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Príncipe de Vergara, 55 4º D • 28006 tel. (34) 91 411 96 17 • www.ascri.org

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SURVEY Venture Capital & Private Equity in Spain 2017

WITH THE SPONSORSHIP OF Private Equity & Venture Capital in a changing global environment SURVAY 2017

Sponsor by:

Private Equity & Venture Capital in Spain THIS SURVEY WAS ELABORATED BY: Dominique Barthel (ASCRI Managing Director) and Ángela Alférez (ASCRI Head of Research), from the data obtained and collected by José Martí Pellón (Universidad Complutense of Madrid) and Marcos Salas de la Hera (Webcapitalriesgo.com)

Copyright ASCRI ® 2017 The Spanish Venture Capital & Private Equity Association (ASCRI) is the industry body that units and represents the sector to the authorities, Government, institutions, investors, entrepreneurs and media. ASCRI regularly communicates and provides statistics and updated information regarding the developments of the tax and legal framework. ASCRI also organizes a range of activities (training courses, events and round tables) for the members and general public in order to disseminate and reinforce the contribution of the Venture Capital & Private Equity industry for the economy and growth of SMEs in Spain.

ASCRI comprises almost 100 national and international Venture Capital & Private Equity firms, five limited partners and over 50 service providers, spreading and ensuring the professional standards among its members: transparency, good governance and best practice. REPORT 2017 INDEX INDEX 5

CHAIRMAN’S LETTER 7

SUMMARY OF THE YEAR 2016 9

FUNDRAISING 12

INVESTMENT 14

DIVESTMENT 18

PORTFOLIO 19

VENTURE CAPITAL 20

2016 MAIN TRANSACTIONS 27

STATISTICS 33

THE REGULATORY FRAMEWORK IN PERSPECTIVE: QUESTIONS UNDER REVIEW 46

GENERAL PARTNERS INCLUDED IN THIS SURVEY 50 Our goal is to support the expansion plans of leading companies with high growth potential and international projection

Recent transactions

Smartphones, Quick service High performance Children’s clothing tablets, 3D printers Solar energy restaurants steel components and robots

Torre Europa Pº de la Castellana, 95, 29th fl oor 28046 Madrid - Spain Tel.: +34 914 262 329 [email protected] www.dianacapital.com

CHAIRMAN’S LETTER 7

have the pleasure, as the Chairman of ASCRI, of presenting this annual report on Venture Capital and Private Equity activity in Spain during 2016. We have been publishing these reports for over 30 years, I although the statistics collected have obviously evolved over the years, with data becoming increasingly detailed, reliable and comparable to those collected in other European countries. The EDC Platform – collecting and processing statistics on our sector from across – was implemented in the second half of 2016. This is the materialization of 6 years of work by ASCRI and other european National VC&PE Associations. This new process for gathering and preparing statistics will play a crucial role in enhancing reliability, consistency and confidence in our sector.

Figures from 2016 confirm that the Venture Capital & Private Equity sector is definitely entering a new stage of growth. Following an end of 2015 and start of 2016 that were overshadowed by a national political scene that slowed fund closings and execution of large transactions, the sector achieved strong results in 2016 across all key indicators: fundraising, and divestment. Private domestic entities raised nearly €2,271 million in new funds (+48.5% from 2015) and fundraising conditions remain favorable: market liquidity, international investor interest and support for the sector from public Funds of Funds (Innvierte and Fond ICO Global). As regards investment, we saw a continued positive trend with investment volumes in excess of €3,600 million, thanks in large part to the momentum of international GPs, representing close to two thirds of total investment this year, resulting in the recovery of large transactions and megadeals (9 over €100 million in 8 companies). Following two years of heavy divestment, divestment levels have slowed but continue at a healthy pace (close to €2,000 million).

I would like to once again express our sincere gratitude for the unwavering support of our sponsor of this publication –DIANA CAPITAL–, who has for the past ten years encouraged us to improve and expand distribution of this report. I also wish to thank all the Venture Capital & Private Equity Firms that responded to our survay used to build these statistical data as well as to the team at Webcapitalriesgo who once again compiled and processed the statistical data for ASCRI, this time through our new European EDC Platform. To all of them, many thanks for their interest, time and work.

Please let me remind you that this report may be downloaded from our website (www.ascri.org) in both English and Spanish. Please don’t hesitate to send us comments on how to improve the next issue.

Juan Luis Ramírez Our goal is to support the expansion plans of leading companies Chairman with high growth potential and international projection

Recent transactions

Smartphones, Quick service High performance Children’s clothing tablets, 3D printers Solar energy restaurants steel components and robots

Torre Europa Pº de la Castellana, 95, 29th fl oor 28046 Madrid - Spain Tel.: +34 914 262 329 [email protected] www.dianacapital.com SUMMARY OF2016 AND OUTLOOK2017

SUMMARY OF 2016 AND OUTLOOK 2017 9

Key Performance Indicators

Fundraising Investment Divestment 2,000 4,000 5,000

4,000 3,000

3,000 1,000 2,000 2,000

1,000 1,000

0 0 0 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016

Fundraising Investment Divestment

A good year for the sector despite political uncertainty Garnica by Intermediate Capital Group, Invent Farma by , Renovalia Energy (Cerberus Capital) and MaxMobility Despite slowdowns in sector activity during the first half of the Spain (Cabify) by . These 9 investments represented 54% year due to political uncertainty in Spain and abroad, 2016 turned of total invested volume (€1,405M). out to be a very positive year for the Spanish Venture Capital and Private Equity (Capital Privado) sector. Investment momentum On the other hand, domestic VC&PEs invested a total of €1,018M in the second half of the year was strong, in part thanks to the in 521 investments (86% of total investments in 2016). significant activity of large international funds who closed several transactions including 9 large transactions (>€100M in The sectors that received the highest volume of investments were equity) in 8 companies. the following: Leisure (25.7%), followed by Consumer Goods (10.6%), Communications (9.6%), IT (8.1%) and Energy and Domestic LPS drove fundraising Natural Resources (8%). Private domestic entities raised €2,271M in 2016 (+48.5% from By number of investments, the IT sector ranked first (41.4% of 2015). Domestic LPs raised 61.9% of total funds in the sector, total investee companies), followed by Consumer Goods (8.2%), and the public Funds of Funds Innvierte (managed by CDTI) and Healthcare (7.9%) and Biotechnology / Life Sciences (5.8%). FOND-ICO Global (managed by Axis) played a significant role in stimulating domestic fundraising in the last years. Middle market A very active middle market vehicles stand out as regards new funds raised by private VC&PEs: The middle market (transactions between €10M and €100M) Alantra Private Equity Fund, Artá Capital Fund II, Fondo Nazca continues its return to pre-crisis levels (€1,238.5M; 38% of total IV, MCH Iberian Capital IV (first closing), Aurica III (first closing), annual investment), although investment by volume and number of BTC II and Realza Capital II. Several funds were closed to finance investments did fall slightly (57 investments in this segment in 2015 start ups, including Ysios BioFund II Innvierte, Kibo Ventures totaling €1,638M). Domestic funds stood out, leading 30 of the Innvierte Open Future, Kanoar Ventures, Bullnet Capital III, 49 investments closed during the year. [A list of middle market BeAble Innvierte KETs Fund, Samaipata I and Swanlaab Giza transactions is provided at the end of this report]. Innvierte I. In 2016, total funds raised by Private Equity GPs totaled €1,702M, whereas Venture Capital GPs totaled €568M. Funds available for investment (dry powder) increased by 41%, Spain is one of the most attractive totaling approximately €4,150M. Venture Capital markets in Europe Venture Capital is gaining strength, with total investments in excess International funds continue to show interest of €402.8M in 469 investments (390 companies) evenly distributed, in the Spanish market by volume, between international and domestic funds (56% and 44%, respectively), although by number of investments, private Investment volume exceeded €3,619.7M1 in 603 investments domestic funds accounted for 70%. [A list of the most significant (+33.6% by volume, +4% by number of investments), with a Venture Capital transactions is provided at the end of this report] particularly strong second half of the year that accounted for 73% The number of new players in this investment segment continues of total investment. to grow, and each year between 20 and 30 new international funds International funds invested €2,601M (+53.4% from 2015) choose Spanish start ups for their first investment here. As at the –accounting for 72% of total investment in Spain in 2016– in end of 2016, 109 of the 149 international entities with Spanish 82 investments, of which 9 were large investments (compared portfolio companies were Venture Capital firms. At the national to 5 in 2015): Hotelbeds by and CPPIB, MásMovil by level, the Venture Capital sector had 78 domestic funds, 12 of Providence, Cupa Group by , Tinsa by Cinven, which were public.

1 For the sake of consistency between our methodologies and those followed by other National Venture Capital and Private Equity Associations in Europe, investment figures refer to investments made by domestic (public and private) and international GPs in Spanish companies. Therefore, investments made by Spanish GPs outside of Spain, which totaled €578M across 84 investments in 2016, are not included. 10

Divestments stabilize improvements in other macro variables in 2017: unemployment will continue to fall, closing the year under 17%, although After two years of heavy divestment activity, portfolio turnover unemployment rates will remain excessively high. Public deficit is remains robust, albeit at a slower pace. Divestments (at price expected to remain stable at 3.3%, above thresholds set by the cost) exceeded €1,851M (-57.5% from 2015) in a total of EU. Consumer spending continues to be the main driving force 314 transactions. The market continues to offer good divestment for the economy, which, together with low inflation (2.2% in conditions: abundant liquidity, industrial investors interested in 2017) and increased export of goods and services, makes business investing and attractive valuations, although high owners more confident about the future of the Spanish economy. volatility stunted performance of this divestment method in the We therefore have reason to be optimistic, although we can’t lose second half of the year. sight of the fact that the economy is expected to slow down and that certain reforms and decreases in the public deficit are still The most commonly used divestment mechanism (by volume at necessary. price cost) was Trade Sale (26.3%), followed by Owner’s Buyback (18%), IPOs (14%) and Secondary (13.5%). [A list of The Venture Capital and Private Equity sector is consolidating, the main investment and divestment transactions is provided at the with a very active middle market, new Private Equity & Venture end of this report] Capital vehicles, an increasingly strong venture capital segment, and the transformation of Spain into an attractive focus for foreign Outlook 2017 investors; the outlook for 2017 is good. Spain remains a country of According to the most recent data published by the Bank of Spain, opportunities both for domestic and international investors. The exit growth projections for Spain are very positive (GDP growth of of the from the European Union should represent 2.8%), although a slight downturn in activity is expected in 2018 an opportunity for Spain to attract a portion of those investors and (2.3%) and 2019 (2.1%). During the first few months of 2017, businesses that decide to relocate to other EU Member States, due the economy has performed better than expected, contributing to Spain’s economic situation, legal security and attractive legal and to Spain’s continued position as one of the most active countries tax framework. among the major developed economies. Projections also anticipate

11 12 Fundraising

undraising by private entities gained momentum in 2016 New funds raised by type of entity (GP) Fthanks to domestic LPs. 4,000 New funds raised by private Private Equity and Venture Capital firms in Spain in 2016 totaled €2,271M, representing an increase of 48.5% from 2015. This figure is the highest on record since 3,000 the financial crisis, exceeding fundraising in countries like (€1,313M1) and (€2,330M2), albeit far from total new 2,000 funds raised in France (€14,700M3). Including new funds for public € Millons 4 entities (€167M), total new funds raised for the sector reach 1,000 €2,438M (+45% from 2015). The public sector’s commitment through funds of funds (Fond-ICO Global and Innvierte), international investors’ confidence in Spain and this asset class, and 0 the growing interest of domestic LPs are some of the many reasons 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 behind the growth in this variable. Domestic private entity Domestic public entity Globally, fundraising conditions improved in 2016, with total funds Source: ASCRI / webcapitalriesgo raised of €347bn (+5% from 2015)5. In particular, new funds raised in Europe totaled €100bn, the highest on record for the 2009-2016 period. A large portion of this amount (€64bn) was directed to large pan-European funds. Political instability and market volatility drove investment interest of LPs in Private Equity and Venture fund closing) of Black Toro Capital Partners; and Realza Capital II Capital investment vehicles. Likewise, high liquidity from capital (€75M, first closing) of Realza Capital. Several funds were closed returns/gains earned from divestments in investee companies in to finance start ups, including Ysios BioFund II Innvierte the sector and high confidence in this asset class explain the strong (€126M, final closing) of Ysios Capital Partners; Kibo Ventures investment demand by LPs. According to Prequin, 89% of LPs plan Innvierte Open Future (€71M) of Kibo Venture Partners; Kanoar to increase their allocations to Venture Capital & Private Equity in Ventures (€50M) of K Fund; Bullnet Capital III of Bullnet Gestión the -term and 94% in the long-term. (€42M, final closing); BeAble Innvierte KETs Fund (€32M) of New funds raised by domestic private entities were headed Beable Capital; Samaipata I (approx. €35M) of Samaipata Capital by 38 Venture Capital & Private Equity Firms (VC&PEs), Partners; and Swanlaab Giza Innvierte I (€21M) of Swanlaab Venture Factory, as well as several undisclosed capital extensions compared to 37 that raised new funds in 2015. Middle market in Venture Capital & Private Equity vehicles. In 2016, total funds vehicles stand out as regards new funds raised by private raised by Private Equity GPs totaled €1,702M, whereas Venture VC&PEs: Alantra Private Equity Fund (€352M) of Alantra Private Capital GPs totaled €568M. Equity; Artá Capital Fund II (€300M) of Artá Capital; Fondo Nazca IV (€275M) of Nazca Capital; MCH Iberian Capital IV (first Significant capital raised by middle market funds through closing) of MCH Private Equity Investments; Aurica III (€100M, fundraising activities led to growth in “dry powder” available to first closing) of Aurica Capital Desarrollo; BTC II (€235M, final domestic private entities, totalling approximately €4,085.2M.

oth investment and fundraising grew vs. GDP. The Fundraising and investments as a percentage of GDP relationship between raised and invested funds as a B 0.005 percentage of GDP6 shows an increase in both variables as compared to 2015. Venture Capital & Private Equity investment climbed 7 percentage points relative to GDP, to 0.32%. The 6-point 0.004 increase in raised capital brings this variable to 0.22%. 0.003

0.002

0.001

0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Investment in Spain / GDP (%) New funds raised / GDP (%) Source: INE, ASCRI/webcapitalriesgo

1 Source: AIFI (Italian Association of Private Equity & Venture Capital). 2 Source: BVK (German Association of Private Equity & Venture Capital). 3 Source: AFIC (French Association of Private Equity & Venture Capital). 4 This category includes the capital extensions provided under the General State Budget (both national and regional) aimed at public VC&PEs. 5 Source: Prequin. 6 According to the National Institute of Statistics (INE), Spain’s gross domestic product grew by 3.2% from 2015. 13

s in 2015, funds of funds were the primary investor New funds raised by Spanish private VC&PEs A(LP) in total funds raised by domestic private entities. by type of investor (LP) in 2016 As regards capital raised by Spanish private VC&PEs, by 35% type of investor of the funds raised, funds of funds led 32% capital contributions, accounting for 21.7% of the €1,271M 30% raised. Individuals () accounted for 20%, regaining 25% confidence in the sector following the contraction of this source 23% during the crisis years, having contributed €459.9M, the second 20% 19% 17% 16% 17% 17% highest contribution since this sector started. The public sector,7 15% 15% including FOND-ICO Global8 and Innvierte (investment vehicle for VC&PE funds managed by CDTI), increased contributions from 10% 9% 9.6% in 2015 to 15% in 2016 (€348M). 6% 5% 5% 5% 3% 3% 3% 3% 2% 1% 1,8% 2% Pension funds, totaling €97,8M, decreasing contributions of new 0% capital to Spanish entities by 42% from 2015. Domestic pension of GPs funds continue to contribute relatively low amounts to Spanish Others Financial Academic Corporate

VC&PE vehicles (€34M in 2016) being far from their European Companies Institutions Institutions Foundations Public Sector Family of ce Pension funds Commitement

counterparts with average annual contributions between 15%- Funds of funds 20% of total funds raised.

