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PREPARED BY INCLUDING STATISTICS FROM THE PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters NATIONAL VENTURE CAPITAL ASSOCIATION NATIONAL VENTURE CAPITAL ASSOCIATION YEARBOOK 2013
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NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

Aug 17, 2014

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Economy & Finance

Lucas Wyrsch

Executive Summary

During 2012, many of the metrics describing the venture capital industry in the United States were similar to those of the prior two years. The decline in the number of firms and capital managed was expected but not as large as some were anticipating. Venture investment focused on companies in the seed and early stages, with many later-stage companies continuing to await a helpful IPO environment. Investment in early-stage life science companies continues to soften.

Fundraising remained very challenging for the majority of venture firms, largely because of a dearth of healthy exits that would distribute yet-unrealized returns to current fund investors. The number of initial public offerings in 2012 fell slightly from 2011 levels, but the proceeds and IPO valuation tally were both up significantly,largely as a result of one huge IPO and a handful of large ones.

A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new business opportunities, known as deal flow, remains very high and the best opportunities are getting funded, stresses remain.
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Page 1: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

PREPARED BY3 Times Square18th Floor

New York, NY 10036www.thomsonreuters.com

1655 Fort Myer DriveSuite 850

Arlington, VA 22209www.nvca.org

INCLUDING STATISTICS FROM THEPricewaterhouseCoopers/National Venture Capital Association

MoneyTree™ Report based on data from Thomson Reuters

NATIONALVENTURECAPITALASSOCIATION

NATIO

NALVEN

TURE

CAPITA

LASSO

CIATIO

NYEA

RBOOK2013

NATIONALVENTURECAPITALASSOCIATION

YEARBOOK 2013

Page 2: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

March 2013

Dear Reader:

These are interesting times characterized by economic and political uncertainty - and little forwardmotion. And yet in the entrepreneurial section of the economy, the opportunities to create greatcompanies remain unabated. There is wide agreement among policy makers on the importance ofentrepreneurial companies to economic growth and well-being. Venture capital is a major driver ofthat entrepreneurial economy. The nation continues to look to this sector for job creation, economicdevelopment, better healthcare, cleaner technology, and a faster, better, and more secure internet.

The NVCAYearbook 2013, prepared by Thomson Reuters, is the 16th iteration of a series launchedin early 1998 by NVCA and what is now Thomson Reuters. Since then we have joined forces withPricewaterhouseCoopers to provide the best possible information on venture capital deals across all50 states. This investment information is tracked and reported by the PricewaterhouseCoopers/NVCAMoneyTreeTM Report based on data from Thomson Reuters.

On behalf of the National Venture Capital Association board of directors and staff, we are pleased topresent you with the latest statistics that describe the activity of the venture capital industry in theUnited States. These statistics reflect strong survey participation by venture capital practitioners.This support has allowed us to bring appropriate transparency to a part of the economy that mostpeople are aware of but few really understand. Your comments are always welcome [email protected].

NVCA believes that it is more important than ever to effectively tell the story of venture capital, dif-ferentiate it from other forms of alternative assets, and explain what’s needed to continue creatinggreat, leading-edge companies. We believe that a strong venture capital industry is essential toAmerica’s future and our quality of life. NVCA is proud to be funding innovation and empoweringentrepreneurs!

Very truly yours

Diana Frazier Mark G. Heesen John S. TaylorFLAG Capital Management NVCA President NVCA Head of ResearchNVCA Director & Chair,NVCA Research Committee

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2 Thomson Reuters

NVCA BOARD OF DIRECTORS 2012-2013

Executive Committee

Ray Rothrock Josh GreenChair Chair-ElectVenrock Associates Mohr, Davidow Ventures

Michael Greeley Jonathan LeffTreasurer At-Large & Research CommitteeFlyBridge Capital Partners Deerfield Management

Jason Mendelson Scott SandellAt-Large At-LargeFoundry Group New Enterprise Associates

Research Committee

Diana Frazier Mike ElliottChair, Research Committee Noro-Moseley PartnersFLAG Capital Management, LLC

Adam GrosserSilver Lake Kraftwerk

Board Members At-Large

Jonathan Callaghan Maria CirinoTrue Ventures .406 Ventures

David Douglass Bruce EvansDelphi Ventures Summit Partners

Claudia Fan Munce Norm FogelsongIBM Venture Capital Group Institutional Venture Partners

Venky Ganesan Robert GoodmanMenlo Ventures Bessemer Venture Partners

Mark Gorenberg Jason GreenHummer Winblad Venture Partners Emergence Capital Partners

Ross Jaffe, MD Ray LeachVersant Ventures Jumpstart, Inc.

Sherrill Neff Robert NelsenQuaker BioVentures ARCH Venture Partners

David Lincoln James MarverElement Partners VantagePoint Capital Partners

Anne RockholdAccel Partners

Page 4: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

For the National Venture Capital Association

Prepared by Thomson Reuters

Copyright © 2013 Thomson Reuters

The information presented in this report has been gathered with the utmost carefrom sources believed to be reliable, but is not guaranteed. Thomson Reuters dis-claims any liability including incidental or consequential damages arising fromerrors or omissions in this report.

2013

National Venture Capital Association

Yearbook

Thomson Reuters 3

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National Venture Capital Association1655 Fort Myer Drive, Suite 850Arlington, Virginia 22209-3114Telephone: 703-524-2549Telephone: 703-524-3940www.nvca.org

PresidentMark G. Heesen

Head of ResearchJohn S. Taylor

Senior Vice PresidentMolly M. Myers

Senior Vice President of Federal Policy & PoliticalAdvocacy

Jennifer Connell Dowling

Vice President of CommunicationsEmily Mendell

Vice President of Membership & Member FirmLiaisonJanice Mawson

Vice President of Federal Policy & Political AdvocacyEmily A. Baker

Chief Marketing OfficerJeanne Lazarus Metzger

Vice President of Federal Life Science PolicyKelly Slone

Membership and Database ManagerTerry Samm

Manager of Administration and MeetingsAllyson Chappell

Accounting ManagerBeverley Badley

Administrative AssistantGwendolyn Taylor

Research LabMavis Moulterd, Thea Shepherd

Thomson Reuters3 Times Square, 18th FloorNewYork, NY 10036Telephone: 646-223-4431Fax: 646-223-4470www.thomsonreuters.com

Global Head of Deals & Private EquityStephen N. Case II

Vice President, Deals and Private Equity OperationsShariq Kajiji

Global Business Manager – Private EquityJim Beecher

Editor-in-ChargeDavid Toll

Global Private Equity Operations ManagerAnna Aquino-Chavez

Press ManagementMatthew Toole

Product ManagerLori Ann Silva

Content SpecialistPaul Pantalla

Data SpecialistFrancis Base

Research EditorEamon Beltran

Senior Art DirectorDavid Cooke

Sales Manager – Publications (Buyouts, VCJ, peHUB)Greg Winterton (646-223-6787)

ThomsonONE.com Sales:Dave Sharma (646-223-4048)

4 Thomson Reuters

National Venture Capital Association 2013 Yearbook

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Table of Contents

What is Venture Capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 11Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Exits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 15

Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 17

Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Appendix A: Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Appendix B: MoneyTree Report Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Appendix C: MoneyTree Geographical Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Appendix D: Industry Codes (VEICs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Appendix G: Data Sources and Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Appendix H: International Convergence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Appendix I: US Accounting Rulemaking and Valuation Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105

Appendix J: Non-US Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

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Venture capital has enabled the United States to sup-port its entrepreneurial talent and appetite by turningideas and basic science into products and servicesthat are the envy of the world. Venture capital fundsbuild companies from the simplest form – perhapsjust the entrepreneur and an idea expressed as a busi-ness plan – to freestanding, mature organizations.

Risk Capital for Business

Venture capital firms are professional, institutionalmanagers of risk capital that enables and supports themost innovative and promising companies. Thismoney funds new ideas that could not be financedwith traditional bank financing, that threaten estab-lished products and services in a corporation, and thattypically require five to eight years to be launched.

Venture capital is quite unique as an institutionalinvestor asset class. When an investment is made in acompany, it is an equity investment in a companywhose stock is essentially illiquid and worthless until acompany matures five to eight years down the road.Follow-on investment provides additional funding asthe company grows. These “rounds,” typically occur-ring every year or two, are also equity investment, withthe shares allocated among the investors and manage-ment team based on an agreed “valuation.” But, unlessa company is acquired or goes public, there is littleactual value. Venture capital is a long-term investment.

More Than Money

The U.S. venture industry provides the capital to cre-ate some of the most innovative and successful com-panies. But venture capital is more than money.Venture capital partners become actively engagedwith a company, typically taking a board seat. With astartup, daily interaction with the management team iscommon. This limits the number of startups in whichany one fund can invest. Few entrepreneurs approach-ing venture capital firms for money are aware thatthey essentially are asking for 1/6 of a person!

Yet that active engagement is critical to the success ofthe fledgling company. Many one- and two-person

companies have received funding but no one- or two-person company has ever gone public! Along the way,talent must be recruited and the company scaled up.Ask any venture capitalist who has had an ultra-suc-cessful investment and he or she will tell you that thecompany that broke through the gravity evolved fromthe original business plan concept with the carefulinput of an experienced hand.

Deal Flows — Where The Buys Are

For every 100 business plans that come to a venturecapital firm for funding, usually only 10 or so get aserious look, and only one ends up being funded. Theventure capital firm looks at the management team,the concept, the marketplace, fit to the fund’s objec-tives, the value-added potential for the firm, and thecapital needed to build a successful business. A busyventure capital professional’s most precious asset istime. These days, a business concept needs to addressworld markets, have superb scalability, be made suc-cessful in a reasonable timeframe, and be truly inno-vative. A concept that promises a 10 or 20 percentimprovement on something that already exists is notlikely to get a close look.

What is Venture Capital?

Venture Capital Backed CompaniesKnown for Innovative Business Models

Employment at IPO and Now

Company As of IPO Current # ChangeThe Home Depot 650 331,000 330,350Starbucks Corporation 2,521 160,000 157,479Staples 1,693 89,019 87,326Whole Foods Market, Inc. 2,350 69,500 67,150eBay 138 31,500 31,362

Venture Capital Backed CompaniesKnown for InnovativeTechnology and Products

Employment at IPO and Now

Company As of IPO Current # ChangeMicrosoft 1,153 94,000 92,847Intel Corporation 460 100,100 99,640Medtronic, Inc. 1,287 45,000 43,713Apple Inc. 1,015 76,100 75,085Google 3,021 53,861 50,840JetBlue 4,011 12,070 8,059

Source: Global Insight; Updated fromThomsonOne 2/2013

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Many technologies currently under development byventure capital firms are truly disruptive technologiesthat do not lend themselves to being embraced bylarger companies whose current products could becannibalized by this. Also, with the increased empha-sis on public company quarterly results, many largerorganizations tend to reduce spending on research anddevelopment and product development when thingsget tight. Many talented teams have come to the ven-ture capital process when their projects were turneddown by their companies.

Common Structure — Unique Results

While the legal and economic structures used to cre-ate a venture capital fund are similar to those used byother alternative investment asset classes, venture cap-ital itself is unique. Typically, a venture capital firmwill create a Limited Partnership with the investors asLPs and the firm itself as the General Partner. Each“fund,” or portfolio, is a separate partnership. A newfund is established when the venture capital firmobtains necessary commitments from its investors, say$100 million. The money is taken from investors asthe investments are made. Typically, an initial fundingof a company will cause the venture fund to reservethree or four times that first investment for follow-onfinancing. Over the next three to eight or so years, theventure firm works with the founding entrepreneur togrow the company. The payoff comes after the compa-ny is acquired or goes public. Although the investorhas high hopes for any company getting funded, onlyone in six ever goes public and one in three isacquired.

Economic Alignment of all Stakeholders —An American Success StoryVenture capital is rare among asset classes in that suc-cess is truly shared. It is not driven by quick returns ortransaction fees. Economic success occurs when thestock price increases above the purchase price. Whena company is successful and has a strong public stockoffering, or is acquired, the stock price of the compa-ny reflects its success. The entrepreneur benefits fromappreciated stock and stock options. The rank and fileemployees throughout the organization historicallyalso do well with their stock options. The venture cap-ital fund and its investors split the capital gains per a

pre-agreed formula. Many college endowments, pen-sion funds, charities, individuals, and corporationshave benefited far beyond the risk-adjusted returns ofthe public markets.

Beyond the IPO

Many of the most exciting venture capital backedcompanies left the venture portfolios after they wentpublic. Far from being a destination, the IPO processprovides needed growth capital for a growing compa-ny. A 2009 analysis by IHS Global Insight shows thatmore than 90% of the jobs at today’s venture backedpublic companies were created after it went public.That is, these companies on average are 10% of theirmature size at the time they go public.

What’s AheadMuch of venture capital’s success has come from theentrepreneurial spirit pervasive in the American culture,financial recognition of success, access to good science,and fair and open capital markets. It is dependent upona good flow of science, motivated entrepreneurs, protec-tion of intellectual property, and a skilled workforce.

The nascent deployment of venture capital in othercountries is gated by a country’s or region’s cultur-al fit, tolerance for failure, services infrastructurethat supports developing companies, intellectualproperty protection, efficient capital markets, andthe willingness of big business to purchase fromsmall companies.

The Exit FunnelOutcomes of the 11,686 Companies

First Funded 1991 to 2000

Went/Going Public14%

Acquired33%

Known Failed18%

Still Privateor Unknown*

35%

*Of these, most have quietly failed

8 Thomson Reuters

National Venture Capital Association

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Executive Summary

Introduction

The National Venture Capital Association 2013Yearbook provides a summary of venture capitalactivity in the United States. This ranges from invest-ments into portfolio companies to capital managedby general partners to fundraising from limited part-ners to exits of the investments by either IPOs ormergers and acquisitions. The statistics for this pub-lication were assembled primarily from theMoneyTree™ Report by PricewaterhouseCoopersand the National Venture Capital Association, basedon data from Thomson Reuters and analyzed through

the ThomsonONE.com (formerly VentureXpert)database of Thomson Reuters, which has beenendorsed by the NVCA as the official industry activ-ity database. Subscribers to ThomsonONE can recre-ate most of the charts in this publication and reportindividual deal detail and more granular statisticsthan provided herein.

Industry Resources

The activity level of the U.S. venture capital industryis roughly half of what it was at the 2000-era peak.For example, in 2000, 1053 firms each invested $5million or more during the year. In 2012, the countwas less than half that at 522.

Venture capital under management in the UnitedStates by the end of 2012 decreased to $199.2 billionas calculated using the methodology describedbelow. However, looking behind the numbers, weknow that the industry continues to contract from thecirca 2000 bubble high of $261.2 billion

The slight downtick in number of firms and capitalmanaged in 2012 perhaps understates a consolidat-ing trend. The average venture capital firm shrunk to7.0 principals per firm from 7.4 in 2011. The corre-sponding drop in headcount to under 6,000 princi-pals is almost one-third lower than 2007 levels. This

During 2012, many of the metrics describing the venture capital industry in the United States were similar tothose of the prior two years. The decline in the number of firms and capital managed was expected but not aslarge as some were anticipating. Venture investment focused on companies in the seed and early stages, withmany later-stage companies continuing to await a helpful IPO environment. Investment in early-stage life sci-ence companies continues to soften.

Fundraising remained very challenging for the majority of venture firms, largely because of a dearth of healthyexits that would distribute yet-unrealized returns to current fund investors. The number of initial public offer-ings in 2012 fell slightly from 2011 levels, but the proceeds and IPO valuation tally were both up significant-ly, largely as a result of one huge IPO and a handful of large ones.

A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new businessopportunities, known as deal flow, remains very high and the best opportunities are getting funded, stressesremain.

Thomson Reuters 9

11999922 22000022 22001122No. of VC Firms in Existence 358 1,089 841No. of VC Funds in Existence 616 2,119 1,269No. of Principals 4,996 14,541 5,887No. of First Time VC Funds Raised 13 25 43No. of VC Funds Raising Money This Year 78 176 162VC Capital Raised This Year ($B) 4.9 15.7 20.1VC Capital Under Management ($B) 28.7 272.1 199.2Avg VC Capital Under Mgt per Firm ($M) 80.2 249.9 236.9Avg VC Fund Size to Date ($M) 39.1 94.4 110.6Avg VC Fund Size Raised This Year ($M) 62.8 89.2 124.1Largest VC Fund Raised to Date ($M) 1,775.0 6,300.0 6,300.0

Figure 1.0Venture Capital Under Management

Summary Statistics

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National Venture Capital Association

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0

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Figure 2.0Capital Under Management

U.S. Venture Funds ($ Billions)1985 to 2012

Figure 3.0Capital Commitments to

U.S. Venture Funds ($ Billions)1985 to 2012

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meant that there was an increase in the averageamount of capital managed by each principal. It ispossible going forward, that the number of principalsper firm will increase as the number of firmsdecreases. This is because the bulk of the moneybeing raised today is being raised by larger, special-ty, and boutique firms.

Commitments

New commitments to venture capital funds in theUnited States increased for the second year in a row,which follows four years of declines. In 2012, com-mitments totaling $20.1 billion were made to 183funds. This is roughly two-thirds of the annual levels

seen in 2005-2007 and approximately one-fifth of theannual amount raised at the bubble peak.

When you look behind the 2012 capital commitmentsat the specific funds being raised, the 10 largest fundsrepresent 48% of the capital raised, with 173 fundsraising the other 52%.

This is the sixth consecutive year in which moremoney was invested by the industry than raised innew commitments. That has been the case in 11 ofthe past 13 years. While this is not a true apples-to-apples comparison, it does explain the industry’sstrong interest in raising additional funds in 2013and beyond. The narrow success of recent IPO and

2013 NVCA Yearbook

Thomson Reuters 11

Figure 4.0Investments in

Portfolio Companies ($ Billions)1985 to 2012

Investment InvestmentIndustry Group # Companies # Deals Amt ($Bil) # Companies # Deals Amt ($Bil)Information Technology 2,130 2,480 16.5 870 870 3.0Medical/Health/Life Science 649 818 6.8 148 148 0.7Non-High Technology 364 425 3.4 156 156 0.4Total 3,143 3,723 26.7 1,174 1,174 4.1

All Investments Initial Investments

Figure 5.0Venture Capital Investments in 2012

By Industry Group

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National Venture Capital Association

12 Thomson Reuters

Figure 7.0Venture Capital Investments in 2012Industry Sector by Dollars Invested

Business Productsand Services 0.4%

Computers and Peripherals 2%

Consumer Products and Services 5%

Electronics/Instrumentation 1%

Biotechnology15%

Financial Services 1%

Healthcare Services 1%

Industrial/Energy 10%

IT Services 7%

Media andEntertainment 7%

Medical Devicesand Equipment 9%

Networking andEquipment 1%

Retailing/Distribution 2%

Semiconductors3%

Telecommunications 2%

Software 31%

Other0.2%

Seed 3%

Early Stage 30%

Expansion 35%

Later Stage 32%

Figure 6.0Venture Capital Investments in 2012

Stage by Dollars Invested

Page 14: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

acquisition markets has not enabled most firms topay out sufficient distributions to their investors tobegin raising another fund. For the vast majority offirms, raising additional capital right now is verydifficult.

Investments

Measuring industry activity with the total dollarsinvested in a given year shows that the industry hasremained generally in the $20 billion to $30 billion

range since 2002. In 2012, $26.7 billion was invested in3,143 companies. This is less than 2011 totals andgreater than 2010 totals.The number of first-time fund-ings likewise was less than 2011 and greater than 2010.Further parsing the data shows an increasing portion ofthe investment dollars going to California companies.Software was the leading sector in 2012, receiving31% of the total dollars. The second largest sector wasBiotechnology which fell to roughly half that amountat 15.4% of total investment The continued interest inClean Technology investing brought the

2013 NVCA Yearbook

Thomson Reuters 13

Figure 8.02012 Investments

By State

Year1985 48 763 13 16 1,991 32 47 3 41986 104 2,414 14 23 166,260 53 1889 4 41987 86 2,125 17 25 10,790 46 150 4 41988 43 769 15 18 20,523 51 555 3 41989 42 873 16 21 5,479 51 166 4 41990 47 1,108 20 24 5,886 60 178 4 41991 120 3,726 27 31 14,151 78 168 5 51992 150 5,431 24 36 15,759 68 147 5 51993 175 6,141 24 35 14,430 75 129 5 61994 140 4,004 24 29 9,854 67 91 5 51995 184 7,859 36 43 17,046 103 136 4 51996 256 12,666 35 49 40,360 111 191 3 41997 141 5,831 33 41 17,784 99 146 3 61998 79 4,221 43 53 9,649 149 214 3 31999 280 24,005 70 86 86,669 294 425 3 32000 238 27,443 83 115 63,610 336 464 3 42001 37 4,130 80 112 15,545 304 576 4 42002 24 2,333 89 97 8,322 266 347 3 52003 26 2,024 71 78 7,412 252 285 5 62004 82 10,032 70 122 50,268 254 613 6 62005 59 5,113 68 87 39,702 202 673 5 52006 68 7,127 85 105 71,467 293 1067 5 62007 92 12,365 97 134 68,282 361 742 6 62008 7 765 83 109 3,645 278 521 7 72009 13 1,980 123 152 9,192 548 707 6 72010 68 7,609 93 112 111,386 431 1662 5 62011 51 10,690 106 210 94,987 606 1862 6 72012 49 21,451 89 438 122,264 371 2495 7 8

Mean Age@ IPO (yrs)Num of IPOs

OfferAmount

($Mil)Med Offer

Amt ($Mil)Mean OfferAmt ($Mil)

Post OfferValue ($Mil)

Med PostValue ($Mil)

Mean PostValue ($Mil)

Median Age@ IPO (yrs)

Figure 9.0Venture-Backed IPOs

Number of Pct of Investment Pct ofState Companies Total ($ Millions) TotalCalifornia 1,280 41% 14,128.8 53%Massachusetts 326 10% 3,067.9 12%New York 287 9% 1,856.7 7%Washington 101 3% 931.5 3%Texas 134 4% 930.5 3%Illinois 76 2% 570.4 2%Colorado 85 3% 564.2 2%Pennsylvania 154 5% 517.8 2%New Jersey 49 2% 429.3 2%Virginia 62 2% 372.3 1%All Others 589 19% 3,282.8 12%Total 3,143 26,652.4

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National Venture Capital Association

14 Thomson Reuters

Industrial/Energy sector to 10.5% of the total. MedicalDevices rounded out the top four sectors at 9.4%.

The life sciences share of the venture capital invest-ment dollars decreased in 2012 to its lowest levelsince 2002. In 2012, 15.4% of the money went intoBiotechnology, 9.4% into Medical Devices, and 1.2%into Healthcare Services, totaling 26.0%. This isdown from the 33.1% combined share in 2009.

As has been the case for several years, attention hasbeen focused on the two ends of the spectrum.Looking at deal counts, 2012 actually saw the highestpercentage of seed- and early-stage deals since at least1985 (51.8% of total deals). This certainly wouldchallenge the suggestion that the industry’s attentionis single-focused on later-stage companies. That said,the 22.4% of deals going to later-stage companies isalso toward the top end of the historical range. There

remains a record number of companies in portfoliosin the later stage of development that in most otherpositions in the business cycle would have alreadygone public or otherwise been acquired.

With the rule of thumb that a healthy venture capitalindustry invests in 1,000-1,300 new companies eachyear, the 1,174 first fundings in 2012 is very much inthat range. Not surprisingly, 81% of those first roundinvestments were made at the seed- and early-stagelevels.

The year 2012 provided an interesting contrast in geo-graphic dispersion. While 53% of all the investmentdollars went to California-based portfolio companies,a record for MoneyTree™, companies in 48 states andDC received financing, also a MoneyTree™ recordhigh.

Number Number ($ Millions)Year Total Known Price Average1985 6 3 300.2 100.11986 8 1 63.4 9.11987 10 4 667.2 111.21988 17 9 920.7 115.11989 20 10 746.9 74.71990 19 7 120.3 10.01991 16 4 190.5 15.91992 69 43 2,119.1 81.51993 59 36 1,332.9 58.01994 82 56 3,207.1 123.41995 92 58 3,801.8 111.81996 107 76 8,230.8 265.51997 143 99 7,743.6 176.01998 189 113 8,002.0 105.31999 227 154 38,688.0 530.02000 379 245 79,996.4 597.02001 384 175 25,115.6 120.22002 363 165 11,913.2 60.22003 323 134 8,240.8 43.62004 402 199 28,846.1 142.12005 443 198 19,600.2 80.02006 485 207 24,288.5 87.42007 488 200 30,745.5 106.82008 416 134 16,236.9 57.62009 350 108 12,364.9 51.12010 521 149 17,700.3 47.62011 488 169 24,093.2 75.52012 449 121 21,516.2 65.6

Figure 10.0Venture-Backed M&A Exits

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Exits

Once successful portfolio companies mature, venturefunds generally exit their positions in those compa-nies by taking them public through an initial publicoffering (IPO) or by selling them to presumably larg-er organizations (acquisition, or trade sale). This thenlets the venture fund distribute the proceeds toinvestors, raise a new fund for future investment, andinvest in the next generation of companies. This chap-ter considers each type of exit separately.

IPOs in 2012 were a mixed bag at best. On the onehand, the number of venture-backed companies goingpublic actually fell from 2011 from 51 to 49. But thedollars raised in those initial public offerings morethan doubled from $10.7 billion to $21.5 billion. Butlooking behind the numbers, we see that Facebookitself raised $16.0 billion of that $21.5 billion, with afew other high-profile IPOs looming large in theremainder. This meant that many companies attempt-

ing or seeking to go public were not able to do so.

On the market valuation placed on these IPOs at theoffer price, 2012 was a very good year. The 49 IPOshad a valuation of $122.3 billion. This is the highestamount since 1986. What is quite striking (Fig 5.03),is the huge gap between median and mean (average)valuation of almost seven times! This suggests a hugeoutlier effect created by the very large IPOs that suc-ceeded.

In 2012, the acquisition market weakened. There wasa slight decrease in the number of acquisitions, ortrade sales, of venture-backed companies. We tracked449 acquisitions, of which we had disclosed dealamounts for 121 of them. The sum of the disclosedvalues was also down at $21.5 billion. Just over one-fifth of them were acquired at 10 times or greater thanthe cumulative venture capital investment in thosecompanies. We tracked four acquisitions at more than$1 billion.

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Industry Resources

METHODOLOGYHistorically we have calculated industry size using a“rolling eight years of fundraising” proxy for capitalmanaged, number of funds, number of firms, etc. Thenumber of firms in existence will vary on a rollingeight-year basis as firms raise new funds or do notraise funds for more than eight years. Currently, weknow the industry is consolidating, but the eight- yearmodel now includes fund vintage years 2005-2012.However, through 2012, the rolling eight yearmethodology belies this contraction because the veryslow fundraising years of 2002-2004 were rolling outof the calculation.

Under this methodology, we estimate that there arecurrently 841 firms with limited partnerships “inexistence.” To clarify, this is actually stating that thereare 841 firms that have raised a venture capital fundin the last eight years. In reality, fewer firms are actu-ally making new investments in 2012.

To better report the actual number of active firms, we

added a column to the table to report the number ofindependent and corporate venture groups actuallyinvesting $5 million or more in a given year. These522 firms are less than half the level of 2000. Weexpect this statistic to fall further going forward.

For this publication, we are primarily counting thenumber of firms with limited partnerships and areexcluding other types of investment vehicles. Fromthat description, it may appear that the statistics fortotal industry resources may be underestimated.However, this must be balanced with the fact that cap-ital under management by captive and evergreenfunds is difficult to compare equitably to typical lim-ited partnerships with fixed lives. For this analysisonly, the firms counted for capital under managementinclude firms with fixed-life partnerships and venturecapital funds they raised. If a firm raised both buyoutand venture capital funds, only the venture fundswould be counted in the calculation of venture capitalunder management.

The activity level of the U.S. venture capital industry is roughly half of what it was at the 2000-era peak. Forexample, in 2000, 1053 firms each invested $5 million or more during the year. In 2012, the count was less thanhalf that at 522.

Venture capital under management in the United States by the end of 2012 decreased to $199.2 billion as cal-culated using the methodology described below. However, looking behind the numbers, we know that the indus-try continues to contract from the circa 2000 bubble high of $261.2 billion

The slight downtick in firms and capital managed in 2012 perhaps understates a consolidating trend. The aver-age venture capital firm shrunk to 7.0 principals per firm from 7.4 in 2011. The corresponding drop in head-count to under 6,000 principals is almost one-third lower than 2007 levels. This meant that there was anincrease in the average amount of capital managed by each principal. It is possible going forward, that thenumber of principals per firm will increase as the number of firms decreases. This is because the bulk of themoney being raised today is being raised by larger, specialty, and boutique firms. For our purposes here, wedefine a principal to be someone who goes to portfolio company board meetings. That is, deal partners wouldbe included and firm CFOs would not be included.

Geographic location of the largest venture firms is quite concentrated. California domiciled firms manage47.1% of the industry’s capital although these firms may be actively investing in other states and countries. Thisconcentration has been consistent for several years and may increase going forward, given the movement ofsome east coast funds westward. Taken together, the top five states (California, Massachusetts, New York,Connecticut, and Illinois) hold 81.4% of total venture capital in this country.

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0

50

100

150

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250

300

350

1985

1986

1987

1988

1989

1990 1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

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2010

2011

2012

($B

illio

ns)

Year

Figure 1.01Capital Under Management

U.S. Venture Funds ($ Billions)1985 to 2012

18 Thomson Reuters

Venture capital under management can be a complexstatistic to estimate. Indeed, capital under manage-ment reported by firms can differ from firm to firm asthere’s not one singular definition. For example, somefirms include only cumulative committed capital, oth-ers may include committed capital plus capital gains,and still other firms define it as committed capitalafter subtracting liquidations. To complicate matters,it is difficult to compare these totals to European pri-vate equity firms, which include capital gains as partof their capital under management measurements.

For purposes of the analysis in this publication, wehave tried to clarify the industry definition of capitalunder management as the cumulative total of commit-ted capital less liquidated funds or those funds that

have completed their life cycle. Typically, venturecapital firms have a stated 10-year fixed life span,except for life science funds, which are often estab-lished as 12-year funds. Figure 1.08 shows the realityof fund life. Thomson Reuters calculates capital undermanagement as the cumulative amount committed tofunds on a rolling eight-year basis. Current capitalunder management is calculated by taking the capitalunder management calculation from the previousyear, adding in the current year’s funds’ commitments,and subtracting the capital raised eight years prior.

For this analysis, Thomson Reuters classifies venturecapital firms using four distinct types: private inde-pendent firms, financial institutions, corporations,and other entities. ‘Private independent’ firms are

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20

40

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125111 112

139

91

6047

Capital Under Management ($ Millions)This chart shows capital committed to U.S. venture firms in active funds. While much of the capital is managedby larger firms, of the 841 firms at the end of 2012, roughly 60% of them (504) managed $100 million or less. Bycomparison, just 47 firms managed active funds totaling more than $1 billion.

Figure 1.03Distribution of Firms

By Capital Managed 2012

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997Private Independent 11,636 14,574 17,299 18,607 22,112 22,632 21,805 22,557 25,199 28,528 33,417 40,235 51,877Financial Institutions 3,368 3,508 3,442 3,178 2,714 2,802 2,392 2,220 2,484 2,924 3,758 5,123 7,209Corporations 1,739 1,709 2,062 2,148 2,095 2,142 2,086 2,211 1,526 1,573 1,345 2,032 2,348 3Other 857 909 897 867 779 725 618 313 191 275 380 409 665Total 17,600 20,700 23,700 24,800 27,700 28,300 26,900 27,300 29,400 33,300 38,900 47,800 62,100

Figure 1.02Total Capital Under Management

By Firm Type 1985 to 2012 ($ Millions)

Thomson Reuters 19

made up of independent private and public firmsincluding both institutionally and non-institutionallyfunded firms and family groups. ‘Financial institu-tions’ refers to firms that are affiliates and/or sub-sidiaries of investment banks and non-investmentbank financial entities, including commercial banksand insurance companies. The ‘corporations’ classifi-cation includes venture capital subsidiaries and affili-ates of industrial corporations. In 2013, we will mod-ify the methodology to reflect virtually all direct cor-porate investment because many of the corporate ven-ture investors do not operate out of a separate fund or

group. The capital under management statisticsreported in this section consist primarily of venturecapital firms investing through limited partnershipswith fixed commitment levels and fixed lives and donot include non-vintage “evergreen funds” or truecaptive corporate industrial investment groups with-out fixed commitment levels. The term ‘evergreenfunds’ refers to funds that have a continuous infusionof capital from a parent organization, as opposed tothe fixed life and commitment level of a closed-endventure capital fund.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012P 76,398 120,221 187,475 221,105 221,634 225,208 233,976 242,466 255,714 238,766 194,698 171,713 175,980 183,482 180,936

10,382 15,466 23,454 24,975 24,453 23,558 22,277 21,634 18,991 14,384 6,263 4,865 5,266 9,541 9,6703,245 6,797 11,604 12,787 12,766 12,717 12,245 12,044 11,964 8,828 4,171 2,979 3,458 4,483 4,497

875 1,116 1,467 2,134 2,347 2,317 2,302 2,055 2,031 1,822 1,469 843 3,997 3,995 4,09890,900 143,600 224,000 261,000 261,200 263,800 270,800 278,200 288,700 263,800 206,600 180,400 188,700 201,500 199,200

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No. Estimated Avg MgtPrincipals Industry Per Principal

Year Per Firm Principals ($M)2007 8.7 8,665 30.02008 8.5 7,293 28.32009 8.6 6,760 26.42010 8.0 6,328 25.72011 7.4 6,231 28.62012 7.0 5,887 33.8

Figure 1.05Principals Information

State ($ Millions)CA 93,814.8MA 34,482.3NY 21,378.0CT 8,051.2IL 4,369.0Total* 162,095.4

*Total includes above 5 states only

Figure 1.06Top 5 States

By Capital Under Management 2012

*Total includes above 5 states only

The correct interpretation of this chart is that at year end 2012, there were 5,887principals (people who go to board meetings) in the industry. A principal on aver-age manages $33.8 million and the average firm is made up of 7.0 principals, downfrom 7.4 principals a year earlier.

Fund Total Total Total Firms That Raised Capital Avg Avg FirmsVintage Cumulative Cumulative Cumulative Existing Funds in the Last Managed Fund Size Firm Size Actively

Year Funds Firms Capital ($B) Funds 8 Vintage Years ($B) ($M) ($M) Investing1985 631 323 20 532 294 17.6 33.1 59.9 921986 707 353 23.4 590 324 20.7 35.1 63.9 1131987 810 388 27.4 670 353 23.7 35.4 67.1 1121988 887 406 30.8 700 365 24.8 35.4 67.9 1181989 979 435 35.8 727 380 27.7 38.1 72.9 1151990 1,037 451 38.3 716 383 28.3 39.5 73.9 1001991 1,075 458 40.5 639 360 26.9 42.1 74.7 801992 1,147 478 44.1 601 352 27.3 45.4 77.6 1041993 1,244 509 49.4 613 370 29.4 48.0 79.5 931994 1,342 542 56.7 635 385 33.3 52.4 86.5 1101995 1,497 607 66.2 687 424 38.9 56.6 91.7 1851996 1,647 668 78.6 760 469 47.8 62.9 101.9 2491997 1,859 760 97.9 880 541 62.1 70.6 114.8 3421998 2,096 839 129.2 1,059 613 90.9 85.8 148.3 4081999 2,433 966 184.1 1,358 733 143.6 105.7 195.9 7132000 2,849 1,109 268.2 1,702 864 224 131.6 259.3 10532001 3,092 1,191 310.4 1,848 920 261 141.2 283.7 7592002 3,174 1,208 318 1,832 918 261.2 142.6 284.5 5342003 3,282 1,260 330 1,785 948 263.8 147.8 278.3 5052004 3,447 1,328 349.4 1,800 984 270.8 150.4 275.2 5752005 3,622 1,398 376.2 1,763 1009 278.2 157.8 275.7 5582006 3,805 1,474 417.9 1,709 1019 288.7 168.9 283.3 5702007 4,019 1,558 447.9 1,586 1010 263.8 166.3 261.2 6272008 4,205 1,621 474.8 1,356 879 206.6 152.4 235 6032009 4,313 1,664 490.7 1,221 818 180.4 147.7 220.5 4622010 4,439 1,725 506.7 1,265 844 188.7 149.2 223.6 5092011 4,599 1,787 531.5 1,317 868 201.5 153.0 232.1 5452012 4,716 1,828 548.6 1,269 841 199.2 157.0 236.9 522

Figure 1.04Fund and Firm Analysis

The correct interpretation of this chart is that since the beginning of the industry to the end of 2012, 1,828 firms had been founded and 4,716 funds hadbeen raised. Those funds totaled $548.6 billion. At the end of 2012, 841 firms as calculated using our eight-year methodology managed 1,269 individualfunds, with each fund typically being a separate limited partnership. Capital under management, again calculated using a rolling eight years of fundrais-ing, by those firms at the end of 2012 was $199.2 billion. However, only 522 independent and corporate venture groups invested at least $5 million inMoneyTree™ deals in 2012.

