VC Valuations

2016
Annual Report
 Credits & Contact
PitchBook Data, Inc.
JOHN GABBERT Founder, CEO
ADLEY BOWDEN Vice President,
Market Development & Analysis

Content
NIZAR TARH U NI Analysis Manager
K YLE STANFORD Analyst
BRYAN HANSON Data Analyst
J ENNIFER SAM Senior Graphic Designer

Contact PitchBook
pitchbook.com

Contents RESE ARCH

reports@pitchbook.com

EDITORIAL
editorial@pitchbook.com

SALES
sales@pitchbook.com
Introduction 3
Overview 46
Seed 7-8
Series A 9-10
COPYRIGHT 2017 by PitchBook Data,
Inc. All rights reserved. No part of this
Series B 11-12 publication may be reproduced in any
form or by any meansgraphic, electronic,
or mechanical, including photocopying,
Series C 13-14 recording, taping, and information storage
and retrieval systemswithout the express
written permission of PitchBook Data, Inc.
Series D and Later 15-16 Contents are based on information from
sources believed to be reliable, but accuracy
and completeness cannot be guaranteed.
Corporate, Hedge & Mutual Fund Nothing herein should be construed as any
17-18 past, current or future recommendation to
Participation buy or sell any security or an offer to sell, or
a solicitation of an offer to buy any security.
Valuation Step-Ups, Changes & Time This material does not purport to contain
19-20 all of the information that a prospective
Between Rounds investor may wish to consider and is not to
be relied upon as such or used in substitution
for the exercise of independent judgment.
Liquidation Participation 21-22

The PitchBook Platform

The data in this report comes from the PitchBook Platformour data software for VC, PE and M&A.
Contact sales@pitchbook.com to request a free trial.

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
US VC valuations
still growing
Introduction

Key takeaways

Look up a company.
Despite the overall decline in venture capital activity last year, median
valuations continued to rise And its cap table.
And its investors.
VC deals with corporate VC participation have consistently been
completed at higher valuations that those without
And its EBITDA
multiples.
Participating liquidation preferences have declined to the lowest levels
in the past decade And its board
members.

Valuations are one of the most intriguing parts of VC. A number that at In seconds.
times seems arbitrary, is at other times a driving force behind a bubble.
The recent growth of VC valuations may have created an even hazier
understanding of how round prices are agreed upon, or even if VC is able
to price itself correctly. The PitchBook Platform

This report offers thorough datasets of US VC valuations from the past

has the data you need
decade, providing break downs by series, stage, sector and more. In to close your next deal.
addition, data surrounding corporate VC, mutual funds and hedge funds
is provided, as well as a section dedicated to liquidation preferences Learn more at
around the industry.
pitchbook.com
We hope this report helps inform your analysis around current VC
valuation trends. If you have any questions or comments, please feel free
to reach out to us at reports@pitchbook.com.

K YLE STANFORD

Analyst

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
The new normal
Overview

The general attitude around the US VC activity by year

venture industry coming into 2016
$90 12,000
wasnt one of excitement, to say Deal Value ($B) # of Deals Closed
10,496
the least. The exit market had $80
dramatically slowed in the second Angel/Seed Early VC 10,000
$70
half of 2015, and the dislocation
Late VC
between median late-stage private $60 8,467 8,000
valuations and the falling prices of
public tech comparables caused $50
5,695 6,000
a frenzied response to what was
$40 4,280
deemed at the time a valuation
bubble. Sure, several private tech $30 4,000
2,971
companies had their valuations 2,595
$20
marked down by mutual fund 2,000
investors, but the price of their $10 1,830
most recent rounds didnt change.
1,592
The growth in private valuations $0 0
had been undeniably extensive. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Never had so many companies
Source: PitchBook
been valued at $1 billion than *As of 3/1/2017
before 2016 began, and never had
there been so much unrealized
value in the VC market.

