Preqin and Nevca Update: New England Venture Capital in 2017

PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017

In association with PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 FOREWORD

ith this report, the New England Venture Capital Association (NEVCA) is thrilled to welcome Preqin as our 2018 Data Partner. While WNEVCA quarterly reports have traditionally examined general regional activity with an eye toward portfolio-related data, Preqin’s depth of information and expertise in both the fund performance and LP space enables a new approach. This report, and subsequent 2018 quarterly publications, will feature a tighter focus on fund performance, investor activity and fundraising, with sector-specific breakouts and highlights.

The return of NEVCA quarterly reports is a component of a larger organizational initiative to bring awareness to the scale and success of the regional venture capital industry, while also providing meaningful insight for those within the ecosystem.

Some initial takeaways from the data: ■■ New England skews Seed, with 31% of funds closed in the past decade raising under $100mn. ■■ New England fundraises above weight class, accounting for nearly a quarter of national venture capital commitments since 2007. ■■ And appetite is growing, with a record 70 firms currently fundraising (in stark contrast to the 10-year average of 40). ■■ Continuing trend: cash invested on the rise as deal counts fall.

While each of the above bullets is expounded upon in the following report, there is a wealth of data yet to be leveraged. As you read further, consider areas to expand: What additional data would be useful? Is anything extraneous? What components should be further developed?

Your feedback is welcome!

Sincerely,

Jody Rose President, New England Venture Capital Association

PREQIN’S VENTURE CAPITAL DATA AND INTELLIGENCE

Preqin tracks all aspects of the venture capital industry, with comprehensive data on institutional investors, fundraising, fund managers, fund terms and conditions, fund performance, deals and exits, service providers and more.

Our dedicated teams of analysts are strategically placed in key industry centres across the globe, ensuring our venture capital data is up to date and of the highest quality.

Preqin’s platform can be used to: ■■ Identify potential LPs for funds and as a powerful investor relations and fund marketing tool. ■■ Conduct market analysis and track industry trends. ■■ Carry out competitor analysis. ■■ Conduct due diligence, with net-to-LP returns showing how well individual fund managers have performed over time.

Get in touch today to find out how Preqin’s venture capital data can help you:

www.preqin.com/venturecapital

All rights reserved. The entire contents of Preqin and NEVCA Update: New England Venture Capital in 2017 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin and NEVCA Update: New England Venture Capital in 2017 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent financial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or Debt for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin and NEVCA Update: New England Venture Capital in 2017. While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confirm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin and NEVCA Update: New England Venture Capital in 2017 are accurate, reliable, up-to-date or complete. Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin and NEVCA Update: New England Venture Capital in 2017 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.

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p4 Fundraising

p6 Funds in Market

p8 Fund Managers

p10 Deals

p12 In Focus: Healthcare

p14 Exits

p15 Performance

p16 Investors

DEFINITIONS

EARLY STAGE: SEED Allows a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing.

EARLY STAGE Start-up - Supports a non-commercial company’s product development and marketing.

EXPANSION/LATE STAGE Invests in companies towards the end of the venture stage cycle. Provides capital injections for expansion into a position of stable profit streams.

GENERALIST Provides capital to new or growing businesses with perceived, long-term growth potential.

KEY FACTS

$7.1bn 70 $73bn was invested in New England-based New England-based venture capital has been raised by New England- portfolio companies in 2017. funds are currently in market based venture capital managers (As at April 2018). in the past 10 years.

3 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 FUNDRAISING

2017 was a successful year for New Fig. 1: Annual Venture Capital Fundraising: All US- vs. New England-Based Firms, England-based venture capital fundraising: 2008 - 2017

42 funds reached a final close, raising 350 50 Aggregate Capital Raised ($bn) a record $12.9bn in capital (Fig. 1). New 300 England-based managers accounted for 40 more than a third (38%) of aggregate 250 capital raised by US venture capital firms 200 30 that closed a fund in 2017 – the largest 150 proportion since 2009 (48%). 20 100 Massachusetts-based Clarus Ventures No. of Funds Closed 10 50 raised one of the largest venture capital funds closed in 2017: Clarus Ventures IV 0 0 secured $910mn at its final close in July 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2017 from a mix of new and returning Year of Final Close investors, including a $7.5mn commitment All US: No. of Funds Closed New England: No. of Funds Closed from Alpha Associates, achieving over All US: Aggregate Capital Raised ($bn) New England: Aggregate Capital Raised ($bn) 120% of its initial target (Fig. 5). The fund Source: Preqin will target North America-based early- and late-stage investments in the healthcare Fig. 2: New England-Based Venture Capital Fundraising by Fund Size, 2008 - 2017 and life sciences sectors. 100% 7% 5% 7% 4% 3% 6% 3% 3% 17% 3% 15% 10% 90% 10% 7% 11% 9% 15% 18% The largest proportion of funds closed 17% 5% $1bn or More 80% 17% by New England-based managers have 19% 23% 15% 25% 15% typically fallen into the sub-$100mn range, 70% 25% 23% $500-999mn accounting for 31% of vehicles closed on 60% 24% 20% 11% 15% 16% 24% $250-499mn average over the past 10 years, and 41% 10% 50% 50% 7% 15% 18% in 2017 (Fig. 2). At the other end of the 29% 10% $100-249mn 40% 16% 6% spectrum, 21% of New England-based 25% 26% 13% funds reached a final close on $500mn or 30% $50-99mn 13% 10% more in 2017 – the largest proportion of 20% 43% 41% Proportion of Funds Closed 38% 39% 32% Less than $50mn the past decade; this growth was driven by 25% 26% 28% 10% 17% 20% vehicles within the $500-999mn bracket. 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Aside from post-GFC dips (2009-2010), New Year of Final Close England-based funds have, on average, Source: Preqin achieved or exceeded their targets in nearly every year of the past decade, and Generalist venture vehicles dominate the Few New England-based funds target spent an average of 19 months on the New England-based fundraising market: regions outside North America, accounting road – one month less when compared to 25 funds secured $10.1bn in 2017, 4x for just 17% of funds closed in 2017, of all US-based venture capital funds closed more capital than early stage (Fig. 4). The which 10% are focused on opportunities over the same period. Improving on the majority ($2.0bn) of early-stage capital in Asia. 10-year moving average in 2017, New was accounted for by broader early-stage England-based venture capital funds took strategies, compared with early stage: an average of just 16 months to reach seed ($406mn) and early stage: start- 100% of their target size (Fig. 3). up ($405mn), while one late-stage fund secured $3.1mn.

