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Frothy, but…
CB Insights
In God we trust, all others must bring data
@cbinsights
2www.cbinsights.com 2www.cbinsights.com @cbinsights
Backed by the National Science Foundation, CB Insights uses data science and
machine learning to help our customers predict what’s next—their next customer,
their next investment, the next market they should attack, or the next company they
should acquire.
Cisco, Salesforce, Castrol, Gartner, as
well as top tier VCs including, NEA,
Upfront Ventures, RRE, and FirstMark
Capital rely on CB Insights to make
decisions based on data, not decibels.
About CB Insights
A unique combination of data science and machine learning to help you make data-driven decisions
”A detailed discussion of data collection and how the company parses them is written by CB Insights’ data
scientists; it convincingly tells the story of scalability and accuracy for what they call “The Cruncher.”
Forbes article “Predictive Analytics And Novel Visualization Draw Customers To 'Must Have' Data” published April 8, 2015
3www.cbinsights.com 3www.cbinsights.com @cbinsights
See what other customers have to say at
http://www.cbinsights.com/customer-love
“Designed by a VC insider who truly knows the
space and understands end-user needs.”
Greg Bae
Investments & Biz Dev
Comcast Ventures
Jack Leeney
Portfolio Manager
Telefonica Ventures
“We're using CB Insights at Salesforce Ventures
to analyze industry trends that are relevant to
our strategy. It's helped improve our efficiency.”
Matt Garratt
Sr. Director, Corporate
Development
Salesforce Ventures
“CB Insights provides our team with a holistic and
thematic approach that really captures market
activity….we've found CBI to have the best
access for the most accurate market view.”
“We have been looking for a tool that could give us the
ability to track, research and identify investment
opportunities. CB Insights provides this simply and in a
simple, easy to use interface. The depth of information
that we get is exactly what we need. Great product.”
Jonathan Tudor
Ventures Director
Castrol innoVentures
“CB Insights perfectly illustrates what I expect today from such
online services to stay tuned to our fast-changing Tech
Landscape. Accurate and up-to-date data mash-ups, intuitive
UIs, smart data visualization capabilities and direct API
access… all packaged together with straightforward pricing.”
Simon Mencarelli
Senior Manager, Strategic
Planning
Dassault Systems
“CB Insights' intuitive user interface, analytical
capabilities, and detailed investment information create
a very powerful tool for our team's research needs.”
Nate D’Anna
Corporate Development
Cisco
A few of our happy customers
The most publicly reference-able customers of anyone in the industry
4www.cbinsights.com 4@cbinsights
“According to CB Insights…”
From the NY Times to Bloomberg, CB Insights data is used by hundreds of leading media outlets every week
“CB Insights put out an intriguing infographic in which they analyzed the
most capital efficient unicorns. That is, the startups with the highest ratio of
investment to current estimated valuation.”
See our latest media mentions
http://www.cbinsights.com/press
“London & Partners, working with data from CB Insights, says that money-
transfer startup WorldRemit raised the most of any other company in Q1, a
$100 million round in February”
“The stakes for both exchanges are high. According to the research firm
CB Insights, about 588 privately backed companies have valuations of
more than $100 million, meaning that they are potential candidates for
going public sometime in the next several years.”
“Last year, more than $100 million flowed into U.S. drone start-ups,
according to CB Insights, double 2013 levels”
“About 33 Dallas-based tech companies have been acquired since 2012,
including the enterprise cloud company SoftLayer, which was bought by
IBM in 2013 for $2 billion, according to data from CB Insights. ”
5www.cbinsights.com 5@cbinsights
Join 82,000+ and subscribe
www.cbinsights.com/newsletter
6www.cbinsights.com 6@cbinsights
Lots of bubble
chatter
7www.cbinsights.com 7@cbinsights
Many smart folks say things are bubbly
From investors to journalists, the cries of a bubble have intensified as of late
“Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What
is uncertain is how much further the bubble can expand and what might pop it.
In our view the current bubble is an echo of the previous tech bubble, but with fewer large
capitalization stocks and much less public enthusiasm. Some indications that we are pretty far
along include:
•  The rejection of conventional valuation methods;
•  Short-sellers forced to cover due to intolerable mark-to-market losses; and
•  Huge first day IPO pops for companies that have done little more than use the right buzzwords
and attract the right venture capital.”
