The State of the Venture Capital Markets

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23 Οκτ 2011 (πριν από 6 χρόνια και 2 μήνες)

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Final VCJ Conference October 2011 - The State of the Venture Capital Markets.

The State of the Venture
Capital Markets





Mark Suster


VCJ Venture Alpha Conference


October 2011


@msuster



What is the State of the VC
Market?

What Comes After Social
Networking?


Accenture (software dev)


BuildOnline (

99)


Koral (

05)


VP Product Mgmt,
Salesforce.com


Largest VC firm in
Southern California




Both Sides of The Table


This Week in VC

The Set Up


What is Driving Change?

It Is Dramatically Cheaper to Start a Company

Open source

Cloud

Developers
Start
Companies

2000

$5m

$500k

2005

$50k

2009

$5k

2011

Amazon &
Ycombinator

Have Fueled the Market


90% reduction in cost


Faster time
-
to
-
market


Great ability to experiment

So Founders Much Younger, More Technical

Huge Explosion in Tech Startup Creation

Seed Deals
/ Incubation

While The Total Number of VCs Has Right
-
Sized

The Opportunities are Much Bigger

2001

2011

100

2,000


Always On


Higher Speed


Payment Ready


Socially Linked

Millions Online

Conditions Actually Bode Really Well for VCs

Active
VCs

Seed
Deals

Revenue
Potential

+

So What Exactly Is Changing
in our Industry?


Some Goods,

Some Bads

Mentorship
-
Led Investing Has Captured
Enormous Talent Pool

Access to
Deals

Great New Focused &
Disciplined

VCs Created

Super Early

Territory

Topic Area

(i.e. big data)

Thrive

Early or Classic A

Some Traditional VCs Now Doing Many Seed Deals

Seed

C
-
E

Round

A, B

Round

This is Driven by FOMO

(Fear of Missing Out)


High volume,
small deals


No oversight


Purely an

option



Not smart strategy
for VC or founders

In H1 2011 80% of LP Money Went to Just 7 Firms.
The Billion Dollar Club.

7 Firms

Total

$6.3

$8.1

VC Money Raised

($ billion)

Which Begs the Question of Whether It

s
Venture Capital or Growth Equity

Seed

C
-
E

Round

A, B

Round

Fund Size + FOMO Driving Separation from Price
& Underlying Value

Time

$

Historic
Value

Today

s
Market

People are Paying Growth Prices for Market Risk

Time

Valuation

Product Risk

Growth / Scale
Risk

Monetization /
Competition Risk

Market Risk

Probably Less Traditional VCs Being Funded Lately.

Seed

C
-
E

Round

A, B

Round

$25
-
75m

Typical Fund Size

$200
-
300m

$500m
-
$1bn

Traditionally VCs Have Focused on Few
Companies & Deep Commitments

1
-
2 deals per
partner / year

Many deals /
year

Ops Support

Two great firms have reinvented model by focusing
on the

group collective



Founder
friendly


High volume


CEO Summits


Founder Email
Lists


X
-
Company
Equity Sharing


Heavy focus on

second round
capital


Winning

Follow On $$

Some of Best Returns Seem to Be Driven By

Right
-
Sized


Traditional VCs


Public


Accessible


Though
-
Leaders

Public Openness Helps With Every Major Stage
of the VC Lifecycle

Access to
Deals

Winning

Follow On
$$

Exits

Top end of
funnel
much
wider

Founders
want to
work with
you

VCs work
with others
they know,
like &
respect

Awareness
with
buyers for
your
portfolio

So What is the Next Big
Investment Opportunity on the
Internet?


Television.


Yes, really.

Americans watch 5.3 hours of TV / Day

TV

Reading

< 1 Hour

5.3 Hours

Media Patterns

Online

3 Hours

You Tell Me
What the
Future of the
Internet Is?

But VCs Hate Investing in Content


Hits
Driven Business?

It

s Not Just Dogs on Skateboards Anymore

A Disruptive Breed of Digital Content Producer
Has Emerged

UGC

Network TV

YouTube
TV

Production
Costs /
Minute

$100
-
400

$6,000
-
8,000

These 4 LA Companies Alone Doing > 3 Billion
Video Views / Month

YouTube
TV

Costs /
Minute

YouTube is the New Comcast … And Notice the
Change in Branding

With YouTube Content Distribution is Much More
Predictable

Viewer


Subscribers


Email Lists


Facebook Connect

YouTube

Producer

Youth Demo Already 1/3
rd

of Time Online
Watching Video

Streaming Video

Other Surfing

And Revenue Becoming Substantive


$1,017


$1,420


$2,160


$3,090

$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2009
2010
2011E
2012E
US Online Video Advertising Revenue
($millions)

How Mainstream? 86% of All Internet Watch
Online Video

Aug 11

42 billion
views

185 million
viewers

228

videos / person

17

hours

91% of Households Still Pay for TV (91%)

This Market Disruption
Will Be Enormous


And
It

s Arriving Now

</end>


Thank you