Insurance companies accounted for 7.7% (€174.9M) of the total. Private Equity funds Venture Capital funds Source: ASCRI / webcapitalriesgo

omestic LPs are the main contributors of new funds in New funds raised by Spanish private VC&PEs by geographic break- Dthe sector. Spain stands out as regards geographic origin of down of investor (LP) in 2016 contributions to Spanish private VC&PEs in 2016, representing 500 463 61.9% of funds invested. In absolute terms, volume invested by 450 429 400 domestic LPs grew by 158% from 2015, whereas international 349 investors essentially maintained their commitment to Spanish 350 private VC&PEs (€866M) as compared to the previous year, 300 reflecting their interest in the Spanish market and renewed 250 200 188 confidence in the national economy. Specifically, 25.6% arose in € Millons 166 150 Europe (Luxembourg, Switzerland, the , Denmark and 99 110 100 71 76 France stand out in particular), followed by the with 46 64 64 44 50 29 31 34 5%. 10 0

Domestic LPs of GPs Others Financial

International LPs Insurance Academic Corporate Companies Institutions Foundations Public Sector Family of ce

Source: ASCRI / webcapitalriesgo Institutions & Pension funds Commitement Funds of funds

panish SMEs grew and consolidated its position as Intended application of new funds raised by Spanish private Sthe main recipient of capital raised by Spanish private VC&PEs entities9. While from 2009 to 2013, fundraising for investment in start ups was the main driver of Venture Capital activity, in Other 2014-2016 domestic middle market funds renewed their funds for investments over the coming years. In 2016, mature companies (MBO/MBI) accounted for 38% of intended application (€870M). Leveraged Growth companies accounted for the second highest application of new funds raised (€709M, i.e. 31% of total). Finally, capital for seed, start up and late stage ventures totaled €528M (23% of total), a historic high since statistics on the sector are being Early Stages recorded. (seed + start up + late stage venture) 0% 20% 40% 60% 2016 2015

Source: ASCRI / webcapitalriesgo

7 This category includes public funding aimed at funds raised by domestic private entities. 8 In 2016, FOND ICO Global contributed €151M to domestic VC&PE vehicles. Funds allocated to international vehicles should be added to this figure. FOND ICO Global, through seven calls (up to December 2016), has agreed to total commitments of €947M since launch, enabling the 39 selected funds, 12 of which were international funds, to invest around €3,800M in Spanish companies. 9 This data is developed based on the answers provided by those entities that responded to the question “Intended application of new funds raised” on the survay. 14 Investment

arge transactions1 drive investment volume in the second Investment by type of entity (GP) Lhalf of the year. 5,000 Whereas investment volumes in 2015 were lower than expected, 4,000 although with positive performance in Venture Capital and Middle Market segments, 2016 has been marked by a mature sector 3,000 showing considerable resiliency to the political uncertainty of 2016. Investment in Venture Capital & Private Equity2 in Spain in € Millons 2,000 2016 totaled €3,619.7M, representing a 33.6% increase from 2015 (€2,709.6M), the third best figure on record following 2005 1,000 and 2007. 92% of investments were allocated to new investments, compared to 8% in follow ons. Economic recovery, easier access to 0 loans, investor appetite and ample capital resources for investment 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 have undoubtedly contributed to this year’s performance, and in International GP Domestic private GP particular to the concentration of 73% of investment volume Domestic public GP Number of investments in the second half of the year. Source: ASCRI / webcapitalriesgo International GPs3 contributed 72% (€2,601M) of total maintained modest direct investment levels, and in 2016 investment annual investment in 2016, and investment volume grew 53.4% remained below €60M (-44% YoY), allocated to 124 investments from 2015 (€1,696M). Over half of these investments (54%) were (-6% from 2015). Likewise, the public sector continued supporting equity investments for over €100M, totaling 9 transactions in 8 Venture Capital and Private Equity through its investment activity (as companies in 2016. As in previous years, presence of international LP) both in Private Equity and Venture Capital vehicles, as further GPs in Spain, that supplement the activity of local funds, was again explained in the chapter on fundraising of this report. extremely relevant not only in large Private Equity transactions, but also in Venture Capital, in particular in late stage ventures4. As at the A comparison between the two main segments of this sector shows end of the fiscal year, international funds had closed a total of 82 that Private Equity investment totaled €3,216.8M across 134 investments, the second best on record after 2015 (96 investments5). investments and Venture Capital totaled €402.8M across 469 investments. Domestic private GPs invested a total of €958M (+5.7% from 2015) across 397 investments (+9 from 2015). Recovery of Regarding the number of investments in 2016, a total of 603 domestic fundraising and therefore of funds available for investment were recorded in 510 companies. 64% of investments recorded together with an industrial fabric that has recovered from the crisis were new investments (compared to 36% in expansions of previous continue to drive investment by these GPs. To the contrary, public GPs investments), a proportion which has remained stable since 2011.

he investment of international funds in the large Stage distribution of Venture Capital & Private Equity investments Tmarket boosted the amount of leveraged transactions, 4,000 representing 60% of total investments. Domestic entities focused their investment activity on capital growth and venture capital. 3,000 In terms of volume, investment was concentrated in leveraged 2,000 transactions (€2,174, 60% of total), followed by growth capital (€752M, 20% of total). € Millons 1,000 Growth in leveraged investments was supported by the number of large transactions in 2016, primarily buy outs led by international 0 funds. In particular, these funds invested a total of €1,870.9M 2011 2012 2013 2014 2015 2016 in buy outs in 2016, compared to €769M in 2015. On the other Seed Growth hand, and despite normalization of bank lending and growth of Start-up + other early stages LBO/MBO/MBI/LBU alternative financing, domestic Private Equity funds decreased Later stage venture Others investments in LBOs (€303M invested compared to €584.7M in Source: ASCRI / webcapitalriesgo 2015). The total number of buy outs decreased slightly from 38 in 2015 to 34 in 2016. Participation of domestic and international by number of investee companies, similar to 2015. Capital GPs in the funding of growth in more mature companies (growth flows were directed to some 198 start ups, followed by other capital) was similar: €389.5M from domestic entities and €363.4M early stage (126). For a detailed analysis of investments in the from international funds, distributed across 85 investments. A seed, start up, other early stage6 and late stage venture stages see majority of the investments in growth capital were carried out Chapter 6, on Venture Capital. by domestic entities (72 investments). [A list of the main growth The remaining investee companies belong to the late stage venture capital and buy out investments is provided in Table 27, page 28]. (50 investments), seed (95), other (9) and replacement (34) Investment in Venture Capital (469 investments) ranked first categories.

1 Investments in equity above €100M. 2 In Spanish, the term Capital Riesgo is now referred to as Capital Privado, and includes both Venture Capital and Private Equity. For the sake of consistency between our methodologies and those followed by other National Venture Capital and Private Equity Associations in Europe, the investment figures contained in this report refer to investments made by domestic (public and private) and international GPs in Spanish companies, thus excluding investments by Spanish GPs abroad, which totaled €578M across 84 investments in 2016. This is a change from the methodology previously used to prepare statistics. 3 In this chapter we use indistinctly the term fund, entity, GP and Venture Capital and Private Equity Firm (VC&PE) to refer to Venture Capital and Private Equity operators. 4 Late Stage: investment by Venture Capital funds in growth companies with sales and positive EBITDA. 5 The number of investments as published in this report is calculated from the investor perspective, meaning that some investee companies may be double counted in the case of syndicated investments. 6 Other Early Stage: Refers to follow-on rounds or Series B/C investments in startups 15

he Leisure sector was the primary recipient of Venture Investments by sector (2016) Capital and Private Equity financing, and the IT sector T Others received the highest number of investments. Regarding Others services sectors, Leisure received 25.7% of funds invested (in transactions including Hotelbeds, Ingesport, Telepizza and Grupo Vips), followed Medical / Helthcare by Consumer Products (10.6%), in transactions including Ramón Chemistry & Materials Sabater, Kiwoko, Discefa, Go Fruselva, Arenal Perfumerías and Construction Martínavarro. These were followed by Communications (9.6%), in Biotechnology transactions including Masmovil and Unitronics Comunicaciones; IT (8.1%), including companies such as Cabify, Jobandtalent, Userzoom Technologies and Corner Job; and Energy (8%), with transactions Industrial Products & Services including Renovalia Energy and Soria District Heating. Energy / Natural resources By number of companies, the IT sector ranked first (41.4% of Computer related total investee companies), followed by Consumer Products (8.2%), Communications

Healthcare (7.9%) and Biotechnology / Life Sciences (5.8%). Consumer related products Leisure

0% 5% 10% 15% 20% 25% 30%

Source: ASCRI / webcapitalriesgo

adrid and the Balearic Islands stood out as the main Investment by region (2016) Mrecipients of Venture Capital & Private Equity investment. As far as the Autonomous Communities, Madrid stood out, with 32.9% of total investment in Spain, followed by the Balearic 1.2% 0% 2.4% 7.4% 1% Islands (19.8%) and Catalonia (14%). In the case of Madrid, the 4.8% 14.2% investments in Cabify, Tinsa, Masmovil, Telepizza, Ingesport, Grupo 0.6% 0% Vips, Jobandtalent, Vitaldent, Konecta and Kiwoko were crucial.

In the Balearic Islands, the Hotelbed, Habitissimo and Travel 32,9% Compositor transactions stood out, as well as the Invent Farma, Go 19.8% 6.4% 6.3% Fruselva, Agromillora, Torrot - Gas Gas, Stat Diagnóstica and Deltalab 0.1% transactions in Catalonia. Galicia (7.4%) and the Autonomous Community of Valencia (6.3%) saw significant growth in terms of 1.4% volume due to large transactions involving companies headquartered 1.5% in these regions, including Cupa Group and Discefa (Galicia) and Ingenomix, Martín Navarro and Royo Group (Comm. of Valencia). 0% As regards number of investments by region, Catalonia topped the ranking with 182 investments, followed by Madrid (117), the Basque Country (58) and Galicia (57). It is worth highlighting the 12 Source: ASCRI / webcapitalriesgo investments recorded in Andalusian companies, as this region had consistently attracted investments in over 100 companies each year since 2006.

enture Capital and Private Equity activity in Spain primarily Investment by size of company (number of investments) in 2016 Vfocused on financing SMEs. Investments in SMEs are dominating the Spanish Venture Capital & Private Equity 100% market. Of the 603 investments made in Spain in 2016, 430 were made in SMEs with less than 100 employees. 80% According to transaction size, of the 603 investments, nearly half 60% (45%) received contributions of less than €250,000, 71% received less than €1 million, 16% €1-5 million, 2.8% €5-10 million, 4.4% 40% €10-25 million and 3.6% €25-100 million. The rest (1.4%) relates to transactions of more than 100 million. 20% The average amount invested per company increased to €6M

(the average in 2015 was €4.7M). 0% 0 to 99 employees 100 to 199 employees 200 to 499 employees More than 500 employees Venture Capital Private Equity Source: ASCRI / webcapitalriesgo 16 Middle Market

he Spanish middle market remained active in 2016, Middle market investments by size of investment although total investment volume fell by 20% from T2015. Despite this decrease, midmarket investments (equity 600 investments between €10 and 100 million) maintained pre-crisis levels both in terms of volume and number of investments. Total amount invested in this market segment was €1,238.5M 400 (compared to €1,543.5M in 2015) across 49 investments (51 in 2015), well above 2013 (€332M) and 2014 (€573M) levels. The middle market represented 34% of total Venture Capital and € Millons 200 Private Equity investment in Spain (€3,619M), and 89.8% of invested capital was applied to new investments. 0 Domestic GPs invested a total of €717M (-8% from 2015) in 10 to 25 25 to 50 50 to 75 75 to 100 middle market transactions across 30 investments. On the other 2015 2016 hand, international GPs contributed €521M (-32% from 2015) across 19 investments (same as in 2015). Source: ASCRI / webcapitalriesgo In 2016, as compared to 2015, more transactions were completed in the €25M-75M investment range and less in the €50M-100M range. International midmarket GPs focused primarily on buy out transactions, while domestic midmarket GPs concentrated their investments in growth capital and buy outs. The middle market in Spain, in general terms, is doing well: a great number of Spanish sectors are fragmented, which presents great buy & build opportunities that several GPs are taking advantage of. An offer of interesting assets with growing valuations, albeit far from valuation levels in other countries, significant liquidity most GPs operating in this investment segment managed to raise funds over the past three years and increased availability of debt should pave the way for growth in this segment over the coming years.