20 Thomson Reuters

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SSttaattee 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966 11999977 11999988CA 4,875 5,836 6,493 6,727 7,987 7,620 7,732 7,728 8,562 9,315 11,524 14,797 19,349 26,799MA 2,331 2,646 3,533 3,886 4,292 4,414 4,070 4,944 5,136 5,645 6,881 7,339 10,436 15,737NY 3,382 4,421 4,369 4,158 5,589 5,810 5,460 5,314 5,911 6,977 8,268 9,952 10,286 19,646CT 1,285 1,432 1,917 1,979 1,821 1,984 1,840 1,937 2,268 2,430 2,282 2,397 3,677 4,684IL 470 490 720 848 804 818 783 886 1,148 1,220 1,361 1,312 1,989 2,245PA 444 518 548 562 731 772 774 770 570 739 822 1,324 1,743 2,100 3DC 3 4 4 3 4 4 4 1 20 20 123 1,670 2,325 2,450TX 454 488 722 720 792 835 773 805 936 1,143 1,145 1,225 1,681 2,994NJ 610 707 746 734 730 950 880 546 512 695 958 1,480 1,557 2,171MD 93 97 123 116 158 163 98 115 374 784 914 1,514 2,004 2,642 3WA 313 406 384 422 395 383 198 241 227 178 299 460 677 1,078VA 72 78 78 84 104 91 56 42 35 32 48 73 251 506MN 198 294 338 672 743 882 810 764 842 896 877 511 616 713NC 34 54 87 89 124 113 109 110 108 146 128 298 618 804 1,007 1,36CO 361 428 396 513 613 572 554 528 617 566 475 549 863 1,162MO 557 581 614 591 599 655 653 642 107 137 119 124 147 111UT 9 19 19 15 15 16 15 10 10 25 31 31 94 96MI 111 119 125 122 123 38 14 14 13 10 41 41 66 76FL 124 131 172 192 194 132 110 97 151 223 321 303 378 688TN 102 127 191 183 215 259 276 270 200 292 306 453 463 743GA 88 94 175 257 261 275 262 262 434 432 434 359 762 1,074DE 39 40 40 38 47 41 41 14 41 51 100 121 114 116OH 852 889 969 831 254 257 273 303 427 470 447 375 689 764AL 125 131 131 127 134 136 136 137 6 6 6 6 5 24IN 45 55 56 77 96 88 80 96 99 109 111 192 176 191AZ 40 43 43 73 74 75 75 34 44 43 44 10 9 38LA 7 7 7 7 7 5 2 11 22 31 49 89 275 366KY 15 16 16 16 0 0 0 0 0 7 21 21 21 21WI 181 99 98 95 104 104 78 78 81 163 168 195 180 204 1NM 71 100 135 132 168 255 243 230 205 179 154 151 120 12ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1ME 1 1 20 25 26 26 26 28 29 98 89 86 88 89OK 1 29 29 28 37 38 37 37 38 9 10 32 23 67SD 0 0 0 0 0 0 0 0 0 0 0 10 10 85HI 2 2 2 2 2 2 2 0 0 0 2 2 2 2 1IA 49 51 104 101 80 82 61 62 54 55 5 5 16 17OR 168 176 203 239 242 246 228 116 74 74 77 30 30 40VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1NH 24 25 25 49 50 51 50 50 27 27 47 19 66 67ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1KS 0 0 0 0 0 13 13 13 14 14 37 37 56 43SC 1 1 1 1 15 15 15 15 15 15 29 52 37 37NE 0 0 0 1 1 1 1 1 11 11 105 136 138 141MS 0 0 0 0 0 0 0 0 0 0 11 11 11 11PR 0 0 0 0 0 9 9 9 9 9 9 9 49 40WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1RI 15 16 16 36 36 37 36 36 22 22 23 0 2 2 2 2 2NV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2AR 2 2 2 2 2 2 2 0 0 0 0 0 0 0 1MT 0 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0UN 46 48 48 46 31 31 21 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0AK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0TToottaall 1177,,660000 2200,,770000 2233,,770000 2244,,880000 2277,,770000 2288,,330000 2266,,990000 2277,,330000 2299,,440000 3333,,330000 3388,,990000 4477,,880000 6622,,110000 9900,,990000

22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 22000099 22001100 22001111 2200112283,652 102,032 102,065 105,008 110,920 116,533 125,205 113,611 97,099 85,072 88,085 93,952 93,81538,137 47,762 49,004 48,678 49,187 50,675 55,598 52,312 38,586 32,397 32,001 31,836 34,48238,221 39,225 37,658 37,086 36,655 36,182 29,295 25,621 14,104 13,156 18,116 22,380 21,378

8,913 11,878 11,710 11,682 13,333 13,525 14,879 13,251 12,165 8,498 9,263 10,076 8,0514,393 4,805 5,258 5,616 5,690 5,168 5,289 4,235 3,590 3,278 3,060 4,564 4,3696,233 6,338 6,231 6,523 6,100 6,506 7,033 7,063 4,564 4,399 4,408 4,123 4,1833,847 4,122 4,686 4,584 3,373 3,582 4,640 5,046 4,835 4,631 4,043 4,510 4,1656,871 7,994 7,922 7,799 8,259 8,448 8,203 6,550 5,431 4,203 4,061 4,164 3,8383,628 4,311 4,226 4,440 4,083 4,073 5,159 5,021 4,137 3,916 3,959 3,554 3,3555,112 5,378 5,159 5,043 4,811 4,762 4,743 4,432 2,936 3,005 2,912 2,891 3,010

2,799 3,684 3,687 3,566 4,630 4,591 4,597 5,173 4,627 3,720 3,684 3,693 2,7492,520 2,636 2,649 2,819 2,868 3,338 3,367 3,013 1,802 2,225 2,267 2,073 1,9992,235 2,187 2,363 2,357 2,361 2,441 2,593 2,472 1,640 1,657 1,317 1,763 1,862

N 1,365 1,446 1,577 1,776 1,618 1,447 1,657 1,542 1,190 1,216 1,696 1,614 1,6334,775 5,288 5,432 5,412 5,229 4,882 4,663 3,010 1,604 974 1,137 1,144 1,399

307 449 417 407 504 1,232 1,293 1,384 1,318 1,182 1,187 1,188 1,315268 475 448 559 589 546 651 1,251 1,328 1,136 1,199 1,314 1,296587 591 589 631 859 912 946 685 919 976 1,051 1,244 1,022

1,782 1,749 1,682 1,591 1,577 1,802 1,525 1,283 558 801 864 819 8181,235 1,280 1,161 1,150 1,043 1,089 840 669 576 565 775 802 763

2,308 2,158 2,151 2,075 2,109 1,835 1,697 1,686 558 530 533 646 605113 80 69 28 15 15 15 251 256 394 396 445 544

O 1,847 1,872 1,873 1,853 1,986 1,805 1,721 1,329 714 565 521 570 439107 107 107 155 173 225 224 216 357 361 362 387 369662 662 650 683 593 595 608 617 136 342 343 308 335101 104 145 180 180 199 171 173 130 118 263 260 309476 651 648 631 663 502 430 353 336 196 263 279 214

21 21 14 14 14 18 216 218 223 225 226 212 212W 245 245 152 152 133 105 205 213 141 143 170 194 199

12 12 12 33 35 69 74 77 79 80 114 84 8214 14 14 14 14 14 84 85 72 73 73 73 73

202 290 218 219 214 215 276 160 164 73 73 69 69140 139 139 139 117 117 111 121 47 47 47 47 48178 177 177 177 175 175 103 113 32 32 48 48 40

11 11 11 9 16 16 16 7 14 14 43 43 3616 60 60 55 65 53 60 67 69 39 39 39 29

100 100 112 83 85 85 76 78 34 40 29 29 2716 43 43 43 43 43 43 57 41 14 19 19 1965 65 84 65 65 19 30 30 31 31 11 11 160 0 0 0 0 0 0 0 13 13 14 14 14

42 42 42 19 19 0 0 0 0 0 8 8 8S 36 37 71 58 35 41 41 41 42 41 5 5 5N 175 164 164 71 38 38 38 38 0 0 2 2 3M 11 39 39 28 28 28 29 30 30 1 1 1 1P 39 68 68 68 68 29 29 30 31 1 1 1 1W 117 117 117 117 117 118 118 119 0 0 0 0 0R 2 26 26 35 35 33 33 33 34 10 10 0 0N 23 23 32 32 33 33 33 9 10 10 0 0 0W 21 21 21 21 21 21 21 21 0 0 0 0 0A 19 19 19 19 19 19 19 0 0 0 0 0 0M 0 0 0 0 0 0 0 0 0 0 0 0 0U 0 0 0 0 0 0 0 0 0 0 0 0 0A 0 0 0 0 0 0 0 0 0 0 0 0 0T 222244,,0000 226611,,330000 226611,,220000 226633,,880000 227700,,880000 227788,,220000 228888,,770000 226633,,880000 220066,,660000 118800,,440000 118888,,770000 220011,,550000 119999,,220000

Figure 1.07Capital Under Management By State 1985 to 2012 ($ Millions)

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Life of IT Funds % of In Years Funds<= 10 7%11-12 20%13-14 27%15-16 22%17-18 14%>=19 10%

Figure 1.08Life of IT Funds in Years

Source: Adams Street Partners, based on 2010 analysis of dissolved funds.This chart tracks the year in which a 10-year fund is, in fact, dissolved.These later periods are referred to as “out years.” Historically, after the 10th year, only a few companies remain in the portfolios that typically do not havehuge upside potential. But the slow pace of exits in recent years has resulted in a number of good, mature companies remaining in portfolios well pastthe nominal 10-year mark. Life science funds tend to have lives two years longer than typical technology funds. In preparing this chart, partial years arerounded to the nearest whole year. So 10.4 years would round to 10 years, and 10.5 years would round up to 11 years. The median life span of a fund inthis analysis is 14.17 years.

National Venture Capital Association

22 Thomson Reuters

Page 24: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

Capital Commitments

Methodology

As defined by Thomson Reuters, capital commitments,also known as fundraising, are firm capital commit-ments to private equity/venture capital limited partner-ships by outside investors. For purposes of these statis-tics, the terms “capital commitments,” “fundraising,”and “fund closes” are used interchangeably. There arethree data sources for tracking capital commitments:(1) SEC filings that are regularly monitored by ourresearch staff, (2) surveys of the industry routinely con-ducted by Thomson Reuters, and (3) verified industrypress and press releases from venture firms.

Capital commitments are stated on either (1) a calen-dar-year basis when committed (for example, through-out this chapter) or (2) a vintage-year basis which isdesignated once the fund starts investing (for example,

figure 1.04). The data in this chapter is by calendaryear and incrementally measures how much in newcommitments funds raised during the calendar year.

Consider, for example, a venture capital firm thatannounces a $200 million fund in late 2010, raises$75 million in 2011, and subsequently raises theremaining $125 million in 2012. In this chapter, noth-ing would be reflected in 2010, $75 million would becounted in 2011, and $125 million would be countedin 2012. Assuming it started investing and made itsfirst capital call in 2012, the entire fund would then beconsidered to be a 2012 vintage year fund.

Note that fund commitments presented in this publica-tion do not include those corporate captive venture cap-ital funds that are funded by a corporate parent, whichdo not typically raise capital from outside investors.

New commitments to venture capital funds in the United States increased for the second year in a row, whichfollows four years of declines. In 2012, commitments totaling $20.1 billion were made to 183 funds. This isroughly two-thirds of the annual levels seen in 2005-2007 and approximately one-fifth of the annual amountraised at the bubble peak.

When you look behind the 2012 capital commitments at the specific funds being raised, the 10 largest fundsrepresent 48% of the capital raised, with 173 funds raising the other 52%.

This is the sixth consecutive year in which more money was invested by the industry than raised in new com-mitments. That has been the case in 11 of the past 13 years. While this is not a true apples-to-apples compar-ison, it does explain the industry’s strong interest in raising additional funds in 2013 and beyond. The narrowsuccess of recent IPO and acquisition markets has not enabled most firms to pay out sufficient distributions totheir investors to begin raising another fund. For the vast majority of firms, raising additional capital right nowis very difficult.

For the seventh year in a row, the top fundraising states were California and Massachusetts. This year,Connecticut replaces New York in the third position. California, with its venture firms raising $13.7 billion,holds the top spot for the tenth year in a row. Firms domiciled in the top five fundraising states in 2012 gath-ered 88% of the dollars, compared with 91% in 2011, 88% in 2010 and 82% in 2009.

Please note that the state of fund domicile matters less than has been true historically. Much of the money ismanaged by large, national funds that tend to be domiciled in any of several states with a broad geographicinvesting footprint. Readers should not interpret capital available to entrepreneurs in a given state as beinglimited to the capital raised in that state.

Venture capital fundraising typically makes up 20-25% of private equity fundraising. But in 2012, it represent-ed 16% of total, down from 22% in 2011.

Thomson Reuters 23

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National Venture Capital Association

24 Thomson Reuters

Year Sum ($Mil) % of Total PENo.

Funds Sum ($Mil) No. Funds Sum ($Mil)No.

Funds1985 3,727.9 56% 116 2,971.8 21 6,699.7 1371986 3,584.5 42% 101 5,043.7 32 8,628.2 1331987 4,379.1 21% 116 16,234.6 47 20,613.6 1631988 4,209.7 28% 104 10,946.4 54 15,156.1 1581989 4,918.8 29% 106 12,068.5 78 16,987.3 1841990 3,222.7 27% 86 8,831.5 64 12,054.3 1501991 1,900.3 31% 40 4,242.1 27 6,142.4 671992 5,223.1 33% 80 10,752.5 58 15,975.6 1381993 4,489.2 21% 93 16,961.7 81 21,451.0 1741994 7,636.7 27% 136 20,457.0 100 28,093.7 2361995 9,387.3 26% 161 27,040.7 108 36,428.0 2691996 11,550.0 26% 168 32,981.4 104 44,531.3 2721997 17,741.9 29% 242 42,803.0 136 60,544.9 3781998 30,641.7 33% 290 62,023.7 173 92,665.4 4631999 53,597.8 50% 430 53,720.7 166 107,318.5 5962000 101,417.9 56% 634 80,614.8 171 182,032.7 8052001 38,923.4 43% 324 52,523.0 137 91,446.4 4612002 11,867.3 25% 202 35,076.8 124 46,944.0 3262003 10,586.7 23% 161 35,913.4 121 46,500.1 2822004 18,137.1 23% 212 59,878.5 158 78,015.6 3702005 30,627.3 22% 234 108,249.8 205 138,877.1 4392006 31,371.7 17% 236 152,566.2 216 183,937.9 4522007 29,378.1 11% 235 243,264.2 264 272,642.3 4992008 25,577.2 12% 215 180,923.9 231 206,501.1 4462009 16,194.4 25% 162 49,871.5 148 66,065.9 3102010 13,519.8 21% 175 51,674.8 173 65,194.6 3482011 19,296.2 22% 188 70,103.5 207 89,399.6 3952012 20,065.9 16% 183 106,249.9 217 126,315.7 400

Venture Capital Buyouts and Mezzanine Capital Total Private Equity

Figure 2.02Capital Commitments To Private Equity Funds 1985-2012

0

20

40

60

80

100

120

1985

1986

1987

1988

1989

1990 1991

1992

1993

1994

1995

1996

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1998

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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

($B

illio

ns)

Year

Figure 2.01Capital Commitments

To U.S. Venture Funds ($ Billions)1985 to 2012

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2013 NVCA Yearbook

Thomson Reuters 25

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012CA 1,250 969 1,159 936 1,519 831 549 1,311 1,333 1,764 3,107 3,724 5,463 8,456 21,891 43,485MA 534 356 973 582 339 675 180 1,051 368 1,158 1,955 1,871 2,602 5,176 7,659 16,692CT 282 156 420 352 66 290 150 300 473 388 260 425 1,324 1,068 2,843 2,313 4NY 202 1,460 547 279 2,260 490 474 494 940 1,860 2,364 1,516 3,609 9,346 8,945 15,400NC 7 7 31 23 38 1 0 0 0 63 10 184 349 174 180 613WA 25 126 37 60 0 0 5 48 40 37 129 239 180 409 640 1,175CO 32 71 32 70 80 0 0 0 114 0 19 216 253 433 1,942 2,414TN 20 23 73 0 34 0 0 40 0 116 84 149 109 266 267 262FL 10 0 36 11 29 0 35 0 59 105 106 0 78 250 326 955PA 54 73 55 12 118 45 167 30 110 182 114 264 784 177 1,241 2,751UT 0 11 1 0 0 0 0 0 0 27 0 0 17 50 62 126MO 644 0 33 0 0 53 0 0 64 0 11 6 45 25 80 65MN 14 110 51 418 20 162 16 946 66 164 7 36 208 217 107 1,827IL 51 47 325 158 26 57 94 247 278 183 230 295 575 466 1,304 964 1,10NJ 254 61 120 0 125 243 75 110 177 401 213 606 118 1,002 570 1,041 6AZ 0 0 0 37 0 0 0 0 10 0 0 0 0 0 29 60VA 0 4 10 13 15 2 0 17 5 0 7 20 165 226 884 2,212 1WI 0 0 0 0 0 0 0 0 0 40 0 31 30 0 17 66IN 0 10 0 27 16 5 0 49 0 20 0 116 0 13 20 103OH 3 0 87 75 0 30 0 67 4 86 10 0 358 58 659 662TX 37 33 231 41 161 143 50 381 137 283 179 326 394 1,330 1,803 3,615MI 5 0 7 33 0 0 0 0 3 14 0 26 11 0 321 241MD 4 7 24 0 49 14 50 0 225 479 67 439 145 768 840 1,990AL 150 0 0 0 0 0 0 0 0 0 0 0 5 30 0 137GA 0 0 15 65 0 14 0 0 56 0 74 34 41 181 30 918NH 49 0 0 40 0 0 15 0 0 0 20 0 50 0 0 0 0 1NE 0 0 0 0 0 0 0 0 0 0 111 36 0 0 0 41DE 39 0 0 5 0 0 0 0 0 0 130 820 668 392 360 778ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1OK 0 32 0 0 10 0 0 0 0 0 0 24 0 45 0 110 0 0 0 0 1AR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20DC 0 0 0 0 0 0 0 0 0 25 31 65 0 0 28 0HI 0 0 0 0 0 0 0 0 0 0 3 0 0 0 10 0ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15IA 11 0 60 0 0 0 0 56 0 0 5 0 11 2 5 21KS 0 0 0 0 0 0 0 0 0 0 0 0 20 0 0 0 0 0 0 0 0 0 1KY 0 0 0 0 0 0 0 0 14 7 15 0 42 0 0 0 1LA 0 0 0 0 0 0 0 11 14 169 18 24 88 51 373 70ME 0 0 22 948 0 0 0 2 0 59 0 22 0 0 127 0MS 0 0 0 0 0 0 0 0 0 0 12 0 0 0 0 30NV 0 0 0 0 0 0 0 0 0 0 50 25 0 0 25 0NM 36 28 0 2 0 155 40 0 0 6 2 0 0 0 0 0 0 0 1OR 0 0 30 0 0 0 0 0 0 0 32 0 0 10 0 65PR 0 0 0 0 0 10 0 0 0 0 0 0 0 0 0 0 3RI 17 0 0 25 0 0 0 0 0 0 0 0 0 0 0 0 2SC 0 0 0 0 13 5 0 0 0 0 14 0 0 0 0 0 0 3SD 0 0 0 0 0 0 0 0 0 0 0 11 0 22 14 131VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 4 1WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 26Total 3,728 3,584 4,379 4,210 4,919 3,223 1,900 5,161 4,489 7,637 9,387 11,550 17,742 30,642 53,598 101,418

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012C 13,452 154 4,830 8,645 12,869 13,621 12,016 14,053 8,635 6,337 9,790 13,665

9,783 1,397 1,597 1,485 9,151 4,366 5,122 2,486 3,574 2,779 2,503 1,4104,164 24 165 1,926 1,143 3,136 904 766 158 1,035 149 1,3882,986 7,704 1,233 2,149 1,736 2,512 4,310 1,826 1,652 1,259 4,096 758

105 55 237 17 108 401 185 103 5 456 130 472888 43 1 955 281 563 1,376 492 5 0 0 399513 118 94 84 69 132 358 221 3 262 6 280

T 82 22 101 16 84 62 100 134 89 42 161 27826 8 56 1 313 10 109 25 32 75 2 268

537 54 388 451 688 794 746 963 233 205 126 183232 0 34 40 24 170 213 569 33 16 160 159286 0 0 80 829 40 210 54 0 72 0 155

17 276 26 50 295 473 275 325 22 0 0 1501,103 478 657 432 80 422 545 258 216 238 215 120652 392 561 197 204 1,812 235 53 504 112 100 63

21 43 41 0 19 0 0 20 0 0 222 54119 37 196 72 419 555 582 105 14 121 36 4514 0 0 11 0 78 102 15 9 27 0 400 10 36 17 6 24 1 29 1 28 0 39

330 102 5 210 558 152 81 83 4 30 79 322,232 106 76 589 570 314 316 1,038 78 83 210 31

8 0 65 63 122 23 49 256 84 177 192 20340 381 105 162 433 472 783 369 484 68 544 19

16 11 49 19 70 19 0 118 101 2 58 1919 0 0 55 104 103 203 19 31 31 26 130 11 9 0 0 5 7 0 0 0 0 5

N 0 0 0 0 0 0 0 0 0 2 0 1D 622 315 0 299 393 896 315 1,123 204 0 475 0

0 0 0 0 0 0 0 13 0 0 0 0O 0 0 0 0 12 38 11 0 0 0 0 0A 0 0 0 0 0 0 0 0 0 0 0 0D 0 22 0 10 0 0 0 0 0 0 0 0H 0 3 0 8 0 0 0 6 0 0 0 0I 27 0 0 0 0 0 75 0 0 0 0 0I 26 0 0 10 0 43 0 0 15 0 0 0K 0 0 0 0 0 0 10 20 0 0 8 0K 135 8 2 0 5 65 98 12 0 0 0 0L 27 8 0 73 4 12 0 0 0 0 0 0M 76 16 3 0 0 46 19 0 0 0 6 0M 0 0 0 0 0 1 0 0 0 0 0 0N 0 10 0 0 0 0 0 0 0 0 0 0N 0 0 18 4 34 5 7 0 0 35 1 0O 0 14 0 2 0 0 2 5 6 12 2 0P 31 0 0 0 0 0 1 0 0 0 0 0R 25 0 0 0 0 0 0 0 0 0 0 0S 0 35 2 0 6 0 0 0 0 0 0 0S 1 0 0 5 0 3 0 14 0 16 0 0V 25 0 0 0 0 0 11 3 0 0 0 0W 4 13 0 0 0 0 0 0 0 0 0 0W 0 0 0 0 0 0 0 0 0 0 0 0T 38,923 11,867 10,587 18,137 30,627 31,372 29,378 25,577 16,194 13,520 19,296 20,066

Figure 2.03Venture Capital Fund Commitments

1985 to 2012 ($ Millions)

Page 27: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

National Venture Capital Association

26 Thomson Reuters

-2040 6080

100120140160 180 200220 240 260 280

1985

1986 1987

1988

1989

1990 1991

1992

1993

1994

1995

1996 1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

($B

illio

ns)

Year

Venture Capital Buyout and Mezzannine Capital

Figure 2.05Private Equity

Annual Commitment ($ Billions)1985 to 2012

NNoo.. ooff CCoommmmiitttteeddSSttaattee FFuunnddss (($$MMiill))California 64 13,665.3Massachusetts 17 1,409.7Connecticut 4 1,388.0New York 21 757.7North Carolina 5 472.0SSuubb--TToottaall 111111 1177,,669922..77RReemmaaiinniinngg SSttaatteess 72 2,373.1TToottaall 118833 2200,,006655..99

Figure 2.04Top 5 States

By Venture Capital Committed 2012

Page 28: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

Investments

Sectors

Software was the leading sector in 2012, receiving 31%of the total dollars. The second largest sector wasBiotechnology which fell to roughly half that amount at15.4% of total investment The continued interest inClean Technology investing brought the Industrial/-Energy sector to 10.5% of the total. Medical Devicesrounded out the top four sectors at 9.4%.

The life sciences share of the venture capital invest-ment dollars decreased in 2012 to its lowest levelsince 2002. In 2012, 15.4% of the money went intoBiotechnology, 9.4% into Medical Devices, and 1.2%into Healthcare Services, totaling 26.0%. This isdown from the 33.1% combined share in 2009.

This recent downward life sciences trend is very visi-ble when just looking at first fundings. In 2012, only149 life science (the three sectors combined) compa-nies received first funding. This is 12.7% of the total.As recently as 2006, the 294 first fundings of life sci-ence companies made up 23.0% of total first fundings.

Among first fundings, Software led the way with 441companies getting their initial venture capital rounds.This is more than one-third of the total number of firstfundings. The nearest sector to Software was Mediaand Entertainment with 174 first fundings.

Stages and First-Time Fundings

Seed stage companies received 3% of total dollars in2012, with early stage, expansion, and later stagecompanies roughly splitting the remaining share.More than one-third of the capital went to expansion-stage companies. But it is worth looking more close-ly at those statistics.

As has been the case for several years, attention hasbeen focused on the two ends of the spectrum.Looking at deal counts, 2012 actually saw the highestpercentage of seed- and early-stage deals since at least1985 (51.8% of total deals). This certainly wouldchallenge the suggestion that the industry’s attentionis single-focused on later-stage companies. That said,the 22.4% of deals going to later-stage companies isalso toward the top end of the historical range. Thereremains a record number of companies in portfoliosin the later stage of development that in most otherpositions in the business cycle would have alreadygone public or otherwise been acquired.

With the rule of thumb that a healthy venture capitalindustry invests in 1,000-1,300 new companies eachyear, the 1,174 first fundings in 2012 is very much inthat range. Not surprisingly, 81% of those first roundinvestments were made at the seed and early stage.

Geographical Spread Across the UnitedStatesThe year 2012 provided an interesting contrast in geo-graphic dispersion. While 53% of all the investmentdollars went to California-based portfolio companies,a record for MoneyTree™, companies in 48 states andDC received financing, also a MoneyTree™ recordhigh. That said, the five largest states (California,Massachusetts, New York, Washington and Texas)received 78% of all the dollars invested nationally.

This compares to 2011, when California companiesreceived a then-record 51.2% of the dollars. That year,companies in a record 47 states and DC received ven-ture capital funding. Together, the top five states(California, Massachusetts, New York, Texas, andIllinois) received 77% of the total dollars.

Measuring industry activity with the total dollars invested in a given year shows that the industryhas remained generally in the $20 billion to $30 billion range since 2002. In 2012, $26.7 billion wasinvested in 3,143 companies. This is less than 2011 totals and greater than 2010 totals. The numberof first-time fundings likewise was less than 2011 and greater than 2010. Further parsing the datashows an increasing portion of the investment dollars going to California companies.

Thomson Reuters 27

Page 29: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

California-domiciled venture capital firms madeinvestments in 39 states in 2012. Approximately 49%of all the money invested in California came fromCalifornia-domiciled firms. Conversely, California-based firms concentrated 71% of their investmentpower within the state.

Corporate Venture Group Involvement

The number and reach of corporate venture capitalgroups increased in 2012. These groups provided8.2% of the venture capital invested by all venturegroups. They were involved in 15.2% of the deals -the highest level in four years. Going forward, allsigns suggest that these groups are becoming moreinvolved alongside traditional venture firms in deals,as well as initiating corporate venture group syndi-cates to do deals in lieu of, or in advance of, invest-ment rounds by traditional venture firms.

Methodology

As calculated by Thomson Reuters, venture capitalinvestment data are derived from several sources.Primarily, survey information is obtained from thequarterly survey that drives the MoneyTree Report™from PricewaterhouseCoopers and the NationalVenture Capital Association based on data fromThomson Reuters. This is the official industry databaseof venture capital investment. Secondly, ThomsonReuters obtains data from SEC filings that are regular-ly monitored by our research staff. Finally, publiclyavailable sources such as press releases and trade pub-lications are used.

For detailed information on which transactions quali-fy as MoneyTree deals and are therefore counted inthis chapter, please refer to Appendix B.

National Venture Capital Association

28 Thomson Reuters

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2013 NVCA Yearbook

Thomson Reuters 29

AmtState # Companies # Deals Invested ($Bil)California 1,280 1,532 14.1Massachusetts 326 414 3.1New York 287 331 1.9Washington 101 117 0.9Texas 134 159 0.9Total* 2,128 2,553 20.9

Figure 3.03Venture Capital Investments

Top 5 States in 2012

Investment InvestmentIndustry Group # Companies # Deals Amt ($Bil) # Companies # Deals Amt ($Bil)Information Technology 2,130 2,480 16.5 870 870 3.0Medical/Health/Life Science 649 818 6.8 148 148 0.7Non-High Technology 364 425 3.4 156 156 0.4Total 3,143 3,723 26.7 1,174 1,174 4.1

All Investments Initial Investments

0

20

40

60

80

100

12019

8519

8619

8719

8819

8919

90 1991

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2006

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2011

2012

($B

illio

ns)

Year

Figure 3.02Venture Capital Investments in 2012

By Industry Group

Figure 3.01Venture Capital Investments ($ Billions)

1985 to 2012

*Total includes top 5 states only

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National Venture Capital Association

30 Thomson Reuters

Business Productsand Services 0.4%

Computers andPeripherals 2%

Consumer Products and Services 5%

Electronics/Instrumentation 1%

Biotechnology15%

Financial Services 1%

Healthcare Services 1%

Industrial/Energy 10%

IT Services 7%

Media andEntertainment 7%

Medical Devicesand Equipment 9%

Networking andEquipment 1%

Retailing/Distribution 2%

Semiconductors3%

Telecommunications 2%

Software 31%

Other0.2%

Figure 3.04Venture Capital Investments in 2012Industry Sector by Dollars Invested

Seed 3%

Early Stage 30%

Expansion 35%

Later Stage 32%

Figure 3.05Venture Capital Investments in 2012

Stage By Dollars Invested

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2013 NVCA Yearbook

Thomson Reuters 31

AR

NE

WY

8

AL

56CO 5

DE

38

GA

2

HI

15

KS

MA

57MD

33MN

12

MO

2MS

1

MT2

ND

12

NH

12NM

44

OH

94

TX

31

UT

5

VT

9

WI

250

AK

AR

NE

WY

43

AL

111

AZ

468CO 18

DE

302

GA

7

HI

84

IA

15

ID

8

KS

277MD

263MN

24

MO

0MS

15

MT7

ND

7NM

15NV

101OR

645

TX

178

UT

574WA

23

WI

Figure 3.06Amount of Capital Invested By State in 2012

($ Millions)

Figure 3.07Number of Companies Invested in By State in 2012

6MT

15ID WY

564CO

304UT

7NV14,129

CA

212AZ

35NM

931TX

2ND

0SD

11NE

46KS

34OK

243MN

95WI 232

MI

1,857NY

4VT

61NH

13ME

3,068 MA

85 RI158 CT

429 NJ

9 DE

280 MD169 NC87 TN

10MS

23AL

265GA

203FL

PRVI

GU

5IA

570IL

84IN

286OH

372 VA

15VW23

KY21MO

5AR

11LA

1HI

AK

AK

24OR

3MT

1ND

26MN

4ID

1SD

1,280CA

4NV

37UT 85

CO

5NE

9KS

1IA

12WI 41

MI

8MO

76IL

14IN

51OH

5KY

30 TN

154PA

62VA

5ME

8NH

4VT

287NY

25DC

1AR

7OK

134TX

3HI

4LA

3MS

6AL

44GA

31FL

1 PRVI

GU

12NM

13AZ

WY

518PA

6 DC39SC

5SC

50MD

6DE

49 NJ38 CT12 RI

326 MA

2WV

33 NC

932WA

124OR

101WA

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National Venture Capital Association

32 Thomson Reuters

RReeggiioonn 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966Silicon Valley 758.8 1,016.3 849.9 985.9 916.5 914.1 780.5 1,119.5 903.2 1,074.4 1,807.8 3,417.7New England 435.4 436.6 525.1 496.9 404.7 425.0 287.0 417.0 358.4 440.4 796.6 1,159.4NY Metro 221.2 211.0 273.9 308.0 360.4 190.1 181.5 239.0 222.3 283.3 509.7 743.2LA/Orange County 196.5 186.9 276.9 222.5 242.1 174.7 119.4 179.4 176.4 198.4 1,004.1 702.9Midwest 157.5 139.9 198.4 132.3 183.2 155.9 181.4 165.2 276.9 432.6 470.3 743.3San Diego 99.6 95.4 107.8 149.8 145.5 113.3 115.7 111.2 133.0 220.5 276.8 485.2Northwest 142.2 142.9 153.3 141.2 118.0 88.2 59.9 252.1 118.4 165.7 379.7 557.6Texas 249.0 228.4 211.0 240.7 228.3 141.0 161.4 149.6 240.7 311.8 479.2 553.4Southeast 166.4 234.2 271.0 266.5 224.4 145.9 109.4 346.6 405.8 362.3 876.6 1,165.0DC/Metroplex 99.1 61.1 111.8 129.9 139.5 96.9 51.3 65.8 384.1 137.8 420.2 586.3Colorado 77.0 113.8 111.4 107.8 157.8 93.7 54.2 129.7 135.0 197.4 325.1 321.2SouthWest 40.1 82.5 57.5 59.7 50.7 30.3 49.0 98.4 49.7 38.0 113.1 184.6Philadelphia Metro 52.6 63.3 79.2 71.8 65.3 105.9 34.7 168.9 108.3 137.6 220.9 349.9North Central 37.0 44.5 73.6 41.6 51.2 92.2 44.9 89.1 109.6 87.4 223.8 208.5South Central 13.7 11.4 19.8 11.7 14.5 11.6 4.2 6.5 8.6 15.2 45.2 81.1 Upstate NY 14.2 10.7 10.2 5.3 7.3 11.1 3.4 9.1 5.7 0.7 35.5 22.7Unknown - - 0.5 0.8 6.1 13.0 0.2 30.8 0.8 0.1 0.3 2.2Sacramento/N.Cal 16.0 45.5 32.0 33.6 4.2 19.5 15.7 8.5 19.1 20.0 20.0 28.6AK/HI/PR - - - - - - 0.3 0.0 1.0 22.0 7.8 28.7TToottaall 22,,777766..44 33,,112244..55 33,,336633..66 33,,440066..00 33,,331199..66 22,,882222..44 22,,225544..00 33,,558866..33 33,,665566..88 44,,115577..66 88,,001122..66 1111,,334411..55

11999977 11999988 11999999 22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 220000994,632.3 5,878.3 17,801.6 33,452.0 12,599.3 7,242.9 6,755.6 7,999.3 8,116.3 9,816.8 11,554.7 11,436.4 8,220.51,606.7 2,353.4 5,641.6 12,019.9 5,431.2 2,992.3 2,990.4 3,345.5 2,967.1 3,310.8 3,964.5 3,788.3 2,577.61,289.4 1,817.6 4,532.3 10,300.4 3,512.8 1,569.4 1,422.0 1,648.2 1,998.5 2,185.5 1,902.8 2,148.7 1,737.3

875.2 1,250.6 3,596.9 6,808.1 2,285.8 1,286.8 1,069.4 1,319.8 1,506.1 1,902.7 1,906.3 2,041.1 1,060.1919.6 1,653.5 2,729.2 5,776.7 2,182.4 976.9 913.6 712.5 918.0 1,010.1 1,167.9 1,364.6 952.8516.0 669.1 1,429.5 2,302.3 1,579.1 996.2 825.8 1,197.8 1,203.9 1,223.6 1,844.4 1,209.4 949.0564.4 820.3 2,877.6 3,603.4 1,426.8 746.4 643.5 993.3 1,011.3 1,318.2 1,636.2 1,134.7 678.7908.7 1,205.6 3,162.7 6,262.9 3,104.3 1,187.6 1,221.0 1,215.1 1,189.4 1,519.7 1,496.9 1,122.6 665.5

1,366.1 1,794.8 4,831.0 7,976.1 2,684.7 1,772.7 1,117.9 1,439.2 1,101.3 1,228.2 1,812.4 1,389.3 1,045.0515.1 1,148.5 2,395.1 5,785.3 2,103.1 1,095.6 794.6 1,086.6 1,220.4 1,361.6 1,443.5 1,145.8 678.4

405.0 838.9 1,845.8 4,091.9 1,244.4 588.0 644.8 363.2 653.4 688.8 686.3 872.3 623.2303.1 411.2 843.1 1,387.5 515.1 393.8 220.5 393.6 524.8 526.6 577.7 490.1 277.5534.2 703.9 1,732.6 2,591.5 1,073.3 607.8 555.1 768.4 597.8 845.5 953.6 861.9 433.7341.6 429.6 770.0 1,426.7 669.4 431.5 268.5 464.1 367.0 382.1 535.7 644.6 400.3

67.4 196.7 360.1 446.9 110.4 69.3 65.5 130.1 96.1 64.3 152.8 91.3 25.090.3 195.4 212.4 293.9 159.1 104.5 122.7 104.8 60.1 156.2 136.5 92.3 26.9

4.4 39.1 2.4 50.4 14.3 - - - - - - - 0.521.4 86.8 119.1 375.3 203.0 65.4 32.2 38.4 37.7 29.4 82.0 71.3 18.814.0 5.5 17.4 248.6 69.8 4.9 17.9 15.1 43.3 47.1 20.9 21.3 7.4

1144,,997744..99 2211,,448899..99 5544,,990000..33 110055,,220000..00 4400,,996688..33 2222,,113322..33 1199,,668811..11 2233,,223355..11 2233,,661122..55 2277,,661177..22 3311,,887711..55 2299,,992255..99 2200,,337788..33

22001100 22001111 220011229,302.8 11,656.8 10,907.42,604.3 3,318.1 3,237.41,886.2 2,859.8 2,334.61,704.5 2,080.4 2,067.21,340.0 1,769.2 1,386.7

896.9 926.6 1,116.7774.9 796.6 1,076.0

1,070.9 1,580.2 930.51,109.4 1,210.2 796.2967.2 987.2 727.4447.9 615.7 564.2263.8 543.1 558.4444.7 458.9 399.0343.3 392.5 355.8

77.7 106.2 95.744.8 106.7 48.7- - 29.522.5 88.3 20.114.0 0.6 0.7

2233,,331155..77 2299,,449977..22 2266,,665522..44

Figure 3.08Venture Capital Investments in 1985 to 2012

By Region ($ Millions)

RReeggiioonn 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966 11999977 11999988Silicon Valley 323 340 343 362 394 398 337 421 316 336 509 771 867 1,043New England 235 214 257 231 222 217 170 159 149 146 232 333 383 469NY Metro 89 100 131 108 121 90 89 81 80 85 135 158 240 274Midwest 98 116 133 101 127 103 99 93 85 83 132 192 239 250LA/Orange County 90 101 114 106 112 97 89 97 63 55 92 134 166 217Southeast 91 117 134 115 113 130 112 108 117 112 181 226 294 308DC/Metroplex 45 45 65 59 51 62 54 48 41 47 72 113 135 162Texas 106 93 106 105 91 85 70 70 71 69 101 135 172 197Northwest 47 49 62 70 64 48 41 50 49 50 84 112 134 132Philadelphia Metro 38 35 54 44 41 48 43 65 47 46 78 91 142 138San Diego 43 35 54 56 56 47 43 46 49 61 77 109 100 123Colorado 43 58 62 63 53 49 35 53 48 53 58 83 98 127SouthWest 20 30 42 26 32 22 30 34 30 29 37 55 71 88North Central 37 50 54 52 39 44 40 39 38 37 70 69 116 106Upstate NY 17 10 10 10 12 6 4 9 10 5 8 9 21 31South Central 11 10 12 6 7 5 4 5 6 9 15 22 25 27Sacramento/N.Cal 11 18 12 10 6 10 9 9 8 10 7 9 7 17AK/HI/PR 1 - - - - - 3 3 1 2 4 9 6 5Unknown - - 1 2 3 1 1 2 4 2 2 7 7 14TToottaall 11,,334455 11,,442211 11,,664466 11,,552266 11,,554444 11,,446622 11,,227733 11,,339922 11,,221122 11,,223377 11,,889944 22,,663377 33,,222233 33,,772288

11999999 22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 22000099 22001100 22001111 220011221,685 2,159 1,103 817 874 958 1,006 1,236 1,305 1,290 990 1,092 1,248 1,160

663 904 597 457 446 427 440 458 521 510 387 411 448 452491 818 448 232 193 227 192 294 296 342 287 393 415 396311 515 276 243 174 178 181 230 272 304 252 272 311 300

356 518 251 164 149 150 178 219 234 243 170 227 233 264454 665 391 270 247 246 198 238 246 227 159 216 211 171272 510 261 199 183 187 222 220 220 208 139 152 162 163318 484 341 173 173 177 181 201 188 161 123 165 167 159264 329 192 140 108 148 160 184 216 205 129 161 167 154145 231 142 102 88 105 97 116 138 153 97 124 119 118161 236 156 114 125 132 143 128 169 134 115 134 113 101 162 222 115 91 74 72 93 110 114 116 94 86 107 100 116 146 89 68 55 58 84 93 106 84 71 59 84 77114 151 125 75 71 77 67 73 95 88 68 58 70 5031 36 29 24 22 29 28 39 33 31 13 21 21 2430 50 28 24 21 31 11 26 31 40 32 42 58 2219 36 27 7 11 9 11 8 18 20 9 8 8 55 15 10 3 8 6 8 14 10 9 3 4 3 43 16 8 - - - - - 1 - 1 1 1 3

55,,660000 88,,004411 44,,558899 33,,220033 33,,002222 33,,221177 33,,330000 33,,888877 44,,221133 44,,116655 33,,113399 33,,662266 33,,994466 33,,772233

Figure 3.08bVenture Capital Investments in 1985 to 2012

By Region (Number of Deals)

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SSttaaggee 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966 11999977 11999988Seed 357 388 387 371 355 258 193 252 290 332 431 504 542 670Early Stage 290 333 412 359 338 370 278 291 184 256 519 754 896 1,019 Expansion 525 504 616 614 664 603 544 606 515 429 706 1,045 1,402 1,572Later Stage 173 196 231 182 187 231 258 243 223 220 238 334 383 467TToottaall 11,,334455 11,,442211 11,,664466 11,,552266 11,,554444 11,,446622 11,,227733 11,,339922 11,,221122 11,,223377 11,,889944 22,,663377 33,,222233 33,,772288

11999999 22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 22000099 22001100 22001111 22001122811 703 279 181 216 234 264 396 524 537 375 409 445 280

1,735 2,855 1,299 875 799 899 859 1,001 1,129 1,137 973 1,271 1,562 1,647 2,445 3,703 2,392 1,585 1,355 1,201 1,116 1,380 1,277 1,242 888 1,074 1,021 962

609 780 619 562 652 883 1,061 1,110 1,283 1,249 903 872 918 83455,,660000 88,,004411 44,,558899 33,,220033 33,,002222 33,,221177 33,,330000 33,,888877 44,,221133 44,,116655 33,,113399 33,,662266 33,,994466 33,,772233

