NVCA yearbook 2011

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Arlington, VA 22209www.nvca.org

INCLUDING STATISTICS FROM THEPricewaterhouseCoopers/National Venture Capital Association

MoneyTree™ Report based on data from Thomson Reuters

NATIONAL VENTURECAPITALASSOCIATION

PREPARED BY

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NATIONAL VENTURECAPITALASSOCIATION

YEARBOOK 2011

March 2011

Dear Reader:

Never before in the nation’s history have financial mechanisms and markets come undermore scrutiny by Congress, the regulators, the media, and the general public. Despite theturmoil in many sectors of the economy, the closer look reaffirmed venture capital as akey driver of economic growth. The nation continues to look to the entrepreneurial sectorfor job creation, economic development, better healthcare, cleaner technology, and afaster, better, and more secure internet.

The statistics gathered and tracked by Thomson Reuters for ThomsonONE.com(formerly VentureXpert) and this Yearbook are essential to enabling analysis of venture capi-tal by policy think tanks and economists and for use by government officials and otherdecision makers. For example, recent analysis of Thomson Reuters data by IHS GlobalInsight shows that while venture capital investment represents 0.2% of US GDP, the rev-enue of companies created by the industry represented 21% of GDP in 2008. We are inthe process of revising these numbers based on recent results.

On behalf of the National Venture Capital Association board of directors and staff, we arepleased to present you with the latest statistics that describe the activity of the venturecapital industry in the United States. These statistics reflect yet another all-time high levelof survey participation by venture capital practitioners. This support has allowed us toresponsibly bring transparency to a part of the economy most people are aware of but fewreally understand. Your comments are always welcome at [email protected].

NVCA believes that it is more important than ever to effectively tell the story of venturecapital, differentiate it from other forms of alternative assets, and explain what’s needed tocontinue creating great, leading-edge companies. We believe that a strong venture capitalindustry is essential to America’s future.

Very truly yours,

Diana Frazier Mark G. Heesen John S. TaylorFLAG Capital Management NVCA President NVCA VP ResearchNVCA Director & Chairman, NVCA Research Committee

2 Thomson Reuters

NVCA BOARD OF DIRECTORS 2010-2011

Executive Committee

Kate Mitchell Paul MaederChairman Chairman-ElectScale Venture Partners Highland Capital Partners

E. Rogers Novak Ray RothrockTreasurer Treasurer-ElectNovak Biddle Venture Partners Venrock Associates

Jack LasersohnRotating At-LargeThe Vertical Group

Research Committee

Diana Frazier Mike ElliottResearch Chairman Noro-Moseley PartnersFLAG Capital Management, LLC

Bruce Evans Stephen HolmesSummit Partners InterWest Partners

Board Members At-Large

Ira Ehrenpreis James FlemingTechnology Partners Columbia Capital

Norm Fogelsong Michael GreeleyInstitutional Venture Partners Flybridge Capital Partners

Josh Green Jim Hale, IIIMohr, Davidow Ventures FTV Capital

Deepak Kamra Pascal LevensohnCanaan Partners Levensohn Venture Partners

Trevor Loy James MarverFlywheel Ventures Vantage Point Partners

Jason Mendelson Sherrill NeffFoundry Group Quaker BioVentures

Robert Nelsen David PrendARCH Venture Partners RockPort Capital Partners

Theresia Ranzetta Jonathan RootAccel Partners U.S. Venture Partners

Scott SandellNew Enterprise Associates

For the National Venture Capital Association

Prepared by Thomson Reuters

Copyright © 2011 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 Reutersdisclaims any liability including incidental or consequential damages arisingfrom errors or omissions in this report.

2011

National Venture Capital Association

Yearbook

Thomson Reuters 3

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

PresidentMark G. Heesen

Vice President of ResearchJohn S. Taylor

Senior Vice PresidentMolly M. Myers

Vice President of Federal Policy & Political AdvocacyJennifer Connell Dowling

Vice President of Strategic Affairs & Public OutreachEmily Mendell

Vice President of Membership & Member Firm Liaison

Janice Mawson

Director of Federal Policy & Political AdvocacyEmily A. Baker

Director of MarketingJeanne Lazarus Metzger

Director of Federal Life Science PolicyKelly Slone

Public Policy ManagerSumi Singh

Membership Coordinator & Database AdministratorTerry Samm

Accounting ManagerBeverley Badley

Manager of Administration and MeetingsAllyson Chappell

Administrative Assistant Gwendolyn Taylor

Research LabMavis Moulterd

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

Vice President, Head of Private Equity and DesktopProducts

Elizabeth Benson

Vice President, Deals and Private Equity OperationsShariq Kajiji

Global Business Manager – Private EquityJim Beecher

Editor-in-ChargeDavid Toll

Global Private Equity Operations ManagerAlex Tan

Press ManagementMatthew Toole

Product ManagerLori Ann Silva

Content SpecialistPaul Pantalla

Senior AnalystFrancis 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 2011 Yearbook

Table of Contents

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

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 10Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Portfolio Company Post-Money Valuations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 10

Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 15

Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Portfolio Company Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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

Appendix A: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Appendix B: MoneyTree Report Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Appendix C: MoneyTree Geographical Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Appendix D: Industry Codes (VEICs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Appendix G: Data Sources and Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Appendix H: Portfolio Company Valuation Guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Appendix I: International Convergence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Appendix J: Non-US Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

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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 theway, talent must be recruited and the company scaledup. Ask any venture capitalist who has had an ultra-successful investment and he or she will tell you thatthe company that broke through the gravity evolvedfrom the original business plan concept with the care-ful input 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 650 331,000 330,350 Starbucks Corporation 2,521 176,000 173,479 Staples 1,693 75,588 73,895 Whole Foods Market, Inc. 2,350 52,900 50,550 eBay 138 15,500 15,362

Venture Capital Backed CompaniesKnown for Innovative Technology and Products

Employment at IPO and Now

Company As of IPO Current # ChangeMicrosoft 1,153 91,000 89,847 Intel Corporation 460 86,300 85,840 Medtronic, Inc. 1,287 40,000 38,713 Apple Inc. 1,015 35,100 34,085 Google 3,021 16,805 13,784 JetBlue 4,011 11,632 7,621

Source: IHS Global Insight. Current data is FY 2007 Year End Data

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, venturecapital itself is unique. Typically, a venture capitalfirm will create a Limited Partnership with theinvestors as LPs and the firm itself as the GeneralPartner. Each “fund,” or portfolio, is a separate part-nership. A new fund is established when the venturecapital firm obtains necessary commitments from itsinvestors, say $100 million. The money is taken frominvestors as the investments are made. Typically, aninitial funding of a company will cause the venturefund to reserve three or four times that first invest-ment for follow-on financing. Over the next three toeight or so years, the venture firm works with thefounding entrepreneur to grow the company. The pay-off comes after the company is acquired or goes pub-lic. Although the investor has high hopes for any com-pany getting funded, only one in six ever goes publicand one in three is acquired.

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 Public 14%

Acquired 33%

Known Failed18%

Still Private or Unknown*

35%

*Of these, most have quietly failed

8 Thomson Reuters

Executive Summary

Introduction

The National Venture Capital Association 2011Yearbook provides a summary of venture capitalactivity in the United States. This ranges from invest-ments into portfolio companies to capital managed bygeneral partners to fundraising from limited partnersto valuations of companies receiving venture capitalinvestments to exits of the investments by either IPOsor mergers and acquisitions. The statistics for thispublication 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) data-base of Thomson Reuters, which has been endorsedby the NVCA as the official industry activity data-base. Subscribers to that system can perform consid-erable further analysis on the underlying data.

Industry Resources

Venture capital under management in the UnitedStates by the end of 2010 decreased only slightlyfrom 2009 levels to $176.7 billion. It is, however, thefourth decline in a row and belies the expectation forfurther reduction in industry assets and overall met-rics as the fallout from the technology bubble worksits way through the system almost 10 years later. Atthe end of 2010, the industry managed $176.7 billiondollars, down 38% from the peak a few years back.With the industry in a very constrained fundraisingenvironment in early 2011, further declines are likely.

Many of the firm, fund, and headcount declines arethe result of firms that raised money at the time of thebubble being unable to follow those funds with newfunds in recent years. As portfolios are wound down,these fund managers leave the industry. With 2010fundraising a mere 12% of the amount raised in2000, the industry has returned to a more traditionalsize band. At the end of 2010, 462 firms were active-ly investing. While slightly above 2009 depressedlevels, this number is a part of a longer term down-

During 2010, the industry continued to right-size and find equilibrium. Capital under management, headcount,and fundraising all declined, as anticipated. Investment totals were up from 2009 depressed levels, but stillbelow 2008 levels and well below the 2002-2008 trend line. More than 1,000 new companies were funded byventure capital firms in 2010.Initial public offerings in 2010 picked up considerably from the minimal levels of the prior two years. Whilethis provided some relief for the backlog of mature companies waiting for an opportunity to go public, totalshave to increase far beyond 2010 levels for a sustainable industry. A record number of venture-backed compa-nies were acquired, but the total proceeds from those purchases were far from a record. The lack of distributions to the institutional investors who provide the capital to the industry has left these pro-fessional money managers with little capital to recycle back to the industry. Thus, 2010 remained a difficultyear for many venture capital firms to raise money.A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new busi-ness opportunities, known as deal flow, remains very high and the best opportunities are getting funded, stress-es remain.

Thomson Reuters 9

11999900 22000000 22001100No. of VC Firms in Existence 384 861 791No. of VC Funds in Existence 716 1,701 1,183No. of Professionals 3,686 7,921 6,328No. of First Time VC Funds Raised 13 104 44No. of VC Funds Raising Money This Year 86 649 157VC Capital Raised This Year ($B) 3.2 104.8 12.3VC Capital Under Management ($B) 28.3 220.3 176.7Avg VC Capital Under Mgt per Firm ($M) 73.7 255.9 223.4Avg VC Fund Size to Date ($M) 36.5 88.0 107.8Avg VC Fund Size Raised This Year ($M) 37.2 161.5 78.3Largest VC Fund Raised to Date ($M) 1,775.0 5,000.0 6,300.0

Figure 1.0Venture Capital Under Management

Summary Statistics


10 Thomson Reuters

trend. Industry headcount continues to decrease, end-ing 2010 at 6,328 principals in the industry.

Commitments

New commitments to venture capital funds in theUnited States again decreased in 2010 to $12.3 billionfrom the post-bubble fundraising peak in 2006, when$31.8 billion was raised. This reflects an ongoing dif-ficult fundraising environment in part created byrecent economic stress. However, most of thedecrease reflects the contraction of the U.S. venturecapital industry that began after the technology bubbleburst in 2000 and the industry sought a more reason-able size band.

In 2010, 157 funds raised $12.3 billion, down 25%from 2009, which itself was down 38% from 2008.Overall, the 2010 amount raised was down 61% fromthe 2006 post-bubble peak. A look behind the chartsshows that this total was dominated by a small groupof firms, most of which are the same firms that ledfundraising a decade or two ago.

Investments

In 2010, total venture investment increased 20% from2009 levels from $18.3 billion to $22.0 billion.Putting this in perspective, 2010 investment remained22% below 2008 totals and 26% below 2007 whichwas a post-bubble high. Many in the industry wel-comed the resizing of the industry’s levels from thenear $30 billion level seen in 2007 to just above $20billion in 2010. Certainly the timing and speed of thisdownward shift followed the credit crunch in 2008and the subsequent questions about world economicaffairs. However, this resizing began after the techbubble burst and is not unexpected. Deal counts fol-lowed suit, increasing 12% in 2010 from the prioryear, but counts remained 18% below the 2007 post-bubble peak.

Portfolio Company Post-MoneyValuations

Much has been written about valuation trends forentrepreneurial companies and whether early roundvaluations were reasonable enough for a venture cap-ital fund to make a financial and time commitment

and still realize a successful exit. In 2010, first roundsoverall reflected lower median valuations than theserounds in the period of 2005-2009, with medicaldevices deals being among the exceptions. Follow-onrounds showed mixed but overall higher valuations in2010 than in the reference period.

While IPO exits were more plentiful in 2010, theywere not done at higher multiples than in 2009, whichhad only 12 IPOs. IPOs in 2009 had a median valua-tion of $428.3 billion, an all-time record and almostdouble the median valuation of 2010. However, thepre-money valuations for 2009 IPOs were 9.7 timestotal venture investment, and in 2010 they were only4.4 times total venture investment.

Exits

Venture-backed company exit activity was driven by arecord breaking mergers and acquisitions (M&A) mar-ket and a strengthening initial public offerings (IPO)market. For full year 2010, there were 72 venture-backed IPOs, the biggest year for activity since 2007.More than 400 acquisitions were completed during fullyear 2010, the biggest year, by number of deals, forventure-backed M&A exits since Thomson Reutersstarted tracking venture capital from the 1970s.

The most recent three years have seen the number ofIPOs increase from 6 to 12 to 72. While encouraging,this is far below the IPO levels seen in 1999 and 2000.Remember, too, there is a large pent-up demand forexits by companies funded late in the technology bub-ble and shortly thereafter that have not been able to gopublic up to this point.

The number of venture-backed companies acquiredduring 2010 (427) sets a new record. This follows aslow acquisition year in 2009 (272) and several yearsduring and following the technology bubble whenacquisition counts were in the 300s. Despite the larg-er number of acquisitions, the total disclosed numberdollars ($18.5 billion) is far from a post-bubblerecord.

In 2010, IPO and acquisition activity were both farbelow what is necessary to sustain the industry longterm.

0

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200

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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

Year

Figure 2.0Capital Under Management

U.S. Venture Funds ($ Billions)1985 to 2010

0

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120

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

Year

Figure 3.0Capital Commitments to


($B

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s)($

Billion

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2011 NVCA Yearbook

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0

10

20

30

40

50

60

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Year

Figure 4.0Investments

to Portfolio Companies ($ Billions)1985 to 2010

($ B

illio

n)

No. of No. of Investment No. of No. of InvestmentIndustry Group Companies Deals Amt ($Bil) Companies Deals Amt ($Bil)Information Technology 1,596 1,914 10.8 578 578 2.1Medical/Health/Life Science 679 827 6.3 224 224 1.1Non-High Technology 474 553 4.9 199 199 1.1Total 2,749 3,294 22.0 1,001 1,001 4.3

All Investments Initial Investments

Figure 5.02010 InvestmentsBy Industry Class

8%

Expansion39%

Later Stage29% Early Stage

24%

Seed

Figure 6.02010 Investments

By Company Stage

’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

2011 NVCA Yearbook

Thomson Reuters 13

Figure 7.0Venture Capital Investments in 2010

By Industry Sector

Number of Pct of Investment Pct ofState Companies Total ($ Millions) TotalCalifornia 1,298 39% 11,054.9 50%Massachusetts 353 11% 2,383.4 11%New York 264 8% 1,312.8 6%Texas 144 4% 906.4 4%Washington 117 4% 624.3 3%Illinois 59 2% 575.4 3%Pennsylvania 153 5% 508.5 2%Colorado 77 2% 469.0 2%North Carolina 57 2% 456.3 2%New Jersey 71 2% 450.8 2%All Others 701 21% 3,233.0 15%Total 3,294 21,974.8

Figure 8.02010 Investments

By State

BiotechnologyBusiness Products

and Services2% Computers and

Peripherals

Consumer Products and Services

2%Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment6%

Medical Devices and Equipment

10%

Networking and Equipment

Retailing/Distribution

Semiconductors

Software

Telecommunications Other

1%

16%

2%

2%

17%4%

18%

4%

3%

1%

2%

8%

0.10%


14 Thomson Reuters

Avg Upper LowerVal Quartile Quartile

Biotechnology 65.4 390.6 64.1 42.0 13.6 1.2Business Products and Services 13.5 13.5 13.5 13.5 13.5 13.5Computers and Peripherals 46.8 66.3 56.6 46.8 37.0 27.2Consumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation 12.8 20.1 16.4 12.8 9.1 5.4Financial Services 102.1 102.1 102.1 102.1 102.1 102.1Healthcare Services 23.1 23.1 23.1 23.1 23.1 23.1Industrial/Energy 62.6 102.0 99.8 68.6 31.3 11.1IT Services 213.3 735.0 286.4 158.3 10.3 6.5Media and Entertainment 447.6 3,569.0 86.0 45.7 32.9 3.5Medical Devices and Equipment 75.1 221.3 99.3 68.2 20.1 6.5Networking and Equipment 18.3 39.2 27.3 15.0 5.9 3.9Other 17.5 17.5 17.5 17.5 17.5 17.5Retailing/Distribution 295.3 295.3 295.3 295.3 295.3 295.3Semiconductors 67.1 88.9 75.7 62.5 56.3 50.0Software 42.6 161.4 50.6 17.4 7.3 1.7Telecommunications 10.3 11.0 10.7 10.3 10.0 9.7Total 115.2 3,569.0 85.5 38.0 11.7 1.2

MinCompany Industry Max Median

Figure 9.0Valuations Per Company Industry

2010 Financings ($ Millions)

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'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

Year

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No of IPOs

Offer Amount ($B)

Figure 10.0Venture-Backed IPOs

No.

of I

POs

Offe

r ($

Billi

on)

Industry Resources

METHODOLOGY

The number of firms in existence will vary on arolling eight-year basis as firms raise new funds or donot raise funds for more than eight years. Under thismethodology, we estimate that there are currently 791firms with limited partnerships “in existence”. Toclarify, this is actually stating that there are 791 firmsthat have raised a venture capital partnership in thelast eight years. In reality, there may well be fewerfirms actually making new investments.

For this publication, we are primarily counting the num-ber of firms with limited partnerships and are excludingother types of investment vehicles. From that descrip-tion, it may appear that the statistics for total industryresources may be underestimated. However, this mustbe balanced with the fact capital under management bycaptive and evergreen funds is difficult to compareequitably to typical limited partnerships with fixedlives. For this analysis only, the firms counted for capi-tal under management include firms with fixed life part-

nerships and venture capital funds raised. If a firmraised both buyout and venture capital funds, only theventure funds would be counted in the calculation ofventure capital under management.

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 thathave completed their life cycle. Typically, venture cap-

Venture capital under management in the United States by the end of 2010 decreased only slightly from 2009levels to $176.7 billion. It is however the fourth decline in a row and belies the expectation for further reduc-tion in industry assets and overall metrics as the fallout from the technology bubble works its way through thesystem almost 10 years later. At the end of 2010, the industry managed $176.7 billion dollars down 38% fromthe peak a few years back. While the number of active firms and professionals in the industry continues todecline, using our methodology described below, the number of firms remained relative constant through 2010.With the industry in a very constrained fundraising environment in early 2011, further declines are likely.

Of the 791 firms which raised capital in the last eight vintage years, 45 of these managed more than $1 billion.A total of 97 firms managed more than $500 million.

Geographic location of the largest venture firms is quite concentrated. California domiciled firms manage 48%of the industry’s capital although investing partners may be located in other states or even countries. Takentogether, the top five states (California, Massachusetts, New York, Connecticut, and Pennsylvania) hold 81%of total venture capital in this country.

Many of the firm, fund, and headcount declines are the result of firms which raised money at the time of thebubble being unable to follow those funds with new funds in recent years. As portfolios are wound down, thesefund managers leave the industry. With 2010 fundraising a mere 12% the amount raised in 2000, the industryhas returned to a more traditional size band. At the end of 2010, 462 firms were actively investing. While slight-ly above 2009 depressed levels, it is a part of a longer term downtrend. Industry headcount continues todecrease to 6,328 principals in the industry.

Thomson Reuters 15

ital firms have a stated 10-year fixed lifespan, except for life science funds whichare often established as 12-year funds.Figure 1.08 shows the reality of fund life.Thomson Reuters calculates capital undermanagement as the cumulative amountcommitted to funds on a rolling eight-year basis. Current capital under manage-ment is calculated by taking the capitalunder management calculation from theprevious year, add in the current year’sfunds’ commitments, and subtracting thecapital raised eight years prior.

For this analysis, Thomson Reuters clas-sifies venture capital firms using fourdistinct types: private independent firms,financial institutions, corporations, andother entities. ‘Private independent’


16 Thomson Reuters

123 123

93

117

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5245

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0-10 10-25 25-50 50-100 100-250 250-500 500-1000 1000+

Figure 1.03Distribution of Firms

By Capital Managed 2010

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 2010Private Independent 11,366 14,274 16,686 18,110 21,532 22,153 21,356 22,074 24,448 27,566 32,442 38,280 50,261 73,849 116,394 182,187 214,105 216,281 218,222 226,969 234,415 247,575 231,906 192,555 167,382 164,690Financial Institutions 3,559 3,707 3,911 3,630 3,174 3,160 2,728 2,544 3,071 3,679 4,477 5,779 8,003 10,959 15,827 22,607 23,983 23,290 22,524 21,560 20,625 19,346 15,266 8,322 7,092 7,321Corporations 1,773 1,766 2,163 2,254 2,276 2,327 2,225 2,342 1,659 1,709 1,616 2,493 2,622 3,523 7,145 13,241 14,279 14,247 13,917 13,508 13,503 13,322 10,246 4,204 3,237 3,743Other 803 853 841 806 717 660 591 340 222 346 466 548 913 1,169 1,534 2,265 2,933 2,881 2,837 2,863 2,556 2,558 2,182 1,619 989 946Total 17,500 20,600 23,600 24,800 27,700 28,300 26,900 27,300 29,400 33,300 39,000 47,100 61,800 89,500 140,900 220,300 255,300 256,700 257,500 264,900 271,100 282,800 259,600 206,700 178,700 176,700

Figure 1.02Total Capital Under Management

By Firm Type 1985 to 2010 ($ Millions)

Capital Under Management ($ Millions)This chart shows capital committed to US venture firms in active funds. While much of thecapital is managed by larger firms, of the 791 firms at the end of 2010, roughly 58% of them(456) managed $100 million or less. By comparison, just 45 firms managed active funds total-ing more than $1 billion.

0

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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

Year

Figure 1.01Capital Under Management


($B

illio

n)

firms are made up of independent private and publicfirms including both institutionally and non-institu-tionally funded firms and family groups. ‘Financialinstitutions’ refers to firms that are affiliates and/orsubsidiaries 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. The capital under man-

agement data referred to in this section consist prima-rily of venture capital firms investing through limitedpartnerships with fixed commitment levels and fixedlives and does not include infinite lived “evergreenfunds” or true captive corporate industrial investmentgroups without fixed commitment levels. The term‘evergreen funds’ refers to funds that have a continu-ous infusion of capital from a parent organization asopposed to the fixed life and commitment level of aclosed-end venture capital fund.

2011 NVCA Yearbook

Thomson Reuters 17

Fund Total Total Total Firms That Raised Capital Avg Avg FirmsVintage Cumulative Cumulative Cumulative Existing Funds in the Last Managed Fund Size Firm Size ActivelyYear Funds Firms Capital ($B) Funds 8 Vintage Years ($B) ($M) ($M) Investing1985 629 322 19.9 530 293 17.5 33.0 59.7 871986 705 352 23.3 589 324 20.6 35.0 63.6 1071987 808 387 27.3 668 352 23.6 35.3 67 1011988 888 407 30.8 701 366 24.8 35.4 67.8 1121989 980 436 35.8 727 381 27.7 38.1 72.7 1071990 1038 452 38.3 716 384 28.3 39.5 73.7 961991 1077 459 40.5 642 363 26.9 41.9 74.1 751992 1149 478 44.1 604 354 27.3 45.2 77.1 971993 1242 508 49.3 613 368 29.4 48.0 79.9 901994 1340 539 56.7 635 382 33.3 52.4 87.2 1041995 1497 604 66.2 689 421 39 56.6 92.6 1751996 1643 665 77.9 755 464 47.1 62.4 101.5 2381997 1860 758 97.6 880 537 61.8 70.2 115.1 3241998 2096 837 127.8 1058 608 89.5 84.6 147.2 3741999 2433 966 181.4 1356 731 140.9 103.9 192.7 6742000 2850 1109 264.5 1701 861 220.3 129.5 255.9 10222001 3089 1188 304.6 1847 917 255.3 138.2 278.4 7342002 3164 1202 313.4 1824 914 256.7 140.7 280.9 5192003 3265 1253 323.8 1768 942 257.5 145.6 273.4 4792004 3430 1319 342.8 1787 976 264.9 148.2 271.4 5312005 3603 1389 368.7 1743 1001 271.1 155.5 270.8 5082006 3781 1459 410.5 1685 1006 282.8 167.8 281.1 5382007 3989 1545 441 1556 996 259.6 166.8 260.6 5802008 4166 1602 471.1 1316 858 206.7 157.1 240.9 5492009 4256 1638 483.2 1167 786 178.7 153.1 227.4 4232010 4347 1673 490.1 1183 791 176.7 149.4 223.4 462

Figure 1.04Fund and Firm Analysis

The correct interpretation of this chart is that since the beginning of the industry to the end of 2010, 1,673 firms had been founded and 4,347 funds hadbeen raised. Those funds totaled $490.1 billion. At the end of 2010, 791 firms as calculated using our eight-year methodology managed 1,183 individualfunds, each fund typically a separate limited partnership. Capital under management by those funds at the end of 2009 is $176.7 billion. A new column hasbeen added to this Figure showing the number of firms actively investing which is based on the number of independent and corporate venture groupsinvesting at least $5 million in MoneyTreeTM deals.

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 25.7

Figure 1.05Principals Information

State ($ Millions)CA 84,341.9MA 31,504.6NY 13,847.1CT 8,756.8PA 4,178.1Total* 142,628.6

Figure 1.06Top 5 States

By Capital Under Management 2010

*Total includes above 5 states only

The correct interpretation of this chart is that at year end 2010, there were6,328 principals (people who go to board meetings) in the industry. A prin-cipal on average manages $25.7 million and the average firm is made up of8.0 principals.


18 Thomson Reuters

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 2010CA 4,946 5,905 6,565 6,804 8,007 7,622 7,714 7,628 8,611 9,306 11,565 14,467 19,352 26,449 50,134 82,972 99,657 100,477 102,886 108,550 113,285 122,221 110,640 96,200 83,439 84,342MA 2,181 2,505 3,392 3,717 4,122 4,255 3,902 4,827 5,015 5,512 6,828 7,328 10,321 14,955 21,542 35,753 44,279 46,852 45,690 46,624 48,176 54,289 52,269 39,469 33,631 31,505NY 3,458 4,497 4,663 4,483 5,968 6,195 5,850 5,705 6,729 7,884 9,006 10,696 11,442 20,916 27,810 40,781 41,841 39,713 38,698 38,356 37,764 30,624 26,812 14,883 13,274 13,847CT 1,236 1,380 1,616 1,692 1,531 1,689 1,567 1,660 1,563 1,719 1,817 1,923 3,449 4,459 6,846 8,162 11,427 11,263 11,228 12,684 12,589 13,933 12,645 12,151 8,704 8,757PA 444 517 547 562 731 773 799 794 573 737 825 1,079 1,499 1,715 2,691 4,944 5,150 4,971 5,254 5,104 5,634 6,152 5,932 4,348 4,093 4,178NJ 623 721 792 780 777 998 925 592 549 732 961 1,481 1,563 2,175 2,727 3,642 4,323 4,239 4,451 4,102 4,089 5,181 5,040 4,164 3,942 3,814WA 312 405 383 422 395 383 197 241 228 179 300 461 680 1,080 1,811 2,814 3,637 3,642 3,517 4,503 4,465 4,470 5,038 4,500 3,648 3,604DC 35 38 38 45 46 47 47 60 28 34 170 1,707 2,378 2,452 2,640 3,624 4,444 4,424 4,286 3,080 3,123 4,200 4,352 4,379 3,594 3,602TX 451 486 714 713 786 834 770 802 941 1,147 1,162 1,239 1,700 2,986 4,730 7,398 8,465 8,397 8,255 8,654 8,308 8,062 6,339 4,689 3,492 3,320IL 469 489 788 968 926 942 905 1,101 1,382 1,451 1,476 1,296 1,979 2,430 3,761 4,362 4,768 5,490 5,893 5,997 5,525 5,419 4,552 4,049 3,744 2,882MD 93 97 122 116 158 163 98 115 377 787 842 1,425 1,749 2,380 3,160 4,898 4,998 4,781 4,736 4,467 4,589 4,569 4,353 2,720 2,955 2,794VA 72 78 78 84 104 91 56 42 35 32 39 64 148 402 1,143 2,378 2,498 2,512 2,691 2,891 3,459 3,488 3,336 2,188 2,612 2,596MN 198 294 337 672 744 883 809 763 847 900 880 511 618 714 1,102 2,249 2,188 2,365 2,357 2,367 2,449 2,600 2,473 1,640 1,668 1,323NC 34 54 87 89 124 114 109 110 109 147 129 280 602 786 999 1,354 1,433 1,582 1,780 1,643 1,470 1,681 1,562 1,212 1,239 1,200MO 556 580 613 591 599 656 652 641 108 137 120 124 148 111 123 215 241 209 199 296 1,029 1,089 1,272 1,205 1,190 1,193UT 9 19 19 15 15 16 15 10 10 25 31 31 94 96 132 270 477 450 562 577 534 639 1,240 1,299 1,105 1,108CO 360 427 326 450 549 507 489 369 456 403 382 451 757 1,012 3,213 4,752 5,259 5,405 5,382 5,210 4,888 4,706 3,028 1,624 990 1,073MI 111 118 125 121 123 37 13 13 12 9 40 39 64 65 432 580 583 581 623 817 851 869 594 733 788 895GA 53 58 138 222 225 238 192 191 246 243 239 165 254 557 693 1,286 1,293 1,289 1,213 1,246 1,281 1,141 1,417 863 838 840OH 867 904 984 871 294 289 297 369 500 559 538 542 862 938 1,426 2,013 2,034 2,016 2,027 2,076 1,895 1,809 1,675 1,033 883 836TN 102 127 191 183 215 259 276 269 201 293 303 455 525 747 1,071 1,246 1,289 1,169 1,163 1,050 1,040 845 671 572 541 582FL 124 130 172 192 195 133 110 97 152 224 322 303 380 690 1,081 1,747 1,711 1,643 1,551 1,540 1,768 1,488 1,240 560 542 551AL 125 130 131 127 134 137 136 137 6 6 6 6 5 24 34 108 108 107 155 174 226 226 217 359 363 364LA 7 7 7 7 7 5 2 11 23 31 49 90 277 367 448 479 731 727 710 747 585 513 434 420 200 267WI 178 95 94 91 101 102 78 78 81 164 168 167 138 140 111 184 183 90 90 100 85 255 268 197 199 234KY 15 16 16 16 0 0 0 0 0 7 21 21 21 21 21 21 21 14 14 14 18 218 219 224 227 227NM 71 99 135 132 168 256 242 230 207 180 154 151 121 12 12 12 12 12 34 35 70 75 76 78 79 114IN 28 38 39 37 56 55 56 29 30 21 21 26 7 19 36 510 509 517 516 531 532 545 553 102 113 109RI 15 16 16 36 36 37 36 36 22 22 23 0 2 2 2 2 26 26 26 26 24 97 98 100 77 77AZ 40 43 43 73 74 75 75 34 44 43 45 10 10 38 38 101 104 145 180 181 200 172 173 130 119 75ME 1 1 20 25 26 26 26 28 29 99 89 86 88 89 209 203 291 219 220 216 216 278 161 165 74 74ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14 14 14 14 14 14 85 85 73 74 74HI 2 2 2 2 2 2 2 0 0 0 2 2 2 2 12 11 11 11 9 16 16 16 7 14 14 44IA 49 51 104 101 63 64 61 62 55 55 5 5 16 17 17 16 60 60 55 65 54 60 68 69 39 39OK 1 29 29 28 37 38 36 37 38 9 10 32 23 67 67 140 140 140 140 118 118 111 112 37 37 37SD 0 0 0 0 0 0 0 0 0 0 0 10 10 74 74 168 167 167 167 162 163 101 101 19 19 35OR 168 175 203 239 242 246 227 116 74 74 77 30 30 40 40 100 100 113 83 86 86 77 79 34 40 26VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 43 42 42 43 43 43 56 42 14 19ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13 13 13NH 24 25 25 49 50 51 50 50 27 27 47 19 66 67 67 66 66 84 65 66 19 30 30 31 31 12DE 39 40 40 38 47 41 41 14 41 52 100 121 115 117 116 140 106 116 69 56 56 57 57 31 31 10SC 2 2 2 2 16 16 15 15 15 15 29 52 37 37 37 102 103 117 103 81 86 86 87 21 20 6MS 0 0 0 0 0 0 0 0 0 0 25 25 25 26 26 25 53 53 28 28 28 30 30 30 1 1PR 0 0 0 0 0 9 9 9 9 9 9 9 49 40 40 39 68 68 68 69 29 29 30 31 1 1KS 0 0 0 0 0 13 13 13 14 14 37 37 57 43 43 42 42 42 19 19 0 0 0 0 0 0NE 0 0 0 1 1 1 1 1 11 11 105 136 139 141 141 176 165 165 71 38 38 38 38 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 0MT 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 0NV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 24 23 23 23 23 23 24 24 0 0 0 0WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 118 118 118 117 118 119 119 119 0 0 0AR 2 2 2 2 2 2 2 0 0 0 0 0 0 0 19 19 19 19 19 19 19 19 0 0 0 0WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 21 21 21 21 21 21 21 21 0 0 0Total 17,500 20,600 23,600 24,800 27,700 28,300 26,900 27,300 29,400 33,300 39,000 47,100 61,800 89,500 140,900 220,300 255,300 256,700 257,500 264,900 271,100 282,800 259,600 206,700 178,700 176,700

Figure 1.07Capital Under Management By State 1985 to 2010 ($ Millions)

Life of IT Funds % ofIn Years Funds<= 10 7.4%11-12 22.2%13-14 24.1%15-16 22.2%17-18 14.8%>=19 9.3%

100.0%

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 have huge upside potential. But the slow pace of exits in recent years has resulted anumber of good, mature companies remaining in portfolios well past the nominal 10-year mark. Life science funds tend to have lives 2 years longer thantypical technology funds. In preparing this chart, partial years are rounded to the nearest whole year. So 10.4 years would round to 10 years, and 10.5years would round up to 11 years. The median life span of a fund in this analysis is 14.17 years.

