1、February 2023A Review of the Health and Productivity of the Innovation Economy We continue to believe in the innovation economy in the face of adversity.Challenging market conditions are periods for building,particularly for startups.Today,founders have time to slow down,focus on product market fit,

2、and develop long-lasting innovations while drawing on a greater availability of talent.Further,after corrections,there tends to be a long period of economic expansion.In the three years during and directly after the Global Financial Crisis(GFC),127 unicorns were founded a 76%increase over the prior

3、three years.Today,US venture capitalists(VCs)hold a record$300B in dry powder waiting to be deployed,but investment has slowed.Following recessions,the weighted average age of dry powder has historically increased due to decreased investment and fundraising.Today,the weighted average age of dry powd

4、er is nearly 50%lower than its peak following the GFC,indicating that if the economy ends up in a so-called“hard landing,”we can expect todays dry powder to sit on the shelf a little longer.That said,investors are on the clock to deploy capital and generate a return for limited partners(LPs)and fina

5、ncial incentives are aligned for them to deploy that capital.As a result of slowing investment,capital is scarce for founders.Tightening venture capital(VC)investment and falling public markets have led to the most significant private market valuation correction in the last 20 years;the median late-

6、stage tech pre-money valuation fell 56%in 2022.Furthermore,33%of late-stage tech companies have yet to be repriced since 2021,indicating there may be challenging fundraises on the horizon for some companies.Additionally,the slower fundraising environment has led nearly 40%of US VC-backed tech compan

7、ies to cut net burn year over year(YoY)as they focus on extending cash runway and improving profitability.Only 50%of US tech companies have increased payroll spending quarter over quarter(QoQ).As a result of decreasing burn and economic headwinds,US VC-backed tech companies are growing more slowly.I

8、f headwinds persist,some companies will likely fail,but those that come out the other side will be more efficient,grittier and better equipped for long-term growth and the demands of public markets.With layoffs continuing,we expect many talented workers to found their own companies given falling opp

9、ortunity costs fueling the next wave of innovation.Ultimately,despite headwinds,tech is an integral part of the US economy and will continue to grow.Since 2000,the US digital economy has grown two times faster than the overall economy and now accounts for more than 10%of US GDP.Today,technology is i

10、ntertwined through every aspect of life and business,yet there are still many opportunities for innovations,from tapping the power of artificial intelligence(AI)to developing solutions to climate change.Sunita Patel Chief Business Development Officer Silicon Valley BankState of the Markets H1 20232F

11、ebruary 2023Source:PitchBook,Preqin,SVB proprietary data,US Bureau of Economic Analysis,and SVB analysis.3FundraisingEarly-StageLate-StageExitsCategory2022 Venture Outlook From the H1 2022 Report2022 by the NumbersGrade for 2022 Outlook2023 Venture OutlookMassive exits in 2021 infused LPs with cash,

12、while demand for venture assets continues to grow.However,a prolonged market downturn and slowing growth of active investors means another record year for venture fundraising is unlikely.6/10US VC funds will likely raise$70B in 2023 a 50%decline from 2022 highs but still the 4thhighest year ever.Thi

13、s decline will be driven by subdued public markets(relative to recent highs),higher interest rates and muted distributions to LPs.The migration of tech talent away from Silicon Valley will continue,as tech companies commit to remote work.With talent bedding in,greater support available for startup f

14、ounders,and many“massive”market opportunities,we expect Series A tech deals2to break 2,000(1,526 in 2021).5/10US Series A tech will likely decrease 15%to 1,250 deals in 2023,which is aligned with the period of stability witnessed between 2015 and 2020.Mismatched investor and founder valuation expect

15、ations,increased investor scrutiny and slowed company growth will facilitate the regression to historic levels.The unprecedented revenue multiples being paid are starting to stretch what is deemed reasonable by investors.As public markets soften,we expect a correction in late-stage valuations starti

16、ng early Q2.9/10The median late-stage US tech valuation will likely fall an additional 5%-10%in 2023 placing it at 60%-65%below Q4 2021 levels.We are nearing a price floor as public and private markets converge.The additional decline will result from companies running out of cash runway and raising

17、rounds on unfavorable terms.Underperforming tech IPOs from 2021 will cause hesitation for companies planning on listing in 2022,so we expect fewer IPOs.As a consequence,private secondary markets will rise in popularity as shareholders look for liquidity.8/10US VC-backed tech IPOs will likely remain

18、dormant in H1 2023.As the market gets clarity on the rate ceiling,forward revenue multiples align with long-term averages and pent-up demand builds from institutional investors and public-ready companies,at least 10 US VC-backed tech companies will IPO in 2023.US VCs raised$139B in 2022,$3B more tha

19、n 2021;however,fundraising slowed every quarter in 2022,with Q4 accounting for 6%of annual fundraising.1US Series A tech deals fell to 1,447.Furthermore,many companies brought workers back to the office,exemplified by Twitter and Snap.Multiples for US VC-backed tech companies with$25M-$50M in revenu

20、e declined 46%YoY,and late-stage tech valuations fell 56%YoY.3There were only four US VC-backed tech IPOs in 2022 and zero in Q4.Secondary volumes remain suppressed given high bid-ask spread.Notes:1)Fundraising by fund close date.2)Tech defined using PitchBooks information technology classification.

21、3)Revenue defined as annual revenue run rate for a given quarter;multiple calculated using trailing three-quarter median;tech defined using SVBs proprietary taxonomy;late-stage defined by PitchBook.Source:SVB proprietary data,PitchBook,S&P Capital IQ and SVB analysis.State of the Markets H1 2023Macr

22、o:“Tech-tonic”Shifts for Long-term GrowthInvestment:Venturing Into a New Normal Private Market Benchmarks:Extinguishing Excess Burn State of the Markets H1 20234Capital:Ready and Waiting Exits:Coming Soon Please Try Again LaterInternational:Heading North and Crossing the PondThe Future of Climate Te

23、ch5State of the Markets H1 20235State of the Markets H1 20236 6MacroEquityQuarterly VC Fundraising$9B-74%QoQ-74%YoYQuarterly VC Investment$37.7B-18%QoQ-60%YoYMedian Late-Stage Valuation5$70M5%QoQ-30%YoYDebtCurrent 10-Year Treasury Yield3.88%1%QoQ155%YoYQuarterly Convertible Debt Volume6$10B-9%QoQ-47

24、%YoYInvestment-Grade Credit Spreads7138bps-17%QoQ41%YoYLiquidityQuarterly VC-Backed Tech IPOs0-100%QoQ-100%YoYQuarterly VC-backedDe-SPACs87-42%QoQQuarterly VC-Backed M&A254-13%QoQ-57%YoY0.7%QoQ1.0%YoY-1.8%YoY-19.4%YoY7.1%QoQ0.5%QoQ6.4%YoY-76%YoY26%YoY-31%QoQ8.2%YoYNotes:1)YoY defined as Q4 2021 to Q

25、4 2022;QoQ defined as Q4 to Q3;for index values the last day of each period was used.2)Real GDP data is subject to revision after initial release.3)Chicago Board Options Exchange Volatility Index.4)Measured using the DXY.5)Late-stage category defined by PitchBook.6)Convertible debt and preferred vol

26、ume includes deals greater than$25M in base deal size.7)ICE BofA US Corporate.Index Option-Adjusted Spread;one basis point(bps)is equivalent to 0.01%.8)Methodology updated since H1 report to represent de-SPACs of US VC-backed companies.Source:PitchBook,ICE Data Indices,Federal Reserve Board of Gover

27、nors,Preqin,ICE Futures,Chicago Board Options Exchange,Bureau of Labor Statistics,Deal Logic,and SVB analysis.-7.7%QoQChange in Real GDP2Change in S&P 500 PerformanceChange in Consumer Price Index(CPI)Change in CBOE Volatility Index3Change in USD Index4-0.4%QoQChange in Money Supply(M2)State of the