Figure 3.09bVenture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Stage 1985-1Q 1985-2Q 1985-3Q 1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1Q 1987-2Q 1987-3Q 1987-4QSeed 153.0 146.5 93.7 133.0 526.2 185.6 270.0 114.7 189.4 759.7 145.7 199.4 142.0 136.3Early Stage 96.3 185.3 106.3 129.9 517.8 129.6 135.3 176.6 178.7 620.3 170.7 183.9 205.1 190.8Expansion 219.5 319.6 312.8 393.7 1,245.7 270.0 381.4 252.6 294.8 1,198.8 423.3 354.2 402.5 315.1Later Stage 154.4 89.4 164.4 78.5 486.8 125.3 93.2 180.4 146.7 545.7 100.1 164.9 118.9 110.7Total 623.1 740.8 677.2 735.1 2,776.4 710.5 879.9 724.4 809.6 3,124.5 839.7 902.4 868.5 752.9

1986 198719851987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 Total

623.4 164.7 150.0 240.6 115.2 670.5750.5 144.0 216.6 184.7 169.4 714.6

1,495.1 314.5 497.1 320.2 431.4 1,563.2494.6 135.3 105.0 151.4 66.0 457.7

3,363.6 758.5 968.6 896.9 781.9 3,406.0

1988

Figure 3.09c-1Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

Stage 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 1990 Total 1991-1QSeed 138.1 174.6 115.4 130.3 558.4 81.9 116.7 114.8 83.8 397.1 45.8Early Stage 255.9 127.7 163.1 190.9 737.6 139.7 199.1 133.1 212.5 684.4 137.9Expansion 399.6 434.1 305.5 456.6 1,595.8 307.2 356.1 208.0 397.9 1,269.2 249.5Later Stage 95.5 97.7 78.3 156.4 427.8 123.1 105.5 126.3 116.7 471.7 89.5Total 889.1 834.1 662.2 934.2 3,319.6 651.9 777.4 582.2 810.9 2,822.4 522.8

1989 19901991-2Q 1991-3Q 1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 Total

84.6 53.4 58.0 241.8 67.6 210.2 71.8 206.8 556.5130.3 140.4 140.0 548.7 123.0 187.6 102.7 153.4 566.8276.2 262.9 311.7 1,100.2 496.3 434.8 352.2 495.4 1,778.7115.8 57.9 100.1 363.3 203.2 175.3 107.0 198.8 684.3

606.9 514.5 609.9 2,254.0 890.2 1,007.9 633.8 1,054.5 3,586.3

1991 1992

Figure 3.09c-2Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

Stage 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996Seed 526.2 759.7 623.4 670.5 558.4 397.1 241.8 556.5 629.6 781.2 1,272.9 1,271.7Early Stage 517.8 620.3 750.5 714.6 737.6 684.4 548.7 566.8 575.8 839.7 1,733.4 2,640.5Expansion 1,245.7 1,198.8 1,495.1 1,563.2 1,595.8 1,269.2 1,100.2 1,778.7 1,866.0 1,539.1 3,564.2 5,540.4Later Stage 486.8 545.7 494.6 457.7 427.8 471.7 363.3 684.3 585.4 985.7 1,442.2 1,888.9Total 2,776.4 3,124.5 3,363.6 3,406.0 3,319.6 2,822.4 2,254.0 3,586.3 3,656.8 4,145.7 8,012.6 11,341.5

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 1,374.2 1,766.2 3,666.2 3,156.1 800.7 340.2 365.7 951.6 1,006.3 1,293.6 1,819.6 1,917.3 1,870.7

3,420.5 5,460.1 11,360.2 25,335.4 8,606.3 3,935.3 3,608.5 4,045.9 4,056.3 4,727.4 6,081.5 5,731.0 4,906.97,588.6 10,367.0 29,406.8 59,121.5 22,911.7 12,135.5 9,805.5 9,046.2 8,607.9 11,154.8 11,091.8 10,857.4 6,824.22,591.6 3,905.5 10,467.0 17,587.0 8,649.6 5,721.1 5,901.4 9,191.5 9,942.0 10,441.5 12,882.2 11,420.1 6,776.5

14,974.9 21,498.9 54,900.3 105,200.0 40,968.3 22,132.0 19,681.1 23,235.1 23,612.5 27,617.2 31,875.1 29,925.9 20,378.3

2010 2011 2012S 1,661.3 1,052.6 726.4

5,867.0 8,794.4 7,876.38,702.0 9,830.5 9,376.47,085.4 9,819.7 8,673.3

23,315.7 29,497.2 26,652.4

Figure 3.09Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

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34 Thomson Reuters

Stage 1993-1Q 1993-2Q 1993-3Q 1993-4Q 1993 Total 1994-1Q 1994-2Q 1994-3Q 1994-4Q 1994 Total 1995-1QSeed 139.7 144.1 164.3 181.5 629.6 190.0 225.8 160.2 205.1 781.2 316.6Early Stage 164.3 136.8 106.6 168.0 575.8 177.6 196.4 157.8 307.9 839.7 408.8Expansion 355.0 412.3 461.3 637.3 1,866.0 325.3 390.5 344.2 479.1 1,539.1 620.0Later Stage 189.2 111.2 116.8 168.3 585.4 186.6 190.5 262.0 346.6 985.7 344.5Total 848.3 804.4 849.0 1,155.2 3,656.8 879.5 1,003.3 924.2 1,338.7 4,145.7 1,689.9

1993 19941995-2Q 1995-3Q 1995-4Q 1995 Total 1996-1Q 1996-2Q 1996-3Q 1996-4Q 1996 Total

396.6 229.9 329.8 1,272.9 322.7 431.9 200.6 316.5 1,271.7 393.6 366.8 564.1 1,733.4 597.8 714.0 574.6 754.1 2,640.5

1,328.2 800.4 815.7 3,564.2 1,151.9 1,509.9 1,277.0 1,601.6 5,540.4428.0 308.7 361.1 1,442.2 346.4 460.3 545.4 536.8 1,888.9

2,546.4 1,705.8 2,070.6 8,012.6 2,418.8 3,116.1 2,597.6 3,208.9 11,341.5

1995 1996

Figure 3.09c-3Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

Stage 1997-1Q 1997-2Q 1997-3Q 1997-4Q 1997 Total 1998-1Q 1998-2Q 1998-3Q 1998-4Q 1998 Total 1999-1QSeed 400.6 330.8 323.3 319.5 1,374.2 402.6 426.4 459.9 477.3 1,766.2 591.5Early Stage 769.5 846.8 760.1 1,044.1 3,420.5 1,164.7 1,014.5 1,290.4 1,990.6 5,460.1 1,215.0Expansion 1,358.4 1,958.5 1,970.6 2,301.0 7,588.6 1,753.9 3,359.1 2,716.0 2,538.0 10,367.0 3,210.3Later Stage 594.7 531.6 669.3 795.9 2,591.6 854.6 973.6 949.5 1,127.9 3,905.5 1,605.2Total 3,123.3 3,667.8 3,723.3 4,460.5 14,974.9 4,175.7 5,773.5 5,415.7 6,133.9 21,498.9 6,622.0

1997 19981999-2Q 1999-3Q 1999-4Q 1999 Total 2000-1Q 2000-2Q 2000-3Q 2000-4Q 2000 Total

840.4 989.7 1,244.5 3,666.2 807.0 984.1 878.3 486.8 3,156.11,993.7 2,661.8 5,489.7 11,360.2 7,138.2 6,937.9 5,912.3 5,347.0 25,335.4

5,498.5 7,348.1 13,350.0 29,406.8 16,113.3 15,761.4 15,263.6 11,983.2 59,121.52,999.2 2,597.5 3,265.1 10,467.0 4,382.9 4,343.2 4,572.9 4,288.1 17,587.011,331.8 13,597.1 23,349.3 54,900.3 28,441.3 28,026.6 26,627.0 22,105.1 105,200.0

1999 2000

Figure 3.09c-4Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

Stage 2001-1Q 2001-2Q 2001-3Q 2001-4Q 2001 Total 2002-1Q 2002-2Q 2002-3Q 2002-4Q 2002 Total 2003-1QSeed 256.6 265.3 128.5 150.3 800.7 76.4 93.5 84.2 86.1 340.2 84.5Early Stage 3,459.5 2,102.1 1,712.2 1,332.5 8,606.3 1,182.2 1,134.1 827.7 791.4 3,935.3 690.0Expansion 6,939.3 6,622.1 4,563.8 4,786.5 22,911.7 3,804.8 3,544.3 2,462.6 2,323.8 12,135.5 2,468.7Later Stage 2,447.6 2,513.1 1,802.4 1,886.5 8,649.6 1,927.7 1,339.6 1,094.4 1,359.4 5,721.1 1,159.6Total 13,103.0 11,502.5 8,206.9 8,155.9 40,968.3 6,991.1 6,111.4 4,468.8 4,560.7 22,132.0 4,402.8

2001 20022003-2Q 2003-3Q 2003-4Q 2003 Total 2004-1Q 2004-2Q 2004-3Q 2004-4Q 2004 Total

95.2 100.3 85.8 365.7 104.8 124.3 168.0 554.5 951.61,015.7 806.8 1,096.0 3,608.5 904.9 1,030.3 1,028.6 1,082.0 4,045.92,513.9 2,202.5 2,620.3 9,805.5 2,063.3 2,680.0 2,043.1 2,259.7 9,046.21,368.7 1,520.5 1,852.6 5,901.4 2,312.6 2,481.9 1,856.6 2,540.4 9,191.54,993.4 4,630.1 5,654.7 19,681.1 5,385.6 6,316.6 5,096.3 6,436.6 23,235.1

20042003

Figure 3.09c-5Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

Stage 2005-1Q 2005-2Q 2005-3Q 2005-4Q 2005 Total 2006-1Q 2006-2Q 2006-3Q 2006-4Q 2006 Total 2007-1QSeed 148.5 530.5 165.0 162.2 1,006.3 246.7 374.0 366.6 306.2 1,293.6 319.3Early Stage 867.8 1,001.6 1,192.0 994.8 4,056.3 930.1 1,018.4 1,112.3 1,666.6 4,727.4 1,337.9Expansion 2,132.9 2,367.4 1,759.6 2,348.1 8,607.9 2,604.7 3,211.1 2,881.2 2,457.7 11,154.8 2,646.9Later Stage 2,082.1 2,551.8 2,972.5 2,335.5 9,942.0 2,847.4 2,793.3 2,529.5 2,271.4 10,441.5 3,108.6Total 5,231.3 6,451.3 6,089.1 5,840.7 23,612.5 6,629.0 7,396.8 6,889.6 6,701.9 27,617.2 7,412.6

2005 20062007-2Q 2007-3Q 2007-4Q 2007 Total 2008-1Q 2008-2Q 2008-3Q 2008-4Q 2008 Total

489.2 455.0 556.0 1,819.6 459.3 535.3 557.9 364.9 1,917.31,700.5 1,263.1 1,780.0 6,081.5 1,376.9 1,524.3 1,372.6 1,457.2 5,731.02,353.2 3,104.8 2,986.9 11,091.8 3,427.7 2,697.9 2,556.8 2,175.0 10,857.43,289.9 3,389.9 3,093.8 12,882.2 2,813.0 3,272.5 3,137.7 2,197.1 11,420.17,832.8 8,213.0 8,416.7 31,875.1 8,076.8 8,030.0 7,625.0 6,194.1 29,925.9

2007 2008

Figure 3.09c-6Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q 2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 2011-1QSeed 319.7 672.4 511.0 367.6 1,870.7 407.9 687.8 332.5 233.1 1,661.3 225.2Early Stage 767.3 1,179.6 1,213.6 1,746.5 4,906.9 1,147.8 1,740.3 1,410.4 1,568.5 5,867.0 1,830.3Expansion 1,223.8 1,770.3 1,824.4 2,005.7 6,824.2 1,788.9 2,796.5 1,685.3 2,431.3 8,702.0 2,257.4Later Stage 1,531.5 1,606.8 1,844.7 1,793.6 6,776.5 1,723.4 1,925.7 1,999.1 1,437.1 7,085.4 2,220.8Total 3,842.2 5,229.1 5,393.7 5,913.3 20,378.3 5,067.9 7,150.2 5,427.4 5,670.2 23,315.7 6,533.7

2009 20102011-2Q 2011-3Q 2011-4Q 2011 Total 2012-1Q 2012-2Q 2012-3Q 2012-4Q 2012 Total

413.4 221.7 192.4 1,052.6 157.9 230.6 181.0 156.9 726.42,272.4 2,233.2 2,458.5 8,794.4 1,933.7 2,190.2 1,824.0 1,928.3 7,876.32,418.9 2,545.3 2,608.9 9,830.5 1,789.2 2,715.7 2,614.1 2,257.5 9,376.43,037.1 2,426.3 2,135.5 9,819.7 2,355.8 2,187.7 1,983.2 2,146.6 8,673.38,141.7 7,426.5 7,395.3 29,497.2 6,236.6 7,324.2 6,602.3 6,489.4 26,652.4

20122011

Figure 3.09c-7Quarterly Venture Capital Investments

1985 to 2012 By Stage ($ Millions)

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2013 NVCA Yearbook

Thomson Reuters 35

Stage 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 1990 TotalSeed 106 100 77 72 355 60 69 59 70 258Early Stage 101 65 84 88 338 87 97 73 113 370Expansion 215 160 127 162 664 148 153 145 157 603Later Stage 52 33 38 64 187 55 57 48 71 231Total 474 358 326 386 1,544 350 376 325 411 1,462

1989 19901991-1Q 1991-2Q 1991-3Q 1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 Total

51 49 42 51 193 49 68 49 86 25279 69 60 70 278 73 86 52 80 291137 127 126 154 544 156 160 104 186 606 49 69 54 86 258 74 47 44 78 243

316 314 282 361 1,273 352 361 249 430 1,392

19921991

Figure 3.09d-2Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Stage 1993-1Q 1993-2Q 1993-3Q 1993-4Q 1993 Total 1994-1Q 1994-2Q 1994-3Q 1994-4Q 1994 Total 1995-1QSeed 69 68 66 87 290 91 67 83 91 332 125Early Stage 41 49 38 56 184 64 61 54 77 256 130Expansion 145 121 116 133 515 105 111 98 115 429 187Later Stage 67 53 52 51 223 50 69 43 58 220 61Total 322 291 272 327 1,212 310 308 278 341 1,237 503

1993 19941995-2Q 1995-3Q 1995-4Q 1995 Total 1996-1Q 1996-2Q 1996-3Q 1996-4Q 1996 Total

95 95 116 431 130 140 97 137 504136 116 137 519 148 206 175 225 754179 164 176 706 235 247 245 318 1,045 55 58 64 238 71 82 85 96 334

465 433 493 1,894 584 675 602 776 2,637

1995 1996

Figure 3.09d-3Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Stage 1997-1Q 1997-2Q 1997-3Q 1997-4Q 1997 Total 1998-1Q 1998-2Q 1998-3Q 1998-4Q 1998 Total 1999-1QSeed 163 120 120 139 542 152 162 164 192 670 166Early Stage 201 208 228 259 896 242 221 243 313 1,019 245Expansion 310 361 320 411 1,402 366 407 405 394 1,572 383Later Stage 100 87 90 106 383 108 121 114 124 467 140Total 774 776 758 915 3,223 868 911 926 1,023 3,728 934

1997 19981999-2Q 1999-3Q 1999-4Q 1999 Total 2000-1Q 2000-2Q 2000-3Q 2000-4Q 2000 Total

211 249 185 811 196 197 172 138 703380 448 662 1,735 763 793 680 619 2,855567 595 900 2,445 1,009 981 899 814 3,703174 150 145 609 192 172 207 209 780

1,332 1,442 1,892 5,600 2,160 2,143 1,958 1,780 8,041

1999 2000

Figure 3.09d-4Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Figure 3.09d-5Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Stage 1985-1Q 1985-2Q 1985-3Q 1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1QSeed 110 88 61 98 357 134 107 65 82 388 116Early Stage 88 69 60 73 290 111 70 72 80 333 131Expansion 138 122 114 151 525 166 136 96 106 504 182Later Stage 65 40 37 31 173 60 55 31 50 196 64Total 401 319 272 353 1,345 471 368 264 318 1,421 493

1985 19861987-2Q 1987-3Q 1987-4Q 1987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 Total

101 85 85 387 120 79 88 84 37183 103 95 412 99 94 87 79 359

139 158 137 616 158 182 133 141 61464 51 52 231 54 48 42 38 182

387 397 369 1,646 431 403 350 342 1,526

1987 1988

Figure 3.09d-1Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Stage 2001-1Q 2001-2Q 2001-3Q 2001-4Q 2001 Total 2002-1Q 2002-2Q 2002-3Q 2002-4Q 2002 Total 2003-1Q 2003-2QSeed 80 73 68 58 279 47 53 40 41 181 57 60Early Stage 436 338 271 254 1,299 247 242 193 193 875 188 215Expansion 650 670 543 529 2,392 410 447 348 380 1,585 346 320Later Stage 155 156 148 160 619 160 136 128 138 562 132 160Total 1,321 1,237 1,030 1,001 4,589 864 878 709 752 3,203 723 755

200220012003-3Q 2003-4Q 2003 Total 2004-1Q 2004-2Q 2004-3Q 2004-4Q 2004 Total

44 55 216 46 75 45 68 234183 213 799 207 238 222 232 899336 353 1,355 281 349 261 310 1,201168 192 652 205 216 194 268 883731 813 3,022 739 878 722 878 3,217

2003 2004

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National Venture Capital Association

36 Thomson Reuters

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996Software 612 577 519 482 457 519 463 614 459 671 1,186 2,350Biotechnology 136 223 290 369 334 314 287 581 479 585 832 1,186Industrial/Energy 201 208 290 222 345 242 183 285 278 294 527 498Medical Devices and Equipment 181 182 259 340 347 325 235 514 393 439 668 618IT Services 26 38 51 39 36 38 41 29 54 119 175 442Media and Entertainment 101 118 155 166 151 93 69 132 278 275 944 1,154Consumer Products and Services 69 135 176 153 86 159 126 123 159 176 534 510 Semiconductors 253 293 255 294 165 190 90 156 93 157 214 340Telecommunications 178 174 148 161 124 128 117 200 251 463 937 1,323Retailing/Distribution 32 114 296 232 217 89 48 97 103 103 303 269Computers and Peripherals 449 473 392 370 311 245 174 205 164 178 316 363Networking and Equipment 224 164 143 137 197 174 140 250 516 250 372 631Healthcare Services 81 125 140 97 155 92 72 191 202 202 460 734Financial Services 81 96 62 209 233 63 25 120 102 123 181 323Electronics/Instrumentation 120 121 122 77 110 58 74 51 50 65 151 211 Business Products and Services 29 81 64 53 52 94 77 39 70 40 176 369Other 3 3 0 6 0 33 0 6 6 37 21Total 2,776 3,125 3,364 3,406 3,320 2,822 2,254 3,586 3,657 4,146 8,013 11,341

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 3,462 4,721 10,690 25,251 10,820 5,509 4,855 5,483 5,144 5,449 6,124 6,069 4,205 5,116 7,516 8,293

1,368 1,551 2,101 4,270 3,480 3,312 3,745 4,388 3,930 4,816 5,713 4,970 3,972 3,903 4,825 4,115704 1,260 1,464 2,627 1,250 826 774 847 1,138 1,996 3,082 4,631 2,564 3,465 3,595 2,792

1,026 1,256 1,577 2,403 2,046 1,863 1,613 1,905 2,209 2,778 3,759 3,603 2,605 2,341 2,883 2,511 640 1,093 4,323 8,890 2,475 978 747 748 1,057 1,482 1,930 2,108 1,228 1,661 2,264 1,993

1,056 1,873 7,408 10,598 2,370 784 662 1,410 1,200 1,888 2,166 1,796 1,371 1,572 2,258 1,976742 680 2,718 3,220 702 256 157 334 363 424 454 418 489 571 1,399 1,208 597 631 1,380 3,806 2,474 1,654 1,767 2,166 1,855 2,307 2,041 1,595 773 1,046 1,345 926

1,562 3,024 8,032 16,468 5,179 2,168 1,674 1,854 2,150 2,414 2,191 1,514 636 792 631 582326 769 2,810 3,209 368 139 64 217 249 189 340 222 156 165 454 498394 383 939 1,628 693 457 360 538 535 388 550 470 345 408 494 453962 1,446 4,658 11,730 5,791 2,671 1,739 1,559 1,695 1,252 1,443 756 753 678 357 316939 959 1,495 1,386 543 380 229 389 364 416 307 159 171 272 394 309385 843 2,215 4,131 1,238 331 413 530 903 528 580 464 404 408 394 284307 202 274 797 400 309 209 395 412 703 557 646 393 422 437 244434 706 2,590 4,726 1,085 478 673 460 408 586 621 475 260 491 215 97

71 102 225 60 55 17 - 14 - - 18 30 56 4 37 5314,975 21,499 54,900 105,200 40,968 22,132 19,681 23,235 23,612 27,617 31,875 29,926 20,378 23,316 29,497 26,652

Figure 3.10Venture Capital Investments

1985 to 2012 By Industry ($ Millions)

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996Software 321 323 307 280 296 302 287 296 243 253 435 686Biotechnology 73 98 138 153 138 145 138 164 136 140 176 236Media and Entertainment 56 68 92 75 71 58 54 79 82 97 138 191Medical Devices and Equipment 128 117 166 151 185 191 161 188 148 128 179 212IT Services 23 25 33 24 27 31 30 22 19 33 62 127Industrial/Energy 122 138 162 140 144 157 125 132 102 101 128 155Consumer Products and Services 43 51 72 59 52 67 48 51 54 66 114 132Semiconductors 84 72 92 91 80 78 51 60 45 38 64 74Telecommunications 86 77 94 80 81 63 67 64 73 73 141 211Retailing/Distribution 18 32 71 81 73 46 38 34 35 28 54 70Electronics/Instrumentation 77 68 70 57 60 50 47 38 27 37 49 47Computers and Peripherals 157 148 131 138 135 104 78 84 65 66 93 95Financial Services 22 28 36 43 44 25 24 24 31 31 47 61Healthcare Services 33 56 56 46 55 41 38 46 52 45 73 139Networking and Equipment 80 76 73 69 71 74 65 83 65 77 82 123Business Products and Services 20 42 51 38 32 28 20 25 32 22 50 69Other 2 2 2 1 2 2 2 3 2 9 9Total 1,345 1,421 1,646 1,526 1,544 1,462 1,273 1,392 1,212 1,237 1,894 2,637

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 820 980 1,411 2,165 1,298 1,005 965 949 955 1,027 1,073 1,098 815 1,035 1,178 1,277

242 274 260 355 337 326 357 400 405 483 526 530 458 493 466 463219 266 701 944 372 167 127 140 209 329 399 400 266 345 441 395272 294 288 295 257 234 248 280 286 358 399 402 345 349 370 319162 207 456 687 324 170 147 151 172 236 281 286 221 303 362 315213 186 205 254 204 131 142 158 154 225 306 365 255 307 311 243162 163 287 285 119 72 47 67 78 79 110 103 86 114 137 162116 120 148 256 209 169 214 258 218 266 224 206 132 137 136 108

268 340 529 858 481 275 214 232 236 309 279 230 131 120 124 9591 121 230 282 83 49 31 38 40 40 41 42 38 33 68 5954 56 53 76 59 63 55 72 84 96 93 94 63 67 58 51115 91 104 133 81 59 57 61 65 60 70 61 54 56 61 4891 115 190 334 137 76 64 68 63 90 85 68 54 74 60 45

152 155 159 165 105 70 70 64 64 51 57 51 40 45 47 43140 211 279 481 335 232 186 193 186 137 146 106 101 63 49 3894 139 279 459 177 102 97 83 83 99 113 119 72 75 61 3512 10 21 12 11 3 1 3 2 2 11 4 8 10 17 27

3,223 3,728 5,600 8,041 4,589 3,203 3,022 3,217 3,300 3,887 4,213 4,165 3,139 3,626 3,946 3,723

Figure 3.10bVenture Capital Investments

1985 to 2012 By Industry (Number of Deals)

Stage 2005-1Q 2005-2Q 2005-3Q 2005-4Q 2005 Total 2006-1Q 2006-2Q 2006-3Q 2006-4Q 2006 Total 2007-1QSeed 52 68 68 76 264 82 93 121 100 396 90Early Stage 212 219 214 214 859 205 241 236 319 1,001 257Expansion 275 295 242 304 1,116 328 360 345 347 1,380 277Later Stage 223 280 286 272 1,061 290 314 253 253 1,110 282Total 762 862 810 866 3,300 905 1,008 955 1,019 3,887 906

2005 20062007-2Q 2007-3Q 2007-4Q 2007 Total 2008-1Q 2008-2Q 2008-3Q 2008-4Q 2008 Total

139 136 159 524 135 134 156 112 537326 257 289 1,129 265 301 284 287 1,137322 319 359 1,277 344 331 282 285 1,242326 336 339 1,283 310 338 323 278 1,2491,113 1,048 1,146 4,213 1,054 1,104 1,045 962 4,165

2007 2008

Figure 3.09d-6Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q 2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 2011-1QSeed 70 87 99 119 375 93 119 99 98 409 94Early Stage 195 213 244 321 973 268 361 308 334 1,271 344 Expansion 183 217 219 269 888 252 300 244 278 1,074 225Later Stage 229 244 199 231 903 205 239 230 198 872 234Total 677 761 761 940 3,139 818 1,019 881 908 3,626 897

201020092011-2Q 2011-3Q 2011-4Q 2011 Total 2012-1Q 2012-2Q 2012-3Q 2012-4Q 2012 Total

128 114 109 445 61 78 73 68 280392 401 425 1,562 350 433 411 453 1,647 275 277 244 1,021 221 250 244 247 962279 212 193 918 229 197 192 216 834

1,074 1,004 971 3,946 861 958 920 984 3,723

20122011

Figure 3.09d-7Quarterly Venture Capital Investments

1985 to 2012 By Stage (Number of Deals)

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2013 NVCA Yearbook

Thomson Reuters 37

Figure 3.11Venture Capital Investments By State 1985 to 2012 ($ Millions)

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998CA 1,070.9 1,344.1 1,266.7 1,391.8 1,308.3 1,221.6 1,031.3 1,418.6 1,231.6 1,513.3 3,108.7 4,634.4 6,044.9 7,884.8MA 396.3 379.5 446.8 387.8 296.8 351.5 240.0 366.3 310.9 385.9 697.2 1,053.9 1,438.6 2,002.1 5,085NY 114.5 71.2 100.5 112.1 158.7 48.8 45.0 143.8 103.9 69.9 303.3 293.3 786.2 1,402.4WA 55.4 66.1 98.3 73.3 74.8 55.2 29.2 191.5 85.4 138.6 325.9 466.9 434.2 736.5TX 249.0 228.4 211.0 240.7 228.3 141.0 161.4 149.6 240.7 311.8 479.2 553.4 908.7 1,205.6IL 43.7 30.7 38.5 42.7 93.4 72.0 96.6 73.9 89.5 168.9 198.9 361.1 419.4 435.9CO 77.0 113.8 111.4 107.8 157.8 93.7 54.2 129.7 135.0 197.4 325.1 321.2 405.0 838.9PA 48.3 43.3 78.0 68.4 56.2 108.8 35.2 154.0 104.7 148.9 128.0 299.4 540.9 644.9NJ 75.3 116.9 132.3 99.1 156.6 66.5 68.7 106.1 101.2 198.2 241.6 441.8 490.9 501.2 907VA 32.3 23.5 76.4 66.6 51.8 46.7 14.0 30.9 39.5 77.6 279.4 440.1 297.9 749.7UT 6.0 32.8 8.3 11.9 4.4 1.0 9.1 24.4 7.3 1.2 23.2 57.5 90.7 116.2OH 34.7 55.7 44.8 53.4 32.7 27.9 19.6 27.1 34.3 67.3 68.7 164.5 181.9 319.1MD 46.8 20.8 30.5 46.1 87.7 47.6 36.4 30.1 343.5 55.9 140.0 139.5 188.3 349.9GA 55.8 111.4 66.6 97.2 53.7 20.9 47.1 192.7 143.4 93.5 155.8 247.1 371.9 504.5 1,MN 24.4 29.9 35.4 26.0 37.6 78.7 38.7 64.1 37.1 55.4 192.3 149.9 256.8 340.0MI 34.8 21.3 59.1 15.7 21.8 26.4 5.7 14.9 58.7 8.6 65.7 79.4 106.2 122.4AZ 15.2 38.1 38.6 43.9 37.8 27.5 33.3 64.9 41.9 35.7 83.4 95.5 170.2 226.1FL 31.1 34.5 70.8 82.5 44.3 34.6 22.5 71.9 127.7 102.8 270.9 398.9 436.5 625.3NC 17.3 17.4 20.9 15.7 26.1 36.9 12.1 48.8 22.2 63.6 210.7 179.9 271.8 326.9CT 71.6 76.9 101.3 167.7 89.6 134.5 86.5 57.8 33.3 82.5 141.3 146.0 264.9 345.2OR 84.9 75.0 51.7 66.7 43.2 33.0 29.7 55.6 32.8 27.0 38.6 90.5 126.9 53.5WI 11.4 13.6 16.4 12.8 11.7 10.9 5.5 23.3 32.5 8.5 9.1 26.0 62.9 51.3TN 43.5 53.5 76.1 42.7 73.8 38.8 21.1 7.0 44.3 40.6 157.7 178.2 106.6 107.3RI 12.6 9.9 6.6 14.2 30.9 2.7 0.4 5.1 10.5 - 3.5 20.3 11.5 26.0IN 13.3 16.7 17.7 6.4 10.1 10.5 8.3 0.0 16.6 56.3 15.2 20.8 29.7 44.0DC 18.9 14.8 4.7 17.2 0.0 2.5 0.8 4.8 1.1 4.3 0.8 6.7 5.2 46.9NH 5.3 14.8 15.1 27.7 29.5 16.2 29.2 6.8 31.7 7.9 30.5 42.9 53.3 167.8KS 2.3 2.2 3.9 4.6 5.1 8.9 0.4 1.7 4.8 1.5 8.7 35.7 9.2 10.4SC 0.9 - 15.3 18.1 23.7 7.6 4.0 1.2 11.4 21.8 53.1 100.2 61.0 168.0NM 18.9 9.2 6.6 3.9 3.0 1.8 4.4 - 0.5 - 3.6 12.9 32.5 7.7OK 1.5 4.7 14.1 5.3 9.3 2.6 1.5 - - 11.0 6.1 31.8 27.8 115.4AL 15.5 17.3 21.3 9.6 2.0 2.3 0.3 10.6 55.1 25.0 28.5 50.2 109.9 58.3 65KY 2.4 2.3 7.4 2.8 5.8 - 8.5 3.9 15.4 11.9 21.6 31.1 35.0 37.5MO 8.8 4.3 11.1 1.6 9.4 7.5 34.9 25.2 55.1 70.5 98.5 56.1 72.6 611.7ID 0.3 - - - - - - 5.0 0.2 0.1 15.2 0.1 1.2 30.3WV 1.1 2.0 0.1 0.0 - 0.1 - - 0.0 - - - 23.8 2.0ME 19.0 11.6 15.3 8.7 17.2 5.1 4.3 0.5 3.0 - 1.5 1.5 3.7 59.7ME 0.5 - - 1.5 - - - - 38.0 3.5 0.5 10.4 3.7 29.1LA 9.9 3.3 1.9 1.9 - - 2.3 3.8 3.8 2.7 25.5 13.7 26.5 41.0MS 2.2 0.0 - 0.6 0.9 4.9 2.4 14.5 1.7 15.0 - 10.6 8.4 4.5 2DE 0.3 - 4.5 1.4 4.8 2.3 3.8 9.9 3.0 12.5 4.4 4.7 1.1 - 16NV - 2.4 4.1 - 5.5 0.1 2.2 9.1 - 1.2 2.9 18.7 9.7 61.2MT 1.6 1.7 3.3 1.1 - - 1.0 - - - - - - -AR - 1.2 - - - - - 1.0 - - 5.0 - 4.0 29.9IA 0.7 0.9 7.8 1.3 2.0 2.5 0.7 1.6 2.0 19.8 12.1 22.1 17.1 8.8VT - 6.6 8.0 4.5 7.4 7.2 1.3 3.8 - 5.3 13.0 1.8 4.5 4.2 - 46ND - - 14.0 - - - - - - 0.2 9.8 - 1.1 0.5 3.HI - - - - - - - - - - - 20.5 1.5 4.2 12PR - - - - - - 0.3 0.0 1.0 22.0 7.8 8.2 12.5 1.3 4.AK - - - - - - - - - - - - - -SD - - - - - - - - - - - - - -UN - - 0.5 0.8 6.1 13.0 0.2 30.8 0.8 0.1 0.3 2.2 4.4 39.1WY - 0.1 - - - - - - - - - - 2.0 -Total 2,776.4 3,124.5 3,363.6 3,406.0 3,319.6 2,822.4 2,254.0 3,586.3 3,656.8 4,145.7 8,012.6 11,341.5 14,974.9 21,498.9

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012C 22,947.1 42,937.7 16,667.2 9,591.2 8,683.1 10,555.3 10,864.0 12,972.4 15,387.4 14,758.1 10,248.4 11,926.7 14,752.2 14,128.8

5,085.3 10,576.4 4,953.4 2,639.3 2,721.3 3,093.7 2,733.8 3,062.6 3,759.3 3,423.2 2,381.7 2,448.9 3,132.5 3,067.93,428.6 6,715.8 1,948.7 767.0 669.8 786.2 1,094.7 1,458.1 1,316.5 1,513.4 1,068.8 1,400.0 2,429.0 1,856.72,343.7 2,767.8 1,150.7 570.7 450.8 847.0 837.6 1,147.2 1,358.9 942.7 582.2 621.8 551.4 931.53,162.7 6,262.9 3,104.3 1,187.6 1,221.0 1,215.1 1,189.4 1,519.7 1,496.9 1,122.6 665.5 1,070.9 1,580.2 930.51,243.7 2,382.3 998.6 313.6 379.9 236.6 320.2 437.6 459.6 480.0 257.6 647.6 768.7 570.41,845.8 4,091.9 1,244.4 588.0 644.8 363.2 653.4 688.8 686.3 872.3 623.2 447.9 615.7 564.2 1,763.5 2,911.7 1,084.2 497.8 537.6 658.8 523.5 948.7 1,010.7 808.5 433.6 517.9 509.6 517.8

907.8 3,162.9 1,544.4 972.0 839.8 968.1 925.4 740.2 608.6 757.7 666.1 466.0 485.9 429.31,238.9 3,325.2 1,004.2 429.0 397.3 291.1 536.7 461.9 644.9 559.6 240.9 409.3 617.7 372.3

418.4 666.9 220.1 135.7 111.8 249.8 248.8 198.1 184.7 199.2 162.7 139.0 239.5 304.3508.0 1,013.6 247.1 266.0 193.9 89.9 136.5 91.2 226.4 275.8 122.7 175.2 432.5 285.7616.5 1,947.3 935.6 627.1 328.6 709.5 645.0 848.6 727.3 520.9 386.5 446.7 314.0 279.6

1,164.1 2,270.7 847.9 574.9 281.5 500.5 264.4 414.1 438.0 418.5 313.6 337.0 383.4 264.8616.5 981.1 475.0 343.3 208.2 388.3 274.0 300.5 413.1 481.0 284.8 142.1 283.1 242.6253.5 356.4 154.9 109.4 95.2 134.3 93.3 131.3 109.7 214.5 178.5 151.7 84.8 232.3365.5 668.6 247.5 212.4 81.9 72.2 134.7 276.7 238.2 228.5 94.0 78.4 229.1 211.7

1,697.4 2,700.1 937.3 401.7 326.1 427.6 346.0 323.8 599.3 327.5 347.6 239.4 350.2 202.9853.6 1,829.8 585.6 557.2 379.4 327.3 341.6 410.5 522.1 488.9 254.9 423.1 304.9 169.0889.2 1,550.8 608.2 191.9 223.6 251.6 209.6 289.0 271.0 236.1 190.2 133.2 156.7 157.6501.0 810.4 248.6 165.1 140.5 142.4 132.2 146.8 254.4 152.2 67.4 133.4 236.8 123.888.5 259.7 92.6 51.2 37.6 66.0 67.8 72.6 90.2 71.6 25.9 135.0 72.9 95.2

581.0 458.3 193.3 122.5 82.6 96.2 101.5 35.2 126.7 84.3 75.0 67.8 107.4 87.235.4 92.6 118.7 95.9 62.8 58.0 72.8 77.2 4.5 16.1 30.0 59.3 42.2 85.146.7 273.3 56.5 40.1 24.5 67.8 123.7 32.8 70.6 93.7 232.1 80.0 177.9 84.1

539.7 508.3 161.8 23.5 56.1 80.2 28.1 46.2 60.5 35.4 49.2 107.5 53.4 61.0233.8 767.9 257.9 225.7 167.1 127.6 97.2 84.1 154.1 194.8 52.1 56.9 56.3 60.730.2 264.8 40.3 8.9 27.0 48.7 7.2 31.5 123.4 59.5 7.5 41.7 57.2 46.2

218.2 415.2 10.1 45.3 11.8 13.6 2.7 8.3 86.9 21.2 7.1 41.6 59.7 39.512.1 21.1 14.2 13.9 3.6 24.0 76.4 32.1 131.1 49.8 5.5 12.4 64.9 35.2

70.0 44.5 13.8 33.0 35.1 68.1 80.8 14.9 8.1 17.3 4.5 13.0 27.1 34.065.9 278.5 80.3 66.1 35.7 69.2 35.2 19.9 34.4 48.8 45.4 0.6 3.5 23.181.9 201.8 88.9 13.8 5.4 48.2 32.0 28.2 54.1 22.8 17.3 16.7 12.5 23.1

309.1 655.8 267.4 81.0 79.5 26.0 127.7 57.8 47.6 92.5 17.4 97.0 134.4 21.2 16.5 8.5 2.7 10.6 52.2 2.5 10.0 17.8 18.7 22.8 14.6 7.8 5.1 15.2- 4.5 1.4 15.9 12.6 5.8 10.5 4.9 10.8 30.0 3.0 3.8 2.1 14.644.9 140.2 3.9 16.9 2.7 26.0 5.1 39.9 7.8 5.4 11.4 4.3 38.6 12.857.3 163.1 90.1 16.9 4.6 0.2 13.1 7.5 2.9 27.8 - 11.5 - 10.6

234.0 103.3 46.0 17.7 2.3 9.6 3.0 11.4 15.1 14.5 13.0 18.0 21.9 10.5250.7 23.5 30.0 5.0 0.9 4.9 10.0 16.2 5.0 - 1.3 - 1.0 9.8

16.8 134.7 14.6 19.4 0.4 2.1 11.1 5.3 7.3 79.0 20.6 32.2 26.2 9.5 47.1 30.9 33.3 31.8 23.2 47.6 64.9 19.6 23.7 12.6 15.4 33.9 9.5 7.116.3 16.7 24.8 - - - 27.4 - 4.0 15.6 14.5 1.9 3.2 5.625.9 34.3 10.4 9.7 1.2 3.7 5.1 6.5 6.2 - - 5.0 - 5.03.9 16.4 9.1 2.0 - 5.3 12.1 1.5 25.3 58.2 84.1 51.5 28.4 5.0

- 46.4 11.6 1.2 0.5 4.5 34.8 24.1 17.6 42.2 47.1 33.1 24.8 4.43.0 6.1 1.0 - 14.5 2.0 - - 0.2 5.5 4.7 3.2 4.0 2.4

12.8 203.0 37.8 4.4 17.8 13.7 14.6 32.8 4.9 7.5 7.4 9.5 0.6 0.64.6 42.1 32.0 0.5 0.1 1.5 28.8 14.3 16.0 13.8 - 4.5 - 0.1

- 3.5 - - - - - - - - - - - - 0.7 0.3 1.6 18.1 3.5 2.2 - - 4.0 0.5 0.8 - 4.1 - 2.4 50.4 14.3 - - - - - - - 0.5 - - -

- - - - - 1.5 4.1 6.5 0.2 1.5 - 10.0 - -54,900.3 105,200.0 40,968.3 22,132.0 19,681.1 23,235.1 23,612.5 27,617.2 31,875.1 29,925.9 20,378.3 23,315.7 29,497.2 26,652.4

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National Venture Capital Association

