MARKETS TO WATCH: AUSTIN, TX 2021 DATA PROVIDED BY KEEP AUSTIN INNOVATIVE.

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Aggregate deal value for the Austin VC ecosystem CONTENTS topped $2 billion for the third year running in 2020, while investment volume fell by just 10.5% year- over-year (YoY) to 274 funding rounds, despite the impact of COVID-19. OVERVIEW 4-6

From angel & seed deals through late-stage financings, median transaction sizes all tracked up in 2020. Likewise, median pre-money valuations SPOTLIGHT 8 posted gains on the results from 2019, with median valuations for the most mature companies doubling to $50.0 million for just the second time since at EXITS & FUNDRAISING 9-10 least 2006 as investors returned to familiar names.

Robust public markets encouraged a significant increase in the median IPO size that helped aggregate exit value double to $2.6 billion for Austin-based companies—the first time exit activity generated more than $2 billion in total for the area since 2012.

Austin’s software startups continue to dominate annual investment into the larger ecosystem. $15.3B Startups offering software solutions to businesses enjoyed one of their more active years on record for Sum of VC raised by Austin-based venture financing as investors committed nearly $300 million across 37 funding rounds to the companies from the start of 2010 enterprise tech sector. through 2020, expanding at a compound annual growth rate After climbing YoY through 2019, the count of new funds closed in Austin leveled off in 2020. However, of 13% across more than 2,700 capital committed to the dozen new vehicles that funding rounds closed over the closed reached roughly $500 million for a fourth same period. year in a row, with funds from $100 million to $250 million securing the lion’s share in a considerable increase over 2019’s total for vehicles of this size.

Markets to Watch: Austin, TX 3 OVERVIEW

Austin, home to “Silicon Hills,” has VC deal activity long enjoyed a reputation for producing Investment value set new record despite the pandemic top-quality tech companies. The city $2.5 350 has served as the headquarters for since its founding out of Michael Dell’s 300 dorm room in 1984 and a major hub for $2.0 since 1979, the 250 year the chipmaker made its debut on the $1.5 NYSE and opened its first semiconductor 200 fabrication plant in the area. As a result, has flowed with increasing $1.0 150 ease into the Austin ecosystem over the 100 years—particularly in the past decade. $0.5 Since the start of 2010 through year- 50 end 2020, Austin-based companies have raised $15.3 billion in aggregate $0 0 across more than 2,700 funding rounds, representing CAGRs of some 13% and 7% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 for VC investment and financing volume, respectively. Deal value ($B) Deal count Source: PitchBook | Geography: Austin, TX

VC deal activity by quarter Investment activity recovered after firms adjusted to virtual dealmaking $0.8 100 $0.7 90 80 $0.6 70 $0.5 60 $0.4 50 $0.3 40 30 $0.2 20 $0.1 10 $0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 2018 2019 2020 Deal value ($B) Deal count

Source: PitchBook | Geography: Austin, TX

Markets to Watch: Austin, TX 4 The COVID-19 pandemic did little to Average VC deal size ($M) by stage derail VC allocated to the area. For a third Mean transaction sizes remained elevated historically year running in 2020, aggregate deal $25 value for the Austin VC and emerging tech ecosystem topped $2 billion, while $19.6 investment volume fell by just 10.5% $20 $18.4 to 274 funding rounds. At the height of uncertainty in Q2, overall deal value $15 actually jumped quarter-over-quarter $11.5 (QoQ) to $616 million—topping capital raised in Q2 2019 by $30.8 million on 15 $10 $8.7 fewer rounds closed—as many investors took flight to familiar names once $5 executing deals went virtual at scale. This $2.1 $2.2 performance contributed to a record figure for aggregate VC allocated to the $0 Austin ecosystem at $2.3 billion in 2020, 2011 2013 2015 2017 2012 2018 2014 2016 2019 results that will undoubtedly grow as more 2010 2020 data is collected. Angel & seed Early VC Late VC

