More Trends with IPOs and VC Investment

Came across a few more tidbits since my previous post on IPOs. The first comes from Fortune’s Dan Primack who reported that “ten companies have priced U.S. IPOs so far [last] week, and each one has done so either at the bottom of their proposed price range, or below it altogether.” He thinks we’re moving into “trend” territory now.

On the flip side the latest MoneyTree report from PwC, the NVCA and Thomson Reuters reports that venture capitalists invested the most money since Q2 2001 last quarter. Overall, VCs pumped $9.5 billion into 951 U.S.-based companies last quarter, representing a 12% increase in dollars and 14% decrease in deals from Q4 2013.

The quarter included nine rounds of $100 million or more, including top raiser Dropbox ($325m). Software was the leading sector with more than $4 billion, followed by biotech (1.06b), IT services ($815m) and media/entertainment ($743m). Silicon Valley topped the pack regionally with a whopping $4.7 billion for its startups, followed by New England ($1.01b), New York Metro ($961m) and LA/Orange County ($519m).

VC Round Sizes Continue Upward Climb

Pitchbook has come up with a first-quarter infographic that features a few surprises. First, four funds garnered more than 50 percent of the capital raised in the first three months of this year.

The first quarter also saw the most capital invested in a single quarter in the history of venture capital. And we’ve also just seen the most IPOs in a single quarter since the fourth quarter of 2007.

In fact, according to a new report by Thomson Reuters and the NVCA, 36 venture-backed IPOs raised $3.3 billion during the first quarter of 2014, a 50 percent increase, by number of new listings, compared to the previous quarter. The first quarter also marked the fourth consecutive quarter to see 20 or more venture-backed IPOs.

Startup Resources – Books, Blogs, Newsletters, Events and Other Good Stuff

Venture Capital / Fundings
Fortune’s Term Sheet (daily email)
Strictly VC (daily email)
Mattermark Daily (daily email)
Crunchbase Daily (daily email)

Hacker News
Business Insider
This Week In Startups

Startup / VC Blogs
Ask the VC (Foundry Group)
Ben Horowitz (A16Z)
Benedict Evans (A16Z)
Bill Gurley (Benchmark)
Boris Wertz (Version One)
Bryce Roberts (OATV)
Charlie O’Donnell (Brooklyn Bridge)
Chris Dixon (A16Z)
David Hornik (August)
Eric Paley (Founder Collective)
Hunter Walk (Homebrew)
Google Ventures Library (Google Ventures)
Joe Wallin (covers startup law)
Mark Suster (Upfront)
Paul Graham (YC)
Reid Hoffman (Greylock)
Street Fight (covers hyperlocal)
Tomasz Tunguz (Redpoint)
Venture Hacks (Nivi from AngelList)
William Mougayar (startup news aggregator)

Engineering Blogs
Etsy Code as Craft
Foursquare Engineering
Instagram Engineering

NYC Specific Resources
NYC Tech Meetup
StartupDigest (newsletter)
GarysGuide (newsletter)
This is Going to be Big (newsletter)
Ultra Light Startups (newsletter & events)
NYEBN (pitch events and meetups)
Hatchery (pitch events)

Conferences / Events
LAUNCH Festival
Startup Grind
TechCrunch Disrupt
Business Insider Events
Columbia Business School PE/VC Conference
VentureBeat Summits

Venture Deals
What Every Angel Investor Wants You to Know
Startup CEO
The Founder’s Dilemmas
The Lean Startup
Innovator’s Dilemma
The Exceptional Presenter

The Likelihood of Raising Capital (aka. Running the Startup Financing Gauntlet)

Stop by a pitch competition or VC panel event and you’re guaranteed to hear questions about raising money and just how likely it is for your company to be one of the selected few.

Dave McClure advises startups to just be awesome. Marc Andreesen tells entrepreneurs to be so compelling investors can’t resist giving you money. That’s all well and good, but what are the actual odds either of these guys is going to invest in your idea/team? Tomasz Tunguz decided to crunch the numbers and find out.

