The May 18, 2012, offering was the largest IPO ever for an Internet company, briefly valuing the company at $104 billion. Despite its disappointing post-IPO performance, Facebook still drove many of the top names on the Midas list, including five of the top ten and 6 of the top 11.
Those top investors were Jim Breyer of Accel Partners in the top slot, Marc Andreessen of Andreessen Horowitz at number 2, Peter Thiel of Founders Fund at 3, Reid Hoffman of Greylock Partners at 5 and David Sze of Greylock at 10. That’s because Facebook’s value is so large–an order of magnitude larger than most other exits last year. (For more on the Midas List methodology, read this post.)
These venture investors provided fantastic returns to their limited partners. Venture capital is a hits business where one outsized outcome (think Google) can change the fortunes of a firm and make irrelevant many other losses.
There were also some other large consumer tech exits last year, such as the mergers or acquisitions of Instagram (acquired by Facebook), OMGPOP (acquired by Zynga) and Tudou in China and as well as the IPOs of Kayak, Yelp, Trulia and China’s VIP Shop. And there were exits from enterprise-focused social media companies, such as Yammer and Buddy Media. Jeremy Levine of Bessemer Venture Partners, at number 9, invested in Yelp and LinkedIn, as well as one of the hottest new social media companies, Pinterest.
However, despite Facebook’s massive exit, many of the largest exits in 2012 were in enterprise technology. The focus on Facebook may have drawn attention away from some enterprise companies with IPOs, such as Workday, ServiceNow, Palo Alto Networks, Ruckus Wireless and Splunk. Meraki and Nicira each were acquired for more than $1 billion, showing the strong appetite of large corporations to acquire disruptive technology. These companies spanned areas that could have lasting impact on business, such as security, big data, virtualization, wireless, IT management and cloud computing. They also boosted rankings for investors such as Scott Sandell at number 8 (who also has Tableau Software, which just filed for an IPO), Sequoia Capital’s Douglas Leone and Jim Goetz at numbers 4 and 7 respectively, and Greylock Partners’ Aneel Bhusri and Asheem Chandna at 14 and 20 respectively.
The disappointing results of Facebook’s offering cooled the IPO market for some time. But the June 29 offering of ServiceNow, the first significant IPO since Facebook, brought some confidence back to the market. Then in October came Workday’s IPO, in what became the second-largest in 2012 after Facebook.
Some longstanding trends in the venture industry have continued–the strength of a handful of large brand name firms, alongside the growth of smaller niche firms or seed investing firms. The venture industry overall seems to have stabilized from a larger trend of shrinking. But a leaner venture industry is something that many have argued is a good thing in the long term. ”I think we’re at the bottom in terms of contraction for fundraising,” says Paul Kedrosky, senior fellow at the Kauffman Foundation. “There’s really innovative small funds trying to experiment and try new things. And well branded incumbents can raise money pretty much no mater what they do. But they’re the only ones having any luck raising money.”
In terms of firms, the most sought-after early stage firms on Sand Hill Road in recent years have been Accel, Benchmark, Greylock, Sequoia, Kleiner Perkins, and in recent years Andreessen Horowitz. (For more on Kleiner’s status today, see our feature here.)
In 2012 Greylock and Sequoia each had particularly strong years, continuing a recent streak, and the list reflects that. Sequoia has been one of the constants on the list over the years and this year Douglas Leone had the highest ranking in the firm. It doesn’t appear to have skipped a beat despite management changes, posting two partners in the top ten, four in the top 15 and five in the top 20.
Greylock, similarly had two partners in the top ten and four in the top 20. Sequoia, while not investing in Facebook, had Palo Alto Networks, Meraki, ServiceNow, Kayak and Ruckus Wireless. Greylock, meanwhile, had investments in Facebook, LinkedIn and Workday, three of the largest in recent years–at least by market cap of their IPOs. The two firms also shared a number of deals together, including Palo Alto Networks and ServiceNow. Other large firms continued to place multiple partners on the list besides Accel and Benchmark, including Bessemer and New Enterprise Associates.
Meanwhile, seed investors have jumped on the scene, driven by the decreasing cost of starting a company. That trend continued this year, with investors such as Josh Kopelman, Chris Sacca, Steve Anderson, Ron Conway and Mike Maples continuing to appear on the list (Rob Hayes also made the list this year). Seed investors have generally climbed the Midas rankings over the past few years, showing their increasing importance in the startup world.
These seed investors tend to invest earlier than their larger VC counterparts, and get heavily involved at the earliest stages of company development. Steve Anderson, for example, used this model with Instagram, getting heavily involved during the first year or so of the company’s development. That paid off when Facebook bought the company last year for $715 million.
“Within this top tier world, the market is pretty efficient. Larger firms deploy more capital at a later stage, smaller firms deploy less and earlier stage. There is a healthy ecosystem where the smaller firms are handing off their best companies to the larger firms,” says Michael Kim, of Cendana Capital, which invests in seed stage firms.
Still, venture capital is a long game. For every rocket ship like Instagram or Nicira, there are many companies that take seven years or more to reach massive outcomes. That gives hope to many venture investors who are waiting for that mythical next big thing.
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