Austin’s track record of fostering a robust Source: PitchBook | Geography: Austin, TX VC and emerging tech ecosystem has been punctuated by its resilience since the Median VC deal size ($M) by stage pandemic struck. This, coupled with the Early- and angel & seed-stage startups secured record deal sizes desire for cheaper expenses and to avoid costly local policies, has fueled a migration $12 to the region from the Bay Area over the past year. Not only did Oracle decide to $10 move their headquarters to Austin after more than 30 years in , $8 $6.5 $6.8 but Elon Musk and his Boring Company have also decamped to the city. The Tesla $6 $5.0 and Space X founder joins a trove of tech $4.6 workers headed for the hills from the $4 valley after many tech giants adopted companywide work-from-home policies. $2 $1.1 $1.4 This has allowed employees from the likes of and to relocate from $0 expensive areas such as San Francisco, with its reputation for eye-watering 2011 2013 2015 2017 2012 2018 2014 2016 2019 2010 housing prices. Whether or not this trend 2020 picks up pace post-pandemic in the long Angel & seed Early VC Late VC term, the presiding tax savings, friendlier Source: PitchBook | Geography: Austin, TX regulatory environment, and lower cost per employee in the Austin area should continue to contribute to the shift of tech workers from California to through at least the coming year.

Markets to Watch: Austin, TX 5 This dynamic has already contributed to Average VC pre-money valuation ($M) by stage more than 130 companies establishing a Mean valuation continued to soar for late-stage companies new or expanding an existing presence in $200 Austin, increasing overall headcount in $173.1 the area by 21,335 employees, according $180 to data from the Texas capital’s chamber $160 $133.1 of commerce. That includes Addepar and $140 Palantir co-founder Joe Lonsdale’s 8VC, a $120 venture capital firm that moved to Austin after a decade based in San Francisco, $100 adding 15 employees of its own to the $80 overall workforce. In January 2021 alone, $60 Austin added or expanded its company $42.0 base by another 21 operations, including $40 $27.7 1,275 workers. And venture capital has $20 $9.0 $9.8 followed. As of February 24, the Austin $0 ecosystem has drawn an additional $472.4 2011 2013 2015 2017 million in venture dollars across 39 deals. 2012 2018 2014 2016 2019 2010 This pace of activity has already put the 2020 level of capital committed in Q1 2021 on Angel & seed Early VC Late VC track to surpass the record-setting first Source: PitchBook | Geography: Austin, TX quarter of 2019. Median VC pre-money valuation ($M) by stage The recent influx of talent from Silicon Valuations returned to historic heights Valley and elsewhere to Silicon Hills joins a workforce schooled by the engineering $60 and computer science programs at $50.0 the University of Texas. The flagship $50 institution of the University of Texas System, with a student body of more $40 $25.3 than 40,000 undergraduate and 11,000 graduate students, has conferred an $30 undergraduate degree on 749 founders. $20.0 That figure includes 88 female founders $20 $19.0 who have together raised more than $800 million in VC funding. UT’s class of female $10 $6.6 $6.8 founders have helped start companies as diverse as fertility-prediction $0 software developer Celmatix, education technology platform Civitas Learning, 2011 2013 2015 2017 2012 2018 2014 2016 2019 2010 and Infrastructure Networks, a digital 2020 communications services platform for oil Angel & seed Early VC Late VC & gas companies. Source: PitchBook | Geography: Austin, TX

Markets to Watch: Austin, TX 6 VC deals ($) by sector VC deals (#) by sector Demand drove deal value for HC devices & supplies Software retained lion’s share of investment volume 100% Commercial 100% Commercial services services 90% 90% Consumer goods Consumer goods 80% & recreation 80% & recreation 70% Energy 70% Energy 60% HC devices 60% HC devices 50% & supplies 50% & supplies HC services HC services 40% 40% & systems & systems 30% IT 30% IT 20% Media 20% Media 10% Other 10% Other 0% Pharma & biotech 0% Pharma & biotech 2011 2011 2013 2013 2015 2015 2017 2012 2017 2012 2018 2018 2014 2014 2016 2019 2019 2016 2010 Software 2010 Software 2020 2020

