National Venture Capital Association Yearbook 2014 by pshmerling

NATIONAL VENTURE CAPITAL ASSOCIATION YEARBOOK 2014

NATIONAL VENTURE CAPITAL ASSOCIATION 2014 INCLUDING STATISTICS FROM THE PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters

2014 National Venture Capital Association Yearbook | 1

March 2014

Dear Colleague: We are delighted to present to you the NVCA 2014 Yearbook, prepared by Thomson Reuters. This is the 17th edition in a series launched in early 1998. Since then, much has changed in the industry. One thing that has not changed, however, is our commitment to bring accurate and responsible transparency to this powerful economic force called venture capital. You will find in this publication new and updated charts that track investment activity in the United States. Reflecting our dynamic environment, for the first time we provide a chapter on Growth Equity â&#x20AC;&#x201C; an asset subclass that did not exist in its present form when we printed the first edition of this publication. More changes are already in the works. For example, in recognition of the strong and broad emergence of corporate venture capital groups and direct corporate investment over the past few quarters, we will soon be changing our methodology to be more inclusive of solo (i.e., without a traditional venture investor in the round) and early corporate investment into companies. Further, we will also include corporate direct investment from the corporation itself, not just from a separate or captive entity. Stay tuned. The industryâ&#x20AC;&#x2122;s goal remains the same: to create fast-growing and sustainable companies, introduce new technologies, and improve medical care and patient well-being, while providing an attractive return to those who trust the industry with their capital. Whether by traditional venture capital, corporate venture capital, growth equity, or a number of new and energized investment vehicles, we are here to report that the beat goes on. As always, your feedback and suggestions are welcome. Please feel free to contact us at research@nvca. org or through any NVCA director or staff member. Very truly yours,

Diana Frazier FLAG Capital Management NVCA Director and Chair, Research Committee

NVCA

Bobby Franklin NVCA President and CEO

John S. Taylor NVCA Head of Research

THOMSON REUTERS

2 | 2014 National Venture Capital Association Yearbook

NVCA BOARD OF DIRECTORS 2013-2014 EXECUTIVE COMMITTEE

Josh Green Scott Sandell Mohr, Davidow Ventures New Enterprise Associates Chair Chair-Elect Anne Rockhold Accel Partners Treasurer

Jonathan Callaghan True Ventures Executive Committee At-Large

Bruce Evans Summit Partneer Executive Committee At-Large

Jonathan Leff Deerfield Management Executive Committee At-Large, Research Committee

AT-LARGE

Diana Frazier Mark Leschly FLAG Capital Rho Ventures Research Chair Research Committee John Backus Maria Cirino New Atlantic Ventures .406 Ventures David Douglass Claudia Fan Munce Delphi Ventures IBM Venture Capital Group

Norm Fogelsong Venky Ganesan Institutional Venture Partners Menlo Ventures Robert Goodman Mark Gorenberg Bessemer Venture Partners Zetta Venture Partners Jason Green Adam Grosser Emergence Capital Partners Silver Lake Kraftwerk James Healy Ross Jaffe Sofinnova Ventures Versant Ventures Scott Kupor Ray Leach Andreessen Horowitz Jumpstart, Inc David Lincoln Robert Nelsen Element Partners ARCH Venture Partners Art Pappas Sue Siegel Pappas Ventures GE Ventures

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 3

2014 National Venture Capital Association Yearbook

For the National Venture Capital Association Prepared by Thomson Reuters

The information presented in this report has been gathered with the utmost care from sources believed to be reliable, but is not guaranteed. Thomson Reuters disclaims any liability including incidental or consequential damages arising from errors or omissions in this report.

NVCA

THOMSON REUTERS

4 | 2014 National Venture Capital Association Yearbook

National Venture Capital Association 2014 Yearbook National Venture Capital Association 1655 Fort Myer Drive, Suite 850 Arlington, Virginia 22209-3114 Telephone: 703-524-2549 Telephone: 703-524-3940 www.nvca.org

Thomson Reuters 3 Times Square, 18th Floor New York, NY 10036 Telephone: 646-223-4431 Fax: 646-223-4470 www.thomsonreuters.com

President and CEO Bobby Franklin

Global Head of Deals & Private Equity Stephen N. Case II

President Emeritus Mark G. Heesen

Head of Deals and Private Equity Operations Katarzyna Namiesnik

Head of Research John S. Taylor

Global Business Manager â&#x20AC;&#x201C; Private Equity Jim Beecher

Senior Vice President of Federal Policy and Political Advocacy Jennifer Connell Dowling

Editor-in-Charge David Toll

Vice President of Federal Life Science Policy Kelly Slone

Global Private Equity Operations Manager Anna Aquino-Chavez

Vice President of Federal Policy and Political Advocacy Emily Baker Vice President of Communications Ben Veghte Vice President of Membership and Member Firm Liaison Janice Mawson

Press Management Matthew Toole

Vice President of Administration Roberta Catucci Director of Business Development Hannah Veith

Data Specialist Francis S. Tan

Manager of Administration and Meetings Allyson Chappell Accounting Manager Beverley Badley

Sales Manager â&#x20AC;&#x201C; Publications (Buyouts, VCJ, peHUB) Greg Winterton (646-223-6787)

Senior Content Specialist Michael D. Smith Content Specialist Paul Pantalla

Senior Art Director David Cooke

ThomsonONE.com Sales:

1-877-365-1455

Research Lab Mavis Moulterd (Emeritus), Annie Black, Liberty Benjamin Lab Assistants Thea Shepherd, Lexi Oscar, Gracie Baker

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 5

TABLE OF CONTENTS What is Venture Capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 11 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Exits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 14 Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 17 Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Growth Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Appendix A: Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Appendix B: MoneyTree Report Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105 Appendix C: MoneyTree Geographical Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107 Appendix D: Industry Codes (VEICs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113 Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115 Appendix G: Data Sources and Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Appendix H: International Convergence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .119 Appendix I: US Accounting Rulemaking and Valuation Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121 Appendix J: Non-US Private Equity . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . 125

NVCA

THOMSON REUTERS

6 | 2014 National Venture Capital Association Yearbook

This page is intentionally left blank.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 7

WHAT IS VENTURE CAPITAL? Venture capital has enabled the United States to support its entrepreneurial talent and appetite by turning ideas and basic science into products and services that are the envy of the world. Venture capital funds build companies from the simplest form – perhaps just the entrepreneur and an idea expressed as a businessplan – to freestanding, mature organizations.

Risk Capital for Business Venture capital firms are professional, institutional managers of risk capital that enables and supports the most innovative and promising companies. This money funds new ideas that could not be financed with traditional bank financing, that threaten established products and services in a corporation, and that typically require five to eight years to be launched. Venture capital is quite unique as an institutional investor asset class. When an investment is made in a company, it is an equity investment in a company whose stock is essentially illiquid and worthless until a company matures five to eight years down the road. Follow-on investment provides additional funding as the company grows. These “rounds,” typically occurring every year or two, are also equity investment, with the shares allocated among the investors and management team based on an agreed “valuation.” But, unless a company is acquired or goes public, there is little actual value.Venture capital is a long-term investment.

Venture Capital Backed Companies Known for Innovative Business Models Employment at IPO and Now Company

As of IPO

Current

# Change

650

331,000

330,350

Starbucks Corporation

2,521

160,000

157,479

Staples

1,693

89,019

87,326

Whole Foods Market, Inc.

2,350

69,500

67,150

138

31,500

31,362

The Home Depot

eBay

Venture Capital Backed Companies Known for Innovative Technology Products Employment at IPO and Now Company

As of IPO

Current

# Change

Microsoft

1,153

94,000

92,847

Intel Corporation

460

100,100

99,640

Medtronic, Inc.

1,287

45,000

43,713

Apple Inc.

1,015

76,100

75,085

Google

3,021

53,861

50,840

More Than Money

JetBlue

4,011

12,070

8,059

The U.S. venture industry provides the capital to create some of the most innovative and successful companies. But venture capital is more than money. Venture capital partners become actively engaged with a company, typically taking a board seat. With a startup, daily interaction with the management team is common. This limits the number of startups in which any one fund can invest. Few entrepreneurs approaching venture capital firms for money are aware that they essentially are asking for 1/6 of a person! Yet that active engagement is critical to the success of the fledgling company. Many one- and two-person companies have received funding but no one- or twoperson company has ever gone public!Along the way, talent must be recruited and the company scaled up. Ask any venture capitalist who has had an ultra-successful investment and he or she will tell you that the company that broke through the gravity evolved from the original business plan concept with the careful input of an experienced hand.

Source: Global Insight; Updated fromThomsonOne 2/2013

Deal Flows — Where The Buys Are For every 100 business plans that come to a venture capital firm for funding, usually only 10 or so get a serious 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 objectives, the value-added potential for the firm, and the capital needed to build a successful business. A busy venture capital professional’s most precious asset is time. These days, a business concept needs to address world markets, have superb scalability, be made successful in a reasonable timeframe, and be truly innovative. A concept that promises a 10 or 20 percent improvement on something that already exists is not likely to get a close look.

NVCA

Many technologies currently under development by venture capital firms are truly disruptive technologies that do not lend themselves to being embraced by larger companies whose current products could be cannibalized by this. Also, with the increased emphasis on public company quarterly results, many larger organizations tend to reduce spending on research and development and product development when things get tight. Many talented teams have come to the venture capital process when their projects were turned down by their companies.

Common Structure — Unique Results While the legal and economic structures used to create a venture capital fund are similar to those used by other alternative investment asset classes, venture capital itself is unique. Typically, a venture capital firm will create a Limited Partnership with the investors as LPs and the firm itself as the General Partner. Each “fund,” or portfolio, is a separate partnership. A new fund is established when the venture capital firm obtains necessary commitments from its investors, say $100 million. The money is taken from investors as the investments are made. Typically, an initial funding of a company will cause the venture fund to reserve three or four times that first investment for follow-on financing. Over the next three to eight or so years, the venture firm works with the founding entrepreneur to grow the company. The payoff comes after the company is acquired or goes public. Although the investor has high hopes for any company getting funded, only one in six ever goes public and one in three is acquired.

THOMSON REUTERS

8 | 2014 National Venture Capital Association Yearbook

Economic Alignment of all Stakeholders — An American Success Story Venture capital is rare among asset classes in that success is truly shared. It is not driven by quick returns or transaction fees. Economic success occurs when the stock price increases above the purchase price. When a company is successful and has a strong public stock offering, or is acquired, the stock price of the company reflects its success. The entrepreneur benefits from appreciated stock and stock options. The rank and file employees throughout the organization historically also do well with their stock options. The venture capital fund and its investors split the capital gains per a pre-agreed formula. Many college endowments, pension funds, charities, individuals, and corporations have benefited far beyond the risk-adjusted returns of the public markets.

What’s Ahead Much of venture capital’s success has come from the entrepreneurial spirit pervasive in theAmerican culture, financial recognition of success, access to good science, and fair and open capital markets. It is dependent upon a good flow of science, motivated entrepreneurs, protection of intellectual property, and a skilled workforce. The nascent deployment of venture capital in other countries is gated by a country’s or region’s cultural fit, tolerance for failure, services infrastructure that supports developing companies, intellectual property protection, efficient capital markets, and the willingness of big business to purchase from small companies.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 9

EXECUTIVE SUMMARY During 2013, many of the metrics describing the venture capital industry in the United States were similar to those of the prior three years, with the exception of a pickup in the breadth of the IPO markets. The decline in capital managed continued as expected, but not as much as some were anticipating. A record proportion of venture deals focused on companies in the seed and early stages, while a number of companies long in the portfolios finally went public, led by Biotechnology companies in the first half of 2013. Investment in early-stage life science companies continued to fall during the year, although a fourth-quarter increase in first fundings of Biotechnology companies was encouraging. Fundraising remained very challenging for the majority of venture firms. This is largely because of a dearth of healthy exits through 2012 that would have distributed yet-unrealized returns to current fund investors. Aside from the Facebook IPO in 2012 ($16.0B of the $21.5B raised in 2012), 2013 was a much-improved year with 81 venture-backed IPOs. Remarkably, over half of them were Biotechnology companies. Early signs for 2014 suggest that IPO momentum carried forward into at least the first part of the year. A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new business opportunities, known as deal flow, remains very high and the best opportunities are getting funded, stresses remain.

Introduction The National Venture Capital Association 2014 Yearbook provides a summary of venture capital activity in the United States. This ranges from investments into portfolio companies to capital managed by general partners to fundraising from limited partners to valuations of companies receiving venture capital investments to exits of the investments by either IPOs or mergers and acquisitions. The statistics for this publication were assembled primarily from the MoneyTreeâ&#x201E;˘ Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters and analyzed through the Thomson ONE.

Figure 1.0 Venture Capital Under Management Summary Statistics 1993

2003

2013

No. of VC Firms in Existence

370

951

874

No. of VC Funds in Existence

613

1,788

1,331

No. of Professionals

5,217

14,777

5,891

No. of First Time VC Funds Raised

No. of VC Funds Raising Money This Year

160

187

VC Capital Raised This Year ($B)

4.5

9.1

16.8

VC Capital Under Management ($B)

29.3

263.9

192.9

Avg VC Capital Under Mgt per Firm ($M)

79.2

277.5

220.7

Avg VC Fund Size to Date ($M)

40.2

94.4

110.3

Avg VC Fund Size Raised This Year ($M)

48.3

102.9

89.7

Largest VC Fund Raised to Date ($M)

1,775.0

6,300.0

NVCA

com (formerly VentureXpert) database of Thomson Reuters, which has been endorsed by the NVCA as the official industry activity database. Subscribers to Thomson ONE can recreate most of the charts in this publication and report individual deal detail and more granular statistics than those provided herein.

Industry Resources The activity level of the US venture capital industry is roughly half of what it was at the 2000-era peak. For example, in 2000, 1,050 firms each invested $5 million or more during the year. In 2013, the count was roughly half that at 548. Venture capital under management in the United States by the end of 2013 decreased to $192.9 billion. However, looking behind the numbers, we know that the industry continues to contract from the circa 2004 high of $288.9 billion. The peak capital under management that year was a statistical anomaly caused when funds raised at the height of the 2000 tech bubble were joined by new capital raised post bubble. The slight downtick in firms and capital managed (Fig. 1.04) in 2013 understates a consolidating industry. The average venture capital firm shrunk to 6.7 principals per firm from 8.7 just six years earlier. The corresponding drop in headcount to under 6,000 principals is almost one-third lower than 2007 levels. This meant that there was a general increase in the average amount of capital managed by each principal. It is possible going forward that the number of principals per firm will increase as the number of firms decreases. This is because the bulk of the capital being committed today is being raised by larger, specialty, and boutique firms. For our purposes here, we define a principal to be someone who goes to portfolio company board meetings. That is, deal partners would be included and firm CFOs would not be included. Contrary to some popular misconceptions, only 43 firms managed more than $1 billion. By comparison, 277 firms managed less than $25 million.

Commitments The year 2013 continued to be a very challenging fundraising year for most venture capital firms in the United States. This was due to a lack of recent distributions caused by the tight exit markets, lackluster returns by many venture funds over the past decade compared with the prior decade, and a challenge for the largest alternative asset investors to place money in many of the smaller funds in this asset class because of scale. Only $16.8 billion was raised by 187 funds. This was considerably less than the $19.6 billion raised in 2012 or the $19.0 billion raised in 2011. The amount of new commitments each year by venture capital funds continued to be less than the amount they invested in companies.

Investments Measuring industry activity by the total dollars invested in a given year shows that the industry has remained generally in the $20 billion to $30 billion range since 2002. In 2013, $29.5 billion was invested in 3,382 companies through 4,041 deals. The number of deals was 4% higher than 2012 counts, but was essentially the same as 2011. The number of firsttime fundings increased in 2013 to 1,334 companies from the previous 1,275, but it remains near the top of the healthy range of 1,000 to 1,400

THOMSON REUTERS

10 | 2014 National Venture Capital Association Yearbook

first-time fundings in a year. Further parsing the data shows 50% of the investment dollars going to California companies, down from 53% in 2012 but consistent with the previous three years. The year 2013 saw a record 56% of the financing rounds going to seed and early stage companies, compared with a more typical one-third of deals. A carefully watched statistic is the investment in the life sciences. It is possible that the downward plummet in first-time life sciences investment is starting to reverse, led by Biotechnology, but it is still too early to be sure. Corporate Venture investment continues to gain considerable strength and presence in the overall industry. Software was the leading sector in 2013, receiving 37.3% of the total dollars. The second largest sector was Biotechnology, which was less than half that amount at 15.4% of total investment. Among first fundings, Software led the way with 591 companies getting their initial venture capital rounds. This is more than 46% of the first fundings. Again in 2013, the second most active first-funding sector is Media and Entertainment at 170 first fundings. California-domiciled venture capital firms made investments in 38 states in 2013. Approximately 48% of all the money invested in California came from California-domiciled firms. Conversely, California-based firms concentrated 68% of their investment dollars within the state. The number and reach of corporate venture capital groups increased in 2013, along with the visibility of this group. These groups provided an estimated 10.5% of the venture capital invested by all venture groups. They were involved in 16.9% of the deals â&#x20AC;&#x201C; the highest level in five years. Going forward, all signs suggest that these groups are becoming more involved alongside traditional venture firms in deals, as well as initiating corporate venture group syndicates to do deals in lieu of, or in advance of, investment rounds by traditional venture firms.

Exits Once successful portfolio companies mature, venture funds generally exit their positions in those companies by taking them public through an initial public offering (IPO) or by selling them to presumably larger organizations (acquisition, â&#x20AC;&#x153;M&Aâ&#x20AC;?, or trade sale). This then lets the venture fund distribute the proceeds to investors, raise a new fund for future investment, and invest in the next generation of companies. We consider each type of exit separately. During 2013, 81 venture-backed companies went public in the United States, marking the strongest full-year total for the number of new venture-backed listings since 2007. Remarkably, more than half of them were Biotechnology IPOs, many of those being modestly sized. While the total

THOMSON REUTERS

dollars raised in 2012 was higher at $21.5 billion, it is important to remember that $16.0 billion of that came from the Facebook IPO alone. The remaining $5.5 billion was raised by the remaining 48 IPOs in 2012. It was a very different story in 2013. $11.1 billion was raised by 81 companies. The increase in mean and median time to exit reflects the fact that many of these IPOs were mature companies, and many of them were in the life sciences space, which had been awaiting an IPO opportunity for months, and in some cases, years. NVCA is encouraged by the increase in smaller IPOs and biotech IPOs in light of its 2012 legislative successes with the JOBS Act and creating a pathway for FDA Reform. The M&A space continued to soften in 2013, with the total number of deals falling from 473 in the prior year to 376. Total proceeds fell by 27%. Note that only 94 of the 376 acquisitions had reported deal values. Historically, deals with unreported sales prices are fairly diminutive, and in many cases, fire sales. However, an increasing number of deal term sheets specify a non-disclosure restriction on all parties. So going forward, all but the largest and most visible acquisitions may be hard to measure. Observers have wondered why, given the huge amounts of cash on the balance sheets of technology and Biotechnology giants, more acquisitions are not occurring. We did see a flurry of acquisitions in early 2014, perhaps signaling an increase in that kind of activity.

Growth Equity This edition of the NVCA Yearbook, prepared by Thomson Reuters, for the first time profiles US growth equity investment in its own chapter. The NVCA believes growth equity investing is an important segment of the overall venture capital industry. Venture capitalists help create and grow companies; growth equity investors are strongly focused on the growth component of that mission and help companies scale through fat part of their hiring curves. The NVCA also believes that growth equity investing is a critical component of the emerging growth company financing continuum and has become, in many respects, the private alternative to the public markets for both emerging growth companies and their earlier stage venture capital backers. Growth equity really emerged as an asset class in 2000 and continues strong today. In 2013, we identified 342 growth equity deals in the United States. This compares with 406 in 2012, but is very much in line with the past several years. A disclosed $12.3 billion in equity investment was reported for 2013. This does not count the approximately 105 deals for which no dollar equity amounts were disclosed.

NVCA

2014 National Venture Capital Association Yearbook | 11

Figure 2.0 Capital Under Management U.S. Venture Funds ($ Billions) 1985 to 2013

350 300

($ Billions)

250 200 150 100 50

201

201 1

201

200

199

198

0 Year

Figure 3.0 Capital Commitments To U.S. Venture Funds ($ Billions) 1985 to 2013

120 100

($ Billions)

80 60 40 20

201

201 1 201 2

201

200

199

9 200 0 200 1

199

198

Year

NVCA

THOMSON REUTERS

12 | 2014 National Venture Capital Association Yearbook

Figure 4.0 Venture Capital Investments ($ Billions) 1985 to 2013

120 100

($ Billions)

80 60 40 20

199

4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3

199

198

0 Year

Figure 5.0 Venture Capital Investments in 2013 By Industry Group All Investments Industry Group

Initial Investments

# Companies

# Deals

Investment Amt ($Bil)

# Companies

# Deals

Investment Amt ($Bil)

2,360

2,784

1009

3.5

Medical/Health/Life Science

649

816

6.9

167

1.2

Non-High Technology

373

440

2.7

157

0.4

3,382

4,041

29.6

1,334

5.1

Information Technology

Total

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 13

Figure 6.0 Venture Capital Investments in 2013 By Stage Seed 3% Later Stage 30%

Early Stage 34%

Expansion 33%

Figure 7.0 Venture Capital Investments in 2013 By Industry Sector

Telecommunications 2%

Other 0.2%

Biotechnology Business Products and 15% Services 0.4% Computers and Peripherals 2% Consumer Products and Services 4%

Software 37%

Electronics/Instrumentation 1% Financial Services 2% Healthcare Services 1%

Semiconductors 2%

IT Services 7%

Retailing/Distribution 1% Networking and Equipment 2%

NVCA

Industrial/Energy 5%

Media and Entertainment 10% Medical Devices and Equipment 7%

THOMSON REUTERS

14 | 2014 National Venture Capital Association Yearbook

Figure 8.0 2013 Investments By State State

Number of Companies

Pct of Total

Investment ($ Millions)

Pct of Total

California

1,280

40%

14,769.7

50%

Massachusetts

326

10%

3,079.3

10%

New York

287

2,870.4

10%

Texas

101

1,315.5

Washington

134

913.2

Maryland

664.5

Virginia

593.8

Pennsylvania

154

446.5

Illinois

434.9

Colorado

428.8

All Others

676

21%

4,028.6

14%

Total

3,230

29,545.2

Figure 9.0 Venture-Backed IPOs Year

Num of IPOs

Offer Amount ($Mil)

Med Offer Amt ($Mil)

Mean Offer Amt Post Offer Value ($Mil) ($Mil)

Med Post Value ($Mil)

Mean Post Value ($Mil)

Median Age At IPO (Years)

Mean Age At IPO (Years)

1985

763

2,020

3.0

4.0

1986

105

2,417

166,032

1866

4.0

1987

2,125

10,972

155

4.0

1988

769

21,117

571

3.0

4.0

1989

873

4,443

131

4.0

4.0 4.0

1990

1,108

5,886

178

4.0

1991

120

3,726

17,611

202

5.0

1992

150

5,443

15,955

146

5.0

1993

175

6,154

14,808

130

5.0

6.0

1994

138

3,952

10,344

5.0

1995

184

7,859

19,300

104

152

4.0

5.0

1996

256

12,716

51,511

112

240

3.0

4.0

1997

141

5,829

19,101

148

3.0

6.0

1998

4,125

24,655

164

324

3.0

1999

280

23,975

147,341

304

532

3.0

2000

238

27,443

115

108,783

325

494

3.0

4.0

2001

4,130

112

19,233

327

534

4.0

2002

2,333

8,322

266

347

3.0

5.0

2003

2,024

7,412

252

285

5.0

6.0

2004

10,032

122

50,268

254

613

6.0

2005

5,113

39,702

202

673

5.0

2006

7,065

105

71,124

283

1078

5.0

6.0

2007

12,339

136

68,203

365

749

6.0

2008

765

109

3,645

278

521

7.0

2009

1,980

123

152

9,192

548

707

6.0

7.0

2010

7,774

111

114,981

428

1643

5.0

6.0

2011

10,690

106

210

94,657

606

1856

6.0

7.0

2012

21,460

438

122,168

371

2493

7.0

8.0

2013

11,068

137

62,700

354

784

7.0

8.0

*Age at IPO is defined as time elapsed from first funding round until IPO date.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 15

Figure 10.0 Venture-Backed Mergers & Acquisitions by Year ($ Millions)

NVCA

Year

Number Total

Number Known

Price

Average

1985

300.2

100.1

1986

63.4

1987

667.2

166.8

1988

920.7

102.3

1989

746.9

74.7

1990

120.3

17.2

1991

190.5

47.6

1992

2119.1

49.3

1993

1332.9

37.0

1994

3208.4

56.3

1995

3801.8

65.5

1996

108

8230.8

108.3

1997

145

100

7798.0

78.0

1998

189

113

8002.0

70.8

1999

228

155

38710.6

249.7

2000

379

245

79996.4

326.5

2001

384

175

25115.6

143.5

2002

365

166

11913.2

71.8

2003

323

134

8240.8

61.5

2004

402

199

28846.1

145.0

2005

446

201

19717.3

98.1

2006

484

208

24291.0

116.8

2007

488

201

30745.5

153.0

2008

417

134

16236.9

121.2

2009

351

109

12364.9

113.4

2010

523

150

17707.3

118.0

2011

490

169

24093.2

142.6

2012

473

132

22694.2

171.9

2013

376

16586.5

176.5

THOMSON REUTERS

16 | 2014 National Venture Capital Association Yearbook

Figure 11.0 Growth Equity Investments ($ Billions) 2000 to 2013* 30 25

($ Billions)

20 15 10 5

3 201

2 201

1 201

0 201

9 200

8 200

7 200

6 200

5 200

4 200

3 200

2 200

1 200

200

Year Totals include only disclosed amounts. Many growth equity deal amounts are not reported.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 17

INDUSTRY RESOURCES The activity level of the US venture capital industry is roughly half of what it was at the 2000-era peak. For example, in 2000, 1,050 firms each invested $5 million or more during the year. In 2013, the count was roughly half that at 548. Venture capital under management in the United States by the end of 2013 decreased to $192.9 billion as calculated using the methodology described below. However, looking behind the numbers, we know that the industry continues to contract from the circa 2006 high of $288.9 billion. The peak capital under management that year was a statistical anomaly caused by funds raised at the height of the 2000 tech bubble were joined by new capital raised post bubble. The slight downtick in firms and capital managed (Fig. 1.04) in 2013 perhaps understates a consolidating industry. The average venture capital firm shrunk to 6.7 principals per firm from 8.7 just six years earlier. The corresponding drop in headcount to under 6,000 principals is almost one-third lower than 2007 levels. This meant that there was a general increase in the average amount of capital managed by each principal. It is possible going forward that the number of principals per firm will increase as the number of firms decreases. This is because the bulk of the capital being committed today is being raised by larger, specialty, and boutique firms. For our purposes here, we define a principal to be someone who goes to portfolio company board meetings. That is, deal partners would be included and firm CFOs would not be included. Geographic location of the largest venture firms is quite concentrated. 49% of the industry’s California-domiciled firms manage capital, although these firms may be actively investing in other states and countries. This concentration has been consistent for several years and may increase going forward, given the movement of some East Coast funds westward. Taken together, the top five states (California, Massachusetts, New York, Connecticut, and Illinois) hold 81.1% of total venture capital in this country, essentially the same as a year ago. Contrary to some popular misconceptions, only 43 firms managed more than $1 billion. By comparison, 277 firms managed less than $25 million.