David Einhorn, Greenlight Capital
“I think there’s two things are going on: One, there’s quite a bit of capital availability out there, and if
you look at how low-interest rates are, and what are the alternatives to invest capital and get return,
that causes asset prices to rise. The stock market’s up, as well.
You know, this is a cyclical industry, and when times get good, they get really good. Last time we
saw that was 1999 and many of the people at this conference might not have been paying
attention, because they were in high school. But money is definitely freer flowing today than it was
three or four years ago.”
Bill Gurley, Benchmark Capital
8www.cbinsights.com 8@cbinsights
“For me a bubble is simple, it’s when people are paying significantly higher prices for any asset class
that is in great excess of the underlying value of that asset. (One area that is subject to that definition
right now is) late-stage financing of tech companies of companies like ZocDoc, or maybe even
Dropbox, AirBnB and Uber. I’m not arguing (late-stage investors) are crazy, I’m arguing they’re
irrational.”
Mark Suster, Upfront Ventures
As with so many of the telltale signs of a bubble, I have seen this before. When times are so good
that executives are willing to disregard the difference between ethical and unctuous behavior, it’s just
one sign that the end, relatively speaking, is near. It’s not the only sign. The over-supply of journalism
jobs covering the technology industry, for example, is a good indicator.
Adam Lashinksy, Fortune
“It’s been a steady sequence of very large rounds. It means we are in bubble territory…No one wants
to say because nobody wants to break it. Everybody wants to cash out before its over.
…We are seeing expansion of valuation even from the seed stage all the way up…(There is)
desperation to not miss out on what will be the next big thing.”
George Zachary, CRV
Many smart folks say things are bubbly
From investors to journalists, the cries of a bubble have intensified as of late
9www.cbinsights.com 9@cbinsights
Other signs
Things that made us go huh?
10www.cbinsights.com 10@cbinsights
Other signs
Things that made us go huh?
11www.cbinsights.com 11@cbinsights
Other signs
Things that made us go huh?
12www.cbinsights.com 12@cbinsights
Other signs
Things that made us go huh?
13www.cbinsights.com 13@cbinsights
In God we trust, all
others must bring data
14www.cbinsights.com 14@cbinsights
Why it’s a bubble
15www.cbinsights.com 15@cbinsights
What’s a unicorn?
Unfortunately, this term was adopted by our industry. I apologize.
Private companies valued at over
$1B. Generally refers to companies in
high-growth sectors of tech, life
sciences and energy. But mostly
tech.
Unicorn exits are private companies
which have exited for over $1 billion
via M&A or IPO.
16www.cbinsights.com 16@cbinsights
Lots of new VC funds being formed
Source: Venture Capital Raising Barbell
17www.cbinsights.com 17@cbinsights
Lots of new unicorns
More and more companies are getting valued at a billion dollars in the private markets
18www.cbinsights.com 18@cbinsights
VC deal and funding activity is down, but…
Deal activity involving VCs has actually declined for 3 straight quarters
19www.cbinsights.com 19@cbinsights
Investment to private companies hit new highs
Private equity, hedge funds, mutual funds and sovereign wealth funds are all investing big dollars
20www.cbinsights.com 20@cbinsights
Much easier to raise at a billion than exit at one
Stark difference in the # of companies raising at a billion dollar valuation vs those which exit at one
21www.cbinsights.com 21@cbinsights
IPO activity has been blah
Q1 2015 was grim
22www.cbinsights.com 22@cbinsights
But private IPO activity has been increasing
$100M+ financings are increasingly common
23www.cbinsights.com 23@cbinsights
Private + public IPO activity is trending up
An atypical cast of characters has helped the “IPO” market stay strong
24www.cbinsights.com 24@cbinsights
The new cast of characters
Here’s some of the names we’re seeing in the large rounds
25www.cbinsights.com 25@cbinsights
Hedge funds are active and competing
Tiger Management offspring (Tiger Cubs) are getting more and more active and competing with each other
26www.cbinsights.com 26@cbinsights
Corporate VCs deals & funding are up
Corporates are investing at a fast and furious pace in private companies
Source: 2014 Corporate VC Report
27www.cbinsights.com 27@cbinsights
More corporate VCs jumping in
Corporates are investing at a fast and furious pace in private companies
Source: 2014 Corporate VC Report
28www.cbinsights.com 28@cbinsights
Find & stalk smart money investors
Monitor strategies and deals of investors and uncover new sources of dealflow in your areas of focus
Common refrain from some VCs is that many of these investors are “dumb
money”. Of course, that also conveniently ignores returns of most VCs.
