Good morning from Tel Aviv! I’m here for the Jeffries Tech Trek conference where I just spoke Bill Ackman speak, catching up with all my investor friends and meeting amazing Israeli founders.
The classic saying goes: “Why do people rob banks? Because that’s where the money is.” In venture capital, the equivalent is: “Why do we invest? Because our business is exits.” Venture funds only return capital when portfolio companies achieve liquidity through either an initial public offering (IPO) or a strategic acquisition. The real measure of success is not simply writing checks but identifying the industries and business models most likely to generate billion-dollar exits.
A review of the past decade demonstrates a clear reality: not every industry has the same probability of reaching billion-dollar valuations. Certain categories consistently produce outcomes above $1B, while others rarely cross that threshold. For investors seeking strong internal rates of return (IRRs), the data shows that capital should be concentrated where exits are proven to occur.
Exits by the Numbers
Examining U.S. and Israeli venture-backed companies from 2015–2024 (excluding SPACs, biotech, and cleantech) highlights several consistent metrics:
Average time to exit:~12 years from founding
Average capital raised:~$490M (median ~$230M) prior to exit
Average multiple on invested capital:~24:1 (each $1 raised generated ~$24 in exit value)
Implication for funds:To achieve 20–30% IRRs, VCs require outliers producing 10x, 20x, or even 50x returns — which are concentrated in specific sectors.
Exits Year by Year
2018:A strong year with Spotify and Dropbox going public. Major acquisitions included Microsoft’s $7.5B purchase of GitHub and Walmart’s $16B acquisition of Flipkart.
2019:Characterized as the “unicorn IPO year.” Uber ($82B IPO), Lyft ($24B IPO), Zoom, Slack, and Pinterest all went public.
2020:Despite the pandemic, tech IPOs surged. Airbnb ($47B), DoorDash ($39B), and Snowflake ($33B) led the class. Salesforce’s $27.7B acquisition of Slack capped the year.
2021:The most active year in recent memory, with 69 exits over $1B. Coinbase listed at $86B, Rivian IPO’d at $66B, UiPath debuted at $35B, and Mailchimp sold for $12B.
2022:Exit activity collapsed. Only six exits above $1B occurred, including Adobe’s $20B agreement to acquire Figma and Mobileye’s $17B IPO.
2023:Slight recovery, highlighted by Instacart’s ~$10B IPO, Klaviyo’s ~$9B IPO, and Qualtrics’ $12.5B acquisition.
2024:Signs of renewed momentum. Wiz agreed to a $32B acquisition by Google, Melio sold for $2.5B, and IPOs began to reopen cautiously.
The cycle illustrates how dependent exits are on macro conditions. Public markets and strategic buyers determine liquidity windows, but the industries that dominate exits remain consistent.
Exits by IndustryEnterprise SaaS & Cloud (≈16% of $1B exits)
Enterprise SaaS has generated the largest share of billion-dollar outcomes. These companies attract acquirers and IPO investors because of recurring revenue, scalability, and high margins.
Examples:Snowflake ($33B IPO), Zoom ($16B IPO), Datadog, MongoDB, Coupa, Okta, MuleSoft, Slack.
Observation:Enterprise-oriented startups accounted for ~71% of billion-dollar exits over the past decade.Financial services is a massive market, and fintech startups have disrupted payments, trading, and lending.
Examples:Coinbase ($86B direct listing), Robinhood ($32B IPO), Affirm ($12B IPO), Credit Karma ($7B acquisition), Melio ($2.5B acquisition in Israel).
Observation:Fintech exits are capital-efficient, with average multiples approaching 60x on invested capital.Cybersecurity & Infrastructure (≈8%)
This sector has been particularly strong in Israel, where security innovation has attracted both IPO markets and acquirers.
Examples:Zscaler and Cloudflare IPOs, Duo Security’s $2.35B sale to Cisco, Wiz’s pending $32B acquisition by Google.
Observation:Israel produced over 20 cybersecurity exits above $1B in the last decade, reinforcing its global leadership.Marketplaces & Consumer Platforms (≈11%)
Consumer marketplaces produced some of the most recognized brands, though in smaller numbers.
Examples:Uber ($82B IPO), Airbnb ($47B IPO), DoorDash ($39B IPO), Instacart ($10B IPO), Chewy ($3B acquisition before IPO).
Observation:Consumer exits account for only ~20% of deals, but when they succeed, they often create the largest single valuations.Direct-to-Consumer (≈5%)
Few DTC brands reach $1B, but exceptions prove the rule.
Examples:Dollar Shave Club ($1B acquisition), Beats ($3B acquisition), Warby Parker (public offering).
Observation:Success in this category depends on brand strength and strategic acquirers rather than consistent scalability.Health Tech / MedTech (≈10%)
Digital health and medical devices — distinct from biotech — have generated several high-value exits.
Examples:Livongo ($18.5B merger with Teladoc), One Medical ($3.9B sale to Amazon), Mazor Robotics ($1.6B acquisition).
Observation:Health tech exits often show high value-to-invested ratios (17:1+) despite longer regulatory timelines.The rise of artificial intelligence and data platforms has fueled multi-billion valuations.
Examples:Palantir (direct listing ~$20B), UiPath ($35B IPO), Databricks (private at $38B, IPO expected).
Observation:These companies benefit from massive enterprise adoption and global demand for automation.Marketing Tech & Ad Tech (≈7%)
Advertising and marketing technology produced several major exits.
Examples:AppLovin ($28B IPO), Trade Desk, DoubleVerify, Taboola/Outbrain.
Observation:Although less frequent, adtech IPOs have achieved multi-billion valuations and strong returns.Transportation, Automotive & Robotics (≈8%)
Automotive technology and robotics accounted for some of the largest individual exits.
Examples:Rivian ($66B IPO), Mobileye ($15B Intel acquisition and later IPO), Aurora, robotics-driven startups.
Observation:While capital-intensive, these exits can be very large in scale.Gaming & Entertainment (≈3%)
Though smaller in number, gaming exits generated significant outcomes.
Examples:Roblox ($30B IPO), Unity ($13B IPO), Epic Games (still private at $30B+).
Observation:Entertainment platforms demonstrate high consumer demand and global reach.Social Media & Communities (≈3%)
Social platforms are rare but outsized when successful.
Examples:Snap ($24B IPO), Discord (large valuation, not yet exited).
Observation:Few new entrants have broken through, but when they do, valuations can be immense.Other Verticals (≈7%)
Education, logistics, and niche verticals round out the balance.
Examples:Coursera (~$4B IPO), Flexport, various specialized hardware exits.
Observation:Collectively, these sectors contribute meaningful exits but not in high frequency.The Playbook Going Forward
The evidence is consistent across years and sectors:
Enterprise SaaS, Fintech, Cybersecurity, and Vertical AIrepeatedly generate billion-dollar outcomes.
Consumer platformsare more volatile — a few unicorns create massive returns, but the overall count is low.
Health techoffers strong multiples but requires longer development cycles.
Other categories like Data & AI, Ad Tech, Transportation, and Gamingaccount for the remainder, with individual blockbusters but less predictability.
For these reasons, the most compelling opportunities today lie inAI-native SaaS, vertical AI, and infrastructure technologies. These domains are scaling rapidly, attracting strategic buyers, and already producing exits valued in the billions.
Venture capital ultimately thrives on exits, not simply investments. By concentrating capital in the industries with consistent exit histories, funds maximize their ability to generate the extraordinary outcomes that drive overall performance.
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