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Fig. 3: New England-Based Venture Capital Fundraising Success, Fig. 4: New England-Based Venture Capital Fundraising in 2017 2008 - 2017 by Strategy

35 140% Proportion of Target Size Achieved 45 1 118% 40 30 109% 120% 106% 103% 106% 98% 100% 100% 25 100% 35 Expansion/ 16 80% Late Stage 20 75% 80% 30 33 25 15 60% All Early 23 20 Stage 10 21 20 22 40% 16 14 14 14 15 5 20% 9 25 Venture Capital Time Spent in Market (Months) 2.8 10 (General) 0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5 10.1

Year of Final Close 0 Average Time Spent in Market (Months) No. of Funds Closed Aggregate Capital Raised Average Proportion of Target Size Achieved ($bn)

Source: Preqin Source: Preqin

NO. OF NEW ENGLAND-BASED VENTURE CAPITAL FUNDS CLOSED IN 2017 BY PRIMARY GEOGRAPHIC FOCUS

North America Europe 35 2 Asia 4

Rest of World 1

Source: Preqin

Fig. 5: Largest New England-Based Venture Capital Funds Closed in 2017 Fund Firm Fund Type Geographic Focus Core Industry Fund Size (mn) New Enterprise New Enterprise Venture (General) North America Healthcare 3,300 USD Associates 16 Associates* Clarus Ventures IV Clarus Ventures Venture (General) North America Healthcare 910 USD Canaan Equity XI Canaan Partners* Early Stage North America Healthcare 800 USD Summit Partners Summit Partners Early Stage North America Diversified 730 USD Venture Capital Fund IV Bain Capital Life Bain Capital Venture (General) North America Healthcare 720 USD Sciences Fund Flagship Ventures Fund Flagship Pioneering Venture (General) North America Healthcare 618 USD VI Oak HC/FT Partners Information Oak HC/FT Partners Venture (General) North America 600 USD Fund II Technology 6 Dimensions Capital 6 Dimensions Capital* Venture (General) North America Healthcare 533 USD Information Venrock VIII Venrock* Venture (General) North America 414 USD Technology SV Life Sciences Fund VI SV Health Investors Venture (General) North America Healthcare 400 USD

* Indicates a New England-Based satellite office, not headquarters. Source: Preqin

5 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 FUNDS IN MARKET

s previously mentioned, New Fig. 6: New England-Based Venture Capital Funds in Market, 2008 - 2018 YTD AEngland-based fundraising has grown (As at February 2018) substantially over the past decade; a 80 12

11.0 Aggregate Capital Targeted ($bn) record number (70) of venture capital 70 funds are currently in market as at 9.0 10 8.9 8.9 8.6 February 2018, seeking an aggregate 60 8 $8.6bn in capital (Fig. 6). Fundraising in 50 6.7 6.7 6.4 2018 is therefore likely to be significantly 5.5 40 5.1 6 more competitive than previous years, 70 30 given that an average of 40 funds were in 57 4 49 53 market at the start of each year from 2008 2.8 44

No. of Funds Raising 20 35 34 34 36 35 to 2017. 2 10 21

Managers in New England continue to 0 0 favour strategies offering wider investment Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 mandates. While generalist venture Feb-18 capital and all early-stage vehicles account No. of Funds Raising Aggregate Capital Targeted ($bn) for about the same number of funds in Source: Preqin market, general venture capital funds are targeting more than 2x more capital than early-stage funds combined (Fig. 7).

Fig. 7: New England-Based Venture Capital Funds in Market by Fig. 8: New England-Based Venture Capital Funds in Market by Fund Type (As at February 2018) Primary Geographic Focus (As at February 2018)

35 6 70 9

32 Aggregate Capital Targeted ($bn) 63 5.0 8 Aggregate Capital Targeted ($bn) 30 5 60 25 7.7 7 4 50 20 6 20 3 40 5 15 2 30 4 10 1.2 9 1.4

No. of Funds Raising 0.9 3 4 5 1 20 5 No. of Funds Raising 0.2 2 0 0 10 0.8 1 Early Stage Early Stage: Early Stage: Expansion/ Venture 1 1 Seed Start-up Late Stage Capital 0 5 0.1 0.0 0 (General) North America Europe Asia Rest of World

No. of Funds Raising Aggregate Capital Targeted ($bn) No. of Funds Raising Aggregate Capital Targeted ($bn)

