PitchBook 2H 2014 VC Valuations and Trends Report

Bet ter Data. Bet ter Decisions.PitchBook

Late stage financings mirror the public markets.PAGE 5

VC VALUATIONS & TRENDS2H 2014 REPORT

PAGE 12: VALUAT ION CHANGES BETWEEN ROUNDS PAGE 14: VALUAT IONS AT EX IT

Series B valuations

rocket to $41 million; Series D+ remains

elevated at $164 million. PAGE 6

CONTENTSIntroduction

Overview

Median Valuations

Seed Stage

Series A

Series B

Series C

Series D and Later

Valuation Changes Between Rounds

Exits by Valuations

34-5

6789

1011

12-1314-15

CREDITS & CONTACTPitchBook Data, Inc.

JOHN GABBERT Founder, CEO

ADLEY BOWDEN Senior Director, Analysis

ContentALEX LYKKEN Editor

ANDY WHITE Lead Data Analyst

Contact PitchBookpitchbook.com

RESEARCH

[email protected]

EDITORIAL

[email protected]

SALES

[email protected]

COPYRIGHT 2014 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any meansgraphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systemswithout the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.

Want to see more detail?The PitchBook Platform has thousands of valuations on individual companies and VC rounds waiting for you to explore. Find out more by emailing [email protected] or visiting pitchbook.com.

Introduction

1 ,068

3 ,703

29%

2,423

8 ,630

28%

2,490

8 ,483

29%

2,203

7,359

30%

1 ,3 17

5 ,937

29%

1 ,239

4 ,837

27%

1 ,450

5 ,363

27%

1 ,1 70

4 ,858

24%

77 7

3 ,76 1

21%

603

3 ,292

18%

201420132009 20112007 2012

# OF

VALUATIONS

# OF

VC DEALS

% OF

DEALS WITH

VALUATIONS

2008 201020062005

COUNT OF VC VALUATIONS IN THE PITCHBOOK PLATFORM BY INVESTMENT YEAR

Valuations have become the topic du jour of the VC industry in recent quarters. A record

number of startups have raised financing at valuations north of $1 billion, a handful of which are valued much higher, like Uber ($18.2 billion) Airbnb ($10.3 billion) and Snapchat ($10 billion). Several secular trends are at work, as many have pointed out, to cause valuations at both the late and early stages to balloon as much as they have. Among other reasons, successful technology startups have very large user bases to work with, and technology adoption rates have rapidly increased in recent years, which explains why some startups have amassed upwards of $50 million in funding just months after being founded. Additionally, non-traditional investors like hedge funds, mutual funds and private equity firms have entered the picture in later rounds, seeking pre-IPO exposure to startups and competing vigorously for those investments, pushing valuations up higher. Furthermore, public markets have been on a tear in recent years, with private valuations following the same trajectory. Small surprise, then, that concerns over a bubble in the public markets have seeped into the private markets, as well, especially as VC financing activity

is approaching levels not seen since the dot-com days.

The purpose of this report isnt to weigh in on that debate, but to add further context to the discussion by breaking down our collection of valuations, which numbers over 16,000. In addition to the familiar later stage valuations that make headlines, weve also collected thousands of valuations across the spectrum of the VC cycle, including the seed and Series A stages. Additionally, we looked at valuation trends for startups as theyve grown, and included the percentage changes in valuations from previous rounds, as well as a breakdown of up, flat and down rounds by quarter. Finally, we took a look at valuations in relation to exits, which ultimately factor into the assumptions of every VC investor. Exit activity remains strong, with all three of the major exit ramps (IPOs, acquisitions and buyouts) providing strong returns due to favorable market conditions affecting each of them.

We hope the information in this report proves insightful and informs your decision-making process in the coming quarters. If you have any questions, comments or suggestions, please contact us at [email protected].

