Q3 Pitchbook-NVCA Venture Monitor Report for 2016

3Q 2016

Total VC invested is on pace to Median venture-backed exit Expanded league tables hit $74B in 2016, the second- size via M&A/buyout doubles Pages 16-18 highest level of the decade from 2015 Page 4 Page 13

The definitive quarterly review of the US venture capital ecosystem and trends. Credits & Contact PitchBook Data, Inc. JOHN GABBERT Founder, CEO ADLEY BOWDEN Vice President, Market Development & Analysis

Content NIZAR TARHUNI Senior Analyst GARRETT JAMES BLACK Senior Analyst KYLE STANFORD Analyst ELIZABETH ARMON Analyst ANDY WHITE Data Analysis Manager BRYAN HANSON Data Analyst JENNIFER SAM Senior Graphic Designer

Contact PitchBook Contents pitchbook.com RESEARCH [email protected]

EDITORIAL [email protected]

Executive Summary 3 SALES [email protected] Overview 4-5 National Venture Capital Association (NVCA) Angel & Seed 6 BOBBY FRANKLIN President and CEO MARYAM HAQUE Vice President of Research Early Stage 7 BEN VEGHTE Vice President of Communications and Marketing Late Stage 8 Contact NVCA Corporate Venture Capital 9 nvca.org [email protected] Growth Equity 10

COPYRIGHT © 2016 by PitchBook Data, Inc. All Rounds by Sector 11 rights reserved. No part of this publication may be reproduced in any form or by any means—graphic, electronic, or mechanical, including photocopying, Exits 12-13 recording, taping, and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc. Contents are Fundraising 14-15 based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed 3Q 2016 League Tables 16-18 as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. Methodology 19 This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.

2 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Executive Summary

We are excited to release this inaugural issue of the PitchBook-National Venture Capital Association (NVCA) Venture Monitor. The result of a partnership forged between the leading source of private capital data and the venture industry’s flagship trade association, the PitchBook-NVCA Venture Monitor serves as the definitive source of information and analysis about venture capital activity in the entrepreneurial ecosystem. From fundraising to investment to exit, the Venture Monitor paints a complete picture of US venture activity in one comprehensive report each quarter.

Headquartered in our nation’s capital, NVCA’s primary mission is advocacy and working with policymakers to implement a policy agenda to strengthen the entrepreneurial ecosystem. Viewed as a small, cottage industry in the minds of policymakers, it’s always a challenge for venture capital to command a lot of attention in our nation’s capital, especially when competing for airtime with large, entrenched industries. However, as policymakers and other stakeholders better understand venture capital and the unique and irreplaceable role it plays in our economy, more attention is being paid to the issues that matter to our ecosystem.

Most recently, the venture industry reached an important milestone in August when five venture-backed companies—Apple, Alphabet (Google), Microsoft, Amazon, and Facebook—held the top five spots as the most valuable companies in the world by market value. Knowing that these powerful brands, and their 530,000 employees, all trace their roots back to venture capital, it’s not surprising to see venture capital continue to flow to the next generation of great American companies.

In the third quarter, close to 2,000 investors (namely venture capital firms, corporate venture capital firms, angels, accelerators, and incubators) deployed just short of $15 billion to over 1,600 companies in the entrepreneurial ecosystem. These investments spanned 48 states and the District of Columbia and across companies operating in a range of sectors, showing the true reach of the venture ecosystem. The extent of this reach was apparent with investments in companies like CVRx, a Minneapolis-based medical device company developing technology for the treatment of high blood pressure and heart failure; Dallas-based StackPath offering cybersecurity solutions via a web-based security platform; San Francisco-based game development company Unity Technologies; and Cambridge-based Moderna developing alternative treatments for a range of disease conditions. In each case, these innovative companies are driving value creation to our economy, shaping society, and improving the health and wellbeing of our citizens.

Knowing of the transformative changes being driven by these venture-backed companies, investors in venture capital funds, such as endowments, foundations and pensions, continue their strong interest in the asset class. Third-quarter fundraising totaled $9 billion, bringing total funds raised for the year to $32 billion. At this pace, it’s likely 2016 could be one of the best fundraising years in recent memory. This isn’t surprising given that investors increasingly want exposure to high venture capital returns, especially in a low interest- rate environment, as well as a front row seat to innovation.

Naturally, much of the recent attention on the ecosystem has been on the exit environment, as 2016 has proven challenging for venture- backed technology IPOs. In the third quarter, 14 venture-backed companies went public, raising $1.04 billion, and creating over $5.7 billion in public company market value. M&A remains the most likely exit route for venture backed companies, and although the pace of exits via acquisition continued to slow for the fourth straight quarter, the median acquisition/buyout price crossed $100 million, reaching an eleven-year high.

