2014 Venture Capital Review

Transcription

1 214 Venture Capital Review

2 Venture capital activity reaches 13-year high The venture capital (VC) industry had an exceptional year in 214. Funding was back to levels not seen since 2, median deal sizes were higher across all development stages and we saw more mega-investments of more than US$m than at any point since 2. With the macroeconomic situation improving and an active exit environment, in which VC-backed IPOs both increased in number and outperformed other IPOs (including those backed by PE), the prospects for 21 look strong.

3 VC investors put more capital to work Global VC funding levels in 214 were at their highest level for 13 years, with average deal size continuing to increase, making 214 the best year for VC investment activity since 2. In 214, US$86.7b was raised globally, surpassing every year since 2, when US$116.3b was raised. The strong growth in funding was evident in all three key VC markets the US, Europe and China. Global venture capital investment ,1 6,7 7, Amount invested (US$b) , , , ,4 6, ,, 4, 3, 2, 1, Number of rounds Amount invested during Q1 (US$b) Amount invested during Q3 (US$b) Number of rounds during the year/quarter Amount invested during Q2 (US$b) Amount invested during Q4 (US$b) Note: Global total includes the US, Europe, Canada, China, Israel (all site) and India only. 1

4 Compared with 213, median deal sizes increased significantly across all stages of development in 214, particularly in the US, Europe and China. The rate of growth was highest in China, which recorded the highest median value across all markets in 214. While the revenue generation stage continued to attract the largest share of investment, VC activity also increased in the early-stage rounds. From a sector perspective, consumer and business and financial were the preferred areas for global VC investors, both in volume and value terms. activity was particularly strong in Europe and China. Venture capital investment by industry Number of rounds Business and financial 1,17 1,163 1,3 1,682 goods ,332 1,47 1,44 1,69 Energy and utilities ,179 1,9 1,13 1,64 Industrial goods and materials Information technology 1,67 1,74 1,738 1,4 Amount invested (US$b) Business and financial goods Energy and utilities Industrial goods and materials Information technology Venture Capital Review

5 Mega-investments on the rise in was notable for the increase in mega-investments of more than US$m. More than 3 companies received this level of investment in 214 (US$39.4), double the number of mega-investments in 213. Mega-investments by region 214 (US$b) number of rounds Mega-investments by region (US$b) Canada China Europe India 3 Israel United States Number of rounds Amount invested during 214 (US$b) Number of rounds during 214 Mega-investments by sector 214 (US$b) number of rounds Mega-investments by sector (US$b) Business and financial.3 3 goods Energy and utilities Information technology Number of rounds Amount invested during 214 (US$b) Number of rounds during 214 3

6 Positive exit and fundraising environments drive activity Improving macroeconomic conditions underpinned investor confidence and fueled an active exit and positive fundraising environment, which supported the increase in global VC activity in 214. The IPO window remained open throughout the year and M&A activity was up on 213 levels in all VC markets. In the US, the increase in IPO volumes was solid, but paled by comparison with China, which saw a three-fold increase in activity as capital markets reopened, and with Europe, where activity levels more than doubled. IPO activity in smaller VC markets, such as Israel and Canada, also reached its highest levels in the last six years. VC-backed IPOs delivered particularly well for investors, outperforming all other IPOs in 214, including those that were backed by PE. Although VC is traditionally attracted to the highest growth sectors and its investments are considered higher growth than PE portfolio companies, the degree of difference in performance was significant. Globally, more than 7% (77% in the US) of VC-backed IPOs were in the tech and health care sectors. In 214, both of these sectors dominated the IPO rankings with health care accounting for the greatest number of deals (193) and tech accounting for the greatest amount of capital raised (US$.2b). Amount raised through IPO exits by region 214 (US$b) number of exits Mega-investments by region (US$b) United States Europe China Canada India Israel Number of IPO exits Amount raised through IPO exits (US$b) Number of IPO exits Amount raised through IPO exits by sector 214 (US$b) number of exits Mega-investments by sector (US$b) Business and financial 1.8 goods Energy and utilities Industrial goods and materials Information technology Number of IPO exits Amount raised through IPO exits (US$b) Number of IPO exits VC contacts Global Strategic Growth Markets Maria Pinelli maria.pinelli@ey.com Global VC Leader Bryan Pearce bryan.pearce@ey.com Regional VC leaders Markets and Operations Sandra Feldner Vandergriff sandra.feldnervandergriff@ey.com United States Jeff Grabow jeffrey.grabow@ey.com Venture Capital Review