28、Markets H1 20237Percentage of Countries Raising Interest Rates and Average Interest Rate1US Inflation2and Interest Rate Hikes YoY by DecadePace of US Interest Rate Hikes Since 19903S&P 500 Returns During Rate Hike Cycles4Notes:1)Based on central bank policy rates for countries reporting to the Bank

29、of International Settlements.Latest available data as of 11/30/2022.2)Consumer price index for All Urban Consumers(CPI-U),seasonally adjusted.Annual data from 1990 to 2022.3)Interest rate hike cycles based on changes in the target fed funds rate after the initial rate hike.Data as of 1/10/2023.4)Lig

30、ht shaded lines represent monthly S&P 500 returns for each respective rate hike cycle.Source:S&P Capital IQ,Federal Reserve,US Bureau of Labor Statistics,Bank of International Settlements and SVB analysis.0%1%2%3%4%5%6%7%8%0%10%20%30%40%50%60%70%80%Jun 21Jul 21Aug 21Sep 21Oct 21Nov 21Dec 21Jan 22Feb

31、 22Mar 22Apr 22May 22Jun 22Jul 22Aug 22Sep 22Oct 22Nov 22Share of Countries Raising Interest RatesAverage Interest Rate05010015020025030035040045006121824303620222015 20181994 19952004 2006Change in Target Federal Funds Rate(bps)Months Since Rate Hike Cycle StartedFastest increase since 19901999 200

32、01990sAverage Interest RatePercentage of Countries Raising Rates-30%-20%-10%0%10%20%30%+0+1+2+3+4+5+6+7+8+9+10+11+12+13+14+15+16+17+18+19+20+21+22+23+24Slow-Pace Rate Hike Cycle Average ReturnFast-Pace Rate Hike Cycle Average Return2020202120220%1%2%3%4%5%6%7%8%-6%-4%-2%0%2%4%6%Inflation(End of Year

33、)Percentage Point Change in Fed Funds Rate YoY2000s2010s2020sMonths from Start of Rate Hike CycleOn the back of a pandemic-driven and stimulus-fueled couple of years,the US is in a sustained market downturn.Despite this,inflation continues to remain elevated though there are signs of easing in recen

34、t readings.Inflation increased 6.5%YoY in December 2022,the smallest 12-month increase since October 2021.However,the types of inflation driving the“core”figures are diverging,with prices of goods falling as supply increases while prices of services are increasing due to a hot job market and escalat

35、ing labor costs.The intricacies of inflation continue to cause pause for investors as they remain torn over how the Fed should pursue reducing inflation in a tempered way.Despite this,the Fed continues to hike rates at the fastest pace in nearly 30 years and a pace about six times faster than the la

36、st cycle.Based on current sentiment and expectations,the Fed is still signaling that it plans to raise interest rates even as they creep closer to levels not experienced since the 20042006 cycle though it took longer to reach these levels with hikes taking place over two years.While absolute interes

37、t rate levels are important,the pace of interest rate hikes is just as important,especially for equity markets.The current rate cycle is the fastest pace since the 1990s.Looking at historical equity market returns during different rate hike cycles,faster-paced rate hike cycles tend to correspond wit

38、h lower equity market returns.Notably,among the fast-paced rate hike cycles,the lowest equity return two years after an initial rate hike occurred during the 1973 rate hike cycle a period also plagued with elevated energy prices and soaring inflation.If history were to repeat itself,this could have

39、significant knock-on effects for the VC ecosystem from general partners(GPs)marking down portfolios to LPs pulling back on private equity(PE)allocations,as other asset classes offer attractive yield and risk management comes more into focus.State of the Markets H1 20238The tech industry has matured

40、significantly in the last two decades.No longer seen as a niche carveout of the broader economy,tech products are integrated into all industries and sectors today.Compared to prior eras when the potential of a new technology was enough to carry a VC-backed company to a public listing in just a few y

41、ears,founders today are expected to demonstrate higher benchmarks of success for longer before going public.To illustrate this trend,we analyzed cohorts of tech companies that went public during the peak year preceding four recent tech downturns:the dot-com bubble,the GFC,the 2016 tech recalibration

42、,and the current downturn.What emerges when looking at these cohorts is a story of the innovation economy maturing over time,both in terms of company performance and investor expectations.Most dot-com IPO companies would be considered Series B companies in todays environment.The companies that went

43、public in 2000 had a median age under three years from first funding with revenue of less than$30M(in 2021 dollars).Public investors felt the burn when many of these companies failed to reach their potential.By 2007,tech IPO metrics had improved considerably,with median age up to 6.6 years and reven

44、ues three times higher than the dot-com cohort.By 2021,the cohort of new IPO companies had median revenues six times higher than the dot-com cohort and three times more operating experience.But even those more impressive metrics couldnt keep up with rising valuations,which surged to 18x revenue in 2

45、021 as institutional investors flocked to VC.With VC investment declining,valuations will continue to rebase.However,the trend of companies staying private longer will likely continue.Metrics for US VC-backed Tech Companies at IPO1 and S&P Tech Sector ReturnsUS VC Investment YoY US VC Investment:Tra

46、jectory Through Past Downturns2Notes:1)Revenue and valuations are adjusted to 2021 dollars.Tech sector is the S&P 1200 Global Information Technology Index.2)Extrapolation based on exponential smoothing forecast of monthly data going back to 2011.The 95%predictioninterval is from$53B to$285B.Source:P

47、itchBook,S&P Capital IQ and SVB analysis.$74B$87B$85B$90B$147B$150B$171B$344B$237B13.3K18.5K15.7K$0B$50B$100B$150B$200B$250B$300B$350B$400B100%50%39%37%100%75%87%123%69%49%2021 was an anomalous year,and 2022,while 31%lower,is the second-highest year ever.Capital InvestedDealsTrend:Capital Invested 0

48、500100015002000250019951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023Index Value2.96.67.48.32000 2007 2015 2021$751M$566M$485M$3.8B2000 2007 2015 2021Post-Valuation$28M$82M$76M$177M2000 2007 2015 2021Revenue36x7x8x18x2000 2007 2015 20

49、21Revenue MultipleMiddle 50%S&P Global 1200 Information Tech IndexMedianChange in Median from 2000 to 2021-50%5x6x3xIndexed to 100Dot-ComGFC20222023 Extrapolated20212008200020222009200120232010200220112003Dot-Com PeakGFC PeakPre-VC Recalibration2021 PeakYears to IPO9State of the Markets H1 202390%20

50、%40%60%80%100%20002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022-40%-20%0%20%40%60%0%5%10%15%20%25%30%35%40%45%50%55%60%65%70%75%80%85%90%95%0.0 x0.5x1.0 x1.5x2.0 x2.5x3.0 x2000200120022003200420052006200720082009201020112012201320142015201620172018201920202

51、0212022Venture as an asset class is driven by the outsized performance of a few companies within a portfolio;the same is true for funds.For example,between 2005 and 2015 only 31%of funds hit the industry benchmark of 20%net internal rate of return(IRR)with the top 10%of funds returning over 35%.Choo

52、sing the right funds becomes even more critical in a rising rate environment.The 10-year US treasury yield what many investors consider the risk-free rate of return increased 225 basis points during 2022.In calculating the risk-adjusted rate of return,we see that as the risk-free rate of return clim

53、bs,a smaller basket of funds within the venture asset class is capable of generating an acceptable risk-adjusted rate of return.1Certainly,the risk-adjusted rate is only one way LPs consider portfolio construction,and most LPs turn to venture for its potential for outsized returns.However,if interes

54、t rates continue to climb and remain high for an extended period,we would expect long-term impacts to VC fundraising.In the short term,the challenge for VCs is realizing the paper value they have amassed in their portfolios.Many VCs and LPs have started to write down their portfolios,including Fidel

55、ity,which has written down several late-stage investments between 30%and 60%.2In the overall market,the median total value to paid-in capital(TVPI)3for vintages between 2010 and 2018 is 49%above the prior 10 years.However,with 92%of US VC-backed tech IPOs since 2020 trading below their IPO market ca

