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PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE IN 2017

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p4 Fundraising

p6 Funds in Market

p7 Fund Managers

p8 In Focus: Micro

p10 Deals

p12 Exits

p13 Performance

p14 Investors

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Preqin partnered with First Republic Bank to prepare this information regarding US Venture Capital. This report is for information purposes only and is not intended as an offer, solicitation, advice (investment, legal, tax, or otherwise), or as the basis for any contract. First Republic Bank has not independently verified the information contained herein and shall not have liability to any third party in any respect for this report or any actions taken or decisions made based upon anything contained herein. This information is valid only as of April 2018 and neither Preqin nor First Republic Bank will undertake to update this report with regard to changes in market conditions, information, laws, or regulations after the date of this report. This report may not be further reproduced or circulated without the written permission of Preqin and First Republic Bank.

All rights reserved. The entire contents of Preqin and First Republic Update: US 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 First Republic Update: US 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 for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin and First Republic Update: US 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 First Republic Update: US 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 First Republic Update: US 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.

3 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 FUNDRAISING

2017 was a successful fundraising year for Fig. 1: US-Based Venture Capital Fundraising, 2007 - 2017 US-based venture capital fund managers: 350 259 funds reached a final close, raising 316 $34bn in aggregate capital (Fig. 1). 300 263 259 Although fundraising activity declined 252 250 slightly compared to 2016 figures, both the 207 number of funds closed and capital raised 200 171 171 in 2017 were above the annual average 156 150 for the period 2007-2017 (196 funds and 119 123 123 $27bn). 100

43 California-based New Enterprise 50 28 31 26 33 33 34 15 16 18 19 Associates raised one of the largest 0 venture capital funds closed in 2017: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New Enterprise Associates 16 secured Year of Final Close $3.3bn and reached a final close in June, No. of Funds Closed Aggregate Capital Raised ($bn) achieving 110% of its initial target (Fig. 3). Source: Preqin Headline commitments came from a mix of new and returning investors, including a Fig. 2: US-Based Venture Capital Fundraising by Fund Size, 2010 - 2017 $300mn commitment from California State 100% 1% 1% 2% 1% 5% 5% 3% 3% 3% Teachers’ System (CalSTRS) 7% 3% 5% 4% 5% 7% 5% 90% 9% 10% 9% and a $200mn commitment from Teacher 15% 12% 8% 13% 11% 80% 17% Retirement System of Texas. The fund will 12% 23% 70% 17% 23% 23% 26% 20% target early-stage investments in US-based 60% 17% 19% IT, energy, technology and healthcare 7% 14% 50% 18% 9% 15% 18% sectors. 40% 30% The largest proportion of funds closed by 48% 53% 52% 49% 49% 20% 42% 42% 42%

US-based managers have typically fallen Proportion of Funds Closed 10% into the micro VC (sub-$100mn) category, 0% for 62% of vehicles closed since 2010 2011 2012 2013 2014 2015 2016 2017 2007 and 63% of vehicles closed in 2017 Year of Final Close (Fig. 2). At the other end of the spectrum, Less than $50mn $50-99mn $100-249mn just 1% of US-based funds reached a $250-499mn $500-999mn $1bn or More Source: Preqin

Fig. 3: Largest US-Based Venture Capital Funds Closed in 2017 Fund Firm Fund Size (mn) Fund Type Geographic Focus New Enterprise Associates 16 New Enterprise Associates 3,300 USD Venture (General) US Emerging Markets, The Rise Fund TPG 2,100 USD Venture (General) North Africa, South Asia Institutional Venture Partners XVI Institutional Venture Partners 1,500 USD Expansion/Late Stage US Clarus Ventures IV Clarus Ventures 910 USD Venture (General) US IV Sequoia Capital 850 USD Expansion/Late Stage Asia Mithril II Mithril Capital Management 850 USD Expansion/Late Stage Global Canaan Equity XI Canaan Partners 800 USD Early Stage India, Israel, US , North America, Venture Capital Fund IV Summit Partners 730 USD Early Stage US Life Sciences Fund Bain Capital 720 USD Venture (General) Global, US Flagship Ventures Fund VI 618 USD Venture (General) US