7 The US and Europe continued to dominate the global M&A exit landscape in 214, with the US accounting for 66% of global deals. VC-backed M&A activity remained particularly strong in the US on the back of big-ticket deals, with the amount raised through M&A exits at its highest level since 28. Amount raised through M&A exits by region 214 (US$b) number of exits Mega-investments by region (US$b) United States Europe China Canada India Israel Number of M&A exits Amount raised through M&A exits (US$b) Number of M&A exits Amount raised through M&A exits by sector 214 (US$b) number of exits Mega-investments by sector (US$b) Business and financial goods Energy and utilities Industrial goods and materials 143 Information technology Number of M&A exits Amount raised through M&A exits (US$b) Number of M&A exits The fundraising environment in 214 was most positive in the US, with early- and late-stage financing running at multi-year highs. In the Asia-Pacific region, VC funds continued to target early stage investing reflected by an increasing proportion of early stage funds closed. The Asia-Pacific region recorded the biggest gains in average fund values compared with 213. Israel Oren Bar-On oren.bar-on@il.ey.com EMEIA Demet Ozdemir demet.ozdemir@tr.ey.com France and Luxembourg Franck Sebag franck.sebag@fr.ey.com India Mayank Rastogi mayank.rastogi@in.ey.com Asia-Pacific Ringo Choi ringo.choi@cn.ey.com Greater China Lawrence Lau lawrence.lau@cn.ey.com

8 Outlook positive but global economy at an inflection point Looking ahead to 21, we expect the upward trend in VC activity to be maintained, provided that the expected tightening in US monetary conditions does not damage investor confidence and undermine the exit environment. With US growth leading the global economic recovery, the Federal Reserve has now ended its quantitative easing (QE) program and is expected to raise interest rates at some point in 21. However, it remains uncertain whether the US can manage the shift away from unconventional monetary policy without unsettling asset markets. From a geographic perspective, given the strength of its economic recovery, we expect VC activity in the US to continue to perform well in 21. The tightening of the US labor market is a key determinant of when the US will start to raise interest rates. From a VC viewpoint, however, it is the focus on job creation in small entrepreneurial businesses within the tightening labor market that will help support VC investment. The outlook for Europe is more uncertain given the anaemic Eurozone recovery, discussions around quantitative easing and resulting currency market instability impacting confidence. Germany, Europe s largest economy, was the second most preferred VC destination after the US Bay Area in 214, but this performance may not be maintained as its key export markets, particularly China, are slowing. Despite slower growth in China, which the monetary authorities are combatting with easier monetary policy, the structural rebalancing of the Chinese economy will continue to support VC activity. The Chinese financial system is becoming more mature and the ongoing shift away from over-investment in export-led growth toward domestic consumption will continue to support VC investment in consumer and business. Investors remain keen EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory. The insights and quality we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide to clients. For more information about our organization, please visit ey.com. About EY s Strategic Growth Markets Network EY s worldwide Strategic Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 3 years, we ve helped many of the world s most dynamic and ambitious companies grow into market leaders. Whether working with international mid-cap companies or early-stage venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed. 21 EYGM Limited. All Rights Reserved. EYG no. CY868 ED None The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.. Global VC investors recognize these trends, as shown by greater willingness to invest in 214. We believe they are likely to remain keen to invest at an early stage in emerging markets in pursuit of higher returns. Activity in China is expected to remain robust and interest in India will be heightened following the installation of a more pro-business government. Lower oil prices will further boost economic activity helping to sustain a positive operating environment for VC. In terms of sectors, we anticipate that interest will continue to focus on technology, health care, consumer, business and financial.