Capital Commitments

MethodologyAs defined by Thomson Reuters, capital commit-ments, also known as fundraising, are firm capitalcommitments to private equity/venture capital limitedpartnerships by outside investors. For purposes ofthese statistics, the terms “capital commitments,”“fundraising,” and “fund closes” are used inter-changeably. There are three sources of data for capi-tal commitments: (1) SEC filings that are regularlymonitored by our research staff, (2) surveys of theindustry routinely conducted by Thomson Reuters,and (3) verified industry press and press releases fromventure firms. Capital commitments are stated on either a calendaryear basis when committed or a vintage year basis oncethe fund starts investing, depending on the analysis

required. The data in this chapter is by calendar year andincrementally measures how much in new commit-ments funds raised during the calendar year. For exam-ple, a venture capital firm announces a $200 millionfund in late 2007, raises $75 million in 2008, and sub-sequently raises the remaining $125 million in 2009. Inthis chapter, nothing would be reflected in 2007, $75million would be counted in 2008, and $125 millionwould be counted in 2009. Assuming it started invest-ing and made its first capital call in 2010, the entire fundwould then be considered to be a 2010 vintage yearfund. An important note: the fund commitments pre-sented in this publication do not include those corporatecaptive venture capital funds that are funded by a cor-porate parent, nor evergreen funds, which do not typi-cally raise capital from outside investors.

New commitments to venture capital funds in the United States again decreased in 2010 to $12.3 billion fromthe post-bubble fundraising peak in 2006 when $31.8 billion was raised. This reflects an ongoing difficultfundraising environment in part created by recent economic stress. However, most of the decrease reflects thecontraction of the U.S. venture capital industry that began after the technology bubble burst in 2000 and theindustry sought a more reasonable size band.In 2010, 157 funds raised $12.3 billion, down 25% from 2009, which itself was down 38% from 2008. Overall, the2010 amount raised was down 61% from the 2006 post-bubble peak. A look behind the charts shows that this totalwas dominated by a small group of firms, most of which are the same firms that led fundraising a decade or two ago. For most firms, the fundraising environment in 2010 was difficult, with only the most promising, and in manycases, established, firms able to raise capital. Over the past few years, it has been very difficult for any firmnot perceived as having top quartile potential to raise money. There are several reasons for fundraising diffi-culty: (1) the denominator effect where institutional investors found themselves over allocated to the asset classas their overall portfolio valuations fell, (2) while exit markets have improved from low levels, few distribu-tions back to investors from exits in recent years impairs the traditional “recycling” of capital from maturefund exits to newly-emerging funds, and (3) with strong returns difficult in the current environment, top per-forming firms have a better chance of outperforming other asset classes on a risk-adjusted basis.Looking at annual commitment totals, venture firms had raised considerable funds in 2007 and the first partof 2008. As the economy worsened toward the end of 2008, many institutional investors (e.g., pension plans,endowments, money managers) saw the public portion of their portfolios fall and found themselves over-allo-cated to alternative asset classes, including venture capital. This situation has not changed significantly asfundraising declined through 2010.The top two fundraising states remained California and Massachusetts. Rounding out the top five states areNew York (moving up from fourth place), Connecticut (new to the top five) and North Carolina (also new tothe top five). Overall, funds domiciled in the top five states accounted for 88% of the capital raised comparedwith the top five states raising 82% of the total just two years ago. 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 limitedto the capital raised in that state.

Thomson Reuters 19


20 Thomson Reuters

YYeeaarrVVeennttuurree CCaappiittaall

$$MMiill NNoo.. FFuunnddssBBuuyyoouuttss aanndd MMeezzzzaanniinnee CCaappiittaall

$$MMiill NNoo.. FFuunnddssPPrriivvaattee EEqquuiittyy CCaappiittaall

$$MMiill NNoo.. FFuunnddss1985 3,750.7 118 3,074.5 23 6,825.2 1411986 3,587.4 102 5,001.9 31 8,589.3 1331987 4,379.1 116 17,528.3 45 21,907.4 1611988 4,476.7 106 11,653.4 54 16,130.1 1601989 4,918.8 106 12,034.5 78 16,953.3 1841990 3,222.7 86 7,744.5 62 10,967.2 1481991 1,905.7 41 6,186.6 28 8,092.3 691992 5,226.8 81 10,795.3 57 16,022.1 1381993 4,323.2 92 16,043.8 79 20,367.0 1711994 7,751.6 138 19,490.0 98 27,241.6 2361995 9,468.9 165 27,129.2 104 36,598.1 2691996 12,002.6 170 30,103.2 99 42,105.8 2691997 18,259.9 246 41,343.2 131 59,603.1 3771998 30,969.8 298 60,831.0 158 91,800.8 4561999 54,133.6 444 50,458.4 155 104,592.0 5992000 104,764.3 649 78,232.3 161 182,996.6 8102001 38,957.8 324 46,903.5 126 85,861.3 4502002 16,121.4 205 26,547.1 93 42,668.5 2982003 11,448.9 162 29,256.9 104 40,705.8 2662004 18,651.9 210 51,492.6 137 70,144.5 3472005 30,759.6 234 100,893.4 181 131,653.0 4152006 31,861.9 235 137,849.7 177 169,711.6 4122007 31,205.0 237 203,913.0 217 235,118.0 4542008 26,419.2 213 158,964.0 190 185,383.2 4032009 16,321.5 150 34,153.7 113 50,475.2 2632010 12,307.9 157 36,404.7 131 48,712.6 288

Figure 2.02Capital Commitments

To Private Equity Funds 1985-2010

0

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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

Year

Figure 2.01Capital Commitments

To U.S. Venture Funds ($ Billions)1985 to 2010

($ B

illio

n)

2011 NVCA Yearbook

Thomson Reuters 21

State 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966 11999977 11999988 11999999 22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 22000099 22001100

CA 997.7 944.7 1,158.6 936.2 1,519.1 810.7 546.1 1,331.2 1,334.7 1,829.1 3,107.0 3,724.0 5,431.9 8,510.1 21,984.1 43,935.6 13,580.1 2,747.5 5,614.0 8,891.6 12,714.8 13,533.9 13,763.5 14,139.4 8,919.8 5,480.0MA 534.3 356.1 973.1 813.5 338.5 674.7 180.1 1,051.1 331.5 1,158.4 1,956.3 1,892.5 2,930.3 5,278.5 7,852.9 16,776.8 9,743.2 2,514.5 1,597.0 1,797.1 9,148.4 4,301.5 5,411.6 2,736.4 3,564.5 2,624.1NY 213.6 1,460.4 694.1 378.9 2,260.1 489.8 473.9 493.9 940.2 1,894.6 2,364.1 2,066.1 3,867.8 9,346.1 9,005.5 17,047.0 3,282.9 7,899.4 1,245.3 1,847.6 1,799.6 2,610.4 4,344.9 1,832.6 1,405.1 1,357.7CT 271.1 155.9 236.0 288.2 65.9 309.5 150.0 300.0 272.2 388.3 260.2 424.9 1,324.0 1,082.6 2,992.6 2,328.4 3,904.3 59.7 165.0 1,926.5 1,216.3 3,186.0 289.6 876.8 157.5 938.2NC 6.5 7.0 31.5 22.8 38.1 0.6 0.0 0.0 0.0 63.5 10.1 183.5 349.0 173.7 226.4 613.4 119.6 72.0 275.9 16.0 106.1 399.9 185.3 102.9 5.4 413.6IL 57.4 47.0 324.6 157.8 26.2 57.2 94.4 247.2 277.8 182.8 229.7 295.2 575.1 466.4 1,353.6 993.5 1,073.2 477.9 701.8 432.3 80.5 465.2 557.6 264.2 381.3 302.5CO 31.5 70.6 32.2 69.9 79.7 0.4 0.0 0.0 114.2 0.0 19.4 216.4 252.9 432.6 1,942.1 2,414.3 512.6 118.0 93.9 83.9 68.8 132.5 351.3 220.7 3.5 252.6PA 54.1 73.1 54.7 12.1 118.0 44.5 166.6 30.1 109.7 181.7 113.6 174.0 608.9 177.0 1,285.8 2,440.5 334.3 85.7 363.0 450.7 685.7 794.4 746.0 952.7 173.7 194.2MI 5.0 0.0 6.7 32.5 0.0 0.0 0.0 0.0 3.0 13.3 0.0 26.0 11.3 0.3 320.8 241.0 8.0 0.0 64.8 33.3 101.4 13.0 49.0 255.6 83.0 141.5VA 0.0 3.5 10.0 12.8 15.0 2.0 0.0 0.0 0.0 0.0 7.0 20.0 65.4 256.0 924.0 2,286.9 119.1 37.5 196.3 72.0 418.6 554.7 582.4 105.3 14.4 100.0MO 643.5 0.0 33.3 0.0 0.0 53.1 0.0 0.0 63.6 0.0 11.3 6.0 45.4 25.0 79.6 64.8 286.2 0.0 0.0 80.3 828.7 39.7 210.3 53.9 0.0 72.0MD 4.2 7.5 24.2 0.0 49.3 13.6 50.0 0.0 224.9 254.2 66.5 439.0 145.0 787.2 839.7 1,987.9 340.5 480.5 105.0 161.5 532.8 472.2 776.4 368.9 483.8 68.6TX 37.4 61.1 231.3 40.7 161.5 142.8 58.4 381.9 137.0 282.5 193.6 326.0 387.8 1,437.4 1,820.0 4,311.2 2,232.2 185.5 75.6 793.9 629.8 362.5 283.8 1,177.9 77.9 68.5WA 25.0 126.1 37.4 59.5 0.0 0.0 5.0 48.0 39.9 36.9 128.5 239.3 180.0 408.8 640.3 1,174.6 938.0 83.0 1.2 995.3 280.6 590.2 1,423.9 492.4 5.3 65.0TN 20.0 23.5 72.5 0.0 34.1 0.0 0.0 40.0 0.0 115.9 83.8 151.5 109.1 266.4 267.0 261.6 81.6 22.4 101.3 16.0 83.8 61.8 99.5 128.7 68.8 40.0NM 36.2 27.7 0.0 2.1 0.0 155.0 40.0 0.0 0.0 6.1 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.8 20.4 34.4 5.4 6.9 0.0 0.0 35.0OH 2.6 0.0 87.0 102.3 0.0 30.4 0.0 116.0 4.4 106.0 10.0 111.1 365.0 58.0 658.6 697.3 330.0 101.7 40.4 209.7 558.3 151.8 208.4 231.4 2.5 30.3IN 0.0 10.0 0.0 0.0 16.3 4.7 0.0 0.0 0.0 0.0 0.0 5.0 0.0 12.8 20.0 68.0 0.0 10.0 0.0 17.0 6.0 24.5 1.2 28.8 1.0 28.1WI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40.0 0.0 0.0 16.0 0.0 16.6 82.0 14.0 0.0 0.0 10.7 0.0 78.4 101.3 15.1 10.2 27.3FL 9.7 0.0 36.0 10.7 29.3 0.0 35.0 0.0 133.3 105.0 106.0 0.0 77.7 250.0 325.9 954.7 25.8 8.0 56.0 1.0 313.0 11.2 109.3 25.2 32.3 21.3UT 0.0 10.5 0.8 0.0 0.0 0.0 0.0 0.0 0.0 11.0 0.0 0.0 33.0 50.0 40.0 126.0 223.6 29.6 34.3 40.3 24.0 169.6 213.2 533.7 53.3 16.5SD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.0 0.0 22.0 14.0 131.0 1.0 0.0 0.0 5.0 0.0 0.0 0.0 14.5 0.0 16.0OR 0.0 0.0 30.0 0.0 0.0 0.0 0.0 0.0 0.0 32.0 32.0 0.0 0.0 10.0 0.0 65.0 0.0 14.0 0.0 2.2 0.0 0.0 2.0 5.0 5.0 12.3AL 150.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 30.0 0.0 137.0 16.4 11.0 49.0 18.7 69.7 19.1 0.0 117.9 101.4 1.5GA 0.0 0.0 15.1 65.0 0.0 14.0 0.0 0.0 56.0 0.0 74.2 34.3 40.9 181.0 30.0 847.9 19.0 0.0 0.0 55.0 103.5 102.6 513.0 18.7 30.7 0.8ND 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 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.2 0.0 0.5NJ 270.0 61.3 156.9 0.3 125.0 243.5 75.0 110.0 176.6 401.3 213.1 605.8 117.6 1,001.8 569.8 1,040.9 651.7 392.1 560.6 196.7 204.3 1,812.4 235.2 47.8 500.0 0.0DC 38.7 0.0 0.0 4.8 0.0 0.0 0.0 0.0 0.0 225.0 130.0 820.0 667.6 391.5 219.6 1,423.2 622.2 314.8 0.0 324.5 410.2 1,296.3 239.6 1,292.9 204.1 0.0MN 265.6 109.7 51.2 417.5 20.0 161.8 16.2 946.3 65.9 164.0 46.8 35.5 443.0 216.7 106.6 1,826.5 16.5 275.5 26.0 49.8 295.0 398.2 275.0 325.1 21.8 0.0LA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.6 14.2 169.0 18.3 24.0 88.0 51.0 374.5 69.5 111.6 52.0 8.0 75.3 4.0 12.5 0.0 0.0 0.0 0.0OK 0.0 31.8 0.0 0.0 10.3 0.0 0.0 0.0 0.0 0.0 0.0 24.3 0.0 45.3 0.0 110.1 0.0 0.0 0.0 0.0 12.0 38.0 0.0 0.0 0.0 0.0IA 10.7 0.0 60.1 0.0 0.0 0.0 0.0 56.0 0.0 0.0 5.0 0.0 10.5 1.8 5.0 21.0 26.0 0.0 0.0 10.0 0.0 42.9 0.0 0.0 15.4 0.0HI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 9.5 0.0 0.0 2.5 0.0 7.9 0.0 0.0 0.0 6.4 0.0 0.0KS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25.0 0.0 20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0RI 16.6 0.0 0.0 24.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25.0 0.0 0.0 0.0 0.0 64.2 13.8 0.0 0.0 0.0MS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.0 0.0 0.0 0.0 0.0 30.0 0.0 0.0 0.0 0.0 0.0 1.4 0.0 0.0 0.0 0.0NH 49.4 0.0 0.0 40.0 0.0 0.0 15.0 0.0 0.0 0.0 20.0 0.0 50.0 0.0 0.0 0.0 0.0 11.2 8.8 0.0 0.0 5.0 6.7 0.0 0.0 0.0ME 0.0 0.0 22.0 947.6 0.0 0.0 0.0 2.0 0.0 58.8 0.0 21.7 0.0 0.0 126.9 0.0 76.5 15.6 3.0 0.0 0.0 45.6 19.5 0.0 0.0 0.0AZ 0.0 0.0 0.0 37.0 0.0 0.0 0.0 0.0 10.1 0.0 0.0 0.0 0.0 0.0 29.4 60.0 20.7 42.3 40.8 0.0 19.0 0.0 0.0 20.0 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 15.0 27.0 0.0 0.0 0.0 0.0 0.0 75.0 0.0 0.0 0.0WV 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 5.5 4.0 12.8 2.0 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 14.0 7.4 15.0 0.0 42.0 0.0 0.0 0.0 135.0 8.0 2.1 0.0 5.0 65.0 98.0 12.0 0.0 0.0SC 0.0 0.0 0.0 0.0 12.5 4.5 0.0 0.0 0.0 0.0 14.0 0.0 0.0 0.0 0.0 70.0 0.0 15.0 0.0 0.0 5.6 0.0 0.0 0.0 0.0 0.0PR 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.2 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0NV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50.0 25.0 0.0 0.0 25.0 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 0.0 111.0 36.0 0.0 0.0 0.0 40.6 0.0 0.0 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 25.0 31.0 64.5 0.0 0.0 28.0 0.0 0.0 22.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0UN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 62.5 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 0.0 0.0WY 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 26.0 0.0 0.0 0.0 0.0 0.0 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 20.0 0.0 0.0 0.0 0.0 0.0 0.0 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 19.7 25.0 0.0 0.0 0.0 0.0 0.0 11.0 3.0 0.0 0.0Total 33,,775500..77 33,,558877..44 44,,337799..11 44,,447766..77 44,,991188..88 33,,222222..77 11,,990055..77 55,,222266..88 44,,332233..22 77,,775511..66 99,,446688..99 1122,,000022..66 1188,,225599..99 3300,,996699..88 5544,,113333..66 110044,,776644..33 3388,,995577..88 1166,,112211..44 1111,,444488..99 1188,,665511..99 3300,,775599..66 3311,,886611..99 3311,,220055..00 2266,,441199..22 1166,,332211..55 1122,,330077..99

Figure 2.03Venture Capital Fund Commitments

1985 to 2010 ($ Millions)


22 Thomson Reuters

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

220.00

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

Year

Venture Capital

Buyouts and MezzanineCapital

Figure 2.05Private Equity

Annual Commitment ($ Billions)1985 to 2010

No. of CommittedState Funds ($Mil)California 54 5,480.0 Massachusetts 22 2,624.1 New York 13 1,357.7 Connecticut 4 938.2 North Carolina 4 413.6 Sub-Total 97 10,813.6 Remaining States 60 1,494.3 Total 157 12,307.9

Figure 2.04Top 5 States

By Venture Capital Committed 2010

($ B

illio

n)

Investments

Methodology

As calculated by Thomson Reuters, venture capitalinvestment data are derived from several sources.Primarily, survey information is obtained from thequarterly survey which drives the MoneyTreeReport™ from PricewaterhouseCoopers and theNational Venture Capital Association based on datafrom Thomson Reuters. This is the official industry

database of venture capital investment. Secondly,Thomson Reuters obtains data from SEC filings thatare regularly monitored by our research staff. Finally,publicly available sources such as press releases andtrade publications are used.

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

In 2010, total venture investment increased 20% from 2009 levels from $18.3 billion to $22.0 billion. Puttingthis in perspective, 2010 investment remained 22% below 2008 totals and 26% below 2007 which was a post-bubble high. Many in the industry welcomed the resizing of the industry’s levels from the near $30 billion levelseen in 2007 to just above $20 billion in 2010. Certainly the timing and speed of this downward shift followedthe credit crunch in 2008 and the subsequent questions about world economic affairs. However, this resizingbegan after the tech bubble burst and is not unexpected. Deal counts followed suit increasing 12% in 2010 fromthe prior year, but counts remained 18% below the 2007 post-bubble peak.

After years of taking on 1,000 or more new companies each year, the industry in 2009 funded 772 first timecompanies but that count increased in 2010 to 1,001. Regardless of the actual count, it is important to remem-ber that each first funding represents a fresh commitment by venture capital funds to the future.

The contention for venture capitalist attention (and dollars) between existing later stage portfolio companiesand newly-arriving business plans continues. There are still a record number of companies in portfolios in thelater stage of development which in most other environments would have already gone public or otherwisebeen acquired. As the IPO and acquisition counts increased in 2010, the number of later stage rounds fell. In2010, 29% of investment was made into later stage companies. By contrast, 32% of the capital went into Seedand Early Stage companies.

The life sciences share of the venture capital investment scene backed off somewhat but remained at near-record levels. In 2010, 17% of the money went into biotechnology, 10% into devices, and 1% into healthcareservices. By contrast, in 2009, 20% of total dollars went to biotechnology companies, 14% went to medicaldevices and equipment and 1% went to healthcare services. Clean technology is the industry’s most visibleemerging sector with $3.7 billion invested in 2010, up 61% from the 2009 total but still below 2008’s recordamount of $4.0 billion. The 2010 investment total represents 17% of all venture investment.

California companies received just over 50% of the total investment dollars although individual centers of sec-tor strength and strong deal flow drove investment to 46 states and DC.

Investment by corporate venture capital groups increased to 9% of total US investment in 2010. Approximately14% of all rounds involve at least one corporate venture group down from 19% two years earlier.

Thomson Reuters 23


24 Thomson Reuters

No. of No. of Investment No. of No. of InvestmentIndustry Group Companies Deals Amt ($Bil) Companies Deals Amt ($Bil)Information Technology 1,596 1,914 10.8 578 578 2.1Medical/Health/Life Science 679 827 6.3 224 224 1.1Non-High Technology 474 553 4.9 199 199 1.1Total 2,749 3,294 22.0 1,001 1,001 4.3

All Investments Initial Investments

0

10

20

30

40

50

60

70

80

90

100

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

Year


By Industry Group

Figure 3.1Venture Capital Investments ($ Billions)

1985 to 2010

($B

illio

ns)

2011 NVCA Yearbook

Thomson Reuters 25

No. of No. of AmtState Cos Deals Invested ($Bil)California 1,070 1,298 11.1Massachusetts 289 353 2.4New York 221 264 1.3Texas 121 144 0.9Washington 98 117 0.6Total* 1,799 2,176 16.3

Figure 3.3Venture Capital Investments

Top 5 States in 2010

Biotechnology

17%Business Products and

Services2%

Computers andPeripherals

2%

Consumer Products andServices

2%

Electronics/Instrumentation

2%

Financial Services

2%

HealthcareServices

1%

Industrial/Energy16%

IT Services8%

Media andEntertainment

6%

Medical Devices and Equipment

10%

Networking and Equipment

3%

Retailing/Distribution

1%

Semiconductor4%

Software

18%

Telecommunication4%

Other

0.10%


By Industry Sector

Seed8%

Expansion39%

Later Stage29%

Early Stage24%


By Stage

*Total includes top 5 states only

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


26 Thomson Reuters

Figure 3.6Amount of Capital Invested By State in 2010

($ Millions)

Figure 3.7Number of Companies Invested in By State in 2010

2MT

8ID 10

WY

469CO

143UT

29NV11055

CA

83AZ

23NM

906TX

ND

SD

NE12

42KS

13OK

140MN

122WI 152

MI

1313NY

33VT

57NH

2ME

2383 MA

65 RI

199 CT451 NJ

31 DE

358 MD456 NC52 TN

MS1

AL334GA

186FL

4PR

VI

GU

102IA

575IL

69IN

157OH

375 VA12KY

61MO

5AR

18LA

11HI

AK

AK

33OR

2MT

ND 26MN

4ID SD

1298CA

3NV

25UT 77

CO

3NE

36KS

3IA

21WI 33

MI

12MO

59IL

14IN

52OH

14KY

18 TN

153PA

45VA

5ME

10NH

6VT

264NY

13DC

1AR

2OK

144TX

5HI

3LA

MS 2AL

63GA

39FL

1PR

VI

GU

13NM

17AZ

1WY

509PA

107 DC21SC

8SC

70MD

9DE

71 NJ55 CT13 RI

353 MA

4WV

57 NC

624WA

174OR

117WA

2011 NVCA Yearbook

Thomson Reuters 27

Region 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 2010Silicon Valley 707.6 926.8 819.0 921.8 857.5 825.9 711.0 1043.2 830.9 996.2 1712.9 3308.0 4385.4 5457.4 16766.7 31789.7 11593.5 6800.0 6338.8 7753.6 8055.6 9555.6 10935.4 10966.4 7333.1 8548.9New England 409.4 395.6 483.3 472.6 399.3 346.9 258.6 392.3 325.2 400.2 670.8 1099.2 1461.0 2155.5 5286.0 11224.7 5004.1 2765.1 2789.8 3187.5 2839.4 3054.9 3740.4 3324.9 2200.2 2548.0NY Metro 204.4 196.9 247.3 290.9 348.7 185.3 173.4 198.5 180.8 264.2 440.9 683.7 1240.2 1559.0 4298.6 9649.0 3358.6 1468.1 1342.0 1622.2 1971.6 2035.4 1718.7 1956.9 1480.5 1848.9LA/Orange County 185.1 173.2 266.7 191.6 217.9 163.2 113.3 159.1 152.8 191.8 938.2 638.3 782.1 1149.7 3416.1 6444.4 2174.3 1198.7 1060.7 934.0 1533.7 2033.8 1845.0 1981.8 960.9 1590.1Midwest 140.3 129.4 193.2 144.9 176.7 146.8 152.8 146.7 258.6 357.6 425.5 679.3 836.2 1528.4 2505.2 5243.2 1947.3 901.0 836.9 615.7 696.9 899.8 1091.4 1258.3 787.6 1194.7Southeast 161.8 223.0 233.0 223.4 193.5 135.9 93.4 312.7 365.0 301.9 728.5 1039.3 1318.5 1603.1 4284.6 7567.9 2445.5 1699.0 1083.7 1279.5 1048.1 1154.8 1693.4 1129.9 933.1 1048.8Texas 221.4 221.9 200.9 225.7 214.9 124.8 132.3 145.4 216.4 253.2 454.8 520.1 788.4 1091.2 2873.6 5749.5 2785.9 1180.8 1185.3 1092.5 1164.6 1376.9 1411.7 1276.3 687.7 906.4San Diego 90.3 76.6 100.8 146.3 132.5 106.2 93.0 101.1 121.3 212.6 242.9 444.7 502.3 567.4 1181.4 2020.3 1456.8 944.1 749.1 1169.1 1113.3 1144.7 1838.5 1158.2 944.0 881.9DC/Metroplex 91.1 58.1 96.1 116.3 131.9 75.8 37.3 47.0 65.7 132.6 371.0 458.6 540.3 1045.0 2021.6 5176.1 1957.5 1060.9 721.9 913.9 991.7 1121.4 1198.4 1071.5 598.1 844.6Northwest 132.5 125.8 127.6 95.7 102.4 88.6 59.4 219.4 113.4 156.6 347.4 473.7 528.9 771.3 2746.4 3598.1 1273.5 717.9 610.8 990.2 958.3 1170.1 1568.2 1063.0 717.4 817.5Colorado 70.0 104.7 106.2 93.4 149.2 87.9 50.3 124.3 132.9 183.3 300.9 241.5 371.7 714.9 1801.4 3850.5 1126.0 498.8 634.1 353.7 600.7 597.4 590.3 833.5 463.0 469.0Philadelphia Metro 50.0 53.0 77.8 69.0 55.7 99.7 29.3 140.6 421.5 133.9 198.0 343.0 417.2 488.6 1459.0 2530.7 882.2 507.6 492.4 744.4 534.8 752.2 799.9 740.0 435.3 430.6North Central 30.6 39.2 72.4 41.4 48.6 54.0 45.2 81.5 106.6 80.7 199.9 218.3 333.1 403.1 752.0 1236.7 611.5 444.7 480.7 443.9 383.8 403.0 565.9 619.6 383.4 374.7SouthWest 39.3 79.5 54.8 58.8 42.2 29.6 24.6 84.6 36.3 31.8 95.5 158.5 305.5 366.8 760.5 1293.2 445.5 342.7 221.6 333.4 462.7 479.1 511.8 490.7 282.1 277.7South Central 13.7 11.4 19.5 12.6 18.5 11.6 9.1 15.6 13.3 42.4 45.2 70.9 67.0 158.5 407.4 388.0 104.8 62.3 63.0 113.9 2.4 47.7 97.8 78.7 23.4 77.7Upstate NY 13.4 10.7 9.7 5.3 7.3 8.1 3.4 9.1 5.1 0.7 35.5 22.4 78.0 186.9 204.1 263.4 126.9 84.2 120.6 102.8 53.0 101.7 135.4 70.4 10.0 45.9Sacramento/N.Cal 12.0 34.0 21.2 33.6 4.2 19.3 15.7 7.6 10.2 14.4 17.0 28.6 20.6 85.8 98.8 313.8 230.8 58.8 32.1 36.5 42.5 36.7 110.1 69.0 18.0 33.9Unknown 2.7 0.0 0.5 0.8 0.3 0.0 0.0 30.0 0.8 0.1 0.3 2.2 4.4 29.6 2.4 58.8 26.3 0.0 1.0 0.9 57.1 0.0 0.0 0.0 4.4 19.5AK/HI/PR 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 1.0 22.0 7.8 24.6 14.0 5.5 17.4 233.5 69.8 2.3 12.9 11.2 13.9 47.1 20.9 18.3 7.4 16.0Total 2,575.6 2,859.8 3,130.2 3,144.2 3,101.4 2,509.4 2,002.3 3,258.4 3,357.7 3,776.2 7,233.0 10,454.9 13,995.0 19,367.7 50,883.4 98,631.7 37,620.7 20,737.1 18,777.4 21,698.7 22,524.2 26,012.0 29,873.4 28,107.3 18,269.6 21,974.8