Source: PitchBook | Geography: Austin, TX Source: PitchBook | Geography: Austin, TX

In a testament to the promise of the year ahead for Austin, VC firms have already committed $244.7 million to the software space across 11 funding rounds—or roughly half of all venture raised in 2021 on a $245M quarter of all deals closed as of February 24.

VC deals ($) by series VC deals (#) by series Most mature companies expanded share of value Late-stage transactions grew in number 100% D+ 100% D+ 90% C 90% C 80% B 80% B 70% A 70% A 60% Seed 60% Seed 50% Angel 50% Angel 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2011 2011 2013 2015 2017 2012 2018 2014 2013 2015 2016 2019 2017 2012 2018 2014 2016 2019 2010 2010 2020 2020

Source: PitchBook | Geography: Austin, TX Source: PitchBook | Geography: Austin, TX

Markets to Watch: Austin, TX 7 SPOTLIGHT

Enterprise tech VC deal activity Enterprise tech median VC deal size ($M) by type Appetite for B2B solutions bounced back Transaction sizes remained near historic heights $18 $0.5 40 $16 35 $0.4 $14 30 $12 $0.3 25 $10 20 $8 $7.0 $0.2 $6.4 15 $6 $5.5 $0.1 10 $4 $5.0 $1.7 5 $2 $0.4 $0 0 $0 2011 2013 2015 2017 2012 2018 2014 2016 2019 2011 2010 2013 2015 2017 2012 2018 2014 2016 2019 2020 2010 2020 Deal value ($B) Deal count Angel & seed Early VC Late VC

Source: PitchBook | Geography: Austin, TX Source: PitchBook | Geography: Austin, TX

Venture funding for Austin’s software in Austin have secured $1.8 billion in Khoros, WP Engine, and SecureLink startups totaled $744.3 million across 93 venture funding across 326 rounds—an maintaining operations in the area while completed deals in 2020. Although those average of $5.5 million in disclosed value identity & access management services figures represent a modest retreat from per deal. At nearly $300 million invested provider SailPoint Technologies has the record-setting sum of $1.0 billion on across 37 funding rounds for enterprise always called the city home. To their 120 rounds achieved in 2019, the sector tech companies, 2020 was one of the ranks, venture funding has added a continues to dominate annual investment more active years on record for venture considerable crop of up-and-coming into the wider ecosystem. Of the $15.3 financing. At the same time, the space has enterprise tech companies in recent billion raised by Austin-based startups hardly overheated. Pre-money valuations years. For instance, supply chain & over the past decade, $6.0 billion of that have remained remarkably consistent logistics specialist Shipwell has raised amount has filtered into the software over the past decade, while proving $47.1 million in VC funding, achieving space. At 1,102 funding rounds closed, significantly undervalued in recent years a $165.0 million valuation as part of its the sector has also captured about a compared to the broader US early-stage Series B round in late 2019. Meanwhile, third of all investment activity in that VC ecosystem, producing a $20.0 million SaaS e-commerce platform BigCommerce time. And startups offering solutions to median pre-money valuation versus the led Austin’s IPO class last year, stepping the enterprise have driven much of this $31.0 million median posted by the US in up from a $450.0 million pre-money outsized venture investment in recent 2020. valuation with its last VC round to $1.6 years. billion for its debut. Like the Bay Area, the enterprise tech Since the start of 2010 through year- ecosystem in Austin features a significant end 2020, enterprise tech companies incumbent presence, with the likes of