US VC activity by quarter

$25 3,000
Deal Value ($B) # of Deals Closed

Angel/Seed Early VC 2,500

$20
Late VC 2,031
2,000
$15
1,500
$10
1,012
1,000
655
$5
500
364
$0 0
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 2Q 3Q 4Q 1Q*
2010 2011 2012 2013 2014 2015 2016 2017
Source: PitchBook
*As of 3/1/2017

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
At the beginning of 2016, vintage
2009 through vintage 2012 residual
value-to-paid in (RVPI) multiples
all stood above 1.1x. As the industry
became stretched with valuations
growing and exit opportunities
sliding, entrepreneurs and
investors alike began to see that
capital needed to be invested and
raised in a more rational way. The
number of unicorn deals declined
significantly last year, falling to just
37 from 60 the year before, but
any hesitance created at the top
of the market didnt make its way
throughout earlier stages of the
industry.
Relative to historical figures, VC
activity stayed high in 2016 as
8,467 deals were completed and
the decades second-highest
capital sum made its way into
startups. Deal sizes continued
to grow as investors looked for
companies with more traction and
emphasized slower burn rates.
Altogether, median valuations
stayed elevated across the board,
growing at nearly every stage in
2016.
Certain signs of a plateau did begin
to show last year, however. Series
D+ valuations dropped year-over-

Median % acquired by series in US US VC activity (#) by stage

35% 2017 1Q*

4Q
3Q

2016
30%
2Q
25.7% 1Q
24.5%
25% 4Q
22.0% 22.0%
3Q

2015
20.0% 20.3% 2Q
20%
20.2% 1Q
18.4%
4Q
15%
3Q
2014

13.5% 2Q
13.1%
10% 1Q
Seed Series A Series B 4Q
3Q
2013

5%
2Q
Series C Series D+
1Q
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 0% 20% 40% 60% 80% 100%
Angel/Seed Early VC Later VC
Source: PitchBook
*As of 3/1/2017 Source: PitchBook
*As of 3/1/2017

Median age (years) of early-stage US VC-backed Median age (years) of late-stage US VC-backed
startups startups
6 12
10.4
5.1 5.1
4.9 10
5
8.7
8.2
4 3.7 8
3.3 3.4

3 6
6.3 6.4 6.4

2 4
2.0 2.1
1.7

1 2 Series C Series D+

0 Seed Series A Series B

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: PitchBook Source: PitchBook
*As of 3/1/2017 *As of 3/1/2017

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median US early-stage post-money valuations ($M) by years year (YoY) for the first time since
2009, and Series B valuations
$60
Seed Series A Series B grew only slightly ($400,000 at
$50.6 $50.0 the median). Further, the highest
$50 number of companies in the last
Source: PitchBook
*As of 3/1/2017 decade exited at a valuation lower
$40 than their most recent private
value. We have also seen cracks
$30 $25.8
develop in the previously exalted
ranks of unicorns. Zenefits will
$21.0
$20 cut 50% of its workforce and
has replaced its CEO after legal
$8.0
questions around its platform
$10 $7.7
arose; lending marketplace Prosper
is reportedly in the process of
$0 raising a massive down round;
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
and Uber has been embroiled in a
series of controversies over recent
Median US late-stage post-money valuations ($M) by years months. Put more simply, unicorns
$250
are reaching the point where more
than just growth metrics matter.

$194.8 But the overarching theme stays

$200
the same: Venture is healthy.
Series C Series D+
$160.4 Several unicorns have already
$150 Source: PitchBook made their exits thus far in 2017.
*As of 3/1/2017
The high-profile IPO of Snap
$100.4 $100.0 (NYSE: SNAP) raised $3.4 billion
$100 at a valuation of almost $20
billion. AppDynamics was acquired
$50
by Cisco (NYSE: CSCO) for $3.7
billion just before making its public
debut. And just last week, Okta
$0 ($1. 2 billion valuation) and Yext
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* ($566 million valuation) filed for
IPOswhile these valuations may
not be near the top of venture
Companies (#) with exit value < prior financing post-money valuation
industry, the appetite shown for
40 37 their offerings could prove a more
appropriate barometer for the
35
31 greater exit market in 2017. While
30 analyzing private valuations can
25 provide insight into the status of
the market, until there are actual
20 exits, we wont know how well the
15 industry has priced itself in recent
years.
10 Source: PitchBook
*As of 3/1/2017
5 2

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Seed stage seeing significant
change
Seed valuations and trends