Figure 3.08Venture Capital Investments in 1985 to 2010

By Region ($ Millions)

RReeggiioonn 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 2010Silicon Valley 323 330 333 348 381 388 333 419 313 331 509 775 875 1,049 1,703 2,169 1,108 808 874 951 996 1,209 1,265 1,253 919 967New England 236 208 248 227 215 211 172 160 144 141 232 333 378 464 653 884 578 452 437 423 431 445 504 490 361 389NY Metro 88 99 117 103 117 87 85 72 75 81 128 152 235 263 482 808 435 225 194 222 186 284 275 325 255 351Midwest 97 111 128 102 126 99 89 85 84 80 128 184 231 244 313 500 272 237 171 164 169 210 256 284 228 244LA/Orange County 93 98 113 100 107 96 90 96 60 57 89 132 158 213 350 522 249 156 146 152 183 227 226 245 169 206Southeast 93 117 129 109 108 124 108 106 109 111 170 220 296 308 456 655 396 272 240 235 201 226 229 208 139 187Northwest 46 46 56 64 63 48 41 48 42 47 82 108 132 132 263 336 193 138 109 149 154 173 214 207 133 157Texas 106 90 103 101 86 83 69 65 66 65 99 133 172 196 307 474 334 174 170 170 174 193 179 152 120 144DC/Metroplex 46 42 61 57 49 58 54 45 36 47 74 112 136 160 267 500 265 202 182 180 209 213 213 211 131 138Philadelphia Metro 37 35 50 43 35 42 42 64 50 44 79 91 139 136 136 225 128 97 86 105 91 114 135 150 95 118San Diego 43 32 50 54 56 47 41 46 48 61 74 106 100 118 149 233 154 114 120 127 134 126 164 128 110 117Colorado 43 56 59 59 50 47 34 51 47 49 57 81 95 125 160 222 110 88 73 69 79 99 103 107 79 77SouthWest 19 29 41 24 30 21 25 35 29 27 37 50 72 86 115 147 89 65 53 55 78 84 95 86 68 58North Central 36 47 53 52 38 43 40 40 40 37 70 71 117 108 115 148 121 72 74 69 65 66 86 83 59 53South Central 11 10 12 7 8 5 5 8 7 10 15 20 25 25 30 50 30 23 20 30 8 24 31 41 36 42Upstate NY 17 10 9 10 12 6 4 9 10 5 8 9 20 32 31 35 29 24 22 29 28 38 33 31 12 23Unknown 11 0 1 2 2 0 0 1 4 2 2 7 7 14 3 17 14 0 1 2 2 0 0 0 7 9Sacramento/N.Cal 11 17 11 10 6 10 9 9 7 8 7 9 7 16 17 35 27 7 11 8 10 10 19 19 10 8AK/HI/PR 1 0 0 0 0 0 3 3 1 2 4 8 6 5 5 14 10 3 6 5 6 14 8 9 3 6TToottaall 1,357 1,377 1,574 1,472 1,489 1,415 1,244 1,362 1,172 1,205 1,864 2,601 3,201 3,694 5,555 7,974 4,542 3,157 2,989 3,145 3,204 3,755 4,035 4,029 2,934 3,294

Figure 3.08bVenture Capital Investments in 1985 to 2010

By Region (Number of Deals)


28 Thomson Reuters

Stage 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 2010Seed 360 382 386 365 352 259 189 251 288 330 429 505 538 671 813 704 280 178 210 222 256 388 497 511 350 364Early Stage 307 326 391 350 328 367 275 287 183 257 523 767 906 1021 1735 2875 1301 880 810 882 847 966 1070 1087 916 1153Expansion 525 492 588 594 643 587 532 602 508 424 705 1034 1423 1589 2477 3718 2415 1608 1372 1245 1104 1381 1270 1225 845 1024Later Stage 165 177 209 163 166 202 248 222 193 194 207 295 334 413 530 677 546 491 597 796 997 1020 1198 1206 823 753Total 1357 1377 1574 1472 1489 1415 1244 1362 1172 1205 1864 2601 3201 3694 5555 7974 4542 3157 2989 3145 3204 3755 4035 4029 2934 3294

Figure 3.09bVenture Capital Investments

1985 to 2010 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 1987-4Q 1987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 TotalSeed 140.0 139.7 86.0 128.5 494.3 175.5 265.0 102.1 175.5 718.1 142.5 199.7 142.6 128.3 613.1 154.0 142.1 228.2 111.0 635.3Early Stage 90.4 165.8 102.6 132.8 491.6 123.6 124.6 170.7 170.7 589.6 155.7 178.5 177.1 183.0 694.4 140.6 219.6 185.2 160.5 705.9Expansion 193.6 312.7 289.0 354.5 1149.8 263.7 349.7 227.1 267.8 1108.3 381.8 344.4 362.8 291.3 1380.3 299.1 448.8 290.3 392.6 1430.7Later Stage 132.9 82.2 150.7 74.1 439.9 105.3 79.7 132.3 126.5 443.8 89.8 148.9 102.7 100.9 442.4 107.4 67.9 139.6 57.5 372.3Total 556.9 700.5 628.3 689.9 2575.6 668.1 819.0 632.2 740.5 2859.8 769.8 871.6 785.2 703.6 3130.2 701.1 878.4 843.3 721.5 3144.2

1987 19881985 1986

Figure 3.09c-1Quarterly Venture Capital Investments

1985 to 2010 By Stage ($ Millions)


1989 1990 1991 1992



Stage 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 2010Seed 494.3 718.1 613.1 635.3 541.7 374.5 219.4 528.0 598.6 725.7 1120.2 1216.2 1272.1 1614.8 3443.5 2895.3 689.0 306.6 326.9 452.5 920.2 1244.5 1492.4 1736.2 1738.9 1700.2Early Stage 491.6 589.6 694.4 705.9 677.5 647.7 500.7 528.2 563.0 800.9 1644.0 2464.7 3308.9 4945.5 10594.1 23095.7 7942.3 3660.3 3462.2 3761.9 3784.9 4182.5 5690.8 5288.8 4596.9 5321.4Expansion 1149.8 1108.3 1380.3 1430.7 1483.8 1162.8 967.6 1647.5 1714.3 1372.6 3358.7 5232.9 7217.8 9643.6 28394.7 56821.4 21302.1 11713.9 9356.8 9109.0 8332.5 10993.0 10874.4 10305.2 5774.8 8582.6Later Stage 439.9 443.8 442.4 372.3 398.4 324.5 314.6 554.8 481.8 877.0 1110.1 1541.1 2196.1 3163.8 8451.1 15819.2 7687.4 5056.3 5631.5 8375.3 9486.6 9591.9 11815.9 10777.0 6159.0 6370.6Total 2575.6 2859.8 3130.2 3144.2 3101.4 2509.4 2002.3 3258.4 3357.7 3776.2 7233.0 10454.9 13995.0 19367.7 50883.4 98631.7 37620.7 20737.1 18777.4 21698.7 22524.2 26012.0 29873.4 28107.3 18269.6 21974.8



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19961993 1994 1995




1997 1999 20001998




2001 2002 2003 2004




2005 2006 2007 2008



Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q 2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 TotalSeed 279.0 544.1 519.2 396.5 1738.9 421.1 766.6 282.2 230.3 1700.2Early Stage 702.6 1092.4 1167.0 1634.9 4596.9 1035.3 1578.3 1312.0 1395.9 5321.4Expansion 916.4 1388.7 1768.7 1701.0 5774.8 1873.4 2793.9 1637.6 2277.7 8582.6Later Stage 1502.8 1254.4 1756.9 1644.8 6159.0 1608.6 1754.8 1773.1 1234.1 6370.6Total 3400.8 4279.7 5211.9 5377.2 18269.6 4938.4 6893.6 5004.8 5138.0 21974.8

20102009




30 Thomson Reuters

1989 1990 1991 1992Stage 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 1990 Total 1991-1Q 1991-2Q 1991-3Q 1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 TotalSeed 106 97 77 72 352 60 70 58 71 259 51 48 42 48 189 49 68 48 86 251Early Stage 99 63 82 84 328 87 95 74 111 367 79 70 58 68 275 74 87 51 75 287Expansion 212 156 118 157 643 148 147 140 152 587 129 128 123 152 532 154 160 101 187 602Later Stage 44 29 38 55 166 47 51 40 64 202 48 65 53 82 248 68 40 41 73 222Total 461 345 315 368 1489 342 363 312 398 1415 307 311 276 350 1244 345 355 241 421 1362

Figure 3.09d-2Quarterly Venture Capital Investments


Stage 1993-1Q 1993-2Q 1993-3Q 1993-4Q 1993 Total 1994-1Q 1994-2Q 1994-3Q 1994-4Q 1994 Total 1995-1Q 1995-2Q 1995-3Q 1995-4Q 1995 Total 1996-1Q 1996-2Q 1996-3Q 1996-4Q 1996 TotalSeed 69 68 66 85 288 89 68 82 91 330 125 95 95 114 429 132 139 98 136 505Early Stage 40 48 39 56 183 64 62 53 78 257 133 136 116 138 523 151 209 181 226 767Expansion 144 119 117 128 508 103 109 99 113 424 190 178 165 172 705 233 245 239 317 1034Later Stage 64 46 41 42 193 46 64 37 47 194 55 46 54 52 207 65 71 75 84 295Total 317 281 263 311 1172 302 303 271 329 1205 503 455 430 476 1864 581 664 593 763 2601

1995 19961993 1994




1997 1999 20001998




1986 1987 19881985




2003 20042001 2002



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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 2010Software 569.9 554.6 489.1 451.0 433.2 500.1 435.9 584.6 432.7 613.3 1,069.3 2,152.1 3,191.6 4,192.3 9,982.6 23,166.2 10,019.5 5,072.3 4,401.3 5,342.0 4,798.9 4,911.1 5,431.4 5,165.7 3,281.6 4,009.8Biotechnology 106.2 211.6 254.1 345.7 305.3 278.2 245.8 511.3 453.5 549.7 745.7 1,123.8 1,304.0 1,458.1 1,975.4 3,971.4 3,270.4 3,181.2 3,591.4 4,229.1 3,757.6 4,338.6 5,201.9 4,443.6 3,553.3 3,736.1Industrial/Energy 194.3 184.3 271.5 201.8 306.4 164.7 149.9 266.5 278.1 266.2 474.8 497.5 684.9 1,411.1 1,532.2 2,484.6 1,026.8 712.1 692.9 746.0 851.3 1,938.5 3,034.1 4,631.0 2,448.1 3,407.7Medical Devices and Equipment 170.1 170.7 251.8 334.5 330.7 308.4 213.8 468.4 398.6 406.8 582.0 573.9 983.4 1,062.0 1,376.7 2,212.9 1,845.6 1,781.6 1,478.3 1,762.6 2,164.5 2,827.0 3,630.7 3,443.1 2,547.3 2,260.9IT Services 21.4 31.0 39.5 28.4 36.1 35.4 38.9 28.2 31.3 110.8 159.3 424.9 653.9 1,016.8 3,860.9 8,525.8 2,167.1 989.5 702.5 766.4 1,001.7 1,428.0 1,828.3 1,914.9 1,181.8 1,659.8Media and Entertainment 89.4 107.7 141.8 126.7 151.8 89.3 56.3 130.9 242.0 241.8 925.6 1,043.1 924.7 1,695.3 6,458.3 9,824.6 2,126.3 686.3 824.7 883.1 1,111.0 1,699.5 1,978.9 1,706.2 1,209.8 1,426.3Semiconductors 226.5 271.0 248.1 286.3 158.4 170.9 73.6 140.0 61.6 128.9 189.1 302.9 561.4 623.7 1,191.1 3,447.8 2,249.0 1,491.2 1,770.2 2,031.0 1,955.1 2,109.1 2,018.4 1,499.3 761.3 977.7Telecommunications 169.7 166.3 145.3 147.0 111.2 120.6 104.5 175.0 214.2 444.1 797.1 1,140.6 1,438.4 2,496.6 7,698.2 15,910.1 4,938.0 2,057.8 1,605.6 1,746.2 2,231.7 2,518.3 1,894.7 1,582.0 517.1 894.7Networking and Equipment 209.9 148.3 128.5 128.5 194.0 155.0 125.1 234.6 504.8 229.4 339.8 607.8 932.4 1,351.8 4,554.0 11,149.0 5,399.9 2,569.2 1,669.1 1,489.0 1,497.2 1,284.8 1,574.3 822.5 807.9 663.6Financial Services 78.7 102.3 63.2 203.0 221.1 57.3 20.6 106.7 114.7 115.4 181.8 315.0 348.7 728.0 2,029.2 4,007.2 1,207.6 330.4 387.2 493.8 889.8 418.9 570.7 490.8 378.6 549.3Consumer Products and Services 60.1 123.1 152.9 148.6 92.1 132.6 124.7 99.3 127.8 155.1 425.5 476.0 715.9 580.7 2,364.3 2,974.9 564.8 211.8 156.2 310.7 318.8 362.7 378.7 404.1 362.1 546.5Computers and Peripherals 428.5 417.4 382.6 337.3 278.6 219.2 161.0 179.1 148.3 169.0 298.3 344.0 374.3 351.6 863.7 1,520.3 586.9 462.0 369.4 602.2 554.0 471.3 534.9 454.1 388.4 514.6Electronics/Instrumentation 112.7 117.7 122.4 76.3 110.8 60.8 68.2 51.9 53.7 64.8 119.2 194.0 256.5 222.2 254.0 749.5 377.2 263.9 203.3 365.7 411.7 684.1 534.9 671.9 299.8 410.2Business Products and Services 24.4 53.9 50.0 42.3 42.4 55.0 70.6 34.2 69.7 35.5 154.9 356.4 390.1 666.3 2,719.9 4,389.7 980.2 433.4 648.0 378.0 324.3 501.3 613.1 443.8 243.4 405.2Healthcare Services 79.3 116.6 116.6 83.3 138.9 77.2 49.9 151.4 140.4 162.6 448.4 647.5 878.5 846.8 1,282.5 1,286.4 517.7 346.4 216.0 367.3 412.1 333.9 300.0 155.8 136.1 322.9Retailing/Distribution 31.9 80.7 272.3 203.3 190.4 84.6 30.7 96.3 80.7 77.0 312.2 234.6 295.2 567.7 2,649.3 2,974.7 298.0 144.0 60.1 184.8 187.3 181.4 347.0 278.3 145.6 166.8Other 2.5 2.5 0.3 0.3 0.0 0.0 32.7 0.0 5.8 5.8 10.0 20.7 61.1 96.7 91.1 36.4 45.7 4.0 1.0 0.9 57.1 3.5 1.4 0.0 7.4 22.6Total 2,575.6 2,859.8 3,130.2 3,144.2 3,101.4 2,509.4 2,002.3 3,258.4 3,357.7 3,776.2 7,233.0 10,454.9 13,995.0 19,367.7 50,883.4 98,631.7 37,620.7 20,737.1 18,777.4 21,698.7 22,524.2 26,012.0 29,873.4 28,107.3 18,269.6 21,974.8


1985 to 2010 By Industry ($ Millions)

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 2010Software 322 320 299 276 294 303 286 297 240 250 429 683 816 969 1,401 2,126 1,268 990 942 936 907 964 984 996 694 837Biotechnology 73 97 130 145 128 139 136 160 136 140 176 236 248 282 268 357 335 316 353 391 387 462 491 501 426 465Medical Devices and Equipment 130 111 164 147 180 189 159 190 151 128 180 213 269 285 281 289 250 233 241 272 284 356 396 390 326 326Media and Entertainment 52 61 82 68 67 55 48 75 74 92 139 178 214 263 695 933 359 157 130 137 191 314 376 396 253 294Industrial/Energy 126 131 155 134 140 145 122 126 95 95 130 158 217 189 199 247 200 131 136 145 150 219 305 361 237 283IT Services 24 24 31 22 27 30 30 19 17 31 60 123 166 204 452 691 323 174 145 152 155 216 267 282 218 275Telecommunications 87 76 91 78 77 55 65 63 69 71 138 210 267 333 531 866 491 277 219 219 246 319 285 238 133 135Semiconductors 85 71 87 90 78 73 48 56 42 38 62 71 114 121 146 256 207 165 210 250 227 248 223 196 124 125Consumer Products and Services 46 51 69 57 50 62 43 49 48 65 112 129 159 160 275 280 115 68 47 64 74 78 100 107 85 105Business Products and Services 21 37 42 33 29 25 18 20 30 21 49 67 95 139 278 459 172 100 95 76 76 100 106 119 79 85Financial Services 24 29 36 42 40 23 22 23 30 29 44 61 82 111 188 334 142 74 59 66 62 81 78 69 53 73Computers and Peripherals 158 140 123 132 123 100 79 80 65 65 91 98 111 91 103 136 79 61 59 69 66 68 75 68 57 69Electronics/Instrumentation 77 67 69 57 60 54 48 42 29 35 49 44 53 58 54 77 60 61 57 72 87 96 96 96 61 66Networking and Equipment 78 73 72 68 73 75 64 86 63 75 80 122 140 213 290 479 336 228 191 196 183 142 145 114 106 64Healthcare Services 33 55 55 45 53 41 36 42 46 42 70 130 149 148 154 164 109 72 72 62 69 51 56 50 38 43Other 2 2 2 1 0 1 2 0 3 2 5 8 10 9 16 10 11 2 1 3 3 1 6 3 15 25Retailing/Distribution 19 32 67 77 70 45 38 34 34 26 50 70 91 119 224 270 85 48 32 35 37 40 46 43 29 24Total 1,357 1,377 1,574 1,472 1,489 1,415 1,244 1,362 1,172 1,205 1,864 2,601 3,201 3,694 5,555 7,974 4,542 3,157 2,989 3,145 3,204 3,755 4,035 4,029 2,934 3,294

Figure 3.10bVenture Capital Investments

1985 to 2010 By Industry (Number of Deals)


2007 20082005 2006



Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q 2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 TotalSeed 66 83 98 103 350 87 111 87 79 364Early Stage 185 202 223 306 916 249 341 276 287 1153Expansion 172 206 211 256 845 247 298 229 250 1024Later Stage 215 218 184 206 823 181 213 200 159 753Total 638 709 716 871 2934 764 963 792 775 3294

20102009




32 Thomson Reuters

Figure 3.11Venture Capital Investments By State 1985 to 2010 ($ Millions)

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 2010CA 995.0 1,210.6 1,207.7 1,293.3 1,212.0 1,114.7 933.0 1,310.9 1,115.1 1,415.0 2,911.0 4,419.6 5,690.5 7,260.2 21,463.1 40,568.3 15,455.5 9,001.6 8,180.7 9,893.2 10,745.1 12,770.7 14,729.0 14,175.4 9,256.0 11,054.9MA 372.8 349.7 407.3 374.7 307.2 279.6 217.2 347.6 292.0 349.7 592.7 1,017.6 1,319.8 1,830.8 4,755.5 9,974.6 4,601.2 2,459.5 2,570.1 2,981.2 2,610.0 2,842.0 3,568.1 3,004.2 2,074.8 2,383.4NY 111.9 68.6 86.2 104.3 156.6 39.5 42.5 129.0 98.5 68.1 265.3 282.8 775.3 1,227.6 3,250.5 6,442.4 1,892.7 696.7 609.1 758.3 1,116.2 1,286.4 1,116.2 1,344.7 935.4 1,312.8TX 221.4 221.9 200.9 225.7 214.9 124.8 132.3 145.4 216.4 253.2 454.8 520.1 788.4 1,091.2 2,873.6 5,749.5 2,785.9 1,180.8 1,185.3 1,092.5 1,164.6 1,376.9 1,411.7 1,276.3 687.7 906.4WA 46.6 51.3 74.4 36.7 73.1 56.3 29.1 160.6 94.7 134.1 297.9 379.8 400.2 686.7 2,177.1 2,752.3 1,041.3 545.1 442.6 837.0 790.7 1,035.4 1,261.3 870.4 596.9 624.3IL 44.4 29.4 38.5 42.0 89.4 71.5 82.6 59.6 80.9 133.4 181.3 320.3 351.5 350.0 1,255.0 2,185.8 956.7 280.1 358.1 200.5 262.5 350.0 440.3 437.7 237.4 575.4PA 43.0 32.9 77.8 65.7 48.1 101.2 28.2 122.8 418.8 142.3 138.9 294.2 415.3 448.3 1,477.5 2,791.4 928.0 406.0 461.9 619.1 439.0 858.7 809.3 679.0 419.1 508.5CO 70.0 104.7 106.2 93.4 149.2 87.9 50.3 124.3 132.9 183.3 300.9 241.5 371.7 714.9 1,801.4 3,850.5 1,126.0 498.8 634.1 353.7 600.7 597.4 590.3 833.5 463.0 469.0NC 17.2 16.8 21.2 13.6 14.8 33.6 10.0 43.3 21.3 60.1 201.7 157.7 270.4 320.2 765.8 1,709.9 542.4 540.6 381.9 285.0 323.1 426.9 462.6 405.7 244.6 456.3NJ 71.0 114.5 126.6 97.3 152.9 69.0 65.8 82.1 64.3 178.8 193.6 397.0 441.0 398.3 846.3 2,835.9 1,420.4 918.8 828.6 976.9 874.1 716.3 608.2 724.8 536.4 450.8VA 29.7 20.5 62.5 64.9 46.9 45.6 8.8 24.7 38.7 72.9 252.9 318.8 326.5 706.1 1,126.5 3,104.2 936.1 412.9 340.9 278.9 492.1 433.1 532.9 515.6 252.9 375.4MD 41.4 20.8 30.5 45.5 85.0 28.4 27.7 17.4 26.0 55.4 117.4 133.2 184.8 311.8 608.4 1,618.2 859.2 608.5 319.5 549.2 465.2 637.9 582.6 490.7 295.6 358.3GA 54.4 105.3 58.6 86.0 53.1 19.7 31.8 157.4 150.7 83.1 110.5 232.4 387.7 422.2 1,056.2 2,156.3 795.0 554.0 277.0 486.1 241.0 359.9 443.7 382.1 301.1 333.5CT 58.5 56.5 92.5 159.1 80.6 129.5 83.8 52.8 31.8 78.5 116.8 139.4 251.9 328.5 874.1 1,455.5 519.9 170.3 205.5 228.9 208.2 266.4 274.0 121.2 157.4 199.5FL 31.1 33.3 68.1 56.8 31.7 31.8 25.9 78.7 85.4 83.8 207.3 359.5 404.7 544.8 1,580.8 2,570.1 723.2 360.7 305.9 382.5 352.7 297.7 540.9 230.4 291.2 185.7OR 84.2 73.8 50.5 56.4 29.3 32.3 29.3 53.8 18.5 22.5 34.3 93.8 125.4 54.3 537.5 810.6 204.9 164.5 116.1 149.2 128.5 116.1 287.9 154.4 91.4 173.5OH 29.4 51.0 43.7 67.9 32.7 22.4 14.6 26.2 47.5 58.6 65.7 152.4 213.5 306.6 454.7 917.3 211.3 249.8 180.3 69.1 109.7 69.9 213.5 212.3 116.6 156.8MI 33.3 19.1 56.0 15.2 21.8 26.4 3.7 14.7 41.7 8.6 65.8 72.4 83.2 120.2 242.1 286.3 131.9 106.3 87.5 116.1 80.8 117.3 101.1 255.3 133.7 151.6UT 4.0 29.4 5.3 11.4 4.4 0.8 1.5 21.4 3.0 0.0 25.0 52.3 98.7 116.2 402.0 654.1 211.0 109.0 110.1 203.0 153.5 169.6 142.1 210.2 154.5 143.0MN 22.3 25.5 34.3 25.8 35.0 42.7 39.0 58.8 42.4 48.8 168.6 164.9 249.5 341.6 608.3 909.8 429.4 377.2 224.1 379.5 298.4 326.3 479.9 478.6 266.2 139.5WI 7.1 12.9 16.4 12.8 11.6 9.9 5.5 21.1 24.1 8.4 8.9 20.9 61.8 34.4 86.4 159.5 83.8 45.5 37.5 55.4 66.8 70.1 78.6 64.0 23.9 122.2DC 18.9 14.8 2.9 5.9 0.0 1.7 0.8 4.8 1.1 4.3 0.7 6.7 5.2 26.7 286.7 449.1 161.2 23.5 48.8 80.2 26.3 45.8 73.3 35.3 46.6 107.1IA 0.7 0.7 7.8 1.3 2.0 1.4 0.7 1.6 2.0 19.8 12.1 22.1 17.1 8.8 4.5 31.4 8.4 2.0 0.0 5.3 11.2 0.2 3.3 55.1 83.7 101.5AZ 15.0 37.6 37.9 43.6 31.4 27.0 16.5 57.2 32.8 30.7 66.3 91.5 170.2 218.7 320.2 594.3 187.8 188.3 72.1 70.7 106.4 259.3 213.7 209.8 107.0 83.0IN 13.3 15.4 17.6 5.6 7.6 10.5 7.9 0.0 16.5 56.1 8.3 20.8 25.2 31.8 37.0 259.0 38.8 39.6 12.0 67.3 89.0 63.9 58.0 75.9 156.9 68.7RI 12.6 9.7 6.6 14.2 30.9 2.7 0.4 5.1 8.7 0.0 3.4 0.3 11.5 26.0 23.9 74.6 110.7 95.0 53.1 38.3 76.2 80.7 7.0 40.7 39.2 64.8MO 3.0 3.8 10.6 1.6 9.4 6.8 34.9 25.2 49.2 39.1 83.1 51.9 67.4 611.6 165.7 555.4 237.2 74.0 74.3 26.0 56.0 41.7 90.7 89.5 18.3 60.9NH 3.8 14.7 12.8 18.8 15.3 16.2 27.2 4.3 19.8 7.9 27.0 42.6 44.8 153.9 230.0 655.6 218.7 181.8 134.9 124.3 91.4 105.3 129.8 230.3 37.9 56.9TN 45.5 53.9 51.5 38.7 67.6 36.0 19.2 7.0 44.3 40.6 157.7 141.4 101.8 98.0 476.0 457.9 189.2 110.2 75.9 83.7 99.5 41.0 123.4 71.4 48.0 52.1KS 2.3 2.2 3.9 5.4 11.4 8.9 7.9 2.3 4.8 1.5 8.7 25.4 9.2 10.4 24.4 211.7 39.6 6.8 24.5 44.9 1.4 20.2 73.6 47.2 7.9 41.7VT 0.0 6.6 8.0 3.3 7.4 5.5 1.3 3.8 0.0 5.3 4.2 0.3 3.2 1.4 0.0 8.4 11.6 1.5 1.2 5.1 35.2 6.3 6.6 41.8 14.2 32.8DE 0.3 0.0 4.5 1.4 4.8 1.4 1.2 9.7 3.0 12.4 4.4 3.0 1.1 0.0 16.8 134.7 14.6 19.4 0.4 2.1 11.1 5.3 5.6 59.7 17.5 31.0NV 0.0 2.4 4.1 0.0 5.5 0.1 2.2 5.9 0.0 1.2 0.6 1.8 9.7 24.2 27.8 27.3 33.3 31.7 37.4 39.6 127.4 19.6 29.4 12.6 15.4 28.6NM 20.3 10.0 7.5 3.9 1.0 1.8 4.4 0.0 0.5 0.0 3.6 12.9 27.0 7.7 10.5 17.5 13.5 13.7 2.0 20.1 75.4 30.5 126.6 58.1 5.2 23.1SC 0.9 0.0 12.7 18.1 23.5 7.6 4.0 1.2 10.7 3.8 34.1 91.1 39.3 131.9 135.1 388.4 97.1 76.5 14.3 13.6 1.6 8.3 84.5 21.2 5.0 20.7UN 2.7 0.0 0.5 0.8 0.3 0.0 0.0 30.0 0.8 0.1 0.3 2.2 4.4 29.6 2.4 58.8 26.3 0.0 1.0 0.9 57.1 0.0 0.0 0.0 4.4 19.5LA 9.9 3.3 1.9 1.9 0.0 0.0 1.0 3.8 3.8 2.7 25.5 13.7 26.5 40.6 294.0 93.5 29.5 15.1 2.3 0.6 0.8 11.5 15.9 14.9 11.0 18.0OK 1.5 4.7 13.7 5.3 7.1 2.6 0.3 0.0 0.0 6.8 6.1 31.8 27.8 100.5 64.3 49.4 25.3 30.8 35.1 66.4 0.0 14.6 8.1 16.6 4.5 13.0KY 2.4 1.9 7.4 2.8 5.8 0.0 5.5 3.9 15.4 17.6 18.6 31.1 24.3 30.7 81.2 201.8 23.9 12.0 3.9 47.2 32.0 26.2 53.4 29.2 13.6 11.9NE 0.5 0.0 0.0 1.5 0.0 0.0 0.0 0.0 38.0 3.5 0.5 10.4 3.7 17.9 50.3 134.8 88.4 12.6 201.1 0.2 7.4 6.5 0.0 16.0 0.0 11.5HI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.5 1.5 4.2 12.8 199.0 37.8 1.8 12.8 9.9 12.4 32.8 4.9 7.5 7.4 11.5WY 0.0 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 3.2 6.5 0.2 1.5 0.0 10.0ID 0.3 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.2 0.1 15.2 0.1 1.2 30.3 16.5 18.5 2.5 8.2 52.1 2.5 10.0 12.0 15.8 21.0 14.7 7.8AR 0.0 1.2 0.0 0.0 0.0 0.0 0.0 9.5 4.7 31.4 5.0 0.0 3.6 6.9 24.8 33.4 10.4 9.7 1.2 2.0 0.1 1.5 0.2 0.0 0.0 5.0PR 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 1.0 22.0 7.8 4.1 12.5 1.3 4.6 31.0 32.0 0.5 0.1 1.3 1.5 14.3 16.0 10.8 0.0 4.5WV 1.1 2.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.8 0.4 0.0 4.5 1.0 15.9 12.6 5.6 8.0 4.7 9.7 30.0 3.0 3.8ME 18.0 11.6 15.3 8.7 17.2 4.5 0.8 0.2 3.0 0.0 1.5 1.5 3.7 52.7 42.8 132.4 1.5 15.2 0.9 12.0 4.2 7.6 4.0 4.1 5.4 2.2MT 1.5 0.7 2.7 0.4 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.4 16.7 24.8 0.0 0.0 0.0 25.9 0.0 3.0 15.6 14.5 1.9AL 12.3 13.6 20.9 9.6 2.0 2.3 0.1 10.6 50.9 15.5 17.2 46.7 106.3 82.3 35.0 265.8 68.6 56.3 27.8 25.1 20.2 19.9 32.4 19.0 43.2 0.6AK 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 3.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0MS 0.3 0.0 0.0 0.6 0.9 4.9 2.4 14.5 1.7 15.0 0.0 10.6 8.3 3.5 235.7 19.5 30.0 0.8 0.9 3.4 10.0 1.0 5.9 0.0 0.0 0.0ND 0.0 0.0 14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 9.8 0.0 1.1 0.5 2.1 1.0 1.0 0.0 14.5 2.0 0.0 0.0 0.2 5.5 8.8 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 0.4 0.2 0.5 7.4 3.5 1.5 0.0 0.0 4.0 0.5 0.8 0.0Total 2,575.6 2,859.8 3,130.2 3,144.2 3,101.4 2,509.4 2,002.3 3,258.4 3,357.7 3,776.2 7,233.0 10,454.9 13,995.0 19,367.7 50,883.4 98,631.7 37,620.7 20,737.1 18,777.4 21,698.7 22,524.2 26,012.0 29,873.4 28,107.3 18,269.6 21,974.8