3 PITCHBOOK 2H 2014

VC VALUATIONS & TRENDS REPORT

OverviewVC DEAL FLOW BY QUARTER

Despite high valuations, investors have continued

to funnel significant amounts of capital into startups, including a post-2001 high $22.8 billion in 2Q 2014. Much of that is from non-traditional investors like hedge funds, PE firms and mutual funds, but a good deal of it comes from more traditional VC investors, as well. As the chart above shows, financing activity has cooled off somewhat since early 2013, particularly at the angel/seed and early stages. Many industry professionals have cited high valuations for the slowdown.

Indeed, as the chart on the next page illustrates, valuations across the VC spectrum have largely mirrored the run-up in the public markets. Founders are arguing (often persuasively) that their disruptive startups will one day be as valuable as the current technology giants

trading on the stock markets. Moreover, as Wilson Sonsinis Craig Sherman and Herb Fockler recently told us, the ability of later-stage private companies to successfully go public or sell at an attractive valuation is driving the assumptions of VC firms on their expected returns. At the seed stage, the median pre-money valuation has jumped to $5.9 million, easily a ten-year high. The median Series A valuation remains elevated at $6.4 million, while the median Series B valuation came in at $35.2 million through 1H 2014, a 37% pop over the $25.9 million median recorded in 2013. That pales in comparison to the increase in later-stage valuations; through 1H 2014, the median pre-money valuation for Series D and later rounds came in at $171.5 million, a 63% increase over 2013. The first half of this year featured some historically large financings,

Financing activity has dipped in

recent years, but capital invested is

up

Source: PitchBook

VC DEAL FLOW BY YEAR

Source: PitchBook

$10

$8

$8

$8

$10

$10

$9

$11

$15

$15

$13

$12

$13

$13

$12

$12

$12

$13

$13

$14

$17

$23

1,359

1,078 1,151

1,249

1,5991,458

1,3771,503

1,991

1,785

1,799

1,784

2,2842,134

1,999 2,065

2,307 2,251

2,1331,939

1,851

1,852

0

500

1,000

1,500

2,000

2,500

$0

$5

$10

$15

$20

$25

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2009 2010 2011 2012 2013 2014

Capital Invested ($B) # of Deals Closed Angel/Seed Early Stage Late Stage

$3

9

$5

6

$5

0

$5

2

$4

0

5,9377,359

8,482 8,630

3,703

2010 2011 2012 2013 2014*

Capital Invested ($B)# of Deals Closed

*as of 6/30/14

4 PITCHBOOK 2H 2014


MEDIAN % ACQUIRED BY STAGE AND YEARmany of which came from those non-traditional investors. Airbnb, for instance, raised over $500 million in April at a $10.3 billion pre-money valuation, led by TPG Growth. Transportation service Uber received a $1.2 billion round (at a $17 billion valuation) in early June led by Fidelity, Wellington Management and BlackRock. Coatue Management, the New York-based hedge fund, has invested in five VC-backed companies just this year, including Box, Snapchat, Lyft, Avvo and Anaplan.

For founders, one of the benefits to this frothy environment is that, because valuations are so high, investors are willing to take smaller and smaller stakes in startups, as the chart above indicates. The rule of thumb for Series A rounds used to be about 33% acquired, but beginning in 2010, the median percentage acquired in Series A rounds dipped below 30% for the first time. Today, the median stands at 27.7% for Series A rounds, an almost ten percentage point drop since

2005. Likewise, Series D and later rounds are demanding less equity to be surrendered; through 1H, the median stands at 12.0%, down from 16.5% in 2005.

As well discuss further in the last section, exit valuations have shot up in the last year and a half, topping out at an 11.2x median through 1H 2014. Since 2013, weve seen far more investors

MEDIAN VC VALUATIONS BY STAGE VS. MEDIAN NASDAQ VALUE BY YEAR

get into the action pre-IPO, as VC firms have launched funds to take advantage of pro-rata rights and increase their stakes in their portfolio companies before they go public. More broadly, high exit valuations are strongly attributable to the booming stock markets and cash-rich strategic investors, which have given VC investors ample opportunities to find their exits.

Source: PitchBook

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014*

Seed Series A Series B Series C Series D+

*as of 6/30/14

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

NASDAQ Composite Early Stage Later Stage Source: PitchBook*as of 6/30/14

The chart above compares the median valuations of early stage and late stage financings versus the median value of the NASDAQ composite broken down by year.