38 Thomson Reuters

Figure 3.11bNumber of Venture Capital Deals by State 1985 to 2012

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012CA 467 494 523 534 568 552 478 573 436 462 685 1,023 1,140 1,400 2,221 2,949MA 215 187 224 195 182 172 136 135 131 127 197 289 334 398 592 790 520 38NY 45 46 63 48 49 31 24 38 37 38 73 89 156 196 353 611PA 34 45 59 54 41 44 37 61 44 39 64 85 139 149 153 261TX 106 93 106 105 91 85 70 70 71 69 101 135 172 197 318 484 34WA 20 21 29 30 37 26 26 37 32 36 66 83 89 111 208 256 14CO 43 58 62 63 53 49 35 53 48 53 58 83 98 127 162 222IL 26 27 31 31 61 34 44 40 25 35 44 56 88 74 119 203VA 22 22 31 26 30 27 24 20 20 21 39 59 82 99 154 285OH 26 21 26 21 18 21 20 21 20 20 36 57 54 66 53 82GA 31 44 45 41 31 33 36 37 42 46 49 54 79 98 161 224MD 18 17 24 28 19 29 27 25 18 22 32 49 49 58 100 178NJ 45 43 54 42 55 44 48 44 38 40 56 68 85 83 118 188 15CT 33 33 41 46 48 41 36 33 26 35 43 45 65 73 96 123MI 20 24 25 12 16 15 9 6 12 3 12 21 28 29 44 55UT 3 14 15 7 6 4 9 8 7 1 6 16 31 35 43 58 44 29FL 21 20 29 24 22 32 19 25 26 19 61 57 74 70 117 190 11NC 14 20 15 11 18 28 20 20 22 20 36 60 80 82 104 154 88 80 76TN 16 22 28 31 27 22 24 11 8 12 21 29 25 24 47 50MN 23 31 34 29 30 32 31 26 24 20 50 47 89 77 84 107OR 24 24 30 34 27 22 12 12 15 13 17 28 41 18 52 67DC 4 5 8 4 2 5 3 3 2 4 1 5 2 4 18 45IN 8 15 15 6 6 12 8 1 7 7 8 9 13 9 11 28 7 12AZ 15 11 20 13 24 14 15 22 21 25 27 30 29 38 57 70NM 2 3 5 6 1 3 2 - 2 1 2 5 4 4 6 8RI 6 4 7 6 7 7 4 2 3 - 3 2 4 5 11 11WI 12 16 17 15 6 10 6 9 8 9 8 11 19 16 19 27KS 1 2 6 3 3 3 1 3 2 2 4 11 6 3 8 22MO 5 7 13 8 11 11 9 9 13 8 19 26 18 23 29 54 18NH 3 9 11 10 13 18 17 10 10 4 10 17 17 24 31 60 39DE 1 1 1 4 3 5 4 3 1 3 4 4 4 - 3 5OK 4 5 4 1 4 2 1 - - 5 2 7 5 12 8 9AL 7 10 12 4 7 7 2 4 10 4 9 8 17 14 10 30KY 2 4 7 4 5 - 2 2 2 3 9 7 15 16 16 14ME 8 6 5 4 6 6 4 1 2 - 2 5 2 14 11 15MT 2 3 2 6 - - 3 - - - - - - - 2 3ME 1 - - 5 1 - - - 5 3 1 5 3 5 7 11SC 1 - 5 3 7 5 10 7 7 6 5 15 15 17 10 11ID 1 - 1 - - - - 1 2 1 1 1 2 3 2 3LA 6 2 2 2 - - 2 1 4 2 7 4 12 9 9 14MS 1 1 - 1 1 3 1 4 2 5 - 3 4 3 5 6NV - 2 2 - 1 1 4 4 - 2 2 4 7 11 10 10VT - 3 3 3 2 3 3 1 - 3 5 3 3 3 1 4HI 1 - - - - - - - - - - 3 4 3 3 3WV 1 1 2 1 - 1 - - 1 - - - 2 1 - 2AR - 1 - - - - - 1 - - 2 - 2 3 5 5IA 1 3 2 3 2 2 3 4 1 4 9 6 4 7 2 4ND - - 1 - - - - - - 1 2 - 1 1 1 1PR - - - - - - 3 2 1 2 4 6 2 2 2 11SD - - - - - - - - - - - - - - 1 1AK - - - - - - - 1 - - - - - - - 1UN - - 1 2 3 1 1 2 4 2 2 7 7 14 3 16WY - 1 - - - - - - - - - - 2 - - -Total 1,345 1,421 1,646 1,526 1,544 1,462 1,273 1,392 1,212 1,237 1,894 2,637 3,223 3,728 5,600 8,041

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012C 1,537 1,102 1,159 1,249 1,338 1,591 1,727 1,687 1,284 1,461 1,602 1,532

520 387 384 382 391 412 472 456 342 375 395 414294 156 120 159 132 233 218 261 205 296 345 331 155 108 106 114 108 150 178 194 135 160 151 179341 173 173 177 181 201 188 161 123 165 167 159146 110 80 114 123 144 167 163 109 120 125 117115 91 74 72 93 110 114 116 94 86 107 100 128 81 59 62 61 67 73 76 54 73 99 83145 92 86 79 91 95 102 89 50 58 76 80 45 51 32 37 38 46 67 68 60 61 73 60

138 81 65 79 64 91 75 80 46 70 60 5492 92 86 97 115 112 99 103 79 74 73 54157 96 85 94 81 92 101 96 78 72 64 54 78 41 38 38 34 30 36 42 42 62 56 5222 27 18 17 21 24 23 45 36 31 36 4744 29 24 31 32 43 37 38 34 27 49 44 113 64 66 66 54 60 60 45 37 46 57 3588 80 76 56 47 59 69 55 39 58 49 3530 25 24 27 25 13 23 27 17 30 38 3287 58 57 52 43 45 61 51 39 30 48 2942 28 23 31 28 33 39 33 15 33 37 2722 7 6 8 11 9 14 14 8 16 11 267 12 8 10 13 14 17 14 15 17 14 17

35 27 19 12 28 34 34 22 20 16 22 154 6 5 8 16 9 27 18 13 11 10 1411 14 10 8 12 7 3 6 15 11 14 14

20 11 8 14 18 21 23 20 14 21 15 1310 8 13 13 5 10 16 25 17 36 46 1018 29 19 9 11 14 18 25 12 15 22 939 41 34 22 21 19 25 28 14 10 13 8

1 2 1 1 5 4 5 9 6 9 10 75 4 3 12 1 8 6 5 4 2 4 7

15 13 10 8 5 9 8 10 11 2 2 6 5 3 3 6 3 10 9 8 9 15 9 6

9 6 3 4 3 7 8 4 4 7 5 62 - - - 2 1 1 2 1 3 2 6

10 3 2 2 3 4 4 4 - 4 1 54 4 3 5 1 2 10 10 5 10 4 5 2 2 5 2 3 5 7 6 4 4 3 4

10 7 2 4 3 2 7 10 11 3 8 4 3 3 3 5 2 4 1 - 4 - 1 46 6 7 7 8 7 8 6 4 5 3 43 4 3 3 4 8 7 8 8 7 8 4

5 2 7 5 6 11 6 7 3 3 3 32 8 5 3 5 4 5 2 3 4 2 33 5 3 2 2 6 2 - - 1 - 15 1 1 4 3 2 3 8 9 2 3 11 - 2 1 - - 1 4 3 1 1 15 1 1 1 2 3 4 2 - 1 - 12 2 1 4 - 1 3 1 3 - 2 1- - - - - - - - - - - -8 - - - - - - - 1 1 1 -- - - 1 4 1 2 1 - 1 - -

4,589 3,203 3,022 3,217 3,300 3,887 4,213 4,165 3,139 3,626 3,946 3,723

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0

20,000

40,000

60,000

80,000

100,000

120,000

'85

'86 '8

7'88

'89

'90 '9

1'92 '93 '9

4 '95

'96 '97 '9

8'99

'00 '0

1'02

'03

'04 '0

5'06 '0

7'08

'09 '10 '11 '12

($M

illion

s)

Follow-on

First

Year

Figure 3.12Venture Capital InvestmentsFirst vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

Year First Follow-on Total1985 724.1 2,052.2 2,776.41986 898.0 2,226.5 3,124.51987 1,009.1 2,354.5 3,363.61988 1,101.1 2,304.8 3,406.01989 906.1 2,413.5 3,319.61990 835.9 1,986.4 2,822.41991 552.0 1,702.0 2,254.01992 1,284.4 2,301.9 3,586.31993 1,273.7 2,383.1 3,656.81994 1,652.6 2,493.1 4,145.71995 3,976.7 4,035.9 8,012.61996 4,196.6 7,144.8 11,341.5 1997 4,838.4 10,136.5 14,974.91998 7,174.7 14,324.2 21,498.91999 16,362.8 38,537.5 54,900.32000 28,632.2 76,567.8 105,200.02001 7,347.9 33,620.4 40,968.32002 4,321.1 17,810.9 22,132.02003 3,703.9 15,977.2 19,681.12004 5,444.5 17,790.6 23,235.12005 5,955.0 17,657.5 23,612.52006 6,329.9 21,287.4 27,617.22007 7,719.7 24,155.4 31,875.12008 6,556.6 23,369.3 29,925.92009 3,622.0 16,756.3 20,378.32010 4,287.4 19,028.3 23,315.72011 5,437.8 24,059.4 29,497.22012 4,177.4 22,475.0 26,652.4

Figure 3.13Venture Capital InvestmentsFirst vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

No. of Cos No. of CosReceiving Receiving No. of Cos

Initial Deals Follow-On ReceivingYear Financing Financing Financing*1985 433 756 1,1531986 506 759 1,2261987 580 865 1,3871988 513 800 1,2641989 450 839 1,2391990 351 787 1,0711991 267 717 9421992 392 717 1,046 1993 356 651 9501994 430 628 9931995 901 775 1,5711996 1,146 1,171 2,118 1997 1,304 1,473 2,5751998 1,431 1,830 3,0301999 2,470 2,442 4,4772000 3,394 3,691 6,4252001 1,236 2,782 3,8552002 851 1,972 2,7122003 775 1,834 2,5082004 971 1,842 2,7072005 1,081 1,853 2,8062006 1,281 2,128 3,2332007 1,416 2,248 3,4932008 1,307 2,343 3,4742009 830 1,896 2,6382010 1,088 2,040 3,0062011 1,317 2,158 3,3082012 1,174 2,117 3,143

Figure 3.15Venture Capital InvestmentsFirst vs. Follows-on RoundsTotal Number of Companies

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

'85

'86 '8

7'88

'89

'90 '9

1'92

'93

'94 '9

5'96 '9

7'98

'99

'00 '0

1'02

'03

'04 '0

5'06 '0

7'08

'09 '10 '11 '12

(Nu

mb

er

of

Com

pan

ies)

Series2

Series1

Follow-on

First

Year

Figure 3.14Venture Capital Investments

Number of Companies Receiving

* No. of Cos receiving financing can be less than the sum ofthe prior two columns because a given company can receiveinitial and follow-on financing in the same year

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Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997Software 92.3 118.6 94.6 130.1 94.3 167.9 106.8 149.8 123.0 296.0 542.1 918.7 1,053.2Media and Entertainment 69.8 43.5 100.3 114.1 80.4 63.7 13.9 81.3 195.6 115.3 775.1 363.8 392.7Biotechnology 34.5 54.3 66.0 66.9 53.1 26.1 16.1 164.1 123.9 161.1 159.3 206.5 346.2IT Services 20.8 9.6 5.5 12.8 20.6 18.3 10.3 8.9 36.0 93.0 44.9 220.8 236.1Industrial/Energy 93.6 81.3 114.5 123.8 222.5 107.2 68.4 148.9 147.7 154.4 434.1 274.5 361.6Medical Devices and Equipment 41.7 75.0 85.8 84.8 74.7 60.0 45.9 126.1 117.2 124.9 188.4 210.8 259.8Consumer Products and Services 46.8 63.9 57.9 77.0 31.1 77.6 53.8 76.9 74.8 113.2 318.1 209.5 195.1Telecommunications 64.5 45.0 38.6 33.4 44.2 53.6 10.8 93.5 64.6 192.8 365.2 417.5 387.1Semiconductors 46.3 22.4 38.6 56.7 14.5 36.3 10.2 51.7 5.1 40.9 69.5 130.5 166.2Healthcare Services 16.5 66.1 56.4 17.1 48.8 31.5 31.7 66.6 92.5 109.5 300.4 273.9 342.5Electronics/Instrumentation 43.3 27.6 32.1 25.7 12.7 14.7 15.1 14.2 16.0 8.6 67.1 90.3 123.8Other 0.5 2.0 6.0 0.0 32.7 0.0 - 0.2 12.0 0.5 16.1Retailing/Distribution 19.7 57.0 137.8 63.3 22.4 13.2 25.1 52.7 28.4 60.5 217.7 131.0 114.2Computers and Peripherals 38.5 69.0 87.0 70.5 46.3 52.4 19.1 59.9 35.1 48.5 148.1 120.0 110.2Business Products and Services 12.3 48.7 26.6 11.3 13.3 37.7 63.7 28.1 61.9 33.6 125.2 243.0 255.3Networking and Equipment 21.9 34.1 23.5 41.8 55.9 40.4 19.9 61.0 73.0 37.7 95.5 128.0 224.3Financial Services 61.1 79.8 43.9 165.9 71.4 35.3 8.3 100.6 78.9 62.4 114.0 257.2 254.1Total 724.1 898.0 1,009.1 1,101.1 906.1 835.9 552.0 1,284.4 1,273.7 1,652.6 3,976.7 4,196.6 4,838.4

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 1,372.8 2,852.6 6,177.6 1,636.2 1,263.6 900.3 1,232.0 1,174.1 1,344.7 1,483.5 1,161.3 791.2 943.1 1,603.1 1,717.8

688.4 2,458.4 2,874.8 344.6 208.5 219.2 731.5 566.2 637.8 648.3 504.0 249.8 442.1 591.8 459.0384.0 423.0 798.9 817.5 698.8 423.7 724.5 615.5 1,088.5 1,063.8 950.2 616.8 613.9 922.5 441.8377.1 1,549.1 2,621.8 291.6 133.1 163.3 198.8 335.0 347.0 483.0 631.8 326.2 380.9 468.9 303.0

782.4 744.1 1,094.8 474.8 436.1 265.4 308.9 531.4 718.7 1,261.3 1,243.3 573.1 440.7 576.2 247.0275.2 308.1 335.1 277.7 250.5 309.7 325.2 409.6 565.2 786.8 691.1 304.2 243.5 212.4 233.3246.3 838.8 954.3 131.6 44.9 78.0 126.7 233.2 126.3 205.9 200.4 125.0 116.8 353.2 202.0955.6 1,968.5 4,756.8 808.4 189.5 179.5 284.2 343.8 395.9 421.2 318.8 89.4 173.3 82.3 141.3165.4 290.0 1,145.2 517.0 344.6 382.7 419.6 269.5 269.5 200.3 162.7 42.0 105.6 102.1 79.7239.2 368.5 430.5 84.4 155.1 70.5 94.3 140.7 118.1 70.2 32.0 54.5 153.5 98.4 70.6

47.5 81.4 153.1 103.3 82.3 45.8 98.8 136.0 134.9 121.2 60.7 43.1 65.7 50.0 70.026.8 92.3 37.0 36.6 17.0 - 13.6 - 15.8 - 3.6 2.0 15.5 52.7

355.3 667.1 872.8 59.1 34.7 12.4 118.3 135.9 39.9 84.5 55.1 22.5 81.6 79.0 46.8122.1 273.5 348.0 259.8 17.2 83.5 91.1 84.4 55.7 109.4 156.3 60.0 66.4 100.8 37.5367.0 990.7 1,921.7 277.1 120.3 342.6 235.9 162.7 189.3 262.2 98.5 118.7 153.0 63.1 27.4325.9 1,604.5 2,624.8 896.7 248.5 132.8 193.4 173.6 129.6 169.7 50.7 50.7 145.3 59.8 24.4443.6 852.0 1,484.8 331.4 76.3 94.4 247.6 643.3 168.6 332.6 239.8 151.2 159.9 58.7 23.0

7,174.7 16,362.8 28,632.2 7,347.9 4,321.1 3,703.9 5,444.5 5,955.0 6,329.9 7,719.7 6,556.6 3,622.0 4,287.4 5,437.8 4,177.4

Figure 3.18First Sequence by Industry ($ Millions)

1985 to 2012

SSttaaggee 11998855 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Seed 306.3 437.6 353.4 378.1 257.4 178.2 102.7 213.4 356.5 528.1 742.6 636.9 804.9 1,003.4Early Stage 112.0 185.1 319.2 291.8 215.3 292.2 214.6 255.4 261.1 390.8 898.3 1,356.4 1,691.8 2,700.2Expansion 266.8 211.7 274.1 324.3 320.0 278.9 157.6 572.5 488.1 493.1 1,644.4 1,742.4 1,866.5 2,835.0Later Stage 39.1 63.6 62.4 106.9 113.4 86.7 77.1 243.1 168.0 240.5 691.5 460.9 475.2 636.1TToottaall 772244..11 898.0 1,009.1 1,101.1 906.1 835.9 552.0 1,284.4 1,273.7 1,652.6 3,976.7 4,196.6 4,838.4 7,174.7

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 2,798.2 2,520.6 632.1 267.1 304.1 828.4 813.8 1,078.6 1,413.8 1,376.7 1,013.8 897.6 811.4 477.2

6,292.2 16,472.4 4,424.6 2,330.5 2,135.0 2,610.2 2,655.3 2,553.2 2,921.1 2,406.6 1,342.7 1,753.4 2,602.0 2,130.55,960.4 8,715.9 1,925.8 1,339.1 950.4 1,294.3 1,563.0 1,908.1 2,479.8 1,703.8 790.2 913.9 1,038.8 923.8

1,311.9 923.3 365.4 384.4 314.5 711.6 922.9 790.0 905.0 1,069.5 475.3 722.5 985.5 645.816,362.8 28,632.2 7,347.9 4,321.1 3,703.9 5,444.5 5,955.0 6,329.9 7,719.7 6,556.6 3,622.0 4,287.4 5,437.8 4,177.4

Figure 3.16First Sequence by Stage of Development ($ Millions)

1985 to 2012

SSttaaggee 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966 11999977 11999988Seed 220 247 230 211 206 119 88 119 145 189 256 310 347 459Early Stage 81 118 199 169 102 121 79 131 71 112 281 401 470 495Expansion 108 106 119 107 113 88 80 115 106 107 294 360 419 412Later Stage 24 35 32 26 29 23 20 27 34 22 70 75 68 65Total 443333 550066 558800 551133 445500 335511 226677 339922 335566 443300 990011 11,,114466 11,,330044 11,,443311

11999999 22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 22000099 22001100 22001111 22001122661 584 220 131 166 178 211 322 425 383 225 281 355 1981118 1919 693 465 421 535 543 574 588 551 388 542 673 758629 800 280 202 142 183 251 273 299 229 142 166 173 138

62 91 43 53 46 75 76 112 104 144 75 99 116 8022,,447700 33,,339944 11,,223366 885511 777755 997711 11,,008811 11,,228811 11,,441166 11,,330077 883300 11,,008888 11,,331177 11,,117744

Figure 3.17First Sequence by Stage of Development (No. of Deals)

1985 to 2012

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Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997Software 72 75 83 87 68 83 61 66 51 98 223 324 327Media and Entertainment 29 34 46 33 33 23 11 27 27 31 70 76 108IT Services 12 8 6 9 11 7 5 5 8 20 28 66 63Consumer Products and Services 26 30 33 18 23 26 18 21 19 28 57 53 71Biotechnology 28 32 57 47 36 26 21 53 46 42 54 69 84Industrial/Energy 57 59 73 71 73 51 29 33 35 40 80 79 98Medical Devices and Equipment 39 53 61 57 62 37 28 44 41 36 55 84 108Telecommunications 26 25 25 21 24 10 13 18 27 23 68 89 93Other 1 1 1 2 2 2 1 1 5 1 6Retailing/Distribution 13 24 39 26 13 9 6 12 13 9 36 36 33Financial Services 14 20 24 22 12 7 10 13 17 12 32 38 44Healthcare Services 9 32 19 11 9 7 12 17 13 20 42 59 53Business Products and Services 12 26 22 13 9 8 9 10 17 11 31 39 48Electronics/Instrumentation 27 18 24 18 15 8 10 10 6 11 21 21 19Semiconductors 24 13 16 21 13 14 7 11 6 11 25 29 54Computers and Peripherals 27 34 33 35 28 17 11 27 15 20 42 36 43Networking and Equipment 17 22 19 23 21 16 14 23 14 17 32 47 52Total 433 506 580 513 450 351 267 392 356 430 901 1,146 1,304

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 333 591 880 313 268 228 250 289 300 326 308 218 319 433 441

114 376 391 73 43 38 57 102 156 179 165 90 148 215 17490 230 327 73 27 34 51 63 91 100 120 79 99 137 109 68 140 100 29 24 20 31 43 42 57 52 31 41 57 79107 80 122 110 115 92 109 119 148 147 148 95 119 114 7384 102 123 83 62 52 69 70 115 150 154 82 91 87 6896 87 69 61 62 76 79 88 127 124 109 76 70 67 63

140 231 395 128 44 37 57 70 95 77 49 26 37 47 375 10 9 8 2 1 3 2 9 3 6 9 12 25

46 115 121 19 9 5 20 23 10 13 17 11 17 25 2263 102 172 41 29 19 34 31 34 47 31 18 37 21 1737 52 58 20 20 17 16 24 19 19 10 13 21 12 1374 148 224 52 26 29 38 39 41 55 49 27 29 32 1218 16 27 25 18 19 23 32 22 26 29 17 15 11 1244 50 116 77 52 66 80 42 48 38 33 13 15 21 1231 35 52 28 11 21 18 19 12 25 20 17 14 15 1081 105 208 96 39 21 36 25 21 24 10 11 7 11 7

1,431 2,470 3,394 1,236 851 775 971 1,081 1,281 1,416 1,307 830 1,088 1,317 1,174

Figure 3.19First Sequence by Industry (No. of Deals)

1985 to 2012

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Stage Region ($ Millions)Silicon Valley 7,558.5NY Metro 1,776.0New England 1,338.4LA/Orange County 950.0Northwest 769.1Midwest 652.5DC/Metroplex 493.4Texas 470.2SouthWest 433.3Southeast 409.6San Diego 268.2Colorado 233.8Philadelphia Metro 147.0North Central 109.8South Central 40.1Upstate NY 18.9Sacramento/N.Cal 7.1 Alaska/Hawaii/Puerto Rico 0.1 TOTAL 15,676.0

Figure 3.222012 Internet-Related Investments

By Regions

Year # Companies ($ Millions)1995 427 1,931.01996 761 4,215.31997 1,027 6,339.71998 1,494 11,911.91999 3,068 42,567.52000 4,611 80,656.82001 2,389 26,433.42002 1,468 11,358.82003 1,249 9,324.12004 1,270 10,897.82005 1,369 11,153.32006 1,678 13,136.82007 1,791 14,880.72008 1,844 13,332.52009 1,428 9,299.52010 1,703 11,047.02011 2,082 15,851.22012 2,050 15,676.0TOTAL 13,982 310,013.3

Figure 3.20Internet-Related Investments

By Year 1995-2012

State ($ Millions)California 8,783.7New York 1,665.3Massachusetts 1,288.3 Washington 671.4Texas 470.2TOTAL* 12,878.8

*Total includes above 5 states only

Figure 3.21Top Five States By Internet-Related Investments

in 2012

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Figure 3.23Sources and Targets of Invested Capital Investments 2012

Source State includes U.S. states. FF = other foreign UN = undisclosed or unknown.

SOURCESTATE AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IND KAL 0.0 7.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 4.2 0.0 0.0 0.0 0.0 0.0AR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AZ 0.0 0.0 0.0 0.0 3.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0CA 0.0 8.9 0.0 11.0 6,966.5 87.2 24.6 20.7 7.9 48.5 101.3 0.3 0.0 0.0 134.9 4.3CO 0.0 0.0 0.0 0.0 56.4 83.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.7 0.0CT 0.0 0.0 0.0 4.6 281.7 21.7 26.6 0.0 0.0 2.4 7.7 0.0 0.0 0.0 2.6 0.0DC 0.0 0.0 0.0 0.0 18.3 1.4 0.0 2.2 0.0 0.0 4.8 0.0 0.0 0.0 5.1 0.0DE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0FF 0.0 1.1 0.0 20.5 1,191.8 80.1 27.5 0.0 0.0 21.6 6.6 0.0 0.0 0.0 146.9 0.0FL 0.0 0.0 0.0 0.0 29.2 0.0 0.0 0.0 0.0 6.3 3.4 0.0 0.0 0.0 0.0 3.5GA 0.0 2.6 0.8 0.0 18.4 6.7 0.0 0.0 0.0 1.8 28.1 0.0 0.0 0.0 0.0 0.0HI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ID 0.0 0.0 0.0 0.0 2.0 5.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0IL 0.0 0.0 0.0 50.0 257.2 18.3 0.0 0.0 0.0 7.5 5.6 0.0 0.0 0.0 84.5 0.1IN 0.0 0.0 0.1 0.0 10.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.0KS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0KY 0.0 0.0 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0LA 0.0 0.0 0.0 0.0 0.0 0.0 2.9 1.0 0.3 1.3 0.2 0.0 0.0 0.0 1.3 0.0MA 0.0 0.0 0.0 6.3 1218.6 24.7 8.0 0.0 0.0 7.2 5.0 0.0 1.0 12.5 40.2 0.0MD 0.0 0.0 0.0 46.0 49.4 13.8 0.4 7.3 0.0 6.3 5.7 0.0 0.0 0.0 2.5 0.0ME 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0MI 0.0 0.0 0.0 0.0 142.3 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.0 3.0MN 0.0 0.0 0.0 2.5 50.6 0.0 0.0 0.0 0.0 8.2 0.0 0.0 0.0 0.0 0.0 0.0MO 0.0 0.0 0.0 0.0 55.5 0.0 0.0 0.0 0.0 2.4 0.0 0.0 0.0 0.0 0.0 0.0MT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NC 0.0 0.0 0.0 0.0 34.1 0.0 0.0 0.0 0.0 5.7 2.0 0.0 0.0 0.0 0.0 10.0ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NH 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NJ 0.0 0.0 0.0 1.0 144.0 0.4 1.9 0.0 0.3 0.0 2.0 0.0 0.0 0.0 0.0 0.0NM 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NV 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NY 0.0 1.1 0.0 32.2 1029.8 31.6 17.9 3.2 0.1 31.3 17.3 0.0 2.0 0.0 19.6 0.0OH 0.0 0.0 0.0 0.0 6.8 0.0 2.4 0.0 0.2 2.3 0.0 0.0 0.0 0.0 5.9 6.2OK 0.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0OR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0PA 0.0 0.0 0.0 3.8 104.5 0.9 2.5 7.9 0.3 19.6 3.9 0.0 1.0 0.0 6.9 25.0PR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0RI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0SC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0SD 0.0 0.0 0.0 0.0 1.4 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0TN 0.0 0.0 0.0 2.5 8.1 0.0 0.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 10.0 0.0TX 0.0 0.0 0.0 16.9 51.7 2.5 0.0 0.0 0.0 0.0 18.1 0.0 0.0 0.0 0.3 0.0UN 0.0 2.2 4.1 14.0 2227.9 166.8 41.7 17.8 0.0 28.5 45.1 0.3 1.0 2.2 65.8 15.0UT 0.0 0.0 0.0 0.5 21.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0VA 0.0 0.0 0.0 0.0 46.1 4.1 0.0 0.8 0.0 0.0 1.8 0.0 0.0 0.0 7.5 0.0VT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0WA 0.0 0.0 0.0 0.0 93.6 10.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0WI 0.0 0.0 0.0 0.0 5.5 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0Total 0.0 23.2 5.0 211.8 14,129.0 564.1 157.6 61.0 9.5 203.0 264.9 0.6 5.0 15.2 570.6 84.1

Target StateKS KY LA MA MD ME MI MN MO MS0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 21.3 0.0 0.0 0.0 0.0 0.0 0.08.0 2.5 2.3 718.7 122.4 3.8 28.9 81.5 0.0 0.00.0 0.0 0.0 9.8 7.8 0.0 0.0 0.0 0.0 0.00.0 0.2 0.0 58.0 5.1 0.0 52.4 6.0 0.0 0.00.0 0.2 0.0 6.8 0.4 0.0 0.0 0.4 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.6 0.0 0.0 308.6 19.4 0.0 26.2 52.0 0.0 0.00.0 0.0 0.0 6.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 6.0 1.3 0.0 0.0 2.0 0.0 1.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 25.2 4.3 0.0 13.8 0.0 0.0 0.00.0 0.0 0.0 8.9 0.3 0.0 0.0 0.6 0.0 0.00.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.4 3.1 0.0 1.9 0.0 0.0 1.60.0 19.8 0.3 1.0 0.0 0.0 0.0 0.0 0.0 1.03.5 0.2 4.6 903.0 16.0 5.0 8.3 7.5 0.0 0.00.0 0.0 0.0 10.5 13.4 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 11.0 0.0 1.3 0.0 0.0 0.0 0.00.0 0.0 0.1 0.1 0.0 0.0 34.4 7.6 0.0 0.02.0 0.0 0.0 11.3 0.0 0.0 0.0 50.0 0.0 0.00.3 0.0 0.0 9.5 0.0 0.0 0.0 0.0 7.8 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 2.6 9.8 0.0 3.7 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 3.9 0.0 0.5 0.0 0.0 0.0 0.00.0 0.0 0.0 47.2 3.1 0.0 0.0 6.5 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 2.7 0.0 0.0 0.0 0.0 0.0 0.08.5 0.0 2.3 210.1 22.1 0.0 10.8 4.7 0.0 0.00.0 0.0 0.0 9.0 0.0 0.0 4.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 25.6 3.8 0.0 0.0 0.3 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 17.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 1.5 0.0 0.0 0.0 5.2 0.0 0.00.0 0.1 0.0 3.0 0.0 0.0 0.0 1.8 0.0 1.40.0 0.0 0.0 13.4 0.0 0.0 0.3 0.0 8.7 1.4

22.2 0.0 1.0 565.5 33.5 2.2 41.9 16.3 4.8 3.40.0 0.0 0.0 12.0 1.1 0.0 0.0 0.0 0.0 0.00.1 0.0 0.0 10.4 9.6 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 25.3 2.4 0.0 1.4 0.0 0.0 0.00.0 0.0 0.0 2.7 0.0 0.0 4.2 0.0 0.0 0.0

46.3 23.0 10.6 3,068.0 279.4 12.8 232.2 242.4 21.3 9.8

Page 45: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

TN TX UN UT VA VI VT WA WI WV WY TOT0.0 1.0 0.0 0.0 4.1 0.0 0.0 0.0 0.0 0.0 0.0 230.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.0 0.0 0.0 1.9 0.0 0.0 0.0 0.2 0.0 0.0 0.0 2716.3 151.8 0.0 172.5 24.2 0.0 0.0 235.5 29.6 0.0 0.0 9,8440.0 11.3 0.0 0.0 6.7 0.0 0.0 37.9 0.0 0.0 0.0 2470.0 6.0 0.0 0.2 0.0 0.0 0.0 21.1 0.0 0.0 0.0 6070.0 1.3 0.0 0.0 27.8 0.0 0.0 0.8 0.0 0.0 0.0 770.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30.0 67.9 0.0 0.8 12.4 0.0 1.0 57.6 0.5 0.0 0.0 2,3630.0 14.5 0.0 0.0 0.0 0.0 0.0 3.0 3.8 0.0 0.0 835.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 800.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 88.5 14.2 0.0 0.0 38.0 0.0 0.0 32.5 22.3 0.0 0.0 6210.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 410.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.0 0.0 150.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 351.8 102.1 0.0 15.9 18.5 0.0 0.0 53.7 0.0 0.0 0.0 2,8750.0 2.5 0.0 2.5 13.4 0.0 0.0 1.5 0.0 0.0 0.0 2060.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 180.0 0.0 0.0 0.0 0.0 0.0 0.0 7.7 1.8 0.0 0.0 2365.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3 0.0 0.0 0.0 1420.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 860.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 06.4 1.5 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 1470.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60.0 0.7 0.0 6.0 0.2 0.0 0.0 13.7 0.0 0.0 0.0 2870.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30.0 183.2 0.0 34.4 7.5 0.0 0.0 59.9 0.0 0.0 0.0 2,2681.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 990.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 80.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 50.0 17.4 0.0 0.0 8.4 0.0 0.0 27.9 8.8 0.3 0.0 4900.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 220.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9

23.6 5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 600.0 150.5 0.0 1.5 1.1 0.0 0.0 30.2 0.0 0.0 0.0 307

18.3 182.7 0.0 10.5 59.7 0.0 2.9 156.4 17.4 10.7 0.0 4,5120.0 0.0 0.0 45.8 0.0 0.0 0.0 0.8 0.0 0.0 0.0 1020.6 0.8 0.0 12.5 149.4 0.0 0.0 13.3 0.0 3.6 0.0 281

V 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 10.0 6.1 0.0 0.0 0.0 0.0 0.0 174.1 0.0 0.0 0.0 3670.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 9.8 0.0 0.0 3087.1 930.4 0.0 304.5 372.3 0.0 4.4 931.7 95.3 14.6 0.0 26,653

National Venture Capital Association

44 Thomson Reuters

SOURCESTATE MT NC ND NE NH NJ NM NV NY OH OK ORE PA PR RI SC SDAL 0.0 2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0AR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AZ 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0CA 1.0 27.3 0.0 7.5 18.2 62.9 3.4 4.8 422.7 76.1 0.0 46.5 128.7 0.0 19.8 11.3 0.0CO 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 8.4 0.0 0.0 6.6 3.8 0.0 0.0 0.0 0.0CT 0.0 5.9 0.0 0.0 0.0 20.4 1.2 0.0 42.8 27.2 0.0 0.0 10.4 0.0 2.8 0.0 0.0DC 0.0 1.2 0.0 0.0 0.0 0.7 0.0 0.0 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0DE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.7 0.0 0.0 0.0 0.0FF 0.0 34.3 0.0 0.0 0.0 70.4 0.0 1.0 136.1 17.6 0.0 10.2 35.0 0.0 8.8 6.6 0.0FL 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 0.0 5.8 5.2 0.0 0.0 0.0 0.0GA 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 0.0HI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ID 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IL 0.0 7.0 0.0 0.0 0.0 15.6 0.0 0.0 8.4 2.2 0.0 0.0 5.5 0.0 0.0 0.0 0.0IN 0.0 0.8 0.0 0.0 0.0 0.7 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0KS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0KY 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 3.8 0.0 0.0 0.8 0.0 0.0 0.0 0.0LA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0MA 0.5 6.8 0.0 0.0 12.2 23.3 1.0 0.0 256.9 15.4 13.7 2.3 54.9 0.0 19.3 5.8 0.0MD 0.0 2.2 0.0 0.0 0.0 0.3 0.0 0.0 26.5 1.4 0.0 0.0 0.9 0.0 0.0 0.0 0.0ME 0.0 0.0 0.0 0.0 4.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0MI 0.0 0.0 0.0 0.0 0.0 4.4 0.0 0.0 0.8 1.8 0.0 4.6 3.2 0.0 0.0 3.3 0.0MN 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 1.7 0.0 4.6 3.0 0.0 0.0 0.0 0.0MO 0.0 2.9 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.9 0.0 2.7 1.8 0.0 0.0 0.0 0.0MT 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NC 0.0 42.6 0.0 0.0 0.6 8.4 0.0 0.0 6.0 0.0 0.0 0.0 3.1 0.0 6.3 2.8 0.0ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NE 0.0 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NH 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NJ 0.0 0.0 0.0 0.0 5.0 27.5 0.0 0.0 16.5 6.5 0.0 0.0 4.3 0.0 0.0 0.0 0.0NM 0.7 0.0 0.0 0.0 0.0 0.0 7.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NY 0.0 16.9 0.0 0.0 0.0 39.0 0.8 0.0 440.5 17.8 0.0 4.6 15.9 0.0 2.8 0.0 0.0OH 0.0 1.2 0.0 0.0 0.0 0.0 3.1 0.0 15.3 40.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0OK 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0OR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7 0.5 0.0 0.0 0.0 0.0PA 0.0 4.8 0.0 0.0 0.0 14.1 0.0 0.0 86.3 9.9 0.0 0.0 95.9 0.0 10.5 0.0 0.0PR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0RI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.2 0.0 0.0SC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0SD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0TN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.2 0.0 0.0 0.0 0.0TX 0.0 0.5 0.0 0.0 0.0 0.3 1.6 0.0 0.0 7.5 1.0 0.0 0.0 0.1 0.0 0.0 0.0UN 3.2 9.0 2.4 1.0 19.1 120.8 13.6 1.3 333.7 38.2 18.5 20.8 136.3 0.0 5.9 6.6 0.0UT 0.0 0.0 0.0 0.0 0.0 0.0 3.3 0.0 11.3 0.0 0.0 5.1 0.0 0.0 0.0 0.0 0.0VA 0.0 1.7 0.0 0.0 0.0 0.0 0.0 0.0 14.0 0.0 0.0 0.0 5.3 0.0 0.0 0.0 0.0VT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0WA 0.0 0.0 0.0 0.0 0.0 19.8 0.0 0.0 17.4 7.0 0.0 6.4 0.0 0.0 3.5 0.0 0.0WI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total 5.6 169.2 2.4 10.7 60.6 429.3 35.1 7.1 1,856.8 285.8 34.0 123.8 518.0 0.1 84.9 39.6 0.0

Target State

Figure 3.23 (continued)Sources and Targets of Invested Capital Investments 2012

Source State includes U.S. states. FF = other foreign. UN = undisclosed or unknown.