29www.cbinsights.com 29@cbinsights
Price/Revenue multiples of unicorns
Some of these companies are being valued at seemingly eye-popping valuations
Source: Uber and Slack have significantly higher valuation multiples than other unicorns
30www.cbinsights.com 30@cbinsights
Private & public market multiple disconnect
A look at Dropbox (private) vs Box (public)
Source: The Dropbox valuation is irrational
31www.cbinsights.com 31@cbinsights
Wait a minute…
Why it’s NOT a
bubble
32www.cbinsights.com 32@cbinsights
Some more perspective
Unicorns as % of Nasdaq 100 total market cap
33www.cbinsights.com 33@cbinsights
Source: Disrupting Honeywell: The Startups Unbundling Honeywell in the Smart Home
Unbundling Honeywell
Attacking industrials
34www.cbinsights.com 34@cbinsights
Source: Unbundling the Automobile
Unbundling the Automobile
Attacking Automobiles
35www.cbinsights.com 35@cbinsights
Source: Disrupting P&G and the Consumer Packaged Goods Industry
Unbundling P&G
Attacking consumer packaged goods (CPG)
36www.cbinsights.com 36@cbinsights
Source: Disrupting Honeywell: The Startups Unbundling Honeywell in the Smart Home
Unbundling FedEx & UPS
Attacking logistics
37www.cbinsights.com 37@cbinsights
Source: Disrupting Wells Fargo, Citi and Bank of America
Unbundling Wells Fargo, Bank of America, Citi
Attacking banking
38www.cbinsights.com 38@cbinsights
Source: Disrupting Wells Fargo, Citi and Bank of America
The old guard are waking up
Tech is not just attacking tech
Goldman Sachs issues this ominous sounding
report about an “expanding class of competitors to
capture profit pools long controlled by banks.”
“Silicon Valley is coming. There are hundreds of
startups with a lot of brains and money working on
various alternatives to traditional banking. The ones you
read about most are in the lending business, whereby
the firms can lend to individuals and small businesses
very quickly and – these entities believe – effectively by
using Big Data to enhance credit underwriting. They are
very good at reducing the “pain points” in that they can
make loans in minutes, which might take banks weeks.”
Jamie Dimon, Chairman and CEO JP Morgan Chase & Co.
39www.cbinsights.com 39@cbinsights
But they’re also not investing in innovation
40www.cbinsights.com 40@cbinsights
Most new VCs are small
70% of new funds are less than $100M in AUM
Source: Venture Capital Raising Barbell
41www.cbinsights.com 41@cbinsights
Every tech unicorn combined is worth < than Facebook
Private markets are frothy but not a material part of tech
Source: The Value of Every US Tech Unicorn Combined is Still Less Than One Facebook
42www.cbinsights.com 42@cbinsights
Some more perspective
Unicorns as % of Nasdaq 100 total market cap
3.5%
43www.cbinsights.com 43@cbinsights
Public markets are not crazy
The lack of IPOs is a good sign that throwing the label “tech” onto something is not enough for a lofty public market valuation
Source: The Compression ins SaaS Valuations
44www.cbinsights.com 44@cbinsights
Ho-hum companies get punished
For all the chatter about retail investors getting shut out of IPO gains, public market prudishness has protected them as well
45www.cbinsights.com 45@cbinsights
A bubble requires rapid expansion AND contraction
And the private markets are seeing the expansion happen. There is no public scorecard to force the contraction.
Some investors will lose
money on these bets.
And they’ll be replaced by
new investors who dismiss
“those guys” as dumb.
