For the first time in two years, US tech startups are seeing aggregate exit valuations outpace funding to tech startups. When we plot out equity deals into tech companies vs. first exits by those tech companies, this becomes more clear.
In 2010 the ratio of deals to exits was approximately 6.6x. By 2015 that ratio was closer to 9.2x. 2016 saw a steep slowdown in deals, while 2017 has actually seen an uptick in the pace of exits. At the current rate, 2017 will see a similar ratio between deals and exits as 2010, as deals continue to trend downward.
When thinking about returns on capital, funding vs. exit valuation is another important metric to consider. Looking at the aggregate US tech disclosed equity funding vs. aggregate disclosed exit valuations, a few interesting points stand out:
- 2015 and 2016 were the only years to see more aggregate dollars invested in tech than dollars returned at exit. This was due to both lack of exits as well as more availability of late-stage financing, with 5 deals of $1B+ happening in both 2015 and 2016.
- These are also the only years which did not see a private market exit in the US above $10B, with Fitbit topping 2015 at $4.1B and Jet.com topping 2016 at $3.3B. 2016. 2017 has so far seen 3x more value in exits than funding, thanks largely to Snap ($24.8B). Even without Snap’s IPO, however, aggregate exit valuations would still come in higher for the year than disclosed funding.
- The ratio of exit value to funding has ranged from 0.7 (2015) to 7.6 (2012). While the return ratio typically hovers between 1-3x capital invested, 2012 spiked due to Facebook‘s gargantuan $100B+ IPO.
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