Access to newer forms of capital Median seed valuations ($M) by sector

have lengthened seed timeline
$16
The growth of new forms of Total Soware
$14
investors, namely accelerators,
pre-seed funds and crowdfunding
Commercial Services Pharma & Biotech
$12
sites, have given entrepreneurs
several different routes to $10
launching a business than raising
seed capital. The median age of a $8
company before bringing on seed
investment lengthened to two $6
years in 2016, resulting in startups
entering the venture lifecycle with $4
more developed business ideas
and a team of employees. It makes $2
sense then that the median seed
$0
size has grown by more than 200%
2010 2011 2012 2013 2014 2015 2016
since 2010to $1.5 million in 2016
equating to a median valuation
Source: PitchBook
figure that has increased by 87%
during that time to $8 million.

Investors holding strong on seed stage stakes Seed deal sizes roughly double over last three years
Median % acquired at seed by sector Median seed round size ($M) by sector

26% $1.6
Total Soware Commercial Services Total
$1.4
24% Soware
$1.2 Commercial Services
22% Pharma & Biotech
$1.0
20.6%
20.0%
20% $0.8
20.0%

$0.6
18%

$0.4
16%
$0.2

14% $0.0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median seed size and post-money valuation ($M) Median software seed size and post-money
valuation ($M)

$9 $9 $8.5
Post-money valuaon Post-money valuaon Deal Size
$8.0
$8 Deal Size $8
$7.2
$6.8
$7 $7
$5.8 $6.0 $5.9 $6.0
$6 $6 $5.7
$5.1 $5.0 $5.3
$5 $5 $4.5
$4.3
$4 $4

$3 $3

$2 $2
$1.47 $1.50
$1.00 $1.10
$1 $1

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Median commercial services seed round size and post- Median pharma & biotech seed round size and post-
money valuation ($M) money valuation ($M)

$9 $16
Post-money valuaon $14.5 Post-money valuaon
$8.0
$8 $14
Deal Size Deal Size
$6.9
$7
$6.2 $12
$6.0
$6 $9.9
$5.2 $10
$5 $4.5 $8.0
$8
$3.8 $6.8
$4
$6 $5.6
$3 $4.9

$4
$2 $2.8
$1.20
$1.00
$1 $2 $1.00
$1.43

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Select largest seed valuations of 2016

Deal size Post-valuation

Company Date HQ City State Industry
($M) ($M)

Boomcloud 360 $5.5 $132.2 2/25/2016 Austin TX Software

Kinetica $6.0 $78.0 4/10/2016 San Francisco CA Software

SafeGraph $19.5 $78.0 9/12/2016 San Francisco CA Software

Stellar Labs $3.7 $62.6 5/26/2016 Redwood City CA Software

SaltStack $16.0 $60.0 11/4/2016 Lehi UT Software

Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Series A financings continue
growth
Series A valuations and trends

Median Series A post-money valuations ($M) by sector The vast number of seed-funded
companies gives investors plenty
$35 of options
Total Soware
$30 More than 11,000 seed and angel
Commercial Services Pharma & Biotech
deals were closed between 2014
$25 and 2015, giving Series A investors
plenty of choice when startups
$20 came back to the table. Knowing
this, investors have been able to
$15 increase certain benchmarks they
are looking for in potential Series A
investments. From just 2013, Series
$10
A valuations have increased by 57%,
with deal sizes growing by roughly
$5
the same percentage.

$0
2010 2011 2012 2013 2014 2015 2016
Source: PitchBook

Pharma & biotech financing sizes far outpace other Unsurprisingly, lofty financing sizes come with greater
sectors as of late percentages acquired
Median Series A round size ($M) by sector Median % acquired at Series A by sector

$10 40%
37.5%
$9 Total Soware

$8 Commercial Services Pharma & Biotech 35% 32.8%

$7

$6 30%

$5
25.8%
25.0%
$4 25%
25.0% 25.5%
$3 23.0% 22.7%
$2 20%
Total Soware
$1
Commercial Services Pharma & Biotech
$0 15%
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median Series A round size and post-money valuation Median software Series A round size and post-money
($M) valuation ($M)

$25 $25
Post-money valuaon Post-money valuaon
$21.0 $21.0 $20.8
Deal Size
$19.5 $20 Deal Size
$20
$17.5
$16.6