Target State

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Company Stage ($ Millions)

Seed 243.0Early Stage 4,297.2Expansion 7,089.7Later Stage 4,046.1TOTAL 15,676.0

Figure 3.242012 Internet-Related Investments

By Stage

Industry Group ($ Millions)Software 7,956.7IT Services 1,976.7Media and Entertainment 1,894.8Consumer Products and Services 1,093.0Telecommunications 574.4Retailing/Distribution 486.7Computers and Peripherals 355.2Semiconductors 353.0Networking and Equipment 315.0Financial Services 211.7Medical Devices and Equipment 146.8Healthcare Services 140.1Business Products and Services 74.1Industrial/Energy 48.9Biotechnology 29.5Electronics/Instrumentation 19.4TOTAL 15,676.0

Figure 3.252012 Internet-Related Investments

By Industry Sector

Industry Internet Related Non-Internet Related TotalSoftware 7,956.7 336.8 8,293.5IT Services 1,976.7 16.6 1,993.3Media and Entertainment 1,894.8 81.4 1,976.2Consumer Products and Services 1,093.0 115.1 1,208.1Telecommunications 574.4 7.6 581.9Retailing/Distribution 486.7 11.6 498.2Computers and Peripherals 355.2 97.8 453.0Semiconductors 353.0 573.4 926.4Networking and Equipment 315.0 0.9 315.9Financial Services 211.7 72.1 283.8Medical Devices and Equipment 146.8 2,364.7 2,511.5Healthcare Services 140.1 169.4 309.5Business Products and Services 74.1 23.3 97.5Industrial/Energy 48.9 2,743.5 2,792.4Biotechnology 29.5 4,085.2 4,114.8Electronics/Instrumentation 19.4 224.4 243.8Other 0.0 52.7 52.7Total 15,676.0 10,976.4 26,652.4

Figure 3.262012 Internet-Related vs Non Internet-RelatedInvestments By Industry Sector ($ Millions)

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Figure 3.30Number of States Invested Into in 2012

By State of Venture Firm

Figure 3.31Number of States California Venture Firms

Invested Into By Year

Figure 3.28Top Five States By Percentage Invested

Within State in 2012

Industry Internet Related Non-Internet Related TotalSoftware 1,038 58 1,096Media and Entertainment 323 11 334IT Services 281 5 286Consumer Products and Services 114 28 142Telecommunications 83 4 87Retailing/Distribution 46 3 49Networking and Equipment 32 2 34Financial Services 24 16 40Computers and Peripherals 23 10 33Semiconductors 19 66 85Business Products and Services 17 16 33Industrial/Energy 14 182 196Medical Devices and Equipment 14 243 257Healthcare Services 11 29 40Biotechnology 6 353 359Electronics/Instrumentation 5 41 46Other 0 26 26Total 2,050 1,093 3,143

Figure 3.272012 Internet-Related vs Non Internet-Related

Investments By Industry Sector (Number of Companies)

Figure 3.29Top Five States By Portion Received From

In-State Firms 2012

Pct. InvestedFund Domicile Within StateCalifornia 71%Virginia 53%Texas 49%Washington 47%Utah 45%

*Minimum $20 million invested

Pct. InvestedCompany Location From StateCalifornia 49%Virginia 40%Missouri 37%Alabama 31%Massachusetts 29%

*Minimum $20 million invested

Location ofVenture FirmCalifornia 39Massachusetts 33New York 32Pennsylvania 26Connecticut 23Illinois 20Maryland 19Texas 19New Jersey 18Virginia 17North Carolina 17Michigan 17

No. of StatesInvested In

No. of StatesYear Invested In1992 302002 342012 39

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Year# All VentureCapital Deals

# Deals with CVCInvolvement

CalculatedPercentage of Deals

with Corporate VCInvolvement

$M AverageAmount of All VC

Deals$M Average Amountof CVC Participation

1995 1,894 145 7.7% $4.23 $3.011996 2,637 224 8.5% $4.30 $3.031997 3,223 346 10.7% $4.65 $2.731998 3,728 501 13.4% $5.77 $3.441999 5,600 1190 21.3% $9.80 $6.252000 8,041 1963 24.4% $13.08 $7.642001 4,589 964 21.0% $8.93 $4.762002 3,203 546 17.0% $6.91 $3.492003 3,022 434 14.4% $6.51 $2.942004 3,217 533 16.6% $7.22 $2.882005 3,300 544 16.5% $7.16 $2.812006 3,887 789 20.3% $7.11 $3.222007 4,213 793 18.8% $7.57 $3.232008 4,165 878 21.1% $7.19 $3.042009 3,139 394 12.6% $6.49 $3.352010 3,626 452 12.5% $6.43 $4.152011 3,946 557 14.1% $7.48 $3.972012 3,723 565 15.2% $7.16 $3.86

Figure 3.32Corporate Investments By Year

Year1995 77.0 35 2.21996 163.0 47 3.51997 180.4 52 3.51998 183.9 42 4.41999 310.4 56 5.52000 629.1 53 11.92001 404.2 63 6.42002 346.8 50 6.92003 229.0 58 3.92004 431.1 82 5.32005 630.9 98 6.42006 1,800.8 153 11.82007 3,116.2 267 11.72008 4,271.3 313 13.62009 2,523.7 248 10.22010 4,085.3 317 12.92011 4,549.3 349 13.02012 3,303.1 267 12.4

Clean TechnologyInvestments($ Millions)

# Clean TechnologyDeals

AverageInvestment Per

Deal($ Millions)

Figure 3.33Clean technology Investments By Year

31.1% 33.0% 36.0% 41.0%

9.3% 10.3%11.8%

12.0%

59.6% 56.7% 51.7% 47.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1997 2002 2007 2012

Other

SoCal

NoCal

Figure 3.34California Investments as a Percentage of

Overall Investments

Total VCInvestment $M

Total CVCInvestment $M

CalculatedPercentage of Dollars

Coming from CVCs8,013 436 5.4%11,341 679 6.0%

14,975 946 6.3%21,499 1,722 8.0%54,900 7,436 13.5%

105,200 15,003 14.3%40,968 4,588 11.2%22,132 1,907 8.6%19,681 1,277 6.5%23,235 1,535 6.6%23,612 1,527 6.5%27,617 2,542 9.2%31,875 2,558 8.0%29,926 2,670 8.9%20,378 1,319 6.5%23,316 1,877 8.0%29,497 2,211 7.5%26,652 2,178 8.2%

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Page 50: NVCA Yearbook 2013: US National Venture Capital Association's Yearbook 2013

Exits: IPOs and AcquisitionsOnce successful portfolio companies mature, venture funds generally exit their positions in those companies by tak-ing them public through an initial public offering (IPO) or by selling them to presumably larger organizations (acqui-sition, or trade sale). This then lets the venture fund distribute the proceeds to investors, raise a new fund for futureinvestment, and invest in the next generation of companies. This chapter considers each type of exit separately.

IPOs in 2012 were a mixed bag at best. On the one hand, the number of venture-backed companies going publicactually fell from 2011 from 51 to 49. But the dollars raised in those initial public offerings more than doubled from$10.7 billion to $21.5 billion. But looking behind the numbers, we see that Facebook itself raised $16.0 billion ofthat $21.5 billion, with a few other high-profile IPOs looming large in the remainder. This meant that many compa-nies attempting or seeking to go public were not able to do so.

The 49 venture-backed IPOs in 2012 are a far cry from the 280 IPOs in 1999. While no one is suggesting that theindustry would be well-served by returning to the heady days of the bubble, we know that only 49 IPOs means manycompanies that would have gone public in more traditional times were frustrated in their efforts/attempts to go pub-lic. The venture industry typically invests in 1,000-1,400 new companies each year. In the 1990s, 14% of all firstfundings went public. Even if just 10% go public these days, that would suggest an annual run rate of 100 to 140companies — a far cry from 49.

On the market valuation placed on these IPOs at the offer price, 2012 was a very good year. The 49 IPOs had a val-uation of $122.3 billion. This is the highest amount since 1986. What is quite striking (Fig 5.03), is the huge gapbetween median and mean (average) valuation of almost seven times! This suggests a huge outlier effect created bythe several large IPOs. In 2012, the provision in the JOBS act took effect which enabled companies to file the doc-uments necessary to go public confidentially. It appears that the majority of companies are electing this option, soit is difficult to report on the IPO pipeline at year end 2012.

Nine venture-backed companies went public with an IPO valuation of $1 billion or greater. The bulk of the IPO val-uations were in the $100 million to $500 million range.

The length of time it takes for a company to go public remains at historically high levels. Those few that were able

Thomson Reuters 49

0.00

5.00

10.00

15.00

20.00

25.00

30.00

0

50

100

150

200

250

300

'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Offe

r($

Billi

on)

No.

ofIP

Os

Year

No of IPOs

Offer Amount ($B)

Figure 4.01 Venture-Backed IPOs

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Methodology

This chapter focuses on company exits by venturefunds through IPO and through acquisition (tradesale, M&A). Some additional charts are provided onprivate equity backed acquisitions because of theventure industry’s interest in that data.With ThomsonReuters’ expansion of global deals coverage in 2012,the criteria used to report these exits were redefinedand refined during 2012. These are explained below.

In this chapter and throughout this Yearbook, we usethe classic nomenclature for describing the two maintypes of private equity:Private Equity = Venture Capital +Buyout/MezzanineTherefore charts describing Private Equity in thischapter and throughout this Yearbook include bothbuyout/mezzanine activity and venture capital activi-ty.The Thomson Reuters venture capital (private equity)

backed exits coverage includes full history for theU.S. and Canada as well as Global Exits from 2005to the present. Multiple exits per company are nowtracked, including IPOs (although secondary offer-ings are not tracked, since first IPO is considered theexit), Secondary Sales (sponsor to sponsor), TradeSales (VC (PE) Firm to Non-PE Firm), Buybacks,Reverse Takeovers and Writeoffs. All values aresourced from the industry leading Thomson ReutersDeals database with hyperlinks to the Tearsheets toview the underlying details of the transactions. ThePE Backed Exits component in ThomsonONE.comcan be used to further analyze all of the VC and PEExits content herein.

Specifically, venture capital IPO exits reported in thischapter are those done on United States stockexchanges/markets with at least one United Statesdomiciled venture fund investor.Specifically, venture capital (private equity) acquisi-

National Venture Capital Association

50 Thomson Reuters

Figure 4.02 Number of Venture-Backed IPOsvs. All IPOs

2000 347 2382001 81 372002 76 242003 67 262004 188 822005 168 592006 167 682007 162 922008 24 72009 39 132010 104 682011 99 512012 113 49

# of Venture-Backed IPOs

# of All IPOsYear

to go public had a median age of seven years. Many companies awaiting their turn to go public are older than that,so as IPO markets reopen, we could see this statistic increase.

In 2012, the acquisition market weakened. There was a slight decrease in the number of acquisitions, or trade sales, ofventure-backed companies.We tracked 449 acquisitions, of which we had disclosed deal amounts for 121 of them.The sumof the disclosed values was also down at $21.5 billion. Just over one-fifth of them were acquired at 10 times or greaterthan the cumulative venture capital investment in those companies. We tracked four acquisitions at more than $1 billion.

Note: IPO counts reflect IPOs on U.S. stockexchanges and markets. Venture-backed IPOsare those with at least one U.S.-domiciledventure fund investor.

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Year1985 48 763 13 16 1,991 32 47 2.8 3.91986 104 2,414 14 23 166,260 53 1,889 3.9 4.21987 86 2,125 17 25 10,790 46 150 3.7 3.91988 43 769 15 18 20,523 51 555 3.2 3.71989 42 873 16 21 5,479 51 166 3.9 4.21990 47 1,108 20 24 5,886 60 178 3.6 4.21991 120 3,726 27 31 14,151 78 168 4.7 5.01992 150 5,431 24 36 15,759 68 147 4.5 5.01993 175 6,141 24 35 14,430 75 129 5.4 5.81994 140 4,004 24 29 9,854 67 91 4.7 5.31995 184 7,859 36 43 17,046 103 136 3.8 4.81996 256 12,666 35 49 40,360 111 191 3.2 4.11997 141 5,831 33 41 17,784 99 146 3.0 6.41998 79 4,221 43 53 9,649 149 214 2.5 3.11999 280 24,005 70 86 86,669 294 425 2.9 3.12000 238 27,443 83 115 63,610 336 464 3.1 3.72001 37 4,130 80 112 15,545 304 576 4.0 4.42002 24 2,333 89 97 8,322 266 347 3.3 5.02003 26 2,024 71 78 7,412 252 285 5.4 5.62004 82 10,032 70 122 50,268 254 613 5.5 6.12005 59 5,113 68 87 39,702 202 673 5.2 5.32006 68 7,127 85 105 71,467 293 1,067 5.4 5.62007 92 12,365 97 134 68,282 361 742 6.0 6.02008 7 765 83 109 3,645 278 521 7.4 7.32009 13 1,980 123 152 9,192 548 707 5.9 6.92010 68 7,609 93 112 111,386 431 1,662 5.0 5.92011 51 10,690 106 210 94,987 606 1,862 6.3 7.02012 49 21,451 89 438 122,264 371 2,495 7.2 7.8

Mean Timeto Exit (yrs)

Num ofIPOs

OfferAmount

($Mil)Med Offer

Amt ($Mil)Mean OfferAmt ($Mil)

Post OfferValue ($Mil)

Med PostValue ($Mil)

Mean PostValue ($Mil)

Median Timeto Exit (yrs)

Figure 4.03Venture-Backed IPOs 1985 to 2012

Value and Time to Exit Characteristics

tion exits reported in this chapter are secondary salesand trade sales that completed where the companywas domiciled in the United States and had at leastone United States domiciled venture capital (privateequity) investor.

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Figure 4.04Venture-Backed IPOs by MoneyTree™ Industry

Total Offering Size ($ Millions)

Figure 4.05Venture-Backed IPOs by MoneyTree™ Industry

Total Number of Companies

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Media and Entertainment 51 599 22 3 17 10 103 253 710 562 207 659 505 199 2,995 1,243Software 52 270 206 161 135 192 476 409 846 447 2,366 1,869 912 953 5,243 4,924Biotechnology 38 349 217 26 51 66 964 848 473 296 437 1,250 590 197 587 4,211IT Services 15 4 32 0 0 0 163 48 41 68 308 396 151 239 2,146 2,030Networking and Equipment 25 105 136 42 43 82 346 284 233 457 313 749 416 235 3,050 4,339Telecommunications 27 89 421 79 30 141 22 212 766 277 492 1,498 379 881 4,720 5,304Consumer Products and Services 7 177 7 8 91 5 186 240 156 58 335 177 160 541 602 295Industrial/Energy 29 58 177 75 127 242 346 325 670 450 495 1,064 778 138 207 1,107Financial Services 0 91 46 10 47 0 21 1,248 51 237 273 1,597 209 45 521 50Business Products and Services 58 33 0 2 0 44 66 70 193 70 35 496 185 58 1,068 594Semiconductors 15 47 368 79 62 29 210 86 311 164 696 0 319 37 221 1,052Medical Devices and Equipment 61 89 147 22 71 90 241 601 266 388 995 1,666 444 98 0 634Computers and Peripherals 135 306 267 116 150 74 118 295 203 122 339 357 75 59 215 617Electronics/Instrumentation 7 60 17 0 0 48 0 91 372 155 296 261 111 76 135 251Healthcare Services 89 15 14 0 14 69 435 144 132 180 162 269 235 123 458 156Other 0 54 0 0 0 0 0 12 0 0 0 0 203 0 101 177Retailing/Distribution 154 67 48 146 35 18 29 265 718 71 111 358 159 344 1,736 459Total 763 2,414 2,125 769 873 1,108 3,726 5,431 6,141 4,004 7,859 12,666 5,831 4,221 24,005 27,443

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012M 0 353 75 1,422 376 864 209 0 0 731 2,210 16,236

405 259 330 2,466 570 768 1,471 344 604 1,178 3,310 2,022353 342 442 1,616 897 957 1,318 6 153 1,070 997 854

0 0 0 49 140 207 836 0 0 379 353 636275 0 0 69 0 479 313 0 0 267 0 316173 0 175 594 651 731 1,591 0 402 197 805 305120 39 82 280 3 542 154 0 163 727 847 262747 0 0 638 299 1,114 1,007 0 88 1,040 984 247771 231 353 1,447 706 551 1,178 0 0 558 0 176

0 248 62 0 507 0 1,202 0 0 190 322 152133 0 381 522 472 136 975 0 0 534 255 130673 456 0 806 380 633 1,407 134 0 299 145 115

0 63 0 0 8 0 124 188 0 0 367 046 0 0 0 0 0 0 0 438 124 95 0

306 83 59 124 77 0 130 94 132 138 0 0O 100 0 0 0 0 0 0 0 0 0 0 0R 26 259 65 0 28 144 452 0 0 178 0 0T 4,130 2,333 2,024 10,032 5,113 7,127 12,365 765 1,980 7,609 10,690 21,451

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Biotechnology 5 16 14 2 6 4 31 27 21 14 16 33 22 7 9 47 4Software 3 15 10 8 8 9 14 13 26 19 56 54 26 21 75 58 5IT Services 1 1 3 0 0 0 5 1 1 3 5 9 4 5 29 16 0Media and Entertainment 4 10 2 1 1 2 3 7 10 9 4 12 7 3 34 11 0Consumer Products and Services 1 5 1 1 3 1 6 7 4 2 9 7 6 7 9 3 3 1 2 3 1 4 1 0 1 5 2 3Industrial/Energy 3 5 13 6 4 6 10 9 19 15 11 18 17 3 3 7 4 0 0 3 3 7 5 0 1 6 3 3Networking and Equipment 1 2 5 2 2 2 8 11 6 13 10 10 6 5 26 17 2Telecommunications 6 6 6 2 1 4 1 7 14 10 8 18 7 9 37 33 1Financial Services 0 3 3 1 3 0 1 6 2 8 5 10 4 2 7 1 2 2 4 7 2 4 3 0 0 5 0 2Semiconductors 1 4 5 5 3 1 9 4 13 9 16 0 8 1 4 10 2Business Products and Services 1 2 0 1 0 1 3 3 6 3 1 6 3 1 15 8 0 1 1 0 4 0 4 0 0 1 2 1Medical Devices and Equipment 3 10 8 4 5 8 12 27 15 17 20 44 13 2 0 11 7Computers and Peripherals 9 14 9 5 4 3 3 11 9 6 8 11 3 3 4 6 0 1 0 0 1 0 1 1 0 0 2 0Electronics/Instrumentation 1 6 3 0 0 2 0 4 13 5 9 10 3 1 2 3 1 0 0 0 0 0 0 0 1 1 1 0Healthcare Services 4 1 1 0 1 3 13 6 4 4 3 5 7 3 7 2 4 1 1 1 1 0 1 1 1 1 0 0Other 0 1 0 0 0 0 0 1 0 0 0 0 1 0 2 1 1 0 0 0 0 0 0 0 0 0 0 0Retailing/Distribution 5 3 3 5 1 1 1 6 12 3 3 9 4 6 17 4 1 1 1 0 1 1 2 0 0 2 0 0Total 48 104 86 43 42 47 120 150 175 140 184 256 141 79 280 238 37

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012B 4 7 26 15 17 21 1 2 12 11 12

5 4 9 6 7 13 2 5 10 9 9I 0 0 1 1 2 6 0 0 4 3 6M 4 1 6 4 6 2 0 0 5 8 4C 1 2 3 1 4 1 0 1 5 2 3I 0 0 3 3 7 5 0 1 6 3 3N 0 0 1 0 4 3 0 0 3 0 3T 0 2 6 6 3 9 0 2 3 5 3F 2 4 7 2 4 3 0 0 5 0 2S 0 3 6 6 2 10 0 0 6 3 2B 1 1 0 4 0 4 0 0 1 2 1M 4 0 13 8 11 11 2 0 4 2 1C 1 0 0 1 0 1 1 0 0 2 0E 0 0 0 0 0 0 0 1 1 1 0H 1 1 1 1 0 1 1 1 1 0 0O 0 0 0 0 0 0 0 0 0 0 0R 1 1 0 1 1 2 0 0 2 0 0T 24 26 82 59 68 92 7 13 68 51 49

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IInndduussttrryy MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaannBiotechnology 4.5 4.6 4.5 4.6 8.4 6.7 6.0 5.1 5.6 5.1 5.6 5.5Business Products and Services 2.0 1.7 N/A N/A 2.7 2.7 5.7 5.7 N/A N/A 4.3 4.4Computers and Peripherals 4.3 2.8 N/A N/A 15.7 15.7 N/A N/A N/A N/A 0.8 0.8Consumer Products and Services 1.4 1.5 3.7 4.6 4.6 4.6 4.3 4.3 5.5 5.2 5.5 5.5Electronics/Instrumentation 3.4 2.7 6.3 6.3 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 7Financial Services 1.0 1.0 12.9 12.9 1.9 1.9 5.0 4.7 5.5 5.3 3.0 3.0Healthcare Services 3.3 3.3 5.2 5.2 7.1 7.1 5.7 5.7 8.9 8.9 3.9 3.9Industrial/Energy 3.4 3.2 1.1 0.4 N/A N/A N/A N/A 7.7 3.4 8.2 7.0IT Services 1.9 1.8 N/A N/A N/A N/A N/A N/A 5.3 5.3 3.8 3.8Media and Entertainment 4.3 3.2 N/A N/A 4.4 3.5 5.7 5.7 6.1 5.4 4.6 4.4Medical Devices and Equipment 5.1 3.9 4.8 4.5 3.7 3.2 N/A N/A 8.1 7.3 6.6 7.1Networking and Equipment 3.3 3.0 4.2 4.2 N/A N/A N/A N/A 6.1 6.1 N/A N/A 7Other 1.3 1.3 2.6 2.6 N/A 3.4 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/ARetailing/Distribution 1.9 1.8 4.3 4.3 3.4 3.4 4.0 4.0 N/A N/A 6.1 6.1Semiconductors 5.5 3.7 2.9 2.9 N/A N/A 5.3 4.1 6.5 6.4 4.3 5.0Software 3.5 3.3 4.2 4.6 3.3 3.0 6.1 5.6 5.3 5.7 5.4 5.6Telecommunications 3.6 3.1 1.4 1.4 N/A N/A 6.5 6.5 5.3 5.1 5.0 4.1

2200005522000000 2200004422000011 22000022 22000033MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann MMeeaann MMeeddiiaann

5.4 5.1 5.0 5.0 7.0 7.0 10.4 10.4 5.8 4.9 6.6 5.5 5.9 6.0N/A N/A 6.1 5.2 N/A N/A N/A N/A 0.6 0.6 4.2 4.2 5.7 5.7N/A N/A 6.7 6.7 8.7 8.7 N/A N/A N/A N/A 7.3 7.3 N/A N/A

C 4.9 4.9 17.8 17.8 N/A N/A 5.3 5.3 5.1 4.3 1.9 3.8 7.2 8.3N/A N/A N/A N/A N/A N/A 7.8 7.8 3.7 3.7 12.5 12.5 N/A N/A

F 4.7 4.8 3.1 3.4 N/A N/A N/A N/A 7.0 8.9 N/A N/A 9.3 9.3N/A N/A 9.9 9.9 10.2 10.2 2.0 2.0 2.6 2.6 N/A N/A N/A N/A

I 2.1 0.6 1.0 0.9 N/A N/A 1.4 1.4 3.1 3.1 7.0 7.2 5.2 5.46.0 6.0 6.1 6.5 N/A N/A N/A N/A 6.2 6.4 9.9 11.8 10.1 7.98.4 8.2 6.4 6.4 N/A N/A N/A N/A 8.7 10.1 6.7 6.2 6.3 6.46.9 5.3 6.7 6.6 6.0 6.0 N/A N/A 5.2 5.2 5.5 5.5 4.9 4.97.0 6.6 6.3 6.7 N/A N/A N/A N/A 7.4 7.4 N/A N/A 10.1 9.9

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/AR 1.5 1.5 3.1 3.1 N/A N/A N/A N/A 2.2 2.2 N/A N/A N/A N/AS 6.7 6.7 7.9 7.2 N/A N/A N/A N/A 4.9 4.4 7.6 7.6 13.1 13.1

6.5 6.0 6.5 5.9 6.7 6.7 6.4 7.3 7.5 6.3 7.1 5.2 8.5 7.64.2 3.9 6.8 7.2 N/A N/A 10.4 10.4 8.7 9.1 8.0 9.8 9.4 8.8

2200112222001100 2200111122000099220000882200007722000066

Figure 4.06Average and Median Years Between First Funding

and the IPO by Industry 2000 to 2012

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Number Number ($ Millions)Year Total Known Price Average1985 7 3 300.2 100.11986 12 3 178.9 59.61987 14 6 1,072.2 178.71988 33 19 3,839.2 202.11989 28 16 1,829.8 114.41990 29 12 929.7 77.51991 29 11 774.5 70.41992 92 59 3,450.8 58.51993 100 61 4,355.0 71.41994 108 70 7,812.4 111.61995 144 90 10,452.5 116.11996 158 117 19,582.9 167.41997 220 150 31,635.1 210.91998 277 183 35,142.5 192.01999 307 204 62,637.2 307.02000 475 304 134,860.0 443.62001 462 219 64,040.5 292.42002 444 221 35,654.9 161.32003 428 201 25,760.9 128.22004 559 290 55,117.1 190.12005 680 311 66,871.1 215.02006 774 333 111,154.3 333.82007 878 361 149,705.1 414.72008 669 227 63,442.3 279.52009 493 162 55,101.1 340.12010 845 285 97,165.3 340.92011 836 294 88,599.3 301.42012 916 288 125,435.7 435.5

Figure 4.08Private Equity-Backed

Merger & Acquisitions by Year

Number Number ($ Millions)Year Total Known Price Average1985 6 3 300.2 100.11986 8 1 63.4 9.11987 10 4 667.2 111.21988 17 9 920.7 115.11989 20 10 746.9 74.71990 19 7 120.3 10.01991 16 4 190.5 15.91992 69 43 2,119.1 81.51993 59 36 1,332.9 58.01994 82 56 3,207.1 123.41995 92 58 3,801.8 111.81996 107 76 8,230.8 265.51997 143 99 7,743.6 176.01998 189 113 8,002.0 105.31999 227 154 38,688.0 530.02000 379 245 79,996.4 597.02001 384 175 25,115.6 120.22002 363 165 11,913.2 60.22003 323 134 8,240.8 43.62004 402 199 28,846.1 142.12005 443 198 19,600.2 80.02006 485 207 24,288.5 87.42007 488 200 30,745.5 106.82008 416 134 16,236.9 57.62009 350 108 12,364.9 51.12010 521 149 17,700.3 47.62011 488 169 24,093.2 75.52012 449 121 21,516.2 65.6

Figure 4.07Venture-Backed

Merger & Acquisitions by Year

Average acquisition price is calculated by dividing total knownacquisition proceeds by the number of transactions where theproceeds are known, not the total number of transactions. Note:Private Equity includes venture capital, buyouts, mezzanine, andother private equity financed companies. Therefore, transactionsfrom Figure 5.07 are included here.

Average acquisition price is calculated by dividing total knownacquisition proceeds by the number of transactions where theproceeds are known, not the total number of transactions

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IInndduussttrryy 11998855 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Software 0 0 25 0 0 22 83 264 116 455 617 1,228 2,122 2,888 5Biotechnology 0 0 0 0 0 0 68 33 25 8 89 388 265 141Media and Entertainment 0 0 0 0 0 0 30 0 119 29 38 2,160 2,106 343IT Services 0 0 0 0 0 0 0 0 0 0 15 315 80 523Telecommunications 0 0 0 0 0 0 0 4 298 790 328 381 1,133 521Medical Devices and Equipment 201 0 3 0 317 0 0 234 43 295 110 298 507 130Industrial/Energy 99 63 0 238 59 20 0 203 122 764 53 1,127 193 381Semiconductors 0 0 0 0 0 0 0 0 0 59 84 54 11 627Computers and Peripherals 0 0 0 149 61 79 0 16 110 58 140 827 373 422Healthcare Services 0 0 0 199 60 0 0 88 0 178 475 130 180 64Business Products and Services 0 0 640 0 0 0 0 0 0 0 0 109 181 47Consumer Products and Services 0 0 0 0 0 0 10 1 0 26 23 46 237 388Financial Services 0 0 0 140 0 0 0 1,204 91 144 734 67 34 459Networking and Equipment 0 0 0 18 250 0 0 0 317 352 1,024 1,090 178 981Electronics/Instrumentation 0 0 0 81 0 0 0 36 13 49 42 12 105 60Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3Retailing/Distribution 0 0 0 95 0 0 0 35 80 0 29 0 39 28TToottaall 330000 63 667 921 747 120 190 2,119 1,333 3,207 3,802 8,231 7,744 8,002

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012S 5,621 23,475 3,689 1,886 2,098 4,972 4,870 7,704 6,923 5,575 1,745 3,739 6,756 5,199

846 1,206 679 115 259 688 2,478 2,104 6,050 1,266 843 3,720 3,948 2,727M 10,996 3,227 6,315 999 209 3,355 2,980 2,771 3,039 2,251 892 1,088 1,013 2,312I 699 2,384 491 612 1,002 1,999 1,066 795 2,482 745 203 1,415 2,084 2,072

2,218 7,528 2,630 1,125 301 1,678 1,310 2,287 1,785 1,789 2,205 826 451 1,979298 433 932 414 580 1,168 1,268 1,704 1,818 499 2,569 1,571 3,809 1,639962 1,396 858 182 1,006 2,128 1,003 1,425 1,812 832 886 1,276 1,674 1,141

1,903 7,210 2,099 2,703 359 688 575 1,029 964 664 628 1,040 743 1,035721 4,610 357 51 47 680 248 492 6 49 500 348 557 764

0 286 177 818 37 6,227 624 968 542 27 5 755 601 756397 1,637 157 870 151 3,024 132 409 2,124 570 314 181 315 697385 2,611 519 343 418 444 582 486 245 284 0 141 1,143 615

1,299 1,355 617 557 98 250 890 985 1,896 988 0 812 466 43511,521 18,359 5,403 818 813 1,311 1,290 628 549 609 643 678 24 146

133 3,456 189 71 6 116 72 38 87 80 0 0 510 0O 0 0 0 350 0 0 212 0 246 0 0 95 0 0R 689 824 4 0 857 118 0 463 180 10 930 14 0 0T 38,688 79,996 25,116 11,913 8,241 28,846 19,600 24,289 30,746 16,237 12,365 17,700 24,093 21,516

Figure 4.09Venture-Backed Acquisitions by MoneyTree™ Industry

Total Transaction Values 1985 to 2011 ($ Million)

Figure 4.10Venture-Backed Acquisitions by MoneyTree™ Industry

Number of Companies 1985 to 2012

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Software 0 3 2 0 1 6 1 11 15 24 29 21 43 62 59 119 94 128 120 1IT Services 0 1 0 1 1 1 0 0 0 0 2 5 7 11 16 22 31 38 25Media and Entertainment 0 0 0 0 0 0 1 1 4 2 3 7 11 10 20 40 51 27 15Industrial/Energy 1 2 2 3 3 3 2 8 3 9 5 8 9 18 11 13 12 12 9Biotechnology 0 0 0 0 1 1 1 4 2 3 10 9 9 11 12 16 21 9 15Medical Devices and Equipment 2 0 1 2 4 2 0 13 4 8 7 6 13 11 10 9 19 12 10Telecommunications 0 1 0 0 1 0 1 2 4 5 3 6 12 12 18 31 32 40 37Business Products and Services 0 0 1 1 0 0 1 1 0 1 0 3 2 4 4 15 29 13 15Semiconductors 0 0 0 0 0 1 2 1 1 3 3 2 2 8 9 21 14 14 11Networking and Equipment 0 0 1 2 1 0 0 2 7 8 8 13 4 8 22 24 15 20 23Consumer Products and Services 0 0 0 0 0 0 1 2 3 1 1 5 6 7 10 16 14 7 11Healthcare Services 0 1 0 1 2 0 1 4 1 8 9 4 3 9 2 9 5 13 3Financial Services 0 0 0 1 0 0 0 5 2 4 4 5 4 5 13 13 19 13 9Computers and Peripherals 1 0 2 2 4 4 2 9 8 4 5 9 8 7 11 13 6 2 8 8 8 1Electronics/Instrumentation 0 0 1 3 2 0 1 4 2 1 1 4 6 4 3 4 7 7 4 5 3 5 5 7 4 5 4 4Retailing/Distribution 2 0 0 1 0 1 2 2 3 1 1 0 4 2 7 14 15 7 7 7 8 1Other 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1 1 1 1 0 2 2 0 1 2 0Total 6 8 10 17 20 19 16 69 59 82 92 107 143 189 227 379 384 363 323

2004 2005 2006 2007 2008 2009 2010 2011 2012S 133 162 175 157 147 119 169 171 152

33 22 30 38 27 22 45 47 5033 31 26 50 36 33 65 64 4312 21 17 20 22 16 24 20 3124 30 32 32 24 19 38 34 3023 27 25 26 13 26 21 37 2925 34 42 43 30 29 46 23 2920 22 26 35 14 13 14 13 1517 17 20 19 24 22 26 15 15

30 22 28 15 25 23 23 18 1310 11 10 11 11 7 7 8 117 12 13 11 12 7 14 15 914 12 16 12 10 5 12 9 8

C 8 8 10 3 7 4 6 7 6E 5 3 5 5 7 4 5 4 4R 7 8 10 9 5 1 5 1 4O 1 1 0 2 2 0 1 2 0T 402 443 485 488 416 350 521 488 449

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Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Industrial/Energy 2 3 3 9 5 4 9 17 20 12 25 20 35 39 33 37 35 33Software 0 3 2 1 1 6 2 13 17 26 30 21 44 66 67 127 98 133Media and Entertainment 0 1 0 0 2 1 1 1 6 8 5 12 17 19 29 54 58 31IT Services 0 1 0 3 1 1 0 1 0 0 3 6 12 12 22 25 32 41Business Products and Services 0 0 1 3 0 2 2 2 2 1 3 5 7 9 7 23 34 20Medical Devices and Equipment 2 0 2 2 4 3 0 15 5 9 11 9 17 17 14 13 20 14Consumer Products and Services 0 2 1 3 2 1 2 6 10 4 5 13 13 19 14 23 25 22Biotechnology 0 0 0 0 3 1 1 4 3 6 13 10 10 16 14 18 22 12Healthcare Services 0 1 0 1 2 0 1 5 1 9 10 7 5 12 4 11 8 16Telecommunications 0 1 1 0 1 1 1 4 4 8 4 8 14 14 20 38 35 45Financial Services 0 0 0 1 0 0 0 5 8 6 10 12 12 11 17 16 26 19Retailing/Distribution 2 0 0 3 0 3 5 3 5 2 3 2 11 8 13 19 18 9Networking and Equipment 0 0 1 2 1 0 0 2 7 8 10 13 4 11 24 26 16 20Semiconductors 0 0 0 0 0 1 2 1 1 3 4 2 2 10 11 26 15 16Computers and Peripherals 1 0 2 2 4 4 2 9 9 5 6 9 9 8 13 15 7 3 9 9 1Electronics/Instrumentation 0 0 1 3 2 1 1 4 2 1 1 9 8 5 5 4 12 9Other 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 0 1 1 3 4 1Total 7 12 14 33 28 29 29 92 100 108 144 158 220 277 307 475 462 444

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012I 46 65 126 114 148 114 58 121 133 209

127 143 170 197 183 163 131 200 206 18827 43 43 54 86 50 47 79 84 7627 36 26 42 49 30 24 56 51 6218 29 33 44 65 33 19 30 39 5415 27 35 33 40 20 41 43 55 5025 39 33 52 62 39 25 42 42 4417 28 36 33 36 28 26 48 42 404 14 25 31 30 22 10 33 38 38

43 29 37 53 52 36 35 57 29 3813 19 19 21 23 19 14 27 27 2814 14 21 23 29 17 6 29 14 2725 31 28 32 21 30 25 25 25 1811 19 19 21 22 29 22 29 19 169 9 13 11 5 9 5 7 9 124 10 6 9 19 16 4 11 15 93 4 10 4 8 14 1 8 8 7

T 428 559 680 774 878 669 493 845 836 916

Figure 4.12Private Equity-Backed Acquisitions by MoneyTree™ Industry

Number of Companies 1985 to 2012

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactionsfrom Figure 5.10 are included here.

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactionsfrom Figure 5.09 are included here.

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Industrial/Energy 99 63 25 1,490 311 20 102 792 1,881 922 2,490 2,120 4,610 4,738Media and Entertainment 0 0 0 0 32 220 30 0 213 350 398 3,428 3,195 11,274Biotechnology 0 0 0 0 766 0 68 33 25 80 422 407 396 622Software 0 0 25 16 0 22 83 686 128 455 629 1,228 2,252 3,041Telecommunications 0 0 0 0 0 0 0 79 298 1,042 698 2,399 1,187 1,331Healthcare Services 0 0 0 199 60 0 0 94 0 178 598 1,494 3,702 317Financial Services 0 0 0 140 0 0 0 1,204 461 695 2,283 2,728 2,745 1,520Consumer Products and Services 0 116 0 1,444 33 45 10 30 634 1,729 699 1,078 1,360 1,645Retailing/Distribution 0 0 0 295 0 0 475 96 94 90 472 452 8,384 3,738Business Products and Services 0 0 640 0 0 263 7 12 0 0 200 419 207 1,331Medical Devices and Equipment 201 0 383 0 317 167 0 373 182 1,731 244 1,000 1,298 2,075Other 0 0 0 0 0 0 0 0 0 0 0 0 0 229IT Services 0 0 0 7 0 0 0 0 0 0 15 485 1,620 523Electronics/Instrumentation 0 0 0 81 0 115 0 36 13 49 42 375 107 162Networking and Equipment 0 0 0 18 250 0 0 0 317 352 1,024 1,090 178 1,337Semiconductors 0 0 0 0 0 0 0 0 0 59 97 54 11 640Computers and Peripherals 0 0 0 149 61 79 0 16 110 81 140 827 384 620Total 300 179 1,072 3,839 1,830 930 775 3,451 4,355 7,812 10,452 19,583 31,635 35,143

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012I 2,841 2,973 3,193 4,073 7,317 12,455 21,258 24,179 23,751 12,510 1,850 25,115 25,706 31,281M 19,833 42,607 6,332 4,439 1,612 6,958 5,379 26,770 8,738 3,024 1,678 2,248 4,022 15,097

879 2,102 679 2,540 927 1,738 2,978 2,104 7,127 1,443 4,857 7,052 4,499 13,18210,115 25,732 3,795 2,121 3,983 5,574 5,478 9,493 20,762 7,517 2,262 15,688 14,348 12,969

T 2,426 11,257 32,034 7,332 451 2,232 5,731 12,623 4,451 2,162 31,482 3,795 3,516 9,295112 668 617 1,237 37 7,403 3,440 3,643 4,054 780 581 8,210 4,942 8,034

1,605 1,383 1,116 3,038 292 474 2,957 985 3,349 3,792 3,463 2,271 9,887 7,077575 3,612 1,628 2,711 3,656 5,264 5,981 10,238 23,880 2,242 1,451 7,257 2,285 4,297

3,265 1,660 2,227 175 3,174 1,042 978 1,700 30,996 924 945 6,509 554 4,259694 2,532 513 1,356 253 4,077 1,238 11,642 5,825 6,504 561 959 2,540 3,890

1,324 516 1,188 940 1,243 2,078 2,304 2,845 6,073 6,131 3,422 7,477 5,660 3,7560 0 176 350 190 143 1,676 630 411 8,203 0 2,865 871 3,521

2,834 3,138 533 674 1,282 2,124 2,192 929 4,838 5,509 203 3,696 2,172 2,685312 3,456 1,226 381 6 422 948 72 3,210 431 0 1,333 2,407 2,275

12,000 21,167 6,033 818 934 1,406 2,348 1,536 946 782 1,218 678 3,838 1,814S 3,066 7,324 2,224 3,248 359 731 1,251 1,272 1,266 719 628 1,665 743 1,152

758 4,732 528 223 47 995 735 492 29 769 500 348 609 85162,637 134,860 64,041 35,655 25,761 55,117 66,871 111,154 149,705 63,442 55,101 97,165 88,599 125,436

Figure 4.11Private Equity-Backed Acquisitions by MoneyTree™ Industry

Total Transaction Values 1985 to 2012 ($ Million)

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Year < TVI 1x-4x TVI 4x-10x TVI >10x TVI1995 14% 26% 22% 38%1996 8% 29% 29% 34%1997 13% 40% 16% 31%1998 15% 23% 31% 31%1999 15% 15% 25% 45%2000 9% 22% 23% 46%2001 41% 19% 23% 17%2002 51% 26% 13% 10%2003 46% 39% 10% 5%2004 38% 33% 19% 10%2005 30% 38% 17% 15%2006 30% 37% 18% 15%2007 24% 33% 24% 19%2008 30% 30% 24% 16%2009 47% 24% 20% 9%2010 32% 33% 21% 14%2011 20% 29% 30% 21%2012 20% 27% 32% 21%

Values vs. Cumulative Total Venture InvestmentRelationship Between Transaction

Figure 4.13M&A Transaction Values vs.

Amount Invested

This chart is prepared by analyzing all deals where total venture investment and acquisition priceare confirmed. Each deal is classified as a ratio of company acquisition (exit) price to total ven-ture investment from all rounds. This chart compares the number of deals in each category. Anacquisition where deal price is less than the total venture investment (“<TVI”) clearly did notresult in a good return. Four times the investment to 10 times the investment can be a good out-come. An acquisition for more than 10 times venture investment is usually a nice outcome.

* Beginning in 2012, companies could elect confidential registration. Those, of course, cannot becounted in the number in registration. As of this writing, it appears that half or more of compa-nies seeking to go public are electing confidential registration.

