Here are some numbers to ponder based on data from all venture-funded companies.

1. Is Venture Over‐valued?
Numbers to ponder…
Sand Hill Econometrics
October 20, 2015

2. The Sand Hill Index
An index of value for venture‐funded companies
Like a stock market index, eg, Wilshire 5000 or
^DJTSM –
Value‐weighted
Continuously invested
Compiled on a current‐value basis
Shows changes over time for a portfolio invested in
all venture‐funded companies

4.
Data – VentureSource (DowJones)
82,000 valuation events (rounds and exits)
25,000 companies
9,000 companies still private now
16,400 total exits
1,900 IPOs
7,500 acquisitions
7,000 failures

5. Index Computation Strategy
A value for every company every month
Companies enter index upon first round of funding
Companies exit at IPO, Acquisition, or Shutdown
If company raises a round, shares value, we use it
If company raises a round, no value, we estimate it
For IPOs, use pre‐money value
If shutdown, value = 0
If acquisition, value shared, we use it
If acquisition, no value shared, we estimate it
Interpolate between rounds, and extrapolate after last round
Essential: Adjust estimated values for selection bias.

6. Data challenges:
1) Gravefinder bot to find quiet failures.
2) Rounds: Upward bias in reported values. Correct bias using
uncensored, secret, data.
3) About half of acquired companies do not share a value. Many
are actually failures. To estimate missing values, we use
everything we know about the company (money raised,
industry, location, level of the stock market, years from first
round, business status, bridge before exit, whether acquirer
was public or private, and more), plus data we have gathered
on effort required to find findable values.
Bigger effort to find a value ⇒lower value.

7. The Index
0
1,000
2,000
3,000
4,000
5,000
6,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
The Sand Hill Index:
All Industries
© 2014 Sand Hill Econometrics, Inc. ALL RIGHTS RESERVED
The Sand Hill Index:
All Industries

8. Industries
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
The Sand Hill Index:
All Industries Compared
Other
Info Tech - Hardware
Health
Retail
© 2014 Sand Hill Econometrics, Inc. ALL RIGHTS RESERVED
Total
Info Tech - Software
Cleantech

9. Some summary statistics
Total $$ invested in exited companies $410 bn
Total $$ value of exiting companies $1,215 bn
$$ Value to investors from exits $700 bn
$$ Value to founders & ees $515 bn
Gross nominal return to investors: 18%/yr
All figures are before fees and carry
% of founders with $ > 0 at exit: 30%
Market Cap of companies still private now $870 bn
$$ invested in companies still private now $250 bn

10. 0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3/1/1992
10/1/1992
5/1/1993
12/1/1993
7/1/1994
2/1/1995
9/1/1995
4/1/1996
11/1/1996
6/1/1997
1/1/1998
8/1/1998
3/1/1999
10/1/1999
5/1/2000
12/1/2000
7/1/2001
2/1/2002
9/1/2002
4/1/2003
11/1/2003
6/1/2004
1/1/2005
8/1/2005
3/1/2006
10/1/2006
5/1/2007
12/1/2007
7/1/2008
2/1/2009
9/1/2009
4/1/2010
11/1/2010
6/1/2011
1/1/2012
8/1/2012
3/1/2013
10/1/2013
5/1/2014
12/1/2014
VC Market Cap as Percent of US Public Market Cap

11. Are a few high‐value mature companies responsible? Look
at first rounds.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
1990Q1
1990Q4
1991Q3
1992Q2
1993Q1
1993Q4
1994Q3
1995Q2
1996Q1
1996Q4
1997Q3
1998Q2
1999Q1
1999Q4
2000Q3
2001Q2
2002Q1
2002Q4
2003Q3
2004Q2
2005Q1
2005Q4
2006Q3
2007Q2
2008Q1
2008Q4
2009Q3
2010Q2
2011Q1
2011Q4
2012Q3
2013Q2
2014Q1
2014Q4
Total money raised in first rounds, 1990‐2015q2 ($ millions)

12. What about value per dollar raised in first rounds?
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1990Q1
1990Q4
1991Q3
1992Q2
1993Q1
1993Q4
1994Q3
1995Q2
1996Q1
1996Q4
1997Q3
1998Q2
1999Q1
1999Q4
2000Q3
2001Q2
2002Q1
2002Q4
2003Q3
2004Q2
2005Q1
2005Q4
2006Q3
2007Q2
2008Q1
2008Q4
2009Q3
2010Q2
2011Q1
2011Q4
2012Q3
2013Q2
2014Q1
2014Q4
Pre‐money value per $ raised, first rounds,
1990‐2015q2

13. And the number of companies doing a first round?
0
100
200
300
400
500
600
700
800
900
1990Q1
1990Q4
1991Q3
1992Q2
1993Q1
1993Q4
1994Q3
1995Q2
1996Q1
1996Q4
1997Q3
1998Q2
1999Q1
1999Q4
2000Q3
2001Q2
2002Q1
2002Q4
2003Q3
2004Q2
2005Q1
2005Q4
2006Q3
2007Q2
2008Q1
2008Q4
2009Q3
2010Q2
2011Q1
2011Q4
2012Q3
2013Q2
2014Q1
2014Q4
New companies per quarter, 1990‐2015

14. Who gets the exit value?
0
20
40
60
80
100
120
140
160
180
200
Venture Capital Exit Value by year, bns of $$
founders investors

15. And the role of Northern California?
(note two cliffs in market cap – Google exit in 2004, Facebook exit in 2012)
0
0.1
0.2
0.3
0.4
0.5
0.6
Mar‐92
Dec‐92
Sep‐93
Jun‐94
Mar‐95
Dec‐95
Sep‐96
Jun‐97
Mar‐98
Dec‐98
Sep‐99
Jun‐00
Mar‐01
Dec‐01
Sep‐02
Jun‐03
Mar‐04
Dec‐04
Sep‐05
Jun‐06
Mar‐07
Dec‐07
Sep‐08
Jun‐09
Mar‐10
Dec‐10
Sep‐11
Jun‐12
Mar‐13
Dec‐13
Sep‐14
Jun‐15
Northern California, % of mkt cap and money raised
NoCal % of Mkt Cap
No Cal % of $$ raised