56、ps,distributions to paid-in capital(DPI)4will likely come in well below current TVPI levels.Secondary exchanges are seeing increased interest from buyers and sellers,but few transactions are taking place due to high bid-ask spreads in 2022.5As the market bottoms and a price floor is created,we expec

57、t increased activity in both secondary markets and in M&A activity,which will help return some capital to LPs,continuing the venture cycle.State of the Markets H1 202310Historical US VC Returns(2005-2015)Rising Rates and Risk-Adjusted US Venture Returns6Median TVPI and Median DPI for US VC by Vintag

58、e Year Percentage of US VC Fund TVPI Yet to Be Realized by Vintage0%5%10%15%20%25%0%2%4%6%8%10%12%14%Percent of Venture Funds that Generate Acceptable Risk-Adjusted Return3US 10-Year Treasury Yield(Risk Free Rate of Return)Today2020 LowPeak yield 15.8%in 1981As interest rates climb,a smaller percent

59、age of funds can generate an acceptable risk-adjusted return.16%of funds53%of funds31%of fundsNegative Net IRR0%-20%Net IRR20%Net IRRFund Returns Net IRRFund Performance PercentileThe top 25%of funds return at least 22%net IRR,while the top 10%generates at least 35%Most of the value of US VC funds h

60、as yet to be realized by LPs.DPI4TVPI3Break EvenNotes:1)This analysis is for demonstration purposes and has two assumptions:One the analysis assumes an investor(LP)is capable of choosing a cohort with a high enough return to produce a Sharpe ratio greater than one,two the analysis also assumes the s

61、tandard deviation of returns(risk)is constant across the venture asset class.2)From Bloomberg.3)Total value of funds investment and distributions to LPs relative to how much LPs have paid in.4)How much a fund has returned to LPs relative to the amount paid in by LPs.5)According to Nasdaq Private Mar

62、ket(NPM)commentary.6)A fund is considered acceptable if its returns are high enough to generate a Sharpe ratio greater than one.Source:Preqin,US Board of Governors of the Federal Reserve System,Nasdaq Private Markets and SVB analysis.Median Value for all Funds$96B$123B$33B$29B$21B$300B$23B$98B$38B$1

63、40B$300BState of the Markets H1 202311US VC fundraising had a record year in 2022 with$139B of funds closed.However,fundraising all but came to a halt in Q4,which accounted for just 6%of the years total.This drop in fundraising in Q4 was also characterized by a decrease in the number of emerging man

64、agers(EMs)2funded.While 2021 was a record year for EMs,as we enter a period of economic uncertainty,LPs are allocating more heavily to established funds.This also means capital is concentrated in the hands of fewer managers.$1B+funds accounted for 52%of all capital raised in 2022,up from just 37%in

65、2021.Despite a slowdown in US VC fundraising,there is a record level of VC dry powder in the ecosystem.This has led to the amount of dry powder per VC-backed company increasing by 119%,even as the number of US VC-backed companies increased 20%in the last five years.1In other words,today there is rou

66、ghly$6.8M in US VC dry powder available per company,compared to just$3M in 2018.1This means there is more capital available for companies to grow.While there is hesitancy to deploy capital in the current market when price discovery is still happening,the incentive structure of VC is aligned to encou

67、rage investors to deploy capital due to the fact that most managers do not make management fees if they do not deploy.However,in the aftermath of recessions dry powder is deployed more slowly,as evidenced by the increase in average age and the share of dry powder that belongs to older fund vintages.

68、If the economy continues to tip down in 2023,we can expect delayed deployments leading the record dry powder to sit on the shelf a little longer.US VC Dry Powder by Average Age,Percentage from Past Vintages and Fund StrategyUS VC FundraisingUS Dry Powder per US VC-Backed Company1$2.4M$2.6M$2.7M$3.1M

69、$3.3M$4.0M$4.5M$6.8M20152016201720182019202020212022$36B$44B$43B$62B$59B$88B$136B$139B3444385076516366431,22972220152016201720182019202020212022Percentage of Funds Closed that Are Emerging MangersTotal Funds ClosedTotal Value of Funds Closed1.52.12.42.21.81.71.92.22.42.52.42.21.71.51.41.41.51.51.41.

70、21.30%10%20%30%40%50%60%70%80%Using past cycles as a gauge,if we head into a recession,we can expect the average age of dry powder to increase with newer vintages waiting longer to deploy.2022202120202019Pre-20192022 Actual Dry Powder By Vintage YearBy Fund StrategyGeneralLate-StageEarly-StageSeedWe

71、ighted Average Age(years)4 vintages old2 vintages old3 vintages oldPercent of Dry Powder More than:Notes:1)Due to poor tracking of company failures,we defined a US VC-backed company as a US-based company that has raised a venture round in the last five years as a rough proxy for the total number of

72、VC-backed companies.2)Emerging managers defined as a manager that has closed three or fewer funds,and the fund is under$200M.Source:Preqin,PitchBook and SVB analysis.68%69%66%66%74%76%81%74%The Future of Climate Tech12State of the Markets H1 202312$0M$20M$40M$60M$80M$100M$120M$140M$160M$180M$0B$10B$

73、20B$30B$40B$50BThere is a clear relationship between the amount of capital chasing deals and the valuation those deals receive.More capital was deployed in 2021 than any prior year by a factor of two.This pushed valuations to new highs.But as near-zero interest rates and roughly$5T in government sti

74、mulus worked through the US economy,inflation emerged as the predominant concern.The Fed pumped the breaks,raising interest rates at the fastest pace since 1990,which sent public markets into a risk-off cycle.At the end of 2022,the median market cap of 2021 US tech IPOs was down 63%.Late-stage valua

75、tions,which are most closely tied to public comparables given they are closer to an exit,saw their post-money valuations fall steeply in the back half of the year,ending up at pre-2021 levels.The early-stage has been more sheltered from the valuation correction,but not entirely.While valuations have

76、nt dropped as dramatically,our early-stage practice has reported seeing higher liquidation preferences.While these preferences protect founders from the bad optics of a down round,they make it harder to bring in new investors who will often insist on the same terms and make it harder to attract tale

77、nt with equity-based compensation.Lastly,capital is harder to come by,so not every company that needs capital has been able to raise,which,through survivorship bias,keeps valuations higher.To raise at an up round while valuations are falling,companies must grow into their new valuation at their new(

78、lower)revenue multiple.While revenue growth rates are moderating,many companies that raised in 2021 have already grown into their valuations,based on implied revenue multiples for current valuations levels.The median Series A company that raised in 2021 requires just three months to grow into its la

79、st valuation.However,the median late-stage company(Series D+)requires 13 months to grow into their last valuation,putting these late-stage companies at higher risk of needing to raise a down round.Given these dynamics,SVB has seen more tech companies seeking debt as a tool to extend runway.State of

80、the Markets H1 202313Late-Stage Tech Quarterly VC Investment and Median Pre-Money Valuation1Change in Tech Post-Money and Recent IPO Market Caps YoY1,2Months Required to Grow into Last Post-Money Valuation by Series for US Tech Companies that Raised in 2021 Given Current Valuation Levels1,3Capital I

81、nvested per QuarterMedian Pre-Money Valuation2015-201920212022Q1Q2Q3Q4Q1Q2Q3Q4Abundant low-cost capital and intense competition for deals led to high valuations.Reset to normal as investors pull back and capital becomes scarce.23573791312141924Series ASeries BSeries CSeries D+51%of companies have al

82、ready grown into their 2021 post-money valuation.25%of companies have less runway than the time it would take to grow into their last post-money valuation.24%of companies can grow into last post-money valuation given current cash runway and growth rate.Middle 50%of CompaniesMedian12%-29%-56%-63%Seed

83、Early-StageLate-StageIPO$16M$55M$96M$1.4BChange YoY(Q4 2021-Q4 2022)Q4 Median Valuation or Market CapSeedNotes:1)Tech defined using SVB taxonomy.2)Change for private market rounds assessed using the change in median valuations between Q4 2021 and Q4 2022.IPO market caps assessed between 1/1/2022 and