Source: Preqin

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final close on $1bn or more in 2017, the Fig. 4: US-Based Venture Capital Fundraising Success, 2007 - 2017 smallest proportion since 2013. 25 120% Proportion of Target Size Achieved 101% 102% 102% 102% 97% 100% US-based venture capital funds have, on 94% 93% 100% 20 91% 89% average, met or exceeded their target size 83% in each of the past four consecutive years, 80% securing an average 102% in 2017 (Fig. 4). 15 When looking at the average time spent on 60% 22 22 the road, 2017 saw a decline to 19 months 10 19 19 19 19 compared to 22 months in 2016. 17 40% 15 14 15 5 11 20% Generalist venture capital vehicles Time Spent in Market (Months) dominate the US-based venture capital 0 0% fundraising market: 100 such funds 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 closed in 2017 and secured $17bn, almost Year of Final Close double the amount of capital secured Average Time Spent in Market (Months) Average Proportion of Target Size Achieved by early-stage funds (Fig. 5). Early-stage Source: Preqin funds raised $10.7bn in 2017, of which the majority ($9.3bn) was accounted for by broader early-stage strategies, whereas Fig. 5: US-Based Venture Capital Fundraising in 2017 by Strategy seed funds secured $1.4bn. 120

100 100 Few US-based funds target regions outside 100 North America, accounting for just 9% 80 of funds closed in 2017, of which 4% are focused on opportunities in Asia and 3% 60 are Europe focused (Fig. 6). 40 40

19 20 17.3 9.3 6.0 1.4 0 Seed Early Stage Expansion/ Venture Late Stage (General)

No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin

Fig. 6: US-Based Venture Capital Funds Closed in 2017 by Primary Geographic Focus

North America Europe Asia 237 4 10

Rest of World 8

Source: Preqin

5 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 FUNDS IN MARKET

s previously mentioned, US-based Fig. 7: US-Based Venture Capital Funds in Market over Time, 2007 - 2018 (As at April Afundraising has grown substantially 2018) over the past decade. A record number 900 70

64 Aggregate Capital Targeted ($bn) (769) of venture capital funds are currently 800 60 in market as at the start of Q2 2018, 700 48 49 50 seeking an aggregate $64bn in capital 48 50 600 (Fig. 7). Fundraising in 2018 is likely to 42 40 be significantly more competitive than 500 34 40 previous years, given there were 545 funds 400 27 25 769 30 24 23 in market at the beginning of the year 300 545 compared to the historical average of 265 20 No. of Funds Raising 200 429 350 at the start of each year from 2007 to 2017. 10 100 229 220 226 241 178 139 177 181 Managers in the US continue to favour 0 0 strategies offering wider investment Apr-18 mandates: there are 315 general venture Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 capital funds in market targeting $32bn No. of Funds Raising Aggregate Capital Targeted ($bn) and 327 early-stage funds targeting $18bn Source: Preqin (Fig. 8).

Fig. 8: US-Based Venture Capital Funds in Market by Strategy Fig. 9: US-Based Venture Capital Funds in Market by Primary (As at April 2018) Geographic Focus (As at April 2018)

350 35 800 56 60 32 Aggregate Capital Targeted ($bn) Aggregate Capital Targeted ($bn) 300 327 30 700 315 705 50 250 25 600 40 500 200 18 20 400 30 150 15 10 300 100 10 20 No. of Funds Raising

85 No. of Funds Raising 200 50 5 4 10 42 100 5 0 0 1 1 32 9 23 Seed Early Stage Expansion/ Venture 0 0 Late Stage (General) North America Asia Europe Rest of World

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

Source: Preqin Source: Preqin

Fig. 10: Largest US-Based Venture Capital Funds in Market (As at April 2018) Fund Firm Target Size (mn) Fund Type Geographic Focus Asia, Europe, Global, Deerfield Private Design Fund IV Deerfield Management 2,500 USD Venture (General) North America Sequoia Capital Yuan Fund Sequoia Capital 10,000 CNY Venture (General) China NovaQuest Pharma Opportunities Fund V NovaQuest Capital Management 1,500 USD Venture (General) Europe, US Group IX General Catalyst Partners 1,000 USD Venture (General) US VI Khosla Ventures 1,000 USD Venture (General) US Europe, North America, OrbiMed Private Investments VII OrbiMed Advisors 1,000 USD Venture (General) US, West Europe Continuity Affiliates Fund I Y Combinator 1,000 USD Expansion/Late Stage US H.I.G. Strategic Partners Fund H.I.G. BioHealth Partners 750 USD Venture (General) US GPB Automotive Portfolio GPB Capital 700 USD Expansion/Late Stage US GPB Holdings II GPB Capital 700 USD Expansion/Late Stage US