3 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Overview

For some time now, we’ve maintained that Massive sums still concentrated in fewer financings the US venture industry is undergoing a US VC activity regression to the mean. At its current pace, year-end VC invested could hit $74 billion for the entirety of 2016—the second- Deal Value ($B) 10,501 10,293 highest tally of the decade. Even if VC # of Deals Closed 9,291 invested in the fourth quarter is as low as 3Q’s tally, 2016 could still top 2014’s figure. Source: PitchBook 7,979 *As of 9/30/2016 Simultaneously, however, that massive 5,997 sum of capital is concentrated in fewer 6,715 financings, with annual deal flow set to 5,398 decline by 22% relative to the heights of 2015. 4,261 4,676 4,433

The decline in deal flow has been softer than 3,256 some might have expected. As companies have secured massive amounts of capital over the last few years, investors have looked to utilize a more targeted approach $29 $36 $37 $26 $31 $44 $41 $45 $69 $79 $56 to how they invest, which encompasses making fewer but larger bets. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

3Q numbers illustrate the venture reset is still ongoing US VC activity

$25 3,000

Source: PitchBook. Note: Uber’s mammoth financings in the first half of 2016 were collated into one super round in 2Q 2016 according to PitchBook methodology. 2,500 $20

2,000 $15

1,500

$10 1,000

$5 500

$0 0 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Deal Value ($B) # of Deals Closed Angel/Seed Early VC Late VC

4 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR And to that point, 2016 is on pace to record The role of corporate venture arms must important to many corporate giants as over 600 financings of $25 million or more, also not be discounted. As detailed below, they see their legacy businesses slow. in line with the 637 observed in 2014. In 2015 saw an unprecedented $32.9 billion Before some companies may look to invest addition, median financing sizes still remain worth of total transactions that included capital directly off their balance sheets, at near-record levels, three-quarters into corporate VCs; through September, this year corporate VCs can play a pivotal role in the year. has already seen $26.1 billion. Especially helping their parents gain exposure to in technology, M&A has been critically cutting-edge technologies. With that, parent companies can use their investment arms as an educational vehicle to help drive their future corporate development initiatives. Median VC round size ($M) by stage These rationales have motivated corporate $12 venture arms to maintain a significant Angel/Seed Early VC Later VC $10.6 investment pace, which in turn has helped $10.0 soften any slide, particularly in total $10 financing value.

Investors still have plenty of money to $8 deploy, overall returns for VC as an asset class are compelling enough for limited partners to maintain allocations, and $6 $5.4 plenty of entrepreneurs are still starting $4.7 companies and courting funding. Lastly, $4 many emerging technology platforms such as IoT, blockchain, virtual reality, immunotherapies, etc. will continue to pave $2 the way for additional innovations and $1.0 $0.75 market opportunities.

$0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Source: PitchBook *As of 9/30/2016

US VC activity (#) by size US VC activity ($B) by size

100% 100% $25M+ $25M+ 90% 90%

80% 80% $10M-$25M $10M-$25M 70% 70%

60% $5M-$10M 60% $5M-$10M

50% 50% $1M-$5M $1M-$5M 40% 40%

30% $500K-$1M 30% $500K-$1M

20% 20% Under Under 10% 10% $500K $500K 0% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2016* Source: PitchBook Source: PitchBook *As of 9/30/2016 *As of 9/30/2016

5 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Declines must be put in invested through angel deals in 3Q was of pre-seed and angel investors, seed capital higher than any quarter prior to 3Q 2014, is often also no longer the first investment historical context and overall deal activity in angel and seed in a startup. Micro funds have become more Angel & seed activity in the US deals holds strong against pre-2013 levels. common over recent years—more than 100 Angel deal value is slated to decline for were raised each of the past four years— 898 deals were completed at the angel/seed the first time YoY since 2008, yet may still allowing seed investors to provide higher stage during 3Q, a decrease of roughly 13% become the second-highest total by year. amounts of capital. The median seed deal value has made an enormous jump to $1.5 quarter over quarter and the first time there Seed investment in particular has shifted million during 2016, 50% higher than the were fewer than 1,000 completed deals in a further into the venture lifecycle in recent median of 2015 and triple the median value given quarter since 4Q 2012. The dramatic years, aligning more closely to early Series from just three years ago. fall in activity since 2Q 2015, however, must A deals of the past. Due to the rise of be contrasted with historical norms. Capital accelerator programs, as well as the number

US VC angel & seed activity

Deal Value ($M) # of Deals Closed 1,474 1,426 1,413 Source: PitchBook 1,368 *As of 9/30/2016 1,188 1,184 1,121 898 955 856 706 624