Source: Preqin Source: Preqin Fig. 9: Largest New England-Based Venture Capital Funds in Market (As at February 2018) Fund Firm Fund Type Geographic Focus Target Size (mn) General Catalyst Group IX General Catalyst Partners Venture (General) North America 1,000 USD H.I.G. Strategic Partners Fund H.I.G. BioHealth Partners* Venture (General) North America 750 USD Charles River XVII Charles River Ventures* Early Stage North America 450 USD Polaris Venture Partners VIII Polaris Partners Venture (General) North America 417 USD Charles River Growth I Charles River Ventures* Expansion/Late Stage North America 400 USD Techstars Ventures 2017 Techstars Ventures* Early Stage: Seed North America 400 USD Dementia Discovery Fund SV Health Investors Venture (General) Europe 245 GBP Abingworth Bioventures VII Abingworth Management* Venture (General) Europe 300 USD Avalon Ventures XI Avalon Ventures* Early Stage: Seed North America 300 USD ClearSky Security Fund ClearSky* Expansion/Late Stage North America 300 USD

* Indicates a New England-Based satellite office, not headquarters. Source: Preqin

6 © Preqin Ltd. 2018 / www.preqin.com REASONS TO CONTRIBUTE DATA BE SEEN by thousands of investors and decision-makers around the world ENSURE that the data we hold for your firm and funds is correct GENERATE incoming leads from industry professionals seeing your profile CONTRIBUTE to industry benchmarks and help further research into this area

Contributing data is free and simple. For more information, please visit:

www.preqin.com/sharedata PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 FUND MANAGERS

he top 10 New England-based venture Fig. 10: Largest New England-Based Venture Capital Fund Managers by Aggregate Tcapital managers have raised over Capital Raised in the Last 10 Years $37bn in capital over the past 10 years, Total Capital Raised in Last Firm Location and have over $11.7bn in capital available 10 Years (bn) to invest. The majority (80%) of the top New Enterprise Associates* Cambridge, MA 11.5 USD New England-based managers in terms Healthcare Royalty Partners Stamford, CT 3.3 USD of capital raised and capital available are Bessemer Venture Partners* Cambridge, MA 3.2 USD Massachusetts-based firms (Fig. 10). Greylock Partners* Wellesley, MA 3.0 USD Battery Ventures Boston, MA 2.9 USD New England-based venture capital firms Canaan Partners* Westport, CT 2.7 USD have secured more than a quarter (27%) Bain Capital Ventures Boston, MA 2.3 USD of the total capital raised by US firms over the past 10 years, including 37% of general Spark Capital Boston, MA 2.2 USD venture capital and 32% of early stage: Clarus Ventures Cambridge, MA 2.1 USD start-up capital (Fig. 12). General Catalyst Partners Cambridge, MA 2.0 USD

* Indicates a New England-Based satellite office, not headquarters. Source: Preqin Massachusetts is home to 12 of the 13 New England-based venture firms with Fig. 11: Largest New England-Based Venture Capital Funds Managers by Estimated Dry at least one female founder (Fig. 13). Oak Powder HC/FT Partners, which spun off from Oak Firm Location Estimated Dry Powder (bn) Investment Partners in 2014, leads with New Enterprise Associates* Cambridge, MA 4.2 USD $1.1bn raised in the past decade and Canaan Partners* Westport, MA 1.1 USD primarily targets US-based investments in Flagship Pioneering Cambridge, MA 1.1 USD healthcare and financial technology. Clarus Ventures Cambridge, MA 0.9 USD Thirteen women-owned firms in the Greylock Partners* Wellesley, MA 0.9 USD region have raised just a small portion Spark Capital Boston, MA 0.8 USD (6%) of capital compared to the top 10 Healthcare Royalty Partners Stamford, CT 0.7 USD New England-based managers. However, 6 Dimensions Capital* Boston, MA 0.7 USD women-led fundraising has grown over the Bessemer Venture Partners* Cambridge, MA 0.7 USD past decade and is expected to maintain Oak HC/FT Partners Greenwich, CT 0.6 USD its strong trajectory into 2018, as over a * Indicates a New England-Based satellite office, not headquarters. Source: Preqin third of women-owned funds in market have already achieved a first close (Fig. 14). Fig. 12: Aggregate Capital Raised in the Last 10 Years by Strategy: US- vs. New England- NO. OF NEW ENGLAND-BASED VENTURE Based Firms CAPITAL FIRMS BY STATE 160 144 140

120

100 ME 5 80 69 60 53

40 37 VT

1 NH Aggregate Capital Raised ($bn) 20 13 11 9 2 3 2 6 0 Early Stage Early Stage: Early Stage: Expansion/ Venture Capital MA Seed Start-up Late Stage (General) 257 CT RI All US New England 57 4 Source: Preqin

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Fig. 13: New England-Based Women-Owned Venture Capital Firms by Aggregate Capital Raised in the Last 10 Years Total Venture Capital Funds Raised in Firm Location Female Founder(s) Last 10 Years (mn) Oak HC/FT Partners Greenwich, CT 1,100 USD Annie Lamont & Patricia Kemp .406 Ventures Boston, MA 559 USD Maria Cirino NewSchools Venture Fund* Boston, MA 190 USD Kim Smith Fletcher Spaght Ventures Boston, MA 101 USD Linda Tufts Converge Cambridge, MA 100** USD Nilanjana Bhowmik & Maia Heymann Glasswing Ventures Boston, MA 100** USD Rudina Seseri Advancit Capital Norwood, MA 65** USD Shari Redstone Boston Seed Capital Boston, MA 60** USD Nicole Stata