The opaqueness
of the private
markets let you
bury the dead very
quietly.
46www.cbinsights.com 46@cbinsights
Questions
Want the deck? Disagree? Let’s chat.
@asanwal
asanwal@cbinsights.com

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[PreMoney SF 2015] CB Insights >> "Venture-nomics: A Quantitative Look At Bubbles, Unicorns, Fund Formation, Corporate VC, Int'l Market Opps + More"

  • 1. Frothy, but… CB Insights In God we trust, all others must bring data @cbinsights
  • 2. 2www.cbinsights.com 2www.cbinsights.com @cbinsights Backed by the National Science Foundation, CB Insights uses data science and machine learning to help our customers predict what’s next—their next customer, their next investment, the next market they should attack, or the next company they should acquire. Cisco, Salesforce, Castrol, Gartner, as well as top tier VCs including, NEA, Upfront Ventures, RRE, and FirstMark Capital rely on CB Insights to make decisions based on data, not decibels. About CB Insights A unique combination of data science and machine learning to help you make data-driven decisions ”A detailed discussion of data collection and how the company parses them is written by CB Insights’ data scientists; it convincingly tells the story of scalability and accuracy for what they call “The Cruncher.” Forbes article “Predictive Analytics And Novel Visualization Draw Customers To 'Must Have' Data” published April 8, 2015
  • 3. 3www.cbinsights.com 3www.cbinsights.com @cbinsights See what other customers have to say at http://www.cbinsights.com/customer-love “Designed by a VC insider who truly knows the space and understands end-user needs.” Greg Bae Investments & Biz Dev Comcast Ventures Jack Leeney Portfolio Manager Telefonica Ventures “We're using CB Insights at Salesforce Ventures to analyze industry trends that are relevant to our strategy. It's helped improve our efficiency.” Matt Garratt Sr. Director, Corporate Development Salesforce Ventures “CB Insights provides our team with a holistic and thematic approach that really captures market activity….we've found CBI to have the best access for the most accurate market view.” “We have been looking for a tool that could give us the ability to track, research and identify investment opportunities. CB Insights provides this simply and in a simple, easy to use interface. The depth of information that we get is exactly what we need. Great product.” Jonathan Tudor Ventures Director Castrol innoVentures “CB Insights perfectly illustrates what I expect today from such online services to stay tuned to our fast-changing Tech Landscape. Accurate and up-to-date data mash-ups, intuitive UIs, smart data visualization capabilities and direct API access… all packaged together with straightforward pricing.” Simon Mencarelli Senior Manager, Strategic Planning Dassault Systems “CB Insights' intuitive user interface, analytical capabilities, and detailed investment information create a very powerful tool for our team's research needs.” Nate D’Anna Corporate Development Cisco A few of our happy customers The most publicly reference-able customers of anyone in the industry
  • 4. 4www.cbinsights.com 4@cbinsights “According to CB Insights…” From the NY Times to Bloomberg, CB Insights data is used by hundreds of leading media outlets every week “CB Insights put out an intriguing infographic in which they analyzed the most capital efficient unicorns. That is, the startups with the highest ratio of investment to current estimated valuation.” See our latest media mentions http://www.cbinsights.com/press “London & Partners, working with data from CB Insights, says that money- transfer startup WorldRemit raised the most of any other company in Q1, a $100 million round in February” “The stakes for both exchanges are high. According to the research firm CB Insights, about 588 privately backed companies have valuations of more than $100 million, meaning that they are potential candidates for going public sometime in the next several years.” “Last year, more than $100 million flowed into U.S. drone start-ups, according to CB Insights, double 2013 levels” “About 33 Dallas-based tech companies have been acquired since 2012, including the enterprise cloud company SoftLayer, which was bought by IBM in 2013 for $2 billion, according to data from CB Insights. ”
  • 5. 5www.cbinsights.com 5@cbinsights Join 82,000+ and subscribe www.cbinsights.com/newsletter