5 PITCHBOOK 2H 2014


Median Valuations As both of the charts to the right indicate, valuations really

started to take off around early 2011, though we saw some early signs of inflation as far back as 2010. Three of the biggest quarterly spikes have occurred this year, including big jumps in the median valuation for Series B financings in the second quarter (37%) and Series D and later rounds in 1Q. In both Series B and D+ rounds, valuations in 2Q are roughly double the median found only two years ago in 2Q 2012.

As weve mentioned in previous reports, much of this boost in valuations can be explained by a subtle shift in the venture industry, namely that the institutionalization of seed investing has warped the traditional investment timeline. Many of the seed investments today are essentially similar to Series A investments ten years ago, even five years ago. Further down the spectrum, thats translating into some massive Series B and Series C rounds, which used to be reserved for younger companies. In recent quarters weve seen some historically late-stage investors enter into Series B territory, including a handful of hedge funds.

Toward the later end of the spectrum, valuations have also spiked. The median valuation for Series D+ rounds in 1Q 2014 came in at a post- financial crisis record of $181.5 million. Series C rounds are frothy, as well, at $80.5 million in 2Q 2014. As weve discussed elsewhere in this report, there are downsides to such high valuations, including ambitious performance expectations and thinner margins for error come exit time.

EARLY STAGE MEDIAN VALUATIONS BY QUARTER

$2.0 $2.6$4.3 $4.2 $4.3

$5.5 $6.2$7.3

$6.0 $6.8 $7.6 $7.2$10.0 $9.5

$12.2 $12.1$17.2

$17.9

$17.5

$21.1

$20.4

$24.7

$22.0

$25.1$27.4

$30.0

$41.0

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

1Q 2Q3Q4Q 1Q 2Q3Q4Q 1Q 2Q3Q4Q 1Q 2Q3Q4Q 1Q 2Q3Q4Q 1Q 2Q

2009 2010 2011 2012 2013 2014

Seed Series A Series B

LATE STAGE MEDIAN VALUATIONS BY QUARTER

$30.1 $28.9

$34.9$48.3

$66.6

$37.9

$72.2

$54.4

$80.5

$54.3 $44.9$63.7

$79.8$97.2

$79.7

$123.8 $125.8

$122.7

$181.5

$164.0

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200


2009 2010 2011 2012 2013 2014

Series C Series D+

6 PITCHBOOK 2H 2014


Series Seed SEED VALUATIONS ($M) BY SECTOR

MEDIAN SEED ROUND DETAILS

% ACQUIRED

SOFTWARE

DEAL SIZE ($M)

MEDIA

ALL

COMMERCIAL SERVICES

Valuations in Series Seed rounds have gradually increased

through the years. The median valuation for 1H 2014 seed stage deals reached $5.9 million, a 23% increase over last years median of $4.8 million. Back in 2010 the median came in at a comparatively paltry $3.2 million, but in the intervening years seed-stage investing has become much more institutionalized.

Since 2010, founders have given up anywhere between 20% and 25% of their startups at the seed stage, which lends credence to the argument that seed investments have become the new Series A. Interestingly, founders of software startups have given away bigger stakes since 2011, from a median of 20% that year to 23% through 1H 2014.