nvestment in LBOs continues to stand out. The availability Stage distribution of investment in middle market of bank loans in 2015 and 2016 has driven the increase in LBOs, 2,000 Irising from 9 in 2014 to 24 in 2015, and to 22 in 2016, totaling €624M in 2016 (€268M in 2014; €839M in 2015). The middle market has also made 14 investments in Growth Capital, totaling €286M, and 2 investments in Late Stage 1,000 Ventures, totaling €47M, both headed by international GPs. Lower midmarket investments in Venture Capital (7 in 2015 € Millons compared to 2 in 2016) explains in part the decreased investment in this segment in 2016. 0 [A list of the main Venture Capital, Growth Capital and Buy Out 2015 2016 transactions is provided in Table 24, page 25]. Seed Growth Start-up + other early stages LBO/MBO/MBI/LBU As regards sectors, the middle market has historically focused on Later stage venture Others traditional industries. The Consumer Products sector received the Source: ASCRI / webcapitalriesgo highest investment volume (€338M; 27.3% of total), followed by the Leisure (€236M; 19%) and Industrial Products and Services (€168M; 13.6%) sectors. The following stand out in the sector distribution by number of investments: IT (10), Healthcare (8), Industrial Products and Services (7) and Consumer Products (7). Large Market. The International Investor 17

nternational funds led the large market in Spain. Although Investments by international entities in Spain Ipolitical uncertainty at the end of 2015 and beginning of 2016 (by size of investment) slowed international investor appetite, once the political situation 4,000 14 cleared up, international investors returned in full force. The 12 market for large transactions (>€100M in equity) –also known 11 12 3,000 as megadeals– was again headed exclusively by international 9 10 investors in 2016, following the trend of previous years. In 2016, 7 7 8 only 9 international investors headed the 9 large transactions 2,000 6

€ Millons 6 in 8 companies, representing 54% (€1,959M) of total amount 5 5 5 5 3 4 invested – Cinven and CPPIB PE (Hotelbeds), 1,000 Nº Investments

(MásMovil), Cinven (Tinsa), ICG (Garnica), Apax Partners (Invent 0 2 Farma), The Carlyle Group (Cupa Group), Cerberus (Renovalia 0 0 Energy) and KKR (Telepizza). In 2015, 5 megadeals were carried 2015 2016 out totaling €755M (28% of total amount invested in 2015), 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 headed by 5 international investors. Investments > 100M€ Investments< 100M€ Nº Investments > 100M€ Source: ASCRI / webcapitalriesgo

nvestment of international funds in Spain saw strong Number of international entities investing in Spain Igrowth in 2016. In 2016, international funds invested (by size of funds managed)2 €2,601M (compared to €1,696M in 2015) in Spain, €1,959M 180 (54%) of which were megadeals, €521M (14%) in midmarket 160 157

transactions (equity between €10M and €100M), and the rest, 140 132 €121M, in transactions for less than €10M in equity. The number 120 of companies invested in by international funds has been 100 98 84 increasing over the past few years: In 2013, these funds closed 80 61 a total of 46 investments in companies, 64 in 2014 and 96 (all-time 60 53 Nº of Entities 41 46 high) in 2015, and 82 investments were closed in 2016, 60 of 40 34 25 29 which were new investments and 22 in expansions. Investment 20 18 in buy outs stands out (22 investments in 2016 compared to 10 0 in 2015). 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 The number of international VC&PEs with activity in the Large GPs Medium GPs Small GPs Spanish market increased from 18 in 2005 to 61 in 2012, with 37 new international funds starting investment activity in Spain in 2016, bringing the total to 157.1

DEALS CLOSED IN THE LARGE MARKET IN SPAIN 2013 2014 2015 Triton Partners (Befesa Medio Ambiente), CVC (Grupo Hospitalario Quirón and Deóleo), Apax Partners (Idealista), L Capital (Pepe and (Santander Eurazeo (Desigual), Cinven (Ufinet), KKR (Grupo Jeans), PAI (Geriatros) and Partners Group Asset Management), Doughty Hanson (Centro Alfonso Gallardo, Port Aventura and Telepizza), (Joyería Tous) and an undisclosed transaction Médico Teknon) and Bridgepoint (Dorna Sports) Arclight Capital (Bizkaia Energía), Investindustrial (Goldcar), Alquemy (Endeka Ceramics) and Partners Group (Savera)

uy outs led in international funds’ portfolios. Investment Portfolio of international entities by sectoral distribution (by volume) Bof international Venture Capital and Private Equity funds in Energy / Natural Resources 5.9% Spain has been traditionally directed at consolidated companies, as evidenced by the composition of these funds’ portfolios: 69% Communications 6.5% Other Services 17.5% of volume is invested in consolidated companies through buyout transactions, 12% in growth companies and 19% in startups and other early stages. Leisure 11.5% As regards sectors, interest in large companies with activity in the following sectors stands out: Consumer Goods (15.6%), Industrial Products and Services (12%), Healthcare (11.6%) and IT (10.3%). Consumer Industrial Products Related 16.0% & Services 11.2%

Computer Medical / Healthcare 12.1% Related 11.9%

1 A list of the international entities with activity in Spain is provided at the end of this report. 2 Large: manage or advise on more than €150 million. Medium: manage or advise on between €50-150 million. Small: manage or advise on less than €50 million. 18 Divestment

ivestments stabilize after two years of record highs. Divestment by type of entity (GP) DAlthough the financial crisis delayed the exit of large investments closed between 2005-2008, a change in the cycle 5,000 marked by a favorable environment (investor appetite, liquidity 4,500 of industrial buyers and funders, attractive valuations for sellers) 4,000 led to record highs in divestment in 2014 (€4,539.7M) and 2015 3,500 (€4,359M), not only in Spain but worldwide. 3,000 2,500

In 2016, divestments (at price cost) for all Venture Capital and € Millons 2,000 1 Private Equity firms totaled €1,851 million (-57.5% from 1,500 2015) across 314 divestments, as compared to 458 in 2015. This 1,000 downturn was seen worldwide. 500 0 By type of entity, highest divestment volumes were led by international funds (€1,059M in 33 divestments). On the other 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 hand, private domestic funds accounted for total divestments of €754M in 154 divestments, and public domestic funds International entity completed 127 divestments totaling (at price cost) €37.5M. Domestic private entity Domestic public entity The sector with the highest divestment levels in 2016 was “IT” (65 exits), followed by Industrial Products and Services (42) and Source: ASCRI / webcapitalriesgo Leisure (40). The sectors with the highest divestment volumes (at price cost) were “Products and Services” with €477.4M, followed by Leisure (€337M) and IT (€207M). Ingesport; Bridgepoint in Borawind; The Carlyle Group in Applus+; the Private Equity Fund of in Grupo Vips; Portobello In 2016, average holding period of investments increased to 7 Capital in Multiasistencia; Nazca Capital in Grupo IMO; Nauta years, the highest recorded since the collection of statistics on the Capital VC Partners, General Atlantic, , Highland sector began. Capital Partners, Caixa Capital Risc and Insight Venture Partners in Some of the main divestments[1] in 2016 were made by Advent Privalia; Active Venture Partners and Seaya Ventures in Restalo; and International in Tinsa; Corpfin Capita l in Kiwoko, Catai and Nauta Capital VC Partners, Elaia Partners and Neotec in Agnitio.

he main divestment mechanism used in 2016, by Divestments by exit route in 2016 Tdivestment volume, was Trade Sale (26.3%), albeit to a lower extent than in previous years, followed by Others (21%), Owner’s Buyback (18%), IPOs (14%) and Secondary Buyout Others Trade sale (13.5%). 21% 26% Write-offs fell by 83.6% from 2015 (€63.8M in 31 divestments) and sit at a record low since the crisis began. By number of transactions, the primary divestment method was Loan Stock Market Repayment (35%) followed by Owner’s Buyback (21.7%) and 14% Trade Sale (20%). Owners Buyback 18% Writte offs 3% Sale to PE&VCs Repayment of loans 14% 4%

Source: ASCRI / webcapitalriesgo

1 The divestment activity covered in this section refers to all domestic (public and private) and international Venture Capital and Private Equity firms that have divested in companies headquartered in Spain. [1] A list of the main divestment transactions is provided on page 30 of this report. Portfolio 19

he Venture Capital and Private Equity sector has a total Portfolio at cost by type of entity (GP) of 2,759 investee companies valued at €20,329M. The T 25,000 portfolio, at price cost, of the Venture Capital and Private Equity firms (hereinafter, VC&PEs) operating in Spain totaled 20,000 €20,329M as of 31 December 2016. This includes the investee companies of 131 domestic entities and 149 international entities, 57 of which have on-going activity in Spain. Portfolio value 15,000 increased again following the stabilization of divestments after two years of record highs. International VC&PEs accounted for 10,000 57.9%, private domestic VC&PEs for 31.9% and public ones for 10.2%. This amount does not include an outstanding cumulative 5,000 portfolio of €517M in loans from CDTI, Enisa and other regional organizations througth participative loans. 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 The portfolio of investees for the aforementioned domestic International entity and international Venture Capital & Private Equity operators Domestic private entity as a whole totaled 2,517 companies at the end of 2015. After Domestic public entity excluding the investments syndicated between several operators, the total portfolio was estimated to consist of 2,129 companies. Source: ASCRI / webcapitalriesgo 3,709 companies backed by CDTI, Enisa and/or a similar regional organization should be added to this figure.

enture Capital and Private Equity portfolio companies Impact of Venture Capital & Private Equity in Spain Vemploy a total of 331,000 persons. The average investment at price cost of the domestic and international 600 8,000 VC&PEs in each portfolio company was estimated at €7.9M at 7,000 the end of 2016, rising to €10.1M if the investments of several 500 6,000 operators are grouped in the same firm. The decrease compared to 400 the prior year can be explained by the sale of portfolio companies 5,000 that accumulated elevated investments. This change is particularly 300 4,000 3,000 noticeable when looking at the difference between average 200 investment per company of international VC&PEs at the end of 2,000 Number of rms 2016 (approx. €65.1M) and the amount recorded just a year before 100

Thousands of employees 1,000 (€50.5M). Average investment of domestic entities totaled €3.34M. 0 0 The average length of time that firms remain in the portfolio of 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 domestic and international VC&PEs, after subtracting syndicated investments, was estimated at 4.6 years. Employees in portfolio companies Employees in initial investments With the 297 additional investee companies in 2016, the historic Cummulative number of investee firms portfolio of the firms backed by domestic and international VC&PEs since 1972 is estimated at 6,804 companies. Firms backed by CDTI Source: ASCRI / webcapitalriesgo and Enisa that have not yet received Venture Capital/Private Equity should be added to this figure. In aggregate employment terms, the outstanding portfolio of the domestic and international VC&PEs totaled 331,000 employees, compared to 417,000 in 2015, with an average of 148 employees per company. Employment in the portfolio companies of CDTI, Enisa and/or other regional organizations added another 45,000 at the end of 2016. Employment in new investee companies in 2016 was estimated at 38,100 workers, with an average of 128 workers for each new company added. 20 Venture Capital

INTRODUCTION

Key Performance indicators in Venture Capital activity

Fundraising Investment Divestment

700 700 500 600 600 400 500 500 400 400 300

300 300 200 200 200 100 100 100 0 0 0 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 Fundraising Investment international VC entity Divestment Investment domestic private VC entity Investment domestic public VC entity

Spain is one of Europe’s most attractive markets for Venture Capital Venture Capital continues to grow in Spain, in particular in Barcelona • Meanwhile, large corporations –a key element in development and Madrid, making Spain one of the most attractive and promising of the Venture Capital ecosystem and activity– are taking markets in Europe. This is compounded by the strengthening of center stage through the implementation of sector-specific various initiatives mentioned in previous reports, including: incubators and direct investments, although their role remains limited. The only transaction closed in 2016 for over €100M • The launch of incubators and accelerators throughout Spain was made by an international Corporate Venture Capital. in a wide variety of sectors, directly impacting momentum in start ups. • The increasing presence of different types of investors (Business Angels, platforms and public financing instruments channeled through shareholder loans) is enriching funding offers in the start-up ecosystem.

Divestment plays a key role in the maturity of the sector However, if there was a factor that really drove particularly positive new Venture Capital vehicles. Availability of funds in the Venture investments in early stage transactions in 2015 and 2016, it Capital sector has without a doubt grown over the past few years was divestments in start ups. These divestments have bolstered not only by volume (new funds raised by private domestic Venture confidence in the domestic Venture Capital sector, resulting in Capital managers reached a record high in 2016 (€569M1)), but more options for raising new funds. Also, an increased number also in terms of quality, as local teams are now raising their second of entrepreneurs with experience and money to invest turned into and third generations of new funds. business angels, sometimes channeling their resources through

1 A more detailed description of the funds raised by private Spanish managers in 2016 is provided in the chapter of this report on “Fundraising.” 21

International Venture Capital funds are showing interest in Spanish start ups It is also worth noting that international funds, in a short span of offices in Spain and their investments are led by teams located in just 4 years, attracted by the maturity of the sector, have become other European capitals. As at the end of 2015, 109 of the 149 one of the primary actors in the domestic Venture Capital sector. international entities with Spanish portfolio companies were Between 20 and 30 new international funds per year have Venture Capital firms. At the national level, the Venture Capital decided to invest in Spanish start ups for the first time over sector had 78 domestic funds,2 12 of which were public. the past few years. However, none of these funds have opened

MAIN CONCLUSIONS FOR 20163 • 2015 was an exceptional year for Venture Capital investment Summary of VC investment in Spanish start ups in 2016 in Spanish start ups thanks to international funds that led several rounds with investment tickets in excess of €10M. 2016 Domestic International Corporate VC (Investment) €8,47M €116M4 • In 2016, private domestic Venture Capital entities drove early stage investment in Spain both in terms of volume invested and VC (Investment) €143,6M €112,7 number of companies funded, thanks to the implementation Public VC (Investment) €22M – in recent years of new funds and managers. Active Investors (2016) 55 33 • The number of start ups funded by Venture Capital in 2016 Invested (€M) €174M €228,7M reached a record high (390), in particular in series A and B No. of Investments 429 40 funding rounds with investment tranches ranging from €250,000 to €5,000,000 in equity, supporting all sectors (in Start Ups Invested 381 27 particular, ICT and Digital by number of start ups invested and Avg. Round (€M) €0,45M €8,4M Life Sciences by volume of investments received). Avg. Ticket (€M) Investments €0,4M €5,7M • Despite a decrease in the number of large investments closed by international funds in 2016, directly impacting total investment volumes, international funds still maintained their interest in Spanish start ups (investment by volume and number of investments in 2016 was the second best on record). • Start ups funded by domestic Venture Capital funds (approx. 380) form part of the future investment pipeline of international funds.