$15 $15
$13.3 $13.3
$11.7 $11.9
$10.1 $10.5 $10.1
$9.8
$10 $10

$5.00 $5.50
$5.00
$5 $4.50 $5

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Median commercial services Series A round size and Median pharma & biotech Series A round size and post-
post-money valuation ($M) money valuation ($M)

$30 $35

Post-money valuaon Post-money valuaon $31.0

$23.9 $30
$25 Deal Size Deal Size

$20.0 $25
$20
$20.5 $20.3 $20.0
$20
$15.2
$15 $16.1
$14.9 $15.1
$11.8 $15
$10.1 $10.4
$10 $9.0
$10 $8.60
$6.06
$5 $3.50 $4.00 $5

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Select largest Series A valuations of 2016

Deal size Post-valuation

Company Date HQ City State Industry
($M) (SM)

Zoox $50.0 $1,550.0 11/7/2016 Menlo Park CA Automotive

Seven Bridges $45.0 $410.3 2/16/2016 Cambridge MA Healthcare systems

Osterhout Design Group $58.0 $258.0 11/28/2016 San Francisco CA Accessories

Headspace $34.3 $239.0 3/18/2016 Los Angeles CA Software

Jive Communications $7.5 $237.6 8/10/2016 Orem UT Wireless service providers

Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Series B valuations beginning
to form plateau
Series B valuations and trends

Series B sitting at a crossroads Median Series B post-money valuations ($M) by sector

Series B valuations grew 83% to a $80 Total Soware

median of $50.5 million between
2010 and 2015. Last year, however, $70 Commercial Services Pharma & Biotech
the Series B median valuation
flatlined, finishing the year at
$60
just $50.7 million. With that, deal
$50
sizes at the stage also flattened,
realizing a jump of just $400,000
$40
at the median. Despite these
plateaus, less than 10% of the deals $30
were raised as down rounds (9.1%),
making Series B the stage with the $20
lowest percentage of down rounds
and the only to see a decline YoY in $10
2016.
$0
2010 2011 2012 2013 2014 2015 2016
Source: PitchBook

The overall median percentage acquired has Pharma & biotech financings continue marching
increased slightly in recent years upward in size
Median % acquired at Series B by sector Median Series B round size ($M) by sector

31% $25

29% Total Soware

27.7%
$20 Commercial Services Pharma & Biotech
27%
25.0%
25%
$15
23% 22.2%
21.2%
21% 22.0% $10
21.2%
Total 20.0%
19% 19.7%
Soware
$5
Commercial Services
17%
Pharma & Biotech
15%
$0
2010 2011 2012 2013 2014 2015 2016
2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median Series B round size and post-money valuation ($M) Median software Series B round size and post-money
valuation ($M)

$60 $60 $56.2

Post-money valuaon Post-money valuaon
$50.5 $50.6 Deal Size $51.7
Deal Size
$50 $50
$45.2 $46.0

$40 $40 $36.4

$34.7
$30.1 $30.9 $31.4 $30.1
$30 $27.6 $30
$24.2

$20 $20

$12.0 $13.0
$11.5 $11.9
$10 $10

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Median commercial services Series B round size and Median pharma & biotech Series B round size and post-
post-money valuation ($M) money valuation ($M)

$70 $80 $75.3

Post-money valuaon Post-money valuaon
$61.7
$60 $70 Deal Size
Deal Size $64.0

$60
$50 $52.7
$44.5 $48.9 $49.0
$41.9 $50
$40
$33.7 $38.0 $39.2
$30.8 $40
$30 $27.2
$23.4 $30

$20 $20.0
$20 $17.9

$10.0 $10.0
$10 $10

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Select largest Series B valuations of 2016

Deal size Post-valuation

Company Date HQ City State Industry
($M) ($M)

Human Longevity $220.0 $1,888.0 4/4/2016 San Diego CA Pharma & biotech

Quanergy $90.0 $1,549.9 8/22/2016 Sunnyvale CA Electronic components

Denali Therapeutics $130.0 $1,130.0 6/1/2016 South San Francisco CA Pharma & biotech