Methodology Historically, we have calculated industry size using a “rolling eight years of fundraising” proxy for capital managed, number of funds, number of firms, etc. The number of firms in existence will vary on a rolling eight-year basis as firms raise new funds or do not raise funds for more than eight years. Currently, we know the industry is consolidating, but the eight-year model now includes fund vintage years 2006-2013. Under this methodology, we estimate that there are currently 874 firms with limited partnerships “in existence.” To clarify, this is actually stating that there are 874 firms that have raised a venture capital fund in the last eight years. In reality, only 548 of them invested at least $5 million in companies in 2013, and 136 of them invested more than $5 million in first rounds for a company. For this publication, we are primarily counting the number of firms with limited partnerships and are excluding other types of investment vehicles. From that description, it may appear that the statistics for total industry resources may be underestimated. However, this must be balanced with the fact that capital under management by captive and evergreen funds is difficult to compare equitably to typical limited partnerships with fixed lives. For this analysis only, the firms counted for capital under management include firms with fixed-life partnerships and venture capital funds they raised. If a firm raised both buyout and venture capital funds, only the venture funds would be counted in the calculation of venture capital under management. Venture capital under management can be a complex statistic to estimate. Indeed, capital under management reported by firms can differ from firm to firm as there’s not one singular definition. For example, some firms include only cumulative committed capital, others may include committed capital plus capital gains, and still other firms define it as committed capital after subtracting liquidations. To complicate matters, it is difficult to compare these totals to European private equity firms, which include capital gains as part of their capital under management measurements.

NVCA

For purposes of the analysis in this publication, we have tried to clarify the industry definition of capital under management as the cumulative total of committed capital less liquidated funds or those funds that have completed their life cycle. Typically, venture capital firms have a stated 10-year fixed life span, except for life science funds, which are often established as 12-year funds. Figure 1.09 shows the reality of fund life. Thomson Reuters calculates capital under management as the cumulative amount committed to funds on a rolling eight-year basis. Current capital under management is calculated by taking the capital under management calculation from the previous year, adding in the current year’s funds’ commitments, and subtracting the capital raised eight years prior. For this analysis, Thomson Reuters classifies venture capital firms using four distinct types: private independent firms, financial institutions, corporations, and other entities. ‘Private independent’ firms are made up of independent private and public firms including both institutionally and non-institutionally funded firms and family groups. ‘Financial institutions’ refers to firms that are affiliates and/or subsidiaries of investment banks and non-investment bank financial entities, including commercial banks and insurance companies. The ‘corporations’ classification includes venture capital subsidiaries and affiliates of industrial corporations. In 2013, we will modify the methodology to reflect virtually all direct corporate investment because many of the corporate venture investors do not operate out of a separate fund or group. The capital under management statistics reported in this section consist primarily of venture capital firms investing through limited partnerships with fixed commitment levels and fixed lives and do not include non-vintage “evergreen funds” or true captive corporate industrial investment groups without fixed commitment levels. The term ‘evergreen funds’ refers to funds that have a continuous infusion of capital from a parent organization, as opposed to the fixed life and commitment level of a closed-end venture capital fund.

THOMSON REUTERS

18 | 2014 National Venture Capital Association Yearbook

Figure 1.01 Capital Under Management U.S. Venture Funds ($ Billions) 1985 to 2013

350 300

($ Billions)

250 200 150 100 50

198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3

0 Year

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 19

Figure 1.02 Total Capital Under Management By Firm Type 1985 to 2013 1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Private Independent

11,766

14,721

17,459

18,850

22,369

22,722

21,893

22,643

25,162

28,490

33,308

40,201

51,940

76,560

119,121

Financial Institutions

3,388

3,520

3,447

3,190

2,719

2,793

2,384

2,214

2,431

2,873

3,688

5,070

7,061

10,238

15,291

Corporations

1,582

1,545

1,895

1,989

1,931

1,963

1,907

2,032

1,517

1,564

1,526

2,219

2,531

3,425

8,169

Other

864

914

900

871

781

722

616

312

190

273

378

410

667

877

1,119

Total

17,600

20,700

23,700

24,900

27,800

28,200

26,800

27,200

29,300

33,200

38,900

47,900

62,200

91,100

143,700

Figure 1.02 (Continued) Total Capital Under Management By Firm Type 1985 to 2013 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

241,637

255,315

239,643

194,573

171,016

174,722

186,032

186,676

179,202

Private Independent

187,356

221,327 222,028 224,828 233,595

Financial Institutions

22,980

24,459

23,945

23,015

21,659

21,110

18,325

13,914

6,034

4,708

5,620

7,734

7,970

6,615

Corporations

12,995

14,153

14,126

13,886

13,627

13,467

13,297

8,990

4,294

3,125

3,688

4,860

4,892

6,401

Other

1,469

2,061

2,201

2,170

2,219

1,986

1,963

1,754

1,399

851

670

674

662

682

Total

224,800

278,200

288,900

264,300

184,700

199,300

200,200

192,900

262,000 262,300 263,900 271,100

206,300 179,700

Figure 1.03 Distribution of Firms By Capital Managed 2013 200

164

150

113

132

114

107 82

100

00 + 10

0 10 0 50 0-

00 -5 25 0

50 -2 10 0

00 -1 50

0 25 -5

5 10 -2

This chart shows capital committed to US venture firms in active funds. While much of the capital is managed by larger firms, of the 808 firms included in this calculation at the end of 2013, roughly 62% of them (498) managed $100 million or less. By comparison, just 43 firms managed active funds totaling more than $1 billion.

NVCA

THOMSON REUTERS

20 | 2014 National Venture Capital Association Yearbook

Figure 1.04 Fund and Firm Analysis 2013 Fund Vintage Year

Total Cumulative Funds

Total Cumulative Firms

Total Cumulative Capital ($B)

Existing Funds

Firms That Raised Funds in the Last 8 Vintage Years

Capital Managed ($B)

Avg Fund Size ($M)

Avg Firm Size ($M)

1985

631

323

532

294

17.6

33.1

59.9

1986

707

353

23.4

590

324

20.7

35.1

63.9

1987

810

388

27.4

670

353

23.7

35.4

67.1

1988

888

406

30.9

701

365

24.9

35.5

68.2

1989

980

435

35.9

728

380

27.8

38.2

73.2

1990

1037

451

38.2

716

383

28.2

39.4

73.6

1991

1075

458

40.4

639

360

26.8

41.9

74.4

1992

1147

478

44.1

601

352

27.2

45.3

77.3

1993

1244

509

49.3

613

370

29.3

47.8

79.2

1994

1342

542

56.7

635

385

33.2

52.3

86.2

1995

1498

608

66.2

688

425

38.9

56.5

91.5

1996

1648

670

78.8

760

471

47.9

63.0

101.7

1997

1862

764

98.1

882

545

62.2

70.5

114.1

1998

2099

843

129.3

1062

616

91.1

85.8

147.9

1999

2435

969

184.1

1360

736

143.7

105.7

195.2

2000

2851

1111

268.9

1704

866

224.8

131.9

259.6

2001

3096

1194

311.3

1852

923

262

141.5

283.9

2002

3178

1211

319

1836

921

262.3

142.9

284.8

2003

3286

1264

330.1

1788

951

263.9

147.6

277.5

2004

3451

1332

349.9

1803

985

271.1

150.4

275.2

2005

3626

1402

376.3

1764

1009

278.2

157.7

275.7

2006

3815

1481

418.2

1716

1022

288.9

168.4

282.7

2007

4034

1567

448.4

1599

1016

264.3

165.3

260.1

2008

4221

1631

475.2

1370

886

206.3

150.6

232.8

2009

4327

1672

491

1231

823

179.7

146.0

218.3

2010

4456

1736

503.7

1278

853

184.7

144.5

216.5

2011

4621

1801

529.4

1335

881

199.3

149.3

226.2

2012

4785

1868

550

1334

883

200.2

150.1

226.7

2013

4957

1938

569.2

1331

874

192.9

144.9

220.7

The correct interpretation of this chart is that since the beginning of the industry to the end of 2013, 1,938 firms had been founded and 4,957 funds had been raised. Those funds totaled $569.2 billion. At the end of 2013, 874 firms as calculated using our eight-year methodology managed 1,331 individual funds, with each fund typically being a separate limited partnership. Capital under management, again calculated using a rolling eight years of fundraising, by those firms at the end of 2013 was $192.9 billion.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 21

Figure 1.05 Number of Active Investors 1985 to 2013

Figure 1.06 Principals Information

Year

# of Active Investors

# of Active First Round Investors

# of Active Life Science Investors

1985

1986

115

1987

112

1988

119

1989

116

1990

101

1991

1992

104

1993

1994

110

1995

184

1996

251

122

1997

344

138

1998

411

169

1999

717

321

106

2000

1,050

546

148

2001

760

220

155

2002

534

137

147

2003

509

136

165

2004

579

202

201

2005

562

183

193

2006

572

192

197

2007

630

238

236

2008

602

212

219

2009

463

105

173

2010

508

136

177

2011

549

159

195

2012

534

139

175

2013

548

136

179

Year

No. Principals Per Firm

Estimated Industry Principals

Avg Mgt Per Principal ($M)

2007

8.7

8665

30.0

2008

8.5

7293

28.3

2009

8.6

6760

26.4

2010

8.0

6328

25.7

2011

7.4

6231

28.6

2012

7.0

5887

33.8

2013

6.7

5891

32.8

Figure 1.07 Top 5 States By Capital Under Management 2013 State

($ Millions)

94,076.6

32,636.6

19,480.4

5,815.1

4,517.3

Total*

156,526.1

*Total includes above 5 states only

Firms included in each count must have invested $5 million in that year in that category. Life Sciences investor count includes investment in companies in the two MoneyTree Categories: Biotechnology/Pharma and Medical Devices/ Equipment.

NVCA

THOMSON REUTERS

22 | 2014 National Venture Capital Association Yearbook

Figure 1.08 Capital Under Management By State 1985-2013 State

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

5,024

5,974

6,815

7,051

8,318

8,192

8,257

8,258

9,062

9,978

12,015

15,379

20,289

27,452

51,226

2,252

2,580

3,409

3,775

4,179

4,057

3,761

4,636

4,830

5,179

6,553

6,980

9,859

15,397

22,905

3,382

4,428

4,370

4,160

5,598

5,805

5,455

5,308

5,904

6,968

8,246

9,995

10,311

19,676

26,659

1,297

1,444

1,807

1,876

1,714

1,713

1,570

1,665

1,927

2,088

2,064

2,194

3,323

4,492

6,787

474

493

725

907

863

876

840

944

1,202

1,275

1,419

1,263

1,939

2,191

3,693

458

493

727

726

798

840

777

809

935

1,143

1,145

1,233

1,688

3,001

4,797

281

347

376

396

564

601

604

598

569

738

822

1,332

1,750

2,105

3,090

616

713

752

740

736

954

885

549

511

695

958

1,489

1,563

2,177

2,715

146

1,698

2,382

2,504

2,661

316

409

387

425

398

385

199

243

227

178

299

463

680

1,081

1,796

121

117

159

164

115

374

784

914

1,523

2,012

2,649

3,513

365

431

399

518

618

575

557

531

616

565

475

552

867

1,165

3,337

105

252

508

1,238

125

114

110

111

108

146

123

294

620

806

1,009

200

297

340

677

749

886

815

768

841

896

877

514

618

715

1,093

131

112

120

126

123

124

439

176

260

263

276

264

263

433

432

434

361

765

1,077

1,164

103

128

192

185

216

260

278

271

199

291

306

455

465

745

1,059

100

122

115

117

116

562

586

619

596

603

658

656

645

107

137

119

125

148

111

217

860

897

976

838

256

259

275

305

427

469

447

377

692

766

1,247

125

131

173

193

196

133

110

151

223

321

304

380

690

1,072

109

111

194

176

192

207

183

100

104

163

168

196

180

204

174

126

132

128

135

137

138

277

367

444

207

170

177

205

241

244

247

229

117

100

136

133

170

257

244

232

205

179

154

152

121

105

102

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 23

Figure 1.08 (Continued) Capital Under Management By State 1985-2013 State

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

105

137

139

141

140

UNK

17,600

20,700

23,700

24,900

27,800

28,200

26,800

27,200

29,300 33,200

38,900

47,900

62,200

91,100

143,700

AK Total

Figure 1.08b Capital Under Management By State 1985-2013 State

NVCA

2000

2001

2002

2003

2004

85,153

105,283

105,172

107,896

37,341

45,970

47,440

47,019

38,938

39,981

38,421

8,260

10,623

4,308

2005

2006

2007

2008

2009

113,719

119,881 128,655

117,244

100,374

87,469

47,553

48,784

53,712

50,417

37,146

30,861

37,176

36,710

36,242

29,115

25,441

13,205

12,198

10,462

10,431

12,066

11,984

13,336

11,699

10,426

4,747

5,202

5,559

5,685

5,163

5,286

4,239

6,881

8,001

7,932

7,806

8,259

8,486

8,242

6,241

6,344

6,241

6,532

6,439

6,509

3,633

4,315

4,231

4,444

4,083

4,074

3,899

4,172

4,739

4,616

3,401

3,582

2,803

3,687

3,691

3,568

4,629

5,119

5,383

5,165

5,047

4,781

5,293

5,438

2,524

2,638

1,367

1,448

2,238

2010

2011

2012

2013

90,424

96,923

99,386

94,077

30,528

30,209

32,914

32,637

13,599

18,628

17,653

19,480

7,428

8,201

8,940

6,928

5,815

3,620

3,282

3,065

4,595

4,451

4,517

6,589

5,467

4,193

4,057

4,735

4,455

4,215

7,037

7,143

4,642

4,482

4,495

4,250

4,220

3,623

5,160

5,022

4,135

3,917

3,965

3,691

3,503

3,447

4,641

5,047

4,833

4,632

4,049

4,527

4,193

3,369

4,590

4,597

5,174

4,625

3,721

3,691

3,708

2,943

3,303

4,811

4,762

4,744

4,433

2,934

3,005

2,927

3,134

3,282

2,854

5,416

5,229

4,882

4,664

3,011

1,603

974

1,139

1,148

1,187

1,635

2,652

2,822

2,868

3,338

3,367

3,014

1,801

2,226

2,271

2,081

2,056

1,583

1,599

1,803

1,644

1,468

1,678

1,564

1,211

1,238

1,730

1,631

1,726

1,558

2,189

2,366

2,359

2,361

2,441

2,593

2,473

1,639

1,657

1,319

1,323

1,426

1,531

268

475

449

560

589

546

651

1,259

1,335

1,144

1,209

1,245

1,422

1,429

588

591

590

631

859

912

946

685

919

976

1,065

1,263

1,045

1,203

2,311

2,160

2,154

2,077

2,109

1,835

1,940

1,931

808

783

787

921

882

1,122

1,237

1,281

1,162

1,174

1,043

1,089

887

716

624

614

840

857

845

795

114

251

256

404

504

653

755

756

307

450

418

407

504

1,232

1,293

1,385

1,317

1,182

1,189

1,192

1,324

561

1,850

1,874

1,876

1,855

1,986

1,806

1,722

1,329

713

565

522

573

456

529

1,785

1,751

1,684

1,592

1,577

1,802

1,525

1,284

557

801

875

832

834

529

THOMSON REUTERS

24 | 2014 National Venture Capital Association Yearbook

Figure 1.08b (Continued) Capital Under Management By State 1985-2013 State

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

663

662

651

684

593

595

608

617

136

342

343

309

344

345

246

245

152

133

105

207

254

182

185

212

237

309

339

107

155

173

225

227

219

359

363

366

391

376

317

101

104

145

180

199

171

173

130

118

263

261

311

295

476

651

648

631

663

502

431

353

336

196

265

282

217

249

219

221

226

228

230

216

223

216

202

290

218

219

214

215

310

194

198

108

109

110

140

139

117

111

121

100

112

114

178

177

175

103

113

175

165

164

118

117

118

119

UNK

224,800

262,000

262,300

263,900

184,700 199,300 200,200

192,900

Total

271,100 278,200 288,900 264,300

Figure 1.09 Life of IT Funds in Years

Source: Adams Street Partners, based on 2010 analysis of dissolved funds.

THOMSON REUTERS

Life of IT Funds In Years

% of Funds

<= 10

11-12

20%

13-14

27%

15-16

22%

17-18

14%

>=19

10%

206,300 179,700

This chart tracks the year in which a 10-year fund is, in fact, dissolved. These later periods are referred to as â&#x20AC;&#x153;out years.â&#x20AC;? Historically, after the 10th year, only a few companies that typically do not have huge upside potential remain in the portfolios. But the slow pace of exits in recent years has resulted in a number of good, mature companies remaining in portfolios well past the nominal 10-year mark. Life science funds tend to have lives two years longer than typical 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 10.5 years would round up to 11 years. The median life span of a fund in this analysis is 14.17 years.

NVCA

2014 National Venture Capital Association Yearbook | 25

CAPITAL COMMITMENTS The year 2013 continued to be a very challenging fundraising year for most venture capital firms in the United States. This is due to a lack of recent distributions caused by the tight exit markets, lackluster returns by many venture funds over the past decade compared with the prior decade, and a challenge for the largest alternative asset investors to place money in many of the smaller funds in this asset class because of scale. Only $16.8 billion was raised by 187 funds. This is considerably less than the $19.6 billion raised in 2012 or the $19.0 billion raised in 2011. The amount of new commitments each year by venture capital funds continues to be less than the amount they invested in companies. The top fundraising state in 2013 was Massachusetts at $5.5 billion, which edged typical leader California at $5.3 billion. New York was third largest at about half that amount. Much further behind, Washington state and Virginia rounded out the top five. Combined, Massachusetts and California funds raised 64% of the total. Adding in New York, the top three states raised more than three-quarters (77%) of the total amount. The Thomson Reuters taxonomy considers venture capital and buyout/mezzanine to be the two components of Private Equity. Figures 2.02 and 2.05 show venture capital’s decreasing share of the private equity dollars. Venture capital raised 24% of the asset class allocations in 2009 compared with 11% in 2013.

Methodology

The Thomson Reuters/National Venture Capital Association sample includes US-based venture capital funds. Classifications are based on the headquarters location of the fund, not the location of the venture capital firm. The sample excludes fund of funds. Effective November 1, 2010, Thomson Reuters venture capital fund data has been updated in order to provide more consistent and relevant categories for searching and reporting. As a result of these changes, there may be shifts in fundraising statistics from legacy editions of this publication due to reclassification of funds based on analysis of actual activity by primary market, nation, and/or fund stages. As defined by Thomson Reuters, capital commitments, also known as fundraising, are firm capital commitments to private equity/venture capital limited partnerships by outside investors. For purposes of these statistics, the terms “capital commitments,” “fundraising,” and “fund closes” are used interchangeably. There are three data sources for tracking capital commitments: (1) SEC filings that are regularly monitored by our research staff, (2) surveys of the industry routinely conducted by Thomson Re-

NVCA

uters, and (3) verified industry press and press releases from venture firms. Capital commitments are stated on either (1) a calendar-year basis when committed (for example, throughout this chapter) or (2) a vintage-year basis, which is designated once the fund starts investing (for example, figure 1.04). The data in this chapter is by calendar year and incrementally measures how much in new commitments funds raised during the calendar year. Consider, for example, a venture capital firm that announces it will begin raising a $200-million fund in late 2011, raises $75 million in 2012, and subsequently raises the remaining $125 million in 2013. In this chapter, nothing would be reflected in 2011, $75 million would be counted in 2012, and $125 million would be counted in 2013. Assuming it started investing and made its first capital call in 2013, the entire fund would then be considered to be a vintage year 2013 fund. In Figure 1.04, for example, this hypothetical fund would show in the totals for 2013. Note that fund commitments presented in this publication do not include those corporate captive venture capital funds that are funded by a corporate parent, which do not typically raise capital from outside investors.

THOMSON REUTERS

26 | 2014 National Venture Capital Association Yearbook

Figure 2.01 Capital Commitments To U.S. Venture Funds ($ Billions) 1985 to 2013 120 100

($ Billions)

80 60 40 20

201

0 201 1 201 2

201

7 200 8 200 9

200

4 200 5 200 6

200

199

9 200 0 200 1

199

4 199 5 199 6

199

1 199 2 199 3

199

198

Year

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 27

Figure 2.02 Capital Commitments To Private Equity Funds 1985-2013 Venture Capital

NVCA

Buyouts and Mezzanine Capital

Total Private Equity

Year

Sum ($Mil)

% of Total PE

No. Funds

Sum ($Mil)

No. Funds

1985

3,759.9

56%

118

2,971.8

Sum ($Mil) 6,731.7

No. Funds

1986

3,584.5

42%

101

5,043.7

8,628.2

133

1987

4,379.1

21%

116

16,234.6

20,613.6

163

1988

4,209.7

28%

104

10,946.4

15,156.1

158

1989

4,918.8

29%

106

12,068.5

16,987.3

184

1990

3,077.5

26%

8,831.5

11,909.0

149

1991

1,900.3

31%

4,242.1

6,142.4

1992

5,223.1

33%

10,752.5

15,975.6

138

1993

4,489.2

21%

16,961.7

21,451.0

174

1994

7,636.7

27%

136

20,157.0

27,793.7

235

1995

9,387.3

26%

161

27,040.7

108

36,428.0

269

1996

11,550.0

26%

168

32,789.4

104

44,339.3

272

1997

17,741.9

30%

242

42,165.3

134

59,907.2

376

1998

30,641.7

33%

290

61,636.4

172

92,278.1

462

1999

53,420.2

51%

428

51,363.2

164

104,783.4

592

2000

101,417.9

56%

634

79,164.8

170

180,582.7

804

2001

38,923.4

43%

324

51,388.3

137

90,311.7

461

2002

10,388.1

23%

203

35,123.3

124

45,511.4

327

2003

9,144.7

20%

160

35,946.4

123

45,091.1

283

2004

17,656.3

23%

211

59,837.4

158

77,493.7

369

2005

30,071.9

22%

233

107,746.6

206

137,818.6

439

2006

31,107.6

17%

236

152,899.7

219

184,007.3

455

2007

29,401.0

11%

235

234,460.4

266

263,861.4

501

2008

25,052.7

12%

214

176,340.7

232

201,393.5

446

2009

16,122.0

24%

159

50,145.9

149

66,267.9

308

2010

13,243.3

20%

173

51,901.5

177

65,144.8

350

2011

18,962.3

21%

186

70,344.2

210

89,306.5

396

2012

19,554.6

15%

208

108,076.4

226

127,631.0

434

2013

16,765.7

11%

187

130,256.2

214

147,021.9

401

139

THOMSON REUTERS

28 | 2014 National Venture Capital Association Yearbook

Figure 2.03 Venture Capital Fund Commitments 1985-2013 ($ Millions) State

1985

1986

1987

1988

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

201.88

1,460.41

546.89

279.00

2,260.07 489.77

473.90

493.63

940.19

1,860.48

2,364.08

1,516.09

3,757.76

9,346.10

9,065.81

15,399.96

3,092.69

7,754.42

1,233.34

2,148.71

1,249.69

972.35

1,268.36

966.91

1,523.51 1,010.69

549.12

1,331.19

1,388.50

1,829.06

3,106.99

3,724.04

5,717.43

8,525.24

21,928.12

44,218.83

14,166.13

2,767.31

5,634.15

8,731.29

534.28

356.09

973.09

813.49

338.52

529.47

180.08

1,051.12

367.79

1,158.41

1,954.71

1,875.06

2,601.56

5,200.95 7,586.57

16,691.77

9,721.17

2,598.46

1,596.98

1,797.30

37.41

33.48

231.25

40.69

161.45

142.81

55.43

381.89

137.00

282.50

193.64

326.00

393.97

1,406.64

1,802.52

3,687.77

2,232.20

185.50

75.63

893.91

299.07

155.86

310.63

357.37

61.50

129.50

150.00

300.30

419.25

388.28

260.20

424.93

1,165.98

1,067.56

2,842.58

1,813.40

3,464.30

46.73

165.00

1,756.45

253.67

61.34

119.67

0.35

125.00

243.46

75.00

110.00

176.58

401.30

213.13

605.75

117.61

1,001.84

569.79

1,040.86

651.68

392.11

560.62

196.70

4.20

7.47

24.18

0.00

49.25

13.61

50.00

0.00

224.90

479.20

66.50

439.00

145.00

768.15

839.70

1,989.92

340.45

380.50

105.00

161.52

89.43

47.02

324.62

157.79

26.20

57.20

94.40

247.17

277.82

182.81

229.68

295.21

575.13

466.35

1,298.59

964.19

1,103.18

477.86

701.08

432.30

31.50

70.55

32.23

69.90

79.71

0.40

0.00

114.22

0.00

19.35

216.40

252.88

432.62

1,942.08

2,414.30

512.63

117.96

93.92

83.89

25.00

126.13

37.40

59.51

0.00

5.00

48.00

39.90

36.87

128.50

239.32

179.99

408.79

640.30

1,174.61

888.01

83.03

1.20

955.27

38.74

0.00

4.80

0.00

130.00

820.00

667.60

391.50

359.60

778.29

622.18

314.80

0.00

324.48

20.00

23.45

72.50

0.00

34.07

0.00

40.00

0.00

115.90

83.77

149.00

109.07

266.36

254.81

261.55

36.93

22.40

93.25

0.00

3.50

10.00

12.80

15.00

2.00

0.00

17.00

5.00

0.00

7.00

20.00

165.40

255.99

884.03

2,211.92

119.15

37.48

196.27

71.95

9.70

0.00

36.00

10.70

29.30

0.00

35.00

0.00

133.28

105.00

106.00

0.00

77.70

250.00

325.88

954.75

25.75

7.95

56.00

1.00

13.60

109.75

51.20

417.50

20.00

161.80

16.20

946.30

65.85

164.05

46.80

35.50

207.97

216.70

106.57

1,826.52

16.50

275.50

26.00

49.80

0.00

15.10

65.00

0.00

14.00

0.00

56.00

0.00

74.19

34.30

40.85

181.00

30.00

917.90

19.00

0.00

55.00

54.05

73.06

54.65

12.10

117.98

44.52

166.60

30.10

109.70

181.65

113.60

264.00

783.90

177.00

1,240.76

2,751.47

536.61

85.66

387.97

450.73

6.50

7.00

31.48

22.80

38.12

0.60

0.00

63.45

10.10

183.50

349.00

173.68

180.41

613.41

119.64

74.90

275.86

17.31

2.56

0.00

86.98

75.00

0.00

30.38

0.00

67.00

4.43

85.97

10.00

0.00

364.95

58.00

658.58

662.03

329.95

101.70

4.88

209.72

0.00

10.60

14.20

169.00

18.26

23.95

87.95

51.00

373.35

69.50

26.50

52.00

0.00

72.98

0.00

10.50

0.80

0.00

27.00

0.00

17.00

50.00

61.50

126.00

231.65

0.00

34.30

40.30

0.00

31.82

0.00

10.30

0.00

24.29

0.00

45.30

0.00

110.10

0.00

150.00

0.00

5.00

30.00

0.00

137.00

16.35

11.00

49.00

18.70

643.50

0.00

33.26

0.00

53.13

0.00

63.60

0.00

11.30

6.00

45.40

25.03

79.63

64.77

286.20

0.00

80.30

0.00

11.00

0.00

22.00

14.00

131.00

1.00

0.00

5.00

0.00

10.00

0.00

27.30

16.30

4.70

0.00

49.00

0.00

20.00

0.00

116.11

0.00

12.80

20.00

103.30

0.00

10.00

35.56

17.00

0.00

30.00

0.00

32.00

0.00

10.00

0.00

65.00

0.00

14.00

0.00

2.20

10.73

0.00

60.05

0.00

56.00

0.00

5.00

0.00

10.50

1.78

5.00

21.00

26.00

0.00

10.00

5.00

0.00

6.70

32.50

0.00

3.00

13.50

0.00

26.00

11.30

0.30

320.80

241.00

8.00

0.00

64.84

63.33

0.00

20.00

0.00

16.60

0.00

24.50

0.00

25.00

0.00

2.60

0.00

9.50

0.00

2.53

0.00

7.86

0.00

12.00

0.00

30.00

0.00

49.42

0.00

40.00

0.00

15.00

0.00

20.00

0.00

50.00

0.00

11.20

8.80

0.00

22.04

947.60

0.00

2.00

0.00

58.80

0.00

21.65

0.00

126.89

0.00

76.45

15.60

2.95

0.00

37.00

0.00

10.10

0.00

29.40

60.00

20.70

42.61

40.80

0.00

5.50

4.00

12.75

2.00

0.00

19.65

25.00

0.00

12.50

4.50

0.00

14.00

0.00

15.00

0.00

15.00

27.00

0.00

10.00

0.00

31.20

0.00

50.00

25.00

0.00

25.00

0.00

10.00

0.00

111.01

36.00

0.00

40.60

0.00

25.00

31.00

64.50

0.00

10.00

0.00

62.50

0.00

26.00

0.00

20.00

0.00

40.00

0.00

31.00

30.15

0.00

16.60

82.00

14.00

0.00

10.68

36.15

27.70

0.00

2.06

0.00

155.00

40.00

0.00

6.10

1.90

0.00

17.76

20.35

0.00

14.00

7.40

15.00

0.00

42.00

0.00

135.00

8.00

2.14

0.00

4,379.07

4,476.68

9,442.31

11,553.58 17,993.04 30,842.67 53,638.36 101,740.87 38,952.18

15,928.95

11,465.28 18,696.01

Total

3,782.66 3,587.47

THOMSON REUTERS

1989

1990

4,918.80 3,097.52

1991

1,905.73 5,243.80 4,565.30 7,733.72

NVCA

2014 National Venture Capital Association Yearbook | 29

Figure 2.03 (Continued) Venture Capital Fund Commitments 1985-2013 ($ Millions)