84、 12/31/2022 using US VC-backed tech IPOs on major exchanges.3)Calculated an implied multiple based on current valuations levels,then calculated the time to grow into those implied multiples while maintaining the same valuation given Q4 2022 growth rates;analysis uses current revenue run rate for the

85、 quarter.Source:PitchBook,SVB proprietary data,S&P Capital IQ and SVB analysis.0 x5x10 x15x20 x25x30 x35x40 x45x50 xQ1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3201820192020202120222018201920202021202220182019202020212022$0-$10M$10M-$25M$25M-$50MGrowth in revenue multiples happened sl

86、owly over the last few years until a switch flipped in 2021 and multiples ticked up steeply.Take,for example,US tech companies with less than$10M in annual revenue run rate.Between Q1 2018 and Q4 2020,the median multiple for these companies grew just 28%from 21x to 27x,then increased by 85%to 50 x o

87、ver the next four quarters.The multiple expansion is indicative of three fundamental shifts.First,the embrace of technology during the pandemic catapulted technologies like digital wallets decades ahead in terms of user adoption.Second,record-high investment levels increased demand for private compa

88、nies;just as public company multiples climb with growing investor demand,so do private company multiples.Finally,in the frenzied VC investment environment of 2021,investors were less sensitive to price.In conversations,many investors mention the fear of missing out as a driving force behind 2021 inv

89、estment.However,2022 marked a departure from the continual multiple expansion.Three primary factors led to the decline in revenue multiples of private companies.First,capital invested into US VC-backed companies decreased 31%YoY.Second,2021 US VC-backed tech IPOs enterprise value to next twelve mont

90、hs(EV/NTM)revenue multiples fell 72%in 2022(which is considered a good approximation of a private market annual recuring revenue(ARR)multiple).Third,revenue growth rates for US VC-backed tech companies declined for companies of all sizes as they cut net burn and focused on profitability over growth.

91、Here again,multiples saw the steepest and quickest declines among larger companies that are closer to an exit,while early-stage companies have seen slower declines.Beyond the size of companies,multiples have been impacted differently due to the sector of tech companies.Frontier tech companies.for ex

92、ample,take longer to generate revenue,so mature companies can have relatively low revenue leading to high multiples for companies with less than$10M in revenue.State of the Markets H1 202314US Tech Median Revenue Multiple by Annual Revenue Run Rate1,2,3Median Revenue Multiple for Companies with Less

93、 than$10M in Revenue1,2US Tech Median YoY Revenue Growth Rate by Annual Revenue Run Rate3,4Notes:1)Revenue is defined as annual revenue run rate for a given quarter.2)Revenue multiple defined as post-money valuation divided by annual revenue run rate;uses trailing 3-quarter median.3)Tech defined usi

94、ng SVBs proprietary taxonomy.4)Using trailing 3-quarter median.Source:SVB proprietary data and SVB analysis.-17%over 2 quarters-42%over 2 quarters-46%over 4 quarters0 x10 x20 x30 x40 x50 x60 x70 x80 x90 xQ1Q2Q3Q4Q1Q2Q3Q420212022Frontier TechFintechEnterprise SoftwareConsumer Internet$0-$10M20%30%40%

95、50%60%70%80%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420182019202020212022$10M-$25M$25M-$50MWith US VC investment down 31%YoY,capital is now a scarce resource and harder for companies to raise.One narrative thats been repeated in market is that investors are seeking to allocate capi

96、tal to companies that are still growing,are efficient and have a path to profitability.However,in an analysis comparing(1)companies that raised in 2022 and(2)companies that need to raise in the next 12 months and didnt raise in 2022,this trend hasnt played out in the data.For companies under$25M in

97、annual revenue,we see that those that raised in 2022 were less profitable(had a lower Earnings Before Interest,Taxes,Depreciation,and Amortization(EBITDA)margin)and were less efficient(had a higher burn multiple)but had significantly higher revenue growth rates.This suggests that while investors may

98、 be looking more at unit economics and profitability,growth is still the predominant factor in determining a companys ability to raise.When looking at companies under$25M in revenue,as a result of the low efficiency and profitability,the cash runway isnt much higher than that of all tech companies.H

99、owever,larger companies with$25M-$50M in revenue are far more capitalized with a median of 21 months of runway.This is in part due to their higher profitability and efficiency.As companies scaled and had between$25M-$50M in annual revenue,companies that raised had very strong growth,but they also we

100、re more profitable and had slightly lower burn multiples compared to those that didnt raise.This indicates a far higher bar placed on later-stage companies,as they not only need to have strong growth,but also higher profitability and efficiency.State of the Markets H1 202315Q4 2022:Select Metrics fo

101、r US Tech Companies by Annual Revenue Run Rate1Change in Net Burn:US Tech Companies that Raised in 2022 by Revenue Run RateCash Runway in Q4 2022 for Companies that Raised in 2022Notes:1)Revenue is defined as annual revenue run rate for a given quarter.2)Net burn divided by net new revenue;net new r

102、evenue calculated using annual revenue run rates for a given quarter.Source:SVB proprietary data,PitchBook and SVB analysis.Companies that Raised in 2022Companies that Didnt Raisein 2022 and Have Less than 12 Months of Cash Runway-384%-95%-48%-291%-74%-63%54%41%30%24%29%13%Median EBITDA MarginMedian

103、 Revenue Growth Rate$25M-$50M$10M-$25M$0-$10MMedian Burn Multiple2Increased or Kept Net Burn Constant YoYDecreased Net Burn YoYMedianCompanies that are Growing Faster,are More Profitableand More EfficientCompanies that Are Growing Faster,Are Less Profitable and Less Efficient5x3x1x4x2x1x969151321242

104、029$0-$10M$10M-$25M$25M-50M$25M-$50M17%34%27%83%66%73%$0-$10M$10M-$25M$25M-50M$25M-$50MMiddle 50%of CompaniesDecrease Net Burn YoY for All US VC-Backed Tech Companies33%45%38%18.519.217.416.418.618.917.516.618.918.618.616.619.118.518.818.019.319.118.917.419.519.418.318.121.220.419.419.422.122.021.32

105、0.9State of the Markets H1 202316The frenzy to get deals done in the fast-paced funding environment of 2021 shifted the balance of power squarely toward founders.VC investors who were used to taking their time on due diligence found themselves competing with a line of other investors to land the mos

106、t promising tech companies.With founders in control,VCs who offered term sheets fastest often landed the deal.In 2023,VCs are in the drivers seat again,and theyve taken their foot off the gas.Industry-leading VC firms dialed back the pace to 2020 levels or slower.In Q4,Sequoia Capital completed a de

107、al every 9.1 days,down from every 3.5 days the year prior.Tiger Global,the hybrid investment firm that drew attention for its fast-paced dealmaking and large investments in 2021,also drew back,completing deals every 7.9 days in Q4,down from every 2.7 days in Q4 2021.In addition to slowing the pace o

108、f dealmaking,investors also refocused on their thesis,tightening the scope of their investments,which broadened in 2021.The most active US investors targeted 13%fewer subsectors in 2022,narrowing the median number of subsectors represented by investments from 24 to 21.The result of this slower pace

109、is that companies can expect to wait longer between rounds.Across all stages,the elapsed time between funding rounds for companies receiving VC checks jumped about four months over the last two years.The most significant change occurred at the later stage.The average time between Series C and Series

110、 D deals for companies closing in Q4 2022 was 20.9 months,up 27%from 16.4 months in Q1 2022.Average Months Elapsed3Between Rounds by US VC Series Raised4Notes:1)Among 70 tech subsectors classified by SVB taxonomy.2)Determined by total VC deal count since 2018.3)Three quarter rolling average of the t

111、ime elapsed between rounds.4)Analysis excludes companies with add-on deals between rounds.Source:PitchBook,SVB proprietary data and SVB analysis.0481216Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022171920242101020304020182019202020212022The most active US investors narrowed their focus to fewer subsectors in

112、2022.The pace of investment has slowed since Q2.-13%18.9%14.6%22.4%27.4%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420212022Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420212022Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420212022Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420212022Seed to Series ASeries A to Series BSeries B to Series CSeries C to Series DMedianMiddle 50%of Top 100 I

