PitchBook Trends for ABA Angel VC Subcommittee Sept 2014

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VALUATION TRENDS – ABA ANGEL VC SUBCOMMITTEESEPTEMBER 2014

ADLEY BOWDENSENIOR DIRECTOR, ANALYSIS PITCHBOOKadley@pitchbook.com

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THE PITCHBOOK PLATFORM

GLOBAL COVERAGE OF THE ENTIRE PE & VC

LIFECYCLE13,582LPs

70,291Commitments

48,149GPs/Investors

27,144Funds

355,920

Performance Data Lines128,470

Portfolio Companies

220,052Transactions

14,774Valuations

16,224Advisory Firms

542,137People

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VCFUNDRAISING»

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U.S. VC FUNDRAISING BY QUARTER

» VC fundraising is off to a strong start in 2014, bolstered in part by six new mega-funds ($1 billion+) that closed in the first half.

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q2009 2010 2011 2012 2013 2014

$0

$2

$4

$6

$8

$10

$12

0

10

20

30

40

50

60

70

$4.0

$10.9

$4.0

$5.8

$8.7

$8.7

40

21

50

3246

30

53 54

61

Capital Raised ($B) # of Funds Closed

Source: PitchBookas of 6/30/2014

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VC FUNDRAISING (#) BY SIZE

» Significant structural changes may be underway in the VC industry, as mega-funds ($1b+) and micro-funds (>$50m) are beginning to dominate the market.

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$1B+

$500M-$1B

$250M-$500M

$100M-$250M

$50M-$100M

Under $50M

Source: PitchBookas of 6/30/2014

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VC DEALS & VALUATIONS»

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GLOBAL QUARTERLY VENTURE CAPITAL DEAL FLOW

Venture deal flow has tapered recently as a result of high valuations at the early

stage level»

*Through 6/30/14

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q2009 2010 2011 2012 2013 2014

$0

$5

$10

$15

$20

$25

0

500

1,000

1,500

2,000

2,500

$7

.9

$8

.9

$1

5.3

$1

3.2

$1

2.2

$2

2.8

1,078

1,377

1,991

2,284 2,307

1,852

Capital Invested ($B) # of Deals Closed

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U.S. VC DEALS BY STAGE» Seed and angel deals have fallen precipitously in recent quarters.

Source: PitchBook

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q2010 2011 2012 2013 2014

0

100

200

300

400

500

600

700

182

502

433

Seed/Angel Early Stage Late StageSource: PitchBook

Seed

Late Stage

Early Stage

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U.S. VC DEALS (#) BY SIZE

2005 2006 2007 2008 2009 2010 2011 2012 2013 1H 2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$25M+

$10M-$25M

$5M-$10M

$1M-$5M

$500K-$1M

Under $500K

Source: PitchBook

» Larger deals have also taken a larger share of deals than previous years.

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U.S. VC DEALS BY SECTOR» Investors have continued to increase their interest in software startups.

Source: PitchBook

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014*

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

939 253 110142167 661

Software Commercial Services Media HC Devices & Supplies Pharma & Biotech Non-Core VC

* As of 6/30/14Source: PitchBook

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MEDIAN PRE-MONEY VALUATIONS ($M) BY SERIES

Increases in public markets, growth hungry strategics and changes in funding

timelines has caused venture company valuations to dramatically increase over

the last five years

»

*Through 6/30/14

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0

$5

$10

$15

$20

$25

$30

$35

$40

$4.7

$5.7$7.8 $6.6

$10.1$12.1

$22.9

$18.1

$26.0

$35.2

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

$48.9

$29.6

$55.9

$70.0

$86.7

$49.0

$105.2

$171.5

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PREVAL DISTRIBUTIONS –SERIES A & B ($M)

Though valuations are rising across the board, valuations for the highest valued

companies have been increasing at a faster pace than those of lower valued

companies

»

*Through 6/30/14

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0

$5

$10

$15

$20

$25

$4.5 $3.9 $4.8$7.0

$12.1$12.3 $12.0

$16.5

$19.5

25th Median 75th'05 '06 '07 '08 '09 '10 '11 '12 '13 '14

$0

$10

$20

$30

$40

$50

$60

$70

$80

$13.5$9.4

$13.2$19.8

$35.2$37.2$31.2

$47.0

$74.5

25th Median 75th

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MEDIAN % ACQUIRED BY SERIESIncreases in valuations but steady funding sizes has resulted in a steady decline in

ownership stakes acquired across various funding rounds. »

*Through 6/30/14

'05 '06 '07 '08 '09 '10 '11 '12 '13 '140%

5%

10%

15%

20%

25%

30%

35%

40%36.5%

32.6%

27.5%

16.5%13.8%

12.0%

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MEDIAN VALUATION STEP UP % FROM PREVIOUS VC ROUND

Landing funding rounds after the seed stage offer significant increases in valuation»

*Through 6/30/14

Seed to A A to B B to C C to D0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

157%

173%

119%

93%

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MEDIAN PREVALS ($M) BY METRO AREA

As the hub of the VC universe, the Bay Area leads the nation in tech company

valuations, which is especially pronounced in the later stage rounds»

*Through 6/30/14

ALL VC

Austin

Bay Area

Boston

ChicagoL.A.

New York

Seattle

London

$0

$5

$10

$15

$20

EARLY STAGE

ALL VC

Austin

Bay Area

Boston

ChicagoL.A.

New York

Seattle

London

$0

$100

$200

LATE STAGE

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EXIT TRENDS»

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U.S. VC EXIT FLOW» Exit activity has held fairly steady over recent quarters.

Source: PitchBook

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q2010 2011 2012 2013 2014

$0

$5

$10

$15

$20

$25

$30

0

50

100

150

200

250

$7.6

$13.7

$25.9

$17.9

$13.4

$13.0

$12.1

147

189

155

205

198171

Capital Exited ($B) # of ExitsSource: PitchBook

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EXITS (#) BY TYPE» The proportion of IPOs nearly doubled in 1H 2014, reaching the highest level since 2004.

Source: PitchBook

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

20

11

20

12

20

13

20

14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Acquisition IPO Buyout Source: PitchBook

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MEDIAN EXIT VALUATION ($M) BY TYPE

Though IPOs are a relatively rare exit, the benefit to investors is clear»

*Through 6/30/14

'05 '06 '07 '08 '09 '10 '11 '12 '13 '14$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$139

$426

$278

$49 $57$38

IPO Acquisition/Buyout

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MEDIAN VALUATION STEP UP % FROM LAST VC ROUND TO EXIT

More mature companies tend to see smaller increases in valuation at exit»

*Through 6/30/14

Series A Series B Series C Series D+0%

20%

40%

60%

80%

100%

120%

140% 132.0%

95.7%85.7%

51.7%

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