433 408 $699 $632 $556 $543 $775 $790 $928 $952 $909 $965 $996 $1,316 $1,545 $1,299 $1,469 $2,573 $2,021 $1,998 $2,566 $2,050 $1,776 $1,874 $1,852 $1,687 $478 $408 $379

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016

US angel & seed activity (#) by size US angel & seed activity ($M) by size

100% 100%

90% $5M+ 90% $5M+

80% 80%

70% 70% $1M-$5M $1M-$5M 60% 60%

50% 50%

40% $500K-$1M 40% $500K-$1M

30% 30%

20% 20% Under Under 10% $500K 10% $500K

0% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2016* Source: PitchBook Source: PitchBook *As of 9/30/2016 *As of 9/30/2016

6 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Similar to the seed stage, in value still hit $5.7 billion. Several large deals Investors have been more cautious at the bolstered that total, including the outlier early stage than they were in the prior few part financings of self-driving car developer Zoox years, wary of hefty prices. That caution US early-stage VC activity ($200 million Series A) and StackPath ($180 has translated into heightened diligence million Series A). The portion of deals $10 by venture firms, as they increasingly look The early stage resembles its seed-stage million and larger has paced above more for prospects to hit loftier benchmarks counterpart. Deal count fell QoQ, failing than 30% of all deals completed during the in revenues and other key performance to reach 600 completed deals for the first year, the largest percentage in more than a indicators. While early-stage investors are quarter since 4Q 2011. Deal count and decade. Through 3Q, 165 deals worth over also emphasizing capital efficiency in case capital invested at the early stage fell by $25 million closed, while the median deal of an economic downturn, they are still 12% and 9%, respectively, though deal size has legged up more than $700,000 over providing startups with the capital needed 2015’s tally to $5.4 million. to weather a storm.

US early-stage VC activity

Deal Value ($B) # of Deals Closed 802 744 753 Source: PitchBook 711 693 693 *As of 9/30/2016 668 634 717 576 647 609 557 522 $3.1 $2.7 $2.8 $2.6 $3.4 $3.0 $3.5 $3.6 $3.1 $3.9 $3.0 $3.2 $3.4 $3.8 $3.2 $4.6 $4.5 $5.5 $4.9 $5.6 $5.1 $6.2 $6.4 $6.7 $6.6 $6.3 $5.7

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016

US early-stage activity (#) by size US early-stage activity ($M) by size

100% 100% $25M+ $25M+ 90% 90%

80% 80% $10M-$25M $10M-$25M 70% 70%

60% $5M-$10M 60% $5M-$10M

50% 50% $1M-$5M $1M-$5M 40% 40%

30% $500K-$1M 30% $500K-$1M

7 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR A post-surge slump in late- value was primarily impacted by a record continued slowdown shouldn’t necessarily 2Q, which saw more than $14 billion flow alarm market participants. A pullback can stage VC invested into such businesses. Further, late-stage be healthy as investors look to further US late-stage VC activity transactions have also exemplified similar examine the industries and ecosystems that trends to what we’ve seen across the entire remain poised to outperform. In a period In the third quarter, we saw $7.6 billion industry, where total activity has fallen but where heightened uncertainty remains invested across 355 late-stage deals, investors have placed more capital with across most asset classes, the foresight to equating to a rather massive 46% decline select stand-out companies. This was shown continue betting smaller and earlier, but in total capital invested and a 4% drop in last quarter as the concentration of capital then employing more selectivity in larger total deal volume, both QoQ. Although in deals exceeding $25 million accounted for financings, should be interpreted as VCs 3Q saw the lowest amount of capital flow the largest amount we’ve seen in a decade. actually looking to manage risk in a more into late-stage companies since 4Q 2013, As the previous two years have seen prudent and efficient fashion. the massive decline in QoQ late-stage deal investors put plenty of capital to work, the

US late-stage VC activity

Deal Value ($B) # of Deals Closed 498 Source: PitchBook 477 *As of 9/30/2016 438 452 459 419 429 423 438 397 410 351 350 355 $3.9 $5.7 $3.8 $4.4 $9.2 $6.7 $6.7 $5.4 $5.8 $6.3 $6.1 $5.5 $6.0 $5.9 $6.6 $6.1 $7.8 $8.6 $9.2 $9.9 $7.6 $12.9 $11.5 $13.1 $11.1 $12.7 $14.0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016

US late-stage VC activity (#) by size US late-stage VC activity ($M) by size

100% 100% $25M+ $25M+ 90% 90%

80% 80% $10M-$25M $10M-$25M 70% 70%

60% $5M-$10M 60% $5M-$10M

50% 50% $1M-$5M $1M-$5M 40% 40%

30% $500K-$1M 30% $500K-$1M

8 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Corporate venture capital

US venture activity with corporate VC participation US venture activity (#) with corporate VC participation by sector 1,317 Deal Value ($B) 1,276 1,400 Commercial Services Consumer Goods & Recreation