Source: Preqin

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he 10 largest US venture capital 10 years and over $4bn available to invest; The top 10 US-based women-owned Tmanagers have collectively raised the firm closed the largest US-based venture capital firms have raised just 8% more than $67bn in capital over the past venture capital fund of 2017, which is also of the total raised by the top 10 US-based 10 years, and have nearly $25bn available the firm’s largest fund to date. firms (Fig. 14). Connecticut-based Oak to invest (Figs. 11 and 12). The majority of HF/FT Partners, which spun off from Oak the top US managers are California based It is no surprise that US-based managers Investment Partners in 2014, has secured in terms of both capital raised (70%) and raising generalist venture capital funds the most capital ($1.1bn) among US-based estimated dry powder (60%). have secured the most capital ($146bn) women-owned firms in the past decade. over the past 10 years, followed by broad The firm primarily targets investments in Menlo Park’s New Enterprise Associates early-stage ($79bn), late-stage ($37bn) and the healthcare and leads as the most active venture capital seed ($11bn) strategies (Fig. 13). sectors in the US. manager, with $11.5bn raised in the last

Fig. 11: Largest US-Based Venture Capital Fund Managers by Fig. 12: Largest US-Based Venture Capital Fund Managers by Aggregate Capital Raised in the Last 10 Years Estimated Dry Powder Total Funds Raised in Estimated Dry Firm Headquarters Firm Headquarters Last 10 Years ($bn) Powder (bn) New Enterprise Associates Menlo Park, CA 11.5 New Enterprise Associates Menlo Park, CA 4.1 USD Sequoia Capital Menlo Park, CA 9.8 Sequoia Capital Menlo Park, CA 3.1 USD Tiger Global Management New York, NY 9.2 Deerfield Management New York, NY 3.0 USD Caufield & Palo Alto, CA 2.6 USD Menlo Park, CA 6.7 Byers Tiger Global Management New York, NY 2.2 USD Menlo Park, CA 6.2 Andreessen Horowitz Menlo Park, CA 2.0 USD Deerfield Management New York, NY 6.0 Access Technology Ventures New York, NY 2.0 USD Palo Alto, CA 4.9 Institutional Venture Partners Menlo Park, CA 1.9 USD Lightspeed Venture Partners Menlo Park, CA 4.7 TPG Fort Worth, TX 1.7 USD Institutional Venture Partners Menlo Park, CA 4.7 Technology Crossover Palo Alto, CA 1.7 USD General Catalyst Partners Cambridge, MA 3.4 Ventures

Source: Preqin Source: Preqin

Fig. 13: Aggregate Capital Raised by US-Based Venture Capital Fig. 14: Largest US-Based Women-Owned Venture Capital Fund Fund Managers in the Last 10 Years by Strategy Managers by Aggregate Capital Raised in the Last 10 Years

160 Total Funds Raised in Firm Headquarters 146 Last 10 Years (mn) 140 Oak HC/FT Partners Greenwich, CT 1,100 USD 120 Foster City, CA 890 USD

100 DBL Partners San Francisco, CA 551 USD 79 80 Greycroft Partners New York, NY 543 USD Canvas Ventures Portola Valley, CA 475 USD 60 Arboretum Ventures Ann Arbor, MI 433 USD 40 37 .406 Ventures Boston, MA 392 USD Aggregate Capital Raised ($bn) 20 11 Floodgate Palo Alto, CA 356 USD

0 Aspect Ventures San Francisco, CA 331 USD Seed Early Stage Expansion/ Venture Tola Capital Seattle, WA 296 USD Late Stage (General) Source: Preqin Source: Preqin