113、nvestorsAverage Number of Days BetweenUS VC Deals for Select FirmsMedian Number of Tech Subsectors1Targeted by the Top 100 US Investors26080100120140160180Jan21Mar21May21Jul21Sep21Nov21Jan22Mar22May22Jul22Sep22Nov22In the last decade,corporate venture capital(CVC)has gone mainstream as the number of

114、 investors booms.Historically,this investor group was dominated by a small group of legacy tech companies,with the top 15 CVCs accounting for 55%of all deals.But the number of active CVCs has skyrocketed,and a long tail of corporate investors has emerged.Today the top 15 account for just 29%of all d

115、eal activity.While some in the industry have hypothesized that top players would be more likely to stick around during this cycle,there has not been an appreciable change in the top 15 CVCs share of deal activity in 2022.This indicates that the long tail of investors(91%of which do fewer than 10 dea

116、ls per year)have not slowed their pace more significantly than top players.As of Q4,CVC participation rates remain high,accounting for 26%of US VC deals.This is not to say there are no differences between top-tier funds and the rest of the pack.From a recent survey of 164 CVCs,we defined a group of

117、top-tier investors“bellwethers”that have at least$500M assets under management(AUM),deploy at least$100M annually and have a high reputation in the industry.These bellwethers closely tracked traditional VCs in terms of deal-making,while non-bellwether firms increased their rate of deal activity far

118、more significantly in 2021 than traditional VCs and have since returned to being in line with traditional VC.As with traditional VC investors,in the face of mounting economic uncertainty,CVCs shifted focus to early-stage companies that have a longer time to exit and may ultimately benefit from the c

119、urrent environment due to the availability of talent and decreased competition.The share of corporate deals going to Seed and Series A deals has increased by nine percentage points to 51%of all deals between 2021 and 2022.State of the Markets H1 202317Share of CVC Deals Done by the Top 15 CVCs Each

120、YearCVC Participation RatesUS VC Deal Activity Index by Investor Type1Notes:1)Index uses trailing six-months deal activity.2)Bellwether defined as a CVC with at least$500M AUM,deploy at least$100M per year and have a strong reputation in the industry.Source:PitchBook,SVB&Counterpart Ventures CVC sur

121、vey and SVB analysis.Traditional VCsTop-Tier CVCs:“Bellwethers”2All Other CVCsSmaller,often less established CVCs invested at a higher rate during investment boom of 2021.15%27%25%33%21%30%22%27%SeedSeries ASeries BSeries C+20212022Share of CVC Deals by Stage20%25%30%35%40%45%50%55%60%20102011201220

122、13201420152016201720182019202020212022CVC is dominated by legacy tech companies such as Intel,Comcast and Qualcomm.3.2x increase in the number of CVC funds making investments in US companies(2010-2018)Despite a tough environment,no appreciable drop in participation from less-active CVCs.16%18%19%21%

123、24%24%25%24%24%24%26%2012201320142015201620172018201920202021202293%Growth in VC deals since 2012194%Growth in CVC deals since 2012$0B$5B$10B$15B$20B$25B$30B$35B012345678910111213ValuationYears Since First FundingState of the Markets H1 202318Share of US VC Investment in Crypto and the Price of Bitc

124、oin1Estimated Quarterly Commits by Blockchain Developers2Notable VC-Backed Company CollapsesFTX VC Investors and Estimated Losses3$0K$10K$20K$30K$40K$50K$60K0%1%2%3%4%5%6%7%8%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420192020202120222.3M0.8M0.0M0.5M1.0M1.5M2.0M2.5MQ1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020

125、212022TheranosFTXQuibiLendUpKaterraNon-FraudulentBlockchain developmentis down 65%since Q2 2021.85 firmsinvested$2.8BThe FTX collapse from a$32.5B valuation is the largest mark-down for any pre-exit VC-backed company on record.Percentage of VC DealsPercentage of VC DollarsBitcoin Price(USD)Notes:1)B

126、itcoin price displayed as a monthly average of the daily settlement price.2)Quarterly sum of daily coding commits to blockchain networks.3)Includes FTX,and FTX US.Losses estimated based on public disclosures from investors,round size and number of investors per round.Source:PitchBook,Artemis.xyz and

127、 SVB analysis.Crypto was the star tech sector of 2021,but falling asset prices and the collapse of several high-profile projects made for blinding headwinds in 2022.The price of Bitcoin fell 65%from Q4 2021 to Q4 2022,draining liquidity from the market and sapping the public interest that had fueled

128、 last years investment frenzy.During the run-up of 2020 and 2021,crypto took a larger share of the VC pie,jumping from 1.5%of US VC investment to 6.9%at its peak.Now the trend is reversing,with crypto accounting for 4.8%of VC investment in Q4 2022.It could fall lower as the industry grapples with th

129、e fallout from the November 2022 collapse of the crypto exchange FTX.The companys$32.5B bankruptcy constitutes the largest loss in value for any private VC-backed company on record nearly four times greater than the Theranos fraud.Eighty-five VC investors including leading firms such as Sequoia,Soft

130、Bank and Lightspeed invested$2.7B into FTX over the last four years.In turn,FTX and its affiliate hedge fund invested in 235 startups,including 22 companies valued over$1B.The founders of these companies now face the task of untangling from FTX,while the industry faces the more daunting challenge of

131、 repairing public confidence.FTX customers may be owed more than$8B in lost deposits,according to the US Commodities Futures Trading Commission.State and federal regulators have ramped up scrutiny on crypto companies.In January 2023,the Securities and Exchange Commission(SEC)charged crypto exchange

132、Gemini and crypto lender Genesis with selling unregistered securities,while the Department of Justice(DOJ)charged crypto exchange Bitzlato with unlicensed money transmitting.Ultimately,tighter regulations may help the industry.In a January 2023 letter announcing layoffs,Coinbase CEO Brian Armstrong

133、cited“emerging regulatory clarity”as a long-term benefit to Coinbase.“Progress doesnt always happen in a straight line,”he said.$275M$214M$280MSize of InvestmentNumber of Deals:12345102345678910121213FraudThe Future of Climate Tech19State of the Markets H1 20231990th Percentile75th Percentile10th Pe

134、rcentile25th PercentileMedian0%2%4%6%8%10%12%14%16%0369121518212427303336394245485154576060+A new reality cemented itself in 2022.Public markets began to deteriorate,exit markets came to a screeching halt,fundraising slowed and US VC investment fell to approximately$38B in Q4 2022 the lowest quarter

135、ly level since Q2 2020.With capital no longer a commodity and tech demand falling,startups have had to pivot by cutting spend to extend runway.However,unlike the last downturn at the onset of the pandemic,there are different factors at play namely inflation.Inflations negative impact on cash runway

136、has too often been underappreciated.With the consumer price index continuing to hover around 7%,startups are losing over a month of runway due to elevated inflation.For startups that benefitted from the enormous fundraising waves of the last few years and hold an abundance of cash,this may prompt th

137、em to explore higher yielding assets to offset the erosion of purchasing power.While this may be enticing,especially in an environment where inflation may erode runway,liquidity reigns supreme.The purpose of raising VC is to have money when the company needs it.On the other hand,for companies that d

138、ont have ample cash at their disposal,the situation is much more dire.As the market environment remains uncertain,investors have continued to pull back,cutting off critical oxygen for companies to survive.This is ever more important as our proprietary data shows an increasing share of companies with

139、 less than 12 months of cash runway.The median cash runway for companies has fallen from 16 months in Q4 2021 to just over 12 months as of Q4 2022.1This is just shy of the median length of a recession.2However,if this current downturn were to mimic the GFC or 1970s energy crisis the latter of which

140、has a number of parallels to todays environment startups would need closer to 18 to 24 months of runway to survive.Nonetheless,as more companies reach the end of their cash runway,we expect VC activity to increase as companies start to accept lower valuations.State of the Markets H1 202320Effect of