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

2010 2011 2012 2013 2014*

All Software Media Commercial Services

15%

20%

25%

30%

'10 '11 '12 '13 '14*

All Software

Media Commercial Services

$3.25 $3.96

$4.40 $4.99

$5.86

$1.00 $1.02 $1.20 $1.25

$1.69

$0

$1

$2

$3

$4

$5

$6

$7

2010 2011 2012 2013 2014*

$3.48 $3.80

$4.23 $4.78

$6.96

$1.00 $1.00 $1.12 $1.25 $1.87

$0

$1

$2

$3

$4

$5

$6

$7

$8

2010 2011 2012 2013 2014*

$2.70 $3.50

$4.05 $4.65

$7.68

$0.93 $0.97 $1.00 $1.30 $1.87

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

2010 2011 2012 2013 2014*

$0

$.5

$1

$1.5

$2

2010 2011 2012 2013 2014*

All SoftwareMedia Commercial Services

$3.23

$4.07 $4.33

$4.80

$5.90

$1.00 $1.02 $1.14 $1.25 $1.67

$0

$1

$2

$3

$4

$5

$6

$7

2010 2011 2012 2013 2014*

Source: PitchBook*as of 6/30/14

Pre Money Valuation Deal Size


7 PITCHBOOK 2H 2014


Series A SERIES A VALUATIONS ($M) BY SECTOR

MEDIAN SERIES A ROUND DETAILS

% ACQUIRED

SOFTWARE

UP, FLAT & DOWN ROUNDS

MEDIA

DEAL SIZE ($M)

COMMERCIAL SERVICES

The median valuation for Series A rounds through

1H 2014 came in just under $12 million. Thats a $2 million increase from the median last year ($10.0 million) and close to double what we saw for 2010 financings ($6.5 million). Valuations for software companies consistently outpace the median across all industries; the 1H 2014 median was almost a full $1 million above the overall Series A median, at $12.9 million versus $12.0 million. At the same time, the median deal size for software companies matched the overall median for Series A financings, at $5 million each.

$0

$2

$4

$6

$8

$10

$12

$14

2010 2011 2012 2013 2014*

All Software Media Commercial ServicesSource: PitchBook

*as of 6/30/14

$6.67 $7.47

$8.49

$10.41

$12.89

$2.58 $3.00 $3.02 $3.69

$5.00

$0

$2

$4

$6

$8

$10

$12

$14

2010 2011 2012 2013 2014*

$4.83

$7.31

$8.77

$10.32 $11.28

$2.00 $2.50 $2.30 $3.38

$4.00

$0

$2

$4

$6

$8

$10

$12

2010 2011 2012 2013 2014*

$5.40

$7.58 $7.58

$10.10 $11.11

$2.00 $3.00

$2.13 $3.55

$4.00

$0

$2

$4

$6

$8

$10

$12

2010 2011 2012 2013 2014*

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014*

Up Flat Down

$0

$1

$2

$3

$4

$5

$6

2010 2011 2012 2013 2014*


18%

23%

28%

33%

2010 2011 2012 2013 2014*

All Software


Pre Money Valuation Deal Size Source: PitchBook*as of 6/30/14

8 PITCHBOOK 2H 2014


Series B SERIES B VALUATIONS ($M) BY SECTOR

MEDIAN SERIES B ROUND DETAILS

% ACQUIRED

SOFTWARE


MEDIA

DEAL SIZE ($M)

COMMERCIAL SERVICES

Valuations for Series B financings are up substantially

in 2014. Through 1H, the median valuation at the Series B stage was $35.2 million, a 36% increase over the $25.9 million median in 2013. That figure may come down a bit as more data is processed throughout the year, though its interesting to note that, prior to 1H 2014, the median had never eclipsed even the $30 million mark. Between 2010 and 2013, the median increased $20.9 million to $25.9 million last year. Meanwhile, after three consecutive years of investors taking smaller stakes at the Series B stage, investors negotiated higher stakes in 1H, from 21.7% last year to 22.8% in 2014.

$0

$10

$20

$30

$40

$50

$60

2010 2011 2012 2013 2014*



$14.50

$22.04 $27.35 $24.90

$47.87

$6.31 $8.00 $7.00 $6.90 $8.61 $0

$10

$20

$30

$40

$50

$60

2010 2011 2012 2013 2014*

$16.11 $19.02

$29.71

$23.75

$44.90

$6.31 $6.10 $7.00 $7.50 $9.22

$0

$10

$20

$30

$40

$50

2010 2011 2012 2013 2014*

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014*

Up Flat Down

$0

$5

$10

$15

2010 2011 2012 2013 2014*All SoftwareMedia Commercial Services

15%

20%

25%

30%

2010 2011 2012 2013 2014*

All Software


Pre Money Valuation Deal SizeSource: PitchBook

*as of 6/30/14

9 PITCHBOOK 2H 2014


$17.98

$25.00 $24.39

$28.66

$34.14

$7.00 $8.00 $8.00 $9.11 $10.26

$0

$5

$10

$15

$20

$25

$30

$35

$40

2010 2011 2012 2013 2014*

Series C SERIES C VALUATIONS ($M) BY SECTOR

MEDIAN SERIES C ROUND DETAILS

% ACQUIRED

SOFTWARE


MEDIA

DEAL SIZE ($M)