Gusto.com $90 $1,090.0 6/1/2016 San Francisco CA Software

NextVR $80 $966.7 8/9/2016 Laguna Beach CA Software

Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median Series C valuation
hits decade high
Series C valuations and trends

Median Series C post-money valuations ($M) by sector Median Series C valuation surpasses
$100 million for first time
$140
Total Soware
The median Series C valuation has
$120 Commercial Services Pharma & Biotech
ballooned by almost $50 million since
2010, reaching over $100 million last
$100 year for the first time. As companies
have lengthened the amount of
$80 time developing at the early stage,
businesses are simply larger and in
$60 many cases more valuable by the time
they reach the Series C stage in todays
$40 market. Further, there has also been a
huge increase in late-stage capital in
$20 recent years. Since 2014, 21 VC vehicles
based in the US have closed on at least
$1 billion in commitments, combined
$0
totaling more than $30 billion. While
2010 2011 2012 2013 2014 2015 2016
not all is earmarked for late-stage,
Source: PitchBook these funds will help sustain the
increases weve seen in both deal sizes
and valuations.

A modest uptick for overall percentages acquired in Deal sizes of other sectors have caught up to pharma
2016 & biotech
Median % acquired at Series C by sector Median Series C round size ($M) by sector
30% $30
Total Soware
28%
Commercial Services Pharma & Biotech
26% $25

24% 23.2%
$20
22% 20.8%
20%
18.4% $15
18% 17.3%

16% 16.5% 16.6% $10

15.4%
14% 14.8%
Total Soware $5
12%
Commercial Services Pharma & Biotech
10%
2010 2011 2012 2013 2014 2015 2016 $0
2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median Series C round size and post-money valuation ($M) Median software Series C round size and post-money
valuation ($M)

$120 $140
Post-money valuaon Post-money valuaon $125.2
$100.4 $115.0
$120
$100 Deal Size Deal Size
$91.1 $104.1
$100
$80 $75.5
$71.0
$65.0 $76.1 $77.5
$63.3 $80
$60
$51.3 $58.8
$60

$40
$40 $36.8

$21.7 $22.4
$18.0 $22.0
$20
$20

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Median pharma & biotech Series C round size and post-

Median commercial services Series C round size and
money valuation ($M)
post-money valuation ($M)
$120 Post-money valuaon
$140 $108.0
$125.8 Deal Size
Post-money valuaon $100.0
$100
$120 Deal Size $91.4
$86.6

$100 $94.4 $80 $75.1

$89.2 $69.7 $71.4

$80 $72.0 $60

$60 $55.8 $56.4

$52.6
$40

$40 $24.7
$21.3
$24.5 $20
$20 $15.5

$0
$0 2010 2011 2012 2013 2014 2015 2016
2010 2011 2012 2013 2014 2015 2016
Source: PitchBook
Source: PitchBook

Select largest Series C valuations of 2016

Deal size Post-valuation

Company Date HQ City State Industry
($M) ($M)

Magic Leap $793.5 $4,500.0 2/2/2016 Plantation FL Computer hardware

Pivotal Software $653.0 $3,265.0 5/9/2016 San Francisco CA Software development

JetSmarter $105.0 $1,605.0 12/12/2016 Fort Lauderdale FL Software

Unity Technologies $181.0 $1,500.0 7/13/2016 San Francisco CA Software development

Razer $75.0 $1,500.0 2/23/2016 Irvine CA Electronic equipment

Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
First decline in late-stage
valuations since 2009
Series D and later valuations and trends
The latest stages cool off as Median Series D+ post-money valuations ($M) by sector
nontraditionals pull back, VCs get
rational
$300
Total Soware
Just 21 Series D+ deals came
$250 Commercial Services Pharma & Biotech
along with a valuation of $1 billion
or more in 2016, less than half
the average of the previous two
$200
years. While this stat alone wont
explain a trend at this stage, it
is interesting given that median $150
Series D+ valuations saw the only
YoY decline last year, falling 7% to $100
below $193 million. Mutual funds
and hedge funds, which had been
part of many of the largest deals $50
in 2014 and 2015, pulled back on
participation by 42% and 37%, $0
respectively. While certainly this 2010 2011 2012 2013 2014 2015 2016
is a notable source of capital, the
fact that VC dry powder is at an Source: PitchBook
all-time high lessens any negative
impact foudners may feel in terms
of capital availability.

