Last December, we took a look at some of the most capital-efficient VC-backed exits of 2013. With rumors swirling over a potential acquisition of video game streaming service Twitch by Google for $1B+ and a slew of massive exits this year already, we thought it would be interesting to analyze capital efficiency (based on exit valuation/total amount of prior financing) not just for 2013, but over the last five years.
Veeva Systems Still Reigns
The top 25 most value creating U.S.-based tech exits saw an aggregate valuation of $157.92B at the time of exit and raised total financing of just $3.35B. In assessing capital efficiency, we used valuations at the time of exit for IPOs and the higher bound of any valuation ranges based off of post-acquisition earn-outs for exits via M&A. We only evaluated exits over $100 million in size.
Based on the data, 2012 was a great year with 10 of the top 25 most capital efficient exits occurring then.
Life sciences SaaS company Veeva Systems topped the list of its capital efficient exits based on its $4.4B IPO off of just $4M in funding. There have been two new additions to the top 25 from Q1’14. WhatsApp ranked second with its February 2014 $19B M&A exit to Facebook on just $60M of funding from Sequoia Capital. Paylocity, the payroll and HR services company that went public in March 2014, placed 7th on the list with $10M in funding from Adams Street Partners and an IPO that valued them at $832M at the time of exit.
How Does Twitch Fit?
With just $35M in venture capital raised, Twitch would create an immense amount of value for investors including Bessemer Venture Partners and Thrive Capital with a value creation ratio of 28.6x. If the deal were to go through under the rumored terms ($1B), Twitch would place 24th on the value creation list narrowly making the list. Yes, this is a tough list to get on.
Silicon Valley Responsible For Top 3 Most Capital Efficient Tech Exits
Silicon Valley led the way in terms of geographies with 14 of the top 25 most capital efficient exits. The remainder of companies were spread out across the country including Connecticut (Indeed), Illinois (Paylocity), Massachusetts (Trusteer), Pennsylvania (QlikTech), Texas (Bazaarvoice), and New York (Makerbot). Indeed’s September 2012 acquisition was the most capital efficient for any non-SV based startup, with a $1.4B exit on $5M of total funding, a value creation ratio of 280x. Note that Indeed’s valuation was widely disputed/rumored and the number cited was, as previously mentioned, the upper bound CB Insights technology picked up on based on rumors.
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