2 Firms with an investment focus on Venture Capital and that have portfolios in which seed, startup, other early stage and late stage venture account for at least half of the portfolio. 3 All of the statistical data on the Venture Capital sector is available on page 23. 4 The investment by Rakuten in Cabify (also held by, inter alia, the Spanish fund Seaya Ventures) in 2016 was decisive for Corporate investments. 5 A total of 390 companies received investments in 2016, 18 of which were co-invested by domestic and international funds, resulting in an aggregate (by type of investor) of 408 companies. 22

VENTURE CAPITAL ACTIVITY IN 2016

enture Capital investments remain steady, reaching the the portfolio (+3.2%). 97% of start ups received investment in Vsecond best figure on record.Venture Capital funds (domestic rounds ranging from €250,000 to €5,000,000M in equity. (55) and international (33)) invested a total of €402.8M in Spanish As regards Venture Capital funds that invested capital in new companies in 2016, a 24.8% decrease from 2015 (€535.8M). portfolio investments, a total of €309M was invested, compared to This decrease can be explained in part by the fewer number of €93M in extensions and follow ons in 2016. large funding rounds (>€10M) for start ups, late stage ventures and other early stage that drove investment to record highs in 2015 (9 he number of start ups receiving early stage investments investments between €10-100M in 2015 compared to 3 in 2016), Tincreased. Start up or series A funding rounds and other early all of which were carried out by international funds. This decrease in stage or series B funding rounds stood out not only by investment number of large transactions is natural since although the Spanish amount received (€92M and €98M, respectively), but also by market is growing, the annual demand for start ups requiring high number of start ups funded, which reached record highs by funding rounds remains low. However, it should also be noted that number of series A funding rounds (170 companies) and a Spanish start up has for the first time received an investment in series B funding rounds (94 companies) funded by Venture excess of €100M from a single investor.6 International Venture Capital. Capital funds continue to focus their investments on Spain, More and more startups in the Spanish ecosystem reaching investing €228M (-41% from 2015), representing 56% of total maturity has contributed to the strengthening of late stage as a investment, the second best figure on record. These funds made 40 decisive category for investment allocation by stages. In particular, investments in 27 companies. approximately 50% of total investment was represented by rivate domestic Venture Capital entities drove early stage late stage investments, which was the only stage, together with Pinvestment in Spain. On the other hand, private domestic seed capital (€15.7M), that maintained similar investment volumes Venture Capital funds in particular increased investment compared to 2015, thanks to the investment in Cabify. in Spanish start ups, totaling €174M (+18% from 2015; Funding of the technology transfer continues to be the greatest €147M invested in 2015) across 429 investments7 in some concern. Over the last two years, Innvierte and Fond ICO Global 381 companies. Forecasts for the coming years remain positive, have created specific programs to drive the creation of Venture including a supply of start ups that is increasingly mature and diverse Capital funds focused on filling this gap, resulting in86 companies in terms of stages and sectors; local Venture Capital funds with in the seed stage receiving funding in 2016, the highest abundant resources and experience; and international investors figure in the last 4 years. with a continued eye on Spanish start ups that will start investing, for the first time, without relying on local Venture Capital funds. ecord high in number of start ups receiving Venture RCapital funding. EIn 2016, a total of 469 Venture Capital investments were made in a record-high 390 companies (+13.7% from 2015), of which 230 start ups received Venture Capital funding for the first time (45 more companies than in 2015). Capital injections in 160 companies were used to support

unds managed by private Venture Capital firms led significant weight among the LPs comprising the VC&PE vehicles. Finvestment. By type of entity, investment activity was primarily In particular, the FOND ICO Global (managed by Axis), Innvierte carried out by private entities, totaling €380.8M in investments in (managed by CDTI) and ICF programs contributed close to €100M 2016 (94% of total volume invested), as compared to €22M in Venture Capital vehicles in 2016. in investments by public funds (5%). In 2016, the most active private domestic investors (by number The role of the public sector as an investor in start ups of investments) were: Caixa Capital Risc, Inveready Technology through Venture Capital funds and the decrease in direct Investment Group, Nauta Capital and Kibo Ventures. In the public investment activity were once again seen this year. This is based on sector: Gestión Capital Riesgo País Vasco, Seed Capital Bizkaia, lower investment budgets that started at the beginning of the crisis Vigo Activo, Sodena and Xesgalicia.9 and a change in financing instruments used, which are increasingly focused on specific shareholder loan programs. Their role as an indirect investor in Venture Capital funds also continues to hold

6 Investment by Rakuten in Cabify 7 The number of investments published in this report is calculated from the perspective of the funds, meaning that some investee companies may be double counted in the case of syndicated investments. 8 Of these 381 companies, 18 companies received co-investments from domestic and international funds. 9 See page 29 of this report for a list of some of the venture capital investments closed in 2016 in Spain 23

Venture Capital Investment by company stage

Volume Number of start ups

180 250,000 160 140 200,000 120 150,000 100 80 Number 100,000 60 40

Thousands € 50,000 20 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Seed 13,204 8,578 12,794 17,586 15,775 Seed 63 43 51 66 86 Startup 63,397 54,016 53,681 180,272 92,366 Startup 127 151 114 145 170 Other early stages 97,613 73,580 53,245 138,823 98,362 Other early stages 81 85 73 92 94 Late stage venture 24,715 56,854 168,137 199,163 196,321 Late stage venture 37 27 33 40 40

Seed Startup Other early stages Late stage venture Seed Startup Other early stages Late stage venture

Source: ASCRI / webcapitalriesgo

Venture Capital investment volume by sector enture Capital support increases across all sectors. In V2016, the number of start ups receiving Venture Capital 600,000 funding increased across all sectors of the Spanish economy. In 500,000 particular, a total of €286M was invested in 221 companies 400,000 in the ICT and Digital sector. International funds stood out as 300,000 contributing more than 86% of their investments (€197M) to IT start ups. Investment in the industrial sector remained stable from Thousands € 200,000 2015 (€60M), although it is worth emphasizing that more than 110 100,000 companies were funded (highest number in 4 years). In 2015 and 0 2012 2013 2014 2015 2016 2016, the Life Sciences sector attracted several international funds ICT 63,238 59,517 137,590 106,867 58,176 and corporate ventures, resulting in the sector receiving a total of Industrial & others 81,718 58,803 30,940 63,878 58,929 €57.9M in 2016, in 56 start ups, a record high for both variables. Digital 20,124 40,133 88,588 316,884 227,867 In only four years, the average round in the Life Sciences sector has Life Sciences 33,759 34,574 30,738 48,215 57,852 doubled from €500,000 in 2012 to €1 million in 2016. ICT Industrial & others Digital Life Sciences Source: ASCRI / webcapitalriesgo

arcelona and Madrid Venture Capital hubs. With a total of have without a doubt contributed to the development of early B€125M in investments in Catalan start ups and €191M in stage investments. In distant second was Castile and León (€22M start ups in Madrid in 2016, these two regions continue to position in investments in the region), followed by the Basque Country themselves as innovation and entrepreneurship hubs, standing out (€12.5M) and Galicia (€11M). Catalonia also led by number of for the concentration of Venture Capital funds and start ups, as start ups funded (102 start ups), followed by Madrid (64), the well as for holding events and creating start up communities that Basque Country (48) and the Community of Valencia (32).

enture Capital value creation. Due to the maturity of the 3. Sale to PE&VCs increased from €1.2M in 2012 to €38.7M in Vsector, successful exits both in terms of volume (measured at 2016 in a relatively similar number of divestments (4 in 2012 price cost) and quality of the divestment and its impact on the and 5 in 2016), showing that the sector is growing. sector have become common in the past two years. The €350M divested across 195 divestments stood out for the following 4. The use of IPOs as a divestment mechanism in the Venture reasons: Capital sector should have a higher weighting. 1. Write-offs were at an all-time low (€13.5M in 23 divestments). 2. Trade Sale grew as the most significant exit strategy (€202.8M in 34 divestments). 24

INVESTMENT Amount (€M) Nº Start ups TYPE OF GP 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Internacional VC 39.0 57.1 153.8 388.6 228.7 9 31 36 70 40 Domestic Private VC 112.2 101.6 112.5 120.2 152.1 263 261 260 293 324 Domestic Public VC 47.8 34.4 21.5 27.0 22.0 73 68 54 107 105 TOTAL 198.9 193.0 287.9 535.8 402.8 345* 360* 350* 470* 469* STAGE OF DEVELOPMENT Seed 13.2 8.6 12.8 17.6 15.8 63 43 51 66 86 Start-up 63.4 54.0 53.7 180.3 92.4 127 151 114 145 170 Other early stage 97.6 73.6 53.2 138.8 98.4 81 85 73 92 94 Later stage venture 24.7 56.9 168.1 199.2 196.3 37 27 33 40 40 TOTAL 198.9 193.0 287.9 535.8 402.8 308 306 271 343 390 SIZE 0 - 0,25 €M 19.7 19.7 15.8 22.6 21.0 180 147 150 210 218 0,25 - 0,5 €M 16.8 16.2 16.8 16.3 23.7 54 68 33 33 47 0,5 - 1 €M 22.4 31.7 41.9 44.6 40.2 36 49 35 41 56 1 - 2,5 €M 47.5 56.3 57.7 80.6 87.2 26 24 37 30 47 2,5 - 5 €M 31.3 39.6 19.5 65.3 47.0 7 12 5 12 12 5 - 10 €M 46.8 29.5 52.1 39.6 22.8 2 5 6 4 4 10 - 25 €M 14.4 0.0 54.0 63.1 20.0 2 1 4 10 4 25 - 50 €M 0.0 0.0 30.0 114.8 37.5 1 0 0 1 1 50 - 75 M€ 0.0 0.0 0.0 0.0 0.0 0 0 0 0 0 75 - 100 M€ 0.0 0.0 0.0 89.1 0.0 0 0 1 1 0 More than 100 €M 0.0 0.0 0.0 0.0 103.5 0 0 0 1 1 TOTAL 198.9 193.0 287.9 535.8 402.8 308 306 271 343 390 INDUSTRY Life Sciences 33.8 34.6 30.7 48.2 57.9 61 55 48 51 56 Digital & Consumer 20.2 40.1 88.6 316.9 227.9 101 110 106 129 142 Industry and others 81.7 58.8 30.9 63.9 58.9 63 72 56 75 113 TIC 63.2 59.5 137.6 106.9 58.2 83 69 61 88 79 TOTAL 198.9 193.0 287.9 535.8 402.8 308 306 271 343 390 REGIONS Andalucía 17.7 7.9 4.2 10.6 5.2 28 24 15 18 9 Aragón 1.1 0.3 0.5 0.1 1.1 2 2 2 2 2 Asturias 2.8 3.3 2.9 1.6 2.1 10 16 12 9 12 Baleares 1.1 0.1 2.3 12.3 10.8 2 4 1 4 4 Canarias 0.0 0.0 0.0 0.1 0.0 1 0 1 2 1 Cantabria 0.0 0.4 0.0 0.0 0.0 0 1 0 0 0 Castilla-La Mancha 6.1 12.0 4.8 2.6 1.5 0 5 6 21 3 Castilla-León 0.0 1.8 3.0 4.8 22.0 15 18 13 8 19 Catalonia 51.9 63.5 171.0 327.6 125.8 109 96 87 102 102 Extremadura 3.4 2.0 4.1 8.0 1.7 1 14 11 7 5 Galicia 13.7 11.7 2.6 4.8 11.1 10 10 12 25 47 Madrid 45.2 53.9 65.0 126.5 191.8 53 51 55 69 64 Murcia 3.3 2.0 2.3 0.4 3.9 2 4 3 3 6 Navarra 15.7 13.1 5.7 6.0 8.1 18 15 14 15 33 País Vasco 7.0 5.5 9.0 10.1 12.5 22 17 17 38 48 La Rioja 0.7 0.3 0.0 0.3 0.5 4 1 0 1 3 Comunidad Valenciana 29.1 15.2 10.1 20.1 4.7 31 28 22 19 32 Ceuta/ Melilla 0.0 0.0 0.0 0.0 0.0 0 0 0 0 0 TOTAL 198.9 193.0 287.9 535.8 402.8 308 306 271 343 390 *Number investments. 25

DIVESTMENT Amount (€M) Nº divestments EXIT WAY 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Owner/manager buy-back 16.5 36.3 40.1 40.1 85.9 36 40 46 37 36 Sale to PE & VCs 1.8 2.2 3.6 11.5 38.7 4 4 6 6 5 Trade sale 69.3 26.6 62.9 305.7 202.8 28 32 24 18 34 Stock Market 0.2 2.7 0.0 0.2 1.4 1 1 0 3 4 Write-offs 54.0 78.5 71.4 30.7 13.5 81 97 60 70 23 Repayment of loans 5.3 10.2 7.9 9.0 5.8 62 40 119 135 79 Others 14.1 5.7 8.0 6.3 1.8 36 11 12 14 14 TOTAL 161.2 162.2 193.9 403.4 350.0 248 225 267 283 195 STAGE OF DEVELOPMENT Seed 26.7 17.5 31.9 11.3 9.3 99 79 118 117 73 Start-up 96.0 109.0 130.2 61.2 71.6 107 124 114 112 76 Other early stage 18.0 33.2 8.1 18.1 31.1 29 16 19 34 33 Later stage venture 20.5 2.6 23.7 312.8 238.0 13 6 16 20 13 TOTAL 161.2 162.2 193.9 403.4 350.0 248 225 267 283 195

FUNDRAISING Amount (€M) TYPE OF LP 2013 2014 2015 2016 Financial institutions 82.8 65.3 37.9 110.0 Pension funds 9.6 32.8 23.6 15.0 Insurance Companies 2.1 1.0 6.0 16.7 24.7 2.5 26.1 98.4 Corporate investors 43.3 87.5 40.2 30.5 Family office 19.2 41.8 75.4 179.3 Government agencies 20.4 112.0 82.0 98.3 Academic institutions 0.0 0.0 1.0 0.0 Stock Market 0.0 2.2 0.0 0.0 Others 1.0 7.2 14.1 20.8 Capital gains available for re-investment 0.8 6.4 0.0 0.0 TOTAL 203.8 358.8 306.5 569.0 REPORT 2017 2016 MAIN TRANSACTIONS 2016 MAIN TRANSACTIONS 27