Percentage acquired in pharma & biotech companies Softwares march upward continues unabated, even as
has declined as of late overall flatlines
Median % acquired at Series D+ by sector Median Series D+ round size ($M) by sector

22% $60
Total Soware
Commercial Services Pharma & Biotech Total Soware
20% $50
Commercial Services Pharma & Biotech

18% $40
17.2%

16% 15.6% $30

15.0%
14% $20
13.1%
12.3%
12% 12.0% $10
11.7% 11.8%

10% $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

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P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Median Series D+ round size and post-money valuation ($M) Median software Series D+ round size and post-money
valuation ($M)

$250 $300
Post-money valuaon $273.0
Post-money valuaon
$206.8 $247.5 $253.3
Deal Size
$192.7 $250
$200 Deal Size

$163.0
$200
$150
$118.4 $144.6
$107.6 $150
$97.3 $118.3
$100 $104.9
$82.9
$100
$65.4
$50
$30.3 $50
$27.0 $33.8 $32.8

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Median commercial services Series D+ round size and Median pharma & biotech Series D+ round size and
post-money valuation ($M) post-money valuation ($M)

$200 $200
Post-money valuaon Post-money valuaon $181.2
$180 $172.0 $180 Deal Size
Deal Size $160.0
$160 $153.9 $160 $149.8
$138.4 $139.7
$140 $140
$116.8 $118.6
$120 $120
$101.4
$100 $95.8
$90.5 $100 $88.7
$80 $80
$58.1
$60 $60
$48.1
$40 $40
$22.2
$21.0
$20 $14.5 $20

$0 $0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: PitchBook Source: PitchBook

Select largest Series D+ valuations of 2016

Deal size Post-valuation

Company Date HQ City State Industry
($M) ($M)

Uber $5,600.0 $66,600.0 5/24/2016 San Francisco CA Software

Palantir Technologies $880.0 $20,529.4 1/29/2016 Palo Alto CA Software

Snap $1,808.6 $20,000.0 5/25/2016 Los Angeles CA Software

WeWork $690.0 $16,900.0 10/12/2016 New York NY Real estate services

Stripe $150.0 $9,200.0 11/25/2016 San Francisco CA Software

Source: PitchBook. Note: Ubers financings in the first half of 2016 were collated into one
super round in 2Q 2016 according to PitchBook methodology.

16
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
CVCs different strategy
Corporate, hedge & mutual fund participation

Deals with corporate VC (CVC)
participation have increased from
just 455 completed in 2009 to more
than 1,000 during each of the past
four years. The heightened valuations
of these deals has become a point
of contention within the venture
industry over recent years. While it
may be coincidental, the distinct gap
between the median valuation of VC
investments with CVC participation
and those without exemplifies a
fundamental difference in how CVCs
are able to invest. In 2016, the median
valuation of an early-stage deal with
CVC involvement outpaced that of
deals without by $11 million ($28
million compared to $17 million), and
the spread of late-stage valuations
was almost $40 million. The strategic
aspect of CVC dealmaking, along with
a lower reliance on financial returns,
has given CVC a unique investment
profile. Thats not to say that financial
gain is off the investors radar, but that
gain can come in several forms. For
example, new technology can be the

US VC activity with corporate VC participation Median round size ($M) with corporate VC participation

1,304 $16
Deal Value ($B) 1,223 1,153
$14 $13
Deal Count
1,003
$12 $11
$10
803
$10
696
662 669
$8
533 541
455
$6

$4
166
$2
$11

$10

$12

$11

$13

$24

$34

$32
$9

$6

$7

$3

$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: PitchBook Source: PitchBook
*As of 3/1/2017 *As of 3/1/2017

Median post-money valuation ($M) of US early-stage Median post-money valuation ($M) of US late-stage VC
VC rounds with corporate VC participation rounds with corporate VC participation

$30 $28 $180

CVC Investor $26 $164
$25 $160 CVC Investor
No CVC Investor
$25
$140 No CVC Investor
$23 $137
$20 $120 $130