7 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 IN FOCUS: MICRO VENTURE CAPITAL icro venture capital (sub-$100mn) Fig. 15: US-Based Micro Venture Capital Fundraising, 2007 - 2017 Mfundraising has grown substantially 250 7 over the past decade: 168 funds closed 6.0 Aggregate Capital Raised ($bn) 5.7 in 2017, securing a record $6.0bn in 6 200 5.1 aggregate capital, representing an increase 5 of 155% and 131% in the number of funds 4.3 4.3 150 closed and aggregate capital raised since 4 2008 respectively (Fig. 15). 2.6 2.7 3 100 2.4 201 2.2 173 1.8 168 In terms of fundraising success, micro 1.7 141 152 2 No. of Funds Closed venture capital funds have achieved 100% 50 103 1 or more of their target size, on average, for 62 66 63 70 67 the past three years (Fig. 16). The average 0 0 time spent in market by micro venture 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 capital funds reached a record low of 13 Year of Final Close months for funds closed in 2017. No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin Early-stage strategies (including seed) accounted for almost double the number Fig. 16: US-Based Micro Venture Capital Fundraising Success, 2007 - 2017 (108) of micro venture capital funds closed 25 110% in 2017 than generalist venture capital Proportion of Target Size Achieved vehicles (55, Fig. 18). 103% 105% 20 101% 101% 97% 100% Six of the top 10 performing micro venture 95% 96% capital funds are first-time funds (Fig. 20). 15 92% 95% 88% 88% 90% 87% 86% 10 20 20 18 85% 17 22 17 18 17 15 14 13 80% 5 75% Time Spent in Market (Months) 0 70% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year of Final Close Average Time Spent in Market (Months) Average Proportion of Target Size Achieved Source: Preqin

Fig. 17: Most Active Investors in US-Based Micro Venture Capital Funds by Number of Known Fund Commitments, Vintages 2008-2018 Type No. of Known Commitments Active VC Mandate Retirement Plans of Duke University Private Sector 13 No Cendana Capital PE Manager 8 Yes Industry Ventures PE Fund of Funds Manager 8 Yes Oregon Growth Board Government Agency 8 Yes Commonwealth Financing Authority of Pennsylvania Government Agency 7 No GCM Grosvenor Private Markets PE Fund of Funds Manager 7 Yes Sobrato Family Holdings Single- 7 Yes TIFF PE Fund of Funds Manager 7 Yes International Corporation Government Agency 6 No Prudential Financial Company 6 No

Source: Preqin

8 © Preqin Ltd. 2018 / www.preqin.com DOWNLOAD DATA PACK: www.preqin.com/FRUSVC17

Fig. 18: US-Based Micro Venture Capital Fundraising in 2017 by Fig. 19: US-Based Micro Venture Capital Funds Closed in 2017 by Strategy Primary Geographic Focus 80 72 70

60 55 Europe North America 50 2% Asia 92% 40 36 4% 30

20 Rest of World 10 5 2.7 1.1 0.1 2.1 0 3% Seed Early Stage Expansion/ Venture Late Stage (General)

No. of Funds Closed Aggregate Capital Raised ($bn)

Source: Preqin

Fig. 20: Top Performing US-Based Micro Venture Capital Funds (Vintages 2007-2015) Fund Size Net IRR Date Rank Fund Firm Vintage Fund Type (mn) (%) Reported 1 CRCM Opportunity Fund CRCM Ventures 2013 37.5 USD Early Stage: Start-up 122.8 31-Mar-18 Expansion / Late 2 Foresite Capital Fund I Foresite Capital 2012 100 USD 65.4 30-Sep-17 Stage 3 New Science Ventures 2014 A New Science Ventures 2014 98 USD Venture (General) 59.0 30-Sep-17 4 Revel Venture Fund I Revel Partners 2011 10 USD Early Stage: Seed 58.7 31-Dec-16 5 IA Venture Strategies Fund I IA Ventures 2010 50 USD Early Stage 51.2 30-Sep-17 6 YL Ventures II YL Ventures 2013 37.5 USD Early Stage: Start-up 45.1 30-Jun-17 7 Cottonwood Technology Fund I Cottonwood Technology Fund 2010 16.5 USD Early Stage: Start-up 39.0 30-Jun-17 8 Ecosystem Integrity Fund I Ecosystem Integrity Fund 2011 19.5 USD Venture (General) 38.4 31-Dec-16 9 AM Pappas Life Science Ventures IV Pappas Capital 2009 96.8 USD Venture (General) 35.1 30-Sep-17 10 New Science Ventures 2014 B New Science Ventures 2014 55 USD Venture (General) 35.0 30-Sep-17