2016 LARGE TRANSACTIONS IN SPAIN WITH EQUITY INVESTMENTS > €100M TARGET PRIVATE EQUITY & VENTURE INDUSTRY TYPE OF DEAL TYPE OF FIRM CAPITAL FIRM Hotelbeds Cinven / CPPIB PE Other Services LBO International Renovalia Energy Cerberus Capital Energy LBO International Cupira Padesa (Cupa The Carlyle Group Construction materials LBO International Group) MasMovil Providence Equity Communications LBO International Tinsa Cinven Appraisals LBO International Intermediate Capital Garnica Plywood Construction LBO International Group (ICG) Invent Farma Apax Partners Pharmaceutical group LBO International Maxi Mobility Spain Rakuten Internet Late Stage Venture Capital International (Cabify)

Source: ASCRI/webcapitalriesgo Note: Infrastructure, real estate and financial sector not included 28

MIDDLE MARKET (PRIVATE EQUITY) DEALS CLOSED AND PUBLISHED IN 2016 TARGET PRIVATE EQUITY FIRM TYPE OF DEAL INDUSTRY TYPE OF FIRM Igenomix Charme Capital Buy Out Medical instruments International Fruselva Proa Capital Buy Out Consumer Products National Carbures Europe Black Toro Capital Growth Industrial Products and Services National Ramón Sabater Portobello Capital Buy Out Consumer Products National Caiba Nazca Capital Buy Out Plastics National Masquepet (Kiwoko) TA Associates Buy Out Consumer Products and Services National Konecta PAI Partners Build Up Industrial Products and Services International Martinavarro Miura Private Equity Replacement Consumer Products and Services National Torrot - Gas Gas Black Toro Capital Growth Consumer Products and Services National Tenneco Automotive Quantum Capital Partners Buy Out Transport International Ibérica Abelan Board Industrial Aurelius Buy Out Industrial Products and Services International Agromillora Investcorp Buy Out Farming International Muebles Royo HIG Europe Buy Out Consumer Products and Services National Oquendo Capital/ GED Iberian Discefa Buy Out Consumer Products and Services National Private Equity ITA Clinic Magnum Capital Growth Healthcare National Arenal Perfumerías Corpfin Capital Growth Consumer Products and Services National Alianzas en Aceros JZ International Turnaround Industrial Products and Services International Trison Portobello Capital Buy Out Industrial Products and Services National Distribuciones Juan Luna Nazca Capital Buy Out Consumer Products and Services National Tiendas Aurgi GPF Capital Growth Consumer Products and Services National Grupo Gransolar Diana Capital Growth Energy/Environment National Jeanología MCH Private Equity Growth Consumer Products and Services National Unión de Industrias MBO / Espiga Equity Partners Chemistry materials National (Unica) Replacement Sociedad General Española de Librería, Springwater Buy out Logistics International Diarios, Revistas y Publicaciones (SGEL) Palex Medical Corpfin Capital Buy Out Healthcare National Rotecna Talde Gestión Growth Industrial Services and Products National Grupo Elastorsa Corpfin Capital Buy Out Chemistry materials National Reposta Proa Capital Growth Gas Stations National MBO / Deltalab Espiga Equity Partners Healthcare National Replacement Tekman Books Miura Private Equity Growth Educational programs National Marypaz Black Toro Capital Growth Consumer Products National Ingesport Torreal LBO Consumer Products National

Source: ASCRI/webcapitalriesgo 29

SOME OF THE MAIN VENTURE CAPITAL1 INVESTMENTS CLOSED IN 2016 TARGET VENTURE CAPITAL FIRM INDUSTRY TYPE OF DEAL TYPE OF FIRM

Late Stage Venture Maxi Mobility Spain (Cabify) Rakuten Internet International Capital

International / Job&Talent Atomico, Kibo Ventures Internet Late Stage Venture National Gilde Healthcare, Ysios Capital Partners, Caixa International / Stat Diagnostica Capital Risc, Boehringer, Biotechnology Late Stage Venture National Kurma Life Sciences, Idinvest Partners, Axis Soria District Heating Suma Capital Energy/Environment Start Up National Xperience Consulting (User- Stepstone Group, TC Software Services Late Stage Venture International zoom) Growth, Trident Capital Samaipata Ventures, Bonsai Venture Capital, Sabadell Corner Job (Job Digital International / Venture Capital, Antai Ven- Internet Late Stage Venture Networks) National ture Builder, Caixa Capital Risc HolaLuz Axon Partners Group Energy Late Stage National Seaya Ventures, Bankinter Hundredrooms Capital Riesgo, Inveready Internet Other early stage National Technology Trident Cibersecurity, Adara International / 4IQ (ant Survela) Ventures, Telefónica Internet Start up National Ventures Salupro Bonsai VC, Vitamina K Internet Late Stage National , Nauta ABA English Internet Other early stage International Capital VC Partners Serena Capital, Kibo International / iContainers Solutions Internet Other early stage Ventures, Vitamina K National Sherpa Europe Alma Mundi Software Start up National Felix Capital, Olapic Ventures, Fung Capital, Internet Other early stage International Longworth Venture Partners Ysios Capital Partners, Caixa International / Aelix Therapeutics Life Sciences Seed Capital Risc, JJDC Inovation National

1 Investments closed in Spain by national and international Venture Capital firms. Source: ASCRI/webcapitalriesgo Note: Deals listed by the amount invested by the Venture Capital firm (minority investors might not appear in this list). 30 MAIN DIVESTMENTS 2016

PRIVATE EQUITY PRIVATE EQUITY FIRM DIVESTED COMPANY DIVESTMENT MECHANISM

Torreal Swissport Trade Sales Bridgepoint Borawind Sale to financial investor Tinsa Sale to another Private Equity firm The Carlyle Group Applus+ Stock Market Post IPO , KKR Telepizza Stock Market IPO Goldman Sachs Grupo Vips Sale to another Private Equity firm Candover Parques Reunidos Stock Market IPO Portobello Capital Multiasistencia Sale to financial investor Nazca Capital Grupo IMO Trade Sales Nazca Capital Agromillora Catalana Sale to another Private Equity firm Corpfin Capital Catai Trade Sale MCH Private Equity Nutricafés Trade Sale Nazca Capital El Granero Integral Trade Sale

MCH Private Equity Europastry Sale to another Private Equity firm

JZ International Docout Sale to financial investor Corpfin Capital, Prince Capital Kiwoko Sale to another Private Equity firm Miura Private Equity GH Electrotermia Trade Sale JZ International Xacom Comunicaciones Sale to financial investor JZ International Ombuds Sale to financial investor MCH Private Equity Geroresidencias Trade Sale Alantra Private Equity High Tech Hoteles Owner/manager buy back JZ International Oneworld Packaging Sale to financial investor GED Iberian Private Equity Aleastur Sale to financial investor MCH Private Equity Geroresidencias Trade Sale Oquendo Capital Ingesport Sale to another Private Equity firm Corpfin Capital Ingesport Sale to another Private Equity firm GED Iberian Private Equity Bio Oils Trade Sale JZ International Sicame Trade Sale Aurelius Grupo Tavex Trade Sale GED Iberian Private Equity Infopress Trade Sale 31

VENTURE CAPITAL VENTURE CAPITAL FIRM DIVESTED COMPANY DIVESTMENT MECHANISM

General Atlantic, Index Ventures, Highland Privalia Trade Sale Capital, Insight Venture Partners, Nauta Capital VC Partners, Caixa Capital Risc Nauta Capital VC Partners, Elaia Partners, Agnitio Trade Sale Neotec Active Venture Partners, Seaya Ventures Reservas de Restaurantes (Restalo) Trade Sale

Active Venture Parners, Seed Capital de Ticketbis Trade Sale Bizkaia Bullnet Capital, CRB Inbervío, Axis Oncovisión Trade Sale Participaciones Empresariales Nauta Capital VC Partners Mobile Aware Sale to another VC firm

Grupo Intercom Enalquiler rental online Trade Sale

Qualistas Equity Partners Job&Talent Sale to another VC firm

Avet Ventures Nuroa (antes Migoa) Trade Sale

Sunstone Capital Tyba Trade Sale

THCap Zaption Trade Sale

Caixa Capita Risc, Kibo Ventures Trip4Real Trade Sale

GCRPV Erle Robotics Trade Sale

SRP Asturias Gestión, Solución y Calidad Trade Sale

Grupo Intercom Homeforhome.com Trade Sale

Unirisco, Uninvest Inmunostep Sale to financial investor

Fitalent Spectrapply Trade Sale

Caixa Capital Risc, Clave Mayor Idifarma Desarrollo Farmacéutico Sale to another VC firm

Caixa Capital Risc Signadyne Spain Trade Sale 32 REPORT 2017 REPORT STATISTICS STATISTICS 33

NEW FUNDS RAISED Amount (€M)

TYPE OF INVESTOR (GP) 2014 2015 2016 Domestic private entity 2,141.7 1,529.0 2,271.1 Domestic public entity 242.7 152.9 167.1 TOTAL 2,384.4 1,681.9 2,438.3

TYPE OF LPS DOMESTIC PRIVATE ENTITY Financial institutions 229.7 156.6 211,6 Pension funds 376.2 168.5 97,8 Insurance Companies 141.9 216.7 174,9 Fund of funds 370.7 296.2 491,7 Corporate investors 308.2 123.8 81,4 Family office 133.4 235.1 459,9 Government agencies 460.9 147.2 348,6 Academic institutions 22.3 82.4 30,8 Stock Market 2.2 0.0 13,6 Others 89.7 102.4 361,0 Capital gains available for re-investment 6.4 0.0 0,0 TOTAL 2,141.7 1,529.0 2,271.1

GEOGRAPHIC BREAKDOWN OF TYPE OF LP IN 2016 Domestic LPs International LPs LPs DOMESTIC PRIVATE ENTITY Financial institutions 165.6 46.0 211.6 Pension funds 184.3 63.6 247.8 Insurance Companies 75.9 99.0 174.9 Fund of funds 29.0 462.7 491.7 Corporate investors 71.3 10.1 81.4 Family office 428.8 31.1 459.9 Government agencies 348.6 0.0 348.6 Academic institutions 0.0 30.8 30.8 Stock Market 0.0 13.6 13.6 Others 101.4 109.6 211 Capital gains available for re-investment 0.0 0.0 0 TOTAL 1,404.8 866.4 2,271.2 34

NEW FUNDS RAISED Amount (€M)

LOCATION LP 2014 2015 2016 DOMESTIC PRIVATE ENTITY Spain 874.0 543.8 1,404.8 Other European countries 996.4 634.8 581.1 United States 195.6 168.0 121.4 Asia 0.0 76.9 5.4 Canada 0.0 0.0 0.0 Others 75.7 105.5 158.6 TOTAL 2,141.7 1,529.0 2,271.1

INTENDED APPLICATION OF NEW FUND RAISED DOMESTIC PRIVATE ENTITY 181.9 123.4 0.0 Initial stages: High technology 16.9 55.5 528.3 Initial stages: Non-high technology 140.2 10.0 0.0 Growth: High technology 241.7 395.2 709.3 Growth: No alta tecnología/Expansion: Non-high technology 580.6 584.0 1,237.6 Buy-out: High technology 0.0 0.0 0.0 Buy-out: Non-high technology 1,306.0 801.5 870.1 Others 255.1 143.4 163.5 TOTAL 2,141.7 1,529.0 2,271.1

DRY POWDER Domestic private entity 2,524.7 2,896.1 4,085.2 Domestic public entity 261.5 278.3 68.6 TOTAL 2,786.2 3,174.3 4,153.8 35

FUNDS UNDER MANAGEMENT1 Amount (€M)

TYPE OF INVESTOR (GP) 2014 2015 2016 Domestic private entity 9,253.2 8,821.7 10,200.1 Domestic public entity 2,083.5 2,168.4 2,046.5 International entity 11,458.3 10,451.5 12,236.7 TOTAL 22,795.1 21,441.5 24,483.4

NUMBER OF ENTITIES International 98 132 157 Domestic private 110 110 121 Domestic public 17 17 17 TOTAL 225 259 295

International Entity Domestic Entity All Entities BY SIZE OF FUNDS UNDER MANAGMENT 2015 2016 2015 2016 2015 2016 Large entities (>150 €M) 108 130 25 25 133 155 Medium entities (between 50 and 150 €M) 20 23 35 37 55 60 Small institutions (<50 €M) 4 4 67 76 71 80 TOTAL 132 157 127 138 259 295

1 Due methodological reasons, managed funds are now being obtained from adding the portfolio value at cost and dry powder. 36

INVESTMENT1 Amount (€M)

BY TYPE OF ENTITY (GP) 2014 2015 2016 Internacional VC2 153.8 388.6 228.7 Domestic Private VC 112.5 120.2 152.1 Domestic Public VC 21.5 27.0 22.0 TOTAL 287.9 535.8 402.8 Internacional PE3 2.455.2 1.307.4 2.372.7 Domestic Private PE 318.1 785.8 806.0 Domestic Public PE 42.1 80.5 38.2 TOTAL 2.815.4 2.173.7 3.216.9 International Entity (VC+PE) 2.609.0 1.696.0 2.601.4 Domestic Private Entity (VC+PE) 430.6 906.0 958.0 Domestic Public Entity (VC + PE) 63.6 107.6 60.2 TOTAL 3.103.3 2.709.6 3.619.7 NEW - FOLLOW ONS New Investments 2.966.0 2.271.5 3.340.6 Follow ons investments 137.3 438.1 279.1 TOTAL 3.103.3 2.709.6 3.619.7 STAGE OF DEVELOPMENT Seed 12.8 17.6 15.8 Startup 53.7 180.3 92.4 Other early stages 53.2 138.9 98.4 Late stage venture 168.1 199.2 196.3 Growth 500.9 310.9 753.0 Replacement 251.7 357.3 129.2 LBO/MBO/MBI/LBU 1.639.0 1.348.7 2.174.1 Others 423.9 156.7 160.7 TOTAL 3.103.3 2.709.6 3.619.7 INDUSTRY Computer related 227.3 659.1 292.7 Other Electronic related 1.6 9.5 2.4 Industrial Products & Services 329.7 215.6 257.9 Consumer-related Products 738.2 521.8 382.4 Agriculture 5.6 93.7 29.5 Energy 184.1 37.0 289.8 Chemistry & Materials 7.7 19.5 180.9 Construction 165.3 20.5 184.8 Health related 387.0 605.4 120.6 Leisure 416.9 35.6 931.8 Communications 270.6 27.4 347.6 Biotechnology 17.2 23.7 201.4 Industrial Automation 0.2 3.2 0.0 Financial Services 0.1 31.4 215.3 Other Services 302.9 293.6 75.9 Others 1.1 90.4 22.6 Transportation 45.5 6.8 49.7 Other Manufacturing 2.4 15.3 34.4 TOTAL 3.103.3 2.709.6 3.619.7