$100
$15 $17 $96
$16 $89
$80
$85
$10 $60

$40
$5
$20

$0 $0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: PitchBook Source: PitchBook
*As of 3/1/2017 *As of 3/1/2017

17
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
lead motivation for a CVC investment. With investment goals of their
By integrating the new technology into own, mutual fund and hedge fund
its core product, investors can receive investment in venture deals boomed
additional value from its investment in 2014 and 2015. Each investor type
that isnt tied to a future exit. Startups dramatically increased their exposure
can also be looked at as a potential to the asset class, in most occasions
acquisition target down the road, being a cornerstone investor in a
providing a source of inorganic growth. private IPO for a unicorn. This fact
These unique differences in strategy alone skews any analysis between
leave CVCs less focused on the price of investments with mutual or hedge
investments, and allow them to make fund participation with that of more
deals at heightened valuations. traditional VCs simply because
investments by these investors were
almost exclusively limited to the
largest deals of their respective years.
In 2016, however, the activity of both
mutual and hedge funds in VC declined
by 42% and 37%, respectively. The
quick turnaround from investment
to IPO that many of these investors
had envisioned took a hit when the
exit market for VC-backed companies
dramatically slowed toward the end of
2015 and on through 2016. With money
being pulled out of hedge and mutual
funds at the highest clip in some time
due to lackluster returns, these tourist
investors have pivoted back to their
core strategies for the time being.

US VC activity with mutual fund participation Median US round size ($M) with mutual fund participation
114 $70
$65
Deal Value ($B) 103
# of Deals Closed $60

$50
72 67
65 67
$40
59 $40
54
52
$29
$30
42

29 $20

12 $10
$13.3
$10.2

$14.5
$2.3

$2.0
$0.7

$6.0
$1.5

$2.1

$1.8

$1.3

$0.6

$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: PitchBook
Source: PitchBook
*As of 3/1/2017
*As of 3/1/2017

US VC activity with hedge fund participation Median US round size ($M) with hedge fund participation
Deal Value ($B) 104 $50
$46
# of Deals Closed $45

83 $40

$35
67
66 65 $30 $32
53
$25
45
39 38 $20
30 33
$15 $14

$10
9
$5
$1.5

$1.8

$2.0

$2.2

$1.0

$1.7

$5.2

$7.9

$4.4
$0.9

$0.8

$0.2

$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: PitchBook Source: PitchBook
*As of 3/1/2017 *As of 3/1/2017

18
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Venture timeline lengthens
Valuation step-ups, changes and time between rounds

Median valuation step-ups dropped Lastly, down rounds have become since at least 2006. But when
slightly in 2016, falling back to an only slightly more common compared to years in the past
roughly the decade average occurrence than in 2014 when decade, the overall percentage of
for both early stage and late- they comprised just over 10% of down rounds in 2016, and even flat
stage financings of 1.6x and 1.3x, transactions, the lowest proportion rounds, is still relatively low at 14%.
respectively. To be fair, a 60% jump
in a given valuation step-up at
the early stage is still very strong,
though comparing it to the 80%
Median time (years) between US VC rounds
multiple from 2014 may make it
seem more nominal. As valuations 2.2
begin to plateau at later stages, 2.0
2.0
the increase in private valuations
realized in recent years will take its 1.8 1.6
effect on step-ups moving forward. 1.6
1.6
Still, 75% of companies have raised 1.4 1.5 1.5
1.3
subsequent rounds with a higher 1.4 1.5 1.4
post-valuation than their previous 1.3 1.3
1.2
raise, the highest proportion we 1.2 1.2 1.2
have tracked in the past decade. 1.0
The grow-at-all-costs mentality
0.8 1.0
that pervaded VC over the past few
years has begun to change. The 0.6
focus that founders and investors Seed Series A Series B
0.4
seemed to put on valuation in
Series C Series D+
recent years is moving toward 0.2
more rational focus on business 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
metrics and capital needs. Source: PitchBook
*As of 3/1/2017

Median early-stage round step-ups in US Median late-stage round step-ups in US

1.8x 1.3x 1.4x

1.7x 1.3x
1.7x 1.7x 1.6x 1.3x
1.6x 1.2x 1.2x 1.2x 1.3x
1.5x 1.6x 1.2x 1.2x
1.5x 1.5x
1.4x 1.1x
1.0x
1.1x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: PitchBook Source: PitchBook
*As of 3/1/2017 *As of 3/1/2017