# of Deals Closed 1,064 Energy HC Devices & Supplies 1,200 HC Services & Systems IT Hardware 850 1,000 804 Media Other 725 Pharma & Biotech Software 800 677 682

559 600 530 472 400

200 $9 $6 $8 $11 $10 $13 $11 $14 $24 $33 $26 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: PitchBook 2016* *As of 9/30/2016 Source: PitchBook *As of 9/30/2016

Even as overall CVC participation declines, aggregate financing value remains high US VC activity with corporate VC participation

$14 400

$12 350 Source: PitchBook *As of 9/30/2016 300 $10 250 $8 200 $6 150 $4 100

$2 50

$0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016 Deal Value ($B) # of Deals Closed Angel/Seed Early VC Late VC

9 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Growth equity

Note: Growth equity is not included as a subset of overall VC data, but is rather its own unique dataset. See the Methodology, page 19, for more details on this particular category.

US growth equity activity US growth equity activity (#) by size

100% Deal Value ($B) # of Deals Closed 551 514 90% $200M+ Source: PitchBook 80% *As of 9/30/2016 442 414 $100M-$200M 70% 387 408 360 343 352 60% $75M-$100M 50%

276 40% $50M-$75M 254 30% $30M-$50M 20%

10% $15M-$30M $9.0 $8.1 $14.5 $12.3 $10.7 $17.2 $16.2 $13.6 $27.7 $32.8 $21.1 0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 016* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2 Source: PitchBook *As of 9/30/2016

US growth equity deal size metrics US growth equity activity (#) by sector

$250 600 Commercial Services Median deal size ($M) Median pre-money valuation ($M) Consumer Goods & 500 Recreation $200 Energy

$180 400 HC Devices & Supplies $150 $150 HC Services & Systems 300 IT Hardware $100 200 Media

Other 100 $50 $39 $35 Pharma & Biotech

0 Software $0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2010 2011 2012 2013 2014 2015 2016* Source: PitchBook Source: PitchBook *As of 9/30/2016 *As of 9/30/2016

10 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Rounds by sector

All sectors are off pace Software remains on top US VC activity (#) by sector US VC activity ($B) by sector

12,000 $90 Commercial Services Consumer Goods & Recreation Commercial Services Consumer Goods & Recreation $80 Energy HC Devices & Supplies Energy HC Devices & Supplies 10,000 $70 HC Services & Systems IT Hardware HC Services & Systems IT Hardware 8,000 $60 Media Other Media Other $50 Pharma & Biotech Pharma & Biotech Software 6,000 $40 Software 4,000 $30

$20 2,000 $10

0 $0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2016* Source: PitchBook Source: PitchBook *As of 9/30/2016 *As of 9/30/2016

A slight resurgence Dollars invested remain relatively low US VC activity (#) in life sciences US VC activity ($B) in life sciences

1,400 25% $16 30%

1,200 $14 25% 20% $12 1,000 20% $10 15% 16.6% 800 12.9% $8 15% 600 10% $6 10% 400 $4 5% 5% 200 $2

0 0% $0 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2016* Life Sciences Deal Count Life Sciences as % of Total US VC (#) Life Sciences’ Deal Value Life Sciences as % of Total US VC ($B) Source: PitchBook Source: PitchBook *As of 9/30/2016 *As of 9/30/2016 Life sciences is composed of pharma & biotech and healthcare devices & supplies combined together.

11 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Exits

Total exit value has been somewhat resilient Total venture-backed exit value last quarter came in at $14.6 billion across US venture-backed exit activity 162 completed exits, representing a 2.3% decline in terms of total realizations and a Exit Value ($B) # of Exits Closed 1,027 12.4% drop in exit volume. Through 3Q, 940 2016 has seen VCs achieve $38.6 billion in 884 859 liquidity, putting exit value on pace to come in somewhat over what we saw in 2015, 719 although total volume is on pace to come in 686 lower for the second straight year. 594 535 The exit trends we’ve witnessed in recent quarters remained in place through 3Q. 500 479 456 Corporate acquisition counts dropped 14% QoQ, yet they continued to account for the largest proportion of VC sales by a dominating margin, followed by PE buyouts. The median acquisition/buyout exit size $24 $41 $18 $16 $30 $36 $54 $36 $82 $49 $39 hit a new historic high of $100 million last 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* quarter; that same figure has doubled in size Source: PitchBook between 2015 and through September of *As of 9/30/2016 2016.