NVCA

State

2005

2006

2007

2008

2009

2010

2011

2012

2013

1,735.74

2,252.82

4,409.92

1,949.58

1,652.22

1,259.41

4,096.04

659.75

5,474.78

13,319.31

13,635.99

12,533.51

13,972.15

8,635.34

6,337.42

9,678.38

14,708.16

5,315.87

9,150.90

4,365.57

5,121.96

2,516.05

3,573.19

2,664.92

2,339.74

1,414.73

2,200.41

629.84

379.48

263.77

1,037.91

26.79

82.72

209.64

51.34

561.77

143.06

2,910.97

286.64

227.29

157.73

938.22

11.00

23.15

446.06

204.27

1,812.38

235.17

52.79

503.67

112.40

100.27

64.78

310.39

432.75

472.23

782.73

368.88

484.14

67.60

543.52

28.93

275.10

80.46

421.96

544.90

258.01

215.60

237.65

215.05

131.67

274.35

68.76

132.45

358.26

220.75

3.50

262.09

6.13

280.36

259.59

280.57

562.85

1,376.20

492.38

5.28

0.00

398.81

240.19

392.62

896.30

314.60

1,122.94

204.06

0.00

475.00

0.40

236.24

83.75

61.83

99.50

133.96

88.79

56.95

160.93

277.79

222.01

418.62

555.42

582.42

105.28

14.42

121.37

35.63

44.70

187.62

313.00

11.20

109.26

25.20

32.25

74.55

1.57

268.00

154.98

295.00

473.24

275.00

325.10

21.80

0.00

150.00

136.85

103.50

361.70

203.00

18.73

18.75

30.00

25.55

17.15

126.45

688.16

794.40

825.81

962.73

233.18

205.17

126.81

281.89

101.38

108.01

401.37

185.28

102.93

5.37

457.40

109.58

479.98

67.50

558.16

152.22

81.45

83.38

1.88

30.27

82.40

29.44

45.27

4.00

12.00

0.00

44.80

23.98

169.59

213.15

576.50

34.26

16.45

160.42

159.33

40.00

12.00

37.96

10.50

0.00

0.14

25.86

69.65

19.10

0.00

117.93

101.35

1.53

58.10

19.90

14.23

828.70

39.65

210.30

53.94

0.00

72.00

0.00

155.00

12.02

0.00

3.28

0.00

14.48

0.00

16.00

0.00

10.00

6.00

24.49

1.16

28.80

1.00

28.05

0.00

38.95

8.00

0.00

2.03

5.00

5.90

12.25

2.03

6.98

2.00

0.00

42.91

0.00

15.35

0.00

122.44

23.00

49.00

255.56

84.00

176.51

193.98

20.11

0.00

0.25

10.04

19.97

0.00

7.85

0.00

6.39

0.00

1.75

0.00

1.35

0.00

5.00

6.66

0.00

4.50

0.00

45.55

19.45

0.00

5.50

4.64

0.00

19.00

0.00

20.00

0.00

222.18

57.16

0.00

11.00

3.00

0.00

5.60

0.00

75.75

0.00

1.00

0.00

13.20

0.00

0.48

0.00

0.18

0.00

2.00

0.00

1.00

0.00

100.00

0.00

80.68

102.33

15.09

9.20

27.32

0.15

40.00

0.00

25.65

5.20

1.27

0.00

35.00

1.14

0.00

7.95

65.00

98.00

12.00

0.00

7.00

0.00

Total

30,131.45

31,231.10

29,400.99

25,117.84

16,128.99

13,425.72 18,968.57

19,825.91

16,793.70

THOMSON REUTERS

30 | 2014 National Venture Capital Association Yearbook

Figure 2.04 Top 5 States By Venture Capital Committed 2013 State

No of Funds

Committed ($Mil)

Massachusetts

5,474.8

California

5,315.9

New York

2,200.5

Washington

561.8

Virginia

446.1

Subtotal

117

13,999.1

Remaining States

2,766.8

Total

187

16,765.9

199

4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3

199

Buyouts and Mezzanine

199

198

Venture Capital

199

280 260 240 220 200 180 160 140 120 100 80 60 40 20 5

($ Billions)

Figure 2.5 Private Equity Annual Commitment ($ Billions) 1985 to 2013

Year

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 31

INVESTMENTS Measuring industry activity by the total dollars invested in a given year shows that the industry has remained generally in the $20 billion to $30 billion range since 2002. In 2013, $29.5 billion was invested in 3,382 companies through 4,041 deals. The number of deals is 4% higher than 2012 counts, but is essentially the same as 2011. The number of first-time fundings increased in 2013 to 1,334 companies from the previous 1,275, but it remains near the top of the healthy range of 1,000 to 1,400 first-time fundings in a year. Further parsing the data shows 50% of the investment dollars going to California companies, down from 53% in 2012 but consistent with the previous three years. The year 2013 saw a record 56% of the financing rounds going to seed and early stage companies, compared with a more typical one-third of deals. A carefully watched statistic is the investment in the life sciences. It is possible that the downward plummet in first-time life sciences investment is starting to reverse, led by Biotechnology, but it is still too early to be sure. Corporate Venture investment continues to gain considerable strength and presence in the overall industry.

Sectors Software was the leading sector in 2013, receiving 37.3% of the total dollars. The second largest sector was Biotechnology, which was less than half that amount at 15.4% of total investment. Media and Entertainment, where much of the social networking is categorized, received 9.9% and Medical Devices and Equipment received 7.2%. The life sciences share of the venture capital investment dollars decreased in 2013 to its lowest level since 2001 at 23.6% of the total dollars. (For purposes of this paragraph, life sciences is made up of all three life science categories. Some industry observers choose to exclude the healthcare services sector from the life sciences totals.) This is down from the recent peak of 32.7% in 2009. (The all-time peak was 36.3% in 1992.) This recent downward life sciences trend is very visible when just looking at first fundings. In 2013, only 155 life sciences (defined in this paragraph as Biotech/pharma and Medical Devices/therapeutics, but not healthcare services) received first fundings, up just slightly form 148 in 2012. While the uptick driven by Biotechnology first fundings may be an early indicator of a rebound, these last two years are the lowest counts since 1996. The possible recovery in Biotechnology investing may have been driven in part by the success of recent efforts at FDA reform and the strong number of Biotechnology company IPOs in 2013 (count = 42). Among first fundings, Software led the way with 591 companies getting their initial venture capital rounds. This is more than 46% of the first fundings. Again in 2013, the second most active first-funding sector is Media and Entertainment at 170 first fundings.

Stages and First-Time Fundings

Investment activity in the industry seems to be bifurcated by the large number of later stage companies hoping to join fairly strong public markets at year end 2013 and the very large number of new companies being funded by the industry. While many of the larger portfolio companies, IPOs, and big acquisitions have gotten the headlines and visibility, 2013 actually saw the highest percentage of seed- and early-stage deals ever at 55.7% of all deals. This surpasses the prior record of 52.6% in 2012. This certainly would challenge the suggestion that the industryâ&#x20AC;&#x2122;s attention is single-focused on later-stage companies. Despite the flurry of IPO activity in 2013 and acquisitions announced for early 2014, there remains a record number of companies in portfolios in the later stage of development that in most other positions in the business cycle would have already gone public or otherwise been acquired. With the rule of thumb that a healthy venture capital industry invests in 1,000-1,300 new companies each year, the 1,334 first fundings in 2013 is very much in that range. Not surprisingly, 83% of those first round invest-

NVCA

ments were made at the seed and early stage.

Geographical Spread Across the United States The year 2013 provided an interesting contrast in geographic dispersion. The slight majority of investment dollars went to California companies at 50.01%. This is down from the record 53.2% in 2012. Interestingly, companies in 48 states and DC received financing, which ties the 2012 record high. Ranked by total dollars invested, the top five states (California, Massachusetts, New York, Washington and Texas) received 78% of all the dollars invested nationally. This compares to 2011, when California companies received a thenrecord 51.2% of the dollars. That year, companies in a record 47 states and DC received venture capital funding. Together, the top five states (California, Massachusetts, New York, Texas, and Washington State) received 77% of the total dollars. California-domiciled venture capital firms made investments in 38 states in 2013. Approximately 48% of all the money invested in California came from California-domiciled firms. Conversely, California-based firms concentrated 68% of their investment dollars within the state.

Corporate Venture Group Involvement The number and reach of corporate venture capital groups increased in 2013, along with the visibility of this group. These groups provided an estimated 10.5% of the venture capital invested by all venture groups. They were involved in 16.9% of the deals â&#x20AC;&#x201C; the highest level in five years. Going forward, all signs suggest that these groups are becoming more involved alongside traditional venture firms in deals, as well as initiating corporate venture group syndicates to do deals in lieu of, or in advance of, investment rounds by traditional venture firms.

Methodology As calculated by Thomson Reuters, venture capital investment data are derived from several sources. Primarily, survey information is obtained from the quarterly survey that drives the MoneyTree Reportâ&#x201E;˘ from PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. This is the official industry database of venture capital investment. Secondly, Thomson Reuters obtains data from SEC filings that are regularly monitored by our research staff. Finally, publicly available sources such as press releases and trade publications are used. For detailed information on which transactions qualify as MoneyTree deals and are therefore counted in this chapter, please refer to Appendix B.

THOMSON REUTERS

32 | 2014 National Venture Capital Association Yearbook

Figure 3.01 Venture Capital Investments ($ Billions) 1985 to 2013 120 100

($ Billions)

80 60 40 20

198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3

0 Year

Figure 3.02 Venture Capital Investments in 2013 By Industry Group All Investments Industry Group

Initial Investments

# Companies

# Deals

Investment Amt ($Bil)

# Companies

# Deals

Investment Amt ($Bil)

2,360

2,784

1,009

3.5

649

816

6.9

167

1.2

Information Technology Medical/Health/Life Science Non-High Technology Total

373

441

2.7

158

0.4

3,382

4,041

29.6

1,334

5.1

Figure 3.03 Venture Capital Investments Top 5 States in 2013 State

# Companies

# Deals

Invested ($Bil)

California

1,362

1,616

14.8

Massachusetts

307

364

3.1

New York

344

403

2.9

Texas

134

154

1.3

Washington

107

126

0.9

Total*

2,254

2,663

23.0

*Total includes top 5 states only

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 33

Figure 3.04 Venture Capital Investments in 2013 By Industry Sector (Dollars Invested) Telecommunications 2%

Other 0.2%

Biotechnology Business Products and 15% Services 0.4% Computers and Peripherals 2% Consumer Products and Services 4%

Software 37%

Electronics/Instrumentation 1% Financial Services 2% Healthcare Services 1%

Semiconductors 2%

IT Services 7%

Retailing/Distribution 1% Networking and Equipment 2%

Industrial/Energy 5%

Media and Entertainment 10% Medical Devices and Equipment 7%

Figure 3.05 Venture Capital Investments in 2013 By Stage (Dollars Invested) Seed 3% Later Stage 30%

Early Stage 34%

Expansion 33%

NVCA

THOMSON REUTERS

34 | 2014 National Venture Capital Association Yearbook

Figure 3.06 Amount of Capital Invested By State in 2013 ($ Millions)

USA

913 WA

0 24 MT

138

74 NH

270

3,079

7 ID

315

23 IA

435

319 25

113

1,316

594DC

71 DE

664

260 NC

KY 109

286

322

82 RI 182

447

108 MI

429

2,870

SD 10 NE

7 14,770

86 412

421 GU FL

Figure 3.07 Number of Companies Invested in By State in 2013

USA

107

13 NH

WA 1

307

2 ID

SD 9

1,362

74 6

19 AZ

134 TX

58 DC

NC TN

35 KY

38 27

RI43

MO 8

11 IN

196 68

58 MI

344

12 35

37 GU

PR VI

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 35

Figure 3.08 Venture Capital Investments in 1985-2013 By Region ($ Millions) Region

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Silicon Valley

758.8

1,016.0

849.9

985.9

918.1

914.1

780.5

1,121.1

903.7

1,073.8

1,807.8

3,417.7

4,632.3

5,881.4

17,797.4

New England

435.4

436.6

524.3

496.9

404.7

424.9

287.0

417.0

358.4

440.4

796.6

1,159.4

1,611.8

2,353.4

5,622.0

NY Metro

221.2

215.2

273.9

308.0

360.4

190.1

181.5

239.0

221.3

275.8

509.7

743.2

1,289.4

1,817.3

4,611.8

LA/Orange County

196.5

186.9

276.9

222.5

242.1

174.7

119.4

179.4

176.4

189.1

1,004.1

702.9

875.2

1,230.6

3,593.7

DC/Metroplex

99.1

61.5

111.8

129.9

139.5

96.9

51.3

65.8

384.1

137.8

420.2

586.3

515.1

1,148.5

2,395.1

Texas

248.6

228.4

211.0

240.7

229.2

141.0

161.4

150.5

241.9

313.8

479.2

553.4

908.7

1,205.6

3,163.1

Southeast

166.4

237.6

269.5

272.1

235.4

145.9

109.1

346.9

408.2

362.3

878.6

1,166.0

1,396.7

1,794.8

4,831.0

Midwest

160.5

139.9

198.4

132.3

183.2

166.7

181.4

165.2

276.9

432.6

470.4

736.2

913.5

1,644.5

2,631.1

Northwest

142.2

142.9

153.3

141.2

118.0

88.2

59.9

252.1

118.4

164.7

379.7

557.6

564.4

820.3

2,874.6

San Diego

99.6

95.4

107.8

149.8

145.5

113.3

115.7

128.2

133.0

221.0

276.8

485.2

516.0

669.4

1,437.0

SouthWest

40.1

82.5

57.5

59.7

50.7

30.3

49.0

98.4

49.7

38.0

113.1

184.6

303.1

411.2

843.1

Colorado

77.0

113.8

111.4

107.8

157.8

93.7

54.2

129.7

135.0

197.4

325.1

321.2

405.0

838.9

1,832.9

Philadelphia Metro

52.6

63.3

79.2

71.8

65.3

105.9

40.6

168.9

111.4

138.1

220.9

356.2

534.2

703.9

1,732.6

North Central

37.0

44.5

73.6

41.4

51.2

92.2

44.9

77.1

109.6

87.4

223.8

208.5

341.6

429.6

770.0

South Central

13.7

11.4

19.8

11.7

14.5

11.6

4.2

6.5

8.6

15.2

45.2

81.1

67.4

196.7

360.1

Upstate NY

14.2

10.7

10.2

5.3

7.3

11.1

3.4

9.1

5.7

0.7

35.5

22.7

90.3

195.4

212.4

Sacramento/N.Cal

16.0

45.5

32.0

33.6

4.2

19.5

15.7

8.5

19.1

20.0

28.6

21.4

86.8

119.1

Unknown

0.5

0.8

6.1

13.0

0.2

30.8

0.8

0.1

0.3

2.2

4.4

39.1

2.4

AK/HI/PR

0.3

0.0

1.0

22.0

7.8

28.7

14.0

5.5

17.4

2,779.0

3,132.3

3,361.3

3,411.3

3,333.0

2,833.1

2,259.7

3,594.2

3,663.2

4,130.1

8,014.8

Total

NVCA

11,341.6 5,004.6 21,473.0 54,846.7

THOMSON REUTERS

36 | 2014 National Venture Capital Association Yearbook

Figure 3.08 (Continued) Venture Capital Investments in 1985-2013 By Region ($ Millions) Region

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Silicon Valley

33,430.9

12,618.7

7,249.2

6,766.5

8,021.2

8,133.6

9,806.9

11,610.0

11,551.3

8,263.4

9,436.2

12,037.2

11,237.6

12,225.7

New England

12,000.6

5,397.2

2,999.3

2,990.4

3,359.7

2,969.9

3,319.2

4,004.1

3,754.8

2,603.7

2,577.9

3,344.5

3,391.6

3,307.7

NY Metro

10,275.4

3,497.1

1,548.7

1,385.0

1,635.7

1,972.7

2,172.1

1,936.2

2,169.7

1,748.9

1,872.8

2,862.5

2,366.9

3,194.7

LA/Orange County

6,782.0

2,264.7

1,286.8

1,069.4

1,319.8

1,506.1

1,898.7

1,925.3

2,041.4

1,080.9

1,687.8

2,076.7

2,092.5

1,748.2

DC/Metroplex

5,795.2

2,103.1

1,095.6

797.4

1,086.6

1,208.3

1,356.3

1,423.7

1,167.9

684.3

973.9

1,014.0

756.8

1,545.9

Texas

6,270.8

3,137.3

1,191.6

1,221.0

1,212.3

1,170.7

1,518.2

1,493.8

1,127.7

678.2

1,079.4

1,622.4

948.9

1,315.5

Southeast

7,967.1

2,684.7

1,768.7

1,115.0

1,418.1

1,094.2

1,206.3

1,841.0

1,352.0

1,032.0

1,101.2

1,193.4

801.1

1,293.9

Midwest

5,776.7

2,184.5

976.9

913.6

712.5

916.5

1,009.7

1,159.2

1,369.5

952.3

1,368.2

1,554.1

1,436.8

1,107.3

Northwest

3,627.9

1,426.8

766.7

643.5

1,001.2

1,003.9

1,288.0

1,612.5

1,075.6

673.9

728.9

785.4

998.5

1,056.7

San Diego

2,297.6

1,579.1

997.4

825.8

1,197.8

1,203.9

1,231.0

1,846.4

1,209.4

939.5

881.2

928.0

1,191.6

767.7

SouthWest

1,387.5

515.1

393.8

220.5

393.6

524.8

526.6

589.0

545.7

291.2

275.9

571.5

600.4

455.4

Colorado

4,091.9

1,244.4

588.0

609.9

363.2

622.9

703.3

686.3

872.3

458.9

445.9

619.7

589.0

428.8

Philadelphia Metro

2,591.5

1,073.3

636.6

555.1

734.6

592.6

795.9

890.5

803.0

389.4

452.2

456.7

415.3

420.0

North Central

1,397.3

669.6

433.7

268.5

464.0

367.0

385.6

532.7

632.6

410.5

336.7

380.9

359.9

375.3

South Central

446.9

110.4

69.3

65.5

130.1

96.1

64.3

152.8

91.3

25.3

75.2

102.1

96.0

141.1

Upstate NY

293.9

159.1

104.5

122.7

104.8

60.1

156.1

136.5

92.3

26.9

44.8

112.7

48.6

112.5

Sacramento/N.Cal

372.3

203.0

65.4

32.2

38.4

37.7

29.4

82.0

71.3

18.8

16.5

67.8

20.0

25.2

Unknown

50.4

14.3

0.5

21.1

AK/HI/PR

248.6

69.8

4.9

17.9

15.1

43.3

47.1

20.9

21.3

7.4

14.0

0.6

0.7

2.5

Total

105,104.6 40,952.1 22,177.1 19,620.0 23,208.8 23,524.5 27,514.5 31,942.9

THOMSON REUTERS

29,948.9 20,286.2 23,368.6 29,730.0

27,352.3 9,545.2

NVCA

2014 National Venture Capital Association Yearbook | 37

Figure 3.09 Venture Capital Investments in 1985-2013 By Region (Number of Deals) Region

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Silicon Valley

323

339

343

362

395

398

337

422

315

335

NY Metro

101

131

108

121

509

771

869

1,045

1,687

2,159

1,106

819

879

136

158

240

273

491

816

446

231

192

New England

235

214

257

231

222

217

170

159

149

Midwest

100

116

133

101

127

103

146

232

333

384

469

662

905

595

458

446

132

190

237

249

309

515

276

243

174

LA/Orange County

101

114

106

112

134

Southeast

118

134

115

131

111

108

117

112

182

226

166

216

355

516

250

164

149

294

308

454

664

391

268

247

DC/Metroplex

113

135

Northwest

112

134

162

272

509

261

198

183

132

263

331

192

141

108

Texas

106

105

101

135

172

Philadelphia Metro

142

197

318

485

343

174

138

145

231

142

103

San Diego

109

100

124

Colorado

127

162

235

156

114

125

161

222

115

SouthWest

North Central

116

146

107

114

151

126

Upstate NY

South Central

Unknown

Sacramento/N.Cal

AK/HI/PR

1,348

1,423

1,646

1,524

1,547

1,463

1,272

1,394

1,211

1,232

1,896

8,038

4,590

Total

2,635 3,224 3,729 5,597

3,206 3,024

Figure 3.09 (Continued) Venture Capital Investments in 1985-2013 By Region (Number of Deals) Region

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Silicon Valley

970

1,006

1,235

1,311

1,300

997

1,108

1,269

1,225

1,257

NY Metro

226

191

295

299

343

285

387

424

411

446

New England

430

441

458

524

508

388

414

457

466

418

Midwest

178

181

228

271

304

250

277

316

311

416

LA/Orange County

151

177

219

236

245

177

228

233

268

253

Southeast

244

198

235

247

230

158

215

209

172

211

DC/Metroplex

187

221

218

221

210

138

154

167

166

171

Northwest

148

159

182

217

201

128

156

165

154

165

Texas

176

181

201

188

162

126

168

172

163

154

Philadelphia Metro

104

116

135

150

127

123

126

135

San Diego

132

143

130

169

134

114

135

114

106

Colorado

112

114

116

109

105

SouthWest

107

North Central

Upstate NY

South Central

Unknown

Sacramento/N.Cal

AK/HI/PR

3,228

3,293

3,882

4,226

4,177

3,148

3,647

4,004

3,865

4,041

Total

NVCA

THOMSON REUTERS

38 | 2014 National Venture Capital Association Yearbook

Figure 3.10 Venture Capital Investments in 1985-2013 By Stage Stage

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Seed

528.9

759.7

623.4

670.2

559.3

396.6

241.8

557.7

629.6

781.2

1,273.0 1,275.0

1,366.6

1,769.3

3,617.8

3,150.4

803.5

Early Stage

506.8

624.0

748.8

714.6

737.9

684.8

548.4

577.9

574.9

839.7

1,733.1 2,636.8

3,455.1

5,460.1

11,480.6

25,292.6

8,591.3

Expansion

1,243.9 1,198.2 1,490.6 1,568.8 1,600.3 1,265.6 1,099.6

1,770.1

1,867.0 1,506.9 3,561.7 5,503.0

Later Stage

499.4

688.5

Total

550.4

498.5

457.7

435.5

486.0

369.8

2,779.0 3,132.3 3,361.3 3,411.3 3,333.0 2,833.1 ,259.7

591.7

1,002.4 1,447.0 1,926.9

7,564.1 10,322.5 29,254.7

59,047.2 22,898.7

2,618.8

17,614.5

3,921.0

10,493.6

8,658.6

3,594.2 3,663.2 4,130.1 8,014.8 11,341.6 15,004.6 21,473.0 54,846.7 105,104.6 40,952.1

Figure 3.10 (Continued) Venture Capital Investments in 1985-2013 By Stage Stage

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Seed

340.7

364.9

916.9

995.6

1,291.6

1,837.0

1,923.1

1,735.2

1,676.3

1,079.4

836.4

966.4

Early Stage

3,979.7

3,582.2 4,040.8

4,057.9

4,770.4 6,087.3 5,888.9

4,940.6

5,913.8

8,926.9

8,315.1

9,896.0

Expansion

12,122.6

9,764.9

9,053.6

8,521.7

11,123.5 1,065.7

10,725.1

6,841.2

8,706.9

9,829.3

9,446.6

9,814.2

Later Stage

5,734.1

5,908.0 9,197.5

9,949.3

0,329.0 2,952.9 11,411.9

6,769.2

7,071.6

9,894.4

8,754.2

8,868.7

Total

22,177.1

19,620.0 23,208.8 23,524.5

7,514.5

1,942.9

29,948.9 20,286.2 23,368.6 9,730.0

27,352.3 29,545.2

Figure 3.11 Venture Capital Investments in 1985-2013 By Stage (Number of Deals) Stage