COMMERCIAL SERVICES

Valuations at the Series C stage are rising in tandem

with deal sizes. Versus 2013, the median valuation for Series C rounds was $55.4 million, which bumped up 26% in 1H 2014 to $70 million. Correspondingly, the median deal size ballooned to $16 million through 1H, a 23% increase over 2013.

More so than earlier stages, Series C valuations experience more year-to-year fluctuation, particularly when we look at valuation breakdowns at the industry level. The three charts at the very bottom of this page reflect the rapid changes in the median valuations for certain sectors, most notably the commercial services segment.

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2010 2011 2012 2013 2014*



$26.89

$47.69

$62.00 $59.92

$95.16

$8.90 $10.02 $12.04 $13.00 $17.59

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2010 2011 2012 2013 2014*

$42.32

$54.21

$44.22

$80.45

$53.64

$10.00 $8.00 $10.00 $10.00 $16.00

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2010 2011 2012 2013 2014*

$42.32

$76.00

$34.25

$79.88

$51.34

$10.59 $8.10 $9.50 $10.00 $14.51

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2010 2011 2012 2013 2014*

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014*

Up Flat Down

$0

$10

$20

2010 2011 2012 2013 2014*


10%

15%

20%

25%

2010 2011 2012 2013 2014*

All Software



*as of 6/30/14

10 PITCHBOOK 2H 2014


Series D and Later SERIES D+ VALUATIONS ($M) BY SECTOR

MEDIAN SERIES D+ ROUND DETAILS

% ACQUIRED

SOFTWARE


MEDIA

DEAL SIZE ($M)

COMMERCIAL SERVICES

Source: PitchBook

Compared to all other stages, valuations for Series D and

later rounds have jumped the most in recent years, particularly in 2014. Through the first half of this year, the median valuation increased 63% over 2013 levels, to $171.5 million. Financing sizes are also way up this year, to $30.1 million from $17.5 million in 2013.

Later-stage financings have included many non-traditional investors like hedge funds looking for pre-IPO exposure. Accordingly, it isnt surprising to see smaller stakes being purchased at the later stages. The median percentage acquired in 1H 2014 was 12.0%, down noticeably from 16.3% in 2010.

$0

$50

$100

$150

$200

$250

$300

2010 2011 2012 2013 2014*


*as of 6/30/14

$63.70

$95.34 $87.96

$150.80

$252.33

$10.00 $14.05 $15.12 $19.93

$35.00

$0

$50

$100

$150

$200

$250

$300

2010 2011 2012 2013 2014*

$112.68

$139.36 $119.64

$180.14

$215.17

$15.92 $20.15 $14.18 $20.49 $26.00

$0

$50

$100

$150

$200

$250

2010 2011 2012 2013 2014*

$91.22

$65.20

$112.65 $115.10

$188.88

$10.00 $18.50 $12.00 $16.00 $22.50

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2010 2011 2012 2013 2014*

$0

$10

$20

$30

$40

2010 2011 2012 2013 2014*All SoftwareMedia Commercial Services

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014*

Up Flat Down

0%

10%

20%

2010 2011 2012 2013 2014*

All Software



*as of 6/30/14



Valuation Change Between Rounds

UP, FLAT & DOWN ROUNDS BY QUARTER

UP, FLAT & DOWN ROUNDS BY YEAR

Beginning in mid-2010, more than half of all VC financings

have been up rounds, done at valuations higher than their previous rounds. As the graph to the upper-right shows, weve seen a gradually increasing trend toward more up-rounds and fewer down-rounds. Given the increase in valuations, that comes as no surprise, though its worthy to note how high the percentage has jumped, with 65% of all financings done at higher valuations in 2Q 2014. Only 2Q 2012 saw a higher percentage (66%) since the financial crisis. Down rounds, meanwhile, continue to decline in frequency, to 15% in 2Q 2014 from 35% in 2Q 2009.