2011 NVCA Yearbook

Thomson Reuters 33

Figure 3.11bNumber of Venture Capital Deals by State 1985 to 2010

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 2010CA 470 477 507 512 550 541 473 570 428 457 679 1,022 1,140 1,396 2,219 2,959 1,538 1,085 1,151 1,238 1,323 1,572 1,674 1,645 1,208 1,298MA 215 182 216 194 178 167 138 136 127 122 197 292 331 397 585 777 512 385 378 380 377 401 459 437 318 353NY 46 45 52 46 49 29 23 32 35 35 67 87 155 193 353 608 285 153 118 155 128 223 203 246 180 264PA 34 44 55 53 38 42 36 61 47 38 66 84 135 145 145 256 145 101 100 109 100 143 168 193 133 153TX 106 90 103 101 86 83 69 65 66 65 99 133 172 196 307 474 334 174 170 170 174 193 179 152 120 144WA 20 20 25 23 35 27 26 34 28 34 64 78 86 110 207 259 147 109 82 114 120 137 166 162 108 117CO 43 56 59 59 50 47 34 51 47 49 57 81 95 125 160 222 110 88 73 69 79 99 103 107 79 77NJ 43 44 51 42 52 46 48 41 35 39 55 63 81 76 115 183 152 95 91 95 79 91 98 93 74 71MD 20 17 24 28 19 27 28 23 16 23 34 47 49 55 100 177 95 95 87 89 105 111 95 108 71 70GA 31 43 43 38 29 31 34 34 37 43 47 54 84 102 166 224 143 79 61 78 64 83 70 79 45 63IL 27 27 31 31 61 34 36 33 25 34 42 56 81 72 128 199 128 79 60 58 55 58 70 70 44 59NC 15 21 16 11 17 26 19 18 21 23 36 60 82 82 106 155 88 83 77 53 50 63 64 50 34 57CT 32 32 39 43 43 37 33 32 25 34 44 46 65 74 89 116 72 38 34 35 34 30 38 37 39 55OH 25 20 26 22 17 20 20 21 19 19 36 53 54 64 51 77 44 50 30 35 38 44 64 59 55 52VI 21 19 28 24 29 26 23 19 18 21 39 61 83 101 150 276 144 92 84 80 88 90 96 88 51 51FL 21 20 28 23 20 30 20 28 24 19 53 57 72 66 118 186 112 62 63 63 56 56 57 38 32 39KS 1 2 6 4 4 3 3 6 2 2 4 9 6 3 8 22 10 7 12 14 4 8 17 24 18 36MI 19 22 22 12 16 13 8 5 12 3 13 21 29 32 45 55 22 27 17 15 19 20 23 46 33 33OR 24 24 29 35 28 21 12 12 12 12 17 29 42 19 52 70 42 27 22 32 25 32 40 35 19 33MN 23 29 33 29 29 30 31 27 26 21 51 51 90 80 85 109 84 57 59 51 43 40 60 49 34 26UT 1 12 13 6 5 3 6 10 6 0 7 15 33 34 43 62 44 28 23 30 28 40 33 40 35 25WI 11 15 17 15 6 11 6 9 8 8 7 9 19 15 18 22 20 9 8 10 16 20 20 19 11 21TN 17 23 27 29 27 22 24 11 8 11 19 25 25 25 45 48 30 26 22 25 25 13 22 23 14 18AZ 15 11 20 12 23 14 13 21 21 24 27 28 29 38 57 67 35 25 17 12 26 28 29 22 16 17IN 8 15 15 6 6 12 8 1 8 7 7 8 12 8 11 27 6 11 8 10 12 14 15 12 13 14KY 2 4 7 4 5 0 2 2 2 3 9 7 15 16 16 14 4 3 3 4 3 10 7 10 8 14MO 5 5 12 8 11 10 9 9 12 7 16 24 17 20 23 50 17 28 20 9 10 13 17 23 12 14DC 4 5 7 4 1 5 3 3 2 3 1 4 2 3 17 45 24 7 6 8 11 9 17 14 8 13NM 3 4 6 6 1 3 2 0 2 1 2 5 3 4 6 8 4 6 5 8 15 9 24 18 14 13RI 6 4 7 6 7 7 4 2 3 0 3 1 4 5 10 9 11 14 10 8 13 7 4 10 17 13NH 3 9 10 7 11 18 17 11 10 4 10 17 17 24 30 58 35 40 33 22 24 22 20 28 13 10DE 1 1 1 4 3 1 3 2 1 3 4 4 4 0 2 4 1 2 1 1 5 4 4 6 4 9UN 11 0 1 2 2 0 0 1 4 2 2 7 7 14 3 17 14 0 1 2 2 0 0 0 7 9SC 1 0 4 3 7 5 9 7 7 6 5 13 14 16 9 11 5 6 4 5 1 2 9 9 3 8VT 0 3 3 3 2 3 3 1 0 3 4 1 1 2 1 4 3 5 5 4 5 7 5 7 5 6HI 1 0 0 0 0 0 0 0 0 0 0 3 4 3 3 3 5 2 5 4 5 11 4 7 3 5ME 9 6 5 4 6 6 4 1 2 0 2 5 2 11 11 15 5 4 2 3 3 4 8 3 3 5ID 1 0 1 0 0 0 0 1 2 1 1 1 2 3 2 4 2 2 5 2 3 3 6 7 5 4WV 1 1 2 1 0 0 0 0 0 0 0 0 2 1 0 2 2 8 5 3 5 3 5 1 1 4IA 1 3 2 3 2 2 3 4 1 4 9 6 4 7 3 5 5 1 1 3 3 2 2 7 8 3LA 6 2 2 2 0 0 1 1 4 2 7 4 12 9 10 14 10 7 2 2 3 3 7 12 14 3NE 1 0 0 5 1 0 0 0 5 3 1 5 3 5 7 10 10 3 3 1 3 3 1 3 0 3NV 0 2 2 0 1 1 4 4 0 2 1 2 7 10 9 10 6 6 8 5 9 7 9 6 3 3AL 7 9 11 4 7 7 1 4 10 4 10 8 16 15 10 28 15 13 9 6 3 8 5 9 9 2MT 1 2 1 5 0 0 3 0 0 0 0 0 0 0 2 3 2 0 0 0 2 0 1 2 1 2OK 4 5 4 1 4 2 1 0 0 5 2 7 5 11 7 9 7 4 3 12 0 8 6 5 4 2AR 0 1 0 0 0 0 0 1 1 1 2 0 2 2 5 5 3 5 3 2 1 5 1 0 0 1PR 0 0 0 0 0 0 3 2 1 2 4 5 2 2 2 10 5 1 1 1 1 3 4 2 0 1WY 0 0 0 1 0 0 0 1 0 0 0 0 2 0 0 0 0 0 0 1 4 1 1 1 0 1AK 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0MS 1 1 0 1 1 3 1 4 2 5 0 3 3 2 2 3 3 3 4 5 2 1 2 0 2 0ND 0 0 1 0 0 0 0 0 0 1 2 0 1 1 1 1 1 0 2 1 0 0 1 4 3 0SD 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 2 1 3 0 1 2 1 3 0Total 1,357 1,377 1,574 1,472 1,489 1,415 1,244 1,362 1,172 1,205 1,864 2,601 3,201 3,694 5,555 7,974 4,542 3,157 2,989 3,145 3,204 3,755 4,035 4,029 2,934 3,294


34 Thomson Reuters

0

20,000

40,000

60,000

80,000

100,000

120,000

'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

Year

Follow-on

First

Figure 3.12Venture Capital InvestmentsFirst vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

Year First Follow-on Total1985 702.0 1,873.6 2,575.61986 835.2 2,024.6 2,859.81987 968.2 2,162.0 3,130.21988 1,013.7 2,130.4 3,144.21989 879.9 2,221.6 3,101.41990 770.0 1,739.4 2,509.41991 492.5 1,509.8 2,002.31992 1,215.3 2,043.1 3,258.41993 1,208.4 2,149.4 3,357.71994 1,561.9 2,214.3 3,776.21995 3,735.8 3,497.2 7,233.01996 4,026.4 6,428.5 10,454.91997 4,619.6 9,375.4 13,995.01998 6,607.4 12,760.2 19,367.71999 15,160.2 35,723.1 50,883.42000 26,376.8 72,254.9 98,631.72001 6,915.8 30,704.9 37,620.72002 3,999.4 16,737.7 20,737.12003 3,776.2 15,001.2 18,777.42004 4,681.1 17,017.6 21,698.72005 5,581.0 16,943.2 22,524.22006 6,035.8 19,976.3 26,012.02007 7,332.4 22,541.0 29,873.42008 6,202.5 21,904.8 28,107.32009 3,315.0 14,954.6 18,269.62010 4,348.9 17,625.9 21,974.8

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 447 753 1,1641986 491 732 1,1841987 562 824 1,3311988 502 765 1,2201989 438 808 1,1961990 341 762 1,0351991 264 697 9201992 389 696 1,0221993 346 630 9201994 420 610 9651995 891 764 1,5511996 1,146 1,145 2,0921997 1,302 1,455 2,5561998 1,426 1,809 3,0041999 2,453 2,414 4,4332000 3,394 3,639 6,3732001 1,231 2,748 3,8142002 837 1,941 2,6682003 766 1,814 2,4792004 931 1,822 2,6462005 1,043 1,813 2,7322006 1,234 2,069 3,1272007 1,338 2,169 3,3422008 1,248 2,281 3,3492009 772 1,779 2,4662010 1,001 1,854 2,749

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

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

'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

Year

Series2

Series1

Follow-on

First


Number of Companies Receiving

* No. of Cos receiving financing can be less than the sum of theprior two columns because a given company can receive initialand follow-on financing in the same year

($ M

illio

ns)

Num

ber

of C

ompa

nies

2011 NVCA Yearbook

Thomson Reuters 35

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 2010Software 87.9 114.5 89.5 121.8 92.8 159.7 100.5 145.4 110.8 283.6 515.6 859.1 998.6 1,144.1 2,667.0 5,464.7 1,544.4 1,108.6 878.8 1,199.0 1,151.4 1,132.5 1,251.1 994.7 639.7 811.8Biotechnology 31.8 53.4 61.7 64.2 51.0 25.6 13.9 159.0 119.3 150.6 143.4 209.0 343.1 344.5 372.0 702.0 740.6 658.1 393.0 675.8 564.5 897.2 944.4 894.0 482.4 653.3Industrial/Energy 92.9 76.2 113.3 118.2 212.3 83.8 58.6 152.6 158.4 155.4 411.8 282.5 369.6 938.0 859.0 1,026.2 455.6 368.5 233.7 269.6 311.0 704.3 1,291.9 1,130.0 567.2 440.2IT Services 16.1 9.1 4.5 9.4 20.6 16.7 10.3 8.8 13.1 91.5 49.4 215.7 243.7 334.1 1,472.5 2,520.7 301.1 185.6 152.2 212.1 335.5 366.2 542.6 594.7 283.3 406.7Media and Entertainment 69.7 42.6 95.7 90.1 82.4 62.7 13.4 82.0 167.1 88.0 767.3 344.9 384.3 703.6 2,087.7 2,638.2 327.3 177.2 427.3 254.2 545.4 653.7 668.9 509.3 274.8 380.7Financial Services 63.2 81.0 43.9 155.7 71.3 32.6 8.3 100.6 101.9 66.4 112.0 250.3 222.5 395.2 785.0 1,422.0 323.0 78.6 80.7 240.1 592.8 114.3 248.3 252.2 122.9 296.3Medical Devices and Equipment 39.5 71.3 82.1 76.7 70.2 57.9 39.2 90.8 139.1 131.5 170.4 187.0 242.9 237.5 258.9 320.1 244.6 252.7 303.9 296.9 404.3 609.5 721.6 646.2 342.8 253.5Telecommunications 64.5 42.9 37.7 41.1 40.9 52.1 10.8 93.6 59.0 187.1 320.6 384.4 373.2 858.2 1,934.5 4,487.9 805.0 200.7 177.7 255.9 362.4 450.4 387.2 315.7 89.2 210.4Healthcare Services 16.5 60.2 55.8 16.6 48.0 27.8 16.6 62.5 67.6 109.0 297.4 251.0 321.6 243.5 296.2 421.2 84.4 125.6 63.3 85.7 161.9 118.6 72.6 28.9 39.5 204.0Networking and Equipment 20.6 28.4 23.9 39.4 54.6 42.0 19.8 53.5 81.0 37.0 71.6 127.4 220.1 304.1 1,532.4 2,466.3 813.1 221.6 119.7 182.7 124.7 167.3 199.1 84.3 68.9 162.0Consumer Products and Services 44.0 59.4 51.5 74.4 29.5 55.6 52.2 71.2 54.3 100.8 274.1 208.2 193.6 223.1 707.5 878.3 117.8 39.1 75.2 114.3 212.4 122.2 177.8 204.5 124.6 157.7Business Products and Services 7.7 33.7 25.1 10.5 13.3 38.5 62.4 25.4 61.8 29.6 121.4 248.6 222.0 337.5 931.0 1,698.3 222.8 126.6 341.8 211.1 141.5 200.7 251.0 119.1 135.3 117.8Computers and Peripherals 38.6 51.4 82.2 59.1 40.3 51.2 17.4 52.7 33.3 34.1 149.2 107.2 100.6 114.1 253.6 335.6 263.3 29.2 90.3 90.3 97.8 60.8 128.1 150.0 63.7 78.5Retailing/Distribution 19.6 59.0 132.2 54.1 20.3 13.2 10.9 52.5 23.8 49.8 214.4 143.4 108.5 195.9 584.0 849.3 55.8 44.2 11.3 107.6 111.6 43.6 95.3 68.3 10.4 62.0Semiconductors 45.5 22.4 37.3 56.6 13.2 31.8 10.3 50.5 5.0 38.8 54.5 122.3 170.5 169.6 266.9 965.2 504.5 307.5 381.8 390.8 264.8 247.0 222.8 128.5 30.0 55.8Electronics/Instrumentation 43.3 28.2 31.9 25.6 19.1 18.7 15.1 14.1 12.8 8.6 52.6 85.0 88.8 42.9 81.1 145.6 84.8 71.6 44.6 94.0 141.8 143.9 128.4 82.0 33.9 44.7Other 0.5 1.5 0.0 0.3 0.0 0.0 32.7 0.0 0.0 0.2 10.0 0.5 16.1 21.5 70.9 35.2 27.6 4.0 1.0 0.9 57.1 3.5 1.4 0.0 6.4 13.5Total 702.0 835.2 968.2 1,013.7 879.9 770.0 492.5 1,215.3 1,208.4 1,561.9 3,735.8 4,026.4 4,619.6 6,607.4 15,160.2 26,376.8 6,915.8 3,999.4 3,776.2 4,681.1 5,581.0 6,035.8 7,332.4 6,202.5 3,315.0 4,348.9

Figure 3.18First Sequence by Industry ($ Millions)

Stage 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 2010Seed 287.6 401.7 339.1 343.0 244.8 170.0 86.1 202.9 329.2 479.7 649.1 648.0 746.5 934.1 2,593.4 2,289.6 555.8 241.6 270.4 358.8 798.4 1,044.0 1,105.7 1,280.0 867.3 863.7Early Stage 122.2 177.7 307.9 288.1 208.5 276.2 187.1 244.9 285.3 384.6 855.5 1,277.3 1,678.3 2,490.3 5,933.1 15,099.3 4,286.2 2,247.7 2,110.5 2,437.6 2,426.1 2,273.8 2,905.4 2,281.0 1,253.5 1,629.0Expansion 249.0 206.7 268.8 300.0 316.2 284.6 149.5 617.9 488.1 482.7 1,687.6 1,712.5 1,871.1 2,608.9 6,150.1 8,510.9 1,847.4 1,306.3 962.0 1,335.0 1,459.8 1,982.6 2,455.8 1,689.0 743.2 1,113.2Later Stage 43.3 49.1 52.4 82.7 110.4 39.2 69.8 149.6 105.8 215.0 543.6 388.5 323.7 574.1 483.7 477.0 226.3 203.8 433.2 549.6 896.7 735.4 865.6 952.6 451.1 743.0Total 702.0 835.2 968.2 1,013.7 879.9 770.0 492.5 1,215.3 1,208.4 1,561.9 3,735.8 4,026.4 4,619.6 6,607.4 15,160.2 26,376.8 6,915.8 3,999.4 3,776.2 4,681.1 5,581.0 6,035.8 7,332.4 6,202.5 3,315.0 4,348.9

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

SSttaaggee 11998855 11998866 11998877 11998888 11998899 11999900 11999911 11999922 11999933 11999944 11999955 11999966 11999977 11999988 11999999 22000000 22000011 22000022 22000033 22000044 22000055 22000066 22000077 22000088 22000099 22001100Seed 221 242 227 208 203 119 86 118 144 186 252 314 346 461 656 580 219 128 161 169 207 316 400 364 202 239Early Stage 96 116 192 167 99 117 77 128 70 111 285 409 476 497 1118 1935 697 472 427 524 530 549 562 521 365 505Expansion 107 105 117 106 111 90 83 120 105 105 296 365 430 417 639 823 285 203 145 188 246 274 284 224 136 171Later Stage 23 28 26 21 25 15 18 23 27 18 58 58 50 51 40 56 30 34 33 50 60 95 92 139 69 86Total 444477 449911 556622 550022 443388 334411 226644 338899 334466 442200 889911 11,,114466 11,,330022 11,,442266 22,,445533 33,,339944 11,,223311 883377 776666 993311 11,,004433 11,,223344 11,,333388 11,,224488 777722 11,,000011

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


36 Thomson Reuters

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 2010Software 74 73 80 85 67 81 59 67 51 99 220 318 325 330 586 867 306 262 228 241 270 266 286 272 181 261Biotechnology 28 32 54 46 32 26 20 53 46 41 54 70 86 106 79 124 107 108 91 110 113 138 134 139 79 122Media and Entertainment 29 32 45 31 33 22 10 28 24 29 72 76 107 115 377 388 75 41 39 54 93 154 177 172 87 121IT Services 11 8 5 8 11 6 5 4 6 19 27 66 65 88 227 330 75 29 33 50 60 84 98 117 73 89Industrial/Energy 61 58 72 71 73 49 29 31 33 37 82 82 101 88 100 122 84 62 45 58 67 107 147 149 75 86Medical Devices and Equipment 40 51 60 54 59 37 30 43 42 37 55 84 105 95 86 71 58 65 73 76 87 130 118 100 74 60Telecommunications 27 24 24 22 22 7 13 19 27 22 68 90 93 136 236 392 130 46 40 52 77 104 82 49 32 45Consumer Products and Services 28 29 32 18 22 25 16 22 17 30 57 52 73 67 136 102 28 23 19 29 42 41 48 55 31 42Financial Services 17 21 24 21 11 7 10 13 18 13 30 38 40 62 101 177 44 28 17 33 28 30 39 29 18 39Business Products and Services 13 23 20 12 9 9 9 10 16 10 31 41 48 76 147 225 50 28 28 35 35 43 52 49 31 35Other 1 1 0 1 0 1 2 0 1 1 5 1 6 4 10 8 8 2 1 3 3 1 6 3 14 21Healthcare Services 9 31 19 11 8 7 11 16 12 19 42 56 53 39 52 61 21 20 17 15 23 19 17 9 12 19Computers and Peripherals 28 31 31 34 27 18 12 27 16 17 42 37 43 31 34 53 26 12 22 21 19 12 26 19 17 17Semiconductors 24 13 15 21 12 11 8 11 5 11 23 30 54 46 48 117 79 49 64 77 44 45 38 32 11 13Electronics/Instrumentation 27 18 23 17 17 10 9 10 5 9 22 20 18 17 17 28 24 16 21 23 33 27 29 27 14 12Networking and Equipment 17 21 20 24 22 16 14 23 14 17 29 49 51 83 105 210 97 36 23 37 27 22 25 12 16 10Retailing/Distribution 13 25 38 26 13 9 7 12 13 9 32 36 34 43 112 119 19 10 5 17 22 11 16 15 7 9Total 447 491 562 502 438 341 264 389 346 420 891 1,146 1,302 1,426 2,453 3,394 1,231 837 766 931 1,043 1,234 1,338 1,248 772 1,001

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

2011 NVCA Yearbook

Thomson Reuters 37

Stage Region ($ Millions)Silicon Valley 3,912.2NY Metro 1,218.4New England 820.6LA/Orange County 568.6Southeast 491.9Northwest 421.6DC/Metroplex 313.0Midwest 305.4Texas 264.0SouthWest 163.7San Diego 156.6Colorado 152.3Philadelphia Metro 77.0South Central 30.1North Central 28.5AK/HI/PR 10.7Unknown 8.4Upstate NY 5.0Sacramento/N.Cal 5.0TOTAL 8,952.9

Figure 3.222010 Internet-Related Investments

By Regions in 2010

Year No. of Cos ($ Millions)1995 404 1,734.91996 746 3,842.51997 1,006 5,677.21998 1,467 10,624.41999 3,026 39,474.82000 4,555 75,575.82001 2,340 23,880.82002 1,407 10,381.62003 1,192 8,517.32004 1,197 9,714.92005 1,269 9,967.52006 1,539 11,820.72007 1,645 13,332.62008 1,678 11,445.02009 1,264 7,438.92010 1,403 8,952.9TOTAL 26,138 252,381.7

Figure 3.20Internet-Related Investments

By Year 1995-2010

State ($ Millions)California 4,642.3New York 1,076.8Massachusetts 753.8Washington 324.5Texas 264.0TOTAL* 7,061.4

Figure 3.21Top Five States by Internet-Related Investments

in 2010

* Total includes above 5 states only


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STATE AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IND KS KY LA MA MD ME MI MN MO MS MTAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 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 0.0 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 0.5 3.8 2.1 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 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0CA 0.0 0.0 0.0 11.6 5,636.1 90.6 27.5 38.2 3.1 18.7 40.9 3.4 0.0 0.0 89.6 34.7 9.8 2.3 4.3 458.3 149.9 0.0 29.8 43.7 0.0 0.0 0.0CO 0.0 0.0 0.0 0.0 39.0 50.1 1.3 0.0 0.0 0.0 2.0 0.0 0.0 0.0 4.5 0.0 0.0 0.0 0.0 8.4 1.4 0.0 0.0 0.3 0.0 0.0 0.0CT 0.0 0.0 0.0 10.8 302.4 6.0 90.4 0.0 0.0 6.8 27.9 0.0 0.0 0.0 18.9 0.0 0.0 0.0 0.0 62.3 5.5 0.0 0.0 3.4 0.0 0.0 0.0DC 0.0 0.0 0.0 0.0 29.0 4.5 0.0 0.0 0.0 5.0 2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 26.7 0.6 0.0 0.0 0.4 0.0 0.0 0.0DE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0FF 0.0 0.3 0.0 11.8 687.7 57.0 9.6 0.0 20.0 13.1 19.9 0.0 0.0 0.0 37.4 0.0 2.6 0.0 0.0 169.8 14.8 0.0 0.5 6.9 3.4 0.0 0.0FL 0.0 0.0 0.0 0.0 7.1 12.0 0.0 0.0 0.0 11.3 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.2 0.0 0.0 0.0 0.0 1.7 0.0 0.0GA 0.0 0.0 3.2 0.0 13.9 6.2 0.0 0.0 0.0 10.4 51.6 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 3.2 0.0 0.0 0.0 2.2 0.0 0.0 0.0IA 0.0 0.0 0.0 0.0 0.5 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 0.0 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 4.0 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 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.8IL 0.0 0.0 0.0 0.0 219.7 9.0 0.0 0.0 0.0 5.2 4.4 0.0 0.0 0.0 139.5 0.0 0.0 0.0 0.0 8.3 2.0 0.0 8.6 4.6 0.0 0.0 0.0IN 0.0 0.0 0.6 0.0 14.1 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.4 0.0 0.0 0.0 5.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0KS 0.0 0.0 0.0 0.0 2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.6 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 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.4 0.0 0.0 2.4 0.0 0.0 0.0 0.0 0.0 0.0LA 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 7.8 0.0 0.0 0.0 0.9 1.9 0.0 0.0 0.0 0.0 2.1 0.0 0.0MA 0.0 0.0 0.0 15.6 619.1 10.9 2.2 5.6 3.3 14.6 25.0 0.0 0.0 0.0 20.8 1.2 4.0 1.4 12.8 875.8 21.6 0.0 13.4 14.7 5.7 0.0 0.4MD 0.0 0.0 0.0 0.0 61.1 4.7 0.0 17.2 0.0 1.3 7.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.4 44.0 0.0 10.0 0.0 0.0 0.0 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 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0MI 0.0 0.0 0.0 0.0 54.2 0.0 0.0 0.0 0.0 0.0 18.9 0.0 0.0 0.0 10.6 5.0 0.0 0.0 0.0 4.3 0.0 0.0 45.9 0.0 0.0 0.0 0.0MN 0.0 0.0 0.0 3.0 65.7 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 10.3 0.0 0.0 0.0 15.7 0.0 0.0 0.0MO 0.0 0.0 0.0 0.0 21.0 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 0.0 0.0 2.3 8.6 0.0 0.0NC 0.0 0.0 0.0 0.0 12.1 0.0 0.0 0.0 2.5 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.5 1.5 0.0 1.8 3.0 0.0 0.0 0.0NE 0.0 0.0 0.0 0.0 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 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 1.0 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 4.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0NJ 0.0 0.0 0.0 8.0 213.6 4.9 0.0 0.0 0.1 0.0 6.8 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 68.5 14.3 0.0 0.0 0.7 0.0 0.0 0.0NM 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 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NY 0.0 0.0 0.0 8.3 658.2 50.2 12.0 3.7 0.4 33.7 23.6 0.0 0.0 0.0 39.8 6.0 0.0 0.0 0.0 176.6 49.1 0.0 0.0 6.7 1.8 0.0 0.0OH 0.0 0.0 0.0 0.0 13.1 0.0 0.0 0.0 0.0 9.9 4.5 0.0 0.0 0.0 0.0 6.5 0.0 0.4 0.0 0.0 0.3 0.0 4.0 1.7 0.0 0.0 0.0OK 0.0 0.0 0.0 0.0 3.6 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.1 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 0.0 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 0.0 62.7 6.3 3.0 3.4 0.1 7.5 0.0 0.0 0.0 0.0 4.1 0.0 0.0 1.4 0.0 52.5 13.5 0.0 0.0 0.0 5.0 0.0 0.0RI 0.0 0.0 0.0 0.0 5.8 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 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0SC 0.0 0.0 0.0 0.0 5.0 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 0.0 0.0 0.0 0.0 0.0 0.0SD 0.0 0.0 0.0 0.0 1.7 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 0.0 0.0 0.9 0.0 0.0 0.0TN 0.0 0.0 0.0 1.4 0.1 0.0 0.0 0.0 0.0 0.0 4.7 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 0.0TX 0.0 0.3 0.0 0.0 88.2 9.5 0.0 0.0 0.0 5.2 0.3 0.0 0.0 0.0 33.7 2.0 0.0 0.0 0.0 10.2 0.0 0.0 2.3 0.4 1.5 0.0 0.0UN 0.0 0.0 1.2 9.5 2,061.5 132.7 50.1 38.4 0.9 36.2 69.7 8.1 0.8 0.0 165.0 7.4 9.7 2.1 0.0 357.4 30.4 1.3 31.7 29.6 31.3 0.0 0.8UT 0.0 0.0 0.0 2.5 5.3 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0VA 0.0 0.0 0.0 0.0 32.7 0.0 0.0 0.0 0.0 3.1 16.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.8 1.6 0.0 0.0 0.0 0.0 0.0 0.0VT 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 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 0.0 111.6 5.0 3.0 0.6 0.0 0.0 0.0 0.0 0.0 6.7 0.0 0.0 0.0 0.0 0.0 20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0WI 0.0 0.0 0.0 0.0 0.0 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 6.0 3.1 0.0 3.7 0.5 0.0 0.0 0.0WV 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 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0WY 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 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.0Total 0.0 0.6 5.0 83.0 11,055.1 469.0 200.7 107.1 30.9 185.6 333.7 11.5 101.6 7.8 575.4 68.7 41.7 12.0 18.0 2,383.4 358.5 2.1 151.7 139.4 61.1 0.0 2.0