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Seed

358

388

387

370

355

258

193

252

290

332

431

503

542

672

811

705

281

Early Stage

290

333

411

358

338

371

277

292

181

255

519

751

897

1,019

1,735

2,852

1,298

Expansion

523

502

614

665

600

541

603

513

422

705

1,043

1,399

1,569

2,438

3,698

2,391

Later Stage

177

200

234

182

189

234

261

247

227

223

241

338

386

469

613

783

620

1,348

1,423

1,646

1,524

1,547

1,463

1,272

1,394

1,211

1,232

1,896

2,635

3,224

3,729

5,597

8,038

4,590

2011

2012

2013

Total

Figure 3.11 (Continued) Venture Capital Investments in 1985-2013 By Stage (Number of Deals) Stage

2002

2003

2004

2005

2006

2007

2008

Seed

182

217

235

264

398

528

Early Stage

879

800

903

855

1,002

1,137

Expansion

1,580

1,352

1,203

1,113

1,381

Later Stage

565

655

887

1,061

Total

3,206

3,024

3,228

3,293

THOMSON REUTERS

2009

2010

536

374

410

446

296

221

1,152

979

1,287

1,603

1,738

2,031

1,269

1,240

894

1,077

1,026

987

991

1,101

1,292

1,249

901

873

929

844

798

3,882

4,226

4,177

3,148

3,647

4,004

3,865

4,041

NVCA

2014 National Venture Capital Association Yearbook | 39

Figure 3.12a Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 1985

1986

1987

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

Seed

153.0

149.3

Early Stage

95.9

185.3

95.2

130.4

506.8

129.6

139.5

176.6

178.2

624.0

Expansion

219.2

319.2

312.8

392.7

1,243.9

270.2

381.4

252.3

294.3

1,198.2

Later Stage

154.6

89.8

175.5

79.5

499.4

125.6

96.7

180.4

147.7

550.4

Total

622.6

743.6

677.2

735.6

2,779.0

711.0

887.5

724.1

809.6

3,132.3

93.7

133.0

528.9

185.6

270.0

114.7

189.4

759.7

145.7

199.4

142.0

136.3

623.4

170.7

183.9

204.2

190.0

748.8

421.8

352.2

402.5

314.1

1,490.6

100.1

167.0

119.8

111.7

498.5

838.2

902.4

868.5

752.2

3,361.3

Figure 3.12b Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 1988

1989 1988-2Q

1990

Stage

1988-1Q

1988-3Q 1988-4Q 1988 Total 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 1990 Total

Seed

164.5

150.0

240.6

115.2

670.2

138.1

174.6

116.3

130.3

559.3

81.9

116.7

114.3

83.8

396.6

Early Stage

144.0

216.6

184.7

169.4

714.6

255.9

128.0

163.1

190.9

737.9

139.7

199.1

133.1

212.9

684.8

Expansion

314.5

494.6

320.2

439.5

1,568.8

399.6

426.5

305.5

468.8

1,600.3

307.2

352.6

208.0

397.9

1,265.6

Later Stage

135.3

105.0

151.4

66.0

457.7

95.5

105.3

78.3

156.4

435.5

123.1

119.9

126.3

116.7

486.0

Total

758.3

966.1

896.9

790.0

3,411.3

889.1

834.4

663.1

946.4

3,333.0

651.9

788.2

581.6

811.3

2,833.1

Figure 3.12c Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 1991

1992

Stage

1991-1Q

1991-2Q

1991-3Q

Seed

45.8

84.6

53.4

58.0

1993

1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 Total 1993-1Q 1993-2Q 1993-3Q 1993-4Q 1993 Total 241.8

67.6

210.4

71.8

207.8

557.7

139.7

144.1

164.3

181.5

629.6

Early Stage

137.7

130.3

140.4

140.0

548.4

134.0

187.6

102.7

153.6

577.9

164.0

136.1

106.6

168.2

574.9

Expansion

249.5

276.2

257.0

317.0

1,099.6

496.0

434.8

343.9

495.4

1,770.1

357.1

412.3

461.3

636.3

1,867.0

Later Stage

89.5

115.8

63.7

100.8

369.8

211.2

163.2

115.3

198.8

688.5

189.5

111.6

116.8

173.8

591.7

Total

522.5

606.9

514.5

615.7

2,259.7

908.8

996.1

633.8

1,055.5

3,594.2

850.3

804.1

849.0

1,159.8

3,663.2

Figure 3.12d Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 1994

1995

1996

Stage

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 Total

Seed

190.0

225.8

160.2

205.1

781.2

316.8

396.6

229.9

329.8

1,273.0

330.0

427.9

200.6

316.5

1,275.0

Early Stage

177.6

196.4

157.8

307.9

839.7

408.8

393.6

366.8

563.8

1,733.1

596.2

712.9

573.6

754.1

2,636.8

Expansion

310.5

388.5

327.7

480.1

1,506.9

620.0

1,325.7

800.4

815.7

3,561.7

1,151.9

1,506.8

1,277.0

1,567.3

5,503.0

Later Stage

201.3

192.5

262.0

346.6

1,002.4

344.5

430.5

308.7

363.4

1,447.0

348.0

461.3

546.5

571.1

1,926.9

Total

879.4

1,003.3

907.8

1,339.7

4,130.1

1,690.0

2,546.4

1,705.8

2,072.6

8,014.8

2,426.1

3,109.0

2,597.6

3,208.9

11,341.6

NVCA

THOMSON REUTERS

40 | 2014 National Venture Capital Association Yearbook

Figure 3.12e Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 1997

1998

1999

Stage

1997-1Q

1997-2Q

Seed

392.9

330.8

323.4

319.5

1,366.6

405.4

426.4

459.9

477.6

1,769.3

591.5

799.7

990.1

1,236.5

3,617.8

Early Stage

773.5

846.8

760.1

1,074.7

3,455.1

1,164.7

1,014.5

1,290.4

1,990.6

5,460.1

1,302.0

2,026.8

2,661.8

5,489.9

11,480.6

Expansion

1,354.4

1,938.5

1,970.1

2,301.0

7,564.1

1,753.9

3,350.1

2,690.5

2,528.0

10,322.5

3,108.3

5,487.4

7,325.5

13,333.5

29,254.7

Later Stage

601.4

551.6

669.8

795.9

2,618.8

854.6

973.6

955.0

1,137.9

3,921.0

1,620.2

3,004.2

2,620.1

3,249.1

10,493.6

3,122.3

3,667.8

3,723.4

4,491.2

15,004.6

4,178.5

5,764.5

5,395.7

6,134.2

21,473.0

6,622.0

11,318.1

13,597.5 23,309.1

54,846.7

Total

1997-3Q 1997-4Q 1997 Total 1998-1Q 1998-2Q 1998-3Q 1998-4Q 1998 Total 1999-1Q 1999-2Q 1999-3Q 1999-4Q 1999 Total

Figure 3.12f Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2000 Stage

2000-1Q

Seed

808.6

2001

2002

2000-2Q 2000-3Q 2000-4Q 2000 Total 2001-1Q 2001-2Q 2001-3Q 2001-4Q 2001 Total 2002-1Q 2002-2Q 2002-3Q 2002-4Q 2002 Total 984.1

870.9

486.8

3,150.4

256.6

265.6

128.5

152.7

803.5

76.4

94.0

84.2

86.1

340.7

Early Stage

7,137.5

6,937.9

5,903.8

5,313.5

25,292.6

3,447.7

2,104.5

1,720.2

1,318.9

8,591.3

1,209.5

1,138.0

827.7

804.5

3,979.7

Expansion

16,100.4

15,726.9

15,253.6

11,966.2

59,047.2

6,905.3

6,622.1

4,588.8

4,782.5

22,898.7

3,804.8

3,535.3

2,461.7

2,320.8

12,122.6

Later Stage

4,382.9

4,357.2

4,582.9

4,291.6

17,614.5

2,459.6

2,515.1

1,793.4

1,890.5

8,658.6

1,932.6

1,345.6

1,096.5

1,359.4

5,734.1

28,429.3

28,006.1

26,611.1

22,058.1 105,104.6 13,069.2 11,507.4 8,230.9

8,144.7

40,952.1

7,023.4

6,112.9

4,470.0

4,570.8

22,177.1

Total

Figure 3.12g Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2003

2004

2005

Stage

2003-1Q

2003-2Q 2003-3Q 2003-4Q 2003 Total 2004-1Q 2004-2Q 2004-3Q 2004-4Q 2004 Total 2005-1Q 2005-2Q 2005-3Q 2005-4Q 2005 Total

Seed

83.3

95.3

100.3

86.0

364.9

104.8

124.3

118.1

569.7

916.9

139.3

529.0

165.0

162.2

995.6

Early Stage

676.2

1,011.5

806.8

1,087.7

3,582.2

904.9

1,030.3

1,028.5

1,077.0

4,040.8

907.8

992.9

1,186.2

971.0

4,057.9

Expansion

2,468.1

2,508.0

2,165.5

2,623.3

9,764.9

2,069.3

2,680.0

2,042.6

2,261.7

9,053.6

2,092.9

2,336.1

1,759.6

2,333.2

8,521.7

Later Stage

1,160.2

1,374.6

1,520.5

1,852.6

5,908.0

2,312.6

2,481.9

1,856.6

2,546.4

9,197.5

2,082.1

2,579.1

2,952.5

2,335.5

9,949.3

Total

4,387.8

4,989.4

4,593.1

5,649.7

19,620.0

5,391.6

6,316.6

5,045.8

6,454.8

23,208.8

5,222.1

6,437.1

6,063.2

5,802.0

23,524.5

Figure 3.12h Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2006

2007

2008

Stage

2006-1Q

Seed

249.2

367.6

372.1

302.7

1,291.6

315.8

500.0

462.4

558.7

1,837.0

459.3

528.3

557.7

377.9

1,923.1

Early Stage

930.6

1,022.2

1,143.1

1,674.5

4,770.4

1,341.1

1,706.4

1,259.8

1,780.0

6,087.3

1,401.6

1,571.4

1,382.2

1,533.6

5,888.9

Expansion

2,594.2

3,218.2

2,863.1

2,448.0

11,123.5

2,641.8

2,335.6

3,102.0

2,986.4

11,065.7

3,421.3

2,657.7

2,549.7

2,096.4

10,725.1

Later Stage

2,832.4

2,778.3

2,473.8

2,244.5

10,329.0

3,151.4

3,297.7

3,378.0

3,125.8

12,952.9

2,827.0

3,275.0

3,126.9

2,183.1

11,411.9

Total

6,606.5

7,386.3

6,852.0

6,669.7

27,514.5

7,450.1

7,839.8

8,202.2

8,450.9

31,942.9

8,109.1

8,032.4

7,616.5

6,191.0

29,948.9

THOMSON REUTERS

2006-2Q 2006-3Q 2006-4Q 2006 Total 2007-1Q 2007-2Q 2007-3Q 2007-4Q 2007 Total 2008-1Q 2008-2Q 2008-3Q 2008-4Q 2008 Total

NVCA

2014 National Venture Capital Association Yearbook | 41

Figure 3.12i Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2009 Stage

2009-1Q

Seed

319.7

2010

2011

2009-2Q 2009-3Q 2009-4Q 2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 2011-1Q 2011-2Q 2011-3Q 2011-4Q 536.0

511.0

368.5

1,735.2

416.7

689.0

338.7

231.9

1,676.3

219.6

424.4

227.4

2011 Total

208.1

1,079.4

Early Stage

768.2

1,178.5

1,240.7

1,753.2

4,940.6

1,149.7

1,732.4

1,457.3

1,574.5

5,913.8

1,861.1

2,307.7

2,244.0

2,514.1

8,926.9

Expansion

1,233.0

1,779.0

1,829.0

2,000.2

6,841.2

1,820.2

2,788.6

1,670.2

2,428.0

8,706.9

2,210.7

2,457.8

2,579.8

2,580.9

9,829.3

Later Stage

1,527.1

1,600.6

1,844.7

1,796.7

6,769.2

1,702.2

1,915.0

1,985.5

1,468.8

7,071.6

2,236.0

3,007.4

2,506.0

2,145.1

9,894.4

Total

3,848.0

5,094.2

5,425.5

5,918.6

20,286.2

5,088.8

7,125.0

5,451.7

5,703.2

23,368.6

6,527.4

8,197.3

7,557.2

7,448.2

29,730.0

Figure 3.12j Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2012

NVCA

2013

Stage

2012-1Q

2012-2Q

Seed

187.4

282.5

2012-3Q 2012-4Q 2012 Total 2013-1Q 2013-2Q 2013-3Q 2013-4Q 2013 Total 179.3

187.2

836.4

208.7

227.9

192.2

337.5

966.4

Early Stage

1,956.2

2,184.2

1,932.5

2,242.2

8,315.1

1,551.5

2,536.9 2,862.0

2,945.6

9,896.0

Expansion

1,810.0

2,763.6

2,580.5

2,292.5

9,446.6

2,057.7

2,215.5

2,537.0

3,004.0

9,814.2

Later Stage

2,356.5

2,170.9

1,985.2

2,241.6

8,754.2

2,190.4

2,125.8

2,333.2

2,219.3

8,868.7

Total

6,310.1

7,401.1

6,677.5

6,963.5

27,352.3

6,008.3

7,106.1

7,924.4

8,506.4

29,545.2

THOMSON REUTERS

42 | 2014 National Venture Capital Association Yearbook

Figure 3.13a Quarterly Venture Capital Investments 1985-2013 By Stage (Number of Deals) 1985

1986

Stage

1985-1Q

1985-2Q

1985-3Q

Seed

110

1987

1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1Q 1987-2Q 1987-3Q 1987-4Q 98

358

134

107

388

116

101

1987 Total 387

Early Stage

290

111

333

131

102

411

Expansion

138

121

114

150

523

166

136

105

502

182

138

158

136

614

Later Stage

177

200

234

Total

402

320

272

354

1,348

472

370

263

318

1,423

493

387

397

369

1,646

Figure 3.13b Quarterly Venture Capital Investments 1985-2013 By Stage (Number of Deals) 1988

1989

Stage

1988-1Q

1988-2Q

1988-3Q

Seed

119

1990

1988-4Q 1988 Total 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 84

370

106

100

355

1990 Total 258

Early Stage

358

101

338

113

371

Expansion

158

181

133

142

614

216

158

127

164

665

148

151

144

157

600

Later Stage

182

189

234

Total

430

402

350

342

1,524

475

358

326

388

1,547

351

376

325

411

1,463

Figure 3.13c Quarterly Venture Capital Investments 1985-2013 By Stage (Number of Deals) 1991

1992

1993

Stage

1991-1Q

1991-2Q

1991-3Q

1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 Total 1993-1Q 1993-2Q 1993-3Q 1993-4Q

1993 Total

Seed

193

252

290

Early Stage

277

292

181

Expansion

137

127

124

153

541

155

160

103

185

603

144

121

116

132

513

Later Stage

261

247

227

Total

315

314

282

361

1,272

354

360

249

431

1,394

321

291

272

327

1,211

Figure 3.13d Quarterly Venture Capital Investments 1985-2013 By Stage (Number of Deals) 1994

1995

1996

Stage

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 Total

Seed

332

125

116

431

130

139

137

503

Early Stage

255

130

137

116

136

519

147

205

174

225

751

Expansion

101

110

115

422

187

178

164

176

705

235

246

245

317

1,043

Later Stage

223

241

338

Total

309

307

275

341

1,232

503

466

433

494

1,896

584

673

602

776

2,635

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 43

Figure 3.12e Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 1997

1998

1999

Stage

1997-1Q

1997-2Q

Seed

392.9

330.8

323.4

319.5

1,366.6

405.4

426.4

459.9

477.6

1,769.3

591.5

799.7

990.1

1,236.5

3,617.8

Early Stage

773.5

846.8

760.1

1,074.7

3,455.1

1,164.7

1,014.5

1,290.4

1,990.6

5,460.1

1,302.0

2,026.8

2,661.8

5,489.9

11,480.6

Expansion

1,354.4

1,938.5

1,970.1

2,301.0

7,564.1

1,753.9

3,350.1

2,690.5

2,528.0

10,322.5

3,108.3

5,487.4

7,325.5

13,333.5

29,254.7

Later Stage Total

1997-3Q 1997-4Q 1997 Total 1998-1Q 1998-2Q 1998-3Q 1998-4Q 1998 Total 1999-1Q 1999-2Q 1999-3Q 1999-4Q 1999 Total

601.4

551.6

669.8

795.9

2,618.8

854.6

973.6

955.0

1,137.9

3,921.0

1,620.2

3,004.2

2,620.1

3,249.1

10,493.6

3,122.3

3,667.8

3,723.4

4,491.2

15,004.6

4,178.5

5,764.5

5,395.7

6,134.2

21,473.0

6,622.0

11,318.1

13,597.5 23,309.1

54,846.7

Figure 3.12f Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2000

2001

2002

Stage

2000-1Q

Seed

808.6

984.1

870.9

486.8

3,150.4

256.6

265.6

128.5

152.7

803.5

76.4

94.0

84.2

86.1

340.7

Early Stage

7,137.5

6,937.9

5,903.8

5,313.5

25,292.6

3,447.7

2,104.5

1,720.2

1,318.9

8,591.3

1,209.5

1,138.0

827.7

804.5

3,979.7

Expansion

16,100.4

15,726.9

15,253.6

11,966.2

59,047.2

6,905.3

6,622.1

4,588.8

4,782.5

22,898.7

3,804.8

3,535.3

2,461.7

2,320.8

12,122.6

Later Stage

4,382.9

4,357.2

4,582.9

4,291.6

17,614.5

2,459.6

2,515.1

1,793.4

1,890.5

8,658.6

1,932.6

1,345.6

1,096.5

1,359.4

5,734.1

28,429.3

28,006.1

26,611.1

22,058.1 105,104.6 13,069.2 11,507.4 8,230.9

8,144.7

40,952.1

7,023.4

6,112.9

4,470.0

4,570.8

22,177.1

Total

2000-2Q 2000-3Q 2000-4Q 2000 Total 2001-1Q 2001-2Q 2001-3Q 2001-4Q 2001 Total 2002-1Q 2002-2Q 2002-3Q 2002-4Q 2002 Total

Figure 3.12g Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2003

2004

2005

Stage

2003-1Q

2003-2Q 2003-3Q 2003-4Q 2003 Total 2004-1Q 2004-2Q 2004-3Q 2004-4Q 2004 Total 2005-1Q 2005-2Q 2005-3Q 2005-4Q 2005 Total

Seed

83.3

95.3

100.3

86.0

364.9

104.8

124.3

118.1

569.7

916.9

139.3

529.0

165.0

162.2

995.6

Early Stage

676.2

1,011.5

806.8

1,087.7

3,582.2

904.9

1,030.3

1,028.5

1,077.0

4,040.8

907.8

992.9

1,186.2

971.0

4,057.9

Expansion

2,468.1

2,508.0

2,165.5

2,623.3

9,764.9

2,069.3

2,680.0

2,042.6

2,261.7

9,053.6

2,092.9

2,336.1

1,759.6

2,333.2

8,521.7

Later Stage

1,160.2

1,374.6

1,520.5

1,852.6

5,908.0

2,312.6

2,481.9

1,856.6

2,546.4

9,197.5

2,082.1

2,579.1

2,952.5

2,335.5

9,949.3

Total

4,387.8

4,989.4

4,593.1

5,649.7

19,620.0

5,391.6

6,316.6

5,045.8

6,454.8

23,208.8

5,222.1

6,437.1

6,063.2

5,802.0

23,524.5

Figure 3.12h Quarterly Venture Capital Investments 1985-2013 By Stage ($ Millions) 2006 Stage

2006-1Q

2007

2008

2006-2Q 2006-3Q 2006-4Q 2006 Total 2007-1Q 2007-2Q 2007-3Q 2007-4Q 2007 Total 2008-1Q 2008-2Q 2008-3Q 2008-4Q 2008 Total

Seed

249.2

367.6

372.1

302.7

1,291.6

315.8

500.0

462.4

558.7

1,837.0

459.3

528.3

557.7

377.9

1,923.1

Early Stage

930.6

1,022.2

1,143.1

1,674.5

4,770.4

1,341.1

1,706.4

1,259.8

1,780.0

6,087.3

1,401.6

1,571.4

1,382.2

1,533.6

5,888.9

Expansion

2,594.2

3,218.2

2,863.1

2,448.0

11,123.5

2,641.8

2,335.6

3,102.0

2,986.4

11,065.7

3,421.3

2,657.7

2,549.7

2,096.4

10,725.1

Later Stage

2,832.4

2,778.3

2,473.8

2,244.5

10,329.0

3,151.4

3,297.7

3,378.0

3,125.8

12,952.9

2,827.0

3,275.0

3,126.9

2,183.1

11,411.9

Total

6,606.5

7,386.3

6,852.0

6,669.7

27,514.5

7,450.1

7,839.8

8,202.2

8,450.9

31,942.9

8,109.1

8,032.4

7,616.5

6,191.0

29,948.9

NVCA

THOMSON REUTERS

44 | 2014 National Venture Capital Association Yearbook

Figure 3.13i Quarterly Venture Capital Investments 1985-2013 By Stage (Number of Deals) 2009

2010

2011

Stage

2009-1Q

2009-2Q 2009-3Q 2009-4Q 2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 2011-1Q 2011-2Q 2011-3Q 2011-4Q

2011 Total

Seed

118

374

120

100

410

129

114

110

446

Early Stage

195

212

249

323

979

271

361

318

337

1,287

353

398

408

444

1,603

Expansion

186

220

219

269

894

253

305

242

277

1,077

223

277

282

244

1,026

Later Stage

229

242

199

231

901

207

237

228

201

873

237

281

214

197

929

Total

680

761

766

941

3,148

824

1,023

888

912

3,647

906

1,085

1,018

995

4,004

Figure 3.13j Quarterly Venture Capital Investments 1985-2013 By Stage (Number of Deals) 2012

2013

Stage

2012-1Q

2012-2Q

Seed

296

221

Early Stage

359

445

428

506

1,738

420

512

564

535

2,031

Expansion

225

255

252

255

987

236

231

244

280

991

Later Stage

233

195

194

222

844

203

195

187

213

798

Total

882

983

946

1,054

3,865

912

985

1,048

1,096

4,041

THOMSON REUTERS

2012-3Q 2012-4Q 2012 Total 2013-1Q 2013-2Q 2013-3Q 2013-4Q 2013 Total

NVCA

2014 National Venture Capital Association Yearbook | 45

Figure 3.14 Venture Capital Investments 1985-2013 By Industry ($ Millions) Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Biotechnology

136

223

290

369

336

316

292

599

483

578

832

1,192

1,368

1,554

2,104

4,293

Business Products and Services

188

291

437

715

2,561

4,661

450

473

392

370

312

245

174

205

164

178

316

358

394

383

958

1,636

Consumer Products and Services

135

176

153

169

126

123

162

176

522

507

742

692

2,715

3,221

Electronics/Instrumentation

119

118

120

104

151

200

307

198

272

779

Financial Services

209

233

120

102

124

181

319

383

843

2,128

4,131

Healthcare Services

129

138

155

191

204

202

460

734

939

959

1,495

1,396

201

208

290

222

345

243

183

272

281

296

527

495

695

1,257

1,427

2,637

119

175

534

641

1,076

4,319

8,863

101

119

155

166

151

132

278

275

944

1,154

1,080

1,865

7,394

0,613

Computers and Peripherals

Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment

184

182

258

340

347

322

235

515

388

438

668

619

1,027

1,251

1,581

2,404

Networking and Equipment

225

164

143

137

197

174

140

250

516

250

372

628

962

1,436

4,604

1,557

214

121

296

232

217

103

303

269

326

749

2,842

3,206

Semiconductors

255

296

257

299

171

191

156

159

214

346

597

631

1,378

3,802

Software

618

570

519

477

458

519

466

614

460

671

1,188

2,352

3,485

4,769

10,899

25,482

Telecommunications

177

174

148

159

124

128

117

201

250

463

937

1,321

1,556

3,006

7,957

16,364

,260 3,594

3,663

4,130

8,015

11,342

15,005

21,473

54,847

105,105

Other Retailing/Distribution

Unknown Total

2,779

3,132

3,361

3,411

3,333 2,833

Figure 3.14 (Continued) Venture Capital Investments 1985-2013 By Industry ($ Millions) Industry

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

3,503

3,331

3,675

4,402

3,987

4,876

5,843

5,138

3,909

3,970

4,777

4,191

4,562

Business Products and Services

1,076

475

673

466

372

593

596

466

252

437

194

130

218

Computers and Peripherals

709

457

362

530

551

394

569

419

341

375

490

436

517

Consumer Products and Services

702

256

157

331

385

420

441

400

492

661

1,432

1,335

1,245

Electronics/Instrumentation

366

300

194

375

397

669

542

605

379

390

423

250

324

Financial Services

1,204

331

413

532

907

524

574

481

381

391

317

276

536

Healthcare Services

556

380

234

382

379

380

344

165

141

250

299

333

286

1,248

823

734

843

1,131

1,941

3,046

4,537

2,564

3,421

3,753

2,904

1,507

IT Services

2,520

1,017

731

771

999

1,510

1,924

2,106

1,257

1,699

2,627

1,893

1,993

Media and Entertainment

2,368

788

669

1,374

1,203

1,863

2,200

1,877

1,650

1,576

2,307

2,134

2,936

Medical Devices and Equipment

2,085

1,894

1,660

1,919

2,170

2,777

3,694

3,648

2,586

2,363

2,935

2,549

2,130

Networking and Equipment

5,714

2,627

1,726

1,537

1,661

1,222

1,388

776

697

564

370

317

670

Industrial/Energy

Other Retailing/Distribution Semiconductors Software Telecommunications Unknown Total

NVCA

368

139

217

249

189

340

199

133

149

380

370

240

2,473

1,655

1,761

2,157

1,851

2,307

2,058

1,586

808

1,110

1,350

894

597

10,864

5,525

4,945

5,520

5,251

5,495

6,219

6,008

4,085

5,257

7,472

8,573

11,020

5,142

2,163

1,620

1,841

2,032

2,355

2,162

1,533

582

746

590

718

644

40,952

22,177

19,620

23,209

23,524

27,515

31,943

29,949

20,286

23,369

29,730

27,352

29,545

THOMSON REUTERS

46 | 2014 National Venture Capital Association Yearbook

Figure 3.15 Venture Capital Investments 1985-2013 By Industry (Number of Deals) Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Biotechnology