1 The investment figures contained in this report refer to investments made by domestic (public and private) and international GPs in Spanish companies, thus excluding investments by Spanish GPs abroad, which totaled €578M across 84 investments in 2016. 2 Venture Capital 3 Private Equity 37

INVESTMENT Amount (€M)

REGION 2014 2015 2016 Madrid 1,209.2 1,005.7 1,189.2 Catalonia 742.2 878.8 515.7 Andalucia 243.4 50.5 53.5 País Vasco 234.4 110.8 86.8 Galicia 15.1 213.1 267.3 Castilla-León 14.0 101.1 23.2 Castilla-La Mancha 5.4 5.2 232.5 Aragón 5.5 39.1 1.6 Extremadura 229.7 21.1 3.7 Canarias 0.1 0.1 0.0 Navarra 9.9 71.0 37.2 Asturias 14.0 2.5 41.9 Comunidad Valenciana 373.3 112.2 228.9 Baleares 4.6 12.3 715.9 Murcia 2.3 0.6 49.9 Cantabria 0.0 0.0 0.0 La Rioja 0.0 85.3 172.4 Ceuta/ Melilla 0.0 0.0 0.0 TOTAL 3,103.3 2,709.6 3,619.7

SIZE OF INVESTMENT 0 - 0,25 € million 17.3 23.2 22.9 0,25 - 0,5 € million 18.7 19.9 30.0 0,5 - 1 € million 47.4 113.1 46.4 1 - 2,5 € million 81.1 47.1 113.6 2,5 - 5 € million 57.5 75.9 83.9 5 -10 € million 88.9 131.9 125.3 10- 25 € million 289.1 448.2 405.2 25 - 50 € million 94.0 301.4 600.3 50 - 75 € million 110.0 363.5 233.0 75 - 100 € million 80.0 430.5 0.0 More than 100 € million 2,219.3 755.0 1,959.1 TOTAL 3,103.3 2,709.6 3,619.7 Between 10 and 100 € million 573.1 1,543.5 1,238.5

COMPANY SIZE PRIVATE EQUITY VENTURE CAPITAL ALL 0 to 9 employees 68 82.9 151 10 to 19 employees 337 73.6 410 20 to 99 employees 717 197.5 914 100 to 199 employees 303 44.4 347 200 to 499 employees 367 4.4 371 500 to 999 employees 522 0.0 522 1,000 to 4,999 employees 800 0.0 800 More than 5,000 employees 105 0.0 105 TOTAL 3,217 402.8 3,619.7 38

INVESTMENT Nº Investments BY TYPE OF ENTITY (GP) 2014 2015 2016 Internacional VC 36 70 40 Domestic Private VC 260 293 324 Domestic Public VC 54 107 105 TOTAL 350 470 469 Internacional PE 28 26 42 Domestic Private PE 50 57 73 Domestic Public PE 16 25 19 TOTAL 94 108 134 International Entity (VC+PE) 64 96 82 Domestic Private Entity (VC+PE) 310 350 397 Domestic Public Entity (VC + PE) 70 132 124 TOTAL 444 578 603 NEW - FOLLOW ONS New Investments 269 352 386 Follow ons investments 175 226 217 TOTAL 444 578 603 STAGE OF DEVELOPMENT Seed 58 82 95 Startup 134 181 198 Other early stages 92 117 126 Late stage venture 66 91 50 Expansion 51 47 85 Replacement 7 10 6 LBO/MBO/MBI/LBU 22 38 34 Others 14 12 9 TOTAL 444 578 603 INDUSTRY Computer related 195 273 250 Other Electronic related 2 6 8 Industrial Products & Services 39 36 35 Consumer-related Products 39 42 50 Agriculture 6 19 18 Energy 10 9 28 Chemistry & Materials 5 8 17 Construction 3 2 7 Health related 26 49 48 Leisure 16 12 30 Communications 17 11 13 Biotechnology 42 48 45 Industrial Automation 2 9 4 Financial Services 1 11 0 Other Services 23 28 17 Others 4 1 7 Transportation 7 1 10 Other Manufacturing 7 13 16 TOTAL 444 578 603 39

INVESTMENT Nº Investments

REGION 2014 2015 2016 Madrid 108 132 117 Catalonia 24 28 182 Andalucía 148 170 12 País Vasco 24 53 58 Galicia 21 51 57 Castilla-León 15 13 23 Castilla-La Mancha 14 24 5 Aragón 3 4 4 Extremadura 14 14 8 Canarias 2 2 1 Navarra 17 23 42 Asturias 20 12 18 Comunidad Valenciana 28 33 45 Baleares 3 12 12 Murcia 3 4 11 Cantabria 0 0 0 La Rioja 0 3 8 Ceuta/ Melilla 0 0 0 TOTAL 444 578 603

SIZE OF INVESTMENT 0 - 0,25 € million 189 274 270 0,25 - 0,5 € million 57 61 87 0,5 - 1 € million 73 72 73 1 - 2,5 € million 57 74 73 2,5 - 5 € million 16 22 25 5 -10 € million 14 19 17 10- 25 € million 22 30 27 25 - 50 € million 3 10 18 50 - 75 € million 2 6 4 75 - 100 € million 1 5 0 More than 100 € million 10 5 9 TOTAL 444 578 603 Between 10 and 100 € million 28 51 49

COMPANY SIZE PRIVATE EQUITY VENTURE CAPITAL ALL 0 to 9 employees 17 244 261 10 to 19 employees 23 118 141 20 to 99 employees 39 96 135 100 to 199 employees 17 9 26 200 to 499 employees 18 2 20 500 to 999 employees 11 0 11 1,000 to 4,999 employees 6 0 6 More than 5,000 employees 3 0 3 TOTAL 134 469 603 40

DIVESTMENT Amount (€M)

BY TYPE OF ENTITY (GP) 2014 2015 2016 International Entity (VC+PE) 3,299.8 2,695.9 1,059.5 Domestic Private Entity (VC+PE) 1,141.2 1,608.7 754.0 Domestic Public Entity (VC + PE) 99 55 38 TOTAL 4,539.7 4,359.1 1,851.0

CONCEPTS Final Divestments 3,867.9 3,768.5 1,390.3 Partial Divestments 671.8 590.6 460.7 TOTAL 4,539.7 4,359.1 1,851.0

STAGE OF DEVELOPMENT Seed 31.9 11.3 9.3 Start-up 130.2 61.2 71.6 Other early stage 8.1 18.1 27.0 Later stage venture 0.0 0.0 79.7 Expansion 938.3 628.9 496.1 Replacement 103.3 850.4 86.5 LBO/MBO/MBI/LBU 3,298.6 2,503.0 1,045.2 Otras 29.3 286.2 35.6 TOTAL 4,539.7 4,359.1 1,851.0

EXIT WAY Owner/manager buy-back 131.2 181.4 337.8 Sale to PE & VCs 549.6 243.3 250.5 Trade sale 2,828.6 2,211.7 486.8 Stock Market 632.0 1,261.0 260.5 Write-offs 295.6 389.2 63.8 Repayment of loans 67.6 41.6 66.3 Others 35.1 30.9 385.4 TOTAL 4,539.7 4,359.1 1,851.0

INDUSTRY Computer related 138.0 124.4 207.6 Other Electronic related 15.0 8.9 0.8 Industrial Products & Services 468.1 103.9 477.4 Consumer-related Products 157.0 447.5 121.8 Agriculture 1.8 7.3 21.2 Energy 386.4 701.3 278.2 Chemistry & Materials 15.7 21.3 4.3 Construction 28.7 41.7 66.4 Health related 548.7 127.6 59.8 Leisure 311.7 248.5 337.7 Communications 1,506.8 763.0 78.2 Biotechnology 22.6 11.7 18.3 Industrial Automation 1.1 0.4 0.0 Financial Services 0.2 590.0 0.5 Other Services 738.5 1,117.4 105.3 Others 1.7 3.4 2.5 Transportation 183.1 36.9 66.9 Other Manufacturing 14.8 3.9 4.2 TOTAL 4,539.7 4,359.1 1,851.0 41

DIVESTMENT Nº Divestments

BY TYPE OF ENTITY (GP) 2014 2015 2016 International Entity (VC+PE) 30 21 33 Domestic Private Entity (VC+PE) 158 217 154 Domestic Public Entity (VC + PE) 225 220 127 TOTAL 413 458 314

CONCEPTS Final Divestments 236 252 184 Partial Divestments 177 206 130 TOTAL 413 458 314 STAGE OF DEVELOPMENT Seed 118 117 73 Start-up 114 112 76 Other early stage 19 34 32 Later stage venture 0 0 10 Expansion 119 126 84 Replacement 4 12 10 LBO/MBO/MBI/LBU 33 35 23 Otras 6 22 6 TOTAL 413 458 314

EXIT WAY Owner/manager buy-back 74 72 68 Sale to PE & VCs 10 16 12 Trade sale 68 75 63 Stock Market 8 13 8 Write-offs 73 80 31 Repayment of loans 162 179 110 Others 18 23 22 TOTAL 413 458 314

SECTOR Computer related 74 89 65 Other Electronic related 12 13 7 Industrial Products & Services 60 52 42 Consumer-related Products 27 33 25 Agriculture 6 14 7 Energy 19 55 14 Chemistry & Materials 20 19 16 Construction 11 5 9 Health related 19 21 31 Leisure 26 13 40 Communications 25 18 14 Biotechnology 41 47 27 Industrial Automation 4 8 0 Financial Services 1 4 2 Other Services 50 45 2 Others 4 8 3 Transportation 6 6 6 Other Manufacturing 8 8 4 TOTAL 413 458 314 42

PORTFOLIO Amount (€M)

BY TYPE OF ENTITY (GP) 2014 2015 2016 International Entity (VC+PE) 11,618.3 10,451.5 12,236.7 Domestic Private Entity (VC+PE) 6,827.5 5,925.6 6,114.9 Domestic Public Entity (VC + PE) 1,822.9 1,890.1 1,977.9 TOTAL 20,268.7 18,267.1 20,329.5

INDUSTRY Computer related 1,295.8 1,827.4 1,872.6 Other Electronic related 199.8 203.1 201.4 Industrial Products & Services 2,490.8 2,490.7 2,685.0 Consumer-related Products 2,680.5 2,761.5 2,989.5 Agriculture 162.9 247.1 246.3 Energy 2,161.2 1,326.4 1,442.8 Chemistry & Materials 145.1 143.4 315.5 Construction 642.5 626.9 757.2 Health related 1,319.5 1,809.4 1,959.8 Leisure 1,850.9 1,634.7 2,398.0 Communications 1,968.6 1,244.8 1,561.3 Biotechnology 148.3 160.9 339.0 Industrial Automation 6.2 9.2 9.2 Financial Services 686.3 140.9 345.6 Other Services 3,982.3 3,053.6 2,438.4 Others 97.6 183.5 203.2 Transportation 321.1 292.2 432.9 Other Manufacturing 109.2 111.4 131.7 TOTAL 20,268.7 18,267.1 20,329.5

REGION Madrid 7,497.6 7,245.9 7,783.0 Catalonia 4,308.7 3,859.0 3,909.5 Andalucía 668.2 462.8 427.7 País Vasco 1,483.7 1,214.6 1,279.5 Galicia 817.8 586.1 763.5 Castilla-León 435.7 330.0 295.6 Castilla-La Mancha 178.8 82.3 309.1 Aragón 144.5 164.2 132.3 Extremadura 397.7 397.4 397.0 Canarias 20.1 4.0 3.3 Navarra 369.2 303.8 324.0 Asturias 302.2 147.4 182.4 Comunidad Valenciana 772.0 794.0 975.9 Baleares 22.2 24.7 730.9 Murcia 93.5 83.3 132.9 Cantabria 60.0 57.2 56.0 La Rioja 116.8 127.2 299.7 Ceuta/ Melilla 0.0 0.0 0.0 TOTAL 17,688.9 15,883.9 18,002.3 43

PORTFOLIO Nº Investments

BY TYPE OF ENTITY (GP) 2014 2015 2016 International Entity (VC+PE) 1,332 1,343 1,468 Domestic Private Entity (VC+PE) 903 957 1031 Domestic Public Entity (VC + PE) 162 209 260 TOTAL 2,397 2,509 2,759

INDUSTRY Computer related 664 782 902 Other Electronic related 33 32 31 Industrial Products & Services 331 323 321 Consumer-related Products 201 209 230 Agriculture 54 61 66 Energy 165 124 144 Chemistry & Materials 52 56 65 Construction 48 49 59 Health related 119 146 157 Leisure 90 89 106 Communications 97 95 96 Biotechnology 175 179 189 Industrial Automation 14 21 21 Financial Services 35 35 35 Other Services 207 202 196 Others 31 27 41 Transportation 36 31 45 Other Manufacturing 45 48 55 TOTAL 2,397 2,509 2,759

REGION Madrid 325 358 391 Catalonia 495 530 593 Andalucía 212 201 192 País Vasco 187 207 244 Galicia 183 204 238 Castilla-León 83 73 75 Castilla-La Mancha 59 73 72 Aragón 52 38 39 Extremadura 122 122 118 Canarias 11 9 7 Navarra 78 78 89 Asturias 86 90 101 Comunidad Valenciana 109 109 132 Baleares 9 19 24 Murcia 20 18 26 Cantabria 13 11 9 La Rioja 13 10 18 Ceuta/ Melilla 0 0 0 TOTAL 2,057 2,150 2,368 44