Figure 3.23Sources and Targets of Invested Capital Investments 2010

SOURCE Target State

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

2011 NVCA Yearbook

Thomson Reuters 39

ND NE NH NJ NM NV NY OH OK ORE PA PR RI SC SD TN TX UN UT VA VI VT WA WI WV WY TOT0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 0.0 0.0 0.4 0.0 0.0 3.0 0.00 0.0 0.0 0.0 0.0 0.0 12.60.0 0.0 0.0 0.0 0.0 0.0 1.3 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 0.00 0.0 0.0 0.0 0.0 0.0 1.30.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 7.70.0 9.0 3.0 60.3 0.5 1.0 354.4 6.1 0.0 46.0 97.8 0.0 0.0 8.0 0.0 1.5 230.0 7.9 80.2 130.6 0.00 30.1 182.5 11.6 0.0 0.0 8,044.90.0 0.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0 3.8 0.0 0.0 0.0 0.0 0.0 0.0 12.2 4.5 0.0 0.4 0.00 0.0 8.9 0.0 0.0 10.0 151.40.0 0.0 0.0 19.5 5.5 0.0 47.3 13.8 0.0 5.0 35.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.00 0.0 31.9 0.0 0.0 0.0 698.60.0 0.0 0.0 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.5 0.0 0.0 3.5 0.00 0.0 1.2 2.5 0.0 0.0 79.40.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 5.10.0 0.0 0.0 48.1 0.0 0.0 66.5 6.4 0.0 5.1 50.9 0.0 2.2 0.0 0.0 0.4 110.8 0.0 2.0 16.6 0.00 0.0 23.0 11.6 0.0 0.0 1,414.10.0 0.0 0.0 5.6 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 0.00 0.0 0.0 0.0 0.0 0.0 54.10.0 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 1.3 0.0 0.0 0.0 0.00 0.0 1.6 0.0 0.0 0.0 97.00.0 0.0 0.0 3.3 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 0.00 0.0 0.0 0.0 0.0 0.0 4.50.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 6.30.0 0.0 0.0 13.9 0.0 0.0 7.0 1.0 0.0 0.0 6.9 0.0 0.0 0.0 0.0 0.0 13.6 0.0 0.0 3.8 0.00 0.0 10.7 5.7 0.0 0.0 481.40.0 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 3.0 0.0 0.0 0.0 0.00 0.0 3.5 0.0 0.0 0.0 34.30.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 18.30.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 5.5 0.0 0.0 1.0 0.0 1.5 0.0 0.0 0.0 0.3 0.00 0.0 0.0 1.0 0.0 0.0 18.00.0 0.0 0.0 0.0 0.0 0.0 4.3 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 3.6 0.0 0.0 0.0 0.00 0.0 0.0 13.1 0.0 0.0 33.90.0 0.0 9.6 22.3 0.1 0.0 197.8 4.0 3.0 9.1 50.4 0.0 18.8 1.7 0.0 0.0 46.8 0.0 1.0 18.7 0.00 0.0 87.0 4.4 0.0 0.0 2,170.80.0 0.0 0.0 33.3 0.0 0.0 19.6 0.0 0.0 0.0 7.2 0.0 0.0 0.0 0.0 0.0 6.0 0.0 0.0 11.1 0.00 0.0 6.0 0.0 0.0 0.0 285.80.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 1.30.0 0.0 0.0 0.2 0.0 0.0 0.0 1.7 0.0 1.4 0.0 0.0 0.0 0.0 0.0 1.5 5.8 0.0 0.0 0.0 0.00 0.0 0.1 0.0 0.0 0.0 149.50.0 0.0 3.0 1.6 0.0 0.0 0.9 2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 0.00 0.0 0.2 11.6 0.0 0.0 120.30.0 0.0 3.0 0.0 0.7 0.0 6.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 4.9 0.0 0.0 0.0 0.00 0.0 1.8 0.0 0.0 0.0 49.90.0 0.0 0.0 6.5 0.0 0.0 0.7 6.0 0.0 0.0 9.6 0.0 0.0 1.0 0.0 2.0 0.7 0.0 0.0 1.4 0.00 0.0 0.0 0.0 0.0 0.0 109.30.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 101.40.0 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 0.0 0.0 0.0 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 6.60.0 0.0 8.9 40.0 0.0 0.0 11.4 0.0 0.0 0.0 24.8 0.0 7.5 0.0 0.0 3.0 5.8 0.0 0.7 1.8 0.00 0.0 6.3 0.0 0.0 0.0 445.00.0 0.0 0.0 0.0 3.4 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 0.7 0.0 0.00 0.0 0.0 0.0 0.0 0.0 4.30.0 0.0 10.1 47.0 0.0 0.0 253.5 9.2 0.0 50.6 39.3 0.0 15.0 1.2 0.0 0.9 49.0 0.0 10.8 18.9 0.00 0.0 17.4 1.0 0.0 0.0 1,664.30.0 0.0 0.0 0.0 1.2 0.0 2.5 38.4 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 1.2 0.0 0.0 0.0 0.00 0.0 2.6 0.0 0.0 0.0 87.70.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 8.20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.4 3.6 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 7.90.0 0.0 0.0 31.9 0.0 0.0 51.4 2.4 0.0 0.9 97.9 0.0 7.4 0.0 0.0 23.0 11.8 0.0 0.0 24.7 0.00 0.0 2.4 0.0 3.0 0.0 450.60.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.6 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 14.80.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 5.00.0 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 0.0 1.5 0.0 0.00 0.0 0.0 0.0 0.0 0.0 6.20.0 0.0 0.0 0.0 0.0 0.0 0.0 2.4 0.0 0.0 0.8 0.0 0.0 0.0 0.0 10.4 4.0 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.0 0.0 26.80.0 0.0 0.0 10.6 0.9 0.0 3.7 15.0 5.0 0.0 3.8 0.0 0.0 0.0 0.0 2.2 172.2 0.2 5.0 3.4 0.00 0.0 6.4 0.1 0.0 0.0 394.70.0 0.5 18.3 96.1 10.2 27.6 241.3 27.6 5.0 24.8 74.7 0.0 7.4 2.2 0.0 5.5 206.7 2.7 17.2 47.6 0.00 0.7 113.8 53.1 0.0 0.0 4,113.00.0 0.0 0.0 7.0 0.8 0.0 8.7 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.8 3.3 0.00 0.0 0.0 0.0 0.0 0.0 55.10.0 0.0 0.0 0.2 0.0 0.0 22.4 0.0 0.0 10.0 0.0 4.5 0.0 0.7 0.0 0.0 0.0 0.0 0.0 82.7 0.00 0.0 7.2 0.0 0.0 0.0 195.00.0 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 0.0 0.0 0.0 0.00 1.9 0.0 0.0 0.0 0.0 2.30.0 0.0 0.0 3.5 0.0 0.0 5.2 0.0 0.0 10.5 0.0 0.0 2.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.00 0.0 107.8 0.0 0.0 0.0 286.50.0 0.0 0.0 0.0 0.0 0.0 0.0 19.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.8 0.00 0.0 2.0 6.7 0.0 0.0 48.60.0 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 0.0 0.0 0.0 0.00 0.0 0.0 0.0 0.8 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 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 1.70.0 11.5 57.0 450.9 23.3 28.6 1,312.8 156.9 13.0 173.5 508.7 4.5 64.9 20.8 0.0 51.9 906.4 15.3 142.9 375.6 0.0 32.7 624.3 122.4 3.8 10.0 21,976.3

STATEALARAZCACOCTDCDEFFFLGAIAIDILINKSKYLAMAMDMEMIMNMONCNENHNJNMNYOHOKORPARISCSDTNTXUNUTVAVTWAWIWVWYTotal

Figure 3.23 (continued)Sources and Targets of Invested Capital Investments 2010

SOURCE Target State


40 Thomson Reuters

Company Stage ($ Millions)Seed 331.0Early Stage 2,333.4Expansion 4,237.1Later Stage 2,051.4TOTAL 8,952.9


By Stage

Industry Group ($ Millions)Software 3,268.7IT Services 1,495.9Media and Entertainment 1,323.7Telecommunications 637.0Networking and Equipment 603.4Consumer Products and Services 362.0Computers and Peripherals 351.0Financial Services 209.4Business Products and Services 167.9Retailing/Distribution 123.8Medical Devices and Equipment 107.9Healthcare Services 103.7Semiconductors 73.1Biotechnology 50.9Industrial/Energy 48.5Electronics/Instrumentation 26.1TOTAL 8,952.9


By Industry Sector

Industry Internet Related Non-Internet Related TotalSoftware 561 128 689Media and Entertainment 230 18 248IT Services 214 19 233Telecommunications 105 16 121Consumer Products and Services 60 28 88Networking and Equipment 53 7 60Business Products and Services 36 42 78Computers and Peripherals 31 21 52Financial Services 30 34 64Medical Devices and Equipment 18 245 263Retailing/Distribution 15 6 21Healthcare Services 14 24 38Industrial/Energy 13 219 232Semiconductors 11 89 100Biotechnology 7 377 384Electronics/Instrumentation 5 50 55Other 0 23 23Total 1,403 1,346 2,749

Figure 3.272010 Internet-Related vs Non Internet-Related

Investments By Industry Sector (Number of Companies)

Industry Internet Related Non-Internet Related TotalSoftware 3,268.7 741.2 4,009.8IT Services 1,495.9 163.9 1,659.8Media and Entertainment 1,323.7 102.7 1,426.3Telecommunications 637.0 257.7 894.7Networking and Equipment 603.4 60.2 663.6Consumer Products and Services 362.0 184.5 546.5Computers and Peripherals 351.0 163.6 514.6Financial Services 209.4 339.9 549.3Business Products and Services 167.9 237.4 405.2Retailing/Distribution 123.8 43.0 166.8Medical Devices and Equipment 107.9 2,153.0 2,260.9Healthcare Services 103.7 219.2 322.9Semiconductors 73.1 904.6 977.7Biotechnology 50.9 3,685.2 3,736.1Industrial/Energy 48.5 3,359.1 3,407.7Electronics/Instrumentation 26.1 384.2 410.2Other NA 22.6 22.6Total 8,952.9 13,022.0 21,974.8

Figure 3.262010 Internet-Related vs Non Internet-Related

Investments By Industry Sector ($ Millions)

2011 NVCA Yearbook

Thomson Reuters 41

Location ofVenture FirmCalifornia 37Massachusetts 35New York 29Texas 25Pennsylvania 23New Jersey 20Connecticut 19Illinois 18North Carolina 16Colorado 15Maryland 15

No. of StatesInvested In

Figure 3.30Number of States Invested Into in 2010

By State of Venture Firm

No. of StatesYear Invested In1990 332000 422010 37

Figure 3.31Number of States California Venture Firms

Invested Into By Year

Pct. InvestedFund Domicile Within StateCalifornia 70%Georgia 53%North Carolina 47%Ohio 44%Texas 44%

Figure 3.28Top Five States By Percentage Invested

Within State in 2010

*Minimum $20 million invested

Pct. InvestedCompany Location From StateCalifornia 51%Connecticut 45%Kansas 37%Massachusetts 37%Michigan 30%

Figure 3.29Top Five States By Portion Received From

In-State Firms 2010

*Minimum $20 million invested


42 Thomson Reuters

Year1995 417.1 6% 132 7%1996 676.0 6% 237 9%1997 944.8 7% 331 10%1998 1,637.6 8% 512 14%1999 7,889.2 16% 1,286 23%2000 15,531.4 16% 2,050 26%2001 4,742.6 13% 990 22%2002 1,923.9 9% 572 18%2003 1,294.2 7% 445 15%2004 1,519.6 7% 550 17%2005 1,585.0 7% 558 17%2006 2,029.6 8% 657 17%2007 2,644.4 9% 800 20%2008 2,260.9 8% 774 19%2009 1,354.5 7% 389 13%2010 1,920.0 9% 474 14%

Corp-BackedInvestments($ Millions)

No. of Corp-Backed Deals

% of Overall DealsWith at Least One

Corp VC% of OverallInvestments

Figure 3.32Corporate Investments By Year

Year1995 75.9 36 2.11996 147.1 47 3.11997 145.8 48 3.01998 118.2 39 3.01999 213.8 47 4.52000 600.3 52 11.52001 383.0 63 6.12002 348.4 62 5.62003 252.9 60 4.22004 421.5 85 5.02005 500.8 93 5.42006 1,669.6 152 11.02007 2,610.0 248 10.52008 4,019.2 295 13.62009 2,288.6 222 10.32010 3,684.0 286 12.9

Clean TechnologyInvestments

($Millions)No. of Clean

Technology Deals

AverageInvestment Per

Deal ($ Millions)

Figure 3.33Clean technology Investments By Year

23.9%32.5% 36.0% 39.1%

16.3%8.6%

11.7%11.2%

59.8% 58.9%52.3% 49.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2000 2005 2010

Other

SoCal

NoCal

Figure 3.34California Investments as a Percentage of

Overall Investments

Portfolio Company Valuations

Methodology and Presentation

Figures 4.01-4.03 show round valuation statisticsfrom 2005-2009 for all rounds, first rounds, andadditional rounds respectively. The corresponding2010 round valuations are shown in figures 4.04-4.06.

Figures 4.07-4.08 look at IPO valuations in recent

years. Figure 4.07 is the Holmes analysis showingthe ratio of IPO pre-money valuations to total ven-ture investment into those companies. That is, whatmultiple of dollars invested was the company worthcoming into the IPO? Figure 4.08 shows trends inIPO post-money valuations. That is, it shows theoffering share price multiplied by the total number ofshares for the company. (It does not reflect the valu-ation of the company after shares start trading.)

This chapter analyzes trends in round valuation and IPO valuations in recent years. Much has been writtenabout valuation trends for entrepreneurial companies and whether early round valuations were reasonableenough for a venture capital fund to make a financial and time commitment and still realize a successful exit.In 2010, first rounds overall reflected lower median valuations than the period of 2005-2009 with medicaldevices being among the exceptions. Additional rounds showed mixed but overall higher valuations in 2010than in the reference period. While IPO exits were more plentiful in 2010, they were not done at higher multiples than in 2009 which hadonly 12 IPOs. IPOs in 2009 had a median valuation of $428.3 billion, an all-time record and almost doublethe median valuation of 2010. However, the pre-money valuations for 2009 IPOs were 9.7 times total ventureinvestment, and in 2010 they were only 4.4 times total venture investment.

Thomson Reuters 43


Biotechnology 68.5 493.5 98.5 44.2 13.3 0.1Business Products and Services 30.1 97.1 49.5 9.5 7.6 2.0Computers and Peripherals 40.3 98.4 52.1 37.8 21.5 8.7Consumer Products and Services 76.4 273.6 92.0 41.1 11.0 1.3Electronics/Instrumentation 53.1 245.6 85.9 23.4 6.6 1.2Financial Services 76.6 401.8 101.4 14.9 8.0 0.2Healthcare Services 53.4 319.0 57.7 19.8 10.0 6.0Industrial/Energy 101.1 1,118.4 106.0 28.7 8.1 0.1IT Services 70.4 403.0 93.5 43.7 14.9 0.3Media and Entertainment 94.9 1,037.5 67.7 24.1 11.5 2.0Medical Devices and Equipment 69.4 423.6 96.5 44.2 18.1 0.1Networking and Equipment 74.4 426.3 93.8 45.6 22.3 1.6Other 6.1 6.1 6.1 6.1 6.1 6.1Retailing/Distribution 41.1 142.0 33.7 14.6 9.9 2.4Semiconductors 64.1 362.9 79.8 52.3 22.9 1.0Software 55.7 1,610.1 54.2 27.0 12.8 0.5Telecommunications 90.7 915.0 143.5 33.3 10.1 1.8Total 70.1 1,610.1 86.1 33.0 12.1 0.1


Figure 4.01Valuations By Company Industry 2005-2009 ($ Millions)


44 Thomson Reuters


Biotechnology 21.0 115.0 22.5 10.5 3.4 0.1Business Products and Services 11.8 41.7 11.2 8.2 5.5 2.0Computers and Peripherals 25.8 52.9 29.6 20.8 17.0 8.7Consumer Products and Services 12.7 20.4 15.9 11.5 8.9 6.4Electronics/Instrumentation 5.1 15.0 5.6 2.9 2.2 1.2Financial Services 98.5 384.0 110.2 62.0 9.4 4.2Healthcare Services 86.2 319.0 87.2 10.0 8.9 6.0Industrial/Energy 22.1 118.4 16.5 6.0 3.8 0.1IT Services 27.0 93.3 28.6 16.0 7.2 0.3Media and Entertainment 42.6 406.0 19.2 10.0 5.7 2.0Medical Devices and Equipment 15.4 80.9 21.8 9.4 3.7 0.1Networking and Equipment 12.8 21.8 18.4 15.0 8.3 1.6Other 6.1 6.1 6.1 6.1 6.1 6.1Retailing/Distribution 19.6 33.7 28.8 14.6 13.0 7.8Semiconductors 66.3 156.0 97.0 38.0 21.5 5.0Software 18.5 165.0 20.4 9.6 5.1 1.0Telecommunications 12.4 34.7 14.7 9.0 7.5 1.8Total 25.5 406.0 21.7 9.6 5.0 0.1


Figure 4.02Valuations By Company Industry 2005-2009 Financings ($ Millions)

First Round Financings


Biotechnology 81.1 493.5 107.5 60.2 23.8 0.5Business Products and Services 48.3 97.1 83.4 46.6 8.8 4.2Computers and Peripherals 45.6 98.4 56.5 41.4 22.4 10.5Consumer Products and Services 95.5 273.6 147.3 79.8 18.5 1.3Electronics/Instrumentation 77.1 245.6 107.7 42.1 27.3 7.1Financial Services 64.8 401.8 42.9 12.7 6.3 0.2Healthcare Services 34.7 64.6 57.7 20.0 16.4 9.8Industrial/Energy 140.0 1,118.4 161.8 51.9 25.3 4.1IT Services 83.4 403.0 115.7 50.8 18.8 2.9Media and Entertainment 115.5 1,037.5 112.3 35.3 16.6 2.4Medical Devices and Equipment 85.3 423.6 101.9 60.4 30.0 1.5Networking and Equipment 81.8 426.3 98.0 58.8 29.1 8.0Other NA NA NA NA NA NARetailing/Distribution 68.0 142.0 123.9 63.9 8.0 2.4Semiconductors 63.6 362.9 79.6 52.3 23.3 1.0Software 65.7 1,610.1 59.7 32.5 17.8 0.5Telecommunications 116.7 915.0 164.8 80.9 27.1 2.7Total 84.1 1,610.1 100.0 45.5 20.3 0.2


Figure 4.03Valuations By Company Industry 2005-2009 Financings ($ Millions)

Additional Round Financings

2011 NVCA Yearbook

Thomson Reuters 45


Biotechnology 65.4 390.6 64.1 42.0 13.6 1.2Business Products and Services 13.5 13.5 13.5 13.5 13.5 13.5Computers and Peripherals 46.8 66.3 56.6 46.8 37.0 27.2Consumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation 12.8 20.1 16.4 12.8 9.1 5.4Financial Services 102.1 102.1 102.1 102.1 102.1 102.1Healthcare Services 23.1 23.1 23.1 23.1 23.1 23.1Industrial/Energy 62.6 102.0 99.8 68.6 31.3 11.1IT Services 213.3 735.0 286.4 158.3 10.3 6.5Media and Entertainment 447.6 3,569.0 86.0 45.7 32.9 3.5Medical Devices and Equipment 75.1 221.3 99.3 68.2 20.1 6.5Networking and Equipment 18.3 39.2 27.3 15.0 5.9 3.9Other 17.5 17.5 17.5 17.5 17.5 17.5Retailing/Distribution 295.3 295.3 295.3 295.3 295.3 295.3Semiconductors 67.1 88.9 75.7 62.5 56.3 50.0Software 42.6 161.4 50.6 17.4 7.3 1.7Telecommunications 10.3 11.0 10.7 10.3 10.0 9.7Total 115.2 3,569.0 85.5 38.0 11.7 1.2


Figure 4.04Valuations By Company Industry

2010 Financings ($ Millions)


Biotechnology 3.0 4.7 3.8 3.0 2.1 1.2Business Products and Services NA NA NA NA NA NAComputers and Peripherals NA NA NA NA NA NAConsumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy 11.1 11.1 11.1 11.1 11.1 11.1IT Services 7.8 9.1 8.4 7.8 7.2 6.5Media and Entertainment 44.8 86.0 65.4 44.8 24.1 3.5Medical Devices and Equipment 16.6 23.5 20.1 16.6 13.2 9.7Networking and Equipment 5.3 6.6 5.9 5.3 4.6 3.9Other 17.5 17.5 17.5 17.5 17.5 17.5Retailing/Distribution NA NA NA NA NA NASemiconductors NA NA NA NA NA NASoftware 4.3 8.5 5.5 3.5 2.3 1.7Telecommunications NA NA NA NA NA NATotal 12.5 86.0 10.1 6.6 3.8 1.2


Figure 4.05Valuations By Company Industry 2010 Financings ($ Millions)

First Round Financings


46 Thomson Reuters


Biotechnology 73.7 390.6 73.5 48.5 24.6 3.7Business Products and Services 13.5 13.5 13.5 13.5 13.5 13.5Computers and Peripherals 46.8 66.3 56.6 46.8 37.0 27.2Consumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation 12.8 20.1 16.4 12.8 9.1 5.4Financial Services 102.1 102.1 102.1 102.1 102.1 102.1Healthcare Services 23.1 23.1 23.1 23.1 23.1 23.1Industrial/Energy 79.7 102.0 100.6 99.1 68.6 38.1IT Services 295.5 735.0 329.8 243.0 158.3 11.5Media and Entertainment 562.7 3,569.0 118.8 45.7 36.8 13.1Medical Devices and Equipment 94.6 221.3 103.8 84.2 66.7 6.5Networking and Equipment 31.2 39.2 35.2 31.2 27.3 23.3Other NA NA NA NA NA NARetailing/Distribution 295.3 295.3 295.3 295.3 295.3 295.3Semiconductors 67.1 88.9 75.7 62.5 56.3 50.0Software 56.5 161.4 88.2 27.3 16.5 6.0Telecommunications 10.3 11.0 10.7 10.3 10.0 9.7Total 141.7 3,569.0 101.3 47.4 23.1 3.7


Figure 4.06Valuations By Company Industry 2010 Financings ($ Millions)

Additional Round Financings

Year1995 32.5 8.3 24.2 2.2 11.01996 66.0 12.0 54.0 3.7 14.61997 29.8 5.0 24.8 2.7 9.21998 17.3 3.5 13.7 2.4 5.71999 131.4 18.8 112.7 11.0 10.22000 129.1 23.0 106.1 13.0 8.22001 18.1 3.4 14.7 2.6 5.62002 8.0 2.1 5.9 1.7 3.52003 8.3 2.0 6.3 2.4 2.62004 61.7 10.5 51.2 6.7 7.62005 16.6 4.5 12.1 3.1 3.92006 22.2 5.1 17.1 4.3 4.02007 53.6 10.3 43.2 6.7 6.52008 2.6 0.5 2.2 0.4 6.02009 7.5 1.6 5.8 0.6 9.72010 33.0 7.0 26.0 5.9 4.4

Total Venture Inv.($ Billion) Ratio

Post Offer Value($ Billion)

Offer Amt($ Billion)

IPO Pre MoneyValuation

Figure 4.072010 Venture-Backed IPOs Valuations as of IPO

2011 NVCA Yearbook

Thomson Reuters 47


1995 160.3 1,569.0 171.8 109.8 71.4 12.21996 234.8 9,911.4 186.5 111.5 66.9 9.51997 210.1 6,517.5 167.9 109.3 66.8 11.41998 221.2 1,220.6 269.6 182.2 106.6 12.51999 485.0 4,827.7 536.8 332.0 220.5 47.02000 490.7 11,965.5 519.6 244.4 135.7 18.02001 441.0 1,719.2 527.3 322.2 205.7 57.32002 361.4 1,083.3 570.7 223.2 141.7 36.82003 284.7 821.9 359.2 227.7 156.2 41.92004 656.2 23,053.7 389.6 255.8 152.8 21.62005 290.5 1,442.1 387.5 201.9 140.1 23.12006 390.2 2,647.5 406.7 255.3 171.9 70.92007 622.7 7,963.7 573.0 346.0 271.5 50.02008 441.1 1,443.1 380.7 257.7 197.6 88.82009 623.2 1,417.1 816.8 428.3 310.0 212.92010 458.7 5,284.7 447.0 225.9 129.7 11.0

MinYear of IPO Max Median

Figure 4.08Venture-Backed IPOs Valuations as of IPO ($ Millions)

By Year of IPO



48 Thomson Reuters

Exits: IPOs and Acquisitions

MethodologyInitial and secondary public offerings of companiesthat are venture-backed are followed and analyzed byThomson Reuters. This research is compiled threeways: first, through cross-referencing venture-backed companies with IPOs in registration or thathave begun trading, which is tracked through the newissues online database of Thomson Reuters; second,

through daily prospectus research; third, throughindustry surveys. By using this research process, wehave been successful in identifying virtually all com-panies that have gone public that have had venturebacking. However, the term “venture-backed” hasdifferent meanings depending on context. There arethree decreasingly stringent classifications thatThomson Reuters uses in classifying public compa-

Venture-backed company exit activity was driven by a record-breaking mergers and acquisitions (M&A) market and astrengthening initial public offerings (IPO) market. For full-year 2010, there were 72 venture-backed IPOs, the biggestyear for activity since 2007. More than 400 acquisitions were completed during full year 2010, the biggest year, bynumber of deals, for venture-backed M&A exits since Thomson Reuters started tracking venture capital from the 1970s.The most recent three years have seen the number of IPOs increase from 6 to 12 to 72. While encouraging, this is farbelow the IPO levels seen in 1999 and 2000. Remember too, there is a large pent-up demand for exits by companiesfunded late in the technology bubble and shortly thereafter that have not been able to go public up to this point. To put this in context, approximately 14 percent of the venture-backed companies first funded in the 1990s eventu-ally went public. In recent years, more than 1,000 companies annually are funded for the first time. That would sug-gest an annual IPO count of at least 140. While times may have changed and the anticipated percent of first fund-ings going public is lower, a huge gap between what is needed and current levels is clear. While we have provided the traditional analytical charts and summaries in this chapter, the reader is reminded thatsome years covered by the charts are based on a very small number of companies such as 2008 and 2009. At yearend 2010, there were 31 MoneyTree™ companies in registration.The number of venture-backed companies acquired during 2010 (427) sets a new record. This follows a slow acqui-sition year in 2009 (272) and several years during and following the technology bubble when acquisition countswere in the 300’s. Despite the larger number of acquisitions, the total disclosed number dollars ($18.5 billion) is farfrom a post-bubble record. The overall quality of deals was mixed with 23% of the disclosed deals occurring at orbelow total venture investment (TVI) in the company, compared with 16% at 10x or greater.In 2010, IPO and acquisition activity were both far below what is necessary to sustain the industry long term.

Thomson Reuters 49

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

Year

0.00

5.00

10.00

15.00

20.00

25.00

No of IPOs

Offer Amount ($B)

Figure 5.01 Venture-Backed IPOs

No.

ofIP

Os

Offe

r($

Bill

ion)

nies as venture-backed. The most rigorous is that aventure capitalist must be a shareholder at the time ofthe public offering and the investment must havebeen made by a non-buyout venture capital fund.Thus, an investment that was exited prior to goingpublic or a company financed by a buyout firmwould not be counted as venture-backed in this

sense. This is the criterion used in publishing ven-ture-backed IPOs in the Venture Capital Journal. Thesecond most strict category still provides that theinvestment be made in a venture round of financing,but allows that the investment could have been exit-ed at some point prior to the IPO. The third and mostcomprehensive definition of venture-backed includes


50 Thomson Reuters

Year1985 76 1,267 13 17 5,638 39 75 4 81986 154 3,080 14 22 15,287 54 110 5 91987 119 2,249 17 22 9,485 56 93 5 81988 55 847 14 17 3,399 56 67 5 61989 64 1,202 15 21 5,358 54 94 7 81990 67 1,285 20 22 4,968 68 84 7 81991 153 4,728 25 32 20,033 85 134 7 91992 193 7,258 24 39 23,941 76 130 6 91993 221 6,769 23 32 22,148 68 104 7 91994 164 4,471 23 28 17,163 68 106 8 111995 207 8,293 33 41 32,530 110 160 8 101996 281 12,011 32 43 65,986 112 235 6 91997 142 4,997 30 35 29,832 109 210 7 111998 78 3,543 38 45 17,253 182 221 5 71999 271 18,750 56 69 131,421 332 485 4 62000 263 22,959 68 87 129,063 244 491 5 72001 41 3,412 66 83 18,080 322 441 6 122002 22 2,067 71 94 7,950 223 361 8 152003 29 2,006 66 69 8,257 228 285 8 92004 94 10,482 68 112 61,678 256 656 7 82005 57 4,482 65 79 16,558 202 290 6 82006 57 5,117 76 90 22,242 255 390 8 102007 86 10,326 84 120 53,556 346 623 9 92008 6 470 71 78 2,646 258 441 10 102009 12 1,642 97 137 7,479 428 623 10 112010 72 7,018 82 97 33,023 226 459 9 9

Mean Age @IPO (yrs)Num of IPOs

Offer Amount($Mil)

Med OfferAmt ($Mil)

Mean OfferAmt ($Mil)

Post OfferValue ($Mil)

Med PostValue ($Mil)

Mean PostValue ($Mil)

Median Age@ IPO (yrs)

Figure 5.03 Venture-Backed IPOs 1985 to 2010

Value and Age Characteristics

2000 351 2632001 83 412002 76 222003 67 292004 187 942005 167 572006 168 572007 160 862008 24 62009 38 122010 104 72

# of Venture-Backed IPOs# of All IPOsYear

Figure 5.02 Number of Venture-Backed IPOsvs. All IPOs

companies invested in by either venture capital orbuyout funds and the investor may or may not haveexited prior to the IPO. When the term venture-backed is used in this particular chapter, it usuallyrefers to companies covered by the second category.The term ‘private-equity backed’ will refer to thethird category of company.