ReInveture Capital Boston, MA 50** USD Julianne Zimmerman InTeahouse Cambridge, MA 30 USD Xin Liu One Way Ventures Boston, MA 16 USD Eveline Buchatskiy First Star Ventures Boston, MA 10 USD Millie Liu XFactor Ventures* Boston, MA 3 USD Kate Castle

* Indicates a New England-Based satellite office, not headquarters. Source: Preqin **Denotes aggregate target size

Fig. 14: Women-Owned Venture Capital Funds in Market (As at February 2018) Target Size Fund Firm Fund Type Geographic Focus Core Industry Fund Status (mn) Converge Fund I Converge Early Stage US Information Technology Raising 100 USD Glasswing Ventures Glasswing Ventures Early Stage US Information Technology First Close 100 USD .406 Ventures 2016 .406 Ventures Venture (General) Northeast US Information Technology First Close 80 USD Opportunities Fund First Star Venture Fund II First Star Ventures Early Stage: Start-up US Information Technology Raising 50 USD One Way Ventures Fund I One Way Ventures Early Stage US Diversified First Close 50 USD Reinventure Capital I Reinventure Capital Venture (General) North America, US Diversified Raising 50 USD Advancit Capital III Advancit Capital Early Stage US Technology Raising 40 USD Boston Seed Capital III Boston Seed Capital Early Stage: Seed Northeast US Technology Raising 40 USD

Source: Preqin

9 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 DEALS

ggregate venture capital deal value Fig. 15: Venture Capital Deal* Activity in New England-Based Companies, Q1 2010 - Q4 2017 Afor New England-based portfolio companies reached a record high of 180 2.5 $2.2bn in Q4 2017 (Fig. 15); nevertheless, 160 Aggregate Deal Value ($bn) the number of deals completed in the 140 2.0 region has been on the decline and 120 hit its lowest levels since 2009. Deals 1.5 are becoming fewer in number, but 100 increasingly expensive: average deal size 80 1.0 for Q4 2017 was $26mn, over twice the No. of Deals 60 $11mn historical quarterly average from 40 0.5 2010-2017. 20

Likewise, the number of deals completed 0 0.0 by New England-based venture managers Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 has been on a general decline since 2010 2011 2012 2013 2014 2015 2016 2017 2015 (Fig. 16); meanwhile, average deal No. of Deals Aggregate Deal Value ($bn) size reached a record high of $27mn in Source: Preqin Q3 2017. Reflective of global industry Fig. 16: Venture Capital Deal* Activity by New England-Based Managers, concerns, the majority (53%) of venture Q1 2010 - Q4 2017 capital managers surveyed by Preqin in 450 9 December 2017 cited deal pricing as a key industry concern in the year ahead. 400 8 Aggregate Deal Value ($bn) 350 7 Early-stage investments (Series A and 300 6 earlier) accounted for 43% of all venture 250 5 deals and 22% of capital invested in New 200 4 England-based companies in 2017 (Fig. 18). No. of Deals 150 3 Deal value is most concentrated in Series 100 2 B (25%) investments, followed by Series C & D, each accounting for 22%. Healthcare 50 1 is the most active industry for New 0 0 England-based venture capital investment, Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 representing 38% of deals and 58% of deal 2010 2011 2012 2013 2014 2015 2016 2017 value in 2017. No. of Deals Aggregate Deal Value ($bn) Source: Preqin Fig. 17: Largest New England Venture Capital Deals* in 2017 by State Deal Deal Size State Portfolio Company Stage Primary Industry Investor(s) Date (mn) Cascade Investment LLC, General Atlantic**, Massachusetts Ginkgo BioWorks, Inc. Series D/Round 4 Biotechnology Dec-17 275 USD Viking Global Investors, Y Combinator Clayton Dubilier & Rice, Hillhouse Capital Direct Vet Marketing, Management, Rock Springs Capital, Sequoia Maine Unspecified Round Pharmaceuticals Jul-17 223 USD Inc Heritage, Viking Global Investors, Wellington Partners Connecticut LAM Therapeutics, Inc. Series C/Round 3 Pharmaceuticals - Mar-17 58 USD New Hampshire Vapotherm, Inc. Unspecified Round Medical Devices - May-17 20 USD The NanoSteel General Motors Ventures, Lear Corporation, Rhode Island Unspecified Round Nanotechnology Feb-17 15 USD Company, Inc. SPDG - Périer-D'Ieteren Growth Capital/ Consumer Vermont Ogee Fresh Tracks Capital** Jul-17 1 USD Expansion Products

*Figures exclude add-ons, grants, mergers, venture debt & secondary stock purchases. Source: Preqin **New England-based investor.

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Fig. 18: Venture Capital Deals in New England-Based Companies Fig. 19: Venture Capital Deal* Activity in New England-Based in 2017 by Stage Companies in 2017 by Industry Aggregate Deal Value ($mn) 80 1,800 160 ,500 Aggregate Deal Value ($mn) 70 1,600 10 ,000 60 1,400 120 3,500 1,200 3,000 50 100 1,000 2,500 40 80 800 2,000 30 60 600 1,500 No. of Deals No. of Deals 0 20 400 1,000 20 10 200 500 0 0 0 0 t s s r s T e n l l & I e & r e

a a a m r a n i i s d e r r r r m o c e l t o PIPE c e e o h u h C s t t t o t t e Grant s l l u c a n F n I a O Related e d Services u o M e T s & n d