TYPE OF INVESTMENT BY REGION IN 2016 TYPE OF INVESTMENT BY REGION (AMOUNT €M) Other early Later stage Seed Start-up Expansion Replacement Buyout Other Total stage venture Madrid 4.1 20.8 18.7 148.3 416.9 68.2 404.0 108.3 1,189.2 Catalonia 5.9 29.3 49.6 41.0 134.5 31.0 193.4 31.0 515.7 Andalucía 2.1 1.6 1.5 0.0 48.4 0.0 0.0 0.0 53.5 País Vasco 0.0 9.7 2.4 0.5 74.2 0.0 0.0 0.0 86.8 Galicia 1.2 8.4 1.3 0.2 21.0 0.0 235.2 0.0 267.3 Castilla-León 0.6 11.4 6.7 3.2 1.2 0.0 0.0 0.0 23.2 Castilla-La Mancha 0.0 1.5 0.0 0.0 1.5 0.0 229.5 0.0 232.5 Aragón 0.0 0.1 1.0 0.0 0.5 0.0 0.0 0.0 1.6 Extremadura 0.0 1.7 0.0 0.0 2.0 0.0 0.0 0.0 3.7 Canarias 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Navarra 0.9 2.3 2.5 2.3 1.3 0.0 26.4 1.4 37.2 Asturias 0.1 1.1 0.1 0.8 13.5 0.0 26.4 0.0 41.9 Comunidad Valenciana 0.9 2.3 1.5 0.0 25.2 30.0 149.0 20.0 228.9 Baleares 0.0 1.8 9.0 0.0 2.3 0.0 702.7 0.0 715.9 Murcia 0.0 0.3 3.6 0.0 6.9 0.0 39.1 0.0 49.9 Cantabria 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 La Rioja 0.0 0.1 0.4 0.0 3.5 0.0 168.4 0.0 172.4 Ceuta/ Melilla 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total 15.8 92.4 98.4 196.3 753.0 129.2 2,174.1 160.7 3,619.7

TYPE OF INVESTMENT BY REGION (NUMBER OF INVESTMENTS) Other early Later stage Seed Start-up Expansion Replacement Buyout Other Total stage venture Madrid 11 30 22 13 27 2 8 4 117 Catalonia 23 54 47 24 24 3 4 3 182 Andalucía 3 2 3 1 3 0 0 0 12 País Vasco 0 41 9 2 6 0 0 0 58 Galicia 21 25 4 1 1 0 5 0 57 Castilla-León 5 4 7 5 2 0 0 0 23 Castilla-La Mancha 0 3 0 0 1 0 1 0 5 Aragón 0 1 1 0 2 0 0 0 4 Extremadura 0 5 0 0 3 0 0 0 8 Canarias 1 0 0 0 0 0 0 0 1 Navarra 12 10 13 2 3 0 1 1 42 Asturias 2 7 1 2 5 0 1 0 18 Comunidad Valenciana 17 10 7 0 2 1 7 1 45 Baleares 0 2 5 0 2 0 3 0 12 Murcia 0 3 5 0 2 0 1 0 11 Cantabria 0 0 0 0 0 0 0 0 0 La Rioja 0 1 2 0 2 0 3 0 8 Ceuta/ Melilla 0 0 0 0 0 0 0 0 0 Total 95 198 126 50 85 6 34 9 603 REPORT 2017 The Regulatory Framework in Perspective: Questions under Review 46 The Regulatory Framework in Perspective: Questions under Review

irective 2011/61/EU, on Alternative Investment Fund Japan, Isle of Man, , Switzerland, and the United States. DManagers (“AIFMD,” hereinafter the “Directive”) entered However, the final decision rests with the Commission who, for the into force on July 22, 2011, with a deadline for transposition time being, has not issued a decision. Brexit has had a particular by the Member States of July 22, 2013. This Directive was impact in this regard and all signs seem to indicate that the matter transposed into Spanish law by virtue of Law 22/2014 of will not be resolved until the terms of the UK’s exit from the European November 12, which also amended Law 25/2005, governing Union have been negotiated. the former legal framework for private equity. Generally speaking, this rule would have allowed managers from Despite foreseeable initial concerns regarding the new legal third countries to access the passport, subject to compliance framework, it is safe to say that, in general, the market has been with the conditions set forth in the Directive and to obtaining the able to easily adapt to the new rules. However, certain inefficiencies relevant authorization. In the meantime, while this procedure is requiring correction have become clear, several of which are based being implemented, third country operators are free to market their on a lack of consistency in application of the regulations by each products in the EU subject to compliance with the regulations of Member State, and others which are based on mere technical the relevant Member State (National Private Placement Regimes) (to defects in the relevant regulations. the extent said regulations still exist as these were de facto replaced In any event, the Directive already includes specific provisions for its in some countries at the time of transposition) and, in all cases, subsequent review and amendment, in relation to which the two in accordance with certain provisions of the Directive. In fact, this main issues pending at this time are, on the one hand, extension Directive provides for a phasing out of said national regulations of the passport governed by the Directive to third countries and, once the passport has been made fully accessible by third country on the other hand, the implementation of Article 69, which reads managers, although this is not likely to occur until 2019. as follows: “By 22 July 2017, the Commission shall, on the basis It should also be noted that there are no regulatory restrictions of public consultation and in the light of the discussions with preventing funds from investing in Europe or European investors competent authorities, start a review on the application and the from investing in third country funds at their own initiative if they scope of this Directive. That review shall analyze the experience so wish (reverse solicitation), even where there was no marketing acquired in applying this Directive, its impact on investors, funds or managers, both in the Union and in third countries, and the degree per se. On the other hand, the Directive has no effect whatsoever to which the objectives of this Directive have been achieved. The on investors from third countries who may freely invest in European Commission shall, if necessary, propose appropriate amendments. funds without being affected by this regulation. The review shall include a general survey of the functioning of the The implementation of an effective, simple and flexible system for rules in this Directive and the experience acquired in applying them.” non-EU operators to access the passport is essential for business. Timely compliance with the July 2017 deadline seems highly unlikely Complying with regulations in each and every one of the Member at this time with issues such as the political situation in Europe, and States where a company intends to market –in many cases requiring in particular Brexit, giving reason to believe that compliance with this compliance with very different requirements and demands–, in deadline will undoubtedly be delayed. addition to registering with ESMA at the European level, can be a very complex and costly process and, therefore, is only possible for a On the other hand, the regimes applicable to European Venture select few. It is a proven fact that many small and medium managers Capital Funds (“EuVECA”) and European Social Entrepreneurship forgo marketing in Europe for this very reason, which prevents Funds (“EuSEF”)1 are also under review given the present lack of European investors from accessing these products and, therefore, acceptance of such entities in the market. reduces their options, thus negatively affecting the profitability of The key aspects of some of the main amendments that should be their portfolios. expected to be made in the short and medium-term to current As already noted, the political pressure generated by Brexit will regulations governing alternative investment products are briefly delay resolution of this issue, as all signs seem to indicate that the analyzed below. European Union hopes to prevent the UK from benefiting from a relaxation in the requirements for passport access by third countries 1.- Alternative Investment Fund Managers Directive at a time of high tension in negotiations.

1.1. Third-Country Passports 1.2. Passport for Managers Falling Below Certain Thresholds European fund managers are required to obtain relevant One of the main inefficiencies identified in the market since this authorization before activating their passport and engaging in cross- Directive entered into force is the difficulty faced by many operators border marketing and management within the European Union. when it comes to cross-border marketing, in particular for those that have below the thresholds set by This Directive planned to make passports available to managers and funds from third countries, subject to compliance with certain the Directive and who are therefore not required to comply with conditions, but the 2015 date initially set for such purpose was not the Directive. Although operators may voluntarily submit to the met and no significant advances have been made since. requirements imposed by the Directive, many small managers have a hard time meeting these requirements. Given that, in such case, they In July 2016, the European Securities and Markets Authority are unable to obtain the passport, they face significant difficulties and (“ESMA”) issued a public recommendation for extension of the are even completely prevented from marketing in certain Member passport (albeit with some caution) to twelve countries2: Australia, States that directly block these managers, even denying them the Bermuda, Canada, Cayman Islands, Guernsey, , Jersey, option to market in accordance with national regulations.

1 Regulation (EU) No 345/2013 and No 346/2013 of the European Parliament and of the Council both of 17 April 2013. 2 See ESMA reports 2016/1138 and 2016/1140. 47

These obstacles not only negatively affect market competition in primary instrument of incorporation for the fund. This rule requires Europe but in practice, contradict the treaties and philosophy of the that all investors be made aware of the existence and content of European Union. said side letters. Although this is certainly an excellent practice that ensures total transparency in the process, the problem arises when it Although some of these managers may be able to operate under comes to compliance with such requirement. The regulation requires the EuVECA framework, the conditions and restrictions under said that the potential investor have this information prior to effective framework have in practice resulted in most managers discarding execution of their investment which, in practice, is not possible in this option, as further analyzed below. A potential solution to this a large majority of cases, as this type of negotiation agreement is problem, which affects a significant number of operators, could reached throughout the process and tends to be made effective at include revising the EuVECA framework or establishing a specific the time of the relevant closings. This makes it impossible to anticipate passport for smaller managers. the existence or content of any subsequent parallel agreements. 1.3. What is “Marketing”? 1.5. Definition of Professional Investor4 Another problem that has been clearly identified by managers, and This Directive provides that marketing may only be performed as which is particularly problematic at the start of each fundraising between professional investors, as defined in MiFID II. However, this process, is the proper identification and interpretation of the reference has turned out to be unsuitable to the business reality. marketing rules applicable in each Member State in which the manager intends to raise funds with a view to complying with all Many traditional investors are automatically qualified as professional relevant regulatory requirements. investors under the terms of MiFID based on their nature as an , but there are many other investors who However, the definition of “marketing” in each Member State is not despite being just as active on the market have difficulty or, in some clear, in particular in relation to activities that could be considered cases, are unable to qualify as professional investors. This is the “pre-marketing,” thus constituting a preparatory activity outside case for example with Family Offices or high net worth individuals the scope of the regulations. Some countries consider effective which, although having a high level of sophistication and market marketing to have taken place only after the investor has received knowledge, do not meet the criteria set forth in the regulations nearly final documents for signing, whereas others take a more for being considered professional investors. However, these conservative approach. investors account for an increasingly significant amount of funds The practical consequence of this situation is that managers are on the market and are essential for many managers, making the required to spend an inordinate amount of time and money analyzing correction of this regulatory inefficiency a priority. The classification the regulations of each country, thus suffering numerous delays that of these types of investors as investors makes compliance with negatively affect the fundraising process. marketing regulations in different countries more complicated, if not impossible. 1.4. Regulatory Process for Cross-Border Marketing In order to market a new fund in a Member State other than their 1.6. Additional Issues country of incorporation, managers regulated by the Directive Although we have discussed certain aspects that have been identified (i.e. managers with assets under management above established as priorities in relation to revision of the application and impact of thresholds) are required to send notice to the competent authority in the Directive, additional issues are present which affect, to a greater their country. This notice must include a description of the structure or lesser extent, proper operation of the market. In a nutshell, the of the relevant fund and a copy of its instrument of incorporation potential inefficiencies identified should be adjusted and corrected, (e.g. primarily the prospectus and regulations for Venture Capital and the appropriate principles of consistency and proportionality in and Private Equity firms). The regulatory authority then has up to relation to the aims sought by the Directive should be applied. twenty days to respond, before which the manager is not allowed to This includes, inter alia, the principles of compensation, risk start any marketing activities. control, segregation of duties and alignment of interests; the scope The main problem that this has created is in the case of potential of the Directive and the appropriate treatment of entities such changes and amendments subsequently made to the relevant as co-investment vehicles, which are increasingly common and documents, as the regulations require that any substantial changes sophisticated; depositaries and the need to grant a passport to to the documents be reported to the supervisory authority, who will service providers that facilitate operations and reduce costs; or the have up to one month to review and, as the case may be, approve said need to harmonize information and reporting principles, to name a documents.3 Throughout the marketing process several negotiations few of the most relevant issues. are held with potential investors in the fund that could result in significant changes to the documents, and it is easy to imagine how burdensome these obligations and deadlines could become. In fact, it is completely inefficient that each time new amendments to the terms and conditions of a fund are made a new version has to be sent to the authorities and that, even worse, the fund is required to wait a full month before implementing such changes and, as the case may be, before obtaining the green light to close the fund. A similar problem surfaces in relation to the so-called side letters signed with certain investors and which are not included in the

3 See Art. 80.4 of Law 22/2014 and Art. 32.7 of Directive 2011/61/EU. 4 See Art. 205 and Art. 206 of Royal Legislative Decree 4/2015 of October 23, approving the amended and restated text of the Spanish Securities Market Act. 48

2. EuVECA and EuSEF Regimes employees). The current system only allows EuVECA funds to invest in unlisted companies with less than 250 employees, turnover below Regulations on EuVECA and EuSEF funds were implemented with €50 million and an annual balance below €43 million.6 the aim of improving access to capital for the managers of these funds. However, despite the laudable objective of these regulations, their expected advantages have not materialized, notably: (i) the - Simplify and lower costs associated with cross-border opportunity to market to retail investors; (ii) less oversight and marketing, which currently prevent the full effectiveness in practice regulation than alternative management activities governed under of the passport granted under these regimes. the Directive; (iii) automatic marketing without a passport; or (iv) exemption from the obligation to have a depositary. In December 2016, the revision process was initiated addressing - In the case of EuSEF funds, reduce minimum investment potential amendments to both regimes under the Capital Markets requirements from €100,00 to €50,000. Union (“CMU”) Action Plan,5 one of the priorities of which was, as stated by the European Commission itself, to provide easier access to capital for start-ups, SMEs and, in general, innovative businesses - Establish unified rules for all Member States on own equity with high growth potential. Comparing the American market with requirements for these types of funds (1/8 of total costs from the ours, it is clear that a certain degree of support is still required for prior fiscal year). the proper implementation of alternative financing mechanisms in Europe. On the other hand, the recent financial crisis made the need for these sources when bank financing fails clear. Along these - Establish a central registry of funds and EuVECA and EuSEF same lines, the above-mentioned CMU Plan includes other initiatives fund managers, to be managed by ESMA. such as the launch of a Pan-European Venture Capital Fund of Funds or the proposal for tax incentives for venture capital and business angels. On March 22, 2016, the European Parliament confirmed that the members of its Committee on Economic and Monetary Affairs Focusing on the regulatory aspects, the Commission has identified (“ECON”) were in support of the implementation of these and other three fundamental obstacles to the effective application of the amendments to both regulations in order to “make EuVECA and EuVECA and EuSEF regimes. Two of these obstacles are grounded EuSEF funds more attractive for investors.” in the content of the regulations: (i) limitations that govern the type of manager that can promote these types of funds; (ii) restrictions Although as of the date of this report we are not certain when on the type of investments that these funds can make; and (iii) the the legal and regulatory amendments briefly discussed above third obstacle, which we consider external to the regulation itself will take shape and be implemented, it seems indisputable and which is based on the application of fees and levies by various that the European regulatory framework applicable to Members States for cross-border marketing and management of venture capital and private equity is still a long way from these products. being finalized. Although changes and amendments to game Along this line of action, the Commission proposed last year, in rules already known are generally not welcomed by market anticipation of the initial revision date, the amendment of both operators, and despite the potential negative effects on regulations, primarily in the following regards: business due to the uncertainty caused by such changes and amendments, we expect that, with a little bit of luck, most of - Expand the types of managers that can promote and the expected adjustments will be aimed at correcting errors, manage these funds to all managers regulated by the Directive improving practices and eliminating inefficiencies existing (currently only managers with assets under management below a under the current regime. certain threshold are allowed);

Isabel Rodríguez - Extend the classification of assets these funds can invest in Socia Wood & Mallesons to include small mid-caps (unlisted companies with fewer than 500

5 The Capital Markets Union Action Plan was issued in September 2015 and is a central component of the Investment Plan for Europe to foster employment and economic growth in Europe. 6 Commission Recommendation 2003/361/EC of 6 May 2003, concerning the definition of micro, small and medium-sized enterprises.