Thus, in this chapter and throughout this book, weuse the definition:

Private Equity = Venture Capital + Buyout/-Mezzanine

Therefore, charts reporting private equity activityinclude venture capital activity.

2011 NVCA Yearbook

Thomson Reuters 51

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 2010Biotechnology 17 318 173 24 65 63 905 892 499 147 495 976 536 141 254 3,661 335 318 440 1,436 782 855 1,315 0 198 1,150Consumer Products and Services 12 128 119 8 174 5 445 401 372 338 280 191 155 509 452 386 180 39 157 250 103 77 202 0 142 1,008Software 47 268 208 132 128 135 400 452 807 382 1,960 1,907 810 671 3,885 3,616 348 155 292 2,050 505 576 1,242 62 456 911Financial Services 208 207 56 9 85 0 166 300 197 323 531 1,272 317 7 485 112 494 191 322 699 755 197 0 0 0 703Industrial/Energy 223 332 390 242 206 399 350 1,210 767 810 998 1,454 373 130 56 1,154 511 158 0 367 21 257 580 0 0 672Media and Entertainment 78 778 196 61 15 45 243 346 641 293 160 651 528 100 2,625 1,320 0 197 65 1,624 352 798 184 0 0 511Semiconductors 13 41 98 74 79 25 178 132 340 131 699 6 276 0 249 1,399 116 0 312 1,407 594 125 636 0 0 479IT Services 13 21 32 12 0 0 168 848 66 64 280 457 85 251 1,418 1,510 0 102 0 90 122 191 344 0 0 353Business Products and Services 0 51 4 2 0 62 95 61 116 67 78 429 109 81 1,078 578 0 0 97 324 464 0 828 0 0 306Networking and Equipment 30 135 113 37 52 71 252 241 356 402 282 567 297 271 2,452 3,021 135 0 0 138 0 427 453 0 80 296Telecommunications 39 73 361 15 41 167 162 247 758 264 477 1,296 317 679 3,736 4,312 150 0 152 1,001 355 719 2,583 0 386 246Healthcare Services 83 30 13 0 59 61 359 720 124 240 438 276 185 235 464 182 514 72 52 108 67 0 113 164 0 120Electronics/Instrumentation 6 33 16 0 0 45 66 78 326 201 216 140 77 72 36 243 39 498 0 0 0 0 0 0 380 108Medical Devices and Equipment 74 80 146 20 100 109 505 831 333 476 893 1,512 447 91 48 701 590 282 53 843 327 756 1,241 57 0 98Retailing/Distribution 247 236 94 106 34 26 366 257 733 117 67 506 150 264 1,301 251 0 0 65 62 28 139 496 0 0 57Computers and Peripherals 177 294 229 108 165 72 68 232 333 217 433 371 194 42 211 513 0 55 0 84 7 0 108 188 0 0Other 0 55 0 0 0 0 0 10 0 0 7 0 141 0 0 0 0 0 0 0 0 0 0 0 0 0Total 1,267 3,080 2,249 847 1,202 1,285 4,728 7,258 6,769 4,471 8,293 12,011 4,997 3,543 18,750 22,959 3,412 2,067 2,006 10,482 4,482 5,117 10,326 470 1,642 7,018

Figure 5.04 Venture-Backed IPOs by MoneyTree™ Industry

Total Offering Size ($ Millions)

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 2010Biotechnology 5 16 13 2 8 4 31 28 25 12 16 34 22 6 6 49 4 4 7 25 14 17 21 0 3 14Software 3 21 11 8 9 9 15 17 27 19 55 61 26 19 69 55 5 4 4 8 6 6 12 1 4 8Consumer Products and Services 2 8 5 1 5 1 12 11 12 5 9 7 6 7 7 4 4 1 3 3 1 1 2 0 1 8Financial Services 2 7 6 1 4 0 3 8 5 10 9 14 5 1 8 2 3 2 4 7 3 2 0 0 0 7Semiconductors 1 4 4 5 5 1 8 3 16 8 19 1 7 0 5 14 2 0 3 6 8 2 8 0 0 6Industrial/Energy 14 15 27 15 11 15 14 20 25 23 15 24 11 3 1 10 6 1 0 2 1 3 4 0 0 5Media and Entertainment 6 15 4 2 1 4 4 9 14 9 5 11 9 3 35 16 0 3 1 10 4 6 2 0 0 5Telecommunications 8 8 8 2 2 5 3 8 16 11 9 19 9 7 39 41 1 0 2 8 4 3 9 0 2 4Networking and Equipment 2 4 6 3 3 2 7 12 10 14 10 10 6 7 27 15 1 0 0 2 0 4 5 0 1 4IT Services 1 2 3 1 1 0 6 3 3 3 7 12 3 5 27 16 0 1 0 2 1 2 4 0 0 4Medical Devices and Equipment 5 11 9 4 7 10 23 36 20 20 23 45 15 3 1 14 8 3 1 15 8 10 11 2 0 2Business Products and Services 0 6 4 1 0 2 5 3 5 3 3 8 2 2 17 8 0 0 2 3 4 0 3 0 0 2Electronics/Instrumentation 1 7 4 0 0 2 3 6 13 8 8 8 2 1 1 4 1 1 0 0 0 0 0 0 1 1Healthcare Services 4 3 1 0 2 4 12 7 4 7 7 6 6 5 7 3 6 1 1 1 1 0 1 2 0 1Retailing/Distribution 10 10 5 4 2 2 4 8 13 4 2 10 5 6 16 5 0 0 1 1 1 1 3 0 0 1Computers and Peripherals 12 16 9 6 4 6 3 13 13 8 9 11 7 3 5 7 0 1 0 1 1 0 1 1 0 0Other 0 1 0 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0Totals 76 154 119 55 64 67 153 193 221 164 207 281 142 78 271 263 41 22 29 94 57 57 86 6 12 72

Figure 5.05 Venture-Backed IPOs by MoneyTree™ Industry

Total Number of Companies


52 Thomson Reuters

Number Number ($ Millions)Year Total Known Price Average1985 8 3 271.2 90.41986 17 4 214.7 53.71987 21 8 854.4 106.81988 31 16 1579.5 98.71989 37 20 2071.3 103.61990 28 12 595.6 49.61991 34 14 1059.7 75.71992 91 60 4293.4 71.61993 118 73 6027.7 82.61994 136 88 9970.1 113.31995 160 108 16106.4 149.11996 193 146 37023.7 253.61997 268 200 65122.5 325.61998 325 233 91541.2 392.91999 349 255 222568.6 872.82000 377 249 121780.0 489.12001 407 203 39639.9 195.32002 361 187 24031.8 128.52003 328 146 14605.5 100.02004 391 214 25766.4 120.42005 451 222 43507.1 196.02006 518 231 51079.4 221.12007 569 244 76852.5 315.02008 503 171 29711.0 173.72009 335 120 50647.6 422.12010 591 183 39301.5 214.8

Figure 5.08Private Equity-Backed

Merger & Acquisitions by Year

Number Number ($ Millions)Year Total Known Price Average1985 6 3 271.2 90.41986 11 1 86.8 86.81987 13 4 398.1 99.51988 16 6 481.1 80.21989 18 5 371.8 74.41990 20 9 214.3 23.81991 18 5 221.5 44.31992 75 46 2544.8 55.31993 71 42 1656.5 39.41994 100 63 3405.5 54.11995 97 60 3788.3 63.11996 118 77 8531.0 110.81997 163 115 7410.5 64.41998 212 133 9487.6 71.31999 240 164 41904.6 255.52000 318 206 68165.5 330.92001 355 164 16770.3 102.32002 321 154 7586.7 49.32003 285 120 7521.1 62.72004 349 188 16043.8 85.32005 350 163 17324.6 106.32006 378 167 19141.8 114.62007 379 168 29457.5 175.32008 349 120 13974.2 116.52009 272 91 13073.3 143.72010 427 123 18450.7 150.0

Figure 5.07Venture-Backed


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.

Average and Median Age in Months of Companies At IPO 2000-2010 by MoneyTreeTM Industry

Industry Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean MedianBiotechnology 85.2 68.0 202.8 74.5 125.8 106.5 86.3 94.0 84.8 75.0 73.2 67.0 107.6 94.0 92.8 99.0 N/A N/A 152.0 145.0 84.8 82.0Business Products and Services 43.5 48.5 N/A N/A N/A N/A 61.5 61.5 66.7 66.0 73.8 68.0 N/A N/A 191.3 151.0 N/A N/A N/A N/A 76.0 76.0Computers and Peripherals 117.8 103.0 N/A N/A 193.0 193.0 N/A N/A 49.0 49.0 71.0 71.0 N/A N/A 83.0 83.0 127.0 127.0 N/A N/A N/A N/AConsumer Products and Services 26.8 25.5 260.5 269.5 107.0 107.0 130.3 59.0 83.7 82.0 190.0 190.0 76.0 76.0 163.0 163.0 N/A N/A 119.0 119.0 106.8 98.5Electronics/Instrumentation 62.7 66.0 118.0 118.0 9.0 9.0 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 105.0 105.0 111.0 111.0Financial Services 52.0 52.0 36.0 36.0 361.5 361.5 119.5 141.5 131.9 71.0 126.0 66.0 126.5 126.5 N/A N/A N/A N/A N/A N/A 135.3 139.0Healthcare Services 122.7 138.0 141.0 100.0 90.0 90.0 80.0 80.0 N/A N/A 137.0 137.0 N/A N/A 121.0 121.0 163.0 163.0 N/A N/A 89.0 89.0Industrial/Energy 113.1 82.0 223.0 67.0 40.0 40.0 N/A N/A 44.0 44.0 53.0 53.0 87.7 77.0 102.0 108.5 N/A N/A N/A N/A 81.3 82.0IT Services 81.7 57.0 N/A N/A 293.0 293.0 N/A N/A 89.0 89.0 99.0 99.0 131.0 131.0 96.5 82.0 N/A N/A N/A N/A 91.8 103.5Media and Entertainment 52.3 52.0 N/A N/A 248.3 58.0 126.0 126.0 163.0 121.0 187.0 123.5 146.0 137.0 78.5 78.5 N/A N/A N/A N/A 102.0 124.0Medical Devices and Equipment 177.4 67.5 110.7 68.0 308.7 234.0 123.0 123.0 112.2 95.5 107.8 95.5 120.4 94.5 108.9 88.0 71.0 71.0 N/A N/A 122.0 122.0Networking and Equipment 48.7 38.0 48.0 48.0 N/A N/A N/A N/A 101.5 101.5 N/A N/A 117.5 97.0 93.8 94.5 N/A N/A 57.0 57.0 124.8 124.0Retailing/Distribution 49.5 32.0 N/A N/A N/A N/A 70.0 70.0 114.0 114.0 73.0 73.0 75.0 75.0 161.7 148.0 N/A N/A N/A N/A 189.0 189.0Semiconductors 110.9 80.5 104.0 104.0 N/A N/A 143.0 141.0 112.2 91.0 111.4 98.0 111.0 111.0 113.1 99.5 N/A N/A N/A N/A 73.7 79.0Software 92.4 69.0 70.5 64.0 81.8 62.0 95.0 89.0 88.3 90.0 84.7 75.5 121.0 112.5 126.9 112.5 93.0 93.0 123.3 123.5 161.0 157.5Telecommunications 71.9 61.0 18.0 18.0 N/A N/A 102.5 102.5 61.8 58.5 58.8 65.0 91.7 57.0 100.8 94.0 N/A N/A 142.5 142.5 122.8 126.5

2000 20042001 2002 2003 20102005 2009200820072006

Figure 5.06 Average and Median Age in Months

by MoneyTree™ Industry Companies at IPO 2000 to 2010

2011 NVCA Yearbook

Thomson Reuters 53

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 2010Biotechnology 0 0 0 0 0 0 68 61 25 39 97 388 426 172 780 1206 430 115 604 709 2637 1779 6045 1594 2021 4642Software 0 0 5 40 0 104 83 274 141 521 500 1022 2104 2930 10309 15755 3063 1944 2043 4305 4754 4301 5201 3846 1808 3068IT Services 0 0 0 0 0 0 0 0 0 0 19 485 80 706 676 2077 533 603 1011 1681 1729 509 2395 707 373 1871Medical Devices and Equipment 101 0 6 4 250 1 0 436 43 295 221 313 602 157 498 398 611 565 525 1145 1156 1533 2084 584 3100 1836Telecommunications 0 0 0 0 0 0 0 4 299 790 334 419 1097 948 2249 9474 1518 1257 326 1748 1182 1420 1404 1969 1337 1307Semiconductors 71 0 0 0 15 0 0 0 38 67 327 0 8 468 1269 5353 1439 563 415 740 214 1015 1029 787 524 964Industrial/Energy 99 0 0 11 0 20 61 180 231 771 79 1115 245 350 947 2066 1240 113 59 613 499 426 1719 514 540 957Media and Entertainment 0 0 0 0 0 0 0 0 119 29 45 2107 1387 343 10407 2518 669 324 285 2260 1370 4470 1812 1429 891 924Financial Services 0 0 0 0 0 0 0 1407 161 109 734 67 34 463 431 701 489 211 99 10 530 938 1040 988 0 812Healthcare Services 0 0 0 199 60 0 0 94 0 178 475 130 94 166 325 286 262 855 85 706 789 817 362 27 0 791Networking and Equipment 0 0 0 0 0 0 0 0 347 354 794 1033 213 1206 10518 18902 5525 751 789 526 1468 603 713 609 854 518Computers and Peripherals 0 0 0 0 47 79 0 16 161 84 69 889 394 674 388 1374 357 59 64 756 270 311 610 49 400 354Business Products and Services 0 0 387 0 0 12 0 0 0 0 0 185 207 368 1639 2218 245 142 154 279 252 351 2479 463 294 153Electronics/Instrumentation 0 0 0 0 0 0 0 37 13 49 42 14 115 60 47 4162 209 20 21 116 72 3 83 117 0 145Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 195 0 0 95Retailing/Distribution 0 0 0 0 0 0 0 35 80 90 29 2 161 74 955 1086 8 3 757 12 0 323 2285 10 930 14Consumer Products and Services 0 87 0 227 0 0 10 1 0 29 23 362 245 404 466 592 171 61 285 439 403 343 0 284 0 0Total 271 87 398 481 372 214 222 2545 1657 3406 3788 8531 7411 9488 41905 68166 16770 7587 7521 16044 17325 19142 29458 13974 13073 18451

Figure 5.09 Venture-Backed Acquisitions by MoneyTree™ Industry

Total Transaction Values 1985 to 2010 ($ Million)

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 2010Software 0 3 1 3 2 5 2 12 14 30 26 22 45 63 57 99 88 117 103 118 124 137 126 129 99 146Media and Entertainment 0 0 1 0 0 0 1 1 5 2 4 9 14 10 20 32 48 19 13 30 26 26 41 30 27 55IT Services 0 1 0 2 1 0 0 1 0 0 4 6 6 11 16 19 28 34 26 27 22 20 28 21 15 39Telecommunications 0 1 1 0 2 1 1 2 4 5 4 7 12 16 20 29 34 37 30 24 26 29 28 23 21 35Biotechnology 0 1 0 1 1 1 2 6 3 5 9 11 10 12 13 14 17 11 15 22 25 29 24 19 19 30Semiconductors 1 0 0 0 1 1 3 1 2 3 5 1 1 9 8 16 12 13 12 14 11 16 17 23 18 20Medical Devices and Equipment 1 1 2 2 2 2 0 12 4 8 9 7 14 9 11 7 15 11 8 23 25 21 23 14 19 19Networking and Equipment 0 0 1 0 0 0 0 2 8 10 8 13 5 9 20 21 14 15 18 24 21 25 15 23 19 16Healthcare Services 0 1 1 1 2 1 1 5 0 9 9 4 5 14 6 10 8 12 4 6 14 9 5 4 4 13Industrial/Energy 1 1 2 2 3 3 4 8 6 12 8 6 13 19 18 11 13 10 7 9 12 10 19 18 11 13Business Products and Services 0 0 1 1 0 1 1 1 3 1 0 3 3 7 10 14 21 17 14 14 14 19 28 13 9 12Financial Services 0 0 0 0 0 0 0 6 3 3 4 5 5 7 11 8 17 11 9 11 7 13 10 7 5 8Electronics/Instrumentation 0 0 1 2 2 0 1 4 3 2 1 4 7 4 2 4 9 3 3 5 3 5 2 5 1 5Retailing/Distribution 1 0 0 0 0 1 0 2 3 2 1 2 5 3 8 14 11 6 8 5 3 7 5 4 1 5Computers and Peripherals 2 1 2 1 2 4 1 10 10 6 4 10 10 12 9 7 5 1 9 9 9 8 4 5 3 5Consumer Products and Services 0 1 0 1 0 0 1 2 3 2 1 8 8 7 11 11 14 4 6 7 7 4 3 10 1 5Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 0 1 1 0 1 1 0 1Total 6 11 13 16 18 20 18 75 71 100 97 118 163 212 240 318 355 321 285 349 350 378 379 349 272 427

Figure 5.10 Venture-Backed Acquisitions by MoneyTree™ Industry

Number of Companies 1985 to 2010


54 Thomson Reuters

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 2010Software 0 3 3 4 5 7 5 14 20 33 30 31 54 75 74 106 91 117 108 121 128 146 143 144 105 156Industrial/Energy 2 3 3 6 4 4 9 11 18 18 23 17 35 39 34 21 24 23 20 21 53 61 73 73 28 68Media and Entertainment 0 1 1 0 1 0 1 1 6 5 6 16 20 22 29 38 52 21 15 30 30 36 55 35 33 59IT Services 0 1 0 3 1 1 0 1 0 0 5 6 8 14 20 24 31 36 29 28 23 24 36 21 19 48Telecommunications 0 1 1 1 2 1 1 4 4 10 8 10 15 19 25 34 35 41 32 27 26 32 35 30 23 38Biotechnology 0 2 0 1 4 1 2 7 6 8 15 14 13 19 22 16 18 13 16 23 28 30 25 21 24 35Medical Devices and Equipment 2 1 3 2 5 3 0 14 8 12 13 15 23 17 21 11 18 13 11 24 31 25 30 17 25 32Healthcare Services 0 1 1 1 2 1 1 5 1 11 11 8 9 15 9 10 11 13 4 8 17 20 19 12 6 23Semiconductors 1 0 0 0 1 2 4 1 2 3 5 1 2 12 10 17 13 13 12 14 12 17 19 26 19 23Business Products and Services 0 0 1 3 0 2 2 1 3 1 3 4 7 10 13 15 23 17 15 17 20 32 43 25 9 23Consumer Products and Services 0 2 2 3 2 0 2 6 9 3 5 13 19 22 13 16 21 12 9 16 20 21 30 27 9 21Networking and Equipment 0 0 2 0 2 0 0 2 10 11 11 16 7 12 27 21 14 16 19 24 25 28 18 24 20 19Retailing/Distribution 1 0 0 1 2 1 5 2 6 2 3 5 9 8 13 18 13 8 13 7 8 14 14 9 2 14Financial Services 0 0 1 0 0 0 0 8 11 8 13 18 28 22 21 12 24 13 11 13 12 15 13 13 9 13Electronics/Instrumentation 0 0 1 3 2 1 1 4 3 2 2 7 9 6 3 7 13 4 3 6 4 7 8 12 1 8Computers and Peripherals 2 2 2 3 4 4 1 10 11 9 7 12 10 13 15 9 5 1 10 9 10 8 4 7 3 6Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 1 3 4 2 4 7 0 5Total 8 17 21 31 37 28 34 91 118 136 160 193 268 325 349 377 407 361 328 391 451 518 569 503 335 591

Figure 5.12 Private Equity-Backed Acquisitions by MoneyTree™ Industry

Number of Companies 1985 to 2010

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 2010Industrial/Energy 99 63 25 302 75 20 151 282 953 2012 2625 2438 8075 3403 7729 3022 2978 3822 1634 6014 10524 16750 8957 8404 1502 7516Biotechnology 0 0 0 0 809 0 68 228 1057 351 794 999 583 1918 4755 2101 540 2540 660 812 4855 1779 6083 1711 6538 6625Software 0 0 24 56 443 104 135 696 580 911 1287 5958 6479 4574 39945 22068 3258 1944 4175 4631 5027 5337 6176 5107 2570 3763IT Services 0 0 0 7 0 0 0 0 0 0 19 485 357 1075 2164 31248 866 670 1809 1848 2079 1051 2633 707 373 3292Medical Devices and Equipment 101 0 6 4 344 167 0 1311 368 358 614 1199 4980 2235 3208 481 993 1011 548 1295 3063 2202 4326 716 3374 2455Consumer Products and Services 0 132 95 227 0 0 10 90 549 29 573 1305 2129 2506 549 1375 748 1540 1432 1481 4379 1559 17394 770 1072 2149Retailing/Distribution 0 0 0 0 212 0 619 35 357 90 472 1371 7810 5616 3877 2636 2408 178 1636 703 0 928 4745 973 955 2069Healthcare Services 0 0 0 199 60 0 0 94 103 1054 951 1559 5247 789 610 286 602 1020 85 706 1717 3402 1801 718 570 2046Financial Services 0 0 317 0 0 0 0 1424 732 1733 2759 6561 18410 44588 16882 1505 3566 1538 253 10 1005 938 1370 1842 490 1912Semiconductors 71 0 0 0 15 100 70 0 38 67 327 0 289 792 4705 5353 1564 563 415 740 214 1258 1029 787 550 1589Telecommunications 0 0 0 262 0 0 0 81 299 1376 2299 3155 3399 3884 65791 16753 7670 7116 326 2165 1182 2622 4839 2319 29567 1562Media and Entertainment 0 0 0 0 32 0 0 0 143 123 405 3650 3809 12959 23978 6733 738 1112 285 2260 5250 9239 7902 1650 1163 1486Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 190 330 1039 545 890 324 0 1000Business Products and Services 0 0 387 200 0 12 7 0 0 0 1192 370 1383 1999 2201 2258 245 142 196 1269 486 2338 3459 1663 294 687Networking and Equipment 0 0 0 0 15 0 0 0 675 1529 1482 6842 1355 4278 44539 18902 5525 751 877 526 2346 819 947 782 1229 518Computers and Peripherals 0 19 0 242 67 79 0 16 161 289 264 951 394 730 1554 2569 357 59 64 756 270 311 610 769 400 354Electronics/Instrumentation 0 0 0 81 0 115 0 37 13 49 43 181 426 197 81 4491 7582 27 21 221 72 3 3689 472 0 278Total 271 215 854 1580 2071 596 1060 4293 6028 9970 16106 37024 65123 91541 222569 121780 39640 24032 14606 25766 43507 51079 76853 29711 50648 39302

Figure 5.11 Private Equity-Backed Acquisitions by MoneyTree™ Industry

Total Transaction Values 1985 to 2010 ($ Million)

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

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

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This chart is prepared by analyzing all deals where total venture invest-ment and acquisition price are confirmed. Each deal is classified as a ratioof company acquisition (exit) price to total venture investment from allrounds. This chart compares the number of deals in each category. Anacquisition where deal price is less than the total venture investment(“<TVI”) clearly did not result in a good return. Four times the investmentto 10 times the investment can be a good outcome. An acquisition formore than 10 times venture investment is usually a nice outcome.

Year < TVI 1x-4x TVI 4x-10x TVI >10x TVI2003 37% 40% 15% 8%2004 34% 32% 23% 11%2005 27% 40% 20% 13%2006 26% 36% 20% 18%2007 23% 31% 25% 21%2008 26% 30% 26% 18%2009 37% 21% 28% 14%2010 23% 33% 28% 16%

Values vs. Cumulative Total Venture InvestmentRelationship Between Transaction

Figure 5.13Venture-Backed


Year2003 31 292004 57 942005 16 572006 36 572007 31 862008 20 62009 23 122010 31 72

# of Moneytree Cos.in Registration # of IPOs


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


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Biotechnology 125.5 407.7 137.6 94.5 43.1 14.8Business Products and Services NA NA NA NA NA NAComputers and Peripherals NA NA NA NA NA NAConsumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy NA NA NA NA NA NAIT Services NA NA NA NA NA NAMedia and Entertainment NA NA NA NA NA NAMedical Devices and Equipment NA NA NA NA NA NANetworking and Equipment NA NA NA NA NA NAOther NA NA NA NA NA NARetailing/Distribution NA NA NA NA NA NASemiconductors NA NA NA NA NA NASoftware NA NA NA NA NA NATelecommunications NA NA NA NA NA NATotal 128.2 550.0 172.1 64.0 23.2 0.3



Maximum Valuation Prior to IPO ($ Mil)

*Categories containing less than 3 companies will not be displayed but their valuation amounts will be includedin bottom line totals.

Appendix A: Glossary

“A” round – a financing event whereby angelgroups and / or venture capitalists become involvedin a fast growth company that was previouslyfinanced by founders 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 weight-ed average 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 ofevery 100 business plans received eventually receivefunding.

Buyout – a sector of the private equity industry.Also, the purchase of a controlling interest of a com-pany by an outside investor (in a leveraged buyout)or a management 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 ofa venture capital fund which is allocated to theGeneral Partner. Typically, a fund must return thecapital given to it by limited partners plus any pref-erential rate of return before the general partner canshare in the profits of the fund. The general partnerwill typically receive a 20% carried interest, althoughsome successful firms receive 25%-30%. Alsoknown 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 com-mon stockholders. 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 shares ofstock. Usually, preferred stock has certain rights thatcommon stock doesn’t have, such as decision-makingmanagement control, a promised return on investment(dividend), or senior priority in receiving proceeds froma sale or liquidation of the company. Typically, convert-ible preferred stock automatically converts to commonstock if the company makes an initial public offering(IPO). Convertible preferred is the most common toolfor private equity funds to invest 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 cap-ital.

Cost of revenue – the expenses generated by thecore operations 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 company.

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”) theownership percentage of previous investors.

Cumulative dividends – the owner of preferred stockwith cumulative dividends has the right to receiveaccrued (previously unpaid) dividends in full beforedividends are paid to any other classes of stock.

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 employ-er bears the investment risk and is committed to pro-viding 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.Defined contribution plan capital cannot be investedin private equity 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-ists selling their ownership stake in a portfolio com-pany. Buyers are often funds that specialize in suchinvestments.


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Disbursement – an investment by a fund in a com-pany.

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 at deepdiscounts with the expectation of exerting influence inthe restructuring of the company and then selling thedebt once the company has meaningfully recovered.

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 an investorin a company to force all other investors to agree to aspecific action, such as the sale of the company.

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 by

all 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’ valueas a 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 entrepreneur toa potential investor about an investment opportunity.

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.

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.

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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 usingFCFE, 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 rel-atively 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 limitedpartnerships, with the venture firm as the GP and lim-ited partners (LPs) being the institutional and highnet worth investors that provide most of the capital inthe partnership. The GP earns a management fee anda percentage of gains (see Carried interest).


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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 potential-ly affecting the overall performance of the company.

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 abil-ity to use leverage, take short positions in securi-ties, or use a variety of derivative instruments inorder to achieve a return that is relatively less cor-related to the performance of typical indices (suchas the S&P 500) than traditional long-only funds.Hedge fund managers are typically compensatedbased on assets under management as well as fundperformance.

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.

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 further

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growth. 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 trade-marks.

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 venturecapital 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 flow breakeven or positive net income. Typically, a later stagecompany is about 6 to 12 months away from a liquid-ity event such as an IPO or buyout. The rate of returnfor venture capitalists that invest in later stage, lessrisky ventures is lower than in earlier stage ventures.

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.

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 a


64 Thomson Reuters

company’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 grants toa company the right to make, use or sell an inventionunder certain circumstances and for compensation.

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 a pri-vate company compared to the value of a similar butpublicly traded company. Since an investor in a pri-vate 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 volatilerate and is typically quoted in maturities of onemonth, 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-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 in

2011 NVCA Yearbook

Thomson Reuters 65

a 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 lower pri-ority than senior debt but usually has a higher interestrate and often includes warrants. In venture capital, amezzanine round is generally the round of financingthat is designed to help a company have enoughresources to reach an IPO. See Bridge financing.

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 – atype 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 a

weighed average of investor A’s price and investorB’s price. A narrow-based anti-dilution uses onlycommon stock outstanding in the denominator of theformula 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 thatprovides details of an investment to potentialinvestors. See Private placement memorandum.

OID – see Original issue discount.

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.


66 Thomson Reuters

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 ofcertain preferred stock to receive dividends and par-ticipate in additional distributions of cash, stock orother assets.

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 hisor her 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 and ableto invest in a private equity fund. Sometimes a privateequity fund will hire a placement agent so the fundpartners can focus on making and managing invest-ments in companies rather than on raising capital.

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 companyby buying shares sold by the company in futurefinancing 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 vetoprovisions, 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 com-

2011 NVCA Yearbook

Thomson Reuters 67

pany 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 – 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 topotential investors. For example, a private equityfund will issue a PPM when it is raising capital frominstitutional investors. Also, a startup may issue aPPM when 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 pro-fessional money management which serves as a basisfor the Prudent Investor Act. The principle is basedon a statement by Judge Samuel Putnum in 1830:“Those with the responsibility to invest money forothers should act with prudence, discretion, intelli-gence 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 asa 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-


68 Thomson Reuters

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 par-ticipate.

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

Return on investment (ROI) – the proceeds froman investment, during a specific time period, calcu-lated as a percentage of the original investment. Also,net profit 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 several

private 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 limitedpartnership interests in private equity funds.Sometimes limited partners chose to sell their inter-est in a partnership, typically to raise cash or becausethey cannot meet their obligation to invest more cap-ital according to the takedown schedule. Certaininvestment companies specialize in buying thesepartnership interests at a discount.

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

Securities and Exchange Commission (SEC) – the

2011 NVCA Yearbook

Thomson Reuters 69

regulatory 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.

Series A 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 theform 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 corporation

that agrees to invest in a young or a smaller compa-ny in order to have access to its proprietary technol-ogy, product or service.

Subordinated debt – a loan that has a lower priori-ty than a senior loan in case of a liquidation of theasset or 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 completing adirect secondary transaction in which the buyer becomes alimited partner (LP) in a special purpose vehicle (SPV) orsimilar entity which has been set up out of the underlyinginvestments in order to create a limited partnership interest.The term arose 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.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.


70 Thomson Reuters

Term sheet – a document confirming the intent of aninvestor to participate in a round of financing for acompany. By signing this document, the subjectcompany 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 orderto maximize 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 theright to purchase shares in a company at a pre-deter-mined price. A warrant is a long term option, usuallyvalid for several years or indefinitely. Typically, war-rants are 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 ownershipand control 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 fixedamount 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.