Two-thirds of VC financings done at higher valuations will only add to the concerns in the industry about asymmetrical risk, for both investors and for founders. Higher valuations bring higher performance expectations, not to mention higher hurdles come exit time. As an example, a Series B investor makes an investment at a $100 million valuation, and given the typical return expectations at that stage (around 5x), the investment would need to be exited in the $500 million range. As several observers have pointed out, exit opportunities are limited, and assumptions about future return expectations may or may not come to fruition, especially if the M&A or stock markets slow. Additionally, high valuations at the Series B stage inevitably bring higher performance expectations if the company

65% of VC rounds in 2Q were done at a higher valuation than the previous financing.

Source: PitchBook

Source: PitchBook

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Up Flat Down*as of 6/30/14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


2009 2010 2011 2012 2013 2014

Up Flat Down



UP, FLAT & DOWN ROUNDS BY SECTOR

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014* 2012 2013 2014* 2012 2013 2014* 2012 2013 2014* 2012 2013 2014*

Software Media CommercialServices

HC Devices &Supplies

Pharma & Biotech

Up Flat Down

needs to raise Series C financing. As we noted in a previous report, valuations dont defy gravity and cant keep inching upward indefinitely. As such, we wouldnt be surprised to see more flat and down rounds in future quarters,


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especially if valuations deflate from current levels.

By industry, its interesting to see the differences in the number of up, flat and down rounds for certain segments of the market. Media and software startups tend

to enjoy more up rounds than healthcare devices and supplies and pharmaceutical and biotechnology companies, which reflects the different dynamics inherant in those industries more than anything.



Exits by Valuation

MEDIAN EXIT SIZE BY YEAR

EXIT VALUATION TO CAPITAL RAISED BY YEAR

Invariably, valuations for VC-backed companies are

directly tied to exit opportunities. Recent exit figures have given investors plenty of optimism, particularly the two charts on this page. Exit valuations continue to soar, while capital raised has remained relatively steady, even in the last year and a half. The exit valuation to capital raised ratio has reached a post-crisis high of 11.2x through the first two quarters of 2014, and even the 10.0x ratio recorded last year is very high by historical standards. As the chart to the bottom indicates, both IPOs and acquisitions are proving to be lucrative exit ramps; strong stock markets and yield-hungry investors have been paying up for VC-backed IPOs, and strategic acquirers and private equity firms have plenty of cash to buy portfolio companies, as well.

Source: PitchBook

Source: PitchBook

3.0x 3.8x 6.0x 2.7x 1.8x 5.8x 5.9x 6.7x10.0x 11.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

$0

$20

$40

$60

$80

$100

$120

$140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Exit Valuation/Capital Raised Capital Raised ($M) Exit Valuation ($M)

*as of 6/30/14


Exit activity may well set a record in 2014, with 654 liquidity events completed already in 1H. That pace would put this year ahead of 2013s final tally of 1,204. Furthermore, the aggregate amount of capital

exited remains high at $35 billion through 1H, well ahead of schedule compared to the $56 billion exited in all of 2013.

The graph at the bottom of page 15 says as much about VC

43.0 46.5 49.0 22.035.0

50.0 39.9 34.4 40.5

75.0

118.3

170.9

21.0

247.0

239.1228.2

277.9

213.7

252.1

$0

$50

$100

$150

$200

$250

$300

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Acquisition/Buyout IPO



Exits by Valuation VC EXIT FLOW BY YEAR

Source: PitchBook

Source: PitchBook

investments as it does about exits. The time between the last round of financing and exit has shrunk to a median of 1.9 years through 1H, down from 2.1 years in 2011. Meanwhile, the percentage change in valuations for the top quartile of exits is down to 152%, a high figure but considerably less than the 269% seen in 2012. The reason for both figures is due to more startups raising one last round of financing before their anticipated exits, usually through IPOs. Behemoth investors like hedge funds and mutual funds have helped strengthen the balance sheets of VC-backed companies before they go public, helping both themselves and the companies, which have been building stronger balance sheets before facing the glare of the public markets. As many industry professionals have noted, one of the key differences in todays VC market compared to the Internet bubble is that startups are much healthier pre-IPO. One