A pronounced, long-running decline US venture-backed exit activity

Exit Value ($B) # of Exits Closed 256 247 259 238 237 222 203 180 202 203 169 164 188 162 $4.2 $8.4 $4.6 $7.9 $9.2 $7.9 $7.8 $8.9 $6.8 $8.1 $8.4 $11.4 $9.2 $23.9 $11.2 $12.1 $10.8 $13.2 $13.9 $11.7 $18.1 $37.9 $10.4 $14.1 $15.8 $14.9 $14.6

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016 Source: PitchBook *As of 9/30/2016

12 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Amid a slowdown in M&A activity, VC- in appealing sectors such as back-end for VC-backed businesses will come via the sponsored exit flow in general hasn’t been enterprise technology can go public in the M&A route and we think the incentives that helped by the scarcity of IPOs. Recently, current environment and perform well, but have sustained the recent high levels of tech some have opined that the IPO window each listing should still be considered on mergers will remain in place. may be widening on the basis of a handful a case-by-case basis. Public markets are of strong debuts. However, those debuts still prone to choppiness, especially given are still relatively few in number on a how far public multiples have stretched historical basis, and public equities remain over the last few years, which will make it flat, by and large. Cash-flow-positive difficult for a wide range of businesses to companies with growing revenues operating price. Accordingly, the primary exit route

The IPO slump is unlikely to reverse M&A proves most reliable US venture-backed exits (#) by type US venture-backed exits by type

1,200 $90 Acquisition ($B) Acquisition IPO Buyout $80 1,000 IPO ($B) $70 Buyout ($B) 800 $60

$50 600 $40

400 $30

$20 200 $10

0 $0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Source: PitchBook Source: PitchBook *As of 9/30/2016. Note: M&A value is based on disclosed/reported figures. *As of 9/30/2016

Median US venture-backed exit size ($M) by type US venture-backed exits (#) by sector

$120 1,200 Commercial Services

$100 Consumer Goods & $100 1,000 Recreation Energy

800 $80 $76 HC Devices & Supplies $67 HC Services & 600 $60 Systems $50 IT Hardware

400 $40 Media

Other 200 $20 Pharma & Biotech Acquisition/Buyout IPO 0 $0 Software

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2010 2011 2012 2013 2014 2015 2016* Source: PitchBook Source: PitchBook *As of 9/30/2016 *As of 9/30/2016

13 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Fundraising

2016 could see the most raised since at least 2008 The huge amount of VC that has been raised during the first three quarters of 2016 US VC fundraising may be chalked up in part to the oversized Capital Raised ($B) returns realized by the industry over the 263 251 past couple years. $32.4 billion has been # of Funds Closed raised so far during the year, putting 2016 on pace to raise the largest amount of any 201 year—$43 billion. 3Q saw $9 billion raised 190 195 187 181 184 across 56 funds—declines of 33% and 27% respectively—however, those dips are 149 relative, as 2Q saw the highest amount of 139 VC raised for any quarter on record. 117 Since the beginning of 2014, more than 700 different VC vehicles have been closed in the US, the most of any three-year period. 2016 has already surpassed an aggregate of 200 closed venture funds, making it the $35 $35 $37 $12 $19 $23 $24 $20 $35 $36 $32 third consecutive year to pass that mark. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Roughly 10% of the funds closed this year Source: PitchBook have been first-time VC funds, accounting *As of 9/30/2016 for 6% of the capital raised in that time period. As venture has become more and more lucrative for LPs—with $62.6 billion

US VC fundraising

Capital Raised ($B) # of Funds Closed

68 70 68

59 56 53 51 56 49 48 44 39 33 32 $8.2 $3.4 $3.8 $3.7 $6.3 $6.2 $2.6 $8.3 $8.6 $4.6 $7.9 $3.0 $6.3 $4.3 $4.3 $5.5 $9.0 $7.2 $8.9 $8.8 $4.1 $9.0 $10.3 $11.7 $11.6 $10.0 $13.4

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016 Source: PitchBook *As of 9/30/2016

14 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR

US VC fundraising (#) by size in distributions for all of 2015— even as the 100% investment climate has grown more volatile, $1B+ commitments have flowed to industry 90% stalwarts, making it more difficult for newer 80% $500M-$1B investors without strong track records to 70% raise commitments.