Year2003 29 312004 94 572005 57 162006 57 362007 86 312008 6 202009 12 232010 75 312011 53 602012 49 27*

# of Moneytree Cos. inRegistration# of Venture Backed IPOs

Figure 4.14Venture-Backed IPOs

Cos. in Registration vs.Number of Venture-Backed IPOs

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Year >$1B $500M-$1B $100M-$500M <$100M1995 1 4 58 62

1996 4 10 107 89

1997 1 3 55 63

1998 1 3 29 11

1999 16 31 147 10

2000 12 25 96 4

2001 5 5 12 5

2002 - 7 15 2

2003 - 2 22 2

2004 4 10 64 4

2005 4 7 35 13

2006 7 11 45 4

2007 15 16 57 4

2008 2 - 4 1

2009 3 4 6 -

2010 20 6 40 2

2011 17 13 19 2

2012 9 9 29 2

* Count only includes IPOs with disclosed post-offer values

Venture-Backed IPO Post Offer Value Ranges by Number of Companies

Figure 4.15Post-Offer Value Ranges

Year >$1B $500M-$1B $100M-$500M <$100M1995 - 1 10 47

1996 1 2 17 56

1997 - 1 21 77

1998 - - 27 86

1999 2 12 57 83

2000 15 23 101 106

2001 3 3 44 125

2002 1 3 26 136

2003 - 2 28 104

2004 5 5 44 145

2005 1 3 55 140

2006 2 3 60 142

2007 1 12 71 117

2008 2 4 36 92

2009 - 6 31 72

2010 - 6 50 93

2011 1 10 60 98

2012 4 6 48 64

* Count only includes transactions with disclosed values

Venture-Backed M&A Deal Value Ranges by Number of Companies

Figure 4.16M&A Deal Value Ranges

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# ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil)Argentina - - - - 1 332.8 - - - - - - - - - - 1 3Bermuda - - - - - - - - - - - - 1 6Bahamas - - 1 137.5 - - - - - - - - - - - - 1 1Canada 1 91.1 - - 1 57.5 - - - - - - 1 5China 5 621.1 5 624.7 12 2,482.5 - - 2 220.0France - - - - - - - - - - 1 7Hong Kong - - - - - - - - - - 1 1India - - - - - - - - - - 1 8Israel 2 67.5 1 78.0 1 26.3 - - - - - - - - - - 4 1Netherlands - - - - - - - - - - - - 1 3Norway - - 1 43.8 - - - - - - - - - - 1 4Russia - - 1 380.5 - - - - - - - - 1 1,43South Korea 2 190.8 1 144.1 - - - - - - - - - - - - 3 3Taiwan 1 70.4 - - - - - - - - - - - - - - 1 7US 48 4,072.5 58 5,718.4 77 9,466.5 7 765.0 11 1,759.8

Country 20082005 2006 2007 2009

# ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil) # ExitsOffer Amt

($ Mil)- - - - - - 1 332.8- - 1 621.3 - - 1 621.3- - - - - - 1 137.5- - 1 54.0 - - 3 202.6

20 2,738.5 8 1,739.7 2 165.7 54 8,592.11 77.0 - - 1 77.0

1 103.3 - - - - 1 103.31 80.5 - - - - 1 80.5- - - - - - 4 171.8- - 1 304.6 - - 1 304.6- - - - - - 1 43.8- - 1 1,434.8 - - 2 1,815.3- - - - - - 3 334.9- - - - - - 1 70.4

46 4,686.8 38 6,458.1 47 21,285.4 332 54,212.6

Total2010 2011 2012

Figure 4.17Venture-Backed US Company IPOs By Year

By Country

Year1995 17.0 7.9 9.2 2.2 4.21996 40.4 12.7 27.7 3.7 7.51997 17.8 5.8 12.0 2.7 4.41998 9.6 4.2 5.4 2.4 2.31999 86.7 24.0 62.7 11.0 5.72000 63.6 27.4 36.2 13.0 2.82001 15.5 4.1 11.4 2.6 4.42002 8.3 2.3 6.0 1.7 3.52003 7.4 2.0 5.4 2.4 2.22004 50.3 10.0 40.2 6.7 6.02005 39.7 5.1 34.6 3.1 11.22006 71.5 7.1 64.3 4.3 15.02007 68.3 12.4 55.9 6.7 8.32008 3.6 0.8 2.9 0.4 8.02009 9.2 2.0 7.2 0.6 12.02010 111.4 7.6 103.8 5.9 17.62011 95.0 10.7 84.3 6.6 12.82012 122.3 21.5 100.8 6.7 15.0

Total VentureInv

($ Billion) Ratio

Post OfferValue

($ Billion)Offer Amt($ Billion)

IPO PreMoney

Valuation

Figure 4.18Ratio of IPO Pre-Money Valuation

To Amount Invested

Note: To be included in this chart, non-U.S. based companies must be trading on a U.S.exchange/market and have at least 1 U.S. venture fund investor.

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Avg Upper LowerVal

($ Mil)Quartile($ Mil)

Quartile($ Mil)

1995 136.4 1,068.5 144.8 103.3 60.9 10.41996 191.3 4,548.9 183.1 111.1 64.2 9.51997 145.8 1,106.3 60.3 98.8 59.8 6.61998 214.4 1,116.2 226.1 148.8 101.4 12.51999 424.8 2,970.2 480.5 294.4 193.0 16.92000 464.3 2,767.7 539.7 335.8 213.9 18.02001 575.7 3,464.1 723.7 303.5 141.0 46.62002 346.7 822.4 541.0 266.2 165.7 36.82003 285.1 821.9 359.2 251.9 170.4 41.92004 613.0 23,053.7 391.0 254.1 151.7 21.62005 672.9 22,422.9 396.8 201.9 133.0 4.62006 1,066.7 39,248.4 534.9 293.2 179.5 70.92007 742.2 14,035.4 762.8 360.8 268.6 50.02008 520.7 1,443.1 1,011.5 278.5 184.4 75.82009 707.1 1,622.0 1,089.0 547.9 306.9 212.92010 1,662.5 23,725.8 1,414.1 430.5 223.0 23.42011 1,862.5 16,795.6 1,514.7 606.3 327.1 94.82012 2,495.2 81,247.2 727.2 371.0 243.6 75.2

Min($ Mil)Year of IPO

Max($ Mil)

Median($ Mil)

Figure 4.19Venture-Backed IPOs Valuations

As Of IPO

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Appendix A: Glossary

“A” round – a financing event whereby angel groupsand / or venture capitalists become involved in a fastgrowth company that was previously financed byfounders and their friends and families.

Accredited investor – a person or legal entity, suchas a company or trust fund, that meets certain networth and income qualifications and is considered tobe sufficiently sophisticated to make investmentdecisions in private offerings. Regulation D of theSecurities Act of 1933 exempts accredited investorsfrom protection of the Securities Act. The Securitiesand Exchange Commission has proposed revisions tothe accredited investor qualifying rules, which mayor may not result in changes for venture investors.The current criteria for a natural person are: $1 mil-lion net worth or annual income exceeding $200,000individually or $300,000 with a spouse. Directors,general partners and executive officers of the issuerare considered to be accredited investors.

Alternative asset class – a class of investments thatincludes venture capital, leverage buyouts, hedgefunds, real estate, and oil and gas, but excludes pub-licly traded securities. Pension plans, college endow-ments and other relatively large institutionalinvestors typically allocate a certain percentage oftheir investments to alternative assets with an objec-tive to diversify their portfolios.

Alpha – a term derived from statistics and financetheory that is used to describe the return produced bya fund manager in excess of the return of a bench-mark index. Manager returns and benchmark returnsare measured net of the risk-free rate. In addition,manager returns are adjusted for the risk of the man-ager’s portfolio relative to the risk of the benchmarkindex. Alpha is a proxy for manager skill.

Angel – a wealthy individual that invests in compa-nies in relatively early stages of development.Usually angels invest less than $1 million per startup.

Anti-dilution – a contract clause that protects aninvestor from a substantial reduction in percentage

ownership in a company due to the issuance by thecompany of additional shares to other entities. Themechanism for making an adjustment that maintainsthe same percentage ownership is called a FullRatchet. The most commonly used adjustment pro-vides partial protection and is called WeightedAverage.

“B” round – a financing event whereby investorssuch as venture capitalists and organized angelgroups are sufficiently interested in a company toprovide additional funds after the “A” round offinancing. Subsequent rounds are called “C”, “D”and so on.

Basis point (“bp”) – one one-hundredth (1/100) of apercentage unit. For example, 50 basis points equalsone half of one percent. Banks quote variable loanrates in terms of an index plus a margin and the mar-gin is often described in basis points, such as LIBORplus 400 basis points (or, as the experts say, “beeps”).

Beta – a measure of volatility of a public stock rela-tive to an index or a composite of all stocks in a mar-ket or geographical region. A beta of more than oneindicates the stock has higher volatility than theindex (or composite) and a beta of one indicatesvolatility equivalent to the index (or composite). Forexample, the price of a stock with a beta of 1.5 willchange by 1.5% if the index value changes by 1%.Typically, the S&P500 index is used in calculatingthe beta of a stock.

Beta product – a product that is being tested bypotential customers prior to being formally launchedinto the marketplace.

Board of directors – a group of individuals, typical-ly composed of managers, investors and experts whohave a fiduciary responsibility for the well being andproper guidance of a corporation. The board is elect-ed by the shareholders.

Book – see Private placement memorandum.

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Bootstrapping – the actions of a startup to minimizeexpenses and build cash flow, thereby reducing oreliminating the need for outside investors.

Bp – see Basis point.

Bridge financing – temporary funding that willeventually be replaced by permanent capital fromequity investors or debt lenders. In venture capital, abridge is usually a short term note (6 to 12 months)that converts to preferred stock. Typically, the bridgelender has the right to convert the note to preferredstock at a price that is a 20% to 25% discount fromthe price of the preferred stock in the next financinground. See Mezzanine and Wipeout bridge.

Broad-based weighted average anti-dilution – Aweighted average anti-dilution method adjusts down-ward the price per share of the preferred stock ofinvestor A due to the issuance of new preferredshares to new investor B at a price lower than theprice investor A originally received. Investor A’s pre-ferred stock is repriced to a weighted average ofinvestor A’s price and investor B’s price. A broad-based anti-dilution method uses all common stockoutstanding on a fully diluted basis (including allconvertible securities, warrants and options) in thedenominator of the formula for determining the newweighted average price. See Narrow-based weightedaverage anti-dilution.

Burn rate – the rate at which a startup with little orno revenue uses available cash to cover expenses.Usually expressed on a monthly or weekly basis.

Business Development Company (BDC) – a pub-licly traded company that invests in private compa-nies and is required by law to provide meaningfulsupport and assistance to its portfolio companies.

Business plan – a document that describes a newconcept for a business opportunity. A business plantypically includes the following sections: executivesummary, market need, solution, technology, compe-tition, marketing, management, operations, exit strat-egy, and financials (including cash flow projections).For most venture capital funds fewer than 10 of every100 business plans received eventually receive fund-ing.

Buyout – a sector of the private equity industry. Also,the purchase of a controlling interest of a companyby an outside investor (in a leveraged buyout) or amanagement team (in a management buyout).

Buy-sell agreement – a contract that sets forth theconditions under which a shareholder must first offerhis or her shares for sale to the other shareholdersbefore being allowed to sell to entities outside thecompany.

C Corporation – an ownership structure that allowsany number of individuals or companies to ownshares. A C corporation is a stand-alone legal entityso it offers some protection to its owners, managersand investors from liability resulting from its actions.

Capital Asset Pricing Model (CAPM) – a methodof estimating the cost of equity capital of a company.The cost of equity capital is equal to the return of arisk-free investment plus a premium that reflects therisk of the company’s equity.

Capital call – when a private equity fund manager(usually a “general partner” in a partnership) requeststhat an investor in the fund (a “limited partner”) pro-vide additional capital. Usually a limited partner willagree to a maximum investment amount and the gen-eral partner will make a series of capital calls overtime to the limited partner as opportunities arise tofinance startups and buyouts.

Capital gap – the difficulty faced by some entrepre-neurs in trying to raise between $2 million and $5million. Friends, family and angel investors are typi-cally good sources for financing rounds of less than$2 million, while many venture capital funds havebecome so large that investments in this size rangeare difficult.

Capitalization table – a table showing the owners ofa company’s shares and their ownership percentagesas well as the debt holders. It also lists the forms ofownership, such as common stock, preferred stock,warrants, options, senior debt, and subordinated debt.

Capital gains – a tax classification of investmentearnings resulting from the purchase and sale ofassets. Typically, a company’s investors and foundershave earnings classified as long term capital gains

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(held for a year or longer), which are taxed at a lowerrate than ordinary income.

Capital stock – a description of stock that applieswhen there is only one class of shares. This class isknown as “common stock”.

Capital Under Management – A frequently-usedmetric for sizing total funds managed by a venturecapital or buyout firm. In practice, there are severalways of calculating this. In the US, this is the totalcommitted capital for all funds managed by a firm onwhich it collects management fees. This calculationignores whether portions of the committed capitalhave not yet been called and whether portions of thefund have been liquidated and distributed. It typical-ly does not include aging funds in their “out years”on which fees are not being collected. For purposesof this book in calculating capital managed in figure1.04, because direct data is not available, the lasteight vintage years of capital commitments is consid-ered a proxy for the industry’s total capital undermanagement.

Capped participating preferred stock – preferredstock whose participating feature is limited so that aninvestor cannot receive more than a specifiedamount. See Participating preferred stock.

Carried interest – the share in the capital gains of aventure capital fund which is allocated to the GeneralPartner. Typically, a fund must return the capitalgiven to it by limited partners plus any preferentialrate of return before the general partner can share inthe profits of the fund. The general partner will typi-cally receive a 20% carried interest, although somesuccessful firms receive 25%-30%. Also known as“carry” or “promote.”

Clawback – a clause in the agreement between thegeneral partner and the limited partners of a privateequity fund. The clawback gives limited partners theright to reclaim a portion of disbursements to a gen-eral partner for profitable investments based on sig-nificant losses from later investments in a portfolio.

Closing – the conclusion of a financing round where-by all necessary legal documents are signed and cap-ital has been transferred.

Club deal – the act of investing by two or more enti-ties in the same target company, usually involving aleveraged buyout transaction.

Co-investment – the direct investment by a limitedpartner alongside a general partner in a portfoliocompany.

Collateral – hard assets of the borrower, such as realestate or equipment, for which a lender has a legalinterest until a loan obligation is fully paid off.

Commitment – an obligation, typically the maxi-mum amount that a limited partner agrees to invest ina fund. See Capital call.

Common stock – a type of security representingownership rights in a company. Usually, companyfounders, management and employees own commonstock while investors own preferred stock. In theevent of a liquidation of the company, the claims ofsecured and unsecured creditors, bondholders andpreferred stockholders take precedence over commonstockholders. See Preferred stock.

Comparable – a private or public company withsimilar characteristics to a private or public companythat is being valued. For example, a telecommunica-tions equipment manufacturer whose market value is2 times revenues can be used to estimate the value ofa similar and relatively new company with a newproduct in the same industry. See Liquidity discount.

Control – the authority of an individual or entity thatowns more than 50% of equity in a company or ownsthe largest block of shares compared to other share-holders.

Consolidation – see Rollup.

Conversion – the right of an investor or lender toforce a company to replace the investor’s preferredshares or the lender’s debt with common shares at apreset conversion ratio. A conversion feature wasfirst used in railroad bonds in the 1800’s.

Convertible debt – a loan which allows the lender toexchange the debt for common shares in a companyat a preset conversion ratio. Also known as a “con-vertible note.”

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Convertible preferred stock – a type of stock thatgives an owner the right to convert to common sharesof stock. Usually, preferred stock has certain rightsthat common stock doesn’t have, such as decision-making management control, a promised return oninvestment (dividend), or senior priority in receivingproceeds from a sale or liquidation of the company.Typically, convertible preferred stock automaticallyconverts to common stock if the company makes aninitial public offering (IPO). Convertible preferred isthe most common tool for private equity funds toinvest in companies.

Co-sale right – a contractual right of an investor tosell some of the investor’s stock along with thefounder’s or majority shareholder’s stock if either thefounder or majority shareholder elects to sell stock toa third-party. Also known as Tag-along right.

Cost of capital – see Weighted average cost of capi-tal.

Cost of revenue – the expenses generated by the coreoperations of a company.

Covenant – a legal promise to do or not do a certainthing. For example, in a financing arrangement, com-pany management may agree to a negative covenant,whereby it promises not to incur additional debt. Thepenalties for violation of a covenant may vary fromrepairing the mistake to losing control of the compa-ny.

Coverage ratio – describes a company’s ability topay debt from cash flow or profits. Typical measuresare EBITDA/Interest, (EBITDA minus CapitalExpenditures)/Interest, and EBIT/Interest.

Cram down round – a financing event upon whichnew investors with substantial capital are able todemand and receive contractual terms that effective-ly cause the issuance of sufficient new shares by thestartup company to significantly reduce (“dilute”)the ownership percentage of previous investors.

Cumulative dividends – the owner of preferredstock with cumulative dividends has the right toreceive accrued (previously unpaid) dividends in fullbefore dividends are paid to any other classes ofstock.

Current ratio – the ratio of current assets to currentliabilities.

Data room – a specific location where potential buy-ers / investors can review confidential informationabout a target company. This information mayinclude detailed financial statements, client con-tracts, intellectual property, property leases, andcompensation agreements.

Deal flow – a measure of the number of potentialinvestments that a fund reviews in any given period.

Defined benefit plan – a company retirement plan inwhich the benefits are typically based on an employ-ee’s salary and number of years worked. Fixed bene-fits are paid after the employee retires. The employerbears the investment risk and is committed to provid-ing the benefits to the employee. Defined benefitplan managers can invest in private equity funds.

Defined contribution plan – a company retirementplan in which the employee elects to contribute someportion of his or her salary into a retirement plan,such as a 401(k) or 403(b). The employer may alsocontribute to the employee’s plan. With this type ofplan, the employee bears the investment risk. Thebenefits depend solely on the amount of money madefrom investing the employee’s contributions. Definedcontribution plan capital cannot be invested in privateequity funds.

Demand rights – a type of registration right.Demand rights give an investor the right to force astartup to register its shares with the SEC and preparefor a public sale of stock (IPO).

Dilution – the reduction in the ownership percentageof current investors, founders and employees causedby the issuance of new shares to new investors.

Dilution protection – see Anti-dilution and Fullratchet.

Direct secondary transaction – A transaction inwhich the buyer purchases shares of an operatingcompany from an existing seller. While the transac-tion is a secondary sale of shares, the transactedinterest is a primary issue purchase directly into anoperating company. Sellers are often venture capital-

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ists selling their ownership stake in a portfolio com-pany. Buyers are often funds that specialize in suchinvestments.

Disbursement – an investment by a fund in a compa-ny.

Discount rate – the interest rate used to determinethe present value of a series of future cash flows.

Discounted cash flow (DCF) – a valuation method-ology whereby the present value of all future cashflows expected from a company is calculated.

Distressed debt – the bonds of a company that iseither in or approaching bankruptcy. Some privateequity funds specialize in purchasing such debt atdeep discounts with the expectation of exerting influ-ence in the restructuring of the company and thenselling the debt once the company has meaningfullyrecovered.

Distribution – the transfer of cash or securities to alimited partner resulting from the sale, liquidation orIPO of one or more portfolio companies in which ageneral partner chose to invest.

Dividends – payments made by a company to theowners of certain securities. Typically, dividends arepaid quarterly, by approval of the board of directors,to owners of preferred stock.

Down round – a round of financing whereby the val-uation of the company is lower than the value deter-mined by investors in an earlier round.

Drag-along rights – the contractual right of aninvestor in a company to force all other investors toagree to a specific action, such as the sale of the com-pany.

Drawdown schedule – an estimate of the gradualtransfer of committed investment funds from the lim-ited partners of a private equity fund to the generalpartners.

Due diligence – the investigatory process performedby investors to assess the viability of a potentialinvestment and the accuracy of the information pro-vided by the target company.

Dutch auction – a method of conducting an IPOwhere-by newly issued shares of stock are committedto the highest bidder, then, if any shares remain, tothe next highest bidder, and so on until all the sharesare committed. Note that the price per share paid byall buyers is the price commitment of the buyer of thelast share.

Early stage – the state of a company after the seed(formation) stage but before middle stage (generatingrevenues). Typically, a company in early stage willhave a core management team and a proven conceptor product, but no positive cash flow.

Earnings before interest and taxes (EBIT) – ameasurement of the operating profit of a company.One possible valuation methodology is based on acomparison of private and public companies’ value asa multiple of EBIT.

Earnings before interest, taxes, depreciation andamortization (EBITDA) – a measurement of thecash flow of a company. One possible valuationmethodology is based on a comparison of private andpublic companies’ value as a multiple of EBITDA.

Earn out – an arrangement in which sellers of a busi-ness receive additional future payments, usuallybased on financial performance metrics such as rev-enue or net income.

Elevator pitch – a concise presentation, lasting onlya few minutes (an elevator ride), by an entrepreneurto a potential investor about an investment opportuni-ty.

Employee Stock Ownership Program (ESOP) – aplan established by a company to reserve shares foremployees.

Entrepreneur – an individual who starts his or herown business.

Entrepreneurship – the application of innovativeleadership to limited resources in order to createexceptional value.

Enterprise Value (EV) – the sum of the market val-ues of the common stock and long term debt of acompany, minus excess cash.

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Equity – the ownership structure of a company rep-resented by common shares, preferred shares or unitinterests. Equity = Assets – Liabilities.

ESOP – see Employee Stock Ownership Program.Evergreen fund – a fund that reinvests its profits inorder to ensure the availability of capital for futureinvestments.

Exit strategy – the plan for generating profits forowners and investors of a company. Typically, theoptions are to merge, be acquired or make an initialpublic offering (IPO). An alternative is to recapitalize(releverage the company and then pay dividends toshareholders).

Expansion stage – the stage of a company character-ized by a complete management team and a substan-tial increase in revenues.

Fair value – a financial reporting principle for valu-ing assets and liabilities, for example, portfolio com-panies in venture capital fund portfolios. This hasreceived much recent attention as the FinancialAccounting Standards Board (FASB) has issueddefinitive guidance (FAS 157) on this long standingprinciple.

Fairness opinion – a letter issued by an investmentbank that charges a fee to assess the fairness of anegotiated price for a merger or acquisition.

FAS 157 – an an accounting standard developed bythe Financial Accounting Standards Board (FASB)regarding the application of a fair value principle.

First refusal – the right of a privately owned compa-ny to purchase any shares that employees would liketo sell.

Founders stock – nominally priced common stockissued to founders, officers, employees, directors,and consultants.

Free cash flow to equity (FCFE) – the cash flowavailable after operating expenses, interest paymentson debt, taxes, net principal repayments, preferredstock dividends, reinvestment needs and changes inworking capital. In a discounted cash flow model todetermine the value of the equity of a firm using

FCFE, the discount rate used is the cost of equity.

Free cash flow to the firm (FCFF) – the operatingcash flow available after operating expenses, taxes,reinvestment needs and changes in working capital,but before any interest payments on debt are made. Ina discounted cash flow model to determine the enter-prise value of a firm using FCFF, the discount rateused is the weighted average cost of capital (WACC).

Friends and family financing – capital provided bythe friends and family of founders of an early stagecompany. Founders should be careful not to create anownership structure that may hinder the participationof professional investors once the company begins toachieve success.

Full ratchet – an anti-dilution protection mechanismwhereby the price per share of the preferred stock ofinvestor A is adjusted downward due to the issuanceof new preferred shares to new investor B at a pricelower than the price investor A originally received.Investor A’s preferred stock is repriced to match theprice of investor B’s preferred stock. Usually as aresult of the implementation of a ratchet, companymanagement and employees who own a fixedamount of common shares suffer significant dilution.See Narrow-based weighted average anti-dilutionand Broad-based weighted average anti-dilution.

Fully diluted basis – a methodology for calculatingany per share ratios whereby the denominator is thetotal number of shares issued by the company on theassumption that all warrants and options are exer-cised and preferred stock.

Fund-of-funds – a fund created to invest in privateequity funds. Typically, individual investors and rela-tively small institutional investors participate in afund-offunds to minimize their portfolio manage-ment efforts.

Gatekeepers – intermediaries which endowments,pension funds and other institutional investors use asadvisors regarding private equity investments.

General partner (GP) – a class of partner in a part-nership. The general partner retains liability for theactions of the partnership. Historically, venture capi-tal and buyout funds have been structured as limited

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partnerships, with the venture firm as the GP andlimited partners (LPs) being the institutional andhigh net worth investors that provide most of the cap-ital in the partnership. The GP earns a managementfee and a percentage of gains (see Carried interest).

GP – see General partner.

GP for hire – In a spin-out or a synthetic secondary,a GP for hire refers to the professional investor whomay be hired by a purchasing firm to manage the newfund created from the orphaned assets purchased. Inpast cases, the GP has often expanded its role tofundraise for and run new funds aside from the initialfund.

Going-private transaction – when a public compa-ny chooses to pay off all public investors, delist fromall stock exchanges, and become owned by manage-ment, employees, and select private investors.

Golden handcuffs – financial incentives that dis-courage founders and / or important employees fromleaving a company before a predetermined date orimportant milestone.

Grossing up – an adjustment of an option pool formanagement and employees of a company whichincreases the number of shares available over time.This usually occurs after a financing round wherebyone or more investors receive a relatively large per-centage of the company. Without a grossing up, man-agers and employees would suffer the financial andemotional consequences of dilution, thereby poten-tially affecting the overall performance of the compa-ny.

Growth stage – the state of a company when it hasreceived one or more rounds of financing and is gen-erating revenue from its product or service. Alsoknown as “middle stage.”

Hart-Scott-Rodino Act – a law requiring entitiesthat acquire certain amounts of stock or assets of acompany to inform the Federal Trade Commissionand the Department of Justice and to observe a wait-ing period before completing the transaction.

Hedge fund – an investment fund that has the abilityto use leverage, take short positions in securities, or

use a variety of derivative instruments in order toachieve a return that is relatively less correlated to theperformance of typical indices (such as the S&P 500)than traditional long-only funds. Hedge fund man-agers are typically compensated based on assetsunder management as well as fund performance.

High yield debt – debt issued via public offering orpublic placement (Rule 144A) that is rated belowinvestment grade by S&P or Moody’s. This meansthat the debt is rated below the top four rating cate-gories (i.e. S&P BB+, Moody’s Ba2 or below). Thelower rating is indicative of higher risk of default,and therefore the debt carries a higher coupon oryield than investment grade debt. Also referred to asJunk bonds or Sub-investment grade debt.

Hockey stick – the general shape and form of a chartshowing revenue, customers, cash or some otherfinancial or operational measure that increases dra-matically at some point in the future. Entrepreneursoften develop business plans with hockey stick chartsto impress potential investors.

Holding period – amount of time an investmentremains in a portfolio.

Hot issue – stock in an initial public offering that isin high demand.

Hot money – capital from investors that have no tol-erance for lack of results by the investment managerand move quickly to withdraw at the first sign oftrouble.

Hurdle rate – a minimum rate of return requiredbefore an investor will make an investment.

Incorporation – the process by which a businessreceives a state charter, allowing it to become a cor-poration. Many corporations choose Delawarebecause its laws are business-friendly and up to date.

Incubator – a company or facility designed to hoststartup companies. Incubators help startups growwhile controlling costs by offering networks of con-tacts and shared backoffice resources.

Indenture – the terms and conditions between abond issuer and bond buyers.

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Initial public offering (IPO) – the first offering ofstock by a company to the public. New public offer-ings must be registered with the Securities andExchange Commission. An IPO is one of the meth-ods that a startup that has achieved significant suc-cess can use to raise additional capital for furthergrowth. See Qualified IPO.

In-kind distribution – a distribution to limited part-ners of a private equity fund that is in the form ofpublicly trades shares rather than cash.

Inside round – a round of financing in which theinvestors are the same investors as the previousround. An inside round raises liability issues sincethe valuation of the company has no third party veri-fication in the form of an outside investor. In addi-tion, the terms of the inside round may be consideredself-dealing if they are onerous to any set of share-holders or if the investors give themselves additionalpreferential rights.

Institutional investor – professional entities thatinvest capital on behalf of companies or individuals.Examples are: pension plans, insurance companiesand university endowments.

Intellectual property (IP) – knowledge, techniques,writings and images that are intangible but often pro-tected by law via patents, copyrights, and trademarks.

Interest coverage ratio – earnings before interestand taxes (EBIT) divided by interest expense. This isa key ratio used by lenders to assess the ability of acompany to produce sufficient cash to pay its debtobligation.

Internal rate of return (IRR) – the interest rate atwhich a certain amount of capital today would haveto be invested in order to grow to a specific value ata specific time in the future.

Investment thesis / Investment philosophy – thefundamental ideas which determine the types ofinvestments that an investment fund will choose inorder to achieve its financial goals.

IPEV – Stands for International Private EquityValuation guidelines group. This group is made up ofrepresentatives of the international and US venture

capital industry and has published guidelines forapplying US GAAP and international IFRS valuationrules. See www.privateequityvaluation.com

IPO – see Initial public offering.IRR – see Internal rate of return.

Issuer – the company that chooses to distribute aportion of its stock to the public.

J curve – a concept that during the first few years ofa private equity fund, cash flow or returns are nega-tive due to investments, losses, and expenses, but asinvestments produce results the cash flow or returnstrend upward. A graph of cash flow or returns versustime would then resemble the letter “J”.

Later stage – the state of a company that has provenits concept, achieved significant revenues comparedto its competition, and is approaching cash flowbreak even or positive net income. Typically, a laterstage company is about 6 to 12 months away from aliquidity event such as an IPO or buyout. The rate ofreturn for venture capitalists that invest in later stage,less risky ventures is lower than in earlier stage ven-tures.

LBO – see Leveraged buyout.

Lead investor – the venture capital investor thatmakes the largest investment in a financing roundand manages the documentation and closing of thatround. The lead investor sets the price per share ofthe financing round, thereby determining the valua-tion of the company.

Letter of intent – a document confirming the intentof an investor to participate in a round of financingfor a company. By signing this document, the subjectcompany agrees to begin the legal and due diligenceprocess prior to the closing of the transaction. Alsoknown as a “Term Sheet”.

Leverage – the use of debt to acquire assets, buildoperations and increase revenues. By using debt, acompany is attempting to achieve results faster thanif it only used its cash available from pre-leverageoperations. The risk is that the increase in assets andrevenues does not generate sufficient net income andcash flow to pay the interest costs of the debt.

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Leveraged buyout (LBO) – the purchase of a com-pany or a business unit of a company by an outsideinvestor using mostly borrowed capital.

Leveraged recapitalization – the reorganization of acompany’s capital structure resulting in more debtadded to the balance sheet. Private equity funds canrecapitalize a portfolio company and then direct thecompany to issue a one-time dividend to equityinvestors. This is often done when the company isperforming well financially and the debt markets areexpanding.

Leverage ratios – measurements of a company’sdebt as a multiple of cash flow. Typical leverageratios include Total Debt / EBITDA, Total Debt /(EBITDA minus Capital Expenditures), and SenioreDebt / EBITDA.

L.I.B.O.R. – see The London Interbank OfferedRate.

License – a contract in which a patent owner grantsto a company the right to make, use or sell an inven-tion under certain circumstances and for compensa-tion.

Limited liability company (LLC) – an ownershipstructure designed to limit the founders’ losses to theamount of their investment. An LLC itself does notpay taxes, rather its owners pay taxes on their propor-tion of the LLC profits at their individual tax rates.

Limited partnership – a legal entity composed of ageneral partner and various limited partners. Thegeneral partner manages the investments and is liablefor the actions of the partnership while the limitedpartners are generally protected from legal actionsand any losses beyond their original investment. Thegeneral partner collects a management fee and earnsa percentage of capital gains (see Carried interest),while the limited partners receive income, capitalgains and tax benefits.

Limited partner (LP) – an investor in a limited part-nership. The general partner is liable for the actionsof the partnership while the limited partners are gen-erally protected from legal actions and any lossesbeyond their original investment. The limited partnerreceives income, capital gains and tax benefits.

Liquidation – the sale of a company. This may occurin the context of an acquisition by a larger companyor in the context of selling off all assets prior to ces-sation of operations (Chapter 7 bankruptcy). In a liq-uidation, the claims of secured and unsecured credi-tors, bondholders and preferred stockholders takeprecedence over common stockholders.

Liquidation preference – the contractual right of aninvestor to priority in receiving the proceeds from theliquidation of a company. For example, a venturecapital investor with a “2x liquidation preference”has the right to receive two times its original invest-ment upon liquidation.

Liquidity discount – a decrease in the value of aprivate company compared to the value of a similarbut publicly traded company. Since an investor in aprivate company cannot readily sell his or her invest-ment, the shares in the private company must be val-ued less than a comparable public company.

Liquidity event – a transaction whereby owners of asignificant portion of the shares of a private compa-ny sell their shares in exchange for cash or shares inanother, usually larger company. For example, anIPO is a liquidity event.

Lock-up agreement – investors, management andemployees often agree not to sell their shares for aspecific time period after an IPO, usually 6 to 12months. By avoiding large sales of its stock, the com-pany has time to build interest among potential buy-ers of its shares.

London Interbank Offered Rate (L.I.B.O.R.) – theaverage rate charged by large banks in London forloans to each other. LIBOR is a relatively volatile rateand is typically quoted in maturities of one month,three months, six months and one year.

Management buyout (MBO) – a leveraged buyoutcontrolled by the members of the management teamof a company or a division. Often an MBO is con-ducted in partnership with a buyout fund.

Management fee – a fee charged to the limited part-ners in a fund by the general partner. Managementfees in a private equity fund usually range from0.75% to 3% of capital under management, depend-

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ing on the type and size of fund. For venture capitalfunds, 2% is typical.

Management rights – the rights often required by aventure capitalist as part of the agreement to invest ina company. The venture capitalist has the right toconsult with management on key operational issues,attend board meetings and review information aboutthe company’s financial situation.

Market capitalization – the value of a publicly trad-ed company as determined by multiplying the num-ber of shares outstanding by the current price pershare.

MBO – see Management buyout.

Mezzanine – a layer of financing that has intermedi-ate priority (seniority) in the capital structure of acompany. For example, mezzanine debt has lowerpriority than senior debt but usually has a higherinterest rate and often includes warrants. In venturecapital, a mezzanine round is generally the round offinancing that is designed to help a company haveenough resources to reach an IPO. See Bridge financ-ing.

MoneyTree™ Report – Officially known as TheMoneyTree Report from PricewaterhouseCoopersand the National Venture Capital Association basedon data provided by Thomson Reuters. This reportprovides much of the data in this report. It is used forinvestment statistics in United States based compa-nies. Specific definition information is available inseveral of the appendices of this Yearbook.

Multiples – a valuation methodology that comparespublic and private companies in terms of a ratio ofvalue to an operations figure such as revenue or netincome. For example, if several publicly traded com-puter hardware companies are valued at approxi-mately 2 times revenues, then it is reasonable toassume that a startup computer hardware companythat is growing fast has the potential to achieve a val-uation of 2 times its revenues. Before the startupissues its IPO, it will likely be valued at less than 2times revenue because of the lack of liquidity of itsshares. See Liquidity discount.

Narrow-based weighted average anti-dilution – a

type of anti-dilution mechanism. A weighted averageanti-dilution method adjusts downward the price pershare of the preferred stock of investor A due to theissuance of new preferred shares to new investor B ata price lower than the price investor A originallyreceived. Investor A’s preferred stock is repriced to aweighed average of investor A’s price and investor B’sprice. A narrow-based anti-dilution uses only com-mon stock outstanding in the denominator of the for-mula for determining the new weighted averageprice.

NDA – see Non-disclosure agreement.

No-shop clause – a section of an agreement to pur-chase a company whereby the seller agrees not tomarket the company to other potential buyers for aspecific time period.

Non-cumulative dividends – dividends that arepayable to owners of preferred stock at a specificpoint in time only if there is sufficient cash flowavailable after all company expenses have been paid.If cash flow is insufficient, the owners of the pre-ferred stock will not receive the dividends owed forthat time period and will have to wait until the boardof directors declares another set of dividends.

Non-interference – an agreement often signed byemployees and management whereby they agree notto interfere with the company’s relationships withemployees, clients, suppliers and sub-contractorswithin a certain time period after termination ofemployment.

Non-solicitation – an agreement often signed byemployees and management whereby they agree notto solicit other employees of the company regardingjob opportunities.

Non-disclosure agreement (NDA) – an agreementissued by entrepreneurs to protect the privacy of theirideas when disclosing those ideas to third parties.

Offering memorandum – a legal document that pro-vides details of an investment to potential investors.See Private placement memorandum.

OID – see Original issue discount.

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Operating cash flow – the cash flow produced fromthe operation of a business, not from investing activ-ities (such as selling assets) or financing activities(such as issuing debt). Calculated as net operatingincome (NOI) plus depreciation.

Option pool – a group of options set aside for longterm, phased compensation to management andemployees.

Outstanding shares – the total amount of commonshares of a company, not including treasury stock,convertible preferred stock, warrants and options.

Pay to play – a clause in a financing agreementwhereby any investor that does not participate in afuture round agrees to suffer significant dilutioncompared to other investors. The most onerous ver-sion of “pay to play” is automatic conversion to com-mon shares, which in essence ends any preferentialrights of an investor, such as the right to influencekey management decisions.

Pari passu – a legal term referring to the equal treat-ment of two or more parties in an agreement. Forexample, a venture capitalist may agree to have reg-istration rights that are pari passu with the otherinvestors in a financing round.

Participating dividends – the right of holders of cer-tain preferred stock to receive dividends and partici-pate in additional distributions of cash, stock or otherassets.

Participating preferred stock – a unit of ownershipcomposed of preferred stock and common stock. Thepreferred stock entitles the owner to receive a prede-termined sum of cash (usually the original invest-ment plus accrued dividends) if the company is soldor has an IPO. The common stock represents addi-tional continued ownership in the company.Participating preferred stock has been characterizedas “having your cake and eating it too”.

PEIGG – acronym for Private Equity IndustryGuidelines Group, an ad hoc group of individualsand firms involved in the private equity industry forthe purpose of establishing valuation and reportingguidelines.

Piggyback rights – rights of an investor to have his orher shares included in a registration of a startup’sshares in preparation for an IPO.

PIK dividend – a dividend paid to the holder of astock, usually preferred stock, in the form of addi-tional stock rather than cash. PIK refers to paymentin kind.

PIPEs – see Private investment in public equity.

Placement agent – a company that specializes infinding institutional investors that are willing andable to invest in a private equity fund. Sometimes aprivate equity fund will hire a placement agent so thefund partners can focus on making and managinginvestments in companies rather than on raising cap-ital.

Portfolio company – a company that has received aninvestment from a private equity fund.

Post-money valuation – the valuation of a companyincluding the capital provided by the current round offinancing. For example, a venture capitalist mayinvest $5 million in a company valued at $2 million“pre-money” (before the investment was made). As aresult, the startup will have a post-money valuationof $7 million.

PPM – see Private placement memorandum.

Preemptive rights – the rights of shareholders tomaintain their percentage ownership of a company bybuying shares sold by the company in future financ-ing rounds.

Preference – seniority, usually with respect to divi-dends and proceeds from a sale or dissolution of acompany.

Preferred return – a minimum return per annumthat must be generated for limited partners of a pri-vate equity fund before the general partner can beginreceiving a percentage of profits from investments.

Preferred stock – a type of stock that has certainrights that common stock does not have. These spe-cial rights may include dividends, participation, liq-uidity preference, anti-dilution protection and veto

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provisions, among others. Private equity investorsusually purchase preferred stock when they makeinvestments in companies.

Pre-money valuation – the valuation of a companyprior to the current round of financing. For example,a venture capitalist may invest $5 million in a compa-ny valued at $2 million pre-money. As a result, thestartup will have a “post-money” valuation of $7 mil-lion.

Primary shares – shares sold by a corporation (notby individual shareholders).

Private Equity Growth Capital Council (PEGCC) –an advocacy, communications and research organiza-tion for the buyout industry in the United States.

Private equity – equity investments in non-publiccompanies, usually defined as being made up of ven-ture capital funds and buyout funds. Real estate, oiland gas, and other such partnerships are sometimesincluded in the definition.

Private investment in public equity (PIPEs) –investments by a private equity fund in a publiclytraded company, usually at a discount and in the formof preferred stock.

Private placement – the sale of a security directly toa limited number of institutional and qualified indi-vidual investors. If structured correctly, a privateplacement avoids registration with the Securities andExchange Commission.

Private placement memorandum (PPM) – a docu-ment explaining the details of an investment to poten-tial investors. For example, a private equity fund willissue a PPM when it is raising capital from institu-tional investors. Also, a startup may issue a PPMwhen it needs growth capital. Also known as“Offering Memorandum”.

Private securities – securities that are not registeredwith the Securities and Exchange Commission anddo not trade on any exchanges. The price per share isnegotiated between the buyer and the seller (the“issuer”).

Prudent man rule – a fundamental principle for

professional money management which serves as abasis for the Prudent Investor Act. The principle isbased on a statement by Judge Samuel Putnum in1830: “Those with the responsibility to invest moneyfor others should act with prudence, discretion, intel-ligence and regard for the safety of capital as well asincome.” In the 1970s a favorable interpretation ofthis rule enabled pension fund managers to invest inventure capital for the first time.

Qualified IPO – a public offering of securities val-ued at or above a total amount specified in a financ-ing agreement. This amount is usually specified to besufficiently large to guarantee that the IPO shareswill trade in a major exchange (NASDAQ or NewYork Stock Exchange). Usually upon a qualified IPOpreferred stock is forced to convert to common stock.