Markets to Watch: Austin, TX 8 EXITS & FUNDRAISING

Austin has produced more than its fair VC exit activity share of sizable exits over the past decade, Public markets fueled strong year for exit value including the billion-dollar public $3.5 40 listings of HomeAway and RetailMeNot in 2011 and 2013, respectively, along $3.0 35 with the acquisition of Indeed, the 30 jobs listing and recruitment service, $2.5 by Japan’s Recruit Holdings with the 25 unicorn price tag of $1.0 billion in 2012. $2.0 20 Despite the pandemic’s initial potential $1.5 to reduce liquidity to a relative trickle 15 outside of distressed asset sales, 2020 $1.0 represented one of the best in recent 10 memory for investors looking to exit, with $0.5 5 the sustained success of direct listings meeting the rise of special purpose $0 0 acquisition vehicles. Thanks to market 2011 2013 2015 2012 2017 2018 2014 2016 2019 2010 conditions conducive to public listings, 2020 aggregate exit value in the US topped $290 billion in 2020 while exit count totaled Exit value ($B) Exit count 1,101. Source: PitchBook | Geography: Austin, TX

Austin benefited from this strong exit VC fundraising activity environment. Companies in Austin Number of new vehicles remained flat as commitments fell generated greater liquidity in 2020 on an annual basis than any year since $1,000 14 2012, securing $2.6 billion in aggregate 12 value across 26 exits. The software $800 sector produced the bulk of that sum, 10 contributing $1.5 billion in aggregate value on seven exits. However, the year’s $600 8 three largest public debuts illustrate the diversity and vitality of the Austin $400 6 ecosystem. In addition to BigCommerce, pasture-raised foods provider Vital Farms 4 raised $204.7 million from its debut, and $200 2 oncology biotech specialist Shattuck Labs raised $202.0 million to round out the top $0 0 three public listings for Austin in 2020. 2011 2013 2015 2012 2017 2018 2014 2016 2019 2010 2020 Capital raised ($M) Fund count

Source: PitchBook | Geography: Austin, TX

Markets to Watch: Austin, TX 9 VC exits ($) by industry VC exits (#) by industry Software again generated majority of exit value Pharma & biotech posted top performance of the past decade 100% Commercial 100% Commercial services services 90% 90% Consumer goods Consumer goods 80% & recreation 80% & recreation 70% Energy 70% Energy 60% HC devices 60% HC devices 50% & supplies 50% & supplies HC services HC services 40% 40% & systems & systems 30% 30% IT IT 20% Media 20% Media 10% Other 10% Other 0% 0% Pharma & biotech Pharma & biotech 2011 2011 2013 2015 2017 2012 2013 2018 2015 2014 2012 2017 2019 2016 2018

2014 Software 2016 2019 2010

2010 Software 2020 2020

Source: PitchBook | Geography: Austin, TX Source: PitchBook | Geography: Austin, TX

Local sources of capital remain essential since 2015, the sums raised have declined for $65.8 million in aggregate. Funds to companies just getting started, even considerably from nearly $1 billion raised ranging from$100 million to $250 as Austin-based startups continue to in aggregate as recently as 2017. million brought in about three of every command considerable external funding. four dollars invested. Drawing capital to The robust exit activity of 2020 should In 2020, a dozen funds closed on roughly its investment community has proven a recycle capital back into the ecosystem. half that sum at just $495.6 million greater challenge than drawing funding to This dynamic will likely kickstart a new in fresh capital. Meanwhile, limited its crop of startups for Austin. However, cycle of fundraising after a falloff in partners largely targeted more modestly given the recent strength of exit activity capital raised in recent years. While the sized new commitments in 2020, with in 2020 and the influx of talent to the count of new vehicles closed by Austin- eight of the 12 funds closing in 2020 region, Austin appears poised for further based VC firms climbed steadily YoY falling in the under $50 million range outperformance in 2021.

$14.4B

Exit value generated in aggregate by Austin-based companies from the start of 2010 through 2020, which expanded at CAGR of 11% across 275 liquidity events over the same period.

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