138

153

139

146

140

167

136

139

176

235

244

275

264

Business Products and Services

138

277

Computers and Peripherals

158

148

131

138

136

104

115

106

Consumer Products and Services

110

131

162

164

286

Electronics/Instrumentation

Financial Services

115

189

Healthcare Services

139

152

155

159

Industrial/Energy

122

138

162

138

144

158

124

131

102

101

128

155

211

185

202

IT Services

128

160

207

457

Media and Entertainment

138

191

217

263

701

Medical Devices and Equipment

129

117

166

151

184

189

159

187

147

128

179

213

273

297

290

123

140

211

274

Retailing/Distribution

120

231

Semiconductors

118

119

148

322

307

279

297

302

288

296

243

252

436

688

829

988

1,420

142

210

266

337

522

1,348

1,423

1,646

1,524

1,547

1,463

1,272

1,394

1,211

1,232

1,896

2,635

3,224

3,729

5,597

Networking and Equipment Other

Software Telecommunications Total

Figure 3.15 Venture Capital Investments 1985-2013 By Industry (Number of Deals) Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

358

342

331

358

404

413

487

539

544

463

504

468

478

474

Business Products and Services

454

176

101

111

116

Computers and Peripherals

133

Consumer Products and Services

286

119

110

103

116

139

170

171

Electronics/Instrumentation Financial Services

334

136

Healthcare Services

166

106

Industrial/Energy

254

201

128

136

157

152

224

306

358

262

303

320

257

240

IT Services

686

327

174

149

155

174

240

284

282

218

296

366

297

344

Media and Entertainment

950

372

168

129

142

210

330

402

411

279

346

436

410

455

Medical Devices and Equipment

296

259

236

250

284

279

356

395

400

343

345

372

322

311

Networking and Equipment

478

329

227

184

190

183

130

137

106

Other

Retailing/Distribution

282

Semiconductors

256

209

170

215

257

219

265

228

210

136

146

136

113

2,168

1,303

1,006

969

952

1,031

1,078

1,115

831

1,066

1,256

1,391

1,547

852

479

274

213

232

234

308

279

219

123

111

110

8,038

4,590

3,206

3,024

3,228

3,293

3,882

4,226

4,177

3,148

3,647

4,004

3,865

4,041

Software Telecommunications Total

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 47

Figure 3.16 Venture Capital Investments 1985-2013 By State ($ Millions) State

1985

1986

1,070.9

1,343.8

Massachusetts

396.3

379.5

446.0

387.8

296.8

350.9

240.0

366.3

310.9

385.9

697.2

New York

114.5

75.4

100.5

112.1

158.7

48.8

45.0

143.8

103.9

69.9

248.6

228.4

211.0

240.7

229.2

141.0

161.4

150.5

241.9

California

Texas

1987

1988

1,266.7 1,391.8

1989

1990

1,309.8 1,221.6

1991

1992

1,031.3 1,437.2

1993

1994

1995

1996

1997

1998

1999

2000

1,232.1 1,503.8 3,108.7 4,634.4

6,044.9

7,868.2

22,947.2

42,882.9

1,053.9

1,438.6

2,002.1

5,065.7

10,557.1

303.3

293.3

786.2

1,402.1

3,508.1

6,690.8

313.8

479.2

553.4

908.7

1,205.6

3,163.1

6,270.8

Washington

55.4

66.1

98.3

73.3

74.8

55.2

29.2

191.5

85.4

137.6

325.9

466.9

434.2

736.5

2,340.7

2,792.3

Maryland

46.8

20.8

30.5

46.1

87.7

47.6

36.4

30.1

343.5

55.9

140.0

139.5

188.3

349.9

616.5

1,961.5

Virginia

32.3

23.5

76.4

66.6

51.8

46.7

14.0

30.9

39.5

77.6

279.4

440.1

297.9

749.7

1,238.9

3,320.9

Pennsylvania

48.8

43.3

78.0

68.4

56.2

119.6

41.1

154.0

107.9

149.4

128.0

305.6

540.9

644.9

1,763.5

2,911.7

Illinois

43.5

30.7

38.5

42.7

93.4

72.0

96.6

73.9

89.5

168.9

199.0

358.0

414.3

426.9

1,232.7

2,382.3

Colorado

77.0

113.8

111.4

107.8

157.8

93.7

54.2

129.7

135.0

197.4

325.1

321.2

405.0

838.9

1,832.9

4,091.9

Florida

31.1

34.5

70.8

80.0

44.3

34.6

22.5

71.9

127.7

102.8

270.9

398.9

467.1

625.3

1,697.4

2,691.1

Georgia

55.8

111.4

66.6

105.3

64.7

20.9

46.8

192.7

143.4

93.5

157.8

247.1

371.9

504.5

1,164.1

2,270.7

New Jersey

75.3

116.9

132.3

99.1

156.6

66.5

68.7

106.1

100.2

190.7

241.6

441.8

490.9

501.2

907.8

3,162.9

Ohio

34.7

55.7

44.8

53.4

32.7

27.9

19.6

27.1

34.3

67.3

68.7

160.5

180.9

319.1

421.0

1,013.6

Utah

6.0

32.8

8.3

11.9

4.4

1.0

9.1

24.4

7.3

1.2

23.2

57.5

90.7

116.2

418.4

666.9

D. of Columbia

18.9

15.2

4.7

17.2

0.0

2.5

0.8

4.8

1.1

4.3

0.8

6.7

5.2

46.9

539.7

508.3

Minnesota

24.4

29.9

35.4

25.8

37.6

78.7

38.7

52.0

37.1

55.4

192.3

149.9

256.8

340.0

616.5

951.7

North Carolina

17.3

20.9

21.0

15.7

26.1

36.9

12.1

48.8

22.2

63.6

210.7

180.9

271.8

326.9

853.6

1,821.8

Connecticut

71.6

76.9

101.3

167.7

89.6

134.9

86.5

57.8

33.3

82.5

141.3

146.0

270.0

345.2

889.2

1,550.8

Oregon

84.9

75.0

51.7

66.7

43.2

33.0

29.7

55.6

32.8

27.0

38.6

90.5

126.9

53.5

501.0

810.4

Arizona

15.2

38.1

38.6

43.9

37.8

27.5

33.3

64.9

41.9

35.7

83.4

95.5

170.2

226.1

365.5

668.6

Tennessee

43.5

53.5

74.5

42.7

73.8

38.8

21.1

7.2

46.7

40.6

157.7

178.2

106.6

107.3

581.0

466.3

Michigan

34.8

21.3

59.1

15.7

21.8

26.4

5.7

14.9

58.7

8.6

65.7

79.4

106.2

122.4

253.5

356.4

0.9

15.3

18.1

23.7

7.6

4.0

1.2

11.4

21.8

53.1

100.2

61.0

168.0

218.2

415.2

1.2

1.0

5.0

4.0

29.9

25.9

34.3

South Carolina Arkansas Rhode Island

12.6

9.9

6.6

14.2

30.9

2.7

0.4

5.1

10.5

3.5

20.3

11.5

26.0

35.4

92.6

Missouri

8.8

4.3

11.1

1.6

9.4

7.5

34.9

25.2

55.1

70.5

98.5

56.1

72.6

611.7

309.1

655.8

New Hampshire

5.3

14.8

15.1

27.7

29.5

16.2

29.2

6.8

31.7

7.9

30.5

42.9

53.3

167.8

233.8

767.9

Delaware

0.3

4.5

1.4

4.8

2.3

3.8

9.9

3.0

12.5

4.4

4.7

1.1

16.8

134.7

Wisconsin

11.4

13.6

16.4

12.8

11.7

10.9

5.5

23.3

32.5

8.5

9.1

26.0

62.9

51.3

88.5

259.7

Kansas

2.3

2.2

3.9

4.6

5.1

8.9

0.4

1.7

4.8

1.5

8.7

35.7

9.2

10.4

30.2

264.8

Maine

19.0

11.6

15.3

8.7

17.2

5.1

4.3

0.5

3.0

1.5

3.7

59.7

44.9

140.2

New Mexico

18.9

9.2

6.6

3.9

3.0

1.8

4.4

0.5

3.6

12.9

32.5

7.7

12.1

21.1

Indiana

16.0

16.7

17.7

6.4

10.1

10.5

8.3

0.0

16.6

56.3

15.2

20.8

29.7

44.0

46.7

273.3

14.0

0.2

9.8

1.1

0.5

3.0

6.1

0.7

0.9

7.8

1.3

2.0

2.5

0.7

1.6

2.0

19.8

12.1

22.1

17.1

8.8

3.9

16.4

6.6

8.0

4.5

7.4

7.2

1.3

3.8

5.3

13.0

1.8

4.5

4.2

46.4

9.9

3.3

1.9

2.3

3.8

2.7

25.5

13.7

26.5

41.0

234.0

103.3

0.7

0.3

0.5

1.5

0.1

38.0

3.5

0.5

10.4

3.7

29.1

57.3

163.1

North Dakota Iowa Vermont Louisiana South Dakota Nebraska

NVCA

THOMSON REUTERS

48 | 2014 National Venture Capital Association Yearbook

Figure 3.16 (Continued) Venture Capital Investments 1985-2013 By State ($ Millions) State

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2.4

2.3

7.4

2.8

5.8

8.5

3.9

15.4

11.9

21.6

31.1

35.0

37.5

81.9

201.8

2.4

4.1

5.5

0.1

2.2

9.1

1.2

2.9

18.7

9.7

61.2

47.1

30.9

Oklahoma

1.5

4.7

14.1

5.3

9.3

2.6

1.5

11.0

6.1

31.8

27.8

115.4

70.0

44.5

Idaho

0.3

5.0

0.2

0.1

15.2

0.1

1.2

30.3

16.5

8.5

Alabama

15.5

17.3

21.3

9.6

2.0

2.3

0.3

10.6

55.1

25.0

28.5

50.2

109.9

58.3

65.9

278.5

20.5

1.5

4.2

12.8

203.0

2.2

0.0

0.6

0.9

4.9

2.4

14.5

1.7

15.0

10.6

8.4

4.5

250.7

23.5

West Virginia

1.1

2.0

0.1

0.0

0.1

0.0

23.8

2.0

4.5

Montana

1.6

1.7

3.3

1.1

1.0

16.3

16.7

Alaska

3.5

Puerto Rico

0.3

0.0

1.0

22.0

7.8

8.2

12.5

1.3

4.6

42.1

Unknown

0.5

0.8

6.1

13.0

0.2

30.8

0.8

0.1

0.3

2.2

4.4

39.1

2.4

50.4

Wyoming

0.1

2.0

2,779.0

3,132.3

3,594.2 3,663.2 4,130.1 8,014.8 11,341.6

15,004.6

Kentucky Nevada

Hawaii Mississippi

Total

3,361.3 3,411.3

3,333.0 2,833.1 2,259.7

21,473.0 54,846.7 105,104.6

Figure 3.16b Venture Capital Investments 1985-2013 By State ($ Millions) State

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

16,665.4

9,598.7

8,693.9

10,577.2

10,881.4

12,965.9

15,463.7

14,873.4

10,302.7

12,021.7

15,109.7

14,541.6

14,769.7

Massachusetts

4,919.4

2,646.3

2,721.3

3,107.9

2,736.6

3,032.0

3,798.9

3,328.7

2,407.8

2,422.6

3,152.7

3,222.1

3,079.3

New York

1,935.1

746.3

669.8

773.7

1,068.9

1,444.6

1,350.0

1,538.6

1,080.4

1,391.8

2,474.8

1,899.3

2,870.4

Texas

3,137.3

1,191.6

1,221.0

1,212.3

1,170.7

1,518.2

1,493.8

1,127.7

678.2

1,079.4

1,622.4

948.9

1,315.5

Washington

1,150.7

591.0

450.8

854.9

830.3

1,116.9

1,335.2

883.5

565.2

575.8

539.2

853.1

913.2

935.6

627.1

331.4

709.5

637.8

844.2

728.9

578.0

424.0

484.2

438.4

407.8

664.5

Virginia

1,004.2

429.0

397.3

291.1

534.8

460.9

626.4

534.6

209.4

376.7

520.1

273.6

593.8

Pennsylvania

1,084.2

526.5

537.6

624.9

518.3

898.7

977.3

787.0

433.6

525.4

515.6

524.4

446.5

California

Maryland

Illinois

998.6

313.6

379.9

236.6

315.7

437.2

451.4

477.0

257.1

654.3

799.5

594.4

434.9

1,244.4

588.0

609.9

363.2

622.9

703.3

686.3

872.3

458.9

445.9

619.7

589.0

428.8

Florida

937.3

401.7

323.2

422.6

329.2

282.0

599.3

265.2

337.7

234.2

335.5

203.9

421.0

Georgia

847.9

574.9

281.5

500.5

264.4

414.1

431.6

420.9

310.6

334.0

381.3

262.8

411.8

1,542.3

972.0

802.8

968.1

925.4

740.7

578.9

716.0

621.8

460.8

439.6

421.4

322.3

Ohio

249.2

266.0

193.9

89.9

136.5

91.2

228.1

273.6

122.7

199.4

188.1

304.5

319.2

Utah

220.1

135.7

111.8

249.8

248.8

198.1

196.0

254.8

176.3

150.5

249.3

318.4

315.0

D. of Columbia

161.8

23.5

56.1

80.2

25.1

46.2

57.7

25.3

49.1

109.3

53.4

60.8

286.5

Minnesota

475.2

345.5

208.2

388.2

274.0

304.5

413.1

485.0

284.8

145.1

291.4

254.1

270.0

North Carolina

585.6

554.2

379.4

311.1

346.9

422.5

555.4

511.6

254.9

421.6

303.6

180.9

259.6

Connecticut

608.2

191.9

223.6

251.6

209.6

289.0

271.0

236.1

190.2

133.2

157.8

152.6

181.7

Oregon

248.6

165.1

140.5

142.4

132.2

146.8

254.4

152.2

79.6

133.4

237.8

124.6

138.5

Arizona

247.5

212.4

81.9

72.2

134.7

276.7

238.2

228.5

94.0

84.2

230.4

237.4

113.3

Colorado

New Jersey

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 49

Figure 3.16b Venture Capital Investments 1985-2013 By State ($ Millions) State

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Tennessee

193.3

122.5

82.6

96.2

101.5

43.2

126.7

84.3

75.0

69.3

108.6

81.3

109.3

Michigan

154.9

109.4

95.2

134.3

93.3

131.3

104.7

214.5

178.5

148.9

83.1

238.9

108.2

South Carolina

10.1

45.3

11.8

13.6

2.7

8.3

86.9

21.2

7.1

41.6

59.7

39.5

85.7

Arkansas

10.4

9.7

1.2

3.7

5.1

6.5

6.2

5.0

85.5

Rhode Island

118.7

95.9

62.8

58.0

72.8

77.2

4.5

16.1

30.0

59.3

42.2

85.1

81.7

Missouri

267.4

81.0

79.5

26.0

127.7

57.8

47.6

92.5

17.4

97.0

134.4

21.5

76.7

New Hampshire

257.9

225.7

167.1

127.6

97.2

123.1

154.1

255.8

52.1

56.9

62.5

60.7

74.4

Delaware

14.6

19.4

0.4

2.1

11.1

5.3

7.3

79.0

20.6

32.2

26.2

9.6

70.8

Wisconsin

92.6

51.2

37.6

66.0

67.8

72.0

87.2

71.6

36.1

134.9

52.9

95.3

35.9

Kansas

40.3

8.9

27.0

48.7

7.2

31.5

123.4

59.5

7.5

39.1

53.8

47.6

32.9

Maine

3.9

16.9

2.7

26.0

5.1

39.9

7.8

5.4

11.4

4.3

38.6

12.8

26.8

New Mexico

14.2

13.9

3.6

24.0

76.4

32.1

131.1

49.8

5.5

12.4

64.9

36.3

25.9

Indiana

56.5

40.1

24.5

67.8

123.7

32.8

70.6

93.7

232.1

80.0

177.9

84.2

25.4

North Dakota

1.0

14.5

2.0

0.2

5.5

4.7

3.2

4.0

2.4

24.1

Iowa

9.1

2.0

5.3

12.1

1.5

25.3

58.2

84.1

51.5

28.4

5.0

22.5

Vermont

11.6

1.2

0.5

4.5

34.8

24.1

17.6

42.2

47.1

33.1

24.8

4.4

21.4

Louisiana

46.0

17.7

2.3

9.6

3.0

11.4

15.1

14.6

13.3

18.1

21.2

9.4

14.8

South Dakota

1.6

18.1

3.5

2.2

4.0

0.5

0.8

4.1

11.9

Nebraska

90.1

16.9

4.6

0.2

13.1

7.5

2.9

11.8

2.0

3.1

11.0

Kentucky

88.9

13.8

5.4

48.2

35.0

28.2

56.9

32.8

17.3

16.7

12.5

23.5

10.8

Nevada

33.3

31.8

23.2

47.6

64.9

19.6

23.7

12.6

15.4

28.8

27.0

8.3

9.6

Oklahoma

13.8

33.0

35.1

68.1

80.8

14.9

8.1

17.3

4.5

13.0

27.1

34.0

8.0

2.7

10.6

52.2

2.5

10.0

17.8

18.7

22.8

14.6

7.8

5.1

15.2

6.5

80.3

65.1

35.7

69.2

39.7

19.9

36.1

48.8

45.4

0.6

3.5

23.1

5.2

Idaho Alabama Hawaii

37.8

4.4

17.8

13.7

14.6

32.8

4.9

7.5

7.4

9.5

0.6

2.5

Mississippi

30.0

5.0

0.9

4.9

10.0

16.2

5.0

1.3

1.0

9.8

1.2

1.4

15.9

12.6

5.8

10.5

4.9

10.8

30.0

3.0

3.8

2.1

14.6

1.2

24.8

27.4

4.0

15.6

14.5

1.9

3.2

5.6

0.0

Puerto Rico

32.0

0.5

0.1

1.5

28.8

14.3

16.0

13.8

4.5

0.1

Unknown

14.3

0.5

Wyoming

1.5

4.1

6.5

0.2

1.5

10.0

40,952.1

22,177.1

19,620.0

23,208.8

23,524.5

27,514.5

31,942.9

29,948.9

20,286.2

23,368.6

29,730.0

27,352.3

29,545.2

West Virginia Montana Alaska

Total

NVCA

THOMSON REUTERS

50 | 2014 National Venture Capital Association Yearbook

Figure 3.17 Venture Capital Investments 1985-2013 By State (Number of Deals) State

1985

1986

California

467

493

523

New York

Massachusetts

215

Pennsylvania Texas

1987 1988

1989

1990

1991

1992

1993

1994 1995

1996

1997 1998

1999

2000

2001

2002

2003 2004

534

569

552

478

575

435

460

685 1,023

1,142 1,402

2,223

2,946

1,539

1,104

1,164 1,262

156

195

353

609

293

155

120

158

187

224

195

182

172

136

135

131

127

197

289

334

398

591

791

518

388

384

385

139

149

153

261

155

109

106

113

106

105

101

135

172

197

318

485

343

174

176

Washington

111

207

258

146

111

114

Illinois

118

203

128

Ohio

Colorado

127

161

222

115

Michigan

Maryland

100

178

Virginia

154

284

145

Connecticut

123

North Carolina

104

153

Tennessee

Florida

117

189

113

New Jersey

118

188

156

Georgia

161

224

138

Minnesota

107

Missouri

Oregon

Utah D. of Columbia

Arizona

Wisconsin

New Hampshire

New Mexico

Indiana

South Carolina

Rhode Island

Kansas

Vermont

Nebraska

Oklahoma

Louisiana

Kentucky

Alabama

Delaware

Nevada

Arkansas

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 51

Figure 3.17 (Continued) Venture Capital Investments 1985-2013 By State (Number of Deals) State

1985

1986

Maine

Hawaii

Mississippi

North Dakota

Idaho

Iowa

Montana

South Dakota

West Virginia

Alaska

Puerto Rico

Unknown

Wyoming

1,348

1,423

Total

1987 1988

1989

1990

1991 1992

1993

1994 1995

1996

1997 1998

1999

2000

2001

2002

1,646 1,524

1,547

1,463

2003 2004

1,272 1,394

1,211

1,232 1,896 2,635 3,224 3,729

5,597

8,038 4,590 3,206 3,024 3,228

Figure 3.17b Venture Capital Investments 1985-2013 By State (Number of Deals)

NVCA

State

2005

2006

2007

2008

2009

2010

2011

2012

2013

California

1,337

1,592

1,735

1,699

1,297

1,478

1,622

1,604

1,616

New York

131

235

221

265

203

292

355

343

403

Massachusetts

392

409

475

452

343

378

402

426

364

Pennsylvania

107

149

176

193

136

163

156

190

233

Texas

181

201

188

162

126

168

172

163

154

Washington

122

142

168

159

107

116

122

114

126

Illinois

103

Ohio

Colorado

112

114

116

109

105

Michigan

Maryland

115

111

100

108

Virginia

103

Connecticut

North Carolina

Tennessee

Florida

New Jersey

100

Georgia

Minnesota

Missouri

Oregon

Utah

D. of Columbia

THOMSON REUTERS

52 | 2014 National Venture Capital Association Yearbook

Figure 3.17b Venture Capital Investments 1985-2013 By State (Number of Deals) State

2006

2007 2008

2009

2010

2011

2012

2013

Arizona

Wisconsin

New Hampshire

New Mexico

Indiana

South Carolina

Rhode Island

Kansas

Vermont

Nebraska

Oklahoma

Louisiana

Kentucky

Alabama

Delaware

Nevada

Arkansas

Maine

Hawaii

Mississippi

North Dakota

Idaho

Iowa

Montana

South Dakota

West Virginia

Alaska

Puerto Rico

Unknown

Wyoming

3,293

3,882

4,226 4,177

3,148

3,647 4,004

3,865

4,041

Total

THOMSON REUTERS

2005

NVCA

2014 National Venture Capital Association Yearbook | 53

Figure 3.18 Venture Capital Investments First vs. Follow-on Deals Total Dollars Invested ($ Millions)

120,000 100,000

Follow-on First

($ Millions)

80,000 60,000 40,000 20,000

NVCA

'11 '12

'10

'09

'08

'07

'06

'05

'03 '04

'02

Year

'01

'00

'99

'98

'97

'96

'95

'93 '94

'92

'91

'90

'89

'88

'87

'86

'85

THOMSON REUTERS

54 | 2014 National Venture Capital Association Yearbook

Figure 3.19 Venture Capital Investments First vs. Follow-on

THOMSON REUTERS

Year

First

Follow-on

Total

1985

727.3

2,051.7

2,779.0

1986

905.3

2,226.9

3,132.3

1987

1,008.4

2,352.9

3,361.3

1988

1,098.4

2,312.9

3,411.3

1989

907.4

2,425.6

3,333.0

1990

847.2

1,985.9

2,833.1

1991

551.7

1,707.9

2,259.7

1992

1,302.5

2,291.7

3,594.2

1993

1,274.8

2,388.4

3,663.2

1994

1,644.6

2,485.5

4,130.1

1995

3,976.7

4,038.0

8,014.8

1996

4,198.9

7,142.7

11,341.6

1997

4,869.1

10,135.5

15,004.6

1998

7,154.7

14,318.3

21,473.0

1999

16,333.3

38,513.4

54,846.7

2000

28,542.8

76,561.8

105,104.6

2001

7,300.7

33,651.4

40,952.1

2002

4,343.6

17,833.5

22,177.1

2003

3,692.1

15,927.9

19,620.0

2004

5,402.7

17,806.1

23,208.8

2005

5,885.4

17,639.1

23,524.5

2006

6,266.8

21,247.7

27,514.5

2007

7,721.4

24,221.5

31,942.9

2008

6,515.5

23,433.3

29,948.9

2009

3,506.0

16,780.2

20,286.2

2010

4,294.3

19,074.3

23,368.6

2011

5,498.2

24,231.8

29,730.0

2012

4,440.6

22,911.7

27,352.3

2013

5,104.7

24,440.5

29,545.2

NVCA

2014 National Venture Capital Association Yearbook | 55

Figure 3.20 Venture Capital Investments Number of Companies Receiving

7,000

(Number of Companies)

6,000

Follow-on Series2 First Series1

5,000 4,000 3,000 2,000 1,000

NVCA

'13

'12

'11

'10

'09

'08

'07

'06

'05

'03

'02

'04

Year

'01

'00

'99

'98

'97

'96

'95

'94

'93

'92

'91

'90

'89

'88

'87

'86

'85

THOMSON REUTERS

56 | 2014 National Venture Capital Association Yearbook

Figure 3.21 Venture Capital Investments First vs Follow-on

Year

No. of Cos Receiving Initial Deals Financing

No. of Cos Receiving Follow-On Financing

No. of Cos Receiving Financing*

1985

435

757

1,156

1986

507

760

1,228

1987

580

865

1,387

1988

510

801

1,262

1989

450

841

1,241

1990

351

788

1,072

1991

266

717

941

1992

394

716

1,047

1993

354

652

949

1994

428

626

989

1995

902

776

1,573

1996

1,145

1,170

2,116

1997

1,305

1,473

2,575

1998

1,430

1,831

3,030

1999

2,468

2,440

4,474

2000

3,391

3,692

6,423

2001

1,233

2,785

3,854

2002

847

1,977

2,713

2003

777

1,834

2,511

2004

975

1,847

2,715

2005

1,075

1,852

2,800

2006

1,277

2,128

3,229

2007

1,419

2,255

3,502

2008

1,309

2,348

3,479

2009

830

1,903

2,645

2010

1,091

2,052

3,022

2011

1,346

2,178

3,356

2012

1,275

2,148

3,269

2013

1,334

2,221

3,383

* No. of Cos receiving financing can be less than the sum of the first two columns because any given company can receive initial and follow-on financing in the same year

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 57

Figure 3.22 First Sequence by Stage of Development ($ Millions) Stage

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Seed

309.0

437.6

353.4

377.9

258.3

178.2

102.7

214.3

356.5

528.1

742.6

639.1

798.3

1,003.4

2,790.6

Early Stage

101.4

88.8

318.5

291.8

215.7

292.6

214.3

266.5

260.1

390.8

898.0

1,356.4

1,722.4

2,700.2

6,367.9

Expansion

65.8

211.4

272.0

321.8

312.4

277.3

153.3

572.5

490.2

471.0

1,641.9

1,742.4

1,866.5

2,815.0

5,840.2

Later Stage Total

51.1

67.5

64.4

106.9

121.0

99.1

81.4

249.1

168.0

254.8

694.2

460.9

481.9

636.1

1,334.5

727.3

905.3

1,008.4

1,098.4

907.4

847.2

551.7

1,302.5

1,274.8

1,644.6

3,976.7

4,198.9

4,869.1

7,154.7

16,333.3

Figure 3.22 (Continued) First Sequence by Stage of Development ($ Millions) Stage