Quartile – one fourth of the data points in a data set.Often, private equity investors are measured by theresults of their investments during a particular periodof time. Institutional investors often prefer to investin private equity funds that demonstrate consistentresults over time, placing in the upper quartile of theinvestment results for all funds.

Ratchet – a mechanism to prevent dilution. Anantidilution clause in a contract protects an investorfrom a reduction in percentage ownership in a com-pany due to the future issuance by the company ofadditional shares to other entities.

Realization ratio – the ratio of cumulative distribu-tions to paid-in capital. The realization ratio is usedas a measure of the distributions from investmentresults of a private equity partnership compared tothe capital under management.

Recapitalization – the reorganization of a compa-ny’s capital structure.

Red herring – a preliminary prospectus filed withthe Securities and Exchange Commission and con-taining the details of an IPO offering. The namerefers to the disclosure warning printed in red letterson the cover of each preliminary prospectus advisingpotential investors of the risks involved.

Redemption rights – the right of an investor to forcethe startup company to buy back the shares issued as

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a result of the investment. In effect, the investor hasthe right to take back his/her investment and mayeven negotiate a right to receive an additional sum inexcess of the original investment.Registration – the process whereby shares of a com-pany are registered with the Securities and ExchangeCommission under the Securities Act of 1933 inpreparation for a sale of the shares to the public.

Regulation D – an SEC regulation that governs pri-vate placements. Private placements are investmentofferings for institutional and accredited individualinvestors but not for the general public. There is anexception that 35 non-accredited investors can partic-ipate.

Restricted shares – shares that cannot be traded inthe public markets.

Return on investment (ROI) – the proceeds from aninvestment, during a specific time period, calculatedas a percentage of the original investment. Also, netprofit after taxes divided by average total assets.

Rights offering – an offering of stock to currentshareholders that entitles them to purchase the newissue, usually at a discount.

Rights of co-sale with founders – a clause in ven-ture capital investment agreements that allows theVC fund to sell shares at the same time that thefounders of a startup chose to sell.

Right of first refusal – a contractual right to partic-ipate in a transaction. For example, a venture capital-ist may participate in a first round of investment in astartup and request a right of first refusal in any fol-lowing rounds of investment.

Risk-free rate – a term used in finance theory todescribe the return from investing in a riskless secu-rity. In practice, this is often taken to be the return onUS Treasury Bills.

Road show – presentations made in several cities topotential investors and other interested parties. Forexample, a company will often make a road show togenerate interest among institutional investors priorto its IPO.

ROI – see Return on investment.

Rollup – the purchase of relatively smaller compa-nies in a sector by a rapidly growing company in thesame sector. The strategy is to create economies ofscale. For example, the movie theater industry under-went significant consolidation in the 1960’s and1970’s.

Round – a financing event usually involving severalprivate equity investors.

Royalties – payments made to patent or copyrightowners in exchange for the use of their intellectualproperty.

Rule 144 – a rule of the Securities and ExchangeCommission that specifies the conditions underwhich the holder of shares acquired in a private trans-action may sell those shares in the public markets.

S corporation – an ownership structure that limits itsnumber of owners to 100. An S corporation does notpay taxes, rather its owners pay taxes on their propor-tion of the corporation’s profits at their individual taxrates.

SBIC – see Small Business Investment Company.

Scalability – a characteristic of a new business con-cept that entails the growth of sales and revenueswith a much slower growth of organizational com-plexity and expenses. Venture capitalists look forscalability in the startups they select to finance.

Scale-down – a schedule for phased decreases inmanagement fees for general partners in a limitedpartnership as the fund reduces its investment activi-ties toward the end of its term.

Scale-up – the process of a company growing quick-ly while maintaining operational and financial con-trols in place. Also, a schedule for phased increasesin management fees for general partners in a limitedpartnership as the fund increases its investment activ-ities over time.

Secondary market – a market for the sale of lim-ited partnership interests in private equity funds.Sometimes limited partners chose to sell their

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interest in a partnership, typically to raise cash orbecause they cannot meet their obligation to investmore capital according to the takedown schedule.Certain investment companies specialize in buyingthese partnership interests at a discount.

Secondary shares – shares sold by a shareholder(not by the corporation).

Securities and Exchange Commission (SEC) – theregulatory body that enforces federal securities lawssuch as the Securities Act of 1933 and the SecuritiesExchange Act of 1934.

Seed capital – investment provided by angels,friends and family to the founders of a startup in seedstage.

Seed stage – the state of a company when it has justbeen incorporated and its founders are developingtheir product or service.

Senior debt – a loan that has a higher priority in caseof a liquidation of the asset or company.

Seniority – higher priority.

SeriesA preferred stock – preferred stock issued bya fast growth company in exchange for capital frominvestors in the “A” round of financing. This pre-ferred stock is usually convertible to common sharesupon the IPO or sale of the company.

Shareholder agreement – a contract that sets out,for example, the basis on which the company will beoperated and the shareholders’ rights and obligations.It provides protection to minority shareholders.

Sharpe Ratio – a method of calculating the risk-adjusted return of an investment. The Sharpe Ratio iscalculated by subtracting the risk-free rate from thereturn on a specific investment for a time period(usually one year) and then dividing the resulting fig-ure by the standard deviation of the historical (annu-al) returns for that investment. The higher the SharpeRatio, the better.

Small Business Investment Company (SBIC) – acompany licensed by the Small BusinessAdministration to receive government capital in the

form of debt or equity in order to use in private equi-ty investing.

Stock option – a right to purchase or sell a share ofstock at a specific price within a specific period oftime. Stock purchase options are commonly used aslong term incentive compensation for employees andmanagement of fast growth companies.

Strategic investor – a relatively large corporationthat agrees to invest in a young or a smaller companyin order to have access to its proprietary technology,product or service.

Subordinated debt – a loan that has a lower prioritythan a senior loan in case of a liquidation of the assetor company. Also known as “junior debt”.

Success rate – the proportion of venture fundedcompanies that are considered successful. A study ofcompanies funded by VCs during the 1990s indicat-ed that 14% of the companies went public and anoth-er 11%were acquired.

Sweat equity – ownership of shares in a companyresulting primarily from work rather than investmentof capital.

Syndicate – a group of investors that agree to partic-ipate in a round of funding for a company.Alternatively, a syndicate can refer to a group ofinvestment banks that agree to participate in the saleof stock to the public as part of an IPO.

Synthetic secondary – A popular method of com-pleting a direct secondary transaction in which thebuyer becomes a limited partner (LP) in a specialpurpose vehicle (SPV) or similar entity which hasbeen set up out of the underlying investments in orderto create a limited partnership interest. The termarose because of the synthetic nature of the directpurchase through the LP secondary transaction.

Tag-along right – the right of a minority investor toreceive the same benefits as a majority investor.Usually applies to a sale of securities by investors.Also known as Co-sale right.

Takedown – a schedule of the transfer of capital inphases in order to complete a commitment of funds.

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Typically, a takedown is used by a general partner ofa private equity fund to plan the transfer of capitalfrom the limited partners.

Tender offer – an offer to public shareholders of acompany to purchase their shares.

Term loan – a bank loan for a specific period oftime, usually up to ten years in leveraged buyoutstructures.

Term sheet – a document confirming the intent of aninvestor to participate in a round of financing for acompany. By signing this document, the subject com-pany agrees to begin the legal and due diligenceprocess prior to the closing of the transaction. Alsoknown as “Letter of Intent”.

Tranche – a portion of a set of securities. Eachtranche may have different rights or risk characteris-tics. When venture capital firms finance a company,a round may be disbursed in two or three tranches,each of which is paid when the company attains oneor more milestones.

Turnaround – a process resulting in a substantialincrease in a company’s revenues, profits and reputa-tion.

Under water option – an option is said to be underwater if the current fair market value of a stock is lessthan the option exercise price.

Underwriter – an investment bank that chooses tobe responsible for the process of selling new securi-ties to the public. An underwriter usually chooses towork with a syndicate of investment banks in order tomaximize the distribution of the securities.

Venture capital – a segment of the private equityindustry which focuses on investing in new compa-nies with high growth potential and accompanyinghigh risk.

Venture capital method – a pricing valuationmethod whereby an estimate of the future value of acompany is discounted by a certain interest rate andadjusted for future anticipated dilution in order todetermine the current value. Usually, discount ratesfor the venture capital method are considerably high-

er than public stock return rates, representing the factthat venture capitalists must achieve significantreturns on investment in order to compensate for therisks they take in funding unproven companies.

Vesting – a schedule by which employees gain own-ership over time of a previously agreed upon amountof retirement funding or stock options.

Vintage – the year that a private equity fund stopsaccepting new investors and begins to make invest-ments on behalf of those investors. Venture funds aregenerally benchmarked to funds of the same vintageyear.

Voting rights – the rights of holders of preferred andcommon stock in a company to vote on certain actsaffecting the company. These matters may includepayment of dividends, issuance of a new class ofstock, merger or liquidation.

Warrant – a security which gives the holder the rightto purchase shares in a company at a pre-determinedprice. A warrant is a long term option, usually validfor several years or indefinitely. Typically, warrantsare issued concurrently with preferred stocks orbonds in order to increase the appeal of the stocks orbonds to potential investors.

Washout round – a financing round whereby previ-ous investors, the founders and management suffersignificant dilution. Usually as a result of a washoutround, the new investor gains majority ownership andcontrol of the company.

Weighted average cost of capital (WACC) – theaverage of the cost of equity and the after-tax cost ofdebt. This average is determined using weight factorsbased on the ratio of equity to debt plus equity andthe ratio of debt to debt plus equity.

Weighted average anti-dilution – an anti-dilutionprotection mechanism whereby the conversion rate ofpreferred stock is adjusted in order to reduce aninvestor’s loss due to an increase in the number ofshares in a company. Without anti-dilution protection,an investor would suffer from a reduction of his or herpercentage ownership. Usually as a result of the imple-mentation of a weighted average anti-dilution, compa-ny management and employees who own a fixed

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amount of common shares suffer significant dilution,but not as badly as in the case of a full ratchet.

Write-down – a decrease in the reported value of anasset or a company.Write-off – a decrease in the reported value of anasset or a company to zero.

Write-up – an increase in the reported value of anasset or a company.

Zombie – a company that has received capital frominvestors but has only generated sufficient revenuesand cash flow to maintain its operations without sig-nificant growth. Sometimes referred to as “walkingdead.” Typically, a venture capitalist has to make adifficult decision as to whether to liquidate a zombieor continue to invest funds in the hopes that the zom-bie will become a winner.

These definitions were graciously provided by theCenter for Private Equity and Entrepreneurship at theTuck School of Business at Dartmouth. Please referto the Center’s website for additional definitions andinformation at http://mba.tuck.dartmouth.edu/-pecenter/resources/glossary.html. Used by permis-sion. Thomson Reuters and National Venture CapitalAssociation are grateful to the Center for its support.

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Appendix B: MoneyTree Report Criteria

The MoneyTree Report is a quarterly study of ven-ture capital investment activity in the United States.As a collaboration between PricewaterhouseCoopersand the National Venture Capital Association, basedupon data from Thomson Reuters, it is the onlyindustry-endorsed research of its kind. TheMoneyTree Report is the definitive source of infor-mation on emerging companies that receive financ-ing and the venture capital firms that provide it. Thestudy is a staple of the financial community, entre-preneurs, government policymakers and the businesspress worldwide.

Report Criteria

The MoneyTree™ Report records cash for equityinvestments as the cash is actually received by thecompany (also called a tranche) as opposed to whenfinancing is committed (often referred to as a “termsheet”) to a company. Accordingly, the amountreported in a given quarter may be less than the totalround amount committed to the company at the timewhen the round of financing closed.The type of financing as it is used in theMoneyTree™ Report refers to the number of tranch-es a company has received. The number designation(1, 2, 3, etc.) does not refer to the round of financing.Rounds are usually designated alphabetically, e.g.Series A, Series B, and so on. The MoneyTree™Report does not track rounds.

Summary Description

The MoneyTree™ Report measures cash-for-equityinvestments by the professional venture capital com-munity in private emerging companies in the U.S. Itis based on data provided by Thomson Reuters.

General Definition

The report includes the investment activity of profes-

sional venture capital firms with or without a USoffice, SBICs, venture arms of corporations, institu-tions, investment banks and similar entities whoseprimary activity is financial investing. Where thereare other participants such as angels, corporations,and governments in a qualified and verified financ-ing round the entire amount of the round is included.Qualifying transactions include cash investments bythese entities either directly or by participation invarious forms of private placement. All recipientcompanies are private, and may have been newly-cre-ated or spun-out of existing companies.The report excludes debt, buyouts, recapitalizations,secondary purchases, IPOs, investments in publiccompanies such as PIPES (private investments inpublic entities), investments for which the proceedsare primarily intended for acquisition such as roll-ups, change of ownership, and other forms of privateequity that do not involve cash such as services-in-kind and venture leasing.Investee companies must be domiciled in one of the50 US states or DC even if substantial portions oftheir activities are outside the United States.

Specific Methodology

The focus of the report is on cash received by thecompany. Therefore, tranches not term sheets are thedetermining factor. Drawdowns on commitments arerecognized at the time the company receives themoney rather than recorded as a lump sum amount atthe time the term sheet is executed. Convertible debtand bridge loans are recognized only when convertedto equity.Once a company has received a qualifying venturecapital financing round, all subsequent equity financ-ing rounds are included regardless of whether theround involved a venture capital firm as long as allother investment criteria are met (e.g. cash-for-equi-ty, not buyout or services in kind).Angel, incubator and similar investments are consid-

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ered pre-venture financing if the company hasreceived no prior qualifying venture capital invest-ment and are not included in the MoneyTree™results. Angel, incubator and similar investments thatare part of a qualifying venture capital round or fol-low a qualifying venture capital round are included tothe extent that such investments can be fully verifiedas meeting all other criteria (e.g. cash for equity, notbuyout or services in kind).Direct investment by corporations (not through a cor-porate venture capital arm) is excluded unless (a) theinvestment is clearly demonstrated to be primarily afinancial investment rather than outsourced R&D ormarket development, (b) it is a co-investment in anotherwise qualifying round, or (c) it follows a quali-fying venture round in a company and meets all othercriteria (e.g. cash-for-equity, not buyout or servicesin kind).Data is primarily obtained from a quarterly survey ofventure capital practitioners conducted by Thomson

Reuters. Information is augmented by other researchtechniques including other public and privatesources. All data is subject to verification with theventure capital firms and/or the investee companies.Only professional independent venture capital firms,institutional venture capital groups, and recognizedcorporate venture capital groups are included in ven-ture capital industry rankings.

Disclaimer

PricewaterhouseCoopers and the National VentureCapital Association have taken responsible steps toensure that the information contained in theMoneyTree™ Report has been obtained from reli-able sources. However, neither of the parties norThomson Reuters can warrant the ultimate validity ofthe data obtained in this manner. Results are updatedperiodically. Therefore, all data is subject to changeat any time.

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Appendix C: MoneyTree GeographicalDefinitions

Alaska/Hawaii/Puerto Rico: Alaska, Hawaii, andPuerto Rico

Colorado: The state of Colorado

DC/Metroplex: Washington, D.C., Virginia, WestVirginia, and Maryland

LA/Orange County: Los Angeles, Ventura, Orange,and Riverside Counties (i.e., southern California,except San Diego)

Midwest: Illinois, Missouri, Indiana, Kentucky,Ohio, Michigan, and western Pennsylvania

New England: Maine, New Hampshire, Vermont,Massachusetts, Rhode Island, and parts ofConnecticut (excluding Fairfield county)

New York Metro: Metropolitan NY area, northernNew Jersey, and Fairfield County, Connecticut

North Central: Minnesota, Iowa, Wisconsin, NorthDakota, South Dakota, and Nebraska

Northwest: Washington, Oregon, Idaho, Montana,and Wyoming

Philadelphia Metro: Eastern Pennsylvania, south-ern New Jersey, and Delaware

Sacramento/Northern California: NortheasternCalifornia

San Diego: San Diego area

Silicon Valley: Northern California, bay area andcoastline

South Central: Kansas, Oklahoma, Arkansas, andLouisiana

Southeast: Alabama, Florida, Georgia, Mississippi,Tennessee, South Carolina, and North Carolina

Southwest:Utah,Arizona, NewMexico, and NevadaTexas: The state of Texas

Upstate NewYork: Northern NewYork state, exceptMetropolitan NewYork City area

Thomson Reuters 81

The Geographical Regions identified in the MoneyTree™ Report by PricewaterhouseCoopers and the NationalVenture Capital Association based on data provided by Thomson Reuters and used in this NVCAYearbook areas follows:

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Appendix D: Industry Codes (VEIC)

Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

1000 Information Technology 1000 Communications 1100 Commer. Comm. 1000 Communications and Media1100 Commercial Communications1110 Radio & TV Broadcasting Stations1120 CATV & Pay TV Systems1125 Cable Service Providers1130 Radio & TV Broadcasting & Other Related

Equipment1135 Services to Commercial Communications1199 Other Commercial Communications1700 Media and Entertainment1710 Entertainment1720 Publishing1800 Other Communications Related

1200 Telephone Rel. 1200 Telecommunications1210 Long Distance Telephone Services1215 Local Exchange Carriers (LEC)1220 Telephone Interconnect & Other Equipment1230 Telephone answering and/or

management systems, PBXs1299 Other Telephone Related

1300 Wireless Communications 1300 Wireless Communications1310 Mobile Communications, Pagers & Cellular

Radio1320 Wireless Communications Services1325 Messaging Services1330 Wireless Communications Components1399 Other Wireless Communications

1400 Facsimile Trans 1400 Facsimile Transmission

1500 Data Comm. 1500 Data Communications1510 Local Area Networks (incl. voice/data PBX

systems)1515 Wide Area Networks1520 Data Communications Components1521 Communications Processors/Network

Management1522 Protocol Converters & Emulators1523 Modems and Multiplexers1524 Other Data Communication Components1525 Switches/Hubs/Routers/Gateways/ATM1530 Network test, monitor and support equipment1549 Other Data Communications

1600 Satellite Comm 1600 Satellite Microwave Communications1610 Satellite Services/Carriers/Operators1620 Satellite Ground (and other) Equipment1630 Microwave Service Facilities1640 Microwave & Satellite Components1699 Other Satellite & Microwave

1800 Comm. Other 1810 Defense Communications1825 Other Communications Services NEC1899 Other Communications Products (not yet

classified)

2100 Computer Hardware 2100 Computers Hardware 2100 Computers and Hardware2110 Mainframes & Scientific Computers2111 Mainframes2112 Supercomputers and Scientific Computers2119 Other Mainframes and Scientific

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2120 Mini & Personal/Desktop Computers2121 Fail Safe Computers2122 Mini Computers2123 Personal Computers (micro/personal)2124 Other Mini and Personal Computers2125 Portable Computers (notebooks/laptops)2126 Handheld Computing (PDA)2130 Optical computing2140 Servers and Workstations2141 Servers2143 Workstations2144 Thin Client Hardware2149 Other Servers and Workstations

2200 Digital Imaging and 2200 Computer Graphics and Digital ImagingComputer Graphics

2210 CAD/CAM, CAE,EDA Systems2220 Graphic Systems2230 Scanning Hardware2234 OCR (Optical Character Recognition)2236 OBR (Optical Bar Recognition)2238 MICR (Magnetic Ink Character Recognition)2239 Other Scanning Related2250 Graphics Printers/Plotters2255 Graphics/Enhanced Video Cards2260 Other Graphics Peripherals2280 Other Multimedia NEC2290 Digital Imaging Hardware and Equipment2295 Digital Imaging Services2299 Other Computer Graphics

2300 Turnkey Integrated Systems 2300 Integrated Turnkey Systems and Solutionsand Solutions

2311 Business and Office2312 Consumer2313 Retailing2315 Transportation2316 Finance/Insurance/Real Estate2317 Agriculture2318 Recreation/Entertainment2319 Manufacturing/Industrial/Construction2320 Medical/Health2321 Computer related2322 Communications Products/Servcies2323 Education2324 Reference2325 Scientific2399 Other Intergrated Systems and Solutions

2500 Computer Peripherals 2500 Peripherals2510 Terminals2511 Intelligent Terminals2512 Portable Terminals2513 Graphics Terminals2519 Other Terminals2520 Printers2521 Laser Printers2522 Color Printers2523 Inkjet Printers2524 Dot Matrix Printers2529 Other Printers2530 Data I/O Devices2531 Mouse Input Devices2532 TouchPad Input Devices2533 Pen based computing

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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2539 Other Data I/O Devices2540 Disk Related Memory Devices2541 Floppy Disks & Drives2542 Winchester Hard Disks and Drives2543 Optical Disks & Drives,CD-ROM DVD2546 Disk Drive Components2549 Other Disk Related2550 Tape Related Devices2551 Magnetic Tapes2552 Tape Heads & Drives2553 Continuous Tape Backup Systems2559 Other Tape Related Devices2560 Other Memory Devices (excl. semiconductors)2561 PC or PMCIA cards2562 Memory Cards2563 Sound Cards2564 Communications Cards2569 Other Peripheral Cards2590 Other Peripherals (not yet classified)

2700 Computer Software 2600 Computer Services 2600 Computer Services2630 Time Sharing Firms2640 Computer Leasing & Rentals2650 Computer Training Services2655 Backup and Disaster Recover2660 Data Processing,Analysis & Input Services2665 Computer Repair Services2670 Computerized Billing & Accounting

Services2675 Computer Security Services2691 Data communications systems management2699 Other Computer Services

2700 Computer Software 2700 Computer Software2710 Systems Software2711 Database & File Management2712 Operating Systems & Utilities2713 Program Development

Tools/CASE/Languages2716 Graphics and Digital Imaging Software2719 Other Systems Software2720 Communications/Networking Software2721 Security/Firewalls,Encryption software2722 Email Software2723 Groupware2724 Multimedia software2729 Other Communications/Networking

Software2730 Applications Software2731 Business and Office Software2732 Home Use Software2733 Educational Software2734 Manufacturing/Industrial Software2735 Medical/Health Software2736 Banks/Financial Institutions Software2737 Retailing Software2738 Integrated Software2739 ERP/Inventory Software2740 Recreational/Game Software2741 Scientific Software2743 Agricultural Software2744 Transportation Software2748 Other Industry specific Software2749 Other Applications Software2750 Artificial Intelligence Related Software

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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2751 Expert Systems2752 Natural Language2753 Computer-Aided Instruction2754 Artificial Intel. Programming Aids2755 Other Artificial Intelligence Related2799 Other Software Related

2710 Computer Programming 2760 Software Services2761 Programming Services/Systems

Engineering2762 Software Consulting Services2763 Software Distribution/Clearinghouse2769 Other Software Services

2800 Internet Specific 1550 Internet Communications 1550 Internet Communications andInfrastructure NEC

1551 Internet Access Services and ServiceProviders

1552 Internet Multimedia Services1553 Internet Backbone Infrastructure1559 Other Internet Communications NEC

1560 E-Commerce Technology 1560 E-Commerce Technology1561 Internet Security and Transaction Services1562 Ecommerce Services1569 Other Ecommerce

2100 Computers Hardware 2142 Web Servers

2780 Internet Software 1563 Ecommerce Enabling Software2780 Internet Systems Software2781 Site Development and Administration

Software2782 Internet Search Software and Engines2783 WebServer Software2784 Web Languages (Java/ActiveX/HTML/XML)2785 Web Authoring/Development Software2798 Other Internet Systems Software

2785 Internet Programming 2765 Internet/Web Design and programmingservices

2766 Internet Graphics Services2768 Other Internet Software Services

2800 Internet Ecommerce 2800 Internet and Online Related2810 E-Commerce—Selling products Online or

Internet2811 Business and Office Products2812 Consumer Products2813 Retailing Products2814 Publishing Products2815 Transportation Products2816 Finance/Insurance/Real Estate products2817 Agricultural Products2818 Recreation/Entertainment/Music/Movies2819 Manufacturing/Industrial/Construction2820 Medical/Health2821 Computer Related2822 Communications Products2823 Education Products2824 Reference Products2825 Scientific Products2826 Legal Products2829 Other Ecommerce Selling Products2830 Eccommerce—Selling Services

Online/Internet2831 Business and Office Services2832 Consumer Services2833 Retailing Services

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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2834 Publishing Services2835 Transportation Services2836 Finance/Insurance/Real Estate Services2837 Agricultural Services2838 Recreation/Entertainment/Music/Movies2839 Manufacturing/Industrial/Construction2840 Medical/Health Services2841 Computer Related services2842 Communications Products/Services2843 Education Services2844 Reference2845 Scientific2846 Legal2848 Recreation/Entertainment Services2849 Other Ecommerce Selling Services

2810 Internet Content 2850 Web Aggregration/Portal Sites/Exchanges2851 Business and Office Info/content2852 Consumer Info/Content2853 Retailing Info/Content2854 Publishing Info/Content2855 Transportation Info/Content2856 Finance/Real Estate/Insurance Info/Content2857 Agriculture Info/Content2858 Recreation/Entertainment/Music/Movies2859 Manufac/Industrial/Constr. Info/Content2860 Medical/Health Info/Content2861 Computer Related Info/Content2862 Communications Info/Content2863 Education Info/Content2864 Reference Info/Content2865 Scientific Info/Content2866 Legal Info/Content2869 Other Aggregation/Portal/Exchange Sites

2820 Internet Services 2870 Internet Services2871 Internet Marketing Services2873 Data Warehousing Services2879 Other Internet and Online Services NEC

2900 Computer Other 2900 Computer Other 2000 Computer Related2900 Other Computer Related2910 Voice Synthesis2911 Voice Recognition2990 Other Computer Related (not yet classified)

3000 Semiconductor/Electr 3100 Semiconductors/Other 3100 Electronic ComponentsElectronics

3110 Semiconductors3111 Customized Semiconductors3112 Standard Semiconductors3114 Flash Memory3115 Optoelectronics semiconductors (incl laser

diodes)3119 Other Semiconductors3120 Microprocessors3130 Controllers and Sensors3132 Controllers3135 Sensors3139 Other Controllers/Sensors3140 Circuit Boards3160 Display Panels

3200 Batteries 3200 Batteries

3300 Power Supplies 3300 Power Supplies3310 Uninterruptible Power Supply (UPS)

3400 Electronics Equipment 3400 Electronics Related Equipment

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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3410 Semiconductor Fabrication Equip. & WaferProducts

3420 Component Testing Equipment3499 Other Electronics Related Equipment

3500 Laser Related 3500 Laser Related3510 Laser Components (incl. beamsplitters,

excimers)3599 Other Laser Related

3600 Fiber Optics 3600 Fiber Optics3610 Fiber Optic Cables3620 Fiber Optic Couplers and Connectors3630 Fiber Optic Communication Systems

(see 1510)3699 Other Fiber Optics

3700 Scientific Instrumentation 3700 Analytical & Scientific Instrumentation3710 Chromatographs & Related Laboratory

Equipment3720 Other Measuring Devices3799 Other Analytical & Scientific

Instrumentation

3800 Electronics, Other 3000 Other Electronics Related3170 Other Electronics Related (including

keyboards)3800 Other Electronics Related3810 Military Electronics (excluding

communications)3820 Copiers3830 Calculators3835 Security/Alarm/Sensors3899 Other Electronics Related (incl. alarm

systems)

3900 Optoelectronics 3900 Optoelectronics3910 Photo diodes3920 Optoelectronics fabrication equipment3930 Lenses with Optoelectronics applications3940 Advanced photographic processes (incl

lithographs)3989 Other Optoelectrinics Related3990 Other Electronc Semiconductor

4000 Medical/Health/Life Science 4000 Biotechnology 4100 Biotech-Human 4100 Human Biotechnology4110 Medical Diagnostic Biotechnology Products4111 In Vitro Monoclonal Antibody Diagnostics4112 In Vivo Monoclonal Antibody Diagnostics/

Imaging4113 DNA/RNA Probes4119 Other Medical Diagnostic Biotechnology4120 Therapeutic Biotechnology Products4121 Therapeutic Monoclonal Antibodies4122 Immune Response Effectors (interferons,

vaccines)4123 Other Therapeutic Proteins (incl. hormones

& TPA)4129 Other Therapeutic Biotechnology4130 Genetic Engineering

4200 Biotech-Animal 4200 Agricultural/Animal Biotechnology4210 Genetically Engineered Plants4220 Genetic. Eng. Microorganisms to raise plant

yield4230 Other Plant Related Biotechnology4240 Biotech Related Animal Health & Nutrition

Products4250 Genetically Engineered Animals

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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4290 Other Animal Related Biotechnology

4300 Biotech-Industrial 4300 Industrial Biotechnology4310 Biochemical Products4311 Biotech Related Fine Chemicals (NOT

Pharmaceuts.)4312 Biotech Related Commodity Chemicals4319 Other Biochemical Products4320 Biotech Processes for Food Industrial 1

Applications4321 Biotech Related Food Enzymes and Cultures4322 Biotech Related Food Diagnostics4329 Other Biotech Process for Food/Industrial

Products4330 Biotech Processes for Pollution/Toxic Waste

Control4340 Biotech Processes for Enhanced Oil

Recovery/Mining4390 Other Industrial Biotechnology

4400 Biosensors 4400 Biosensors4410 Biosensors for Medical Diagnostic

Applications4420 Biosensors for Industrial Applications4490 Other Biosensors

4500 Biotech Equipment 4500 Biotech Related Research & ProductionEquipment

4510 Biotech Related Analytical Instruments &Apparatus

4520 Biotech Related Production Equipment4525 Biotech laser and optronic applications4599 Other Biotech Research & Production

Equipment

4600 Biotech Research 4600 Biotech Related Research & Other Services4610 Pure & Contract Biotechnology Research4699 Other Biotechnology Services

4700 Biotech Other 4000 Biotechnology and Pharmacology4900 Other Biotechnology Related

5000 Medical/Health 5100 Medical Diagnostics 5100 Medical Diagnostics5110 Diagnostic Services5120 Medical Imaging5121 X-Rays5122 CAT Scanning5123 Ultra Sound Imaging5124 Nuclear Imaging5125 Other Medical Imaging5130 Diagnostic Test Products & Equipment5140 Other Medical Diagnostics

5200 Medical Therapeutics 5200 Medical Therapeutics5210 Therapeutic Services5220 Surgical Instrumentation & Equipment5221 Surgical lasers (including laser delivery fibers)5230 Pacemakers & Artificial Organs5240 Drug Delivery & Other Equipment5299 Other Therapeutic (including defibrillators)

5300 Med/Health Products 5000 Medical/Health Related5300 Medical Health Related Products5310 Disposable Medical Products5340 Handicap Aids5350 Medical Monitoring Equipment5380 Health related optics (including glasses,

lenses)5399 Other Medical/Health (NEC)

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Thomson Reuters 89

Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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5400 Med/Health Services 5400 Medical Health Services5410 Hospitals/Clinics/Primary Care5412 Long Term Care/Home Care/Elder Care5414 Dependent Care (child care/assisted living5420 Managed care (including PPO/PPM)5429 Other Healthcare Facilities5430 Emergency Services/Ambulance5440 Hospital & Other Institutional Management5499 Other Medical/Health Services

5500 Pharmaceutical 5500 Pharmaceuticals5510 Pharmaceutical Research5520 Pharmaceutical Production5530 Pharmaceutical Services5540 Pharmaceutical Equipment5550 Pharmaceuticals/Fine Chemicals (non-

biotech)5599 Other Pharmaceutical NEC

6000 Non-High Technology 7000 Consumer Related 7100 Entertainment and Leisure 7100 Entertainment and Leisure7110 Movies,Movie Products & Theater Operations7120 Amusement & Recreational Facilities7125 Casino and Gambling7130 Toys & Electronic Games7140 Sporting Goods,Hobby Equipment &

Athletic Clothes7150 Sports Facilities (Gyms and Clubs)7155 Sports7160 TVs, Radio, Stereo Equipment & Consumer

Electronics7170 Music,Records,Production and Instruments7199 Other Leisure/Recreational Products and

Services

7200 Retailing Related 7200 Retailing Related7210 Drug Stores7220 Clothing and Shoe Stores7230 Discount Stores7240 Computer Stores7245 Retail Publishing (books, magazines, news-

papers)7246 Office Supply Stores7247 Music/Electronics7248 Specialty Department and retail stores7250 Franchises(NEC)7299 Other Retailing Related

7300 Food and Beverage 7300 Food and Beverages7310 Wine & Liquors7320 Health Food7330 Soft Drinks & Bottling Plants7340 Food Supplements/Vitamins7350 General Food Products7399 Other Food and Beverages

7400 Consumer Products 7400 Consumer Products7410 Clothing,Shoes & Accessories (incl. jewelry)7420 Health & Beauty Aids7430 Home Furnishing & Housewares7431 Housewares7432 Furnishings & Furniture7433 Garden and Horticultural Products7434 Other Home Furnishings (NEC)7450 Mobile Homes7499 Other Consumer Products

7500 Consumer Services 7500 Consumer Services7510 Fast Food Restaurants

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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7520 Other Restaurants7530 Hotels and Resorts7540 Auto Repair Shops7550 Education & Educational Products and

Materials7560 Travel Agencies and Services7599 Other Consumer Services

7600 Consumer, Other 7000 Consumer Related7999 Other Consumer Related (not yet classified)

8000 Industrial/Energy 3100 Semiconductors/Other 8141 Semiconductor Materials (eg. siliconElectronics wafers)

8142 III/V Semiconductor Mater. (eg. galliumarsenide)

6100 Oil & Gas Exploration 6100 Oil & Gas Exploration and Production6200 Oil & Gas Exploration Services6300 Oil & Gas Drilling & Support Services6400 Oil & Gas Drilling,Exploration & Extraction

Equip.6410 Oil & Gas Drilling & Extraction Equipment6420 Oil & Gas Drilling Instrumentation6430 Oil & Gas Exploration Equip.

Instrumentation6499 Other Oil & Gas (NEC)

6500 Energy, Alternative 6500 Alternative Energy6510 Solar Energy6511 Photovoltaic Solar6512 Other Solar6520 Wind Energy6530 Geothermal Energy6540 Energy Co-Generation6599 Other Alternative Energy (incl. nuclear

energy)

6600 Energy, Enhanced Recovery 6600 Enhanced Oil Recovery/Heavy Oil/Shale

6700 Energy, Coal 6700 Coal Related6710 Coal Mining6720 Coal Related Equipment6799 Other Coal Related

6800 Energy, Conservation 6800 Energy Conservation Related

6900 Energy, Other 6000 Energy Related6900 Other Energy Related

8100 Chemicals and Materials 8100 Chemicals & Materials8110 Plastic Fabricators8111 Homogeneous Injections/Extrusions8112 Non-Homogeneous Injections/Extrusions8113 Fiber-Reinforced (Plastic) Composites8114 Other Fabricated Plastics8115 Processes for Working with Plastics8119 Other Plasti Fabricators8120 Coatings & Adhesives Manufacturers8121 Optical coatings8129 Other Coatings & Adhesives8130 Membranes & Membrane-Based Products8140 Specialty/Performance Materials8143 Specialty Metals (incl. coatings, alloys, clad)8144 Ceramics8145 Lubricants & Functional Fluids8146 Other Specialty Materials8147 Specialty materials for laser generation8148 Superconducting materials8149 Other Special Performance Materials8150 Commodity Chemicals & Polymers

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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8151 Industrial Chemicals8152 Polymer (Plastics) Materials8160 Specialty/Performance Chemicals8161 Electronic Chemicals8162 Other Industrial Chemicals8170 Agricultural Chemicals8189 Other Commidity Chemicals and Polymers8199 Other Chemicals & Materials (not yet

classified)

8200 Industrial Automation 8200 Industrial Automation8210 Energy Management8220 Industrial Measurement & Sensing Equipment8221 Laser related measuring & sensing equipment8230 Process Control Equipment & Systems8240 Robotics8250 Machine Vision Software & Systems8260 Numeric & Computerized Control of

Machine Tools8299 Other Industrial Automation (NEC)

8300 Industrial Equipment 8300 Industrial Equipment and Machinery8310 Machine Tools, Other Metalworking

Equipment8320 Hoists, Cranes & Conveyors8330 Pumps, Ball Bearings, Compressors, Indus.

Hardware8340 Mining Machinery8350 Industrial Trucks and Tractors8360 Other Industrial Process Machinery8370 Power Transmission Equipment (generators

& motors)8399 Other Industrial Equipment & Machinery

8500 Pollution and Recycling 8500 Environmental Related8510 Air Filters & Air Purification & Monitoring

Equip.8520 Chemical and Solid Material Recycling8530 Water Treatment Equipment & Waste

Disposal Systems8599 Other Environmental Related

8600 Industrial Products, Other 8000 Industrial Products8600 Other Industrial Products (not yet classified)

8700 Industrial Services 8700 Industrial Services

9100 Transportation 9100 Transportation 9100 Transportation

9110 Airlines and Aviation Related9120 Trucking9125 Railway related9130 Leasing of Railcars,Buses and Cars9140 Mail and Package Shipment9150 Motor Vehicles,Transporation Equipment &

Parts9160 Airfield and Other Transportation Services9180 Advanced Aircraft/Aerospace9199 Other Transportation

9200 Financial Services 9200 Financial Services 9200 Financial Services9210 Insurance Related9220 Real Estate9230 Banking9235 Non Bank Credit9240 Securities & Commodities Brokers and

Services9250 Investment Groups9254 Venture Capital and Private Equity Investors9255 Financial Transactions Services

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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9299 Financial Services, 0ther

9300 Business Serv. 9300 Business Services 9300 Services9310 Engineering Services9320 Advertising and Public Relations9330 Leasing (not elsewhere classified)9340 Distributors,Importers and Wholesalers9350 Consulting Services9360 Media Related Services9399 Other Services NEC

9400 Manufact. 9400 Manufacturing 9400 Product Manufacturing9410 Business Products and Supplies9415 Office Automation Equipment9420 Office Furniture & Other Professional

Furnishings9430 Textiles (Synthetic & Natural)9440 Hardware,Plumbing Supplies9450 Publishing9460 Packaging Products & Systems9470 Printing & Binding9499 Other Manufacturing (not elsewhere

classified)

9500 Agr/Forestr/Fish 9500 Agricultural, Forestry 9500 Agriculture, Forestry, Fishing, AnimalHusbandry,etc.

9510 Agriculture related9520 Forestry related9530 Fishing related9540 Animal husbandry9599 Other Agriculture,Forestry,Fishing9600 Mining and Minerals (non-energy related)

9700 Construction 9700 Construction 9700 Construction & Building Products9710 Construction9720 Manufacture of Building Products9730 Manufacture of Pre-Fabricated Buildings &

Systems9740 Distribution of Building Products & Systems9750 Construction Services9799 Other Construction & Building Products

Related

9800 Utilities 9800 Utilities 9800 Utilities and Related Firms9810 Electric Companies9820 Water,Sewage,Chem. & Solid Waste

Treatment Plants9830 Gas Transmission & Distribution9899 Other Utilities & Related Firms

9900 Other 9900 Other 9000 Other Services and Manufacturing9900 Other Products and Services9910 Conglomerates9912 Socially Responsible9914 Environment Responsible9915 Women-Owned9918 Minority-Owned9920 Holding Companies9999 Other Products and Services

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Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

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Appendix E: Industry SectorVEIC Ranges

Biotechnology4000, 4100, 4110, 4111, 4112, 4113, 4119, 4120, 4121, 4122, 4123, 4129, 4130, 4200, 4210, 4220, 4230,4240, 4250, 4290, 4300, 4310, 4311, 4312, 4319, 4320, 4321, 4322, 4329, 4330, 4340, 4390, 4400, 4410,4420, 4490, 4500, 4510, 4520, 4525, 4599, 4600, 4610, 4699, 4900, 5500, 5510, 5520, 5530, 5540, 5550, 5599

Business Products and Services2811, 2824, 2831, 2844, 9300, 9310, 9320, 9330, 9340, 9350, 9360, 9399

Computers and Peripherals2000, 2100, 2110, 2111, 2112, 2119, 2120, 2121, 2122, 2123, 2124, 2125, 2126, 2130, 2140, 2141, 2142,2143, 2144, 2149, 2220, 2230, 2234, 2236, 2238, 2239, 2250, 2255, 2260, 2280, 2290, 2295, 2299, 2500,2510, 2511, 2512, 2513, 2519, 2520, 2521, 2522, 2523, 2524, 2529, 2530, 2531, 2532, 2533, 2539, 2540,2541, 2542, 2543, 2546, 2549, 2550, 2551, 2552, 2553, 2559, 2560, 2561, 2562, 2563, 2564, 2569, 2590, 3170

Consumer Products and Services2812, 2832, 7000, 7300, 7310, 7320, 7330, 7340, 7399, 7400, 7410, 7420, 7430, 7431, 7432, 7433, 7434,7450, 7499, 7500, 7510, 7520, 7530, 7540, 7550, 7560, 7599, 7999

Computer Software1563, 2200, 2210, 2300, 2311, 2312, 2313, 2315, 2316, 2317, 2318, 2319, 2320, 2321, 2322, 2323, 2324,2325, 2399, 2700, 2710, 2711, 2712, 2713, 2716, 2719, 2720, 2721, 2722, 2723, 2724, 2729, 2730, 2731,2732, 2733, 2734, 2735, 2736, 2737, 2738, 2739, 2740, 2741, 2743, 2744, 2748, 2749, 2750, 2751, 2752,2753, 2754, 2755, 2780, 2781, 2782, 2783, 2784, 2785, 2798, 2799, 2900, 2910, 2911, 2990, 8250

Electronics/Instrumentation3000, 3100, 3160, 3200, 3300, 3310, 3400, 3420, 3499, 3500, 3510, 3599, 3700, 3710, 3720, 3799, 3800,3810, 3820, 3830, 3835, 3899

Financial Services2816, 2836, 9200, 9210, 9220, 9230, 9235, 9240, 9250, 9254, 9255, 9299

Healthcare Services2820, 2840, 5400, 5410, 5412, 5414, 5420, 5429, 5430, 5440, 5499

Thomson Reuters 95

Industry analysis is based upon the following industry sectors: Biotechnology, Business Products andServices,Computers and Peripherals, Consumer Products and Services, Computer Software, Electronics/-Instrumentation, Financial Services, Healthcare Services, Industrial/Energy, IT Services, Media andEntertainment, Medical Devices and Equipment, Networking and Equipment, Retailing/Distribution,Semiconductors, Telecommunications and Other. These sectors are based on the 17 industry classifications ofthe MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based ondata from Thomson Reuters.