50 COMPANIES INCLUDED IN THIS SURVEY

I. DOMESTIC PRIVATE VENTURE CAPITAL & PRIVATE 6. Sociedad de Desarrollo de Navarra, SA (SODENA) EQUITY ENTITIES (S.C.R.) 7. Sociedad para el Desarrollo Industrial de Aragón, SA 1. Activos y Gestión Empresarial, SCR, SA (SODIAR) 2. Amadeus Ventures 8. Sociedad para el Desarrollo Industrial de Castilla-La 3. Angels Capital SL Mancha, SA (SODICAMAN) 4. Bonsai Venture Capital 9. Sociedad para el Desarrollo Industrial de Extremadura, SA (SODIEX) 5. BStartup 10. Sociedad Regional de Promoción del Pdo. de Asturias, SA 6. Caja Burgos, Fundación Bancaria (SRP) 7. Compas Private Equity 8. Corporación Empresarial de Extremadura, SA 9. Fides Capital, SCR, SA III. DOMESTIC PRIVATE VENTURE CAPITAL & PRIVATE 10. FIT Inversión en Talento SCR de Régimen Simplificado SL EQUITY ENTITIES (S.G.E.C.R.) 11. Grupo Intercom de Capital, SCR, SA 1. Abac Capital 12. Grupo Perseo (Iberdrola) 2. Active Venture Partners, SGEIC, SA 13. Healthequity SCR, de Régimen Simplificado SA 3. Adara Venture Partners 14. Indes Capital 4. Addquity Growth Capital, SA 15. Integra Capital SCR, SA 5. Ade Gestión Sodical SGEIC, SA 16. Investing Profit Wisely 6. Alma Mundi Ventures, SGEIC, SA 17. Landon Investment 7. Alter Capital Desarrollo SGEIC, SA 18. Murcia Emprende Sociedad de Capital Riesgo, SA 8. Ambar Capital y Expansión SGEIC SA 19. Najeti Capital, SCR, SA 9. Artá Capital SGEIC, SA 20. Navarra Iniciativas Empresariales, SA (Genera) 10. Atlas Capital Private Equity SGEIC, SA 21. Nero Ventures 11. Aurica Capital Desarrollo, SGEIC, SAU 22. Onza Venture Capital Investments Régimen Simplificado SA 12. Avet Ventures SGEIC SA 23. Repsol Energy Ventures 13. Axón Capital e Inversiones SGEIC, SA 24. Ricari, Desarrollo de Inversiones Riojanas S.A 14. Bankinter Capital Riesgo, SGEIC (Intergestora) 25. Sinensis Seed Capital SCR, S.A 15. Baring Private Equity Partners España, SA 26. Santander Innoventures 16. Beable Capital SGEIC, SA 27. Soria Futuro, SA 17. Black Toro Capital LLP 28. Telefónica Open Future 18. Bullnet Gestión, SGEIC, SA 29. Torreal, SCR, SA 19. Caixa Capital Risc SGEIC, SA 30. Unirisco Galicia SCR, SA 20. Cantabria Capital SGEIC, S.A 31. Univen Capital, SA, SCR de Régimen Común 21. Clave Mayor SGEIC, SA 32. Up Capital 22. Corpfin Capital Asesores, SA, SGEIC 33. Vigo Activo, S.C.R. de Régimen Simplificado, SA 23. CRB Inverbío SGEIC 34. VitaminaK Venture Capital SCR de régimen común, SA 24. CVP Asset Management, SGEIC, SA 25. Diana Capital, SGEIC, SA 26. EBN Capital SGEIC, SA II. DOMESTIC PUBLIC VENTURE CAPITAL & PRIVATE EQUITY ENTITIES (S.C.R.) 27. Eland Private Equity SGEIC SA 1. INVERTEC (Societat Catalana d’Inversió en Empreses de 28. Espiga Capital Gestión SGEIC, SA Base Tecnològica, SA) 29. Everwood Capital SGEIC, SA 2. Sadim Inversiones 30. Finaves 3. SEPI Desarrollo Empresarial, SA (SEPIDES) 31. Gala Capital Desarrollo 4. Sociedad de Desarrollo de las Comarcas Mineras, S.A 32. GED Iberian Private Equity, SGEIC, SA (SODECO) 33. Gescaixa Galicia, SGEIC, SA 5. Sociedad de Desarrollo Económico de Canarias, SA (SODECAN) 34. Going Investment Gestión SGEIC 51

35. GPF Capital IV. DOMESTIC PUBLIC VENTURE CAPITAL & PRIVATE EQUITY ENTITIES (S.G. E.C.R.) 36. Hiperion Capital Management, SGEIC, SA 1. AXIS Participaciones Empresariales, SGEIC, SA 37. Institut Català de Finances Capital SGEIC 2. Cofides 38. Inveready 3. Extremadura Avante Inversiones (antes Sociedad de 39. JB Capital Markets, S.V., SA Fomento Industrial de Extremadura) 40. JME Venture Capital, SGEIC, SA (antes Fundación 4. Gestión de Capital Riesgo del País Vasco, SGEIC, SA Entrecanales) 5. Innova Venture, SGEIC, SA (antes Invercaria Gestión) 41. Kanoar Ventures, SGEIC, SA 6. Seed Capital de Bizkaia, SGEIC, SA 42. Kibo Ventures 7. XesGalicia, SGEIC, SA 43. Magnum Industrial Partners 44. MCH Private Equity, SA 45. Meridia Capital Partners, SGEIC, SA V. INTERNATIONAL VENTURE CAPITAL & PRIVATE EQUITY 46. Miura Private Equity ENTITIES WITH OFFICE IN SPAIN 47. Nauta Tech Invest 1. Europe plc (Sucursal en España) 48. Nazca Capital, S.G.E.C.R, SA 2. Advent International Advisory, SL 49. Neotec Capital Riesgo 3. Aurelius 50. Next Capital Partners, SGEIC, S.A 4. Bridgepoint 51. Nmás1 Capital Privado, SGEIC, SA 5. Cinven 52. Ona Capital 6. Charme Capital Partners SGR S.p.A. 53. Oquendo Capital 7. CVC Capital Partners Limited 54. PHI Industrial Acquisitions 8. Demeter Partners 55. Portobello Capital 9. Ergon Capital 56. Proa Capital de Inversiones SGEIC, SA 10. Harvard Investment Group Capital (HIG) 57. Qualitas Equity Partners 11. Intermediate Capital Group (ICG) 58. Realza Capital SGEIC, SA 12. Investindustrial Advisors, SA 13. (KKR) 59. Renertia Investment Company SGEIC SA 14. MBO Partenaires 60. Riva y García Gestión, SA 15. Oaktree Capital Management, L.P 61. Sabadell Venture Capital 16. PAI Partners 62. Samaipata Ventures 17. Permira Asesores 63. Seaya Ventures 18. Quantum Capital Partners AG 64. Santander Private Equity SGEIC 19. Riverside España Partners, S.L. 65. SES Iberia Private Equity, SA 20. Springwater Capital 66. Sherpa Capital Gestión 21. The Carlyle Group España, SL 67. SI Capital R&S I SA,SCR de Régimen Simplificado 68. Swanlaab Venture Factory, SGEIC, SA 69. Suanfarma Biotech, SGEIC, SA VI. INTERNATIONAL VENTURE CAPITAL & PRIVATE EQUITY 70. Suma Capital Private Equity FIRMS WITH OFFICEOUT IN SPAIN 71. Taiga Mistral de Inversiones 1. 14W 72. Talde Gestión SGEIC, SA 2. Partners 73. Telegraph Hill Capital 3. Adams Street Partners 74. Thesan Capital 4. Alchemy Capital Management 75. Torsa Capital, SGEIC, SA 5. Altpoint Capital 76. Uninvest Fondo I+D 6. Amadeus Capital Partners 77. Venturcap 7. Apax Partners España, SA 78. Victoria Venture Capital 8. ArcLight Capital Partners 79. Ysios Capital Partners 9. Arle Capital Partners 52

10. Atomico 55. Institutional Venture Partners 11. Avalon Ventures 56. Intel Capital 12. Avenue Capital Group 57. Inversur Capital 13. 58. Investcorp 14. Balderton Capital 59. Jackson Square Ventures 15. Baxter Ventures 60. Javelin Venture Partners 16. SE & Co 61. JJDC Innovation 17. Boehringer Ingelheim 62. JZ International 18. Seed Capital 63. Kennet Partners 19. Bruckmann, Rosser, Sherrill & Co 64. Kleiner Perkins C&B 20. Canada Pension Plan Investment Board (CPPIB) 65. Kurma Partners 21. CCMP Capital Advisors 66. L Capital Asi 22. Cerberus Capital 67. L Catternon Europe (antes L Capital) 23. Cisco Investments 68. Venture Partners 24. Connect Ventures 69. Lundbeckfond Ventures 25. Coral Group 70. Magenta Partners 26. Correlation Ventures 71. Maveron 27. Costanoa Venture Capital 72. Middleland Capital 28. Chiesi Ventures 73. Monsanto Growth Ventures 29. Data Collective VC 74. Naspers Limited 30. Delta Partners Group 75. New Enterprise Associates 31. Digital Sky Technologies 76. Nokia Growth Partners 32. DLJ South American Partners 77. OpCapita 33. Early Bird 78. Open Ocean 34. Edmon de Rothschild I.P. 79. Otium Capital (antes Smart Ventures) 35. Eight Road Ventures 80. Oxford Capital Partners 36. Elaia Partners 81. P101 37. Emerige Societe par Accions Simplifiee 82. Palamon Capital Partners 38. Entrée Capital 83. Partech Ventures 39. Eurazeo 84. Partners Group 40. Fidelity Growth Partners Europe 85. N.V. 41. First Reserve 86. Platinum Equity 42. Forbion Capital Partners 87. Point Nine Capital 43. G Square 88. Prime Ventures 44. GGM Capital 89. Providence 45. GGV Capital 90. QED Investors 46. Gilde Healthcare Partners 91. Qualcomm 47. Greylock Partners 92. Rakuten Inc. 48. Highland Capital Partners 93. Roche Venture Fund 49. Horizon Ventures 94. Rose Tech Ventures 50. Idinvest Partners 95. Rothenberg Ventures 51. Index Ventures 96. RTAventures 52. Industry Ventures 97. SalesForce Ventures 53. Initial Capital 98. Sandton Capital 54. Insight Venture Partners 99. Sapphire Ventures (antes SAP Ventures) 53

100. Scope Capital Advisory 15. Kanoar Ventures, SGEIC, SA 101. Sequoia Capital 16. Meridia Capital Partners, SGEIC, SA 102. AG 17. Philips N.V. 103. Sigma Partners 18. Rakuten Inc. 104. SoftBank 19. Siemens AG 105. Sonae Ventures 20. Swanlaab Venture Factory, SGEIC, SA 106. Spark Capital Partners 107. Stage 1 Ventures 108. StepStone Group X. OTHER PUBLIC ENTITIES WITH COMPLEMENTARY INVESTMENT IN THE PRIVATE EQUITY & VENTURE 109. Sun Capital CAPITAL SECTOR 110. Sunstone Capital A/S 1. Centro para el Desarrollo Tecnológico Industrial (CDTI) 111. TA Associates 2. Empresa Nacional de Innovación, SA (ENISA) 112. TC Growth Partner 3. Institut Català de Finances (ICF) 113. Techstars Ventures 4. Institut Valenciá de Competitivitat Empresarial (IVACE) 114. Tekton Ventures 5. SODIAR 115. Tiger Global Management 116. Top Tier Capital 117. Trident Capital XI. MANAGING COMPANIES OR ADVISERS OF 118. Trilantic Partners TRANSNATIONAL FUNDS THAT REACTIVATED THEIR 119. Triton Investment Advisers ACTIVITY IN SPAIN 120. Vulcan Capital 1. Otium Capital (antes Smart Ventures) 121. Vy Capital 2. Providence 3. TA Associates VIII. ENTITIES THAT CEASED ACTIVITY IN 2016 1. BBVA Venture 2. Innova 31, SC 3. Madrigal Participacione 4. Valanza

IX.  ENTITIES THAT START THEIR ACTIVITY IN SPAIN IN 20161 1. Alma Mundi Ventures, SGEIC, SA 2. Amadeus Capital Partners 3. Beable Capital SGEIC, SA 4. Canada Pension Plan Investment Board (CPPIB) 5. Charme Capital Partners SGR S.p.A. 6. Collins Capital Desarrollo SCR-PYME, SA 7. CVP Asset Management, SGEIC, SA 8. Emerige Societe par Accions Simplifiee 9. Entrée Capital 10. Everwood Capital SGEIC, SA 11. Integra Capital SCR, SA 12. Intermediate Capital Group (ICG) 13. Investcorp 14. JB Capital Markets, S.V., SA

1 To these 20 incorporations in the Private Equity & Venture Capital market, it would have to be added several international funds whose name is confidential although its added activity in 2016 is reflected in the report. 54

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K 2017 SURVEY Venture Capital & Private Equity in Spain

SURVEY Venture Capital & Private Equity in Spain 2017

WITH THE SPONSORSHIP OF Private Equity & Venture Capital in a changing global environment