Source: Preqin

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9 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 DEALS

he aggregate value of venture capital Fig. 21: Venture Capital Deals* for US-Based Companies, Q1 2010 - Q1 2018 Tfinancings of US portfolio companies 2,000 25 has nearly tripled over the past few years

1,800 Aggregate Deal Value ($bn) from $7.3bn in Q1 2010 to $19bn in Q1 1,600 20 2018, as seen in Fig. 21. Meanwhile, the first 1,400 quarter of 2018 saw 965 deals involving US- 1,200 15 based venture capital-backed companies, 1,000 the lowest on record since 2010. 800 10 No. of Deals Q1 2018 saw 1,041 venture capital deals 600 that involved a US-based manager, valued 400 5 at an aggregate $26bn, representing 10% 200 fewer deals compared to Q1 2017 but with 0 0 an aggregate value 37% higher (Fig. 22). Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

Deal value in Q1 2018 is almost double the 2010 2011 2012 2013 2014 2015 2016 2017 2018 historical average of $15bn from 2010 to No. of Deals Aggregate Deal Value ($bn) 2017, reflecting the overall industry trend Source: Preqin of higher ticket prices. The majority (59%) of US-based venture capital managers Fig. 22: Venture Capital Deals* Involving a US-Based Manager, Q1 2010 - Q1 2018 surveyed by Preqin in December 2017 cited 1,600 35 deal pricing as a key industry concern for Aggregate Deal Value ($bn) the year ahead. 1,400 30 1,200 25 The largest US venture capital financing 1,000 in 2017 was the $3bn Series G financing 20 of New York-based WeWork Companies 800 15 Inc., with known investments from SB 600 No. of Deals Investment Advisors and SoftBank (Fig. 10 400 24). Six of the 10 largest deals in US-based 5 portfolio companies took place in California, 200 led by the $2.1bn PIPE transaction for Snap 0 0 Inc., from returning investor . Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2010 2011 2012 2013 2014 2015 2016 2017 2018 Five of the 10 largest deals in 2017 that No. of Deals Aggregate Deal Value ($bn) involved a US manager occurred in China Source: Preqin (Fig. 25). California-based Silver Lake participated in the largest among these, Fig. 23: Top Five States by Aggregate Value of Venture Capital Deals* in 2017 the $5.5bn financing round of Didi Chuxing. The deal was $1.5bn larger than the second biggest deal in 2017, the $4bn Series C financing of China-based Meituan-Dianping. NY $13.0bn Early-stage investments (Series A and MA earlier) accounted for 53% of venture $6.7bn IL capital deals in 2017 and 14% of capital CA $1.9bn invested (Fig. 26). Deal value was most $38.0bn concentrated in Series D investments (25%), followed by Series B (17%). Software was the most active industry for US-based FL venture capital investment, representing $2.2bn 38% of deals and 24% of deal value in 2017

(Fig. 27). Source: Preqin

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Fig. 24: Largest US-Based Venture Capital Deals* in 2017 Deal Deal Size Total Known Primary Portfolio Company Stage Investor(s) State Date (mn) (mn) Industry Series G/ SB Investment Advisers, WeWork Companies Inc.** Aug-17 3,000 USD 4,486 USD New York Hotels, Offices Round 7 SoftBank Snap Inc. PIPE Nov-17 2,100 USD 5,009 USD Tencent California Telecoms Dragoneer Investment Group, Unspecified SB Investment Advisers, Technologies, Inc.*** Dec-17 1,250 USD 14,241 USD California Telecoms Round Sequoia Capital, SoftBank, Tencent, TPG Unspecified Roivant Sciences, Inc. Aug-17 1,100 USD 1,100 USD SB Investment Advisers New York Pharmaceuticals Round 32 Equity, Major League Unspecified Fanatics, Inc. Sep-17 1,000 USD 1,695 USD Baseball Players Pension Plan, Florida Round SB Investment Advisers