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Industrial/Energy2819, 2837, 2839, 6000, 6100, 6200, 6300, 6400, 6410, 6420, 6430, 6499, 6500, 6510, 6511, 6512, 6520,6530, 6540, 6599, 6600, 6700, 6710, 6720, 6799, 6800, 6900, 8000, 8100, 8110, 8111, 8112, 8113, 8114,8115, 8119, 8120, 8121, 8129, 8130, 8140, 8143, 8144, 8145, 8146, 8147, 8148, 8149, 8150, 8151, 8152,8160, 8161, 8162, 8170, 8189, 8199, 8200, 8210, 8220, 8221, 8230, 8240, 8260, 8299, 8300, 8310, 8320,8330, 8340, 8350, 8360, 8370, 8399, 8500, 8510, 8520, 8530, 8599, 8600, 8700, 9000, 9100, 9110, 9120,9125, 9130, 9140, 9150, 9160, 9180, 9199, 9400, 9410, 9415, 9420, 9430, 9440, 9460, 9470, 9499, 9500,9510, 9520, 9530, 9540, 9599, 9600, 9700, 9710, 9720, 9730, 9740, 9750, 9799, 9800, 9810, 9820, 9830, 9899

IT Services1560, 1561, 1562, 1569, 2600, 2630, 2640, 2650, 2655, 2660, 2665, 2670, 2675, 2691, 2699, 2760, 2761,2762, 2763, 2765, 2766, 2768, 2769, 2800, 2870, 2871, 2873, 2879

Media and Entertainment1110, 1120, 1125, 1130, 1135, 1199, 1700, 1720, 2814, 2818, 2834, 2838, 2843, 2848, 2850, 2851, 2852,2853, 2854, 2855, 2856, 2857, 2858, 2859, 2860, 2861, 2862, 2863, 2864, 2865, 2866, 2869, 7100, 7110,7120, 7125, 7130, 7140, 7150, 7155, 7160, 7170, 7199, 9450

Medical Devices and Equipment5000, 5100, 5110, 5120, 5121, 5122, 5123, 5124, 5125, 5130, 5140, 5200, 5210, 5220, 5221, 5230, 5240,5299, 5300, 5310, 5340, 5350, 5380, 5399

Networking and Equipment1400, 1500, 1510, 1515, 1520, 1521, 1522, 1523, 1524, 1525, 1530, 1549, 3600, 3610, 3620, 3630, 3699

Retailing/Distribution2810, 2813, 2815, 2817, 2821, 2823, 2825, 2826, 2829, 2830, 2833, 2835, 2841, 2845, 2846, 2849, 7200,7210, 7220, 7230, 7240, 7245, 7246, 7247, 7248, 7250, 7299, 7350

Semiconductors3110, 3111, 3112, 3114, 3115, 3119, 3120, 3130, 3132, 3135, 3139, 3140, 3410, 3900, 3910, 3920, 3930,3940, 3989, 3990, 8141, 8142

Telecommunications1000, 1100, 1200, 1210, 1215, 1220, 1230, 1299, 1300, 1310, 1320, 1325, 1330, 1399, 1550, 1551, 1552,1553, 1559, 1600, 1610, 1620, 1630, 1640, 1699, 1710, 1800, 1810, 1825, 1899, 2822, 2842

Other9900, 9910, 9912, 9914, 9915, 9918, 9920, 9999

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Appendix F: Stage Definitions

SEED STAGE FINANCING

This stage is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept.This involves product development and market research as well as building a management team and develop-ing a business plan, if the initial steps are successful. This is a pre-marketing stage.

EARLY STAGE FINANCING

This stage provides financing to companies completing development where products are mostly in testing orpilot production. In some cases, product may have just been made commercially available. Companies may bein the process of organizing or they may already be in business for three years or less. Usually such firms willhave made market studies, assembled the key management, developed a business plan, and are ready or havealready started conducting business.

EXPANSION STAGE FINANCING

This stage involves working capital for the initial expansion of a company that is producing and shipping andhas growing accounts receivables and inventories. It may or may not be showing a profit. Some of the uses ofcapital may include further plant expansion, marketing, working capital, or development of an improved prod-uct. More institutional investors are more likely to be included along with initial investors from previousrounds. The venture capitalist’s role in this stage evolves from a supportive role to a more strategic role.

LATER STAGE

Capital in this stage is provided for companies that have reached a fairly stable growth rate; that is, not grow-ing as fast as the rates attained in the expansion stages. Again, these companies may or may not be profitable,but are more likely to be than in previous stages of development. Other financial characteristics of these com-panies include positive cash flow. This also includes companies considering IPO.

ACQUISITION FINANCING

An acquisition of 49% stake or less. Firm acquires minority shares of a company. Thomson Reuters includesthese deals in standard venture capital disbursement data when calculating venture capital disbursementswhere the funding is by a venture capital firm.

ACQUISITION FOR EXPANSION

Funds provided to a company to finance its acquisition of other companies or assets. A consolidator of com-panies in specific industries.

MANAGEMENT/LEVERAGED BUYOUT

These funds enable an operating management group to acquire a product line or business, at any stage of devel-opment, from either a public or private company. Often these companies are closely held or family owned.Management/leveraged buyouts usually involve revitalizing an operation, with entrepreneurial managementacquiring a significant equity interest.

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RECAP/TURNAROUNDFinancing provided to a company at a time of operational or financial difficulty with the intention of improv-ing the company’s performance.

SECONDARY BUYOUT

A buyout deal on top of a buyout deal. Secondary buyouts are distinguished when the initial firm investor isdifferent from the current investing firm.

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For this publication, the main source for data was ThomsonONE.com, the online research database of ThomsonReuters. ThomsonONE.com (which replaced VentureXpert™, and Thomson One Banker) is endorsed by theNVCA as the official United States venture capital activity database. By using data gathered through theMoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on datafrom Thomson Reuters, ThomsonONE.com contains investment, fund raising, portfolio company information,and Reuters News along with other statistical data. Over 1.1 million global private companies can be analyzedwithin ThomsonONE.com, including historical revenue figures on over 450,000 companies and detailed finan-cials on over 160,000 companies with up to a five year history. Through a partnership withVC Experts.com, Inc.the historical breadth and depth of the Thomson Reuters venture capital content is integrated with private com-pany valuation and deal terms. ThomsonONE.com includes blogs, events, and articles from the peHUB and theVenture Capital Journal, two of the industry’s most widely-read publications. Other information contained in thisdatabase is gathered through a variety of public and proprietary source. This publication is produced on anannual basis primarily using year-end data. However, the underlying databases can be accessed online to pro-vide the most up-to-date and comprehensive global private equity statistics and profile information available.

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Data Sources and ResourcesMoneyTree™ Data

PricewaterhouseCoopers, Thomson Reuters, and theNational Venture Capital Association joined forces inDecember 2001 to produce what was then known asthe PricewaterhouseCoopers/Thomson VentureEconomics/National Venture Capital AssociationMoneyTree™ Survey. Conducted on a quarterlybasis, the designated PwC/NVCA MoneyTree Reportallows Thomson Reuters unparalleled access to pri-mary sources of information from general partners.

Sources of DataThe online database of Thomson Reuters isThomsonONE.com (VentureXpert), the foremostinformation provider for private equity professionalsworldwide. The private equity portion of ThomsonReuters offers an incomparable range of products fromdirectories to conferences, journals, newsletters,research reports, and the ThomsonONE.com PrivateEquity database. As of March 2013, the databaseincluded over 107,000 portfolio companies, over 18,000private equity firms, nearly 41,000 private equity funds,and over 235,000 financing rounds. By establishingworking relationships with private equity and venturecapital firms, institutional investors, and industry asso-ciations such as the NVCA, PricewaterhouseCoopersand other such entities around the world, ThomsonReuters has been able to gather, on a timely basis, com-

plete and accurate information.

Timeliness of DataMany of the tables and charts presented in this reportcan be produced by using ThomsonONE.com. One ofadvantages of using ThomsonONE.com is that thereader can customize a report to better fit the needs ofwhat they are seeking. In addition, because the onlinedatabase is continuously updated, the informationavailable is more up-to-date than what can be present-ed in this report. Readers should note that timely indus-try information on details concerning venture capitalinvestment is available from other sources such asPricewaterhouseCoopers at www.pwcmoneytree.com,the ‘Industry Stats’ section of the NVCA website,www.nvca.org, and the Private Equity section ofThomson Reuters’ Deals Intelligence found athttp://dmi.thomsonreuters.com/PrivateEquity

Verification and Updating of DataCollectively, PricewaterhouseCoopers, ThomsonReuters, and the NVCA have the utmost commitmentto provide an accurate historical record of venturecapital activity. On a daily basis, the database is con-stantly analyzed for consistency, crosschecked withother data sources, and updated as new informationcomes in. On a quarterly basis, we have worked withmany venture firms to ensure that that their currentand past data is correct. Primarily for this reason, the

Appendix G: Data Sources and Resources

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private equity news releases of Thomson Reuters willoften restate statistics from prior news releases. Withthe availability of the online data access, users areencouraged to always use the most current numberseven regarding historical activity so as to maintainaccuracy and comparability.

Reporting Functionality ofThomsonONE.comUsers can access information in terms of profiles onprivate equity companies, funds, firms, executives,IPOs, and limited partners. In addition, users canaccess the analytics portion of the database, whichcontains investment, valuation, PE backed exits, fundperformance, and fund raising information alongwith venture capital information such as aggregatefund raising, and investments. Thomson Reuters OnDemand is a service offering that caters to Financial& Risk clients. With access to virtually all F&R con-tent sets, users of the service offering can orderreports and analysis as needed.

Comprehensiveness ofThomsonONE.comBoth the breadth and depth of ThomsonONE.comcan perhaps best be shown in that it, among othertypes of information, the user can find the answers tothe following questions:• Which venture firms actively co-invest with a firmI am considering co-investing with?• Which venture firms are most active in funding onlinefinancial services companies in the Ohio Valley?• What does Yearbook Figure 3.15 look like for justbiotech?• How much money was raised by each fund stage in2012?• What was a particular venture-backed IPO’s oneyear return at the end of 2012?• As of December 2012, was the 10-year return to smallbuyout funds larger than that of large buyout funds?• Who are the most active acquirers of ecommercesecurity companies?• How much money was committed to mezzaninefunds from 1997 to 2012?• How much money was invested in the venture cap-ital industry from 1987 to 2012?• What is the performance at quarter end for privateequity funds that were formed from 1998 to 2012?

• In 2012, howmuchmoney was invested at each devel-opment stage in Research Triangle Pharmaceuticalcompanies?

In addition, there are also advantages of using thedatabase for a general partner as well. Although thisis not an inclusive list, utilizing the database by gen-eral partners can be helpful to them for among thefollowing reasons:• Plan your companies’ exits with data on both ven-ture-backed IPOs and mergers and acquisitions• Aid in recruiting talented executives from otherventure-backed companies• Quickly spot venture-backed companies in compe-tition with your own portfolio companies• Create industry analyses to benchmark both per-formance and portfolio investments• Find other venture capitalists likely to support fol-low- on rounds• Provide clarity to investment decisions by compar-ing them to current market conditions• Compile valuation reports for comparable portfoliocompanies• Identify prospective investors and their investmenthistories• Benchmark valuations among recent transactionsand obtain valuation comparables• Analyze investment trends by industry• Utilize returns information to limited partners usingappropriate benchmarks• Tailor your pitch to investor focus size and limitedpartner type

AccessingThomsonONE.com and OtherServicesFor more information on ThomsonONE.com, pleasevisit http://thomsonreuters.com/products_services/-f inancial/f inancial_products/deal_making/privat-e_equity/private_equity_venture_capital/ or byphone at 1-800-782-5555. For information on NVCAmembership, which can include a free trial and dis-counts on an annual subscription, please contactJanice Mawson at the NVCA. You may contact heronline through the link on the member benefits sec-tion of the NVCA website or at 703-524-2549. Forinformation on services PricewaterhouseCoopersprovides for venture capital firms as well as emerg-ing companies, please visit their website atwww.pwcmoneytree.com.

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Appendix H: International Convergence

The Dialogue and SEC Decision: Shouldinternational rules become accepted asU.S. GAAP?For years, the United States has been developing gen-eralized accounting principles referred to asGenerally Accepted Accounting Principles(“GAAP”). The keeper/arbiter/decider of GAAP isthe FinancialAccounting Standards Board (“FASB”).The FASB develops and updates GAAP and the SEChas adopted these accounting rules for public compa-ny reporting and other situations over which the SEChas jurisdiction. In recent years, on a parallel track, aseparate set of rules emerged from the InternationalAccounting Standards Board (“IASB”), which wasEurope-centric. These rules became known as theInternational Financial Reporting Standards (“IFRS,”pronounced “EYE-fers”). IFRS has now been adopt-ed by most developed and many developing countriesaround the world, with the exception of the UnitedStates.

Over recent years, a large number of multinationalcorporations complained that they had to endurekeeping two sets of books and this prompted the con-

cept of convergence. In early September 2008, theSEC and the FASB announced steps to pave the wayfor United States public companies to convert fromU.S. GAAP to IFRS. The SEC “roadmap” providedfor a three-year run-up to an SEC “go-no go” deci-sion in 2011, but the decision was deferred. At aboutthe same time, the FASB and the IASB met to reviewand re-orient their convergence plan to be consistentwith the SEC’s proposed schedule. The 2008-2009world financial crisis deferred and deprioritizedmuch of the work in this area.

The SEC’s 2012 staff report on adopting IFRS didnot make a recommendation, but raised questionsabout consistent application, transparency, reliability,relevance, comparability, and ongoing costs in addi-tion to any conversion costs, which might be signifi-cant. More relevant to the United States venture cap-ital industry are matters specifically affecting fundreporting, the financial statements provided by GPsto LPs under the eventual rules. Because of the recentchange in IFRS consolidation rules, United Statesventure capital firms would conceptually not beimpacted by a change to IFRS.

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During 2012, the discussions and work focused on moving toward one high quality set of standards for finan-cial reporting have begun to provide a picture of the future. While that picture is more gray scale than vividcolor, the following facts and expectations highlight the current state of play at this point in time:

• The SEC issued a report in 2012, without a recommendation, on whether to adopt internationalaccounting rules, or a modification thereof, as the accepted accounting practice in the United States.It appears increasingly unlikely that the SEC will move 100% into the International FinancialReporting Standards (IFRS) camp;

• FASB’s parent, the Financial Accounting Foundation, created a new Private Company Council (PCC)to advise on private company accounting. Their work is just beginning;

• The AICPA is considering whether the PCC will provide an appropriate framework for private compa-nies or if the AICPA should continue with efforts to develop an alternative non-GAAP basis of account-ing for private companies;

• The International Accounting Standards Board (IASB) modified IFRS consolidation rules to effective-ly create Investment Company accounting substantially similar to that used under U.S. GAAP; and

• While Fair Value accounting rules are now virtually identical under U.S. GAAP and IFRS, auditors areraising questions related to "unit of account" and valuing minority positions that could impact howventure capital and private equity funds estimate Fair Value.

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How United States GAAP andInternational IFRS Compare – NeverGeneralize

Even viewed from 30,000 feet, it is difficult to gen-eralize on how the two systems compare. First, whilethe IASB produces plain vanilla IFRS standards,there is no one flavor of IFRS in use. Much like theoriginal UNIX kernel, each country/jurisdiction hasbeen able to create its own version of IFRS. Butunlike UNIX, sometimes the differences among thelocalized IFRS versions are large. So apples-toapples comparison of “IFRS-compliant” financialsfrom different jurisdictions can be difficult. Second,it is true that IRFS itself is a very thin documentcompared to GAAP, which has grown to roughly atwo-foot stack of written rules. However, to imple-ment IFRS, you need the implementation guide thatcombines with the original document to create itsown two-foot stack. Again, much of the surface com-parisons are not useful. Until now, United States ven-ture capital firms have been using U.S. GAAPaccounting standards exclusively.

While seemingly distant from the United States ven-ture capital industry, it is important that all businessconstituencies weigh in on which system (currentU.S. GAAP vs. International vs. neither) is the bestsystem overall for the United States business com-munity going forward.

GP-to LP Reporting – Can MeaningfulStatements Continue?

A key priority for the United States venture capitalindustry is being able to continue producing quarter-ly financial statements using investment company(IC) accounting. Virtually all LP agreements (oraccompanying documents) require GPs to provideGAAP-compliant financial reports to LPs. Annualaudits include testing to ensure GAAP compliance.Under GAAP, the United States venture capitalindustry now provides Fair Value portfolio reportsunder the special rules of “investment companyreporting.” In 2012, IFRS was modified to effective-ly create a financial reporting framework substantial-ly similar to U.S. GAAP.

GP’s should not lose sight of the fact their LP’s whoprepare financial statements using either U.S. GAAP

or IFRS, in almost all cases, must report their LPfund positions on a Fair Value basis. LPs are increas-ingly awakening to the specific conditions outlined ina change to U.S. GAAP from 2009, which codifiedan LP’s ability to use Net Asset Value (NAV) as anLP’s estimate of the Fair Value of their fund interest.These conditions include that the LP must satisfythemselves that the GP reported NAV is based on theFair Value of underlying investments, that NAV is“in-phase” (no time lag, unless deemed insignifi-cant), and that the LP interest is in a fund as definedby ASC Topic 946. If these three conditions are notmet, or if the LP chooses not to use NAV, then FairValue would be determined using other techniques.The point here for GPs is that LPs need robustlydetermined Fair Value on a timely basis, generally atleast quarterly.

How the Same Words have DifferentMeanings

The 2012 change in IFRS consolidation rules forInvestment Entities and the 2011 adoption of a com-mon definition of Fair Value for U.S. GAAP andIFRS should have created a framework where finan-cial reporting to investors would be identical forfunds using IFRS and funds using U.S. GAAP. If itwere only that easy!

While we enter 2013 with a consistent frameworkunder U.S. GAAP and IFRS where venture capitaland private equity funds report all investments at FairValue; and while we now have an identical definitionof Fair Value (the amount a market participant wouldpay in an orderly transaction), schisms are develop-ing.

Because of nuances in the way IFRS is drafted, IFRSauditors are questioning whether Fair Value shouldbe determined based on the “investment” or on a“single share” basis. While the reasons for such aquestion are beyond the scope of this document, thequestion and potential results could mean that IFRSand U.S. GAAP, though identical in principle, wouldresult in different Fair Value estimates (as an aside,this is an example of one situation that concerns theSEC in moving the United States towards IFRS).

At the same time, many auditors of U.S. GAAP, as areaction to their regulators the PCAOB, and because

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of pressure from the SEC, which now regulates pri-vate equity funds, are questioning whether or not thesale or exit of an enterprise can be assumed whendetermining the Fair Value of minority positions.Some auditors have gone so far as to indicate thatthey may require the use of option pricing models fordetermining the Fair Value of all minority positions.

Going Forward

With questions regarding whether or not IFRS shouldbe interpreted as requiring all Fair Value estimates tobe on a single share basis, and with U.S. auditorsappearing to feel some pressure to use mathematicalmodels to document their audit conclusions, bothGPs and LPs in the venture capital and private equi-ty industry could be faced with financial reportingthat is either very costly and/or is not representativeof how deals are done in the industry.

In December 2012, the International Private Equity& Venture Capital Valuation (IPEV) Board updatedits Valuation Guidelines. The updated valuationguidelines address both the “unit of account” andmathematical model questions. In addition, IPEVreleased Investor Reporting Guidelines in October2012. While each fund manager must decide bothwhat information to report and how to estimate FairValue, the IPEV Valuation Guidelines and the IPEVInvestor Reporting Guidelines provide balanced, andindustry created, assistance in dealing with reportingand valuation questions.

NVCA and Thomson Reuters acknowledge andappreciate the assistance of David Larsen of Duffand Phelps in updating and refocusing the materialin this Appendix.

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Appendix I: US Accounting Rulemakingand Valuation Guidelines

Guidelines fall into two categories. The first is portfo-lio performance presentation formats, calculations,and disclosure. Examples of such Guidelines are thePrivate Equity Provisions of the Global InvestmentPerformance Standards (GIPS), developed by the CFAInstitute and the IPEV Investor Reporting Guidelines.While many of the specifications and terminology lineup with current practice in the United States, theNVCA has not endorsed or otherwise commented onthese Guidelines. Neither NVCA nor ThomsonReuters has determined how widespread the adoptionof those guidelines is or will likely be. These docu-ments and accompanying guidance can be currentlyfound at http://www.cfainstitute.org/centre/codes/gips/and www.privateequityvaluation.com.

The second important category of guidelines isfocused on valuation.

WhyValuation Guidelines Matter

What ultimately matters to investors and privateequity practitioners is the cash that has been distrib-uted to the investors during the life of the fund com-pared with the original money put in. However, thespecified life of a typical venture fund is at least 10years and often longer in the life sciences arena.During that period, the venture capital fund reportsprogress to the limited partners. In many cases, thismeans quarterly portfolio updates and a completeannual audited financial statement. For a typical ven-

ture fund, very little money is paid out in the firstfour or five years. Also, while every portfolio compa-ny receives funding with high expectations, it cantake several years to determine if a particular compa-ny is a likely winner. Therefore, understandingprogress in the portfolio requires some estimate ofthe success of the investee companies by the venturecapital or private equity firm. While many investorsand fund managers agree that financial measure-ments mean little for the first three or so years of afund, investors are required to report the Fair Value oftheir fund positions on a quarterly or annual basis.This is where specific valuation rules and processesbecome important. The agreed valuation proceduresfor individual portfolio companies become the basisfor progress assessment as the fund matures and ulti-mately distributes cash to the investors.

Thus, while portfolio company valuations are moreof an art than a science, especially for pre-revenue oreven pre-EBITDA companies, most limited partneragreements (LPAs) establishing a venture capitalfund require the venture firm to provide quarterlyand annual financial statements using GenerallyAccepted Accounting Principles (GAAP). GAAPrequires Fair Value measurement for portfolio posi-tions. Therefore, most GPs must issue financial state-ments using Fair Value.

Most important, if industry-created valuation guide-lines are not used, those outside the industry, such as

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In the United States, a venture capital fund is usually organized as a limited partnership. The institutionalinvestors providing capital to a fund typically become the limited partners (LPs). The venture firm itselfbecomes a general partner (GP) in the limited partnership. In most of the limited partnership agreements defin-ing the GP-LP relationship, the GPs are required to provide financial reports quarterly (unaudited) and annu-ally (audited) prepared according to United States Generally Accepted Accounting Principles (“GAAP”).GAAP calls for the use of investment company accounting, which mandates that a Fair Value be assigned to theindividual investments (portfolio companies). This is consistent with the LP’s need for Fair Value of their invest-ments, as well as third-party or regulatory requirements, e.g., ERISA-regulation. In recent years, the GP-to-LPfinancial statements have been subject to numerous rule “clarifications,” convergence with non-U.S. account-ing, expanded disclosures, and more formal presentations. Industry groups (PEIGG a decade ago and IPEVtoday) have released guidelines that, if adopted, can reduce questions from LPs and provide a basis to respondto questions posed by auditors.

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auditors or regulators could impose their view on theindustry. A non-industry view could adverselyimpact the LPs desire and ability to invest if interimvalues are not representative of the way the industrysees value, and costs for determining valuation couldincrease.

The Evolution of Reporting andValuation Guidelines

To understand the pressure on valuation and report-ing in today’s environment, a historical backgroundreview is instructive.

• 1940 – United States Investment Company legis-lation (“the 40 Act”) required investment compa-nies to report the Fair Value of investments. Whilethe application of accounting standards hasevolved over the past 70+ years, the underlyingbasis of reporting has always been Fair Value.

• 1989-90 – A group of investors, private equityfund managers, and fund-of-fund managersformed a group to develop a set of portfolio com-pany valuation guidelines for financial reporting.Contrary to a very persistent rumor, the NVCAdid not endorse, adopt, bless, publish, or other-wise opine on the guidelines. Using the principleof conservatism, these non-endorsed guidelinesused cost or the value of the last round of financ-ing to approximate Fair Value.

• Decade of the 1990s – Two noteworthy develop-ments occurred in the 1990s. Despite no endorse-ment by the NVCA, these guidelines becameaccepted practice by much of the United Statesindustry, especially in the venture capital side ofprivate equity. These guidelines were referred toby many as being issued by the NVCA but in factthey were not. The second development is thatinternational venture associations created local-ized guidelines based heavily on these guidelines.These were created in Europe and other interna-tional regions. In fact, by 2005, there had beenmultiple iterations of the European and Britishguidelines, again generally focused on cost or thevalue of the last round of financing.

• December 2003/September 2004 – The PrivateEquity Industry Guidelines Group (PEIGG), a

self-appointed group of private equity practition-ers, fund managers, LPs and others, issued U.S.Private Equity Valuation Guidelines. TheGuidelines were issued after extensive input andreview soliciting feedback and input from a num-ber of industry groups that included NVCA.

• 2005 – In part as a reaction to the PEIGGGuidelines, three Europe-based venture capitalassociations (AFIC, BVCA, EVCA) created theInternational Private Equity and Venture Capital(IPEV) Valuation Board.

• April 2006 – IPEV released its ValuationGuidelines.

• September 2006 – Financial AccountingStandards Board (FASB) issued its long-awaitedand long anticipated Fair Value measurement stan-dard as FAS 157. Only a few of its 145 pages relatedirectly to typical venture capital and private equi-ty funds. Because the FASB maintains that this is aclarification and further definition of Fair Valuethat was already required for portfolio accounting,some auditors began requiring selective compli-ance in advance of the 2008 effective date.

• March 2007 – PEIGG issued a revised portfoliocompany valuation guidelines document to reflectthe Fair Value Measurement standard (FAS 157).

• September 2007 – NVCA board reaffirmed itsprior position on the PEIGG guidelines to refer tothe most recent version.

• March 2008 – the IPEV Board reconstituted andre-launched itself and adds five practitioners fromthe United States. The initial focus of the groupwas on convergence of U.S. PEIGG and IPEVvaluation guidelines. Details at www.private-equityvaluation.com.

• July 2009 – Effective July 1, authoritative GAAPbecame contained in a single codification and theprior nomenclature went away. Existing U.S.GAAP was recast into 90 topics, which includeall related FASB pronouncements, AICPA guid-ance and EITFs under single “Topics.” Familiarstandards would no longer exist. For example,FAS 157 became Topic 820 Fair ValueMeasurements and Disclosure. Investment

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Company accounting became ASC Topic 946.

• May 2011 – FASB amended ASC Topic 820 andthe IASB issues IFRS 13, resulting in nearly iden-tical Fair Value guidance.

• October 2012 – IPEV released InvestorReporting Guidelines

• December 2012 – IPEV updated its ValuationGuidelines to harmonize with ASC Topic 820 andIFRS 13.

NVCA Position on Portfolio CompanyValuation Guidelines

The NVCA Board of Directors has not specificallyendorsed valuation guidelines, but has historicallyaffirmed its support for pragmatic industry-support-ed valuation efforts.

NVCA Member Alert –Fair ValueConsiderations for VentureCapitalists–December 2008In 2008, as a response to the economic crisis at thetime, the NVCA issued a membership alert. Much ofthat alert remains relevant today.

The following alert was sent to the NVCA member-ship to highlight certain issues and considerations tobe explored in the application of FAS 157, the FairValue measurement standard. The NVCA thanksDavid Larsen of Duff and Phelps and several mem-bers of the NVCA CFO Task Force for their role indrafting this document:“We are operating in a severely distressed investmentenvironment that has deteriorated rapidly in the pastfew months. What does this mean for venture capitalinvestors as they attempt to value privately-heldinvestments at December 31, 2008? The short answeris: despite the current very challenging economicenvironment, fund managers must continue to exer-cise their sound judgment in estimating the Fair Valueof each portfolio company after considering the rele-vant facts, including current market conditions. Thevaluation process does not change, but much morejudgment is required when we are in a period of eco-nomic discontinuity. Virtually all LP agreementsrequire GPs to use U.S. GAAP for financial reporting.

U.S. GAAP requires Fair Value reporting for virtuallyall VC firms because they are “investment compa-nies.” U.S. GAAP continues to define Fair Value as:“the price that would be received to sell an asset … inan orderly transaction between market participants atthe measurement date.”

Fund managers need to establish Fair Values eventhough they may not currently need to sell, or cannotsell, their private investments in this market. GPsmust use their judgment in estimating the current FairValues of their investments, even though “exit mar-kets” may have few buyers, IPO markets appearclosed, and there are few, if any, relevant comparabletransactions. Such judgment should take into accountall relevant information, including a financinground’s specific terms and conditions. There are noeasy outs, rules of thumb or safe harbors for estab-lishing Fair Value. As always, best considerations forFair Value determination include the following:

• The Fair Value of an investment portfolio is thesum of the Fair Value determined for each portfo-lio company using a “bottoms up” approach.Applying a “top-down” overall percentage adjust-ment to the aggregate portfolio’s value is notcompliant with U.S. GAAP.

• Valuations should reflect specific factors in abuy/sell context. For example, a GP could ask:“Given my portfolio company’s current cash posi-tion, cash burn rate, performance compared toplan, probability of meeting forecasts, the pro-jected environment for its product or technology,etc., as a board member, what is the lowest pricethat I would sell the company’s stock today in anorderly sale with a willing buyer?” [Footnote: Afund manager should not assume a “fire sale” ofthe stock, but should assume “exposure to themarket for a period prior to the measurement dateto allow for marketing activities that are usual andcustomary …” from SFAS 157, Paragraph 7].

• The valuations set by the most recent financinground – perhaps even one in the third quarter of2008 – may be stale and inappropriate for deter-mining Fair Value, especially given current mar-ket conditions.

• The Fair Value at December 31 in many cases willlikely be different from the value at September30, given the deterioration of the macroeconomicenvironment.

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• Each valuation should reflect a company’sdegree of progress from the prior reporting date tothe current one.• To determine a portfolio company’s Fair Value,GPs should apply their judgment in a consistentmanner and evaluate the same data they use formonitoring a company’s performance andprogress. There is no magic formula or weight-ing of factors.

In summary, determining Fair Value continues torequire the exercise of judgment based on objectiveevidence, such as calibrating the original investmentdecision with the current performance of the com-pany and the current economic environment. Thefact that the macro market is distressed probablyadversely impacts the value of most companies.This negative impact may be compounded by disap-pointing company performance or mitigated by tan-gible and sustainable company progress. If you needmore details about Fair Value, you might considerthe IPEV Valuation Guidelines atwww.privateequityvaluation.com.”

2013 Headwinds

As noted above, new pressure is emerging that couldimpact how venture capital and private equity man-agers estimate Fair Value. Key factors include:

1. LPs are awakening to the fact that they need toobtain more information from the GP about howthe GP estimates Fair Value so the LP can useNAV to estimate the Fair Value of their LP inter-est.a. LPs are revisiting their internal valuation

policies.b. LPs are asking more detailed valuation

questions of the GP.

2. The IASB has created “investment companyaccounting” by requiring venture capital and pri-vate equity funds to report all investments at FairValue rather than consolidating control positions.

3. Auditors of IFRS have raised questions concern-ing the level of aggregation (unit of account) thatshould be used to value venture capital and pri-vate equity investments.a. Some auditors believe that unit of account

is a single share of an investee company.b. Single share valuations would likely result

in reporting understated Fair Values.c. Reporting understated Fair Values would

exacerbate the “J” curve, and could causesome LPs to reduce investments in theindustry because of lower interim returns.

d. IFRS could deviate from U.S. GAAP eventhough the Fair Value principles are identi-cal.

4. Auditors of U.S. GAAP have raised questionsconcerning how to estimate the Fair Value ofnon-control positions.a. Is it appropriate to assume that the entire

enterprise is being sold when estimatingFair Value?

b. For non-control positions, is it appropriateor required to use option pricing models andtheory to estimate Fair Value?

The IASB is expected to address the Unit ofAccount question during early 2013. The AICPAhas formed a task force to provide guidance oninvestments of venture capital and private equityfunds. Part of the reason the AICPA has formed atask force is because the IPEV guidelines have notbeen as formally accepted or acknowledged in theU.S. as they have been in Europe. Further, some par-ties believe that the AICPA task force conclusionsmay be relatively auditor-friendly, rather than beingGP/LP/Auditor/Service Provider balanced, as theIPEV guidelines are generally considered to be.

All of this raises the question: could GPs reduce LPquestions and increase LP valuation comfort by stat-ing that they comply with the IPEV ValuationGuidelines? Further, if the IPEV ValuationGuidelines were more widely adopted by the VCcommunity, would the industry be able to push backon anAICPA effort that could increase GP valuationcosts? Over the next year, greater clarity shouldemerge.

NVCA and Thomson Reuters acknowledge andappreciate the assistance of David Larsen of Duffand Phelps in updating and refocusing the materialin this Appendix.

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Appendix J: Non-US Private Equity

IntroductionThis appendix highlights various aspects of privateequity activity outside of the United States and pro-vides valuable information for comparison to theUnited States private equity environment. However,this appendix is not directly comparable to domesticdata found in this Yearbook due to differences in defi-nitions between the regions and variations in the cur-rencies of each region. Additionally, this appendix pro-vides a brief overview of non-US private equity; dataherein is not as comprehensive as the United Statesdata presented elsewhere in this publication. Despitethis, the reader can use this appendix to analyze trendsin private equity outside of the United States. All datais provided by Thomson Reuters. As mentioned previ-ously, readers should note the differences in methodol-ogy and definitions of private equity between UnitedStates and other regions before analyzing the data. Forexample, private equity outside of the United Statesprovides equity capital for entities not publicly tradedand consists of buyouts and venture capital. The cate-gory of buyouts includes management buyouts (man-agement from inside the company investing with pri-vate equity investors), leveraged buyouts (the targettaking on a high level of debt secured by assets), insti-tutional buyouts (outside investors buying a businessfrom existing shareholders), and management buy-ins(management from outside the company investing withprivate equity investors). On the other hand, venturecapital describes the process of financing companies atthe seed, start-up, or expansion stages. The UnitedStates places more emphasis on the early stages ofdevelopment than do other regions, based on historicalanalysis of investments by stage. Like in the UnitedStates, non-US venture capital is considered a subset ofprivate equity. For ease of analysis and to avoid differ-ences in definitions between venture capital and buy-outs inside and outside of the United States, it is per-haps most comparable to analyze aggregate privateequity in the two regions as opposed to any classifica-tions contained within.

**Special Note: The methodology used to generatethe data within this appendix differs slightly from themethodology used in previous years, causing data tovary slightly from previous Yearbook issues.However, trends reported in the past remain intact.Additionally, most data is now replicable onThomsonONE.com.

Commitments

Private equity commitment levels, outside of theUnited States, totaled $110.3 billion in 2012.European-based funds raised the bulk, raising $59.6billion, equal to 54% of this amount. Meanwhile,Asianfunds had $42.6 billion in fundraising commitmentswhich is 39% of the total. Funds in the Other Regionsraised the remaining $8.1 billion or 7% of the total. Inthe stage level, Buyout commitments outside theUnited States accounted for $37.9 billion or 34% of thetotal. Surprisingly taking the second largest part of thecommitments was funds of funds which raised $24.1billion or 22% of the total. Venture Capital funds repre-sented 14% ($15.6 billion). Private Real Estate fundsraised $13.2 billion or 12% of the share. Other PrivateEquity/Special Situation funds, Generalist, andMezzanine funds raised $9.7 billion, $7.7 billion, and$1.9 billion, respectively. It should be noted that thesetotals reflect not only the amount raised by independentfunds, but also include capital gains and the amountraised by captive funds.

Investments

Overall, private equity investing outside of theUnited States reached $73.1 billion. Buyout stagefinancing led investment activity, accounting for69% of total dollars. TheVenture Capital investmentsfollowed with 17% of the total. By number of deals,Venture Capital investments led with 55% and theBuyouts investments followed with 36% of the totaldeal activity outside of the United States. The United

Thomson Reuters 109

As interest in globalization increases with each year, private equity investors have continued to broaden theirinvestment criteria to include overseas ventures so as to increase portfolio diversification and search for high-er returns. As such, Appendix J is produced for readers to analyze non-US private equity data. All data isreported in US dollars.

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Kingdom received the biggest share of private equityoutside the United States in 2012 with $13 billionworth of investments or 18% of the total value.Canada followed with $10.5 billion. China comes inat third with $8.4 billion or 12% of the total.

Private equity commitments and investments saw adecrease outside of the United States in 2012.Commitments saw a slight decrease of 5% from $115billion in 2011. Private equity investments dropped32% from $109 billion of the previous year.

National Venture Capital Association

110 Thomson Reuters

Figure J1Private Equity Commitments Outside of the United States in 2012

Fund Stage # Firms # FundsAmount Raised inRange (USD Mil)

Buyouts 67 68 37,990.9Venture Capital 216 221 15,612.9Generalist 30 32 7,741.1Mezzanine Stage 11 11 1,892.6Fund of Funds 28 32 24,131.4Other Private Equity/Special Situations 11 11 9,728.4Real Estate 46 49 13,240.1TOTAL 409 424 110,337.4

Figure J2Private Equity Commitments Outside of the United States By Fund Stage in 2012

Company Nation # Deals # CompaniesSum of Equity Invested

(USD Mil)United Kingdom 703 643 13,094.9Canada 935 824 10,483.1China 459 439 8,427.0France 619 595 4,748.0Germany 379 354 4,472.2Hong Kong 21 18 4,018.1Other Nations 2,326 2,203 27,832.5TOTAL 5,442 5,076 73,075.8

Figure J3Private Equity Investing Outside of the United States By Location in 2012

Company Stage # Deals # CompaniesSum of Equity Invested

(USD Mil)Buyout/Acquisition 1,961 1,843 50,573.2Venture Capital 3,010 2,846 12,534.5Other 471 433 9,968.1TOTAL 5,442 5,076 73,075.8

Figure J4Private Equity Investing Outside of the United States By Stage in 2012

Fund World Location # Firms # FundsAmount Raised inRange (USD Mil)

Asia 196 213 42,564.6Europe 124 138 59,629.0Other Regions 89 73 8,143.8TOTAL 409 424 110,337.4