First the good news – there are more companies than ever raising seed capital (4x more in the last 4 years). And while the number of companies being started has also gone up dramatically, most likely the odds of raising a seed round are much higher than they used to be (unfortunately there’s no way to quantify this as the total number of companies formed is not available).

Now for the bad news – while the total number of A rounds has gone up marginally, series B remains basically unchanged. Meaning the odds of your startup making it from seed to B have gone down from about 30% in 2006 to about 5% in 2011 (the mean for all years is 12%). Pretty brutal numbers.

So perhaps if your idea is awesome and your traction is ridiculously compelling, you may get lucky enough to successfully run this gauntlet. On the other hand, I wouldn’t worry about the numbers that much. The odds are still way better than playing Powerball.

Most Active VC Firms by Sector in 2013

Last week PitchBook posted an excerpt from their upcoming 2013 League Table Report which looked at 2013’s top VC investors globally (by deal count) in a selection of industries.

Not surprisingly, 500 Startups is leading a number of categories and firms from the Bay Area dominate the top of most of the lists.

Nikhil Basu Trivedi Asks What’s Up with the Series A?

Nikhil Basu Trivedi takes a look at the current trends in Series A rounds where we’re seeing both a rise in ‘mega’ A rounds ($10M+) and a crunch.

Companies with factors such as traction as exhibited by usage growth or revenue growth, or an all-star team, or an insanely compelling story are raising larger Series A rounds than in the past. But companies without such momentum are finding it harder to raise a Series A, often having to raise smaller Series A/“Seed+” rounds, or bridge rounds, or facing the reality of having to shut down.

You can read the full article here.

Location Maybe Sorta Matters?

Harvard Business Review posted a little piece the other day extolling the virtues of building your startup in Silicon Valley (or at least one of the startup ‘superhubs’ – San Francisco Bay area, New York, Boston).

Some have taken issue with the source of data (Crunchbase) while others have argued that the definition of success was off. And the data itself, in my opinion, wasn’t as compelling as I would have expected (10% longer to raise a round, 10 to 15% less in follow on rounds, etc.). But regardless of what you think of the data or the argument, the article still raises a valid question – is it easier to play the startup game in one place vs another?

Now I’m a huge believer that you can build a successful company anywhere, even a technology company. There are tons of case studies. And you definitely don’t have to take venture capital to do so. Plenty have bootstrapped their way to success. As long as you have a great product, customers willing to pay for it, and you’ve got the risk appetite to go for it, there’s no stopping you from opening up in Ann Arbor, Dallas or Berlin. (Yes, I’m ignoring things like recruiting and networking which should also play a major role in your decision making process).

But therein lies the key differentiator – who is going to assume the risk? More specifically, the financial risk. If it’s you, the founder, then do as you like. You are your own angel investor / VC. But if you’re unable or unwilling to take on that risk, it’s still a very good idea to go where the money is. It’s one less thing to worry about. And let’s be honest, the odds are already against you, why add yet another hurdle?

The upside to this is that the money is now in a lot more places. Seattle, Boulder, Austin, Chicago, Las Vegas, Los Angeles and more. Sure, the superhubs are outpacing them by a wide margin still, but things are changing. Just look at the number of angels and VCs who have been or are now expanding their geographies to increase deal flow. Not to mention the accelerators and incubators that have popped up virtually everywhere.

So is it easier? For now, I’d say yes. There’s simply too great an ecosystem in place to say that all places are created equal now. But my gut tells me that in 5 to 10 years, maybe sooner, the list of superhubs will be a bit longer.

Pitch Advice from Reid Hoffman

Reid Hoffman posted a little bit of history today – the Series B pitch deck for LinkedIn. In it he provides insights and advice for entrepreneurs raising capital.

He’s also written up a companion blog post that summarizes some common myths about the pitch process. It’s also worth a read.