Source: Preqin

Fig. 25: Largest Venture Capital Deals* Involving a US-Based Manager in 2017 Deal Deal Size Total Known Primary Portfolio Company Stage Investor(s) Location Date (mn) Funding (mn) Industry Bank of Communications, Unspecified China Merchants Bank, Pagoda Didi Chuxing Apr-17 5,500 USD 20,667 USD China Telecoms Round Investment, RCFSI, Silver Lake, SoftBank , CPP Investment Board, GIC, IDG Capital, Mubadala Capital, Series C/ Meituan-Dianping Oct-17 4,000 USD 7,300 USD Sequoia Capital, Tencent, The China Internet Round 3 Priceline Group, Tiger Global Management, Trustbridge Partners Unspecified Toutiao Aug-17 2,000 USD 3,100 USD China Telecoms Round Dragoneer Investment Group, Unspecified SB Investment Advisers, Uber Technologies, Inc.*** Dec-17 1,250 USD 14,241 USD US Telecoms Round Sequoia Capital, SoftBank, Tencent, TPG Zhejiang Koubei Network Unspecified CDH Investments, Primavera Jan-17 1,100 USD 1,100 USD China Telecoms Technology Co., Ltd. Round Capital, Silver Lake, YF Capital

Source: Preqin

Fig. 26: Venture Capital Deals for US-Based Companies in 2017 Fig. 27: Venture Capital Deals* for US-Based Companies in 2017 by Stage by Industry

30% 28% 35% 34% 25% 25% 25% 30% 25% 24% 24% 20% 17% 15% 20% 18% 15% 14% 12% 15% 14% 12% 15% 13% 10% 10% 8% 10% 7% 7% 10% 8% 8% 8% 5% Proportion of Total 4% Proportion of Total 5% 4% 5% 4% 3% 3% 2% 2%3% 2% 2% 2% 2% 2%2% 1% 0% 0% PIPE Other Grant Internet Other IT Other Services Add-on & Other Business Food & Related Round 3 Round 1 Round 2 Telecoms Series C/ Series Series A/ Series B/ Series Healthcare Agriculture Software & Consumer Angel/Seed Discretionary Expansion Venture and Later and Electronics / Series D/Round 4 Semiconductors &

No. of Deals Aggregate Deal Value No. of Deals Aggregate Deal Value

Source: Preqin Source: Preqin

*Figures exclude add-ons, grants, mergers, venture debt and secondary stock purchases. **Part of a $4.4bn funding round, including $3bn into WeWork and $1.4bn into three subsidiaries. ***Part of a $9bn investment including a $7.75bn secondary stock purchase. US-based fund manager.

11 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 EXITS

2014 was a record year for venture The number of sales was 17% lower the coming months versus 26% in 2017. capital-backed exits of US-based portfolio compared to the previous year while sales The largest venture-backed exit in the US companies, with 1,673 exits valued at to GPs increased 22% (Fig. 29). in 2017 was the $7.8bn GP sale of Uber $134bn (Fig. 28). While the number of Technologies to Dragoneer Investment venture capital-backed exits each year Looking ahead through 2018, a smaller Group, SB Investment Advisors, Sequoia has levelled off since the 2014 record, the proportion (44%) of US-based venture Capital, SoftBank, Tencent and TPG (Fig. 1,207 exits seen in 2017 is on par with the capital fund managers expect exit activity 30). Seven of the 10 largest exits were average of 1,180 for the period 2007-2017, to increase compared to 50% in the year trade sales, while Snap Inc. was the only and aggregate exit value ($76bn) was 8% prior. However, a larger proportion (44%) IPO to make the list. higher in 2017 compared to 2016. believe exit activity will remain the same in

Fig. 28: Venture Capital-Backed Exits of US-Based Companies, Fig. 29: Venture Capital-Backed Exits of US-Based Companies by 2007 - 2017 Type, 2007 - 2017

1,800 160 1,800 160 1,673 1,643 1,600 140 1,600 140 Aggregate Exit Value ($bn) 1,417 1,432 Aggregate Exit Value ($bn) 1,400 134 1,400 120 120 1,175 1,207 1,200 1,200 1,078 1,096 100 100 1,000 1,000 818 80 80 87 800 800 703 743 81 74 76 No. of Exits No. of Exits 70 60 60 600 66 600 57 57 40 40 400 400 33 200 20 200 31 20 0 0 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