I C s H Electronics n Agriculture e Technology e Angel/Seed r o n Discretionary c a i Expansion i Venture Debt Venture and Later and s w t u m Growth Capital/ Add-on & & Add-on Other f e B Series C/Round 3 C/Round Series Series A/Round 1 Series B/Round 2 Series o Series D/Round 4 S S No. of Deals Aggregate Deal Value ($mn) No. of Deals Aggregate Deal Value ($mn) Source: Preqin Source: Preqin

Fig. 20: Largest New England-Based Venture Capital Deals* in 2017 Deal Size Primary Portfolio Company Stage Deal Date Investors State (mn) Industry

Series D/ Cascade Investment LLC, General Atlantic, Ginkgo BioWorks, Inc. Dec-17 275 USD Massachusetts Biotechnology Round 4 Viking Global Investors, Y Combinator Clayton Dubilier & Rice, Hillhouse Capital Direct Vet Marketing, Unspecified Management, Rock Springs Capital, Sequoia Jul-17 223 USD Maine Pharmaceuticals Inc Round Heritage, Viking Global Investors, Wellington Partners

Series B/ 3W Partners, Sequoia Capital, Temasek WuXi NextCODE** Sep-17 165 USD Massachusetts Biotechnology Round 2 Holdings, YF Capital Series D/ Activant Capital Group, Alaska Permanent Fund Indigo Ag, Inc. Sep-17 156 USD Massachusetts Agriculture Round 4 Corporation, Baillie Gifford, Flagship Pioneering Series A/ Cullinan Oncology, LLC Oct-17 150 USD F2 Ventures, MPM Capital Massachusetts Pharmaceuticals Round 1 Rubius Therapeutics, Series B/ Jun-17 120 USD Flagship Pioneering Massachusetts Biotechnology Inc. Round 2 Data Collective, Future Funds, GE Ventures, GV, Kleiner Perkins Caufield & Byers, Lowe’s Ventures, Lux Capital Management, Moonrise Series D/ Desktop Metal, Inc. Jul-17 115 USD Capital, New Enterprise Associates, Saudi Massachusetts Technology Round 4 Aramco Energy Ventures, Shenzhen Capital Group, Techtronic Industries Co. Ltd., Tyche Partners, Vertex Ventures US 6 Dimensions Capital, ARCH Venture Partners, Cowen Finance, Eight Roads Ventures Europe, Semma Therapeutics, Series B/ Nov-17 114 USD F-Prime Capital, JDRF, Medtronic Ventures, Massachusetts Biotechnology Inc. Round 2 MPM Capital, Novartis Venture Fund, ORI Capital, Sinopharm Capital, Wu Capital

Unspecified Bessemer Venture Partners, G20 Ventures, Fuze, Inc. Feb-17 104 USD Greenspring Associates, Summit Partners, Massachusetts Software Round Wellington Management

Series C/ Bessemer Venture Partners, Generation Toast, Inc. Jul-17 101 USD Massachusetts Software Round 3 Investment Management, Lead Edge Capital

*Figures exclude add-ons, grants, mergers, venture debt & secondary stock purchases. Source: Preqin **Realized investment.

11 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 IN FOCUS: HEALTHCARE

he healthcare industry is one of the Fig. 21: Healthcare: Venture Capital Deal* Activity in New England-Based Companies, Tmore prominent New England-based 2010 - 2017 sectors for deal activity. Healthcare 250 4.3 4.5 4.1 companies within New England attracted 4.0 209 4.0

$4.1bn in venture investments during 201 Aggregate Deal Value ($bn) 200 182 181 3.5 2017, just shy of 2016’s record $4.3bn; 173 163 yet, the number (135) of deals completed 3.3 3.0 reached its lowest level since 2009 (Fig. 21). 150 141 135 2.3 2.5 2.1 1.9 2.0 However, healthcare deal activity for New 100 1.7 England-based managers is on the rise No. of Deals 1.5 across metrics: 2017 saw 12% growth in 1.0 the number of deals and 20% growth in 50 deal value compared to 2016 (Fig. 22). 0.5 The bulk of this activity was centred in the 0 0.0 pharmaceuticals sector, which accounted 2010 2011 2012 2013 2014 2015 2016 2017 for 34% of deals and 41% of deal value No. of Deals Aggregate Deal Value ($bn) in 2017. Deal flow also increased for Source: Preqin healthcare IT – doubling since 2010, with 31 completed deals valued at $600mn in Fig. 22: Healthcare: Venture Capital Deal* Activity by New England-Based Managers, 2010 - 2017 2017 – and biotechnology, which has seen deal value reach $2.4bn, compared with 350 10 8.6 $1.4bn in 2016 and just $400mn in 2010. 295 9

300 Aggregate Deal Value ($bn) 279 7.8 8 254 Series A and B investments were the most 250 242 275 250 6.5 246 7 active investment stages for New England- 5.6 6 based managers investing in healthcare in 200 219 4.4 5 2017, accounting for 28% and 24% of deals 4.2 4.1 150 4.0 respectively. In regard to deal value, Series 4 No. of Deals B investments account for the largest 100 3 proportion (30%) of total deal value in the 2 space in 2017, followed by Series C (23%) 50 1 and Series A (21%) investments. 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2014 was a record year for venture capital-backed exits of New England-based No. of Deals Aggregate Deal Value ($bn) healthcare companies, with 37 completed Source: Preqin exits valued at $2.7bn (Fig. 27). While the number and value of healthcare exits has declined since 2016 (-18% and -15% respectively), exit activity in 2017 is close to par based on the historical average for 2010-2017.