2000

2001

2002

2003

2004

302.9

2005

2006

2007

2008

2009

2010

2011

2012

2013

Seed

2,522.9

632.4

266.8

793.6

803.0

1,081.6

1,410.7

1,368.5

878.3

899.2

823.9

558.4

750.2

Early Stage

16,420.1

4,411.0

2,359.3

2,121.4 2,605.1

2,616.9

2,522.1

2,917.8

2,381.0

1,346.1

1,748.5

2,645.7

2,244.3

2,920.4

Expansion

8,673.1

1,891.8

1,333.1

953.4 1,292.3

1,572.6

1,923.0

2,477.3

1,698.1

786.3

946.6

1,047.6

945.7

789.1

Later Stage

926.8

365.4

384.4

892.9

740.1

915.5

1,068.0

495.3

700.0

981.0

692.2

644.9

28,542.8

7,300.7

4,343.6

3,692.1 5,402.7 5,885.4 6,266.8

7,721.4

6,515.5

3,506.0

4,294.3

5,498.2 4,440.6

5,104.7

Total

314.5

711.6

Figure 3.23 First Sequence by Stage of Development (Number of Deals) Stage

1985

1986

1987

Seed

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

221

247

230

210

206

119

145

189

256

309

347

459

661

Early Stage

118

199

168

102

122

132

111

281

401

470

495

1116

Expansion

107

105

118

106

111

115

105

104

293

360

419

411

626

Later Stage

435

507

580

510

450

351

266

394

354

428

902

1,145

1,305

1,430

2,468

Total

Figure 3.23 (Continued) First Sequence by Stage of Development (Number of Deals) Stage

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Seed

587

221

130

165

178

210

324

426

381

224

281

356

213

177

Early Stage

1913

691

465

424

539

570

592

557

387

548

701

827

930

Expansion

799

279

199

142

183

252

275

295

228

142

169

177

149

150

Later Stage

108

106

143

112

3,391

1,233

847

777

975

1,075

1,277

1,419

1,309

830

1,091

1,346

1,275

1,334

Total

NVCA

THOMSON REUTERS

58 | 2014 National Venture Capital Association Yearbook

Figure 3.24 First Sequence by Industry ($ Millions) Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Software

97.8

110.6

94.6

130.1

94.3

167.9

106.8

149.8

123.0

296.0

542.1

923.8 1,060.5

1,375.8

2,980.7

Biotechnology

34.5

54.3

66.0

66.9

54.8

26.1

16.1

181.1

123.0

161.1

159.3

212.8

346.3

383.7

417.9

Media and Entertainment

69.8

43.2

100.3

114.1

80.4

63.7

13.9

81.3

195.6

115.3

775.1

364.3

419.3

686.4

2,466.9

IT Services

15.3

16.6

5.5

12.8

20.6

18.3

10.3

8.9

36.0

93.0

44.9

312.9

231.3

377.1

1,545.9

Medical Devices and Equipment

44.4

75.0

85.0

84.8

74.3

59.6

45.9

127.2

117.2

123.9

188.4

212.6

260.1

263.0

310.4

Healthcare Services

16.5

70.2

56.4

17.1

48.8

31.5

31.7

66.6

92.5

109.5

300.4

273.9

342.5

239.2

368.5

Consumer Products and Services

46.8

63.9

57.9

77.0

31.1

88.4

53.8

76.9

74.8

113.2

306.6

206.5

195.1

257.8

835.8

Financial Services

61.1

75.6

43.9

165.9

71.4

35.3

8.3

100.6

78.9

62.9

114.0

253.2

443.6

765.0

Industrial/Energy

93.6

81.3

114.5

123.5

222.5

108.0

68.2

148.9

150.2

156.4

434.1

274.5

352.3

782.4

708.2

0.5

2.0

6.0

0.0

32.7

0.0

0.2

13.0

0.5

15.3

26.8

92.3

Computers and Peripherals

Other

39.0

69.0

87.0

70.5

46.3

52.4

19.1

59.9

35.1

48.5

148.1

115.2

110.2

122.5

273.5

Business Products and Services

12.3

49.7

26.6

11.3

13.3

37.7

63.7

28.1

61.9

24.3

135.7

159.3

267.6

367.0

963.1

Telecommunications

64.2

45.0

38.6

30.9

44.2

53.6

10.8

93.5

64.2

192.8

365.2

416.4

387.1

955.6

1,960.1

Retailing/Distribution

19.7

64.6

137.8

63.3

22.4

13.2

25.1

52.7

28.4

60.5

217.7

131.0

114.2

335.3

698.7

Electronics/Instrumentation

42.1

27.6

31.9

25.7

12.7

14.7

15.1

14.2

16.0

6.6

67.1

85.7

123.8

47.5

79.2

Semiconductors

47.5

22.4

38.9

56.7

14.5

36.3

10.2

51.7

5.1

42.9

69.5

130.5

166.2

165.0

292.2

Networking and Equipment

22.2

34.1

23.5

41.8

55.9

40.4

19.9

61.0

73.0

37.7

95.5

125.7

224.3

325.9

1,574.8

727.3

905.3

1,008.4

1,098.4

907.4

847.2

551.7

1,302.5

1,274.8

Unknown

Total

1,644.6 3,976.7 4,198.9 4,869.1

7,154.7 16,333.3

2012

2013

1,687.9 1,883.0

2,279.1

Figure 3.24 First Sequence by Industry ($ Millions) Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

Software

6,120.9

1,649.4

1,270.5

936.3

1,236.5

1,170.4

1,320.9

1,492.4

1,184.3

Biotechnology

2009

2010

817.8 1,006.2

2011

807.9

804.2

698.8

423.7

724.5

622.6

1,098.4

1,070.4

955.7

472.8

613.6

891.3

465.7

818.0

Media and Entertainment

2,848.6

344.6

208.5

223.3

680.5

525.5

649.4

652.7

495.6

247.8

378.1

568.1

518.4

433.9

IT Services

2,616.3

310.4

129.0

143.2

198.8

338.6

342.4

517.1

632.7

298.7

444.2

494.2

277.7

371.1

339.5

281.8

279.3

309.7

333.4

389.4

548.6

776.2

682.9

321.7

245.9

244.4

223.2

207.3

Medical Devices and Equipment Healthcare Services

428.0

84.4

155.1

70.5

87.5

144.7

78.7

76.2

28.7

59.5

148.7

91.2

112.3

181.1

Consumer Products and Services

954.3

131.6

44.9

78.0

123.7

225.7

130.5

205.9

193.4

125.0

193.2

351.6

199.8

177.3

Financial Services

1,484.8

297.5

76.3

94.4

249.2

646.1

164.9

326.1

245.9

132.0

149.9

50.5

29.0

142.0

Industrial/Energy

1,106.8

472.8

433.0

251.0

308.9

525.3

698.0

1,262.0

1,218.3

584.9

443.9

597.0

264.4

127.9

37.0

36.6

17.0

13.6

0.1

2.7

3.5

2.0

12.4

25.2

85.9

346.8

259.8

17.2

85.0

91.1

84.4

55.7

101.4

129.4

62.2

50.9

99.3

27.4

67.9

Other Computers and Peripherals Business Products and Services Telecommunications Retailing/Distribution Electronics/Instrumentation Unknown Semiconductors Networking and Equipment Total

THOMSON REUTERS

1,907.7

277.1

117.3

342.6

235.8

152.0

208.3

239.6

97.5

122.8

81.9

49.7

40.2

66.7

4,755.3

796.6

189.5

180.6

285.9

342.0

410.0

423.4

304.1

84.2

158.2

71.1

136.4

55.3

869.8

59.1

34.7

12.4

118.3

135.9

39.9

84.5

34.6

21.5

56.1

79.0

43.0

25.0

144.1

103.3

82.3

45.4

98.8

130.1

134.9

114.2

65.7

37.9

66.2

30.0

70.6

23.8

19.7

1,145.2

514.9

344.7

375.4

417.6

281.5

260.5

212.9

196.0

69.0

110.0

99.6

91.0

19.6

2,629.8

876.5

245.4

120.5

198.4

171.2

125.6

163.7

50.7

44.6

145.3

80.8

33.2

3.0

28,542.8

7,300.7

4,343.6

3,692.1 5,402.7 5,885.4 6,266.8

7,721.4

6,515.5

3,506.0 4,294.3 5,498.2 4,440.6 5,104.7

NVCA

2014 National Venture Capital Association Yearbook | 59

Figure 3.25 First Sequence by Industry (Number of Deals) Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Software

223

327

330

335

596

Media and Entertainment

107

113

379

IT Services

230

Biotechnology

106

Consumer Products and Services

139

Industrial/Energy

100

Medical Devices and Equipment

109

Business Products and Services

146

Financial Services

101

Healthcare Services

Retailing/Distribution

116

Telecommunications

139

228

Electronics/Instrumentation

Semiconductors

Computers and Peripherals

Networking and Equipment

102

435

507

580

510

450

351

266

394

354

428

902

1,145

1,305

1,430

2,468

Other

Total

Figure 3.25 (Continued) First Sequence by Industry (Number of Deals) Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Software

877

315

269

232

249

285

300

329

319

228

338

469

517

591

Media and Entertainment

393

101

157

181

165

146

210

192

170

IT Services

327

117

140

124

Biotechnology

123

109

115

110

121

149

117

113

100

Consumer Products and Services

100

Industrial/Energy

124

115

149

156

Medical Devices and Equipment

126

123

108

Business Products and Services

223

Financial Services

172

Healthcare Services

Retailing/Distribution

121

Telecommunications

393

128

Electronics/Instrumentation

Semiconductors

116

Other Computers and Peripherals Networking and Equipment Total

NVCA

208

3,391

1,233

847

777

975

1,075

1,277

1,419

1,309

830

1,091

1,346

1,275

1,334

THOMSON REUTERS

60 | 2014 National Venture Capital Association Yearbook

Figure 3.26 Internet-Related Investments By Year Year

# Companies

($ Millions)

1995

433

1,946.0

1996

763

4,236.4

1997

1,030

6,375.9

1998

1,492

11,875.9

1999

3,069

42,540.5

2000

4,615

80,915.1

2001

2,391

26,620.0

2002

1,473

11,394.5

2003

1,255

9,343.2

2004

1,278

10,991.5

2005

1,367

11,002.1

2006

1,680

13,007.0

2007

1,805

14,959.7

2008

1,860

13,444.9

2009

1,450

9,434.3

2010

1,725

11,061.2

2011

2,136

15,949.3

2012

2,170

16,067.8

2013

2,281

19,009.3

Total

15,177

330,174.5

Figure 3.27 Top 5 States by Internet-Related Investments State

($ Millions)

California

10,056.9

New York

2,320.1

Massachusetts

1,253.5

Texas

882.1

Washington

624.6

Total*

15,137.2

*Total includes above 5 states only

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 61

Figure 3.28 Internet-Related Investments by Region in 2013 Stage Region

($ Millions)

Silicon Valley

8,735.3

NY Metro

2,406.6

New England

1,358.8

LA/Orange County

1,132.9

DC/Metroplex

911.2

Texas

882.1

Southeast

873.3

Northwest

742.3

Midwest

655.1

SouthWest

329.8

Colorado

259.2

Philadelphia Metro

211.5

North Central

166.9

San Diego

164.8

South Central

127.0

Upstate NY

28.6

Sacramento/N.Cal Total

NVCA

23.9 19,009.3

THOMSON REUTERS

62 | 2014 National Venture Capital Association Yearbook

Figure 3.29 Sources and Targets of Invested Capital Investments 2013 ($ Millions) Target State

SOURCE STATE

IND

0.0

1.3

0.0

0.7

0.0

1.7

0.0

2.4

0.0

5.1

0.0

5.1

1.9

0.0

17.0

6,882.1

86.6

9.4

98.7

7.8

112.5 65.8

1.8

14.0

0.0

77.9

9.6

5.3

1.5

3.0

669.2

52.1

1.2

13.5

0.0

4.7

65.0

115.0

0.0

10.0

0.0

2.0

0.0

4.3

9.0

0.0

83.2

0.5

173.1

5.9

24.7

0.0

6.1

0.0

3.0

0.0

82.6

125.4

0.0

16.3

2.2

0.0

27.0

0.0

12.0

6.7

0.0

7.3

11.6

0.0

7.5

0.0

11.2

1,386.5

87.8

7.2

3.1

0.6

45.0

2.7

0.4

0.0

20.2

0.0

9.1

0.0

229.3

12.7

0.0

0.1

0.0

26.8

0.0

24.8

4.0

0.0

0.6

5.4

0.0

1.6

0.0

14.2

1.1

0.0

2.0

43.3

0.0

0.6

0.0

0.1

0.0

3.1

0.0

102.7

19.3

0.0

21.0

0.0

147.0

0.0

35.7

60.8

0.0

3.7

0.0

13.9

0.0

1.7

3.5

0.8

0.0

7.2

0.0

2.0

0.0

0.3

0.0

0.2

0.0

0.9

0.0

1.5

0.0

8.5

0.0

2.7

0.0

0.6

0.0

0.7

0.0

0.4

0.1

0.0

3.8

938.4

21.7

42.3

0.3

30.0 21.8

4.8

0.0

0.8

5.0

36.9

0.1

0.8

2.3

6.0

976.1

2.2

19.5

1.9

0.0

1.4

84.9

13.0

0.0

14.9

0.0

5.0

0.0

14.4

0.0

1.2

32.5

54.3

0.0

0.3

0.0

4.4

0.0

1.1

0.0

33.5

0.0

15.1

0.0

8.2

0.0

38.7

0.0

55.2

0.0

5.0

0.0

3.6

0.0

22.9

1.1

0.0

0.2

0.0

5.6

0.0

2.1

9.8

0.0

1.1

0.0

26.8

0.0

2.1

5.2

0.0

20.3

1.9

0.0

0.3

0.0

1.3

0.0

0.3

0.0

1.0

0.0

0.8

0.0

6.8

0.0

1.0

0.0

9.1

139.9

2.5

4.8

6.7

2.3

1.2

2.0

0.0

11.8

0.0

43.5

0.0

0.2

0.0

0.5

0.0

0.9

0.0

4.6

0.0

0.4

0.0

1.0

0.0

17.6

1150.1

14.8

14.3

5.5

9.5

65.5 168.7

0.0

1.7

0.0

7.5

4.7

4.5

0.0

0.9

183.5

22.7

3.5

1.8

0.0

7.8

0.1

0.0

8.3

0.0

14.0

0.0

2.0

0.0

0.4

0.0

1.0

0.0

5.0

0.0

2.3

153.2

0.1

3.3

14.0

30.0 18.4

8.0

0.0

64.0

9.8

0.0

1.3

0.0

0.4

0.0

0.6

0.0

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 63

Figure 3.29 (Continued) Sources and Targets of Invested Capital Investments 2013 ($ Millions) Target State

SOURCE STATE

IND

0.0

0.3

0.0

3.4

0.0

4.6

0.0

2.5

0.0

6.2

0.0

1.1

0.0

238.4

1.6

0.0

46.6

0.0

4.2

0.0

1.1

0.0

1.9

0.0

1.3

0.1

35.3

2,698.2

37.8

53.9

86.6

8.0

27.2

88.2

0.4

6.0

1.5

50.7

7.6

5.2

3.1

2.6

631.0

225.5

0.5

22.1

0.0

5.0

28.3

0.0

0.4

0.0

30.8

11.8

0.0

6.0

0.0

2.1

6.7

0.0

2.1

0.0

18.0

63.8

0.0

1.6

0.0

141.8

4.3

0.0

0.5

0.0

10.2

0.8

0.0

3.5

0.0

12.3

0.0

5.8

0.0

0.8

0.0

6.4

0.0

Total

0.0

5.2

86.6

2.5

22.5

6.5

427.5 25.4 32.9 10.8

14.8

113.3 14,471.5 431.3 162.6 274.6 88.4 421.0 413.4

3,062.1 662.8 26.8 99.9

Figure 3.29b Sources and Targets of Invested Capital Investments 2013 ($ Millions) Target State

SOURCE STATE

ORE

0.0

1.4

0.0

2.1

0.0

3.5

0.0

0.6

0.0

0.3

0.0

67.7

0.2

0.0

36.9

0.0

10.0

12.3

75.5

3.4

0.4

757.7

86.2

0.0

43.6 79.7 0.0

27.0

15.3

0.0

3.8

384.7

0.0

2.5

0.0

0.1

0.0

5.6

0.0

3.3

0.0

2.6

0.0

10.0

0.0

5.3

0.0

4.6

0.0

32.9

0.0

11.0

0.0

5.3

0.0

5.5

0.0

12.7

1.5

0.0

57.0

2.3

0.0

0.2

19.0

1.7

0.0

257.5

0.0

0.3

0.0

5.2

0.0

0.9

0.0

0.6

0.0

0.2

0.0

5.7

11.6

0.0

0.7

0.0

1.5

2.3

0.0

0.5

0.0

2.5

0.0

6.0

0.0

4.2

0.0

0.3

0.0

21.5

0.0

3.9

34.8 0.0

18.9

8.6

0.0

69.8

0.0

3.7

3.5

0.0

5.9

0.0

0.4

9.5

0.0

4.7

0.0

3.7

0.0

5.8

0.7

0.0

2.7

12.9

0.0

2.1

0.0

18.1

22.6

0.0

0.9

0.0

1.1

0.0

0.4

0.0

0.2

0.4

0.0

4.7

0.0

0.1

0.0

6.7

0.0

54.9

0.0

6.9

0.0

32.5

9.8

0.9

0.0

248.9

30.5

0.0

2.1

43.5 0.0

18.8

10.0

0.0

6.5

47.9

0.0

11.3

0.0

6.0

0.0

8.0

37.1

0.0

9.5

0.0

0.2

0.0

0.8

0.0

12.2

0.0

2.1

0.0

2.0

0.6

0.0

0.4

1.0

0.0

4.3

0.0

1.1

0.0

17.8

0.0

3.5

0.0

0.8

0.0

6.0

0.0

5.4

0.0

7.3

0.0

1.3

0.0

2.1

0.0

0.4

2.8

0.0

4.6

0.0

4.0

4.3

0.0

NVCA

THOMSON REUTERS

64 | 2014 National Venture Capital Association Yearbook

Figure 3.29b Sources and Targets of Invested Capital Investments 2013 ($ Millions) Target State

SOURCE STATE

ORE

0.0

53.4

0.0

2.0

0.0

3.0

0.0

4.0

0.0

0.9

20.5

0.0

5.1

0.0

0.2

0.0

3.9

0.0

4.5

0.0

10.2

1.8

0.0

11.2

0.0

5.0

35.8

0.0

26.1

0.0

8.9

0.0

1.9

0.0

10.4

0.0

0.1

2.5

0.0

0.2

0.0

16.4

0.0

0.1

7.0

83.8

0.0

519.0

21.9

0.0

2.0

28.8

0.0

5.0

8.6

6.0

0.0

199.3

0.0

2.7

0.0

2.3

0.0

0.2

0.1

8.8

56.7

0.0

0.7

0.0

4.9

0.0

4.2

0.0

3.3

0.0

3.0

5.2

0.0

0.1

0.0

6.0

13.9

0.0

81.8

1.6

0.0

2.3

82.6

0.0

3.7

0.0

9.6

0.0

2.6

0.0

1.0

0.0

0.1

0.0

10.1

0.0

4.1

0.0

0.8

0.0

30.4

20.0

0.0

6.6

0.0

5.0

1.6

0.0

2.7

0.0

0.1

0.0

0.3

275.6

0.0

48.0

20.4

0.8

0.0

45.8

10.6

5.9

4.1

87.3

1.8

1.0

639.1

43.0

3.1

52.2 133.4 0.0

5.0

24.6

0.0

30.9

174.4

0.0

1.7

0.0

14.9

0.0

0.2

0.0

5.0

0.0

0.7

0.0

12.3

0.0

3.1

0.0

2.8

0.2

0.0

6.3

0.0

8.6

13.5

0.0

11.1

0.0

9.0

0.0

0.9

0.0

4.9

0.0

0.2

0.0

Total

267.0

65.0

1.2

0.0

255.6

24.1

21.0

74.4

351.3 25.9

9.6

130.3 441.1

0.0

81.7

85.7

11.9

THOMSON REUTERS

2,686.3 301.8

8.0

109.3 1,272.4 0.0

NVCA

2014 National Venture Capital Association Yearbook | 65

Figure 3.29c Sources and Targets of Invested Capital Investments 2013 ($ Millions) Target State

SOURCE

NVCA

STATE

WV WY TOT

0.0

4.7

0.0

14.2

0.0

3.5

0.0

13.0

96.7 50.0 0.0

0.0

176.6 6.1

0.0

10,062.8

0.0

20.0 0.0

0.0

19.2

0.0

263.7

0.1

0.0

21.2

0.0

591.1

0.0

59.9 0.0

0.0

164.9

0.0

7.8

3.7

57.5 0.0

0.9

30.1

0.2

0.0

2,417.5

0.0

5.7

0.0

90.4

0.0

8.0

0.0

1.3

0.0

93.5

0.0

0.2

1.5

0.0

0.1

0.0

4.8

0.0

3.3

0.0

37.9

2.1

0.0

511.4

1.5

0.0

32.7

0.0

2.4

0.0

1.0

0.0

3.8

0.0

25.1

16.0 44.5 0.0

5.2

44.4

0.0

2,738.1

1.0

11.1

0.0

25.0

0.0

331.0

0.0

6.5

0.0

119.0

0.0

0.1

0.0

97.4

0.0

0.1

0.0

69.5

0.0

0.1

0.0

0.1

THOMSON REUTERS

66 | 2014 National Venture Capital Association Yearbook

Figure 3.29c Sources and Targets of Invested Capital Investments 2013 ($ Millions) SOURCE STATE

TOT

2.2

0.1

0.0

3.3

0.0

146.0

0.0

0.2

0.0

5.3

0.0

6.7

0.0

2.5

0.0

15.6

0.0

5.0

0.0

329.8

0.0

12.0

0.0

0.3

0.0

7.8

34.1

37.5

0.0

43.3

4.3

0.0

2694.8

0.0

0.4

0.0

103.3

0.0

10.1

0.0

9.3

0.0

90.0

0.0

34.9

0.0

0.2

0.0

639.3

0.0

3.1

0.0

2.2

0.0

3.7

7.2

0.0

0.5

0.0

90.2

1.0

4.7

0.0

2.8

0.0

595.2

66.1

146.8

0.0

10.0

286.4

15.7

1.0

0.0

5,850.1

60.9

0.0

111.3

0.0

53.0

0.0

17.3

0.0

237.5

0.0

3.6

0.0

3.6

6.5

0.0

113.7

0.0

329.8

13.1

0.0

3.3

6.2

0.0

53.8

0.0

0.2

Total

313.8

591.0

0.0

21.0

874.1

35.9

1.2

0.0

28,922.8

Figure 3.30 2013 Internet-Related Investments By Stage Company Stage Seed Early Stage

THOMSON REUTERS

($ Millions) 348.75 6,036.86

Expansion

7,559.33

Later Stage

5,064.38

TOTAL

19,009.32

NVCA

2014 National Venture Capital Association Yearbook | 67

Figure 3.31 2013 Internet-Related Investments By Industry Sector Industry Group

($ Millions)

Software

10,821.33

Media and Entertainment

2,771.45

IT Services

1,966.98

Consumer Products and Services

1,074.01

Networking and Equipment

669.55

Telecommunications

572.39

Financial Services

324.00

Retailing/Distribution

228.44

Computers and Peripherals

222.24

Semiconductors

132.53

Healthcare Services

107.14

Business Products and Services

53.76

Industrial/Energy

22.52

Biotechnology

16.23

Medical Devices and Equipment

15.65

Other

5.61

Electronics/Instrumentation

5.50

Total

19,009.32

Figure 3.32 2013 Internet-Related vs. Non Internet-Related By Industry Sector ($ Million) Industry Biotechnology

Non-Internet Related

Total

16.2

4,545.7

4,561.9

Business Products and Services

53.8

164.2

218.0

Computers and Peripherals

222.2

295.0

517.2

Consumer Products and Services

1,074.0

171.5

1,245.5

5.5

318.8

324.3

Financial Services

324.0

212.4

536.4

Healthcare Services

107.1

179.0

286.1

Electronics/Instrumentation

Industrial/Energy

22.5

1,484.0

1,506.5

IT Services

1,967.0

25.9

1,992.9

Media and Entertainment

2,771.4

164.1

2,935.5

Medical Devices and Equipment

15.6

2,114.5

2,130.2

Networking and Equipment

669.6

5.6

93.0

98.6

228.4

12.0

240.4

Other Retailing/Distribution Semiconductors Software Telecommunications Total

NVCA

Internet Related

132.5

464.9

597.4

10,821.3

198.7

11,020.0

572.4

71.2

643.6

19,009.3

10,514.8

29,524.1

THOMSON REUTERS

68 | 2014 National Venture Capital Association Yearbook

Figure 3.33 2013 Internet-Related vs. Non Internet-Related By Industry Sector (Number of Companies) Industry

Internet Related

Non-Internet Related

Total

Biotechnology

367

371

Business Products and Services

Computers and Peripherals

Consumer Products and Services

114

149

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

191

198

IT Services

292

297

Media and Entertainment

368

383

Medical Devices and Equipment

244

250

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

1,291

1,316

Software Telecommunications Total

2,281

1,092

3,373

Figure 3.34 Top 5 States By Pecentage Invested Within State in 2013 Fund Domicile

Pct. Invested Within State

California

68%

Ohio

55%

Utah

55%

Texas

46%

Georgia

46%

*Minimum $20 million invested

Figure 3.35 Top 5 States By Portion Received From In-State Firms 2013 Fund Domicile

Pct. Invested Within State

California

48%

New Mexico

40%

Michigan

39%

Illinois

34%

Massachusetts

32%

*Minimum $20 million invested

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 69

Figure 3.36 Number of States Invested Into in 2013 By State of Venture Firm Location of Venture Firm