No. of Exits Aggregate Exit Value ($bn) Trade Sale Sale to GP IPO Write-off Aggregate Exit Value ($bn)

Source: Preqin Source: Preqin

Fig. 30: Largest Venture Capital-Backed Exits of US-Based Companies in 2017

Initial Total Known Exit Portfolio Exit Exit Acquiror Primary Investment Investors Funding Value Company Type Date (Exit) Industry Date (mn) (mn) Axel Springer AG, Baidu, Barclays, Benchmark Capital, BlackRock, Caspian Venture Capital, Citigroup, CrunchFund, Didi Chuxing, Dragoneer Investment Group, Fidelity Dragoneer Investments, First Round Capital, Founder Collective, Glade Investment Brook Capital Partners, Goldman Sachs, Goldman Sachs Group, SB Merchant Banking Division, GV, Endeavors, Investment Uber Kleiner Perkins Caufield & Byers, Kumpulan Wang Persaraan, Sale Advisers, 7,750 Technologies, Aug-09 LetterOne, Lone Pine Capital, Lowercase Capital, Menlo 14,241 USD Dec-17 Telecoms to GP Sequoia USD Inc.* Ventures, Microsoft, Morgan Stanley, New Enterprise Capital, Associates, Public , Qatar Investment SoftBank, Authority, SB Investment Advisers, SBT Venture Capital, Tencent, Sequoia Capital, Signatures Capital Partners, SoftBank, TPG Summit Partners, Summit Series, Tata Capital , Tencent, Times Internet, Toyota , TPG, Valiant Capital Partners, Wellington Management Adage Capital Management, Altimeter Capital Management, , ClearBridge, Cross Creek Advisors, ESO Fund, General Atlantic, Goldman Sachs, , Cisco AppDynamics, Trade 3,700 Apr-08 Harmony Partners, Industry Ventures, Institutional Venture 415 USD Jan-17 Systems, Software Inc. Sale USD Partners, Kleiner Perkins Caufield & Byers, Lightspeed Inc. Venture Partners, Sands Capital Management, SharesPost, Bank Alibaba Group, Benchmark Capital, Coatue Management, DST Global, , General Atlantic, General Catalyst Partners, GIC, Glade Brook Capital Partners, HDS 5,009 USD IPO Mar-17 3,400 Snap Inc.* Mar-12 Capital, Institutional Venture Partners, Kleiner Perkins - USD Telecoms Caufield & Byers, Lightspeed Venture Partners, Lone Pine Capital, Morgan Stanley, NBC Universal, Sequoia Capital, SV Angel, T Rowe Price, Tencent, Yahoo

*Denotes partial exit. Source: Preqin

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S-based venture capital funds have Fig. 31: US-Based Venture Capital Funds: Median Net IRRs and Quartile Boundaries by Uposted relatively strong returns for vintages 2007-2015, with a median net IRR 40% of 12% (Fig. 31). When looking at median 35% net IRRs and quartile boundaries by 30% vintage year, 2010-2013 funds have tended Top Quartile Net to perform better than those that began 25% IRR Boundary investing in the years leading up to the 20% Median Net IRR Global Financial Crisis (vintage 2007-2009). 15% 10% Venture capital managers continue to Bottom Quartile Net distribute significant sums of capital to 5% IRR Boundary Net IRR since Inception investors: outflows from US-based 0% venture capital funds reached a record -5% high of $57bn in 2016, as fund managers -10% returned capital faster than they called it 2007 2008 2009 2010 2011 2012 2013 2014 2015 up (Fig. 32). 2016 saw the largest net cash Vintage Year flow (+$19bn) on record the period 2007- Source: Preqin 2016. Fig. 32: US-Based Venture Capital Funds: Annual Amount Called up, Distributed and Net Cash Flow, 2007 - 2016 Half of the top performing US-based funds are micro venture capital funds, including 70 the top four, which are also of more recent 60 vintages (Fig. 33). 50