*Figures exclude add-ons, grants, mergers, venture debt & secondary stock purchases.

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Fig. 23: Healthcare by Sector: Number of Venture Capital Deals* Fig. 24: Healthcare by Sector: Aggregate Value of Venture Capital by New England-Based Managers, 2010 - 2017 Deals* by New England-Based Managers, 2010 - 2017

300 10 Biomedical Biomedical 9 250 Life Sciences Life Sciences 8 Medical Instruments Medical Instruments 200 7 Medical Technologies 6 Medical Technologies

150 Healthcare IT 5 Healthcare IT

Healthcare 4 Healthcare No. of Deals 100 Medical Devices 3 Medical Devices

Aggregate Deal Value ($bn) 2 50 Biotechnology Biotechnology 1 Pharmaceuticals Pharmaceuticals 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017

Source: Preqin Source: Preqin

Fig. 25: Healthcare by Stage: Number of Venture Capital Deals Fig. 26: Healthcare by Stage: Aggregate Value of Venture Capital by New England-Based Managers, 2010 - 2017 Deals by New England-Based Managers, 2010 - 2017

350 Unspecified Round 10 Unspecified Round 9 300 PIPE PIPE 8 Add-on & Other Add-on & Other 250 7 Growth Capital/ Growth Capital/ 6 200 Expansion Expansion Series D/Round 4 and 5 Series D/Round 4 and 150 Later Later Series C/Round 3 4 Series C/Round 3 No. of Deals

100 Series B/Round 2 3 Series B/Round 2

Aggregate Deal Value ($bn) 2 50 Series A/Round 1 Series A/Round 1 1 Angel/Seed Angel/Seed 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017

Source: Preqin Source: Preqin

Fig. 27: Healthcare: Venture Capital-Backed Exits of New England-Based Companies, 2010 - 2017

40 3.0 37

35 2.7 33 33 2.7 2.5 30 30 Aggregate Exit Value ($bn) 27 2.2 2.0 25 23 2.0 22 21 20 1.7 1.5 1.5 No. of Exits 15 1.2 1.2 1.0

0.5 5

0 0.0 2010 2011 2012 2013 2014 2015 2016 2017

No. of Exits Aggregate Exit Value ($bn)

Source: Preqin *Figures exclude add-ons, grants, mergers, venture debt & secondary stock purchases.

13 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 EXITS

he number of exits for New England- Fig. 28: Venture Capital-Backed Exits of New England-Based Companies, 2010 - 2017 based portfolio companies has 140 7 T 6.6 130 remained steady over the past three years; however, aggregate exit value reached its 120 6 Aggregate Exit Value ($bn) highest level since 2011 ($5.1bn) in 2017 5.1 4.9 100 5 ($4.9bn), having increased by nearly $2bn 87 88 4.3 83 83 85 from the year prior (Fig. 28). 80 81 80 4.5 4.5 4 3.1 As in years prior, trade sales were the most 60 3 common exit type in 2017, accounting No. of Exits 2.3 for 69% of all exits of New England-based 40 2 portfolio companies and 71% of aggregate 20 1 exit value. There was a slight increase

(+2%) in IPO & follow-on activity in 2017, as 0 0 well as twice the number of sales to GPs 2010 2011 2012 2013 2014 2015 2016 2017 compared to 2016. Sentiment surrounding No. of Exits Aggregate Exit Value ($bn) the current exit environment is improving, Source: Preqin as 61% of venture capital managers surveyed by Preqin in December 2017 Fig. 29: Venture Capital-Backed Exits of New England-Based Companies by Type, 2010 - 2017 expect exit activity to increase in 2018 compared to 2017. 140 7

120 6 The four largest New England-based Aggregate Exit Value ($bn) exits of the past year took place within 100 5 Massachusetts’ software sector, led by the $650mn trade sale of SimpliVity 80 4 Corporation in January 2017 (Fig. 30). In 60 3 addition, there were 17 pharmaceutical No. of Exits exits in the region during 2017, including 40 2 IPOs from Massachusetts-based Jounce Therapeutics ($102mn) in January, 20 1 Connecticut’s Biohaven Pharmaceutical Holding Company ($168mn) in May, and 0 0 2010 2011 2012 2013 2014 2015 2016 2017 seven more in the same sector over the course of the year. New England accounted Trade Sale Sale to GP Write-off IPO & Follow-on Aggregate Exit Value ($bn) for nine of 23 IPOs by venture capital- Source: Preqin backed US pharmaceutical companies.

Fig. 30: Largest Venture Capital-Backed Exits of New England-Based Companies in 2017 Total Known Portfolio Company Primary Industry State Exit Type Exit Date Exit Value (mn) Funding (mn) SimpliVity Corporation Software MA 292 USD Trade Sale Jan-17 650 USD Veracode, Inc. Software MA 119 USD Trade Sale Mar-17 614 USD Black Duck Software, Inc. Software MA 83 USD Trade Sale Nov-17 565 USD nuTonomy Inc. Software MA 20 USD Trade Sale Oct-17 400 USD IFM Therapeutics, LLC Pharmaceuticals MA 27 USD Trade Sale Aug-17 300 USD Zoom Information, Inc. Internet MA 7 USD Sale to GP Aug-17 240 USD CashStar, Inc. Marketing ME 41 USD Trade Sale Aug-17 175 USD Biohaven Pharmaceutical Pharmaceuticals CT 100 USD IPO May-17 168 USD Holding Company Ltd.* Concert Pharmaceuticals, Inc.* Pharmaceuticals MA 130 USD Trade Sale Mar-17 160 USD CarGurus, Inc.* Internet MA 3 USD IPO Oct-17 150 USD