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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/pecen-ter/resources/glossary.html. Used by permission.Thomson Reuters and National Venture CapitalAssociation are grateful to the Center for its support.


72 Thomson Reuters

Appendix B: MoneyTree Report Criteria

Methodology DescriptionThe 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 MoneyTree™ report measures cash-for-equityinvestments by the professional venture capital com-munity in private emerging companies in the U.S.Investee companies must be domiciled in one of the50 U.S. states or the District of Columbia, even ifsubstantial portions of their activities are outside theUnited States.

MoneyTree™ results exclude non-US companies,non-cash investment, Buyouts and other forms ofnon-Venture Private Equity investments. AngelInvestment and direct investment by corporations,unless they are co-investments in an otherwise qual-ifying round, are also excluded.

Specific Methodology

Data is obtained from a variety of public and privatesources and augmented by a quarterly survey of ven-ture capital practitioners conducted by ThomsonReuters. 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.

The reported Round Amounts will be purely com-posed of the equity portion of the investment. Fordeals where the actual equity investment was not dis-

closed, it will remain as “blank” in the RoundAmount column. Estimated round amounts are notincluded.*

Drawdowns on commitments are recognized at thetime the company receives the money rather thanrecorded as a lump sum amount at the time the termsheet is executed. Convertible debt and bridge loansare recognized only when converted to equity.

Generally only one Investment Round is recordedper Quarter for each portfolio company. When a port-folio company engages in multiple investmentrounds in one quarter, these will be combined intoOne Round with the Sum of All the Amounts andRound Date based on the date of the latest round. Inthe case where 1) Venture Capital and Buyout financ-ing are received in the same quarter or 2) Investmentsof different series are made in the same quarter, thesewill be recorded as separate investment rounds.

Pending or Announced Venture Capital transactionsare not included. Pending or Announced Buyouts,Acquisitions or Acquisitions for Expansion areincluding as long as an agreement is in order.

A Company’s Nation is determined by the Locationof the Company’s Main Headquarters. Investmentsfor a Company’s regional operations are creditedunder its Main Headquarters.

*Reported round amounts may be allocated amonginvestors in a round based on reported total roundamount. In cases where one or more investors reporttheir participation in a round, but the full amountraised by the company is not disclosed, ThomsonReuters will report the sum of disclosed participationonly.

Thomson Reuters 73

The MoneyTree™ Report by PricewaterhouseCoopers and the National VentureCapital Association based on data from Thomson Reuters

REPORT CRITERIA

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.


74 Thomson Reuters

CompanyLocation US Non-

US

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o o o oo o o o

o

Appendix C: MoneyTree Geographical Definitions

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, New Mexico, andNevada

Texas: The state of Texas

Upstate New York: Northern New York state, exceptMetropolitan New York City area

Thomson Reuters 75

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 the 2010 NVCA Yearbookare as follows:



76 Thomson Reuters

Appendix D: Industry Codes (VEIC)

Company VE Primary Company VE Primary Company VE Primary Company VE Primary Industry 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 Computers

Thomson Reuters 77

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 Solutions1 and 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 computing2539 Other Data I/O Devices


78 Thomson Reuters


2540 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 Software2751 Expert Systems2752 Natural Language2753 Computer-Aided Instruction2754 Artificial Intel. Programming Aids

2011 NVCA Yearbook

Thomson Reuters 79


2755 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 and Infrastructure NEC

1551 Internet Access Services and Service Providers

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 programming services

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 Services2834 Publishing Services2835 Transportation Services2836 Finance/Insurance/Real Estate Services2837 Agricultural Services2838 Recreation/Entertainment/Music/Movies2839 Manufacturing/Industrial/Construction2840 Medical/Health Services


80 Thomson Reuters


2841 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 Components 1Electronics

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 Equipment3410 Semiconductor Fabrication Equip. & Wafer

Products3420 Component Testing Equipment3499 Other Electronics Related Equipment

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

excimers)

2011 NVCA Yearbook

Thomson Reuters 81


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 Animals4290 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

Applications


82 Thomson Reuters


4321 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 & Production Equipment

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)

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 Pharmaceuticals

2011 NVCA Yearbook

Thomson Reuters 83


5510 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 Restaurants7520 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. silicon Electronics wafers)


84 Thomson Reuters


8142 III/V Semiconductor Mater. (eg. gallium arsenide)

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 & Polymers8151 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 Equipment

2011 NVCA Yearbook

Thomson Reuters 85


8221 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 Transportation9110 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 Services9299 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 Equipment


86 Thomson Reuters


9420 Office Furniture & Other Professional Furnishings

9430 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, Animal Husbandry,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

2011 NVCA Yearbook

Thomson Reuters 87


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88 Thomson Reuters

Appendix E: Industry Sector VEIC 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 Services 2811, 2824, 2831, 2844, 9300, 9310, 9320, 9330, 9340, 9350, 9360, 9399

Computers and Peripherals 2000, 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 Services 2812, 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 Software 1563, 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

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,

Thomson Reuters 89

Industry analysis is based upon the following industry sectors: Biotechnology, Business Products and Services,Computers and Peripherals, Consumer Products and Services, Computer Software,Electronics/Instrumentation, Financial Services, Healthcare Services, Industrial/Energy, IT Services, Mediaand Entertainment, 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.

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


90 Thomson Reuters

Appendix F: Stage Definitions

Seed Stage Financing

This stage is a relatively small amount of capital pro-vided to an inventor or entrepreneur to prove a con-cept. This involves product development and marketresearch as well as building a management team anddeveloping a business plan, if the initial steps aresuccessful. This is a pre-marketing stage.

Early Stage Financing

This stage provides financing to companies complet-ing development where products are mostly in test-ing or pilot production. In some cases, product mayhave just been made commercially available.Companies may be in the process of organizing orthey may already be in business for three years orless. Usually such firms will have made market stud-ies, assembled the key management, developed abusiness plan, and are ready or have already startedconducting business.

Expansion Stage Financing

This stage involves working capital for the initialexpansion of a company that is producing and ship-ping and has growing accounts receivables andinventories. It may or may not be showing a profit.Some of the uses of capital may include further plantexpansion, marketing, working capital, or develop-ment of an improved product. More institutionalinvestors are more likely to be included along withinitial investors from previous rounds. The venturecapitalist’s role in this stage evolves from a support-ive role to a more strategic role.

Later Stage

Capital in this stage is provided for companies thathave reached a fairly stable growth rate; that is, notgrowing as fast as the rates attained in the expansionstages. Again, these companies may or may not be

profitable, but are more likely to be than in previousstages of development. Other financial characteris-tics of these companies include positive cash flow.This also includes companies considering IPO.

Acquisition Financing

An acquisition of 49% stake or less. Firm acquiresminority shares of a company. Thomson VentureEconomics includes these deals in standard venturecapital disbursement data when calculating venturecapital disbursements where the funding is by a ven-ture capital firm.

Acquisition For Expansion

Funds provided to a company to finance its acquisi-tion of other companies or assets. A consolidator ofcompanies in specific industries.

Management/Leveraged Buyout

These funds enable an operating management groupto acquire a product line or business, at any stage ofdevelopment, from either a public or private compa-ny. Often these companies are closely held or familyowned. Management/leveraged buyouts usuallyinvolve revitalizing an operation, with entrepreneurialmanagement acquiring a significant equity interest.

Recap/Turnaround

Financing provided to a company at a time of opera-tional or financial difficulty with the intention ofimproving the company’s performance.

Secondary Buyout

A buyout deal on top of a buyout deal. Secondarybuyouts are distinguished when the initial firminvestor is different from the current investing firm.

Thomson Reuters 91



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Appendix G: Data Sources and Resources

MoneyTree™ DataPricewaterhouseCoopers, 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 productsfrom directories to conferences, journals, newslet-ters, research reports, and the ThomsonONE.comPrivate Equity database. As of February 2011, thedatabase included over 87,620 portfolio companies,197,340 executives, 15,260 private equity firms,33,400 private equity funds, and 197,340 financingrounds. By establishing working relationships withprivate equity and venture capital firms, institutionalinvestors, and industry associations such as theNVCA, PricewaterhouseCoopers and other suchentities around the world, Thomson Reuters has beenable to gather, on a timely basis, complete and accu-rate information.

Timeliness of DataMany of the tables and charts presented in this reportcan be produced by using ThomsonONE.com. Oneof advantages of using ThomsonONE.com is that thereader can customize a report to better fit the needsof what they are seeking. In addition, because theonline database is continuously updated, the infor-mation available is more up-to-date than what can bepresented in this report. Readers should note thattimely industry information on details concerningventure capital investment is available from othersources such as PricewaterhouseCoopers atwww.pwcmoneytree.com, the ‘Industry Stats’ sec-tion of the NVCA website, www.nvca.org, and the‘News & Ideas’ segment of the private equity sectionof Thomson Reuters found at http://thomson-reuters.com/products_services/financial/financial_products/deal_making/private_equity/

Verification and Updating of Data Collectively, 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, theprivate equity news releases of Thomson Reuters

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For this publication, the main source for data was ThomsonONE.com, the online research database ofThomson Reuters. ThomsonONE.com (which replaced VentureXpert™, and Thomson One Banker) is endorsedby the NVCA 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 one million private companies can be analyzed with-in ThomsonONE.com, including sales figures on around 700,000 companies and detailed financials on around220,000 companies. Through a partnership with VC Experts.com, Inc. the historical breadth and depth of theThomson Reuters venture capital content is integrated with private company valuation and deal terms.ThomsonONE.com includes blogs, events, and articles from the peHUB and the Venture Capital Journal, twoof the industry’s most widely-read publications. Other information contained in this database is gatheredthrough a variety of public and proprietary source. This publication is produced on an annual basis primarilyusing year-end data. However, the underlying databases can be accessed online to provide the most up-to-dateand comprehensive global private equity statistics and profile information available.

will often restate statistics from prior news releases.With the availability of the online data access, usersare encouraged to always use the most current num-bers even regarding historical activity so as to main-tain accuracy 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, IPO analytics, merg-er analytics, fund performance, and fund raisinginformation along with venture capital informationsuch as aggregate fund raising, investments, andIPOs broken out into state and nation profiles.

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 firm

I am considering co-investing with?• Which venture firms are most active in funding

online financial services companies in the OhioValley?

• What does Yearbook Figure 3.15 look like for justbiotech?

• How much money was raised by each fund stage in2010?

• What was a particular venture-backed IPO’s oneyear return at the end of 2010?

• As of December 2010, was the 10-year return tosmall buyout funds larger than that of large buyoutfunds?

• Who are the most active acquirers of ecommercesecurity companies?

• How much money was committed to mezzaninefunds from 1997 to 2010?

• How much money was invested in the venture cap-ital industry from 1987 to 2010?

• What is the performance at quarter end for privateequity funds that were formed from 1998 to 2010?

• In 2010, how much money was invested at eachdevelopment stage in Research TrianglePharmaceutical companies?

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 other

venture-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 portfolio

companies • Identify prospective investors and their investment

histories• Benchmark valuations among recent transactions

and obtain valuation comparables• Analyze investment trends by industry• Utilize returns information to limited partners using

appropriate benchmarks• Tailor your pitch to investor focus size and limited

partner type

Reporting Functionality of LPXpertAnother database is available to users: LPXpert, anonline portfolio monitoring system that allows insti-tutional investors to analyze their portfolio activity inboth a cost-effective and timely manner. Over 100different types of reports can be produced detailingfirm, fund, portfolio company, executive, IPO pro-files and fund performance analysis. A description ofthe features provided include portfolio highlights thatshow changes in portfolio activity between reportingperiods. These changes can include the number offunds invested in, committed capital, the amount ofcapital called, and percent overlap of investments, aparticularly valuable tool for large institutionalinvestors investing in various funds.

Comprehensiveness of LPXpert DataThe extent to how comprehensive LPXpert is can beshown by providing the following examples of the typesof queries that could be researched using this product:


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• What other funds have co-invested alongside thefunds I have invested in?

• What are the other funds managed by the firms Ihave invested with, but that I am not currentlyinvested in?

• How have my funds performed over the last 10years ending December 31, 2010?

• Of the amount that I have invested in my portfolioof funds, what is the industry distribution by per-centage?

• Of the funds I have invested in, how has theamountof dollars invested changed between report-ing periods?

Accessing ThomsonONE.com, LPXpert,and Other ServicesFor more information on ThomsonONE.com orLPXpert, please visit http://thomsonreuters.com/-

products_services/financial/financial_products/deal_making/private_equity/private_equity_venture_capi-tal or by phone at 1-800-782-5555. For informationon NVCA membership, which can include a free trialand discounts on an annual subscription, please con-tact Janice Mawson at the NVCA. You may contacther online through the link on the member benefitssection of the NVCA website or at 703-524-2549.For information 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: Portfolio Company Valuation Guidelines

Guidelines fall into two categories. The first is port-folio performance presentation formats, calculations,and disclosure. An example of the former is thePrivate Equity Provisions of the Global InvestmentPerformance Standards (GIPS). This was developedby the CFA Institute. While many of the specifica-tions and terminology line up with current practice inthe United States, the NVCA has not endorsed or oth-erwise commented on these standards. NeitherNVCA nor Thomson Reuters has determined howwidespread the adoption of those standards is or willlikely be. This document and accompanying guid-ance can be currently found at http://www.cfainsti-tute.org/centre/codes/gips/.

Much more attention is being paid to the other catego-ry: portfolio company valuation guidelines. Thechronology and sections below refer to this category.Suffice it to say for now that portfolio valuation guide-lines developed by the Private Equity IndustryGuidelines Group (PEIGG, www.peigg.org/home.html> Valuations), most recently revised in March 2007, arethe most commonly referred to in the US. An unrelat-ed European consortium has created “international”guidelines which they intend to conform to IASB rules.That version has received little attention in the US.

Why Valuation Guidelines Matter

What ultimately matters to the investors and privateequity practitioners is the cash which has been dis-tributed to the investors during the life of the fundcompared with the original money put in. However,

the life of a typical venture fund is at least 10 years,longer in the life sciences arena. During that periodthe venture capital fund reports progress to the limit-ed partners. In many cases, this means quarterly port-folio updates and a complete audited annual financialstatement. For a typical venture fund, very littlemoney is paid out in the first four or five years. Also,while every portfolio company receives funding withhigh expectations, it can take several years to deter-mine if a particular company is a likely winner.Therefore, understanding progress in the portfoliorequires some estimate of the success of the investeecompanies by the venture capital or private equityfirm. While many investors and fund managers agreethat financial measurements mean little for the firstthree or so years of a fund, after that the fund wantsto communicate progress to the investors. This iswhere specific valuation rules and processes becomeimportant. The agreed valuation procedures for indi-vidual portfolio companies become the basis forprogress assessment as the fund matures and ulti-mately distributes cash to the investors.

So while portfolio company valuations are more ofan 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.

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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 limited partners (LPs). The venture firm becomes a gen-eral partner (GP) in the limited partnership. In most of the limited partnership agreements defining GP-LPrelationship, the GPs are required to provide financial reports quarterly (unaudited) and annually (audited)prepared according to United States Generally Accepted Accounting Principles (“GAAP”). GAAP calls for theuse of investment company accounting which mandates that a fair value to be assigned to the individual port-folio companies. This is consistent with the LPs need for fair values of their investments as well as 3rd partyor regulatory requirements, e.g., ERISA-regulation. In recent years, the GP-to-LP financial statements havebeen subject to numerous rule “clarifications”, convergence with non-US accounting, expanded disclosures,and more formal presentations. The underlying theory of fair value has not changed in decades.

The Evolution of Valuation Guidelines:1989 to 2009

This section reviews the various efforts to createcomprehensive portfolio company valuation guide-lines for US private equity.

1989-1990 – A group of investors, private equityfund managers, and fund-of-fund managers formed agroup to develop a set of portfolio company valua-tion guidelines. Contrary to a very persistent rumor,the NVCA did not endorse, adopt, bless, publish, orotherwise opine on the guidelines.

Decade of the 1990s – Two noteworthy develop-ments occurred in the 1990s. Despite no endorsementby the NVCA these guidelines became accepted prac-tice by much of the US industry, especially in the ven-ture capital side of private equity. These guidelineswere referred to by many as being issued by theNVCA but in fact they were not. The second develop-ment is international venture associations creatinglocalized guidelines based heavily on these guide-lines. These were created in Europe and other interna-tional regions. In fact, by 2005, there had been multi-ple iterations of the European and British guidelines.

2003 – A self-appointed group of private equity prac-titioners, fund managers, fund-of-fund managers andothers formed the Private Equity Industry GuidelinesGroups (PEIGG). The overall constitution of thisgroup is not hugely different from the 1989-1990group. The PEIGG group announced that it was con-templating taking on four initiatives, of which port-folio company valuation guidelines was the first one.

December 2003 – After an extensive input phase andreview by various industry groups and serviceproviders, the first version of the PEIGG guidelineswere issued. Throughout the process PEIGG hadbeen actively soliciting feedback and input from anumber of industry groups including the NVCA.

March 2004 – NVCA board issued statement of sup-port, but not endorsement as some pundits hadhoped. NVCA position was widely consistent withinput provided by members of the NVCA CFO TaskForce, members at large, and the NVCA Board ofDirectors. The text of NVCA’s statement is printedbelow.

March/April 2004 – The Institutional LimitedPartners Association (ILPA) hails NVCA support aswelcome support – especially as it relates to the GPand LPs mutually agreeing to the valuation process.PEIGG also hails the NVCA support.

July 2004 – After consulting quietly with variousindustry groups, PEIGG issues guidance on contro-versial paragraph 30 which was the most discussedand debated provision in the guidelines.

September 2004 – Based on input from ILPA andothers, PEIGG agrees to minor wording changes intwo paragraphs. This becomes PEIGG guidelines ver-sion 2. These two wording changes were consistentwith, and in part inspired by, language the NVCAboard used in its March 2004 statement of support.

October 2004 – ILPA endorses the PEIGG guidelines.

December 2004 – As most fund accounting year’s end,GPs prepare for their first audits since the effective dateof AICPA’s SAS 101 rule. Essentially that rule says thatif a reporting entity claims to be reporting “fair value”– which is required by GAAP – then the auditors mustdocument and test that this is, in fact, true. It was notclear to what extent this increased scrutiny would affectvaluation expectation and practices.

March 2005 – NVCA board issues an updated state-ment, which now refers to the September 2004 ver-sion of the PEIGG guidelines. The NVCA also decid-ed to make the PEIGG document widely available toits members. The text of that statement is below.

April 2006 – Guidelines issued by a consortium ofthree Europe-based venture capital associations(AFIC, BVCA, EVCA) are released. The authors citecompliance with IASB rules. Informal feedback fromUS venture capital professionals reviewing this docu-ment was that the document was more formulaic thanPEIGG’s counterpart and only partially compliantwith US GAAP as defined at that time. Subsequently,30 non-US private equity and venture capital associa-tions endorsed this document. Go to http://www.priva-teequityvaluation.com. The most recent edition isOctober 2006. These guidelines have gotten little trac-tion in the US and expected to be updated in 2009.

September 2006 – Financial Accounting Standards


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Board (FASB) issues its long-awaited and long-anticipated fair value measurement standard as FAS157. Only a few of its 145 pages relate directly totypical venture capital and private equity funds.Because FASB maintains that this is a clarificationand further definition of fair value which was alreadyrequired for portfolio accounting, some auditorsbegan requiring selective compliance in advance ofthe 2008 effective date.

March 2007 – PEIGG issues a revised portfoliocompany valuation guidelines document to reflectthe Fair Value Measurement standard (FAS 157).

September 2007 – NVCA board reaffirms its priorposition on the PEIGG guidelines to refer to the mostrecent version.

March 2008 – the International Private EquityValuation & Venture Capital Valuation (IPEV) Boardreconstitutes and re-launches itself, expanded toinclude 5 practitioners from the United States. Theinitial focus of the group is on convergence of USPEIGG and IPEV valuation guidelines. Details atwww.privateequityvaluation.com.

August 2008 – SEC proposes a roadmap towardglobal accounting standards and publishes for publiccomment the concept of adoption of InternationalFinancial Reporting Standards. Details are athttp://www.sec.gov/news/press/2008/2008-184.htm.

September 2008 – At this point, visible signs of avaluation whirlpool are hard to miss. This changedwhat appeared a couple of months earlier to be a gen-

erally painless implementation of FAS 157 to a fluidenvironment with no precedent and little guidance.

December 2008 - The decreases in public marketvaluations accelerate. This makes valuation of evenon-track, pre-revenue companies tricky. The NVCAissues a one page information letter to its members toshed light on applying FAS 157 in a valuationmicroburst/whirlpool. (Text below)

July 2009 – Effective July 1, authoritative GAAPbecame contained in a single Codification and theprior nomenclature went away. Existing US GAAPwas recast in 90 topics which include all relatedFASB pronouncements, AICPA guidance and EITFsunder single “Topics.” Familiar standards will nolonger exist. For example, FAS157 is now Topic 820Fair Value Measurements and Disclosure.

September 2010 – Comments due on a convergedFASB/IASB standard on Fair Value Measurementand Disclosure (Topic 820, formerly known as FAS157). The NVCA submitted a number of commentletters expressing a number of concerns.

February 2011 – As FASB and IASB converge on a“final” Fair Value Measurements and Disclosurestandard, it becomes clear that some anticipated dis-closure requirements either had no relevance toinvestment company accounting for venture capitalfunds, or would have be generated at considerablecost and effort with little financial statement userbenefit. Several discussions between NVCA andFASB/IASB senior staff brought some clarity. Finalstandard expected later in Q1 2011.

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OVERVIEW

Introduction

1. As the U.S. private equity industry (defined as ven-ture, buyout, mezzanine, and other investments in pri-vate companies) has grown and matured, its partici-pants have become increasingly interested in theappropriate reporting of fund values. The intereststems from a number of sources, such as an investor’sdesire to measure interim performance, investor’s needfor fair value data to report investments in their ownfinancial statements, a manager’s need to report andmeasure valuations in accordance with fund agree-ments, and the need to determine the allocation of dis-tributions of fund realizations. This has led toincreased scrutiny of portfolio company values and theneed for greater consistency of valuation methodolo-gies employed by managers of private equity funds.However, by its very nature private equity is an assetclass in which judgment plays a significant role.Accordingly, investors in the same company may havedifferent, but supportable, views on valuation.

2. The objective of the Updated U.S. Private EquityValuation Guidelines (“Guidelines”) is to providemanagers a framework for valuing investments inportfolio companies at fair value and to providegreater consistency within the private equity industrywith regard to valuations. Historically there were fewauthoritative guidelines compliant with U.S. general-ly accepted accounting principles (GAAP) thatrequired specific procedures for estimating fair valueof investments in portfolio companies held by privateequity investors. In September, 2006, the FinancialAccounting Standards Board released Statement of

Financial Accounting Standards No. 157, Fair ValueMeasurements. The Updated U.S. Private EquityValuation Guidelines are intended to assist managersin their estimation of fair value and are intended to beconsistent with GAAP (FASB Statement No. 157)and the AICPA Audit and Accounting Guide - Auditsof Investment Companies. The AICPA Guide’s defi-nition of Investment Companies includes PrivateEquity Investors (paragraph 1.03) and requires invest-ments to be reported at fair value (paragraph 1.32).

3. These Guidelines were created jointly by managers(i.e., general partners) and investors (i.e., limited part-ners) incorporating feedback from a wide number ofindustry participants. The Guidelines are not intend-ed to be all encompassing, nor are they intended toeliminate all subjectivity. Rather, they are to be aguide to assist managers and investors in agreeing toa valuation framework while allowing a manager toexercise its best judgment in applying the Guidelines.

4. Included in these Guidelines are terms that are sub-jective in nature, such as materiality, and could havedifferent meanings in various factual situations.While it is outside the scope of these Guidelines toforce specific definitions upon its users, the manager,in consultation with the Valuation Policy Committee(as discussed below) may develop and documentappropriate definitions of these subjective terms.

5. The Guidelines are not intended in any way tomodify the provisions of the fund agreement relat-ing to the subject matter hereof. To the extent theGuidelines are adopted by a manager and aValuation Policy Committee and in one or morerespects the Guidelines are inconsistent with thefund agreement, the fund agreement would govern(absent a specific amendment thereto).

Fair Value Concept6. The Guidelines seek to have all investments inportfolio companies reported at fair value on a con-sistent, transparent and prudent basis. Fair value asdefined in accordance with GAAP is “the price thatwould be received to sell an asset or paid to transfera liability in an orderly transaction between marketparticipants at the measurement date” (FASBStatement No. 157, paragraph 5). The objective isto estimate the exchange price at which hypothetical

The PEIGG GuidelinesWhile the NVCA has not specifically endorsed thePEIGG portfolio company valuation guidelines (seestatement in next section below), it believes that theguidelines document should be readily accessible toits members for reference and use. Be sure to refer towww.peigg.org for the latest version and guidance onthe document. The NVCA thanks the members ofPEIGG for their efforts and for their permission toreprint the guidelines here. The guidelines as updat-ed in March 2007 to reflect FAS 157 are printedbelow.

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willing marketplace participants would agree totransact in the principal market, or lacking a princi-pal market, the most advantageous market. No mat-ter which market is deemed most appropriate, fairvalue is the estimated “exit price” in that market.

7. Securities of private companies, by definition,will not have quoted market prices available.However, private companies at times engage inarm’s-length transactions for issuances of theirequity or debt securities. The value of these trans-actions could serve as an observable market pricesimilar to a quoted market price if the transaction isboth recent and between willing parties for the samesecurities as those for which the fair value determi-nation is being made (deemed a level 2 input byFASB Statement No. 157), and could therefore beused as an estimate of the theoretical exit price.

8. When quoted market prices or arm’s-length trans-action prices as described above are not available,the estimate of fair value should incorporate all rea-sonably available information about the businessand utilize assumptions that market participantswould normally use in their estimates of value. Theestimate of fair value should seek to best replicatethe amount at which the investment could be sold ina current transaction between willing parties.

9. In determining the fair value of individual invest-ments using these Guidelines, managers are expectedto use their judgment. In utilizing judgment, sub-stance takes precedence over form. For example,when a manager’s past experience indicates that liq-uidation preferences will likely be renegotiated ormay not be fully enforced at the time of liquidation,the manager is strongly encouraged to use the expect-ed results rather than the form of the agreement.

10. Valuations should be updated on each measure-ment date, generally on a quarterly basis. Of course,valuations used for annual and quarterly perform-ance reporting should be used in private placementmemorandums and other marketing materials.

Valuation Policy Committee11. These Guidelines acknowledge the perceptionthat bias exists or has the potential to exist in a non-independent (versus independent) valuation per-

formed by a fund’s manager. As a result, it is recom-mended that the manager of each private equity fundestablish a Valuation Policy Committee consisting ofa subset of the fund’s investor representatives. TheValuation Policy Committee could be all of, or a por-tion of, a fund’s advisory committee, if such a com-mittee exists. (Neither these Guidelines nor GAAPrequire managers to obtain independent valuations).

12. The fund manager, in consultation with theValuation Policy Committee, should establish thewritten valuation parameters to be consistently fol-lowed by the fund’s manager using theseGuidelines. The agreed upon valuation policy anddeviations from that policy should be communicat-ed to the Valuation Policy Committee and the limit-ed partners by the manager. Private equity fundmanagers are solely responsible for establishing anddocumenting valuation policy, practices, proceduresand methodologies as well as valuing their invest-ments in portfolio companies The Valuation PolicyCommittee should not set, formulate or approve thevaluations, except as required by the fund agree-ment. The Valuation Policy Committee should peri-odically discuss the level of the manager’s adher-ence to the fund’s valuation policy parameters.

II. PRIVATE COMPANY VALUATIONMETHODOLOGIES

General Guidelines

13. Managers are to fairly value the investments intheir portfolio companies on a consistent, transparentand prudent basis. Since value is often realizedthrough a liquidity event of the entire company, thevalue of the company as a whole at the reporting datewill often provide the best evidence of the value ofthe investment in that company. As a result, themethodologies discussed in this section involve esti-mating the value of the company as a whole as an ini-tial step for valuing the company’s privately issuedsecurities. The manager will then need to determinehow the total enterprise value is distributed amongthe various securities of the company.

14. Managers of funds should, without undue costand effort, contact other sophisticated investors todiscuss the valuations of common investments and


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the factors considered in their valuations. However,managers are not required to use other investors’valuations since the estimate of fair value is theresponsibility of the managers.

15. To value an investment, managers should placethe most weight on valuation methodologies that areclearly objective and timely. On each valuation datemanagers need to take into account available infor-mation from market participants, the relevant mar-ketplace and the global economy along with specif-ic facts and circumstances in determining the fairvalue of their investments.

16. Historically, the Private Equity Industry usedcost or the value of the latest round of financing asan approximation of fair value; often without takinginto account other facts and circumstances. Such anapproach is incompatible with the concept of fairvalue described above. At each valuation date amanager must make a determination of fair valuefor each investment. As further outlined below,these Guidelines provide a consistent and transpar-ent methodology for determining fair value.However, a manager may conclude, after consider-ing the facts and circumstances as outlined below,that the best indication of fair value is provided bycost or the value of the latest round of financing.17. FASB Statement No. 157 allows managers toutilize three valuation techniques, either alone or incombination. These Guidelines encourage man-agers to use the “market approach” in most situa-tions (see FASB Statement No. 157, paragraph 18a)utilizing Comparable Company Transactions orPerformance Multiple inputs, as the primary tech-nique to estimate the fair value of equity securitiesin private companies. For Private Equity, the mar-ket approach usually is the most appropriate. 18. In addition to the market approach technique dis-cussed above, there are other valuation methodologies,some of which are discussed in paragraphs 41 and 42.These other methodologies or techniques may beappropriate in certain circumstances, and include dis-counting cash flows, valuing net assets, and industry-specific benchmarking (described in FASB StatementNo.157 as the income and cost approaches).

19. Other valuation matters, including valuing inter-est bearing securities, PIK dividends, warrants, liq-

uidation preferences, convertible securities, escrows,and other rights, privileges and preferences of pre-ferred securities are discussed in paragraph 47.

20. Determination of valuation adjustments shouldtypically be based upon actual positive and negativeevents, not upon expected accomplishments andperformance.

21. Regardless of the valuation methodology used,once used, it should continue to be used until a newmethodology will provide a better approximation ofthe investment’s current fair value. It is expectedthat there would not be frequent changes in valua-tion methodology.