141、Inflation on Cash Runway for US VC-Backed Tech3Companies4Share of US VC-Backed Tech3Companies with Less than 12 Months of RunwayCash Runway for US VC-Backed Tech3Companies vs.Length of Notable DownturnsNotes:1)Based on SVB proprietary data.2)Median length of a US recession since 1900.3)Tech defined

142、using SVB taxonomy.4)Analysis assumes only operating expenses at each quarter are impacted by the annual inflation percentage at the respective quarter.No adjustments are made to revenue.Source:US Bureau of Labor and Statistics,National Bureau of Economic Research,S&P Capital IQ,SVB proprietary data

143、 and SVB analysis.46%62%51%41%25%35%45%55%65%75%Q4 17Q2 18Q4 18Q2 19Q4 19Q2 20Q4 20Q2 21Q4 21Q2 22Q4 22Frontier TechFintechConsumer InternetEnterprise SoftwareMonths of Cash Runway Lost Due to InflationMonths of Cash Runway&Length of Downturns(Months)Share of US VC-Backed Tech CompaniesGreat Depress

144、ionGlobal Financial CrisisDot Com Bubble1970s Energy&Inflation CrisisMedian Since 1900US Recession LengthWhile the share is increasing,it is in line with historical norms pre-pandemic.0.00.51.01.52.02.5024681012141618Q4 17Q2 18Q4 18Q2 19Q4 19Q2 20Q4 20Q2 21Q4 21Q2 22Q4 22Monthsof Cash RunwayMonths o

145、f Cash Runway(Inflation Adjusted)Share of Companies by Cash Runway Bucket-25%-30%-35%-40%-45%-50%-55%-60%-65%-70%-75%0102030405060702418126The last decade in the innovation economy can be delineated into four distinct periods.First,the pre-COVID-19 period was characterized by the longest bull-run ma

146、rket in history with abundant capital and strong VC investment hitting record levels eight years in a row.This period filled the pockets of many companies,allowing them to move fast and burn capital quickly to scale.The second period started in March 2020 when the World Health Organization(WHO)decla

147、red COVID-19 a global pandemic.Public markets panicked and companies quickly reacted by cutting burn to ensure ample cash runway for a potentially bumpy road ahead.The third period started in 2021 when the innovation economy entered a frenzy of activity with a doubling of VC investment in one year,i

148、ncreasing competition among investors and growing net burn rates.Finally,in 2022 we entered the fourth period,characterized by monetary tightening,a risk-off mindset in public markets and rationalization in private markets.Venture investment slowed,and in time companies cut net burn focusing on impr

149、oving efficiency,getting to profitability and extending cash runway.Nearly 40%of all pre-profit US tech companies have reduced net burn.These reductions have started to motorize into moderate improvements in profitability in Q4 2022 as measured by EBITDA margins.There are also some important nuances

150、 in sectors.Fintech,consumer internet and enterprise software all started to see improvements to net burn starting in Q3 2022.However,given the more hardware-intensive nature of frontier tech,cutting burn takes longer.It isnt as simple as cutting cloud computing spend,for instance.Therefore,Q4 was t

151、he first time net burn dropped for frontier tech companies.Ultimately,while cutting company spending can be painful,we believe the companies that do will become more efficient,more profitable and more ready for the demands placed on public companies.State of the Markets H1 202321US VC-Backed Tech:Ne

152、t Burn Index1Percentage of US VC-Backed Tech Companies Decreasing Net Burn YoY2,3Median EBITDA Margin for US Backed Companies with$10M-$25M in Revenue3Additional Months of Cash Runway from Decreasing Net BurnNotes:1)Median net burn on a quarterly basis by tech sector indexed to 100 in Q1 2018.2)Tech

153、 defined using SVBs proprietary taxonomy.3)Revenue is defined as annual revenue run rate for a given quarter.Source:SVB proprietary data and SVB analysis.FintechConsumer InternetFrontier TechEnterprise SoftwareIndexed to 100The Median Tech Company that Decreased Net Burn1A company is better off cutt

154、ing net burn with more runway than taking a deeper cut with limited runway.All SizesAnnual Revenue Run Rate$0-$10M$10M-$25M$25M-$50MCOVID-19 Spending CutsAbundant Capital Abundant CapitalCapital Scarcity12.7-34%50100150200250300Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42018201920202

155、02120220%10%20%30%40%50%60%70%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420182019202020212022-140%-120%-100%-80%-60%-40%-20%0%Frontier TechFintechEnterprise SoftwareConsumer InternetAll SectorsQ1Q2Q3Q42020Q1Q2Q3Q4Q1Q2Q3Q4202120222169733298411436342144791124Q1 2021 Q2 2021 Q3 2021 Q4

156、2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022One of the main areas grabbing headlines in todays environment is headcount.Following a pandemic-related hiring boom that led to record employment,rising wages and surging headcount,companies have started to pull back the reins as the new reality sets in.Tech layo

157、ffs(both in terms of the number of companies reporting layoffs and the number of employees being let go)in Q4 2022 surged to the highest level since the onset of the pandemic.Furthermore,more companies are doing second and third rounds of layoffs.Prominent executives of notable public tech firms hav

158、e openly admitted to hiring too fast,citing misguided optimism in tech demand and economic growth post-pandemic.Today,the focus is on the need to reduce costs given the current landscape and even proactively using the current environment to cut underperforming employees.In the extreme,corporate rest

159、ructuring has taken place,such as Elon Musks recent“house cleaning”of Twitter,which saw nearly half of its employees depart the firm.Ripple effects have cascaded throughout private companies,too.Across major tech sectors,SVB proprietary data shows that the share of companies increasing payroll has d

160、eclined by more than 20 percentage points on average since the peak in late 2021.Additionally,median growth rate of payroll spend across tech subsectors has fallen to low double digits YoY in Q4 2022,a stark contrast to north of 50%+YoY median payroll spend at the same time last year.1While layoffs

161、may bring challenges for the tech workforce in the near term,it could serve as a potential opportunity for current startups to scoop up great talent at lower costs.It may also lead to the creation of new companies as former tech employees look to build something on their own.State of the Markets H1

162、202322Tech Companies Reporting Layoffs Hiring Growth Rates YoY and Revenue per Employee for Notable Tech2Companies3Share of US Tech2Companies with Increasing Payroll QoQNotes:1)Based on SVB proprietary data on median payroll spend.2)Tech defined using SVBs proprietary taxonomy.3)Annual revenue and e

163、mployee data for 2021 based on reported figures from the respective companys SEC filings.Revenue data for 2022 based on the annualized latest available quarterly data.Employee data for 2022 estimated based on data from Layoffs.fyi,company press releases and news articles.Data as of 1/5/2023.Source:L

164、ayoffs.fyi,S&P Capital IQ,SVB proprietary data and SVB analysis.Share of Q4 2022 Employees Laid Off by Tech CompanyNumber of Tech CompaniesNumber of Tech Companies that Already Reported Layoffs since COVID-1970%60%60%63%78%71%70%69%76%71%67%68%78%73%68%67%61%55%55%56%58%57%59%51%52%51%51%49%FintechE

165、nterprise SoftwareFrontier TechConsumer InternetQ2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022-100%-50%0%50%100%150%200%250%$0.0M$0.5M$1.0M$1.5M$2.0M$2.5M$3.0M$3.5MRevenue per EmployeeEmployee Growth Year-Over-Year20212022The Future of Climate Tech23State of the Markets H1 20232377%87%60%67%30%24

166、%13%63%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q420152016201720182019202020212022$11B$10B$17B$20B$13B$10B$18B$17B$37B$26B$10B$18B$18B$21B$27B$21B$56B$128B$30B$17B$11B$21B$99B$172B$130B$272B$173B$208B$53B$19B$13B$5BState of the Markets H1 202324As volatility reintroduced itself

167、and public markets softened in 2022,IPOs and de-SPACs came to a screeching halt.After a massive year for public exits in 2021 and three successive years of private exits taking a smaller share of total value,the script has flipped.Acquisitions have started to take the lions share of deals albeit at