*Partial exit. Source: Preqin

ew England-based venture capital Fig. 31: Venture Capital Horizon IRRs: US- vs. New England-Based Funds Nfunds have posted relatively similar returns compared to all US venture capital 14% vehicles. US venture capital funds have 12% generated the highest returns across three- (+8.7%) and five- (+9.43%) year 10% horizons to June 2017 (the most recent 8% performance data available), while New England-based vehicles have performed 6% best over the one- (+10.5%) and 10-

Annualized Return 4% (+3.8%) year horizons (Fig. 31). 2% New England-based 2011 vintage funds 0% have posted the strongest returns among 1-Year to Jun-17 3-Year to Jun-17 5-Year to Jun-17 10-Year to June 17 2007-2015 vintage funds, with a median net IRR of 23.4% (Fig. 32). All US New England Source: Preqin

Fig. 32: New England-Based Venture Capital Funds: Median Net Fig. 33: New England-Based Venture Capital Funds: Annual IRR by Vintage Year Capital Called up, Distributed and Net Cash Flow, 2007 - H1 2017

25% 16 23.4% 14 12 20% 19.7% 19.0% 10 8 15% 14.9% 15.3% 6 12.8% 4 11.0% 2 10% 7.8% 0 -2 5% -4 Median Net IRR since Inception -6 0.9% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 0% 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn) Vintage Year Source: Preqin Source: Preqin

Fig. 34: Top Performing New England-Based Venture Capital Funds (Vintage 2007 - 2015 Funds) Rank Fund Firm Vintage Fund Size (mn) Geographic Focus Net IRR (%) Date Reported 1 Spark Capital II Spark Capital 2008 360 USD North America 51.6 30-Jun-17 2 Avalon Ventures VIII Avalon Ventures* 2007 150 USD North America 51.3 30-Jun-17 3 Third Rock Ventures II Third Rock Ventures 2010 426 USD North America 38.7 30-Jun-17 4 5AM Ventures Fund III 5AM Ventures* 2009 220 USD North America 36.1 31-Mar-16 5 Third Rock Ventures Third Rock Ventures 2007 378 USD North America 31.8 30-Jun-17 6 Spark Capital III Spark Capital 2011 360 USD North America 31.2 30-Jun-17 7 MPM BioVentures V MPM Capital 2010 173 USD North America 29.4 31-Mar-16 8 Canaan Equity IX Canaan Partners* 2012 600 USD North America 27.5 30-Jun-17 9 Battery Ventures IX Battery Ventures 2011 750 USD North America 26.3 30-Jun-17 Longitude Venture 10 Longitude Capital 2008 325 USD North America 25.7 30-Jun-17 Partners

* Indicates a New England-Based satellite office, not headquarters. Source: Preqin

15 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017 INVESTORS

ive out of the top 10 most active Fig. 35: Past Investors in New England-Based Venture Capital Funds with Active Finvestors in New England-based Mandates by Fund Type venture capital firms are public pension 100% funds (Fig. 36). Interestingly, only one of 90% 85% the five is located in the New England 80% 80% region: Massachusetts Pension Reserves Investment Management Board (PRIM) has 70% 59% 71 known commitments to New England- 60% 52% based venture capital funds, although it 50% does not actively maintain a local mandate

Mandates 40% policy. 30%

While investors located in the Northeast 20% US account for the largest proportion 10% (45%) of past New England-based venture Proportion of Past Investors with Active VC capital investors, California-based 0% Angel/Seed Early Stage Late Stage Venture Capital investors lead with the most known (General) commitments (513) to New England-based Source: Preqin venture capital funds, followed by New York (472); Massachusetts comes in third (85%) are targeting late-stage investments, Public and private pension funds each with 460 known investor commitments. followed by general venture capital account for 18% of New England-based vehicles (80%, Fig. 35). Both Performance venture capital investors respectively Early stage funds have historically been Equity Management and SCS Financial (Fig. 40). The New England-based venture most commonly sought among investors are known investors in the New England- capital industry attracts larger, more committing to New England-based firms, based venture capital space and are each sophisticated investors, with the majority with the highest number of known investor planning to commit up to $500mn to (75%) managing over $1.0bn in assets, commitments; however, of investors with venture capital investments in 2018 (Fig. including 15% that manage at least $50bn active mandates, the largest proportion 42). (Fig. 41).

Fig. 36: Most Active Investors in New England-Based Venture Capital Funds by No. of Known Fund Commitments (All Time) Investor Investor Type No. of Known Commitments Massachusetts Pension Reserves Investment Management Board Public Pension Fund 71 HarbourVest Partners Private Equity Fund of Funds Manager 69 California Public Employees' Retirement System (CalPERS) Public Pension Fund 64 AT&T Pension Fund Private Sector Pension Fund 56 Alcatel-Lucent Pension Fund Private Sector Pension Fund 56 Adams Street Partners Private Equity Fund of Funds Manager 52 Illinois Municipal Retirement Fund Public Pension Fund 51 HP Inc. Pension Fund Private Sector Pension Fund 46 Pennsylvania State Employees' Retirement System Public Pension Fund 45 Michigan Department of Treasury Public Pension Fund 44 San Francisco Employees' Retirement System Public Pension Fund 43 Alaska Retirement Management Board Public Pension Fund 43 Verizon Investment Management Corporation Asset Manager 41 Los Angeles Fire and Police Pension System Public Pension Fund 40 California State Teachers' Retirement System (CalSTRS) Public Pension Fund 38 Employees' Retirement System of the State of Hawaii Public Pension Fund 38 Pantheon Private Equity Fund of Funds Manager 38

