NVCA 4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry

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Transcript of NVCA 4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry

  • NVCA 4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry April 29/30, 2009 Dixon Doll DCM Co-Founder and General Partner, NVCA Chairman Mark Heesen NVCA President 1
  • Reinvigorating Liquidity in the U.S. VC Industry The Background The Situation The Solution Liquidity Challenges Job Creation Lack of IPOs Is Harmful to Job Innovation Creation and Overall Economy I II III IV Ecosystem Enhanced Taxation Regulation Partners Liquidity Comprehensive Paths Review of VC Ecosystem Is Required to Reinvigorate Our VC Industry U.S. Government Industry (once Financial Crisis & IPO Markets Stabilize) Drought Revealed Systemic Issues 2
  • Venture Capital Fuels Job Creation VC-Backed Companies 92% of Job Growth Create Jobs Faster Occurs Post-IPO Employment CAGR (2006 2008) VC-Backed Company Employment Growth 97% 94% 88% 76% 92% Pre-IPO Post-IPO 12.1M Jobs Created Sources: Left: Global Insight, 2009 Right: NVCA, Global Insight and Survey of Top 136 VC-Based Companies That Went Public 19702005 3
  • Numerous World-Leading Companies Were First Funded or Founded During Downturns 1970s 1980s 1990s 2000s F 4
  • Dramatic Decline in IPOs in the 2000s Number of Venture-Based IPOs vs. M&A Exits 2000s 1990s 1,776 392 IPOs M&A IPOs M&A 13% 87% 56% 44% IPOs IPOs (01 08) (92 00) Lack of IPOs Is Harmful to Job Creation and Economy Source: Thomson Reuters/NVCA 5
  • IPOs in Decline This Decade Number and Value of Venture-Backed IPOs in the U.S. Number of IPOs IPO Value ($B) * Base Year 1998 = 100 Sources: Qatalyst Partners, Securities Data Company (All U.S. venture-backed IPOs of > $10MM from 1978 through 1991) Dow Jones VentureSource (All U.S. venture-backed IPOs from 1992 through December 31, 2008) 6
  • The Recent Realities of Venture-Backed M&As and IPOs Longer Time to IPO and M&A Median Age at IPO 4.5 9.6 Years Years 1998 2008 Median Age at M&A 3 6.5 Years Years 2008 1998 Source: Thomson Reuters, Dow Jones VentureSource 7
  • The Death of the Under $50M IPO 100 90 Transactions Raising $50M+ 80 70 60 Percent of 50 Total IPOs 40 30 20 Transactions Raising Less Than $50M 10 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* 80% of IPOs 20% of IPOs Smaller than $50M Smaller than $50M *Data Includes Corporate IPOs as of 10/31/08. (Excludes Funds, REITs, SPACs and LPs). Source: Dealogic, Capital Markets Advisory Partners 8
  • NVCA 4-Pillar Plan to Restore Liquidity in the U.S. Venture Capital Industry Job Creation Innovation I III II IV Ecosystem Tax Enhanced Regulation Partners Incentives Liquidity Paths VC Industry U.S. Government 9
  • NVCA Plan: Pillar I Ecosystem Partners Job Creation I-Banks Innovation VC Firms Buy Side Ecosystem I III II IV Partners Entrepreneurs Exchanges Ecosystem Tax Enhanced Regulation Partners Incentives Liquidity Paths Accounting Law Firms Firms VC Industry U.S. Government 10
  • I A Vacuum Exists for Small, Medium-Size Company IPOs Implicit Post-IPO Company Valuation ($MM) Boutique banks needed to help cover unserved areas $500 Would You Consider a Boutique I-Bank To Be the $400 Lead Book Runner for Going Public on a U.S. Stock Exchange?* $300 NO MANS LAND $200 32% 32% No Not Sure 36% $100 Yes IPOs not Appropriate $0 * Source: DCM Analysis / $25 $50