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Exit Value: Consumer or Enterprise?

In a new report Sapphire Ventures analysed the US exit market from 1995 to 2019 and the result are particularly interesting for investors like Graffiti, that is focused on consumer investments.

2019 has been a great year for consumer exit value, buoyed by Uber and Lyft’s IPOs (their recent declines in stock price notwithstanding). The first three quarters of 2019 alone surpassed every year since 1995 for consumer exit value – and we’re not done yet. If the consumer exit pace continues at this scale, we will be on track for the most value created at exit in 25 years.

since 1995, the number of enterprise exits has consistently outpaced consumer exits (blue line versus green line above), but 2019 is the closest to seeing those lines converge in over two decades (223 enterprise vs 208 consumer exits in the first three quarters of 2019). Notably, in five of the past nine years, the value generated by consumer exits has exceeded enterprise exits.

Interesting take away from Sapphire analysis:

  • Venture-backed enterprise tech companies have generated $884B in value since 1995; $349B from M&A and $535B from IPOs.

  • Venture-backed consumer tech companies have generated $773B in value since 1995; $153B from M&A and $620B from IPOs.

  • In total, there were 5,600+ venture-backed exits in enterprise tech and 3,300+ exits in consumer tech.

  • The top five enterprise companies with the largest exits account for $79B in value creation, or 9% of the $884B generated in the enterprise category since 1995.

  • The top five consumer companies with largest exits account for $276B in value creation, or 36% of the $773B generated in the consumer category since 1995.

What does this mean for a Venture Investor?

  • Consumer exits have surpassed enterprise over the past 15 years.

  • Consumer exits value is highly concentrated in the top deals.

  • There are more billion-dollar enterprise IPOs than billion-dollar consumer exits, so you may have more opportunities for a unicorn enterprise outcome than you do a consumer.

  • However, if you happen to invest in one of the outlier consumer exits, you could experience significant returns.

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