Tomas Tunguz of Redpoint Ventures put to paper an analysis of Series B financings, further supporting my conclusion back in October 2013 that the true winnowing of startup investment was not actually Series A after all.
The Series B is, in my opinion, the investment round which sends the strongest signal to the market that the company and its investors are aligned on swinging for the fences. Sometimes, even after a substantial Series A, there is still not true product/market fit and/or a large enough market, and this is often where M&A rather than additional funding becomes attractive. However, if a startup is viable for Series B it is likely that its initial investors will lead, or at least partake, in this financing.
Knowing this, I’ve been curious to dig into understanding two aspects attached to Series B financings:
- For LPs — which venture capital firms currently have the most Series B stage companies, or bullets, that could potentially yield “unicorns”?
- For Founders — which venture capital firms see the highest Series B follow-on rates for their portfolio companies?
In this analysis, I examined firms whose portfolio companies have raised new Series B funding in the past 2 years. I also looked at the full range of Series B candidates within the portfolio (companies who have raised a Series A within the past 2 years), to understand what percentage of Series A bets have progressed to the next round.
Due to the nature of venture capital investing, it is not always possible to know who lead a financing. Instead I’ve included all investors: incubators, seed stage investors, investors who did not actually lead the Series A round, and those who did — to see whose participation is connected to the production of unicorns and follow-on investments.
I have excluded startups who have raised their Series A in the past year from the denominator, because startups generally raise new venture capital rounds every 18 months. These companies are not quite ready to graduate.
For the LPs: Stables of Unicorns
To get started, let’s take a look at a ranking of venture capital firms by the number of portfolio companies currently at Series B, who have raised in the past 2 years. Unsurprisingly, some of the largest and most active firms are in the Top 10 (and this is only based on their publicly known Series B co’s).
- Sequoia Capital (45)
- Intel Capital (42)
- SV Angel (39)
- Khosla Ventures (33)
- Accel Partners & Kleiner Perkins (31)
- New Enterprise Associates (30)
- Andreessen Horowitz (29)
- Bessemer Venture Partners (25)
- Google Ventures & Founder Collective (23)
- Greylock Partners & Greycroft Partners (22)
For the Founders: Conversion to Series Bs
From the perspective of a founder, who is all-in on a single company and doesn’t have a portfolio approach, it’s not about shots on goal. Let’s re-rank the list we just looked at, this time based on the % of portfolio companies who have gone from Series A to Series B in the past 2 years. For this ranking, I excluded portfolio companies who have raised their Series A in the past 12 months, as they’re probably not quite ready to raise yet.
- Greylock Partners & Intel Capital (88%)
- Kleiner Perkins (86%)
- Bessemer Venture Partners & Khosla Ventures (83%)
- Sequoia Capital (79%)
- Andreessen Horowitz (76%)
- Greycroft Partners (68%)
- Founder Collective (66%)
- SV Angel (65%)
- Google Ventures (64%)
- Accel Partners (56%)
Now, I’m sure there is some missing data here. We all know not every venture investment is publicly filed… there are plenty of reasons to submarine Form D filings, least of which is avoiding the attention of competitors, patent trolls, etc. Additionally, there are some Series B candidates we excluded, so if anything these percentage are higher than they should be. If we look outside this initial list of most active investors, we have another interesting list — by conversion rate* rather than portfolio size:
*I have excluded funds with less than 10 Series B candidates.
- Mohr Davidow Ventures & MPM Capital (100%)
- Union Square Ventures (93%)
- Silicon Valley Bank & Insight Venture Partners (90%)
- Felicis Ventures & Qualcomm Ventures (89%)
- Canaan Partners, Greylock Partners, Intel Capital, Tribeca Venture Partners, Atomico, Sigma Partners (88%)
- Shasta Ventures (87%)
- Kleiner Perkins (86%)
- Spark Capital, e.Ventures & Benchmark (85%)
- Norwest Venture Partners (84%)
- Bessemer Venture Partners, Ignition Partners, DCM, and Khosla Ventures (83%)
About the data: It comes from Mattermark, which leverages Crunchbase data, the AngelList API, regulatory filings, news and more to get a complete picture of the startup funding universe. Try it at www.mattermark.com