Cost / Latest Round of Financing22. While entry prices and exit prices are differentconceptually, for the Private Equity Industry theseGuidelines presume the manager at the time of theinitial investment has considered near term compa-ny performance in determining investment valua-tion. Therefore, cost (the transaction price) may befair value (the exit price) upon purchase. The trans-action price may not represent fair value upon pur-chase when:

a) The transaction is between related parties;b) The transaction occurs under duress;c) The transaction price includes transaction costs(transaction costs are expensed under GAAP);d) The market in which the initial transaction takesplace is different than the principal or most advan-tageous market in which the exit transaction wouldtake place.

23. Managers should reconsider a company’s fairvalue in connection with each material equityfinancing, regardless of the manager’s participation.The value of the last round of financing is a factorin determining fair value, but it is not necessarilythe only factor.24. A subsequent equity financing that includessubstantially the same group of investors as theprior financing is an appropriate factor to considerin valuing prior investments unless it can be demon-strated that the financing no longer represents fairvalue. This approach may be different from historicpractice, where, typically the value of prior invest-

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ments was not increased in a subsequent higherpriced financing round unless a new investor ‘vali-dated’ the new pricing.

25. If a private financing will be completed with ahigh degree of certainty in the near future, and the pric-ing of the transaction has been substantially agreed, toestablish the value of a previous investment, a manag-er should consider their best estimate of the upcomingnew financing if it can be objectively determined thatthe prospective financing is at fair value.

26. Occasionally a round of financing includes asignificant investment from a strategic investor pay-ing a premium due to benefits accruing uniquely toitself. The manager must evaluate whether such apremium is representative of what the most likelybuyers of the company would also pay upon exit,and therefore, whether the price paid by the strate-gic investor is deemed to be the exit price (fairvalue) expected from market participants.

Deviations from Cost / Latest Round of Financing27. After some period of time, cost or the latestround of financing becomes less reliable as anapproximation of fair value. Therefore, the manag-er must assess whether fair value has changed eventhough there has not been a new round of financing.Examples of changes in circumstances which indi-cate a change in fair value may include, but are notlimited to, the following:

a) The current performance of the company is signif-icantly above or below the expectations at the time ofthe original investment. Potential indicators of thissituation will include evaluation of the company’ssuccess or failure in attaining certain milestones,achieving technology breakthroughs, developing pro-prietary technology, progressing through clinical trialsor significantly exceeding or failing to meet budgets.

b) Market, economic or company specific conditionshave significantly improved or deteriorated since thetime of the original investment. Potential indicatorsof this situation will include evaluation of broadchanges in the economic climate, changes in thefinancing markets, changes in the legal or regulatoryenvironment in which the company operates, changesin the company’s cost structure, increased or

decreased risk factors faced by the company, or sig-nificant fluctuations in share prices of quoted compa-nies operating in the same or a related industry.

c) Substantial decreases in the value of quoted,more senior securities of the company (e.g., publicdebt), defaults on any obligations of the company, abankruptcy filing, significant ownership dilutioncaused by recapitalization of the company, or liq-uidity concerns that are expected to be more thanshort term in nature are circumstances which mayindicate a potential impairment in value.

28. Estimating the extent of a change in fair value, ifany, may not easily lend itself to an analyticalprocess. As a result, the manager will be required toexercise prudent judgment and carefully consider thebroad indicators of potential changes to fair value(such as market conditions, relevant stock marketindices, and other factors as discussed above).

29. The result of such consideration will provideindications whether the carrying value of the invest-ment should be increased or decreased to representfair value. The longer that fair value has been esti-mated using cost or the price paid at the most recentround of financing, the more consideration shouldbe given to reviewing changed circumstances andpotentially determining fair value utilizing otherinputs. Managers may consider historic cost or theprice paid at the most recent round of financing inmaking their fair value determination, but shouldnot use cost or the most recent financing price as thesole determinate of fair value.

30. These Guidelines recognize that building long-term value in a private equity backed business is notan easy task. Usually, many positive events need tohappen in order for portfolio companies to succeed.However, managers often become aware that certainof their investments are likely to fail given theirinsight into the company. Even private companiesthat have significant manager involvement face adaunting task to create value for investors. Thus, it isnatural that decreases in value may be more easilyidentified and justified than increases in value.However, both decreases and increases in investmentfair value should be recognized when warranted.Because of the difficultly in building sustainable,


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building sustainable, long-term value in a privateequity backed business, increases in value shouldonly be made where the manager can support theincrease using the methodologies discussed inthese guidelines or using other techniques commonto the marketplace, remembering that fair value isdefined as the exit price on the measurement date ina hypothetical transaction. Diligence, prudenceand caution should be applied when valuing privatecompanies, and in particular when considering thevaluation write-up of early-stage companies, in theabsence of market-based financing events. Allsuch changes and the factors upon which thechanges are made should be reviewed with theValuation Policy Committee. However, managersmust recognize that there should be no bias towardeither increasing or decreasing carrying value torecord fair value.

31. When valuation adjustments are necessary, themethodology used should be based on relevantcomparable data wherever possible (“relevant com-parable data” as used in these Guidelines is intend-ed to be consistent with the input hierarchy dis-cussed in paragraphs 22-31 of FASB Statement No.157). Recommended methodologies are discussedbelow.

Comparable Company Transactions32. This methodology involves deriving the valueof a company through examination of third-partyinvestments in comparable equity securities of thecompany, examination of transactions in equitysecurities of comparable companies and direct com-parisons to similar companies. These comparisonsshould be appropriately adjusted for any controlpremiums, synergistic benefits or other excess ben-efits or detriments that accrue to the owner whendetermining a proper comparable valuation.

33. These Guidelines acknowledge that until acompany achieves marketplace acceptance for itsproduct or service, it is unlikely that truly compara-ble companies with determinable fair values will bereadily identifiable.

34. To the extent comparable transactions cannot beascertained and fair value cannot be reasonablyassessed and reliably measured using comparable

transactions, the following Performance Multiplemethodology should be used, if applicable.

Performance Multiple35. The performance multiple methodology appliesa relevant multiple to the performance of the com-pany being valued in order to derive the value of thecompany. This approach is most applicable to com-panies that have achieved positive and sustainableoperating performance.

36. The valuation determined using this methodolo-gy is calculated by applying the most appropriate andreasonable multiple derived from reference to marketbased conditions of quoted companies or recent pri-vate transactions. The multiple to be used, whichmay need to be adjusted for differences in terms ofgrowth prospects and risk attributes (depending onthe size of the comparison sample, among other fac-tors), should be one of the following:

a) Current average comparable public companymultiple for similar companies in the industry;

b) Current average multiples for recent private trans-actions of similar companies in the industry; and

c) The original acquisition multiple when no othersimilar public or private multiples can be ascertained.

The most appropriate and reasonable multiple asdetermined above will be applied to the relevantoperating performance metrics of the company toestimate fair value.

37. The manager should be confident that reason-able, relevant and sustainable performance metricsare utilized, which may necessitate the adjustmentfor one-time and non-recurring items.

38. There may be significant changes in the finan-cial, regulatory, economic or legal climate in whichthe company operates which harm or enhance theprospects of the company, but these changes maynot yet have affected performance. The managerneeds to consider these changes in evaluating acompany’s sustainable performance. Managersshould share with the Valuation Policy Committeethe factual data and their assumptions that support

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the sustainable performance used in the valuationdetermination.

39. The multiples used should be those that areused regularly and routinely to value companies inthe industry in which the subject company is oper-ating. If the multiples used are derived from publiccompany comparables, a discount to a private com-pany’s equity value may be appropriate. Discountsapplied to private securities may be higher thanthose applied to restricted public securities, whichare discussed in paragraph 46. Managers shouldshare with the Valuation Policy Committee the fac-tual data that generates the multiples used in the val-uation process.

40. To the extent fair value cannot be reasonablyassessed and reliably measured using performancemultiples, the following methodologies may be con-sidered.

Other Valuation Methodologies41. A few other valuation methodologies, which maybe appropriate in certain circumstances, are as follows:

a) Because of the need to use significant estimatesand forward-looking information, discounted cashflow (DCF) methodologies should only be used inlimited situations using a discount rate commensu-rate with the risks involved. These situations wouldinvolve instances where the methodologies previ-ously discussed in these Guidelines prove incapableof addressing the specific circumstances.

b) Net asset valuation methodologies should beused for valuing investments in businesses whosevalue is derived primarily from the underlying valueof their tangible assets rather than their performance.

c) Industry-specific benchmarks, which are customar-ily and routinely used in specific industries such asprice per subscriber or other industry norms, shouldonly be used in estimating fair value where appropriate.42. In those circumstances where there are indica-tions that a change in carrying value is appropriatebased on paragraph 27, but the methodologiesdescribed in paragraphs 32-41 are not applicable,the manager should exercise prudent judgment inconsidering assumptions that marketplace partici-

pants would utilize in their estimate of fair value.

III. VALUATION OF PUBLICLY TRADEDSECURITIES

Unrestricted

43. Actively traded public equity and public debtsecurities are required to be valued at the closingprice or bid price, except as discussed below. Activemarkets are defined as a market in which transactionsoccur with sufficient frequency (daily) and sufficientvolume to provide pricing information on an ongoingbasis, regardless of the size of the position held.

44. Discount (blockage) factors for unrestrictedsecurities that trade in an active market are prohib-ited by GAAP (FASB Statement No. 157).

Restricted45. A discount from values of actively traded securi-ties should be taken for holdings of securities whenthere is a formal restriction that limits sale of the secu-rities. Examples of restrictions that may warrant adiscount include rule 144 holding periods and under-writer’s lock-ups. Discounts for restricted equitysecurities from their market price typically range from0% to 30%. When determining a discount to activelytraded restricted securities, factors that should betaken into consideration include the company’s trad-ing characteristics (the extent to which the market forthe security is active), the investor’s ability to sell itsposition when the restriction expires, and the term ofthe restriction. The adjustment of the discount willvary depending on the duration of the restriction. Asthe remaining length of the restriction decreases, theamount of the discount should also decrease.Limitations on sale based on rule 144’s volume testsor based on a closed trading window for board mem-bers do not qualify as formal restrictions related to thesecurity itself. Therefore discounts are not allowed byGAAP in these situations.

Inactive46. A quoted price is not readily available forsecurities which trade in inactive markets, wheretransactions do not occur with sufficient frequen-cy and volume to provide ongoing pricing data.Therefore, the last transacted price may not pro-


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vide the best indication of fair value. In such sit-uations, an adjustment to the last transacted pricemay be appropriate or other valuation techniquesmay be utilized based on all relevant factors.

IV. OTHER MATTERS

47. There are a wide variety of securities and capi-tal structures used in the private equity industry.Such securities should be valued consistent with theGuidelines set forth above. Some examples andvaluation guidance for securities and structureswhich have not been specifically addressed by theseGuidelines include:

a) The carrying value of private interest bearingsecurities should be based on the underlying compa-ny’s ability to service and repay debt.

b) PIK dividends should be accrued in accordancewith the terms of the underlying security. A valua-tion discount may be necessary depending on thehealth of the company and the realizability of theunderlying securities.

c) Valuations of securities denominated in currenciesother than the base currency of the fund should beadjusted for changes in the spot prices of the currency.

d) Warrants should be carried at their fair value.

e) The rights associated with preferred stock are gen-erally divided into two broad categories—economicrights and control rights. Once the enterprise value ofthe company is determined in accordance with theseGuidelines, fair value should be determined by allo-cating value to shares of preferred and common stockbased on their relative economic and control rights.

In addition, when making their fair value determi-nation managers should recognize that liquidationpreferences are often granted to investors as aninducement to invest in a company. When a manag-er’s past experience indicates that liquidation pref-erences will be renegotiated or will not be fullyenforced at the time of liquidation, the manager isstrongly encouraged to use the expected results indetermining the valuation of a security which has a

liquidation preference.

f) Currently convertible securities should be val-ued at the excess of the value of the underlyingsecurity over the conversion price as if the securitywas converted when the conversion feature is “inthe money” (appropriately discounted if restricted).If the security is not currently convertible, the use ofan appropriate discount in valuing the underlyingsecurity should be considered. If the value of theunderlying security is less than the conversionprice, the carrying value of the convertible securityshould be based on the underlying company’s abili-ty to service and repay the security.

g) If deemed determinable beyond a reasonabledoubt (virtually certain) escrows from the sale of aportfolio company should be valued at an amountthat the manager, using its best estimate, ultimatelyexpects to receive from the buyer in light of theescrow’s various conditions.

h) Because of the inefficiencies of the secondarymarket, purchase and sale transactions of partner-ship interests in and of themselves may not beappropriate in determining the value of portfoliocompany valuations or positions in funds.

48. FASB’s Statement No. 157 Fair ValueMeasurements utilizes a hierarchy described as Level1, 2 and 3 inputs (Statement No. 157 paragraphs 21-31). The FASB valuation hierarchy has not beenrestated in these Guidelines. The concepts outlinedin these Guidelines are intended to be consistent withLevel 1, 2 and 3 inputs as defined. The input level isa required GAAP disclosure and provides users offinancial statements with additional clarity in how amanager made their determination of fair value.

V. CONCLUSION

49. As the private equity industry has matured inthe United States, there is a need for greater consis-tency of valuation standards/methodologies by bothmanagers of, and investors in, private equity funds.These Guidelines are designed to provide a frame-work for addressing the majority of the private equi-ty industry’s valuation questions on a consistent,transparent and prudent basis. It is recommended

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that managers and investors collaborate to shareexperiences and best practices across relationships.This collaboration will narrow the range of specificdefinitions of subjective terms and will enhance theconsistent application of these Guidelines.

50. The key goals of these Guidelines are as fol-lows:

• Encourage managers to approach valuation from aconsistent, transparent and prudent basis.

• Focus the private equity industry on the need todetermine fair value for each of their investments ina manner that is consistent with these Guidelines.

• Provide greater transparency into valuation resultsthrough the use of the Valuation Policy Committeeas described in the Guidelines.

51. The Guidelines are not intended to be all encom-passing, nor are they intended to eliminate all sub-jectivity. Rather, they are to be a guide to assistmanagers and investors in agreeing to a valuationframework while allowing a manager to exercise itsbest judgment in applying the Guidelines.

52. The Private Equity Industry Guidelines Groupacknowledges that the application of these guidelinesmay result in a departure from past valuation practices.It is recommended that managers and investors workjointly to develop a timetable to implement theseguidelines. It is expected that over time the broad useof these Guidelines will become industry practice

53. These Guidelines are consistent with USGenerally Accepted Accounting Principles. If man-agers adopt these Guidelines it is expected that theirdetermination of fair value will be GAAP compliant.However, it is also understood that a manager may beGAAP compliant without utilizing these Guidelines.

NVCA Position on Portfolio CompanyValuation Guidelines (March 2007Version)The NVCA Board of Directors reaffirmed its support forthe latest iteration (March 2007) of the PEIGGGuidelines on September 18, 2007. While the NVCA hasnot specifically endorsed the PEIGG or other valuation

guidelines, the NVCA board statement of support isbelow:

The NVCA recommends that its members create, followand communicate clearly the specific procedures andmethodologies used for valuing their portfolios. Thesemethodologies should be agreed to by the firm’sinvestors (LPs), and conform, when required, toGenerally Accepted Accounting Principles and fair valuemeasurement standards, recognizing that the ultimateresponsibility for valuations remains with the generalpartner. When evaluating current valuation proceduresor developing new approaches, the NVCA suggests itsmembers include a review of the Private Equity IndustryGuidelines Group (PEIGG) December 2003 “PrivateEquity Valuations Guidelines” document, as reissued inMarch 2007 (found at www.peigg.org). We commendthe fine efforts of PEIGG, an independent group whichsought and reflected input from the NVCA and otherindustry stakeholders. The NVCA encourages diligence,prudence, and caution when implementing the specificelements of any guideline, such as valuation changes toearly-stage companies in the absence of market-basedfinancing events.

NVCA Member Alert – Fair ValueConsiderations for Venture Capitalists -December 2008The 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 invest-ment environment that has deteriorated rapidly inthe past few months. What does this mean for ven-ture capital investors as they attempt to value pri-vately-held investments at December 31, 2008? Theshort answer is: despite the current very challengingeconomic environment, Fund managers must con-tinue to exercise their sound judgment in estimatingthe Fair Value of each portfolio company after con-sidering the relevant facts, including current marketconditions. The valuation process does not change,but much more judgment is required when we are ina period of economic discontinuity.


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Virtually all LP agreements require GPs to use USGAAP for financial reporting. US GAAP requires FairValue reporting for virtually all VC firms because theyare “investment companies.” US GAAP continues todefine Fair Value as: “the price that would be receivedto sell an asset…in an orderly transaction betweenmarket participants at the 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 currentFair Values of their investments, even though “exitmarkets” 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 no easy outs, rules of thumb or safe harborsfor establishing Fair Value.

As always, best considerations for Fair Value deter-mination include the following:

• The Fair Value of an investment portfolio is the sumof the Fair Value determined for each portfoliocompany using a “bottoms up” approach. Applyinga “top-down” overall percentage adjustment to theaggregate portfolio’s value is not compliant withUS 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 to plan,probability of meeting forecasts, the projected envi-ronment for its product or technology, etc., as aboard member, what is the lowest price that I wouldsell the company’s stock today in an orderly salewith a willing buyer?” [Footnote: A fund managershould not assume a “fire sale” of the stock, butshould assume “exposure to the market for a period

prior to the measurement date to allow for market-ing activities that are usual and customary…” -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 determin-ing Fair Value, especially given current market con-ditions.

• The Fair Value at December 31 in many cases willlikely be different from the value at September 30,given the deterioration of the macro economic envi-ronment.

• Each valuation should reflect a company’s degreeof progress from the prior reporting date to the cur-rent 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 weightingof 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 compa-ny and the current economic environment. The factthat the macro market is distressed probably adverse-ly impacts the value of most companies. This nega-tive impact may be compounded by disappointingcompany performance or mitigated by tangible andsustainable company progress.

If you need more details about Fair Value, you mightconsider the 18-page PEIGG Valuation Guidelines atwww.peigg.org, or you can download the 158-pageSFAS 157 at www.fasb.org.”

Appendix I: International Convergence

A GP’s Primer on Global AccountingStandards Convergence

A recent flurry of media coverage has focused on thepossible upcoming convergence of U.S. and interna-tional accounting standards. Much of this coveragediscusses which accounting system casts which pub-lic companies in the most favorable light. Whileseemingly distant from the U.S. venture capitalindustry, it is important that all business constituen-cies weigh in on which system (current U.S. GAAPvs. International vs. neither) is the best system over-all for the U.S. business community going forward.We would expect this dialogue to center on trans-parency, reliability, relevance, comparability, andongoing costs in addition to any conversion costs,which might be significant.

More relevant to the U.S. venture capital industry arematters specifically affecting fund reporting, specifi-cally the financial statements provided by GPs to LPsunder international rules, should the internationalrules become the new U.S. rules.

In 2009, with a new administration, new SEC lead-ership, and other priorities at the SEC, the direc-tion and timetable for convergence became lessclear. A key concern for the U.S. venture capital

industry is being able to continue investment com-pany (IC) accounting. There are no provisions inthe international rules for IC reporting, so if cur-rent GAAP provisions were not continued, venturefund statements to their investors would becomeunusable. Reports are that international venturecapital and private equity firms currently subjectto international rules are simply ignoring thoseprovisions or additionally providing side sched-ules prepared in accordance with U.S. GAAP. Ifthe U.S. GAAP investment company accounting isremoved from GAAP going forward, for example,and the current international rules replaced it, GPswould likely have to keep an additional set ofbooks. One set would be used to create auditGAAP financial statements, although it not clearwho the audience for those statements would be.The other set would be to provide meaningful port-folio information to investors and other stakehold-ers.

Over the past couple of years, the FASB and IASBefforts at convergence seem to have preserved thekey aspects of U.S. investment company accountingfor private portfolio companies. That is, the U.S.approach on FIN 46, now called Topic 946, seems tohave prevailed over IAS 27. Recognition of invest-ment company accounting is significant.

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Despite all the discussion and work done on moving toward one global accounting standard, the passage oftime and the efforts of a number of groups have not really made the picture any clearer. As this is written inearly 2011, activity centers on three major areas:

• Decision on whether to adopt international accounting rules, or a modification thereof, as the acceptedaccounting practice in the United States;

• Decision on the direction of private company accounting; and • Convergence of specific U.S. and international accounting rules that affect venture capital and private equity

While making a decision on the adoption of international rules for U.S. accounting remains on the agenda ofthe Securities and Exchange Commission for 2011, it is not clear what the priority of this expensive and time-consuming effort is given all of the other must-do items on the national agenda. A blue-ribbon panel created bythe Financial Accounting Foundation (FASB’s parent) in 2010 is in the late stages of recommending separateaccounting principles for private companies, possibly overseen by a separate board. Meanwhile, FASB andIASB continue work on converging certain U.S. and international accounting rules that affect this industry.NVCA staff and the NVCA CFO Task Force have been putting considerable effort into the rules convergence.

The Dialogue and SEC Decision: Shouldinternational rules become accepted asU.S. GAAP?

For years, the United States has been developinggeneralized accounting principles referred to asGenerally Accepted Accounting Principles(“GAAP”). The keeper/arbiter/decider of GAAP isthe Financial Accounting Standards Board(“FASB”). FASB develops and updates GAAP andthe SEC has adopted these accounting rules for pub-lic company reporting and other situations overwhich the SEC has jurisdiction.

In recent years, on a parallel track, a separate set ofrules emerged from the International AccountingStandards Board (“IASB”), which was Europe-cen-tric. These rules became known as the InternationalFinancial Reporting Standards (“IFRS,” pronounced“IFF-ers”).

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 U.S. public companies to convert from U.S.GAAP to IFRS. The SEC “roadmap” provides for athree-year run-up to an SEC “go-no go” decision in2011. 2011 is also the year that major U.S. tradingpartners Canada, Japan, Korea, and India have indi-cated plans to adopt IFRS. At about the same time,the FASB and the IASB met to review and re-orienttheir convergence plan to be consistent with theSEC’s proposed schedule. The updated FASB-IASBmemorandum of understanding is athttp://www.fasb.org/intl/MOU_09-11-08.pdf. In2009, much of Washington’s attention was focusedon rescuing troubled assets and economic stimulus.The convergence timetable may be delayed. Pleasecheck the NVCA website (www.nvca.org) forupdates.

Nothing in the SEC proposal or the FASB-IASBmemorandum says that the U.S. will conclusively“converge” by switching over to IFRS. This all con-templates a well thought-out and informed decisionin two years. It is worth pointing out that the SECroadmap refers to public company reporting; howev-er we should logically expect alignment of private

and public company rules. Even with two sets ofrules, because venture-backed companies plan to bepublic companies or a component of a public compa-ny, most venture-backed private companies wouldwant to use public company accounting from thestart.

What is not clear at this time is what the current glob-al economic turmoil will do to the priority of thisproject or its timetable.

U.S. GAAP vs. IFRS – Never Generalize

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 an apples-to-apples comparison of “IFRS-compliant” financialsfrom different jurisdictions can be difficult. Second,it is true that IRFS itself is a very thin document com-pared to GAAP, which has grown to roughly a two-foot stack of written rules. However, to implementIFRS, you need the implementation guide that com-bines with the original document to create its owntwo-foot stack. Again, much of the surface compar-isons are not useful.

Until this point, U.S. venture capital firms have beenusing U.S. GAAP accounting standards exclusively.However, in early November, we received a reportfrom a member firm with international intermedi-aries for overseas investment where the local audi-tors raised the question of whether those financialstatements need to be IFRS-compliant.

GP-to-LP Reporting

One area already identified as a possible problem areais GP to LP reporting. Virtually all LP agreements (oraccompanying documents) require GPs to provideGAAP-compliant financial reports to LPs. Annualaudits of these reports are GAAP-based. UnderGAAP, the U.S. venture capital industry provides fair-value portfolio reports under the special rules of“investment company reporting.” Our early analysisof IFRS shows special investment company rules for


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portfolios of publicly-traded companies, but no suchprovisions for portfolios of private companies.

Most of the SEC and FASB efforts to date havefocused on public company reporting. Under the cur-rent IFRS rules, the financial statements for a num-ber of the portfolio companies would have to be con-solidated into the operating financials of the venturecapital fund itself. This would create a mish-mashreport that is essentially unusable to the LPs in deter-mining the value of their own portfolio holdings.This would mean an end to fair value reporting as wehave known it. A potential further complication couldarise if DOL ERISA fair value rules remain in placefor the plan sponsors while accounting rules abandonthe current fair value reporting requirements.

Since most fund agreements require GAAP finan-cials, if investment company accounting is eliminat-ed from GAAP, venture firms might have to maintaintwo sets of books.

How International GPs Now Handle LPReporting

A logical question arising from the above paragraphis how venture capital firms operating in IFRS juris-dictions are currently reporting to LPs, includingthose subject to U.S. ERISA fair value reportingrules. A review by the NVCA CFO Task Force sub-group shows that international GPs either ignoreinternational rules and use U.S. GAAP or create aside schedule that is GAAP compliant.

Recent Events

A full chronology of events is posted under ValuationGuidelines on the NVCA website www.nvca.org.This document is updated from the chronology inAppendix H of the NVCA 2011 Yearbook preparedby Thomson Reuters. Even as the U.S. industry

works toward compliance with the FASB’sStatement 157 (now officially called “Topic 820”) onfair value measurement starting with 2008 financials,dialogue has begun on convergence. In March 2008,the International Private Equity & Venture CapitalValuation (IPEV) board reconstituted and relauncheditself. IPEV was expanded to include five practition-ers from the United States who are familiar with theventure industry. The initial focus of the group is onconvergence of U.S. Private Equity IndustryGuidelines Group (“PEIGG”) and IPEV fair valueguidelines. Details, and the September 2009International Private Equity and Venture CapitalValuation Guidelines, are online at www.privatee-quityvaluation.com. Check that site for updates, thepress release issued with those guidelines, FAQs, etc.

Going Forward

With the international and domestic attention onother economic matters, it is not clear how quicklyany accounting standard convergence activities willmove. As this is being written in early 2011, theSecurities and Exchange Commission (SEC) says itis on track to make a decision on the direction ofGAAP and IFRS in 2011. Separately, FASB andIASB continue their program of converging certainaccounting standards such as the fair value measureand disclosure, consolidation, and investment com-pany accounting rules.

In fact, FASB’s work on U.S.-only accounting issuesthat affect venture capital and private equity wounddown a couple of years ago. Instead, anticipating asingle global set of rules at some point in the future,unresolved accounting issues in the U.S. and differ-ences between the two systems are being workedunder the moniker of “convergence.” That is, thesecurrent issues are being addressed jointly by bothFASB and IASB. For more information, please con-tact NVCA at [email protected].

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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 indefinitions between the regions and variations in thecurrencies of each region. Additionally, this appen-dix provides a brief overview of non-US privateequity; data herein is not as comprehensive as theUnited States data presented elsewhere in this publi-cation. Despite this, the reader can use this appendixto analyze trends in private equity outside of theUnited States. All data is provided by ThomsonReuters.

As mentioned previously, readers should note thedifferences in methodology and definitions of pri-vate equity between United States and other regionsbefore analyzing the data. For example, privateequity outside of the United States provides equitycapital for entities not publicly traded and consistsof buyouts and venture capital. The category of buy-outs includes management buyouts (managementfrom inside the company investing with privateequity investors), leveraged buyouts (the target tak-ing on a high level of debt secured by assets), insti-tutional buyouts (outside investors buying a busi-ness from existing shareholders), and managementbuy-ins (management from outside the companyinvesting with private equity investors). On the otherhand, venture capital describes the process offinancing companies at the seed, start-up, or expan-sion stages. The United States places more emphasison the early stages of development than do otherregions, based on historical analysis of investmentsby stage. Like in the United States, non-US venturecapital is considered a subset of private equity. Forease of analysis and to avoid differences in defini-

tions between venture capital and buyouts inside andoutside of the United States, it is perhaps most com-parable to analyze aggregate private equity in thetwo regions as opposed to any classifications con-tained 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 $61.2 billion in 2010. Asianbased funds raised $27 billion equal to 16% of thisamount. Meanwhile, European funds had $23.1 bil-lion in fundraising commitments which is 13.7% ofthe total. The Other regions raised $11.1 billion or6.6%. Venture capital commitments outside theUnited States accounted for 36.4% of the total.Meanwhile, buyout funds represented 35.9%. Fundof Funds raised $4 billion in 2010. Generalist fundcommitments totaled 5.7% of the total or $3.5 bil-lion. Mezzanine funds raised $2.5 billion with theremaining commitments in the other private equityfund stages. It should be noted that these totals reflectnot only the amount raised by independent funds, butalso include capital gains and the amount raised bycaptive funds.

Investments

Private equity investing outside of the United Statesreached $63.6 billion in 2010. Buyout stage financ-ing slightly led investment activity in 2010, account-ing for 36.1% of total. The venture capital invest-

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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.

ments were close behind with 33.5% of the total. Bynumber of deals, venture capital investments led with64.3% and the buyouts investments followed with18.4% of the total deal activity outside of the UnitedStates. Leading all activity outside of the UnitedStates, investments in the Canada totaled $19.2 bil-lion during 2010 accounting for 30.2% of the total.The United Kingdom followed with $16.7 billion.

Chinese investments reached $6.9 billion or 10.8%of the total investment activity outside of the U.S. Private equity commitments and investments saw asignificant increase outside of the United States in2010. Commitments jumped 59% in 2010 from$36.3 billion in the previous year. Similarly, the pri-vate equity investments increased 72% from $46 bil-lion in 2009.


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Fund No. ofStage Deals ($ Millions)Buyout 748 22,987.2 Venture Capital 2,613 21,338.4 Generalist Private Equity 564 13,802.8 Other Private Equity 42 4,509.0 Mezzanine 39 619.6 Fund of Funds 57 365.7 Total 4,063 63,622.7

Fund World Location No. Funds Committed $MilUnited States 441 107,849.2Asia 186 26,979.9Europe 124 23,058.7Other 56 11,086.2Total 807 168,974.1

Figure 15.01 Investments Outside The U.S. in 2010

Figure 15.02 Private Equity Fund Commitment In The U.S.

and Outside The U.S. in 2010

Note: Private Equity includes venture capital, buyouts, mezzan-nine, and other private equity funds.

NVCA yearbook 2011

Investor Relations

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