168、a smaller absolute level relative to last year punctuated by deals such as Nuance Communications($19B),Deliverr($2B)and Xandr($1B).While some deals have been lauded as successful strategic mergers,such as Adobes$20B announced acquisition of Figma at over 50 x revenue,the reality is that most private

169、 acquisitions will be under circumstances of duress as investors pull back and runway shortens.This last point rings especially true as proprietary data shows nearly half of US private tech companies have less than 12 months of runway a jump of 10 percentage points from Q4 2021.However,should public

170、 markets open up this year,there remains a massive backlog of unicorns(and potential liquidity)ready to be unlocked.Since Q4 2021,the aggregate value of private,US VC-backed unicorns has grown over 13%to$2.3T,while the aggregate number of private,US VC-backed unicorns has jumped nearly 30%.1As these

171、 companies remain private longer,they have time to achieve the best operating metrics possible before a potential exit.On the other hand,investors are unable to realize gains,so there is mounting pressure for companies to exit.Should public markets remain depressed,valuation multiples for public com

172、panies will continue to remain muted.However,this isnt all doom and gloom as this also provides an opportunity for investors to scoop up great companies at lower prices.Look no further than ThomaBravos acquisition of Coupa.With over$1.8T in global VC and PE dry powder,there remains ample cash ready

173、to be put to use.2Total Post-Money Valuation by Quarter for US VC-Backed Exits(Excluding Healthcare)Distribution:Change in EV/NTM Revenue Multiples in 2022 for US VC-Backed Tech IPOs3US VC-Backed Unicorn StatisticsNotes:1)Data as of 12/31/2022 and subject to change based on data updates by data prov

174、ider.2)Data as of 1/23/2023 and subject to change based on data updates from data provider.3)Tech defined using SVBs proprietary taxonomy;enterprise value to next twelve months(EV/NTM)revenue.Source:PitchBook,S&P Capital IQ,Preqin,SVB proprietary data and SVB analysis.41%38%15%2%4%75%-100%50%-75%25%

175、-50%0%-25%Increased50%of recent IPOs EV/NTM revenue multiples declined more than 72%.Share of IPOsPercentage DecreaseTotal Post-Money ValuationPercentage of Exit Value from LBOs and M&A$1.8TTotal post-money valuation of US VC-backed exits in the last 10 years(excluding healthcare)$2.3TValue of US VC

176、-Backed Unicorns6%$135M-55%47%8 yrs.10%Of Unicorns Were Created in 2021 Median Annual Revenue Run RateMedian EBITDA MarginOf Unicorns Are ProfitableOf Unicorns Are at Least 13 Years OldMedian Age of US Unicorns5%3%4%6%9%12%33%18%9%Pre-2015201620172018201920202021202233%of companies last valued at ma

177、rket peak-55%96%-2%Since October 2022,the decline in late-stage tech valuations has begun to mirror the decline in recent US VC-backed tech IPOs.This suggests that late-stage tech valuation levels are starting to find the bottom(assuming public markets dont continue to correct).However,33%of late-st

178、age private tech companies raised their last priced round during the market peak in 2021.So many companies have yet to face the new fundraising environment.The dynamics of price discovery are a gating factor for M&A activity.Many buyers are looking to acquire companies at a discount,but many sellers

179、 are still tied to their 2021 valuations since they have not yet had to reprice.Given the robust cash runway and the use of alternative financing mechanisms,many late-stage companies are simply waiting as long as possible to raise.As such,M&A activity of US VC-backed companies by strategic acquirers

180、 has declined 57%YoY.Yet another gating factor for M&A activity is a tightening debt market,not only due to rising rates but also a lower risk appetite.For example,Leveraged buyout(LBO)debt in Q3 2022 had an average original issue discount of 92.2 cents on the dollar vs.99.2 in January 2022 banks ar

181、e selling debt at a higher discount.1As a result of these dynamics,Morgan Stanley is set to lose$500M on the Twitter deal,2and debt providers may be wary of financing other large transactions.We expect a higher percentage of equity in deal capital structures.Some PE funds are already announcing deal

182、s without debt financing,such as Francisco Partners,Thoma Bravo,and Stonepeak Partners.These funds have relied on equity from record dry powder to get deals done.Finally,relatively low prices among recent tech IPOs may lead to PE investors taking public companies private.For recent tech IPOs,the med

183、ian enterprise value to next twelve months revenue multiple fell 72%in 2022,and 52%of tech companies that went public between 2020 and 2021 are trading below their last private valuation.State of the Markets H1 202325Valuations of Late-Stage Tech VC vs.Recent Tech IPO Index3,4Distribution of Late-St

184、age VC-Backed Tech Companies by Date of Last Round4US Leveraged Buyout Loan Volume Key Metrics for Recent US VC-Backed Tech IPOs4,5Notes:1)Insufficient data to calculate Q4 2023.2)As reported by Bloomberg.3)US tech late-stage VC valuation index calculated as median post-money valuation over the last

185、 90 days indexed to 100;US VC-backed recent tech IPO index calculated as the total market cap of US VC-backed tech IPOs that exited on major US exchanges between 2020 and 2021 indexed to 100.4)Tech defined using SVBs proprietary taxonomy.5)IPOs on major US exchanges that exited between 2020 and 2021

186、.Source:PitchBook,S&P Capital IQ,Leveraged Commentary&Data,Bloomberg,SVB proprietary data and SVB analysis.9%of late-stage companies were priced in H2 2022H1H227%$0B$20B$40B$60B$80B$100B$120B$140B$160B$180B$200B200520062007200820092010201120122013201420152016201720182019202020212022GFC30405060708090

187、100110Jan22Feb22Mar22Apr22May22Jun22Jul22Aug22Sep22Oct22Nov22Dec22Late-Stage VC Valuations IndexRecent Tech IPO Index10%of recent IPOs are down at least 90%for the year92035Remaining Months Cash Runway Without a Capital InjectionMiddle 50%of IPOsMedianChange from Last Private Valuation to Market Cap

188、 as of 12/31/202252%of companies have market caps below their last private valuation.2626State of the Markets H1 2023The tide has begun to shift following more than a year of a strong US dollar(USD)bull run,which saw the USD trade near a 20-year high.1From the relative bottom in May 2021 to the rela

189、tive peak in September 2022,the USD strengthened over 28%compared to a basket of foreign currencies,driven by the USDs status as a safe haven asset and the Feds interest rate hikes.2However,beginning in Q4,the USD began to soften,falling 9%from its recent peak.3While a modest decline in the broader

190、index shouldnt cause alarm bells to ring,its worth noting that looking at a diversified index can be deceiving as not all currencies move the same.Several currencies,both from advanced and emerging markets,have strengthened against the USD as additional external factors such as competing interest ra

191、te hikes and macroeconomic conditions cause disparity among currency movements.Further softening wouldnt be unprecedented.The USD index has fallen nearly 15%several times in recent history most recently during 2016-2018 and again in 2020-2021.However,longer-term secular downtrends have also occurred

192、,most notably in the late 1980s and post-dot-com bust.Such prolonged downtrends can have massive implications on key startup operating metrics such as cash runway and operating margins.Using the worst rolling one year performance since 2000 for select currencies,our proprietary data shows that cash

193、runway can be shortened by up to two months in a particular currency due to unfavorable movements versus the USD.Additionally,operating margins can deteriorate by almost nine percentage points.Not proactively implementing an FX strategy can introduce material variability in key operating metrics a d

194、isadvantage for startups,particularly during a downturn.For more information on FX risk management services,strategies and insights,visit our dedicated resources here.State of the Markets H1 202327Notes:1)Based on the DXY.Previous high was in 5/16/2002.2)USD return from 1/5/2021 to 9/26/2022.3)USD r

195、eturn from 9/26/2022 to 1/10/2023.4)Analysis based on proprietary data for companies with$1M net USD sold in 2022,which reflects only the amount of USD sold versus currencies that SVB FX is active in and may not include all of the currencies listed above.Analysis assumes FX movements only effect ope

196、rating expenses.Source:Bloomberg,S&P Capital IQ,SVB proprietary data and SVB analysis.Months of Cash Runway Lost(Gained)9 Mos.16 Mos.33 Mos.-129%-69%-25%Percentage Points Lost(Gained)on EBITDA MarginTRYILSIDRRUBCOPKRWCLPBRLCHFAUDQ4 2022Q4 2022Effect on Key Operating Metrics Based on Worst One-Year F

197、X Movement Since 2000475th Percentile25th PercentileMedianEBITDA MarginCash Runway-2.2-2.1-1.8-1.8-1.7-1.6-1.6-1.5-1.4-1.4-1.2-1.2-1.1-1.1-1.0-0.9-0.8-0.7-0.7-0.7-0.7-0.6-0.6CNYTWDMYRSGDINRGBPPHPMXNCADEURJPYSEKNZD-8.7-8.6-7.5-7.5-7.2-7.0-7.0-6.9-6.7-6.6-6.4-6.4-6.2-6.1-5.9-5.7-5.5-5.1-4.8-4.6-4.5-4.