19
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
All up, flat or down rounds (#) by year
100%

90% While down rounds increased

80%
to 13% of deals in 2016, that
70%

60%
proportion is still low when
50% compared historically
40%

30%

20%

10%

0% Software up, flat or down rounds (#) by year

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 100%
Up Flat Down 90%
Source: PitchBook
80%

70%

60%

50%

The proportion of 2016 pharma 40%

30%
& biotech rounds with increased 20%
valuation was the highest we 10%

have tracked 0%
2012 2013 2014 2015 2016
Up Flat Down
Source: PitchBook

Commercial Services up, flat or down rounds (#) by year Pharma & biotech up, flat or down rounds (#) by year
100% 100%

90% 90%

80% 80%

70% 70%

60% 60%

50% 50%

40% 40%

30% 30%

20% 20%

10% 10%

0% 0%
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Up Flat Down Up Flat Down

Source: PitchBook Source: PitchBook

Note: Up, flat or down rounds are calculated using a combination of comparing share price and the pre and post valuations of previous and current
rounds, e.g. if the price per share in the most recent round was the same as in the prior financing OR the post value of the old round is the same as
the new round, then that would be classified as a flat round.

20
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Still founder-friendly?
Liquidation participation

Participation rates have steadily Liquidation participation by series in US VC rounds

decreased in venture financings
at every stage over the past few
70% 64.5%
years, moving the venture industry
into a more founder-friendly
60% 55.9%
territory than it had been even 54.4%
five years ago. While we have seen
50% 44.6%
investors take slightly larger stakes 43.1% 42.5%
in each round during the last two
40% 36.2%
years, the drop in participating 33.7%
terms, either capped or uncapped, 27.2%
30% 25.4%
has set up founders to keep better 21.5%
20.4%
control over their eventual payout,
20%
as long as they can continue
moving the company forward on 10%
schedule. As investors exercise
more scrutiny over the companies 0%
they back, a negotiating piece 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016
they might be able to use to earn
a spot at the table with the best Soware Pharma/Biotech Commercial Services
companies could be a willingness Source: PitchBook
to defer participation.

Liquidation participation by series in US VC rounds

70%
59.3%
60% 54.8%
49.3% 47.9%
50% 43.3%
42.1% 42.6% 42.9%
37.8% 38.3%
40% 33.3%
33.3% 32.5% 30.2%
27.9% 27.5% 29.2%
30% 23.7% 25.0%
23.6%
20%

10%

0%
2017*

2017*

2017*

2017*
2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

Series A Series B Series C Series D+

Source: PitchBook
*As of 3/1/2017
21
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
Series A liquidation participation in US
100%

90%
Participating liquidation
80%

70%
preferences have fallen steadily
60% across VC over recent years
50%

40%

30%
Series B liquidation participation in US
20%
100%
10%
90%
0%

2017*
80%
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

70%
Non-parcipang Parcipang - Capped Parcipang - Uncapped
Source: PitchBook 60%
*As of 3/1/2017
50%

40%

30%
Uncapped participation terms 20%

included in Series D+ rounds fell 10%

0%
to the lowest proportion in over

2017*
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
a decade Non-parcipang Parcipang - Capped Parcipang - Uncapped
Source: PitchBook
*As of 3/1/2017

Series C liquidation participation in US Series D+ liquidation participation in US

100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%

40% 40%

30% 30%

20% 20%

10% 10%

0% 0%
2017*
2017*

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Non-parcipang Parcipang - Capped Parcipang - Uncapped Non-parcipang Parcipang - Capped Parcipang - Uncapped
Source: PitchBook Source: PitchBook
*As of 3/1/2017 *As of 3/1/2017

The key distinction between participating preferred stock and non-participating preferred is that in the former, holders not only get their investment
back but also share with the common stock on an as-converted basis in any remaining available deal proceeds, while in the latter, investors get either
their investment amount back plus an accrued dividend if applicable or their pro rata share based on common stock, whichever is greater.

22
P I TC H B O O K 201 6 A N N UA L VC VA LUAT I O N S R E P O R T
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