60% $250M-$500M The median time to close a VC fund during 50% 2016 jumped 36% YoY to over 18 months, 40% $100M-$250M the first time it has come in that high. That timeframe reflects venture funds that were 30% $50M-$100M launched squarely in the midst of unicorn 20% mania, when investors were reaping huge 10% Under $50M paper gains with each succeeding financing 0% round for their portfolio companies. In short, it was a good time for investors to go 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

2016* back to limited partners with an offer for a Source: PitchBook piece of their next fund. It should also be *As of 9/30/2016 noted that median fund step-up sizes are US VC funds’ time to close (months) trending at 1.4x for the second year in a 30 row. Median Average Some have noted that the enormous 25 amount raised during the year could be a preventative measure by VCs, in plan for 20 18.2 a VC market downturn or correction that 18.1 could make raising capital for future vehicles 15 14.6 more difficult. LP commitments to venture are traditionally small relative to overall LP 13.3 allocations, limiting exposure to any venture 10 capital downturn. To be brief, it is unlikely that a VC slip would heavily damage LPs’ 5 Source: PitchBook ability or desire to commit capital to the *As of 9/30/2016 asset class, particularly given their timelines 0 which can allow for some volatility in the 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* short to midterm. For the first time in a decade, 85.4% of closed funds are hitting US VC funds (#) hitting target their target during 2016, a 3.6% jump from 100% a year ago and a 29.8% climb from 2010, all the more highlighting that LP confidence in venture remains high. 80%

60%

40%

20%

0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Hit Target Missed Target Source: PitchBook *As of 9/30/2016

15 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR 3Q 2016 League Tables

Most active investors Most active investors Most active law firms Angel/seed Early stage, ctd. Early stage

500 Startups 6 Bloomberg Beta 5 Wilson Sonsini Goodrich & Rosati 45

Liquid 2 Ventures 6 Correlation Ventures 5 Cooley 42

Keiretsu Forum 5 First Round Capital 5 Gunderson Dettmer 34

Y Combinator 5 Floodgate Fund 5 DLA Piper 25

Greycroft Partners 4 General Catalyst Partners 5 Orrick Herrington & Sutcliffe 20

Social Capital 4 Lerer Hippeau Ventures 5 Latham & Watkins 8

StartX 4 Polaris Partners 5 Goodwin Procter 5

Eniac Ventures 3 RRE Ventures 5 Morgan, Lewis & Bockius 5

General Catalyst Partners 3 Shasta Ventures 5 WilmerHale 5

Greylock Partners 3 Y Combinator 5 Perkins Coie 4

Source: PitchBook Source: PitchBook Haystack Partners 3

Kapor Capital 3 Most active investors Most active law firms Lerer Hippeau Ventures 3 Late stage Late stage

Lightbank 3 New Enterprise Associates 7 Cooley 26

Metamorphic Ventures 3 Battery Ventures 6 Wilson Sonsini Goodrich & Rosati 19

Techstars 3 Bessemer Venture Partners 6 Gunderson Dettmer 17

The JumpFund 3 Comcast Ventures 6 DLA Piper 14 Source: PitchBook GE Ventures 6 Latham & Watkins 10 Most active investors GV 6 Morgan, Lewis & Bockius 7 Early stage Sequoia Capital 6 Goodwin Procter 6 New Enterprise Associates 12 Andreessen Horowitz 4 Orrick Herrington & Sutcliffe 5 Greycroft Partners 10 Mintz Levin Cohn Ferris Glovsky Canaan Partners 4 3 & Popeo GV 10 Charles River Ventures 4 Sidley Austin 3 Khosla Ventures 8 EDB Investments 4 WilmerHale 3 SV Angel 8 Index Ventures 4 Source: PitchBook Accel Partners 6 Kleiner Perkins Caufield & Byers 4 Great Oaks Venture Capital 6 Norwest Venture Partners 4 Norwest Venture Partners 6 Source: PitchBook

500 Startups 5

Andreessen Horowitz 5

Avalon Ventures 5

16 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Top 10 largest US venture financings in 3Q 2016

Company Deal size ($M) Series/Stage Date HQ City State Industry

Moderna $474 Late Stage 9/7/2016 Cambridge MA Pharma & Biotech

Solar Mosaic $220 Series C 8/17/2016 Oakland CA Other Financial Services

Zoox $200 Series A 7/1/2016 Menlo Park CA Transportation

FreshDirect $189 Late Stage 9/26/2016 Long Island City NY Retail

Carbon (3D Printing Technology) $181 Series C 9/15/2016 Redwood City CA Commercial Products