198、3-4.2Change in Notable Currencies vs.the US Dollar in 2022US Dollar vs.a Basket of Foreign Currencies Since 19711-6%-8%-9%-9%-11%-11%-12%-13%-13%-14%-17%-17%-18%-18%-20%7%7%-2%2%3%-5%6%1%3%9%13%8%13%6%11%SGDCHFINRCADCNYCOPAUDILSTWDEURKRWGBPNZDSEKJPYQ1-Q3Q470809010011012013014015016017019711974197719

199、8019831986198919921995199820012004200720102013201620192022Index Value20-year high-48%-33%USD weakeningForeign Currencies Weakening vs.USDForeign Currencies Strengthening vs.USD$5M$15M$18M$31M$188M$10M$6M$10M$19M$43M$10M$25M$50M$100M$211M$11M$27M$55M$80M$150M1st Round2nd Round3rd Round4th Round5th Ro

200、und+507090110130150170Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022US and Canadian VC investment have trended similarly.Trailing twelve-month VC investment peaked in early 2022 after an anomalous 2021.However,when we break down the YoY changes on a quarterly basis,the US has fared far worse US VC investment

201、fell 60%from Q4 2021 to Q4 2022 while Canada saw only a 36%decline.While Canadian investment has remained more robust,Canadian valuations have rebased far more quickly than the US,even though Canadian companies typically have lower valuations for any given venture round.Take,for example,companies th

202、at have raised five or more venture rounds.The US saw pre-money valuations fall 30%compared to 77%for Canadian tech companies.Despite what valuations might suggest,Canadian companies are not faring any worse than their US counterparts.In fact,while revenue growth rates are falling,Canadian companies

203、 have seen higher revenue growth rates throughout 2022 than US companies of the same size.Canadian companies are generally burning less cash than US companies.Since 2020 the median net burn for Canadian companies was 38%less than their US counterparts.This indicates higher efficiency for Canadian st

204、artups given that 2022 growth rates are similar.Furthermore,from conversations with Canadian startups,many have done headcount reductions in the back half of 2022 and expect net burn to fall as a result in 2023.In addition to burning less cash,Canadian startups,especially early-stage companies,have

205、benefited from non-dilutive government funding,making private investments in these companies go further.We expect to see continued US investor interest in Canadian startups given the non-dilutive funding available,lower pricing and high performance.State of the Markets H1 202328Trailing Twelve-Month

206、 US and Canada VC Investment IndexMedian Pre-Money Valuations by Venture RoundYoY Revenue Rate for Tech Companies with$0-$10M in Annual Revenue1,2Net Burn Index for Tech Companies with$0-$10M in Annual Revenue1,3Notes:1)Tech defined using SVBs proprietary taxonomy.2)Using annual revenue run rate for

207、 the quarter;metric is a trailing three-quarter median.3)Median net burn on a quarterly basis by tech sector indexed to 100 in Q1 2018.Source:PitchBook,SVB proprietary data and SVB analysis.050100150200250300Jan 20Mar 20May 20Jul 20Sep 20Nov 20Jan 21Mar 21May 21Jul 21Sep 21Nov 21Jan 22Mar 22May 22Ju

208、l 22Sep 22Nov 22Canada|US|$12.3B$378.3BAnnual Investment Run Rate|$7.9B|$150.9BQ4 22Q 21|-36%|-60%Q4 22Indexed to 100USCanadaCanadaTrailing Three-Quarter MedianUS Trailing Three-Quarter Median0%10%20%30%40%50%60%70%80%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022We have yet to see a meaningful reduction in n

209、et burn for Canadian companies.38%Higher median net burn for US companies compared to Canadian companies between Q1 2020 and Q4 2022 USCanadaUSCanada20212022$0.00M$0.20M$0.40M$0.60M$0.80M$1.00M$1.20M$1.40M$1.60M$1.80M$0M$5B$10B$15B$20B$25B$30B$35B$40B$45BQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

210、Q4 Q1 Q2 Q3 Q420182019202020212022Amid marketuncertainties and high asset valuations,European investor interest shifted to early-stage opportunities,with Q4 2022 early-stage fundraising increasing by 11%QoQ.Early-stage startups are a greater distance from public markets,so they have been relatively

211、insulated and saw valuations bolstered in 2022 by investor competition.The median pre-money valuation for seed-stage companies grew 32%YoY while late-stage valuations declined 5%in 2022 and are likely to continue their decline.Although early-stage funding slowed down in 2022,the median deal value in

212、creased by 30%YoY.This is driven by companies flocking to early-stage deals as public market volatility makes late-stage deals less attractive given the increased uncertainty of an exit.This ultimately diminishes the short-term upside that made late-stage deal so attractive in 2022.The Ukraine war a

213、nd the general macro environment has significantly impact on public markets,leading to a slowdown in IPO activity.There were 13 VC-backed European IPOs in H1 2022 compared to 35 in the first half of 2021.This has led to M&A gaining a higher percentage of all exits,despite the total value of those de

214、als declining.At the country level,the UK faced a difficult last year.Inflation and political uncertainty coupled with high energy costs continue to affect the economy and the tech sector.Yet,the UK tech industry demonstrated its resilience in 2022,reaching a combined market value of$1T.With the thr

215、eat of a recession looming over the UK economy,we wont see the record investment levels of 2021.However,we do expect a return to pre-pandemic levels of investment as tech continues to become increasingly entrenched in the broader economy.State of the Markets H1 202329European Median Pre-Money Valuat

216、ionEuropean Early-Stage Deal Size and Capital Invested Trailing Twelve Months2European VC-backed Exit Value by Type&M&A Share of VC-Backed Exit ValueNotes:1)By year closed.Only funds whose manager is located in Europe are included.2)Early Stage includes Angel,Seed&Series A.Source:Preqin,PitchBook an

217、d SVB analysis.European VC and PE Growth Fundraising1Late-Stage/GrowthStage-AgnosticEarly-Stage10%Median Deal SizeEarly-Stage Capital InvestedBuyout/LBODe-SPACIPOPercentage M&AM&A79%69%72%52%85%$0M$10B$20B$30B$40B$50B$60B2018201920202021202221%of early-stage deals in 2022 had US investor participati

218、on.$B$2B$4B$6B$8B$10B$12B$14B$16BQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4201820192020202120225010015020025020182019202020212022Indexed to 100Series CSeedSeries ASeries B|$288M|$6M|$28M|$100M2022 MedianState of the Markets H1 202330SVB Financial Group has an investment in NPM.NPM i

219、s an independent third party and is not affiliated with SVB Financial Group.Sunita Patel Chief Business Development OJosh PherigoSenior Researcher,Market IEli OftedalSenior Researcher,Market IAndrew Pardo,CFASenior Researcher,Market IThe 25+subject matter experts from SVB and external organizations

220、that provided insights,market analyses and guidance.State of the Markets H1 2023311.The material contained in this document,including without limitation the statistical information herein,is provided for informational purposes only and is not intended to forecast or predict future performance or eve

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