40

30

20

10

0

-10

-20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Capital Called up ($bn) Capital Distributed ($bn) Net Cash Flow ($bn) Source: Preqin

Fig. 33: Top Performing US-Based Venture Capital Funds (Vintage 2007-2015)

Fund Geographic Net Date Rank Fund Firm Vintage Fund Type Size (mn) Focus IRR (%) Reported

Multi- 1 CRCM Opportunity Fund CRCM Ventures 2013 37.5 Early Stage: Start-up 122.8 31-Mar-18 Regional 2 Foresite Capital Fund I Foresite Capital 2012 100 Expansion/Late Stage US 65.4 30-Sep-17 3 New Science Ventures 2014 A New Science Ventures 2014 98 Venture (General) US 59.0 30-Sep-17 4 Revel Venture Fund I Revel Partners 2011 10 Early Stage: Seed US 58.7 31-Dec-16 5 OrbiMed Private Investments V OrbiMed Advisors 2013 735 Venture (General) US 57.9 30-Sep-17 6 II Spark Capital 2008 360 Early Stage: Start-up US 51.5 30-Sep-17 7 IA Venture Strategies Fund I IA Ventures 2010 50 Early Stage US 51.2 30-Sep-17 8 Avalon Ventures VIII Avalon Ventures 2007 150 Early Stage: Seed US 50.6 30-Sep-17 9 Frazier Healthcare VII Frazier Healthcare Ventures 2013 377 Venture (General) US 49.0 30-Jun-17 10 XI Menlo Ventures 2011 400 Venture (General) US 47.9 30-Sep-17

Source: Preqin

13 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN 2017 INVESTORS

mong the 10 most active investors Fig. 34: Most Active Investors in US-Based Venture Capital Funds by Number of Known Ain US venture capital, the largest Fund Commitments, All Time No. of Active VC proportion (70%) are pension funds, led Investor Type Commitments Mandate by California Public Employees’ Retirement California Public Employees' System (CalPERS) with 280 known Public Pension Fund 280 No Retirement System (CalPERS) commitments to the strategy (Fig. 34). HarbourVest Partners PE Fund of Funds Manager 208 Yes

However, when looking at the top 10 AT&T Pension Fund Private Sector Pension Fund 186 No investors in US micro venture capital, just HP Inc. Pension Fund Private Sector Pension Fund 175 No one pension fund is on the list: Retirement Illinois Municipal Retirement Fund Public Pension Fund 165 Yes Plans of Duke University, with 13 known Adams Street Partners PE Fund of Funds Manager 163 Yes commitments (see page 8), along with four University of Michigan Endowment Endowment Plan 162 No government agencies and three private Michigan Department of Treasury Public Pension Fund 150 No equity funds of funds. Pennsylvania State Employees' Public Pension Fund 150 No Retirement System Among the 17 different types of Alcatel-Lucent Pension Fund Private Sector Pension Fund 144 No investors allocating to US venture capital, Source: Preqin foundations account for the largest proportion (20%), followed by private Fig. 35: Investors in US-Based Venture Capital Funds by Location sector and public pension funds, which make up 15% and 13% respectively (Fig. 36).

The US venture capital industry tends North America Europe to attract larger, more sophisticated 76% 14% Asia investors, with the majority (65%) 7% managing over $1bn in assets, including 11% that manage at least $50bn (Fig. 37).

Unsurprisingly, the majority (76%) of Rest of World investors in US-based venture capital 3% funds are North America based (Fig. 35).

Source: Preqin

Fig. 36: Investors in US-Based Venture Capital Funds by Investor Fig. 37: Investors in US-Based Venture Capital Funds by Assets Type under Management

40% Foundation 20% 37% 35% Private Sector Pension Fund 15% 30% Public Pension Fund 13% 25% 24% Endowment Plan 10% Fund of Fund Managers 9% 20% 17% 15% Insurance Company 8% 11% Corporate Investor 6% 10% 5% 6% Proportion of Investors Private Equity Firm 5% 5% Government Agency 4% 0% Bank/Investment Bank 3% $100bn Other 8% orMore $1-9.9bn $500mn Less than $10-49.9bn $50-99.9bn

0% 5% 10% 15% 20% 25% $500-999mn Proportion of Investors Source: Preqin Source: Preqin

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