Venture capital returns are often said to follow a power law. Simplistically, the best investment returns more money than the rest of the investments combined. We analyzed the largest 100 U.S.-based tech M&A or IPO exits since 2009 to see whether the power law actually holds and who the most frequent investors in those companies are.
The data below.
Top 100 VC-Backed U.S. Exits Since 2009 – Valuation Distribution Curve
The chart below highlights the distribution of top U.S.-based exits since 2009 by valuation at the day of IPO or M&A exit. The largest, by far, was Facebook’s IPO in May 2012 initially valuing the company at $104 billion. In power law fashion, the dropoff after Facebook is significant with a handful of exits in the $10B to $20B range – think Groupon, WhatsApp, etc.
Top 100 VC-Backed U.S. Exits Since 2009 – Top Investors
Sequoia Capital’s exit of WhatsApp was just 1 of 7 exits out of the 100 that counted just a single institutional investor. But whether going it alone or with others, being part of large exits is old hat for Sequoia. In fact, Sequoia Capital portfolio companies made up a remarkable 22 of the top 100 tech exits. NEA and Accel Partners, respectively, participated in 13 of the exits each, while late-stage VC Meritech Capital Partners counted 12. The chart below highlights the 15 investors who invested in 7 or more of the top 100 U.S. tech exits since 2009. (Note: Investments by way of secondary transactions were not included in the chart below.)
Top 100 VC-Backed U.S. Exits Since 2009 – Top Investors By Stage of First Investment
Of course, simply “getting in” on a big exit does not guarantee strong investment returns as the nature of VC is such that those investors who jumped in earliest are most richly rewarded. So to assess a venture capital’s investment selection aptitude, it is important to look at what stage they made their first investment in a company.
The next chart breaks down the top 15 investors based on the stage they invested in the companies. Benchmark Capital backed the highest percentage of its exits at the early-stage (Series B or earlier), followed by Accel and Norwest Venture Partners. Conversely, Technology Crossover Ventures and Meritech Capital Partners saw under 10% of their first investments at the Series B stage or earlier, which is unsurprising given their late-stage focus.
For companies that exited via M&A, the valuation is simply the amount that the company got acquired for. For a company that went public, the exit valuation was that on the day of the IPO. Tech sectors include internet, mobile, software, computer hardware and electronics (chips & semis).
The time period covered ranges from January 1, 2009 to February 24, 2014.