Figure 3.37 Number of States California Venture Firms Into By Year

No. of States Invested In

Year

No. of States Invested In

California

1993

Massachusetts

2003

New York

2013

Pennsylvania

Illinois

Connecticut

Maryland

New Jersey

Virginia

Texas

Georgia

Missouri

Figure 3.38 Corporate Investments By Year Year

# All Venture Capital Deals

# Deals with CVC Involvement

Calculated Percentage of Deals with Corporate VC Involvement

$M Average Amount of All VC Deals

$M Average Amount of CVC Participation

Total VC Investment $M

1995

1,896

140

7.4%

4.23

3.08

8,015

431

5.4%

1996

2,635

234

8.9%

4.30

3.37

11,342

787

6.9%

1997

3,224

324

10.0%

4.65

2.85

15,005

922

6.1%

1998

3,729

495

13.3%

5.76

3.63

21,473

1,795

8.4%

1999

5,597

1230

22.0%

9.80

6.43

54,847

7,908

14.4%

2000

8,038

1950

24.3%

13.08

7.63

105,105

14,877

14.2%

2001

4,590

964

21.0%

8.92

4.81

40,952

4,639

11.3%

2002

3,206

551

17.2%

6.92

3.33

22,177

1,837

8.3%

2003

3,024

439

14.5%

6.49

2.91

19,620

1,279

6.5%

2004

3,228

545

16.9%

7.19

2.76

23,209

1,505

6.5%

2005

3,293

565

17.2%

7.14

2.68

23,524

1,514

6.4%

2006

3,882

817

21.0%

7.09

3.16

27,515

2,581

9.4%

2007

4,226

846

20.0%

7.56

3.21

31,943

2,714

8.5%

2008

4,177

896

21.5%

7.17

2.99

29,949

2,679

8.9%

2009

3,148

405

12.9%

6.44

3.28

20,286

1,327

6.5%

2010

3,647

487

13.4%

6.41

3.86

23,369

1,879

8.0%

2011

4,004

590

14.7%

7.43

3.80

29,730

2,243

7.5%

2012

3,865

611

15.8%

7.08

3.69

27,352

2,256

8.2%

2013

4,041

683

16.9%

7.31

4.55

29,545

3,105

10.5%

NVCA

Total CVC Calculated Percentage Investment $M of Dollars Coming from CVCs

THOMSON REUTERS

70 | 2014 National Venture Capital Association Yearbook

Figure 3.39 Clean Technology Investments By Year Year

Clean Technology Investments ($ Millions)

# Clean Technology Deals

Average Investment Per Deal ($ Millions)

1995

64.6

1.9

1996

141.5

3.2

1997

180.4

3.5

1998

170.2

4.3

1999

262.1

4.9

2000

592.7

12.1

2001

335.4

5.9

2002

350.3

7.1

2003

237.5

4.1

2004

417.5

5.4

2005

614.7

6.3

2006

1,772.8

152

11.7

2007

3,036.0

261

11.6

2008

4,225.7

306

13.8

2009

2,244.6

234

9.6

2010

3,944.8

305

12.9

2011

4,392.0

333

13.2

2012

3,081.0

246

12.5

2013

1,468.0

184

8.0

Figure 3.40 California Investments as a Percentage of Overall Investment (Dollars Invested) 100% 90% 34.7%

80%

50.0% 70%

50.0%

63.4%

SoCal

60%

NoCal

50% 40% 30%

11.0%

8.5%

39.0%

41.5%

2008

2013

55.7% 8.8%

20% 10%

Other

27.8% 9.7%

0% 1998

THOMSON REUTERS

2003

NVCA

2014 National Venture Capital Association Yearbook | 71

EXITS IPOs and Acquisitions Once successful portfolio companies mature, venture funds generally exit their positions in those companies by taking them public through an initial public offering (IPO) or by selling them to presumably larger organizations (acquisition, “M&A”, or trade sale). This then lets the venture fund distribute the proceeds to investors, raise a new fund for future investment, and invest in the next generation of companies. This chapter considers each type of exit separately. During 2013, 81 venture-backed companies went public in the United States, marking the strongest full year total for the number of new venture-backed listings since 2007. Remarkably, more than half of them were biotechnology IPOs, many of those being modestly sized. While the total dollars raised in 2012 was higher at $21.5 billion, it is important to remember that $16.0 billion of that came from the Facebook IPO alone. The remaining $5.5 billion was raised by the remaining 48 IPOs in 2012. It was a very different story in 2013. $11.1 billion was raised by 81 companies. The increase in mean and median time to exit reflects the fact that many of these IPOs were mature companies, and many of them were in the life sciences space, which had been awaiting an IPO opportunity for months, and in some cases, years. NVCA is encouraged by the increase in smaller IPOs and biotech IPOs in light of its 2012 legislative successes with the JOBS Act and creating a pathway for FDA Reform. The M&A space continued to soften in 2013, with the total number of deals falling from 473 in the prior year to 376. Total proceeds fell by 27%. Note that only 94 of the 376 acquisitions had reported deal values. Historically, deals with unreported sales prices are fairly diminutive, and in many cases, fire sales. However, an increasing number of deal term sheets specify a non-disclosure restriction on all parties. So going forward, all but the largest and most visible acquisitions may be hard to measure. Observers have wondered why, given the huge amounts of cash on the balance sheets of technology and biotechnology giants, more acquisitions are not occurring. We did see a flurry of acquisitions in early 2014, perhaps signaling an increase in that kind of activity.

Methodology This chapter focuses on company exits by venture funds through IPOs and through acquisitions (trade sale, M&A). Some additional charts are provided on private equity-backed acquisitions because of the venture industry’s interest in that data. With Thomson’s expansion of global deals coverage beginning in 2012, the criteria used to report these exits were redefined and refined. These are explained below.

In this chapter and throughout this Yearbook, we use the classic nomenclature for describing the two main types of private equity: Private Equity = Venture Capital + Buyout/Mezzanine Therefore, charts describing Private Equity in this chapter and throughout this Yearbook include both buyout/mezzanine activity and venture capital activity. The Thomson Reuters venture capital (private equity) exits coverage

Figure 4.01 Venture-Backed IPOs 300

30.00 No of IPOs Offer Amount ($B)

25.00

200

20.00

150

15.00

100

10.00

Offer ($ Billion)

No. of IPOs

250

5.00

0.00 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

'12 13

Year

NVCA

THOMSON REUTERS

72 | 2014 National Venture Capital Association Yearbook

includes full history for the US and Canada as well as Global Exits from 2005 to the present. Multiple exits per company are now tracked, including IPOs (although secondary offerings are not tracked, since the first IPO is considered the exit), Secondary Sales (sponsor to sponsor), Trade Sales (VC (PE) Firm to Non-PE Firm), Buybacks, Reverse Takeovers and Writeoffs. All values are sourced from the industry-leading Thomson Reuters Deals database with hyperlinks to the Tearsheets to view the underlying details of the transactions. The private equity-backed exits component in ThomsonONE.com can be used to further analyze all of the VC and PE Exits content herein.

Specifically, venture capital IPO exits reported in this chapter are those done on United States stock exchanges/markets with at least one United States domiciled venture fund investor. Specifically, venture capital (private equity) acquisition exits reported in this chapter are completed secondary sales and trade sales where the company was domiciled in the United States and had at least one United States domiciled venture capital (private equity) investor.

Fig. 4.02 Number of Venture-Backed IPOs vs. All IPOs Year

# of All IPOs

# of VentureBacked IPOs

2000

353

238

2001

2002

2003

2004

189

2005

171

2006

168

2007

164

2008

2009

2010

103

2011

2012

113

2013

169

Note: IPO counts reflect IPOs on US stock exchanges and markets. Venture-backed IPOs are those with at least one US-domiciled venture fund investor.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 73

Fig. 4.03 Venture-Backed IPOs 1985 to 2013 Value and Age Characteristics Year

NVCA

Num Offer Amount Med Offer of IPOs ($Mil) Amt ($Mil)

Mean Offer Amt ($Mil)

Post Offer Value ($Mil)

Med Post Value ($Mil)

Mean Post Value ($Mil)

Median Time to Exit (yrs)

Mean Time to Exit (yrs)

1985

763

2,020

2.8

3.9

1986

105

2,417

166,032

1866

3.9

4.2

1987

2,125

10,972

155

3.7

3.9

1988

769

21,117

571

3.2

3.7

1989

873

4,443

131

3.9

4.2

1990

1,108

5,886

178

3.6

4.2

1991

120

3,726

17,611

202

4.7

5.0

1992

150

5,443

15,955

146

4.5

5.0

1993

175

6,154

14,808

130

5.4

5.7

1994

138

3,952

10,344

4.7

5.3

1995

184

7,859

19,300

104

152

3.8

4.8

1996

256

12,716

51,511

112

240

3.2

4.1

1997

141

5,829

19,101

148

3.0

6.4

1998

4,125

24,655

164

324

2.5

3.1

1999

280

23,975

147,341

304

532

2.9

3.1

2000

238

27,443

115

108,783

325

494

3.1

3.7

2001

4,130

112

19,233

327

534

4.0

4.4

2002

2,333

8,322

266

347

3.3

5.0

2003

2,024

7,412

252

285

5.4

5.6

2004

10,032

122

50,268

254

613

5.5

6.1

2005

5,113

39,702

202

673

5.2

5.3

2006

7,065

105

71,124

283

1078

5.3

5.6

2007

12,339

136

68,203

365

749

6.0

2008

765

109

3,645

278

521

7.4

7.3

2009

1,980

123

152

9,192

548

707

5.9

6.9

2010

7,774

111

114,981

428

1643

5.0

5.9

2011

10,690

106

210

94,657

606

1856

6.3

7.0

2012

21,460

438

122,168

371

2493

7.2

7.8

2013

11,068

137

62,700

354

784

7.4

8.1

THOMSON REUTERS

74 | 2014 National Venture Capital Association Yearbook

Fig. 4.04 Venture-Backed IPOs by MoneyTree Industry Total Offering Size ($ Million) Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Biotechnology

349

217

964

860

486

257

437

1,250

575

197

562

Business Products and Services

193

496

185

1,137

Computers and Peripherals

135

306

267

116

150

118

295

203

122

339

357

215

Consumer Products and Services

177

186

240

169

335

177

160

541

602

Electronics/Instrumentation

372

155

296

224

111

135

Financial Services

1,248

237

273

1,597

209

521

Healthcare Services

435

144

132

180

162

269

235

123

458

Industrial/Energy

177

127

242

346

325

670

437

495

1,064

794

138

207

IT Services

163

308

396

151

239

2,141

Media and Entertainment

599

103

253

710

562

207

727

505

199

2,872

Medical Devices and Equipment

147

241

601

254

388

995

1,666

444

Networking and Equipment

105

136

346

284

233

457

313

749

416

235

2,912

Other

203

Retailing/Distribution

154

146

265

718

111

358

159

344

1,736

Semiconductors

368

210

311

164

696

319

221

Software

270

206

134

135

192

476

409

846

447

2,366

1,851

912

870

5,618

Telecommunications

421

141

212

766

277

492

1,498

377

877

4,592

Total

763

2,417

2,125

769

873

1,108

3,726

5,443

6,154

3,952

7,859

12,716

5,829

4,125

23,975

Fig. 4.04 (Continued) Venture-Backed IPOs by MoneyTree Industry Total Offering Size ($ Million) Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

4,211

353

342

442

1,616

897

895

1,292

153

1,155

997

854

3,507

Business Products and Services

594

248

507

1,202

190

322

152

Computers and Peripherals

617

124

188

367

193

Consumer Products and Services

295

120

280

542

154

163

727

847

262

631

Electronics/Instrumentation

251

438

Financial Services

771

231

353

1,447

706

551

1,178

558

185

253

Healthcare Services

156

306

124

130

132

138

Industrial/Energy

1,107

747

638

299

1,114

1,007

955

984

247

IT Services

2,030

140

207

836

379

163

636

576

Media and Entertainment

1,243

353

1,434

376

864

209

830

3,210

16,236

2,839

Medical Devices and Equipment

634

673

456

806

380

633

1,407

134

299

145

115

283

4,339

275

479

313

267

316

301

Other

177

100

Retailing/Distribution

459

259

144

452

178

Networking and Equipment

Semiconductors

1,052

133

381

522

472

136

975

534

255

130

274

Software

4,924

405

259

330

2,506

570

768

1,471

344

604

1,368

2,500

2,022

Telecommunications

5,304

173

175

542

651

731

1,591

402

197

805

305

187

Total

27,443

4,130

2,333

2,024

10,032

5,113

7,065

12,339

765

1,980

7,774

10,690

21,460

11,068

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 75

Fig. 4.05 Venture-Backed IPOs by MoneyTree Industry Total Number of Companies Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

Telecommunications

Total

105

120

150

175

138

184

256

141

280

Fig. 4.05 Venture-Backed IPOs by MoneyTree Industry Total Number of Companies Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

Telecommunications

Total

238

NVCA

THOMSON REUTERS

76 | 2014 National Venture Capital Association Yearbook

Fig. 4.06 Average and Median Age in Years by MoneyTree Industry Companies at IPO 2000-2013 2000 Industry

2001

2002

2005

2006

Mean Median

Mean

Median

Mean

Median

Mean

Median

Mean

Median Mean

4.6

8.4

6.7

6.0

5.1

5.6

5.1

5.6

5.5

5.3

5.0

N/A

2.7

5.7

N/A

4.3

4.4

N/A

2.8

N/A

15.7

N/A

0.8

N/A

1.5

3.7

4.6

4.3

5.5

5.2

5.5

4.9

2.7

6.3

N/A

Mean

Median

Biotechnology

4.5

4.3

4.5

Business Products and Services

2.0

1.7

Computers and Peripherals

4.3

Consumer Products and Services

1.4

Electronics/Instrumentation

3.4

2003

2004

Median

Financial Services

1.0

12.9

1.9

5.0

4.7

5.5

5.3

3.0

4.7

4.8

Healthcare Services

3.3

5.2

7.1

5.7

8.9

3.9

N/A

Industrial/Energy

3.4

3.2

1.1

0.4

N/A

7.7

3.4

8.2

7.0

2.1

0.6

IT Services

1.9

1.8

N/A

5.3

3.8

6.0

Media and Entertainment

4.3

3.2

N/A

4.4

3.5

5.7

6.0

5.8

4.6

4.4

8.4

8.2

Medical Devices and Equipment

5.1

4.8

4.5

3.7

3.2

N/A

8.1

7.3

6.6

7.1

6.9

5.3

Networking and Equipment

3.3

3.0

4.2

N/A

6.1

N/A

7.0

6.6

Other

1.3

2.6

N/A

Retailing/Distribution

1.9

1.8

4.3

3.4

4.0

N/A

6.1

1.5

Semiconductors

5.5

3.7

2.9

N/A

5.3

4.1

6.5

6.4

4.3

5.0

6.7

Software

3.4

3.3

4.2

4.6

3.3

3.0

6.1

5.6

5.3

5.5

5.4

5.6

6.5

6.0

Telecommunications

3.6

3.1

1.4

N/A

6.5

5.3

5.0

4.1

4.2

3.9

Fig. 4.06 (Continued) Average and Median Age in Years by MoneyTree Industry Companies at IPO 2000-2013 Industry Biotechnology

2007

2008

2009

2010

Mean Median

Mean Median Mean Median

2011

2012

2013

Mean

Median

Mean

Median

Mean

Median

Mean

Median

5.7

4.8

6.6

5.5

5.9

6.0

8.2

7.5

5.1

7.0

10.4

Business Products and Services

6.1

5.2

N/A

0.6

4.2

5.7

N/A

Computers and Peripherals

6.7

8.7

N/A

7.3

N/A

5.0

Consumer Products and Services

17.8

N/A

5.3

5.1

4.3

3.8

7.2

8.3

6.4

3.9

Electronics/Instrumentation

N/A

7.8

N/A

12.5

N/A

Financial Services

3.1

3.4

N/A

7.0

8.9

N/A

9.3

6.7

Healthcare Services

9.9

10.2

2.0

2.6

N/A

Industrial/Energy

1.0

0.9

N/A

1.4

2.8

3.1

7.0

7.2

5.2

5.4

N/A

IT Services

6.1

6.5

N/A

7.6

8.6

8.9

10.1

7.9

9.9

9.1

Media and Entertainment

6.4

N/A

7.9

7.4

6.4

6.1

6.3

6.4

7.9

7.6

Medical Devices and Equipment

6.7

6.6

6.0

N/A

5.2

5.5

4.9

7.5

7.7

Networking and Equipment

6.3

6.7

N/A

7.4

N/A

10.1

9.9

5.7

6.2

Other

N/A

Retailing/Distribution

3.1

N/A

2.2

N/A

Semiconductors

7.9

7.2

N/A

4.9

4.4

7.6

13.1

8.8

9.5

Software

6.5

5.9

6.7

6.4

7.3

7.1

6.1

8.0

9.0

8.5

7.6

8.0

6.8

Telecommunications

6.8

7.2

N/A

10.4

8.7

9.1

8.0

9.8

9.4

8.8

16.9

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 77

Fig. 4.07 Venture-Backed Merger & Acquisitions by Years Year

Number Total

Number ($ Millions) Average Known Price

1985

300.2

100.1

7.0

1986

63.4

1987

667.2

1988

1989

1990

1991

Fig. 4.08 Private Equity-Backed Merger & Acquisitions by Years

Mean Time Median Time To Exit To Exit (Years) To Exit (Years)

Year

Number Total

Mean Time To Exit (Years)

Median Time To Exit To Exit (Years)

4.8

1985

300.2

100.1

7.2

5.3

3.4

3.5

1986

246.4

61.6

3.6

4.0

166.8

4.9

3.5

1987

1422.2

177.8

4.1

3.3

920.7

102.3

4.7

4.1

1988

4139.2

197.1

3.8

3.4

746.9

74.7

4.3

3.6

1989

120.3

17.2

5.8

5.5

1990

2594.8

152.6

4.4

3.6

929.7

77.5

6.1

5.3

190.5

47.6

6.0

5.0

1991

774.5

70.4

5.2

4.7

1992

2119.1

49.3

4.7

4.0

1992

3652.8

61.9

4.7

4.0

1993

1332.9

37.0

5.3

4.7

1993

101

4355.5

71.4

5.1

4.7

1994

3208.4

56.3

5.8

5.3

1994

110

7848.2

110.5

5.6

5.0

1995

1996

108

3801.8

65.5

4.6

4.1

1995

144

11057.4

122.9

5.1

4.8

8230.8

108.3

5.2

4.1

1996

160

117

19587.9

167.4

4.8

3.9

1997

145

100

7798.0

78.0

4.5

3.1

1997

221

150

31562.5

210.4

5.0

3.8

1998

189

113

8002.0

70.8

4.5

2.8

1998

276

182

35578.7

195.5

4.5

3.0

1999

228

155

38710.6

249.7

3.6

2.8

1999

307

204

62827.4

308.0

3.8

3.0

2000

379

245

79996.4

326.5

3.2

2.7

2000

475

304

136325.6

448.4

3.5

2.8

2001

384

175

25115.6

143.5

3.0

2.2

2001

462

219

64564.5

294.8

3.4

2.4

2002

365

166

11913.2

71.8

3.5

2.9

2002

443

221

36264.2

164.1

3.8

3.0

2003

323

134

8240.8

61.5

4.3

3.6

2003

428

201

26264.8

130.7

4.5

3.8

2004

402

199

28846.1

145.0

5.0

4.6

2004

560

290

56179.7

193.7

5.2

4.6

2005

446

201

19717.3

98.1

5.4

5.2

2005

685

316

68468.5

216.7

5.4

5.2

2006

484

208

24291.0

116.8

5.7

2006

777

337

112915.0

335.1

5.6

5.5

2007

488

201

30745.5

153.0

5.8

6.3

2007

879

362

183217.8

506.1

5.6

5.2

2008

417

134

16236.9

121.2

5.8

5.6

2008

672

226

64078.8

283.5

5.3

4.6

2009

351

109

12364.9

113.4

5.7

5.5

2009

495

163

57883.9

355.1

5.5

4.9

2010

523

150

17707.3

118.0

5.8

5.0

2010

849

288

101808.3

353.5

5.7

4.7

2011

490

169

24093.2

142.6

5.8

5.0

2011

846

297

95368.7

321.1

5.8

5.0

2012

473

132

22694.2

171.9

6.2

5.6

2012

968

302

134158.0

444.2

5.9

5.3

2013

376

16586.5

176.5

5.9

5.0

2013

802

203

91618.3

451.3

5.9

5.4

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

NVCA

Number ($ Millions) Average Known Price

Average acquisition price is calculated by dividing total known acquisition proceeds by the number of transactions where the proceeds are known, not the total number of transactions. Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, data from fig. 4.07 is included here.

THOMSON REUTERS

78 | 2014 National Venture Capital Association Yearbook

Fig. 4.09 Fig. 4.09 Venture-Backed Acquisitions by MoneyTree Industry Total Transaction Values 1985 to 2013 Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

Biotechnology

Business Products and Services

Computers and Peripherals

1994

1995

1996

1997

1998

1999

640

388

265

141

846

109

181

397

149

110

140

827

373

422

721

Consumer Products and Services

237

388

503

Electronics/Instrumentation

105

133

Financial Services

140

1,204

144

734

459

1,299

Healthcare Services

199

178

475

130

180

Industrial/Energy

238

203

122

764

1,127

193

381

962

IT Services

315

523

699

Media and Entertainment

119

2,160

2,106

343

10,878

201

317

234

295

110

298

507

130

298

Networking and Equipment

250

317

352

1,024

1,090

178

981

11,521

Other

Retailing/Distribution

689

Semiconductors

627

1,903

Software

264

116

455

617

1,228

2,176

2,888

5,621

Medical Devices and Equipment

Telecommunications Total

298

790

328

381

1,133

521

2,241

300

667

921

747

120

190

2,119

1,333

3,208

3,802

8,231

7,798

8,002

38,711

Fig. 4.09 (Continued) Fig. 4.09 Venture-Backed Acquisitions by MoneyTree Industry Total Transaction Values 1985 to 2013 Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

1,206

679

115

259

688

2,462

2,104

6,050

1,266

843

3,720

3,948

2,967

3,075

Business Products and Services

1,637

157

870

151

3,024

132

409

2,124

570

314

181

315

697

Computers and Peripherals

4,610

357

680

248

492

500

348

557

764

945

Consumer Products and Services

2,611

519

343

418

444

582

486

245

284

141

1,143

615

Electronics/Instrumentation

3,456

167

116

510

115

Financial Services

1,355

617

557

250

890

985

1,896

988

812

466

435

Healthcare Services

286

177

818

6,227

624

968

542

755

601

756

250

Industrial/Energy

1,396

858

182

1,006

2,128

1,117

1,425

1,799

832

886

1,276

1,674

1,141

455

IT Services

2,384

491

612

1,002

1,999

1,066

795

2,482

745

203

1,415

2,084

2,077

898

Media and Entertainment

3,227

6,315

999

324

3,355

2,980

2,599

3,039

2,251

892

1,051

1,013

2,430

1,382

433

932

414

465

1,168

1,268

1,704

1,832

499

2,569

1,571

3,809

1,779

1,528

18,359

5,425

818

813

1,311

1,290

628

549

609

643

678

146

430

Medical Devices and Equipment Networking and Equipment Other

350

212

246

Retailing/Distribution

824

857

118

463

180

930

Semiconductors

7,210

2,099

2,703

359

688

575

1,029

964

664

628

1,047

743

1,284

1,601

Software

23,475

3,689

1,886

2,098

4,972

4,886

7,879

6,923

5,575

1,745

3,775

6,756

5,623

5,328

Telecommunications

7,528

2,630

1,125

301

1,678

1,313

2,287

1,785

1,789

2,205

826

451

1,980

550

79,996

25,116

11,913

8,241

28,846

19,717

24,291

30,746

16,237

12,365

17,707

24,093

22,694

16,587

Total

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 79

Fig. 4.10 Venture-Backed Acquisitions by MoneyTree Industry Number of Companies 1985 to 2013 Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

Telecommunications

Total

108

145

189

228

Fig. 4.10 (Continued) Venture-Backed Acquisitions by MoneyTree Industry Number of Companies 1985 to 2013 Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

118

129

120

133

163

177

157

148

120

171

162

Telecommunications Total

NVCA

379

384

365

323

402

446

484

488

417

351

523

490

473

376

THOMSON REUTERS

80 | 2014 National Venture Capital Association Yearbook

Fig. 4.11 Private Equity-Backed Acquisitions by MoneyTree Industry Total Transaction Values 1985 to 2013 Industry

1985

1986

1987

1988

1989

Biotechnology

Business Products and Services

766

640

Computers and Peripherals

149

Consumer Products and Services

116

Electronics/Instrumentation

Financial Services

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

448

412

472

498

904

263

750

419

220

1331

694

110

140

827

387

620

758

1444

798

634

1729

706

1078

1360

1676

827

115

375

107

162

312

340

1204

461

695

2305

2728

2745

1520

1605

Healthcare Services

199

178

598

1494

3702

317

112

Industrial/Energy

275

1490

311

102

792

1881

922

2490

2120

4610

4783

2841

IT Services

485

1620

533

2820

Media and Entertainment

100

220

213

351

398

3428

3195

11433

19721

201

383

317

167

575

182

1731

244

1000

1378

2075

1341

Networking and Equipment

250

317

354

1024

1090

178

1497

12000

Other

229

Retailing/Distribution

295

475

472

452

8034

3738

3265

Semiconductors

640

3066

Software

686

128

467

629

1228

2357

3196

10115

Medical Devices and Equipment

Telecommunications Total

299

1042

698

2399

1187

1331

2449

300

246

1422

4139

2595

930

775

3653

4356

7848

11057

19588

31563

35579

62827

Fig. 4.11 (Continued) Private Equity-Backed Acquisitions by MoneyTree Industry Total Transaction Values 1985 to 2013 Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

2102

801

2584

986

1805

3047

2384

7904

1830

6963

9043

6488

15784

7207

Business Products and Services

2532

520

1381

254

4077

1982

11642

4709

6517

567

2262

2540

3711

6515

Computers and Peripherals

4732

528

229

995

739

492

769

500

348

754

851

1473

Consumer Products and Services

3666

1628

2711

3656

5264

6074

10591

22156

2252

1451

7257

2413

4720

1137

Electronics/Instrumentation

3456

1204

381

447

1698

2997

392

1333

2517

2275

1240

Financial Services

1383

1116

3435

292

564

2957

1406

3349

3796

3463

2271

9887

7102

7267

Healthcare Services

668

617

1223

7417

3440

3646

4214

780

581

8210

4950

8403

1010

Industrial/Energy

2973

3360

4073

7492

12455

20938

24190

56947

12165

1998

25034

26358

31086

17253

IT Services

3138

533

674

1312

2135

2192

935

5362

5604

373

3717

2172

3960

4426

Media and Entertainment

42607

6332

4460

1733

7223

5397

26597

8756

3066

1708

2446

3816

15613

3213

556

1196

954

1168

2395

2364

3121

6691

6285

3610

8212

6201

8215

13093

22320

6226

854

942

1420

2373

1561

991

782

1281

678

3838

590

2613

176

350

200

143

1676

630

426

8358

2865

871

3521

635

1660

2227

175

3174

1042

978

1700

31001

924

945

6524

3108

4266

7021

Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors

7493

2224

3248

422

805

1276

1272

1591

850

628

1789

890

1408

1799

Software

25737

3796

2134

4087

5761

5603

10034

21470

7546

2327

15871

14993

13333

9841

Telecommunications Total

THOMSON REUTERS

11303

32082

7399

458

2232

5736

12634

4624

2162

31490

3948

3574

9320

5874

136326

64565

36264

26265

56180

68468

112915

183218

64079

57884

101808

95369

134158

91618

NVCA

2014 National Venture Capital Association Yearbook | 81

Fig. 4.12 Private Equity-Backed Acquisitions by MoneyTree Industry Number of Companies 1985 to 2013 Industry

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

Telecommunications

Total

101

110

144

160

221

276

307

Fig. 4.12 (Continued) Private Equity-Backed Acquisitions by MoneyTree Industry Number of Companies 1985 to 2013 Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

128

113

148

115

122

137

219

154

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

126

133

127

143

171

200

184

165

132

203

206

200

196

Telecommunications

Total

475

462

443

428

560

685

777

879

672

495

849

846

968

802

*Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity-financed companies. Therefore, transactions from Figure 4.10 are included here.