Unity Technologies $181 Series C 7/13/2016 San Francisco CA Software

StackPath $180 Series A 7/25/2016 Dallas TX Software

Compass Therapeutics $170 Series A 9/21/2016 Cambridge MA Pharma & Biotech

MetroMile $153 Series D 9/21/2016 San Francisco CA Insurance

DraftKings $153 Late Stage 9/1/2016 Boston MA Software

Source: PitchBook Top 10 largest US venture funds closed in 3Q 2016

Investor Fund Fund size ($M) Close date State

Technology Crossover Ventures TCV IX $2,500 8/1/2016 CA

Thrive Capital Thrive Capital Partners V $700 7/18/2016 NY

Bain Capital Ventures Bain Capital Venture Fund 2016 $600 7/8/2016 MA

Foundry Group Foundry Group Next $500 9/19/2016 CO

8 | partners Eight Partners VC Fund I $420 7/13/2016 CA

True Ventures True Ventures V $310 8/25/2016 CA

Drive Capital Drive Capital Fund II $300 8/31/2016 OH

Edison Partners Edison Partners VIII $275 7/6/2016 NJ

Danhua Capital Danhua Capital II $255 8/26/2016 CA

Volition Capital Volition Capital Fund III $250 7/26/2016 MA

Source: PitchBook Top five largest IPOs of US-based companies in 3Q 2016

Company Total raised ($M) Post-valuation ($M) Date HQ City State Industry

Nutanix $238 $2,196 9/30/2016 San Jose CA Software

Apptio $96 $597 9/22/2016 Bellevue WA Software

Talend $95 $503 7/29/2016 Redwood City CA Software

Protagonist Therapeutics $90 $196 8/11/2016 Milpitas CA Pharma & Biotech

Everbridge $90 $323 9/16/2016 Glendale CA Software

Source: PitchBook Top five largest mergers and acquisitions of US-based companies in 3Q 2016

Company Deal size ($M) Date HQ City State Industry

Jet $3,300 9/19/2016 Hoboken NJ Retail

Afferent Pharmaceuticals $1,250 7/29/2016 San Mateo CA Pharma & Biotech

Dollar Shave Club $1,000 8/10/2016 Santa Monica CA Consumer Non-Durables

Telogis $900 8/1/2016 Aliso Viejo CA Software

Quip $750 8/8/2016 San Francisco CA Software

Source: PitchBook 17 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR States & territories by VC activity States & territories by VC activity Congressional Districts by VC activity in 3Q 2016 in 3Q 2016, ctd. in 3Q 2016

Congressional Deal State Deal count State Deal count State District count

California 612 Louisiana 5 California 12 148

New York 198 Montana 5 New York 12 100

Massachusetts 124 Nevada 5 California 18 63

Texas 108 New Hampshire 5 California 14 51

Washington 78 Arkansas 4 California 17 43

Colorado 58 Maine 3 New York 10 41

Illinois 53 Hawaii 2 Washington 7 35

Florida 49 Idaho 2 California 33 32

Pennsylvania 46 Mississippi 2 Massachusetts 7 32

Virginia 38 New Mexico 2 California 52 22

North Carolina 36 West Virginia 2 Massachusetts 5 22

Georgia 33 Alaska 1 California 13 20

Maryland 29 Nebraska 1 Illinois 7 19

Ohio 29 North Dakota 1 Massachusetts 8 18

Utah 26 Oklahoma 1 Colorado 1 17

Oregon 24 Puerto Rico 1 Colorado 2 16

Tennessee 21 South Dakota 1 California 15 14

Source: PitchBook Connecticut 19 California 49 13

Indiana 19 Virginia 11 12

New Jersey 19 Metropolitan Statistical Area (MSA) California 37 11 activity in 3Q 2016 Michigan 18 Texas 21 11

Arizona 16 San Francisco-Oakland-Fremont, CA 308 California 24 10 New York-Northern New Jersey-Long Minnesota 14 199 Texas 10 10 Island, NY-NJ-PA Wisconsin 14 Boston-Cambridge-Quincy, MA-NH 123 Virginia 10 10 Alabama 11 Source: PitchBook San Jose-Sunnyvale-Santa Clara, CA 116

Missouri 11 Los Angeles-Long Beach-Santa Ana, 102 CA Kentucky 10 Seattle-Tacoma-Bellevue, WA 71 South Carolina 10 San Diego-Carlsbad-San Marcos, CA 49 District of Columbia 9 Washington-Arlington-Alexandria, 49 Iowa 8 DC-VA-MD-WV Chicago-Naperville-Joliet, IL-IN-WI 46 Delaware 7 Austin-Round Rock, TX 37 Kansas 7 Source: PitchBook Rhode Island 6

Vermont 6

18 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR Methodology

Fundraising We define venture capital funds as pools of capital raised for the purpose of investing in the equity of startup companies. In addition to funds raised by traditional venture capital firms, PitchBook also includes funds raised by any institution with the primary intent stated above. Funds identifying as growth-stage vehicles are classified as PE funds and are not included in this report. A fund’s location is determined by the country in which the fund is domiciled, if that information is not explicitly known, the HQ country of the fund’s general partner is used. Only funds based in the United States that have held their final close are included in the fundraising numbers. The entirety of a fund’s committed capital is attributed to the year of the final close of the fund. Interim close amounts are not recorded in the year of the interim close.

