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Yearly Archives

2017

Jun 01
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Internet Trends Report 2017

By Alternative Investments, Venture Capital

Here’s a first look at the most highly anticipated slide deck in Silicon Valley. This year’s report includes 355 slides and tons of information, including a new section on healthcare that Meeker didn’t present live.

Here are some takeaways:

  • Global smartphone growth is slowing: Smartphone shipments grew 3 percent year over year last year, versus 10 percent the year before. This is in addition to continued slowing internet growth, which Meeker discussed last year.
  • Voice is beginning to replace typing in online queries. Twenty percent of mobile queries were made via voice in 2016, while accuracy is now about 95 percent.
  • In 10 years, Netflix went from 0 to more than 30 percent of home entertainment revenue in the U.S. This is happening while TV viewership continues to decline.
  • Entrepreneurs are often fans of gaming, Meeker said, quoting Elon Musk, Reid Hoffman and Mark Zuckerberg. Global interactive gaming is becoming mainstream, with 2.6 billion gamers in 2017 versus 100 million in 1995. Global gaming revenue is estimated to be around $100 billion in 2016, and China is now the top market for interactive gaming.
  • China remains a fascinating market, with huge growth in mobile services and payments and services like on-demand bike sharing.
  • While internet growth is slowing globally, that’s not the case in India, the fastest growing large economy. The number of internet users in India grew more than 28 percent in 2016. That’s only 27 percent online penetration, which means there’s lots of room for internet usership to grow. Mobile internet usage is growing as the cost of bandwidth declines.
  • In the U.S. in 2016, 60 percent of the most highly valued tech companies were founded by first- or second-generation Americans and are responsible for 1.5 million employees. Those companies include tech titans Apple, Alphabet, Amazon and Facebook.
  • Healthcare: Wearables are gaining adoption with about 25 percent of Americans owning one, up 12 percent from 2016. Leading tech brands are well-positioned in the digital health market, with 60 percent of consumers willing to share their health data with the likes of Google in 2016.

Download the Internet Trends Report here: Internet+Trends+2017+Report

Source: KPCB, Recode

May 16
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The 9 most active investors in Bay Area startups

By Venture Capital

It’s true that more and more startups based outside the Bay Area are receiving significant VC funding—last year was the first time in a decade Silicon Valley investors made more non-local than local deals. But the San Francisco region still receives far more capital than any other area.

Since the beginning of last year, 1,697 investors have participated in at least one round involving a Bay Area-based company, per PitchBook data, putting $38.3 billion in capital to work across 1,813 completed deals. The majority (54.6%) of those transactions have been in the software sector, followed in frequency by commercial services (6.5%) and healthcare devices & supplies (5.2%). In terms of round size, a plurality of investments (31.7%) have ranged between $1 million and $5 million, with the $10 million to $25 million bucket ranking second (24.8%).

Here are the top 9 investors in Bay Area-based companies since the beginning of 2016, along with their investment counts (excluding accelerator rounds):

1. NEA (66)
2. Khosla Ventures (55)
3. GV (49)
4. Andreessen Horowitz (47)
5. Y Combinator (43)
6. Kleiner Perkins Caufield & Byers (40)
7. Sequoia (40)
8. SV Angel (37)
9. First Round Capital (37)

Source: Pitchbook

Jan 19
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2016 Private Equity By The Numbers

By Alternative Investments

 

This morning PitchBook released its report on 2016 private equity activity. It’s not great. Deal volume is down. Deal multiples are up. Equity contributions are up. Exit values are down. Fundraising is down. PitchBook calls this a “return to normalcy” from the record-breaking highs of 2014 and the “turning point” of 2015. The breakdown:
• Deals: Private equity firms invested $649 billion into 3,538 deals last year. That’s down 12% by value and 14% by volume from the year prior.
• Multiples: Median enterprise value hit 10.9x EBITDA for M&A transactions last year, up from 10x in 2015 and 8x in 2010. Why? Too few feasible investment opportunities, PitchBook posits.
• Debt-to-equity: The median debt percentage for private equity and M&A deals fell to 50.5% of the enterprise value, compared to 56.8% in 2015. Buyout shops are having to contribute more equity to deals.
• Exits: Buyout firms pulled $316 billion on 1,097 exits in 2016. That’s down 22% by value and 18% by volume from 2015.
• Fundraising: 11% fewer private equity funds raised money last year than the year prior, and commitments were down 12%.

Source: Pitchbook

Jan 13
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Fixed Income: How should you invest during rising interest rates?

By Market Outlook

Robert L. Riedl, CPA, CFP®, AWMA®
Director of Wealth Management

For the past 30 years, the extended period of falling interest rates made long-term US Treasury bonds a great place to be.  However, late last year, indications surfaced that the long-term decline in interest rates may be reversing.  Yields on 10-year US Treasury bonds hit a low of 1.32% on July 6, 2016 and are now at 2.38% (which is still below the historic average rate of over 4%).

For savers that have been earning about 0.2% interest on cash for the last few years, the prospect of rising interest rates is a welcome relief.   However, for investors in bonds, including traditional US Treasury bonds (which have historically been considered conservative investments), rising interest rates should be an alarming situation.

Long Term Interest Rates FRED

 

 

 

Fact:  For every one percentage increase in interest rates, 10-year US Treasury bonds will fall approximately 8.8% and 20-year US Treasury bonds will fall 17.5%!  In comparison, the Barclay Aggregate Bond fund will only fall 5.8% because of its broader diversification and lower duration. Thus, understand the duration or maturity of your bond holdings to properly assess the interest rate risk of your portfolio.

It is possible to mitigate interest rate risk.  For example, substitute your long-term bonds for a stable value fund.  There are fixed income alternatives (which we call satellite investments), to consider that may diversify your fixed income portfolio, such as floating rate debt, high yield bonds, emerging market bonds, inflation-linked bonds, or possibly private credit strategies such as mezzanine debt, middle market debt, venture debt, peer to peer debt, structured credit, or others.

Interest rate risk is not the only risk affecting bonds.  Numerous other factors influence your fixed income allocation, such as credit risk, your personal risk tolerance, and others.   Let us help you understand your fixed income portfolio.  To arrange for your complimentary, no-obligation consultation to review your fixed income portfolio with a fee-based fiduciary adviser at Endowment Wealth Management, contact us today.

Disclaimer: Not intended as individualized investment advice.  All investments involve risk.  Investments not insured, not bank guaranteed and may fluctuate in value.  Diversification does not protect against loss in a declining market.  You should consider your goals, risk tolerance, and the risks and costs of investing before making any investment decision.

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Jan 12
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2016 Year End High Yield Default Rates

By Uncategorized

Moody’s reported that its global speculative-grade default rate stood at 4.4% at the end of Q4’16, according to its own release. It sees the rate falling to 3.0% by December 2017. Moody’s puts the historical average default rate at 4.2% since 1983. In 2016, the number of defaults totaled 142, the highest amount since 2009. The U.S. speculative-grade default rate stood at 5.6% at the end of Q4’16. It sees the U.S. rate falling to 3.8% by December 2017. The default rate on senior loans stood at 2.06% in December, according to S&P Global Market Intelligence.