Source: Preqin

Fig. 37: Seed*: Most Active Investors in New England-Based Venture Capital Funds by No. of Known Fund Commitments (All Time) Investor Investor Type No. of Known Commitments California Public Employees' Retirement System (CalPERS) Public Pension Fund 3 Dow Chemical Company Pension Fund Private Sector Pension Fund 3 Grove Street Advisors Private Equity Fund of Funds Manager 3 Union Carbide Employees' Pension Plan Private Sector Pension Fund 3 Washington State University Foundation Endowment Plan 3

*Seed includes Early Stage: Seed fund type. Source: Preqin

Fig. 38: Early Stage*: Most Active Investors in New England-Based Venture Capital Funds by No. of Known Fund Commitments (All Time) Investor Investor Type No. of Known Commitments Alcatel-Lucent Pension Fund Private Sector Pension Fund 26 Massachusetts Pension Reserves Investment Management Board Public Pension Fund 25 HarbourVest Partners Private Equity Fund of Funds Manager 22 Pennsylvania State Employees' Retirement System Public Pension Fund 17 Verizon Investment Management Corporation Asset Manager 17

*Early Stage includes Early stage and Early Stage: Start-up Source: Preqin

Fig. 39: Late Stage*: Most Active Investors in New England-Based Venture Capital Funds by No. of Known Fund Commitments (All Time) Investor Investor Type No. of Known Commitments California State Teachers' Retirement System (CalSTRS) Public Pension Fund 11 HarbourVest Partners Private Equity Fund of Funds Manager 10 Liberty Mutual Insurance Insurance Company 9 Texas County & District Retirement System Public Pension Fund 9 Alaska Retirement Management Board Public Pension Fund 8 Alcatel-Lucent Pension Fund Private Sector Pension Fund 8

*Late Stage includes Expansion/late stage and Growth Source: Preqin

Fig. 40: Investors in New England-Based Venture Capital Funds Fig. 41: Investors in New England-Based Venture Capital Funds by Investor Type by Assets under Management

Private Sector Pension Fund 18% 70% Public Pension Fund 60% 18% 60% Foundation 17% Fund of Funds Manager 15% 50% Endowment Plan 9% 40% Insurance Company 8% Corporate Investor 4% 30% Government Agency 2% 20% Asset Manager 2% 15% Proportion of Investors 12% 10% Bank/Investment Bank 1% 10% 3% Family Office 1% 0% Other 4% Less than $100-499mn $500-999mn $1-49.9bn $50bn or 0% 5% 10% 15% 20% $100mn More Proportion of Investors Assets under Management Source: Preqin Source: Preqin

17 PREQIN AND NEVCA UPDATE: NEW ENGLAND VENTURE CAPITAL IN 2017

INVESTOR COMMITMENTS TO NEW ENGLAND-BASED VENTURE CAPITAL FUNDS BY LOCATION

North America 87% Europe Asia 10% US-BASED INVESTOR COMMITMENTS TO NEW ENGLAND- 1% BASED VENTURE CAPITAL FUNDS BY LOCATION

Rest of World West North East 1% 21% Mid West 45% 21%

South West 6% South East 7%

TOP FIVE INVESTOR LOCATIONS FOR NUMBER OF KNOWN COMMITMENTS TO NEW ENGLAND-BASED VENTURE CAPITAL FUNDS

California New York Massachusetts Illinois New Jersey

513 past commitments 472 past commitments 460 past commitments 217 past commitments 196 past commitments (13% of US commitments) (12% of US commitments) (12% of US commitments) (6% of US commitments) (5% of US commitments)

Fig. 42: Sample New England-Based Investors with Active Venture Capital Mandates

AUM Date of Investment Investor Investor Type Fund Types Targeted Regions Targeted (mn) Plans Amount Armonia Single Family Office - Q2 2017 Venture Capital (General) North America -

Choate Rosemary Hall 370 USD 15- Endowment Plan Q2 2017 Growth - Foundation USD 20mn Asia-Pacific, Emerging Liberty Mutual Insurance 83,439 USD 30- Q3 2017 Venture Capital (General), Growth Markets, Europe, USD Insurance Company Global, North America 50mn Early Stage, Early Stage: Seed, Early Stage: Private Equity Fund Moonrise Capital - Q1 2018 Start-up, Expansion/Late Stage, Venture Global, North America - of Funds Manager Capital (General) Private Equity Fund 4,100 USD 300- Newbury Partners Q4 2017 Venture Capital (General) Global of Funds Manager USD 350mn Private Equity Fund 3,200 Asia-Pacific, Europe, Park Street Capital Q4 2017 Early Stage, Early Stage: Start-up - of Funds Manager USD Global, North America Performance Equity Private Equity Fund 9,200 Early Stage, Early Stage: Seed, Early Stage: Europe, North Up to USD Q1 2018 Management of Funds Manager USD Start-up, Growth, Venture Capital (General) America 500mn Reynolds Group 1,000 Up to USD Private Investment Wealth Manager Q3 2017 Venture Capital (General) Global, North America USD 5mn Counsellors Early Stage, Early Stage: Seed, Early Stage: Private Equity Fund 18,000 USD 200- SCS Financial Q1 2018 Start-up, Expansion/Late Stage, Growth, Global USD of Funds Manager Venture Capital (General) 500mn

Source: Preqin

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