first two months of 2016 have seen
a considerable drop in the pace of
hedge and mutual fund participation,
although it’s worth noting the value
of the rounds mutual funds are still
involved in remains sizable. On the
face of it, it seems likeliest that hedge
and mutual funds will cut back their
participation considerably, primarily
due to a scarcity of companies with
growth potential robust enough to
withstand a significant degree of
volatility both economic and financial.
Liquidity also remains a pressing issue.
17 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Median U.S. round size ($M) with mutual fund
participation
Median pre-money valuation ($M) of U.S. late-stage VC
rounds with corporate VC participation
U.S. VC activity with mutual fund participation
Median pre-money valuation ($M) of U.S. early-stage
VC rounds with corporate VC participation
$29
$39
$18$19
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
CVC Investor No CVC Investor
$167$174
$102
$122
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
CVC Investor No CVC Investor
$1.5
$2.0
$1.9
$1.3
$0.7
$5.8
$2.0
$2.1
$11.
3
$13.
8
$3.5
6672 67
42
29
5056
61
113 117
16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Overall value of rounds ($B)
# of rounds closed with mutual fund participation
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
$60$56
$0
$10
$20
$30
$40
$50
$60
$70
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*Source: PitchBook
*As of 2/29/2016
Until markets stabilize somewhat,
ameliorating investor fears, hedge and
mutual funds, even more so than other
late-stage VC investors, will flock to
quality. That should decrease the level
of activity, if not overall dollar value of
rounds, considerably.
The venture investment arms of
corporations, on the other hand, are
unlikely to pull back nearly as much,
as their investment theses are very
different. They may pull back a little, as
corporate VCs looking to join rounds
will be subject to similar pressures
as typical venture firms, but median
valuations produced by fundings with
corporate VC participation may not
decline to the same extent as those of
the general population. Corporations’
investment rationales are typically
based more on potential synergies
and R&D at scale than returns alone,
and accordingly will depend more on
general economic trends and parent
company performance and overall
business strategies. Hence the recent
announcement by Intel Capital that
it is seeking to sell about a quarter
of its portfolio companies; that
decision owes more to a reshuffling of
resources to cohere with Intel’s overall
strategies than anything else. In a
similar vein, corporate venture arms
will continue investing in the most
robust of startups whose focuses align
best with their parents; as a result, the
valuations of those companies are
likely to remain high, as illustrated
below.
18 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
Marked by cautionValuation step-ups, changes and time between rounds
Median early-stage round step-ups by year in U.S.
Source: PitchBook
*As of 2/29/2016
Median late-stage round step-ups by year in U.S.
Source: PitchBook
*As of 2/29/2016
1.6x 1.6x 1.6x
1.1x
1.4x
1.7x 1.7x1.5x
1.7x 1.8x1.6x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
1.3x 1.2x 1.3x
1.0x1.1x
1.3x1.3x
1.2x1.3x 1.4x
1.3x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Median time (years) between rounds in U.S. by series
0.9 1.0
1.21.31.3
1.5
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Seed Series A Series B
1.4
1.5
1.3 1.3
1.1
1.2
1.3
1.4
1.5
1.6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Series C Series D+
Source: PitchBook
*As of 2/29/2016
Source: PitchBook
*As of 2/29/2016
After two consecutive annual
increases, median round step-ups
declined through the end of February
2016. Across both the early and late
stages, 2015 saw the highest median
step-ups in the U.S. of the decade, with
the early stage alone seeing a hefty
1.8x. That same metric still remains on
the elevated side in 2016 so far, but
the decrease is telling in conjunction
with the uptick in time between rounds.
The fact there hasn’t been a distinct
plummet, but rather a modest slide
in financing step-ups paired with an
increase in time taken to raise speaks
to a fundraising atmosphere pervaded
with a higher concentration of caution
than in previous years. Series B and
C financings have seen the starkest
increases in time between rounds,
likely as the companies still receiving
Series D or later funding are still
attractive enough to investors that
they can fill their coffers relatively
quickly. On the opposite end of
that spectrum, the sheer level of
competition in the seed fundraising
market—especially in the current
environment—is what has pushed the
time to Series A to an all-time high in
the first two months of 2016.
Note: time between rounds is calculated by the time between the date of
the last financing completed and the financing prior to that.
19 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
As financing flow sputters, the percentage of down rounds is up
U.S. venture up, flat or down rounds by year
Source: PitchBook
Source: PitchBook
*As of 2/29/2016
2012 2013 2014 2015 2016* 2012 2013 2014 2015 2016* 2012 2013 2014 2015 2016*
Software Commercial Services Healthcare Svcs/Supp./Sys.
Up Flat Down
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*Up Flat Down
As suspected given the diminishing
step-ups, the relative proportion
of down rounds through February
2016 was greater than either 2014
or 2015. The simultaneous increase
in up rounds makes more sense in
light of decreased venture activity
overall: The companies getting
funded in the current environment are
either demonstrating robust enough
numbers to quell investor qualms or
they are settling for down rounds. It’s
more of a make-or-break environment
than we’ve seen in some time, as
further evidenced by the smallest
proportion of companies eking out
flat financings in years. Investors are
either being persuaded to re-up in
order to recoup later, even in a down
round, or don’t need to be, essentially.
Commercial services companies
saw by far the largest uptick in the
proportion of down rounds, due more
to the scarcity of venture financing
activity within that space more than
anything else.
Investors are either willing to be persuaded to re-up even in a down round—in order to recoup later—or don’t need to be.
*As of 2/29/2016
Note: Up, flat or down rounds are calculated based on share price, e.g. if the price per share in the most
recent round of financing was lower than in the prior financing, that would be classified as a down round.
Many of the companies still robust enough to garner up financings are in software
U.S. venture up, flat or down rounds by year and sector
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
20 PITCHBOOK 2015 ANNUAL VC VALUATIONS & TRENDS REPORT
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