  • 7. 7www.cbinsights.com 7@cbinsights Many smart folks say things are bubbly From investors to journalists, the cries of a bubble have intensified as of late “Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand and what might pop it. In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm. Some indications that we are pretty far along include: •  The rejection of conventional valuation methods; •  Short-sellers forced to cover due to intolerable mark-to-market losses; and •  Huge first day IPO pops for companies that have done little more than use the right buzzwords and attract the right venture capital.” David Einhorn, Greenlight Capital “I think there’s two things are going on: One, there’s quite a bit of capital availability out there, and if you look at how low-interest rates are, and what are the alternatives to invest capital and get return, that causes asset prices to rise. The stock market’s up, as well. You know, this is a cyclical industry, and when times get good, they get really good. Last time we saw that was 1999 and many of the people at this conference might not have been paying attention, because they were in high school. But money is definitely freer flowing today than it was three or four years ago.” Bill Gurley, Benchmark Capital
  • 8. 8www.cbinsights.com 8@cbinsights “For me a bubble is simple, it’s when people are paying significantly higher prices for any asset class that is in great excess of the underlying value of that asset. (One area that is subject to that definition right now is) late-stage financing of tech companies of companies like ZocDoc, or maybe even Dropbox, AirBnB and Uber. I’m not arguing (late-stage investors) are crazy, I’m arguing they’re irrational.” Mark Suster, Upfront Ventures As with so many of the telltale signs of a bubble, I have seen this before. When times are so good that executives are willing to disregard the difference between ethical and unctuous behavior, it’s just one sign that the end, relatively speaking, is near. It’s not the only sign. The over-supply of journalism jobs covering the technology industry, for example, is a good indicator. Adam Lashinksy, Fortune “It’s been a steady sequence of very large rounds. It means we are in bubble territory…No one wants to say because nobody wants to break it. Everybody wants to cash out before its over. …We are seeing expansion of valuation even from the seed stage all the way up…(There is) desperation to not miss out on what will be the next big thing.” George Zachary, CRV Many smart folks say things are bubbly From investors to journalists, the cries of a bubble have intensified as of late
  • 13. 13www.cbinsights.com 13@cbinsights In God we trust, all others must bring data
  • 15. 15www.cbinsights.com 15@cbinsights What’s a unicorn? Unfortunately, this term was adopted by our industry. I apologize. Private companies valued at over $1B. Generally refers to companies in high-growth sectors of tech, life sciences and energy. But mostly tech. Unicorn exits are private companies which have exited for over $1 billion via M&A or IPO.
  • 16. 16www.cbinsights.com 16@cbinsights Lots of new VC funds being formed Source: Venture Capital Raising Barbell
  • 17. 17www.cbinsights.com 17@cbinsights Lots of new unicorns More and more companies are getting valued at a billion dollars in the private markets
  • 18. 18www.cbinsights.com 18@cbinsights VC deal and funding activity is down, but… Deal activity involving VCs has actually declined for 3 straight quarters
  • 19. 19www.cbinsights.com 19@cbinsights Investment to private companies hit new highs Private equity, hedge funds, mutual funds and sovereign wealth funds are all investing big dollars
  • 20. 20www.cbinsights.com 20@cbinsights Much easier to raise at a billion than exit at one Stark difference in the # of companies raising at a billion dollar valuation vs those which exit at one
  • 21. 21www.cbinsights.com 21@cbinsights IPO activity has been blah Q1 2015 was grim
  • 22. 22www.cbinsights.com 22@cbinsights But private IPO activity has been increasing $100M+ financings are increasingly common
  • 23. 23www.cbinsights.com 23@cbinsights Private + public IPO activity is trending up An atypical cast of characters has helped the “IPO” market stay strong
  • 24. 24www.cbinsights.com 24@cbinsights The new cast of characters Here’s some of the names we’re seeing in the large rounds
  • 25. 25www.cbinsights.com 25@cbinsights Hedge funds are active and competing Tiger Management offspring (Tiger Cubs) are getting more and more active and competing with each other
  • 26. 26www.cbinsights.com 26@cbinsights Corporate VCs deals & funding are up Corporates are investing at a fast and furious pace in private companies Source: 2014 Corporate VC Report
  • 27. 27www.cbinsights.com 27@cbinsights More corporate VCs jumping in Corporates are investing at a fast and furious pace in private companies Source: 2014 Corporate VC Report
  • 28. 28www.cbinsights.com 28@cbinsights Find & stalk smart money investors Monitor strategies and deals of investors and uncover new sources of dealflow in your areas of focus Common refrain from some VCs is that many of these investors are “dumb money”. Of course, that also conveniently ignores returns of most VCs.