72%

124

%

146

%

112%

44

%

96

%

72%

96

%

63

%

86

%

142%

28

3%

33

0%

270

%

98

%

199

%

26

4%

26

9%

194

%

152%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Median % Change in Valuation Top Quartile % Change in Valuation

MEDIAN % CHANGE IN VALUATION AT EXIT BY YEAR

of the byproducts of that change has been fewer post-IPO pops in stock prices, at least compared to 15 years ago. In effect, professional investors have captured more pre-exit value in startups, propping up later-stage valuations in the process.

As we mentioned previously,

exits are inextricably linked to investment valuations. One of the concerns many observers have is that, because exit opportunities are somewhat limited, some of the recent investments made at high valuations will handcuff investors when its time to exit. Well have to wait and see if that comes to pass.

*as of 6/30/14

*as of 6/30/14

$24

$3

5

$5

4

$3

1

$21

$3

7

$5

2

$6

1

$5

6

$3

5

552

690

814

635 624

9631,000

1,1191,204

654

0

200

400

600

800

1,000

1,200

1,400

$0

$10

$20

$30

$40

$50

$60

$70

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

Capital Exited ($B) Exits Closed



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CAPITAL INVESTED & DEAL COUNT DEALS BY REGIONS

SEARCH RESULTS

Limited Partners

2,716 LPs

SAVED SEARCHES

Europe League Table 40,672

Funds w/ Dry Powder 12,948

Open Funds 89

recent IT deals 51,176

PitchBook Rocks 114,382

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Total Capital Invested (millions, USD) Deal Count

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Limited Partners Name (2,716)# Limited Partner Type# Affiliated Funds

# Affiliated Investors AUM

Private Equity

Private Equity (%) HQ Location HQ Ph

1

2

3

4

5

6

7

8

9

10

11

12

13

New York State Common Retirement Fund

Pennsylvania State Employees Retirement S...Pennsylvania Public School Employee Retire...

Bell Atlantic Master Trust

Teachers Insurance and Annuity Assocation...

Massachusetts Pendon Reserves Investment...

Metropolitan Life Insurance

New York State Teachers Retirement System

Metlife Insurance Company of ConnecticutMassachusetts Mutual Life Insurance Company

China Insurance Company

Public Pension Fund

Public Pension Fund

Public Pension Fund

Corporate Pension

Insurance Company

Public Pension Fund

Insurance CompanyPublic Pension Fund

Insurance Company

Insurance Company

Public Pension Fund

594502

348333

328313

312308

304

274373

312192

158157

169136

185126

212

163147

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176,200.00

25,900.00

50,500.00103.35

178.50

59,700.00

516,206.00104,300.00

405,900.00

24,700.00181,980.00

13,919.80

25,900.00

8,040.00103.35

178.50

5,916.00

516,206.007,800.00

405,900.00

24,700.0018,371.00

8%

12%22%17%

42%

12%

7%8%

4.5%

7.3%10%

Albany, NY

Harrisburg, PA

Harrisburg, PA

Basking Ridge, NJ

New York, NY

Boston, MA

New York, NYAlbany, NY

Bloomfield, Ct

Springfield, MA

Quebec, Canada

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New York State Teachers Retirement System Public Pension Fund 308 126 104,300.00 7,800.00 8% Albany, NY

Bell Atlantic Master Trust Corporate Pension 333 157 103.35 103.35 17% Basking Ridge, NJ

Katzen Eye Group Goes Varsity

Energy

VCs doing better than ever

recent IT deals

PitchBook Rocks

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PitchBook 2H 2014 VC Valuations and Trends Report

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Transcript of PitchBook 2H 2014 VC Valuations and Trends Report