Deals We include equity investments into startup companies from an outside source. Investment does not necessarily have to be taken from an institutional investor. This can include investment from individual angel investors, angel groups, seed funds, venture capital firms, corporate venture firms, and corporate investors. Investments received as part of an accelerator program are not included, however, if the accelerator continues to invest in follow-on rounds, those further financings are included. All financings are of companies headquartered in the US. Angel/seed: We define financings as angel rounds if there are no PE or VC firms involved in the company to date and we cannot determine if any PE or VC firms are participating. In addition, if there is a press release that states the round is an angel round, it is classified as such. Finally, if a news story or press release only mentions individuals making investments in a financing, it is also classified as angel. As for seed, when the investors and/or press release state that a round is a seed financing, or it is for less than $500,000 and is the first round as reported by a government filing, it is classified as such. If angels are the only investors, then a round is only marked as seed if it is explicitly stated. Early-stage: Rounds are generally classified as Series A or B (which we typically aggregate together as early stage) either by the series of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history, company status, participating investors, and more. Late-stage: Rounds are generally classified as Series C or D or later (which we typically aggregate together as late stage) either by the series of stock issued in the financing or, if that information is unavailable, by a series of factors including: the age of the company, prior financing history, company status, participating investors, and more. Growth equity: Rounds must include at least one investor tagged as growth/expansion, while deal size must either be $15 million or more (although rounds of undisclosed size that meet all other criteria are included). In addition, the deal must be classified as growth/expansion or later-stage VC in the PitchBook Platform. If the financing is tagged as late-stage VC it is included regardless of industry. Also, if a company is tagged with any PitchBook vertical, excepting manufacturing and infrastructure, it is kept. Otherwise, the following industries are excluded from growth equity financing calculations: buildings and property, thrifts and mortgage finance, real estate investment trusts, and oil & gas equipment, utilities, exploration, production and refining. Lastly, the company in question must not have had an M&A event, buyout, or IPO completed prior to the round in question. Corporate venture capital: Financings classified as corporate venture capital include rounds that saw both firms investing via established CVC arms or corporations making equity investments off balance sheets or whatever other non-CVC method actually employed.

Exits We include the first majority liquidity event for holders of equity securities of venture-backed companies. This includes events where there is a public market for the shares (IPO) or the acquisition of majority of the equity by another entity (corporate or financial acquisition). This does not include secondary sales, further sales after the initial liquidity event, or bankruptcies. M&A value is based on reported or disclosed figures, with no estimation used to assess the value of transactions for which the actual deal size is unknown.

19 PITCHBOOK-NVCA 3Q 2016 VENTURE MONITOR The 411 on the PitchBook and National Venture Capital Association (NVCA) partnership

Why we teamed up Meet the PitchBook-NVCA Venture Monitor

NVCA is recognized as the go-to organization for A brand-new, quarterly report that venture capital advocacy, and the statistics we details venture capital activity release are the industry standard. PitchBook is and delivers insights to inform your the leading data software provider for venture investment strategy. PitchBook’s capital professionals, serving more than 1,800 data will also bolster our clients across the private market. Our partnership year-in-review publication. with PitchBook empowers us to unlock more insights on the venture ecosystem and better advocate for an ever-evolving industry.

THE PERKS OF PARTNERSHIP

The PitchBook Platform More data. Less dough. As an NVCA member, your free access to the Our members get 10% off a new subscription PitchBook Platform includes five advanced to the PitchBook Platform (up to a searches and five profile views per month. $10,000 value) or one free, additional seat.

Fundraise faster with targeted searches for If your firm was a PitchBook client prior limited partners who will likely be interested to September 14, 2016, you’re eligible for in your fund. one of these discounts the next time you renew your contract. Conduct better due diligence by diving deep into a company’s round-by-round financing history, executive team and market traction. Help us help you

Price deals with confidence using pre- and We will email quarterly surveys to each post-money valuations, public and private member firm, which will give you the comps, cap tables and series terms. opportunity to report your activity to

Find promising investors quickly by zeroing PitchBook. The data you provide will in on other firms or strategic acquirers not only power PitchBook-NVCA reports, whose investment preferences match your but also ensure your firm is represented portfolio company. accurately in the PitchBook Platform. If you’d like to send your quarterly activity report directly to PitchBook, email Ready to get started with the PitchBook Platform? Go to pitchbook.com/nvca [email protected].

PitchBook Data, Inc. | 206.623.1986 | pitchbook.com/nvca National Venture Capital Association | 202.864.5920 | nvca.org