  • 29. 29www.cbinsights.com 29@cbinsights Price/Revenue multiples of unicorns Some of these companies are being valued at seemingly eye-popping valuations Source: Uber and Slack have significantly higher valuation multiples than other unicorns
  • 30. 30www.cbinsights.com 30@cbinsights Private & public market multiple disconnect A look at Dropbox (private) vs Box (public) Source: The Dropbox valuation is irrational
  • 31. 31www.cbinsights.com 31@cbinsights Wait a minute… Why it’s NOT a bubble
  • 32. 32www.cbinsights.com 32@cbinsights Some more perspective Unicorns as % of Nasdaq 100 total market cap
  • 33. 33www.cbinsights.com 33@cbinsights Source: Disrupting Honeywell: The Startups Unbundling Honeywell in the Smart Home Unbundling Honeywell Attacking industrials
  • 34. 34www.cbinsights.com 34@cbinsights Source: Unbundling the Automobile Unbundling the Automobile Attacking Automobiles
  • 35. 35www.cbinsights.com 35@cbinsights Source: Disrupting P&G and the Consumer Packaged Goods Industry Unbundling P&G Attacking consumer packaged goods (CPG)
  • 36. 36www.cbinsights.com 36@cbinsights Source: Disrupting Honeywell: The Startups Unbundling Honeywell in the Smart Home Unbundling FedEx & UPS Attacking logistics
  • 37. 37www.cbinsights.com 37@cbinsights Source: Disrupting Wells Fargo, Citi and Bank of America Unbundling Wells Fargo, Bank of America, Citi Attacking banking
  • 38. 38www.cbinsights.com 38@cbinsights Source: Disrupting Wells Fargo, Citi and Bank of America The old guard are waking up Tech is not just attacking tech Goldman Sachs issues this ominous sounding report about an “expanding class of competitors to capture profit pools long controlled by banks.” “Silicon Valley is coming. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking. The ones you read about most are in the lending business, whereby the firms can lend to individuals and small businesses very quickly and – these entities believe – effectively by using Big Data to enhance credit underwriting. They are very good at reducing the “pain points” in that they can make loans in minutes, which might take banks weeks.” Jamie Dimon, Chairman and CEO JP Morgan Chase & Co.
  • 39. 39www.cbinsights.com 39@cbinsights But they’re also not investing in innovation
  • 40. 40www.cbinsights.com 40@cbinsights Most new VCs are small 70% of new funds are less than $100M in AUM Source: Venture Capital Raising Barbell
  • 41. 41www.cbinsights.com 41@cbinsights Every tech unicorn combined is worth < than Facebook Private markets are frothy but not a material part of tech Source: The Value of Every US Tech Unicorn Combined is Still Less Than One Facebook
  • 42. 42www.cbinsights.com 42@cbinsights Some more perspective Unicorns as % of Nasdaq 100 total market cap 3.5%
  • 43. 43www.cbinsights.com 43@cbinsights Public markets are not crazy The lack of IPOs is a good sign that throwing the label “tech” onto something is not enough for a lofty public market valuation Source: The Compression ins SaaS Valuations
  • 44. 44www.cbinsights.com 44@cbinsights Ho-hum companies get punished For all the chatter about retail investors getting shut out of IPO gains, public market prudishness has protected them as well
  • 45. 45www.cbinsights.com 45@cbinsights A bubble requires rapid expansion AND contraction And the private markets are seeing the expansion happen. There is no public scorecard to force the contraction. Some investors will lose money on these bets. And they’ll be replaced by new investors who dismiss “those guys” as dumb. The opaqueness of the private markets let you bury the dead very quietly.
  • 46. 46www.cbinsights.com 46@cbinsights Questions Want the deck? Disagree? Let’s chat. @asanwal asanwal@cbinsights.com