IVP General Partner Sandy Miller has reason to express optimism about exit trends.
In the past 18 months, his firm has had four unicorn IPOs from its portfolio (Dropbox, Yext, MuleSoft and Snap) and in the same period is about to realize its eighth M&A transaction.
“The VC industry has had a terrific first half of 2018 for exits, and we’re going to see a robust second half and 2019,” says Miller a late-stage investing veteran who joined IVP in 2006.
The numbers show he’s not far off.
Through late June, M&A of U.S.-based venture-backed companies is slightly ahead of last year’s pace, preliminary Thomson Reuters data shows.
And the preliminary numbers (see below) don’t yet include a handful of large M&A deals, including Microsoft’s announced $7 billion acquisition of venture-backed GitHub (an IVP portfolio company) for $7.5 billion.
Miller says he’s not surprised to hear the 2018 M&A exit numbers are trending ahead of last year.
With the market seeing a number of unicorn companies going IPO in the past year-plus, Miller says tech M&A tends to cycle concurrently and positively with the public offerings.
“A strong IPO market provides a catalyst for M&A,” he says. “We’re seeing that now.”
This goes back to early 2017, when IVP-backed AppDynamics was on the cusp of an IPO and Cisco instead purchased the application-performance-management provider for $3.7 billion.
Similarly, job-review site Glassdoor was rumored to be headed for an IPO, but in May it agreed to be bought for $1.2 billion by Japanese HR giant Recruit Holdings.
Another large acquisition that is pending involves the Indian online retailer Flipkart Online Services, which Walmart has agreed to purchase for about $16 billion.
Not all exits are in the billion-dollar range, of course. IVP portfolio company Cyence was acquired by Guidewire Software last year for about $275 million, and Shazam sold to Apple for $400 million.
But Miller adds that several buyers are in the market. And they are not just corporate acquirers but PE firms, such as Providence Equity Partners and Vista Equity Partners, that are scooping up tech companies.
SoftBank‘s Vision Fund is also providing liquidity for many tech companies and their investors, Miller notes.
“It’s a good time for exits, and right after some modest years, we need it,” Miller says.
The following stats are based on preliminary data from Thomson Reuters.
Through June 20, disclosed pricing of completed acquisitions is 3.8 percent ahead of last year’s pace, while the overall number of M&A deals is down.
A total of 127 VC-backed companies have been acquired year-to-date, with 23 disclosing transaction prices for a combined deal value of $13.9 billion.
That compares with 165 venture-backed companies selling in the year-earlier period, including 40 with disclosed details, for a combined transaction total of $13.3 billion.
The largest completed deal so far this year is Celgene‘s $7 billion acquisition of Impact Biomedicines, a San Diego developer of a treatment for a type of blood cancer called myelofibrosis.
The cash acquisition, which is laden with incentives, is the largest for a venture-backed company since Stemcentrx was bought for $10 billion in early 2016.
But that deal will be surpassed in size once Microsoft wraps up its purchase of GitHub for $7.5 billion.
And when that deal is added, 2018 will certainly surpass the full-year 2017 M&A total, when 329 companies were acquired, including 71 with financial details, for a combined total of $22.1 billion.
To download an Excel file with this year’s top M&A, click here: Deep Dive.Top M&A Deals
Through the first five months of 2018, 24 venture-backed companies went public on U.S. exchanges, which is eight more than the 16 that debuted in the year-earlier period.
But the value of the year-to-date IPO proceeds has dropped 24 percent to about $4 billion from $5.3 billion.
The largest VC-backed company to go public in 2018 Dropbox’s March raise of $870 million in proceeds. Prior to its public debut, the San Francisco online file storage company had raised more than $580 million in venture funding from Sequoia Capital, Greylock Partners, Accel Partners, Benchmark and others.
Because of confidential filings, it’s tough to say when the second half of 2018 will see IPO activity. But a number of unicorn companies — such as Airbnb, Pinterest and Uber, to name a few — are rumored to be looking at debuts later in 2018 or more likely in 2019.
To download an Excel file of the aftermarket value of VC-backed IPOs for the past 12 months, click here: IPO aftermarket, as of May 31, 2018
U.S.-based VC fundraising through nearly the first half of 2018 is virtually on the same pace as last year.
Through June 20, U.S. firms have raised more than $18.4 billion for 172 funds, compared with 171 funds raising a little more than $19 billion a year earlier.
Year-to-date, three firms have raised billion-dollar funds, including Norwest Venture Partners raising $1.5 billion, General Catalyst closing on $1.375 billion and Battery Ventures raising $1.25 billion.
In 2017, the largest VC fund raised was the $3.35 billion fund by New Enterprise Associates.
However, the 2018 total will certainly spike once Sequoia Capital wraps up its fundraising efforts.
Sequoia is raising several venture and growth funds in the U.S., China and India, including a global growth fund rumored to be targeting $8 billion.
The firm is also targeting U.S.-focused venture and growth funds, according to regulatory filings.
To download an Excel file with this year’s top fundraisers, click here: Deep Dive.Top US Funds