NVCA

THOMSON REUTERS

82 | 2014 National Venture Capital Association Yearbook

Fig. 4.13 Venture-Backed M&A Transaction Values vs. Amount Invested Year

< TVI

1x-4x TVI

4x-10x TVI

>10x TVI

1995

14%

26%

22%

38%

1996

27%

30%

34%

1997

10%

41%

15%

34%

1998

15%

22%

31%

32%

1999

14%

15%

26%

45%

2000

23%

22%

46%

2001

41%

19%

23%

17%

2002

50%

26%

13%

11%

2003

45%

38%

11%

2004

36%

33%

20%

11%

2005

30%

37%

19%

14%

2006

29%

37%

18%

16%

2007

22%

30%

24%

23%

2008

28%

29%

25%

18%

2009

44%

21%

25%

10%

2010

31%

22%

16%

2011

15%

27%

34%

24%

2012

18%

25%

29%

28%

2013

18%

37%

29%

16%

This chart is prepared by analyzing all deals where total venture investment and acquisition price are confirmed. Each deal is classified as a ratio of company acquisition (exit) price to total venture investment from all rounds. This chart compares the number of deals in each category. An acquisition where deal price is less than the total venture investment (â&#x20AC;&#x153;<TVIâ&#x20AC;?) clearly did not result in a good return. Four times the investment to 10 times the investment can be a good outcome. An acquisition for more than 10 times venture investment is usually a nice outcome.

Fig. 4.14 Venture-Backed IPOs Cos In Registration vs. Number of Venture-Backed IPOs Year

# of Venture Backed IPOs

# of Moneytree Cos. in Registration

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

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

Fig. 4.15 Post-Offer Value Ranges by Number of Companies Year

$10B or Greater

>$1B

$500M-$1B

$100M-$500M

<$100M

1995

1996

110

1997

1998

1999

181

2000

138

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

* Count only includes IPOs with disclosed post-offer values

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 83

Fig. 4.16 Deal Value Ranges by Number of Companies Year

>$1B

$500M-$1B

$100M-$500M

<$100M

1995

1996

1997

1998

1999

2000

101

106

2001

125

2002

134

2003

103

2004

143

2005

139

2006

141

2007

112

2008

2009

2010

2011

2012

2013

* Count only includes transactions with disclosed values

Fig. 4.17 Venture-Backed US Company IPOs by Year by Country 2005

Country

2006

2007

Offer Offer # Amt # Amt # Exits ($ Mil) Exits ($ Mil) Exits

2008

Offer Amt ($ Mil)

# Exits

2009

Offer Amt ($ Mil)

# Exits

2010

Offer Amt ($ Mil)

# Exits

2011

Offer Amt ($ Mil)

# Exits

2012

Offer Amt ($ Mil)

# Exits

2013

Offer Amt ($ Mil)

# Exits

Total

Offer Amt ($ Mil)

# Exits

Offer Amt ($ Mil) 332.8

Argentina

332.8

Bahamas

137.5

Bermuda

621.3

Canada

91.1

57.5

148.6

China

621.1

624.7

2,482.5

220.0

2,838.3

1,739.7

165.7

556.3

9,248.2

France

77.0

288.1

365.1

Hong Kong

103.3

India

80.5

Israel

67.5

78.0

208.2

353.7

Netherlands

304.6

89.7

394.3

Norway

43.8

Russia

380.5

1,434.8

1,815.3

South Korea

190.8

144.1

334.9

Taiwan

70.4

United Kingdom

74.0

4,072.5

5,655.9

9,466.5

765.026

1,759.8

4,752.3

6,512.1

21,294.2

9,852.0

405

64,130.4

United States

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

NVCA

THOMSON REUTERS

84 | 2014 National Venture Capital Association Yearbook

Fig. 4.18 Ratio of IPO Pre-Money Valuation to Amount Invested Year

Post Offer Offer Amt Value ($ Billion) ($ Billion)

IPO Pre Money Valuation

Total Venture Inv. ($ Billion)

Ratio

Fig. 4.19 2013 Venture-Backed IPOs Valuations as of IPOs Year of IPO

Avg Val ($ Mil)

Max ($ Mil)

Upper Quartile ($ Mil)

Median ($ Mil)

Lower Quartile ($ Mil)

Min ($ Mil)

1995

152.0

2,128.6

144.8

104.2

61.4

10.4

1995

19.3

7.9

11.4

2.2

5.2

1996

239.6

9,989.8

183.4

111.6

65.2

9.5

1996

51.5

12.7

38.8

3.7

10.5

1997

148.1

1,106.3

161.1

99.3

57.2

6.6

1997

19.1

5.8

13.3

2.7

4.9

1998

324.4

4,623.9

288.0

163.9

106.9

7.1

1998

24.7

4.1

20.5

2.4

8.6

1999

531.9

10,203.2

537.0

303.7

186.7

5.9

1999

147.3

24.0

123.4

11.0

11.2

2000

494.5

4,227.7

550.7

325.4

185.0

1.7

2000

108.8

27.4

81.3

13.0

6.3

2001

534.2

3,464.1

617.7

326.6

158.6

46.6

2001

19.2

4.1

15.1

2.6

5.8

2002

346.7

822.4

537.8

266.2

175.6

36.8

2002

8.3

2.3

6.0

1.7

3.5

2003

285.1

821.9

353.2

251.9

171.2

41.9

2003

7.4

2.0

5.4

2.4

2.2

2004

613.0

23,053.7

389.2

254.1

152.3

21.6

2004

50.3

10.0

40.2

6.7

6.0

2005

672.9

22,422.9

392.2

201.9

136.6

4.6

2005

39.7

5.1

34.6

3.1

11.2

2006

1,077.6

39,248.4

529.2

283.2

179.9

70.9

2006

71.1

7.1

64.1

4.3

14.9

2007

749.5

14,035.4

762.8

364.7

274.1

50.0

2007

68.2

12.3

55.9

6.7

8.3

2008

520.7

1,443.1

713.2

278.5

210.7

75.8

2008

3.6

0.8

2.9

0.4

8.0

2009

707.1

1,622.0

852.5

547.9

313.0

212.9

2009

9.2

2.0

7.2

0.6

12.0

2010

1,642.6

23,725.8

1,419.9

428.1

222.7

23.4

2010

115.0

7.8

107.2

5.9

18.2

2011

1,856.0

16,465.6

1,496.6

606.3

336.2

94.8

2011

94.7

10.7

84.0

6.6

12.7

2012

2,493.2

81,247.2

704.0

371.0

247.3

75.2

2012

122.2

21.5

100.7

6.7

15.0

2013

783.8

14,435.1

587.8

354.1

212.7

42.9

2013

62.7

11.1

51.6

9.4

5.5

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

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 85

GROWTH EQUITY INVESTMENTS This edition of the NVCA Yearbook, prepared by Thomson Reuters, for the first time profiles US growth equity investment in its own chapter. The NVCA believes growth equity investing is an important segment of the overall venture capital industry. Venture capitalists help create and grow companies; growth equity investors are strongly focused on the growth component of that mission and help companies scale through fat part of their hiring curves. The NVCA also believes that growth equity investing is a critical component of the emerging growth company financing continuum and has become, in many respects, the private alternative to the public markets for both emerging growth companies and their earlier stage venture capital backers.

Growth equity really emerged as an asset class in 2000 and continues strong today. In 2013, we identified 342 growth equity deals in the United States. This compares with 406 in 2012, but is very much in line with the past several years. A disclosed $12.3 billion in equity investment was reported for 2013. This does not count the approximately 105 deals for which no dollar equity amounts were disclosed. An analysis of the charts in this chapter helps profile the growth equity activity. Approximately 38% of disclosed equity dollars went to California companies. This compares with 50% of traditional venture capital dollars going to California companies. As with traditional venture capital, the sector receiving the most dollars through the most deals is Software. By count, 148 of the 342 deals, or 43%, were into software companies. By contrast, no other MoneyTree sector garnered more than 10% of the total number of deals. The definition of a growth equity company: • Company’s revenues are growing rapidly • Company is cash flow positive, profitable or approaching profitability • Company is often founder-owned and/or managed • Investor is agnostic about taking a controlling position and usually purchases minority ownership position • Industry investment mix is similar to that of earlier stage venture capital investors • Capital is used for company needs or shareholder liquidity • Additional financing rounds are not usually expected until exit • Investments are unlevered or use light leverage at purchase • Investment returns are primarily a function of growth, not leverage

While still nascent in its application, our 2014 Yearbook methodology for tagging growth equity transactions from the full venture capital/buyout database bears some explanation. We expect these criteria to mature over time as we gain more experience defining the asset class. For now: • Date: 1/1/2000 and later • Equity dollar amount invested: Zero (not disclosed) or more than$15 million • Geographic location of company: United States ª Deal stage: expansion, later stage, acquisition for expansion, acquisition, LBO, mezzanine, MBO, recap or turnaround, secondary buyout, secondary purchase • Firms investing: Must include at least one firm from a list of 65 known, active growth equity investors It should also be noted that the dollar value of many of these growth equity transactions are not disclosed, so therefore the dollar amounts reported in the charts will understate the amount of equity investment made by growth equity firms. For this chapter, we have excluded equity investment reported from $1 to $14.99 million, because growth equity deals tend to be larger in size. Also, unlike traditional venture capital portfolio companies that enter the portfolios with smaller and earlier stage rounds and exit with an IPO, acquisition, or failure, growth equity-backed companies enter those portfolios with more maturity, and, presumably, with a shorter track to liquidity.

Methodology The growth equity asset class really emerged after the 2000 tech bubble. Therefore, our statistics begin in 2000. These growth equity transactions for the most part were already captured in the Thomson One database. But they were, and still are, reported under the respective venture capital or buyout categories. For purposes of this chapter, they are aggregated and reported as if they were a standalone dataset.

NVCA

THOMSON REUTERS

86 | 2014 National Venture Capital Association Yearbook

Figure 5.01 Growth Equity Investments ($ Billions) 2000 to 2013* 30 25

($ Billions)

20 15 10 5

3 201

2 201

1 201

0 201

9 200

8 200

7 200

6 200

5 200

4 200

3 200

2 200

1 200

200

Year

Figure 5.02 Growth Equity Investments By Industry Sector

Financial Services Retailing/Distribution 1% Telecommunications Business Products and Services 3% 2% 1% Semiconductors Electronics/Instrumentation 1% 1% Healthcare Services 1% Biotechnology 2% Medical Devices and Equipment 2%

Networking and Equipment 1%

Software 34%

IT Services 5% Consumer Products and Services 6%

Industrial/Energy 8%

Media and Entertainment 10% Computers and Peripherals 21%

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 87

Fig. 5.03 Growth Equity Investments By Company State* State

# Companies

# Deals

California

153

141

4,677.6

Texas

3,368.8

New York

1,060.6

Massachusetts

650.4

Georgia Total*

Amt. Invested ($Bil)

300.3

247

229

10,057.8

*Total includes top 5 states only

Figure 5.04 Growth Equity Investments 2000-2013 By Industry ($ Millions)* Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

797.01

361

551

743

781

959

829

1,098

819

298

398

409

489

240

Business Products and Services

612.08

222

444

154

139

158

368

2,451

137

Computers and Peripherals

778.08

136

196

187

122

118

261

2,549

Consumer Products and Services

839.55

186

221

176

739

1,224

448

228

442

987

924

747

Electronics/ Instrumentation

197.00

110

164

251

212

164

115

123

129

Financial Services

1,304.76

224

296

672

914

464

316

482

249

1,904

198

410

Healthcare Services

221.88

175

270

145

149

274

129

383

194

287

161

Industrial/Energy

728.69

312

121

325

2,519

622

1,304

1,239

996

1,147

1,856

1,162

927

IT Services

2,678.90

595

323

178

3,700

528

785

814

670

457

1,151

685

666

Media and Entertainment

2,007.22

607

215

458

589

297

487

1,020

713

1,061

1,127

1,848

794

1,277

Medical Devices and Equipment

395.22

571

482

240

447

485

531

1,050

875

469

963

1,217

284

290

4,240.43

2,500

1,226

570

532

654

414

590

268

176

441

199

696

100

130

266

350

306

Networking and Equipment Other Retailing/Distribution

860.80

193

103

207

107

392

154

143

Semiconductors

944.95

622

407

461

478

528

3,049

665

357

365

504

289

161

Software

6,409.81

2,298

825

1,011

2,079

1,471

2,526

1,358

3,034

1,058

1,316

3,645

3,695

4,229

1,471

1,008

619

781

1,375

1,268

913

430

531

285

Telecommunications Total

NVCA

5,727.49 28,743.86

10,055.40 6,643.83 5,200.68 8,490.98 13,848.92 12,493.56 11,094.65 12,384.40 6,127.02 9,579.65

185

325

220

12,961.99

10,370.76

12,329.17

THOMSON REUTERS

88 | 2014 National Venture Capital Association Yearbook

Figure 5.05 Growth Equity Investments 2000-2013 By Industry (Number of Deals)* Industry

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Biotechnology

Business Products and Services

Computers and Peripherals

Consumer Products and Services

Electronics/ Instrumentation

Financial Services

Healthcare Services

Industrial/Energy

IT Services

Media and Entertainment

Medical Devices and Equipment

Networking and Equipment

Other

Retailing/Distribution

Semiconductors

Software

203

117

168

148

Telecommunications

Total

713

317

205

183

286

281

308

454

386

235

353

388

406

342

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 89

Figure 5.06 Growth Equity Investments 2000-2013 By MoneyTree Region ($ Millions)* State

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Silicon Valley

11,021

2,966

1,852

1,347

1,988

2,121

2,060

2,849

3,385

2,675

3,396

5,207

4,151

4,062

Texas

1,968

1,072

594

522

1,246

1,048

3,121

738

521

101

432

1,974

332

3,369

NY Metro

2,342

808

320

270

920

3,415

1,404

1,233

815

455

750

1,274

679

1,112

New England

3,976

1,811

556

742

890

576

846

1,329

950

285

1,882

585

709

828

Southeast

1,773

426

674

571

478

481

2,127

464

1,293

828

644

365

581

656

LA/Orange County

1,421

417

284

323

630

658

1,036

1,076

651

200

659

1,398

1,149

496

DC/Metroplex

1,239

786

307

278

375

463

229

341

436

278

515

435

377

Midwest

1,163

428

862

210

375

253

320

645

272

362

588

849

555

377

SouthWest

197

153

480

128

217

727

212

181

345

255

Northwest

993

320

113

159

300

254

276

427

134

243

420

105

394

219

North Central

310

113

153

160

109

123

2,409

181

San Diego

404

229

137

119

182

277

441

286

241

233

106

198

120

Philadelphia Metro

453

212

416

287

261

3,674

139

345

234

218

229

143

109

South Central

150

173

1,232

331

138

230

126

245

139

446

831

154

105

560

190

AK/HI/PR

190

Sacramento/N.Cal

28,743

10,055

6,644

5,201

8,491

13,849

12,494

11,095

12,384

6,126

9,580

12,963

10,371

12,329

Colorado Upstate NY

Total

NVCA

THOMSON REUTERS

90 | 2014 National Venture Capital Association Yearbook

Figure 5.07 Growth Equity Investments 2000-2013 By MoneyTree Region (Number of Deals)* State

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Silicon Valley

274

121

141

136

144

143

125

NY Metro

Southeast

Texas

LA/Orange County

New England

108

Midwest

DC/Metroplex

SouthWest

Colorado

North Central

Northwest

Philadelphia Metro

San Diego

South Central

Upstate NY

AK/HI/PR

Sacramento/N.Cal

713

317.0

205.0

183.0

286.0

281.0

308.0

454.0

386.0

235.0

353.0

388.0

406.0

342.0

Total

*Data used for the Growth Equity charts is based on the following criteria: The investment dollar totals include investments in US-based companies that are relevant to Growth Equity (Expansion, Later Stage, Acq. for Expansion, Acquisition, LBO, Mezzanine, MBO, Recap or Turnaround, Secondary Buyout, Secondary Purchase), with a total equity investment amount of $15 million and up, and participation from at least one firm classified as a Growth Equity investor. Participating firms include the following: 3i, 3i Group PLC, ABS Capital Partners, Inc., Accel Partners & Co Inc, Adams Street Partners LLC, Andreessen Horowitz LLC, Apax Partners LLP, Austin Ventures LP, Bain Capital Venture Partners LLC, Battery Ventures LP, Bessemer Venture Partners LP, Bregal Capital LLP, Carrick Capital Management Company LLC, Catalyst Investors LLC, Catterton Partners Corp, Chicago Growth Partners, Columbia Capital, Columbia Capital Group, Inc., Edison Ventures, Francisco Partners LP, Frazier Healthcare, FTV Capital, General Atlantic LLC, General Catalyst Partners LLC, GGV Capital, Great Hill Equity Partners LLC, Highland Capital Partners LLC, Insight Venture Partners LLC, Institutional Venture Partners, JMI Equity, Kennet Venture Partners Ltd, Kleiner Perkins Caufield & Byers LLC, Level Equity, LLR Partners Inc, M/C Partners, Mainsail Partners LP, Meritech Capital Partners, New Enterprise Associates, Inc., Newspring Capital, Noro-Moseley Partners, North Bridge Venture Partners L P, Norwest Venture Partners, Oak Investment Partners, Pine Brook Road Partners LLC, Polaris Partners, Redpoint Ventures, Rho Capital Partners Inc, Sequoia Capital, Serent Capital LLC, Silver Lake Partners LP, Spectrum Equity, Stripes Group LLC, Summit Partners LP, Susquehanna Growth Equity LLC, Symmetric Capital, TA Associates Management, L.P., Trident Capital, Updata Partners, Volition Capital LLC, Weston Presidio Capital, WestView Capital Partners, Duff Ackerman & Goodrich LLC, Draper Fisher Jurvetson International Inc, Draper Fisher Jurvetson Gotham Venture Partners, Draper Fisher Jurvetson New England (AKA DFJ/NE), Technology Crossover Ventures, Revolution Ventures LLC, Element Partners, Riveria Investment Group. Company and deal counts include â&#x20AC;&#x2DC;Growth Equityâ&#x20AC;&#x2122; transactions with disclosed and undisclosed equity investment totals.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 91

APPENDIX A Glossary “A” round – a financing event whereby angel groups and / or venture capitalists become involved in a fast growth company that was previously financed by founders and their friends and families. Accredited investor – a person or legal entity, such as a company or trust fund, that meets certain net worth and income qualifications and is considered to be sufficiently sophisticated to make investment decisions in private offerings. Regulation D of the Securities Act of 1933 exempts accredited investors from protection of the Securities Act. The Securities and Exchange Commission has proposed revisions to the accredited investor qualifying rules, which may or may not result in changes for venture investors. The current criteria for a natural person are: $1 million net worth or annual income exceeding $200,000 individually or $300,000 with a spouse. Directors, general partners and executive officers of the issuer are considered to be accredited investors. Alternative asset class – a class of investments that includes venture capital, leverage buyouts, hedge funds, real estate, and oil and gas, but excludes publicly traded securities. Pension plans, college endowments and other relatively large institutional investors typically allocate a certain percentage of their investments to alternative assets with an objective to diversify their portfolios. Alpha – a term derived from statistics and finance theory that is used to describe the return produced by a fund manager in excess of the return of a benchmark index. Manager returns and benchmark returns are measured net of the risk-free rate. In addition, manager returns are adjusted for the risk of the manager’s portfolio relative to the risk of the benchmark index. Alpha is a proxy for manager skill. Angel – a wealthy individual that invests in companies in relatively early stages of development. Usually angels invest less than $1 million per startup. Anti-dilution – a contract clause that protects an investor from a substantial reduction in percentage ownership in a company due to the issuance by the company of additional shares to other entities. The mechanism for making an adjustment that maintains the same percentage ownership is called a Full Ratchet. The most commonly used adjustment provides partial protection and is called Weighted Average. “B” round – a financing event whereby investors such as venture capitalists and organized angel groups are sufficiently interested in a company to provide additional funds after the “A” round of NVCA

financing. Subsequent rounds are called “C”, “D” and so on. Basis point (“bp”) – one one-hundredth (1/100) of a percentage unit. For example, 50 basis points equals one half of one percent. Banks quote variable loan rates in terms of an index plus a margin and the margin is often described in basis points, such as LIBOR plus 400 basis points (or, as the experts say, “beeps”). Beta – a measure of volatility of a public stock relative to an index or a composite of all stocks in a market or geographical region. A beta of more than one indicates the stock has higher volatility than the index (or composite) and a beta of one indicates volatility equivalent to the index (or composite). For example, the price of a stock with a beta of 1.5 will change by 1.5% if the index value changes by 1%. Typically, the S&P500 index is used in calculating the beta of a stock. Beta product – a product that is being tested by potential customers prior to being formally launched into the marketplace. Board of directors – a group of individuals, typically composed of managers, investors and experts who have a fiduciary responsibility for the well being and proper guidance of a corporation. The board is elected by the shareholders. Book – see Private placement memorandum. Bootstrapping – the actions of a startup to minimize expenses and build cash flow, thereby reducing or eliminating the need for outside investors. Bp – see Basis point. Bridge financing – temporary funding that will eventually be replaced by permanent capital from equity investors or debt lenders. In venture capital, a bridge is usually a short term note (6 to 12 months) that converts to preferred stock. Typically, the bridge lender has the right to convert the note to preferred stock at a price that is a 20% to 25% discount from the price of the preferred stock in the next financing round. See Mezzanine and Wipeout bridge. Broad-based weighted average anti-dilution – A weighted average anti-dilution method adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A’s preferred stock is THOMSON REUTERS

92 | 2014 National Venture Capital Association Yearbook

repriced to a weighted average of investor A’s price and investor B’s price. A broad-based anti-dilution method uses all common stock outstanding on a fully diluted basis (including all convertible securities, warrants and options) in the denominator of the formula for determining the new weighted average price. See Narrow-based weighted average anti-dilution. Burn rate – the rate at which a startup with little or no revenue uses available cash to cover expenses. Usually expressed on a monthly or weekly basis. Business Development Company (BDC) – a publicly traded company that invests in private companies and is required by law to provide meaningful support and assistance to its portfolio companies. Business plan – a document that describes a new concept for a business opportunity. A business plan typically includes the following sections: executive summary, market need, solution, technology, competition, marketing, management, operations, exit strategy, and financials (including cash flow projections). For most venture capital funds fewer than 10 of every 100 business plans received eventually receive funding. Buyout – a sector of the private equity industry. Also, the purchase of a controlling interest of a company by an outside investor (in a leveraged buyout) or a management team (in a management buyout). Buy-sell agreement – a contract that sets forth the conditions under which a shareholder must first offer his or her shares for sale to the other shareholders before being allowed to sell to entities outside the company. C Corporation – an ownership structure that allows any number of individuals or companies to own shares. A C corporation is a stand-alone legal entity so it offers some protection to its owners, managers and investors from liability resulting from its actions. Capital Asset Pricing Model (CAPM) – a method of estimating the cost of equity capital of a company. The cost of equity capital is equal to the return of a risk-free investment plus a premium that reflects the risk of the company’s equity. Capital call – when a private equity fund manager (usually a “general partner” in a partnership) requests that an investor in the fund (a “limited partner”) provide additional capital. Usually a limited partner will agree to a maximum investment amount and the general partner will make a series of capital calls over time to the limited partner as opportunities arise to finance startups and buyouts.

THOMSON REUTERS

Capital gap – the difficulty faced by some entrepreneurs in trying to raise between $2 million and $5 million. Friends, family and angel investors are typically good sources for financing rounds of less than $2 million, while many venture capital funds have become so large that investments in this size range are difficult. Capitalization table – a table showing the owners of a company’s shares and their ownership percentages as well as the debt holders. It also lists the forms of ownership, such as common stock, preferred stock, warrants, options, senior debt, and subordinated debt. Capital gains – a tax classification of investment earnings resulting from the purchase and sale of assets. Typically, a company’s investors and founders have earnings classified as long term capital gains (held for a year or longer), which are taxed at a lower rate than ordinary income. Capital stock – a description of stock that applies when there is only one class of shares. This class is known as “common stock”. Capital Under Management – A frequently-used metric for sizing total funds managed by a venture capital or buyout firm. In practice, there are several ways of calculating this. In the US, this is the total committed capital for all funds managed by a firm on which it collects management fees. This calculation ignores whether portions of the committed capital have not yet been called and whether portions of the fund have been liquidated and distributed. It typically does not include aging funds in their “out years” on which fees are not being collected. For purposes of this book in calculating capital managed in figure 1.04, because direct data is not available, the last eight vintage years of capital commitments is considered a proxy for the industry’s total capital under management. Capped participating preferred stock – preferred stock whose participating feature is limited so that an investor cannot receive more than a specified amount. See Participating preferred stock. Carried interest – the share in the capital gains of a venture capital fund which is allocated to the General Partner. Typically, a fund must return the capital given to it by limited partners plus any preferential rate of return before the general partner can share in the profits of the fund. The general partner will typically receive a 20% carried interest, although some successful firms receive 25%-30%. Also known as “carry” or “promote.” Clawback – a clause in the agreement between the general partner and the limited partners of a private equity fund. The clawback gives limited partners the right to reclaim a portion of disbursements to a general partner for profitable investments based on significant losses from later investments in a portfolio.

NVCA

2014 National Venture Capital Association Yearbook | 93

Closing – the conclusion of a financing round whereby all necessary legal documents are signed and capital has been transferred. Club deal – the act of investing by two or more entities in the same target company, usually involving a leveraged buyout transaction. Co-investment – the direct investment by a limited partner alongside a general partner in a portfolio company. Collateral – hard assets of the borrower, such as real estate or equipment, for which a lender has a legal interest until a loan obligation is fully paid off. Commitment – an obligation, typically the maximum amount that a limited partner agrees to invest in a fund. See Capital call. Common stock – a type of security representing ownership rights in a company. Usually, company founders, management and employees own common stock while investors own preferred stock. In the event of a liquidation of the company, the claims of secured and unsecured creditors, bondholders and preferred stockholders take precedence over common stockholders. See Preferred stock. Comparable – a private or public company with similar characteristics to a private or public company that is being valued. For example, a telecommunications equipment manufacturer whose market value is 2 times revenues can be used to estimate the value of a similar and relatively new company with a new product in the same industry. See Liquidity discount. Control – the authority of an individual or entity that owns more than 50% of equity in a company or owns the largest block of shares compared to other shareholders. Consolidation – see Rollup. Conversion – the right of an investor or lender to force a company to replace the investor’s preferred shares or the lender’s debt with common shares at a preset conversion ratio. A conversion feature was first used in railroad bonds in the 1800’s. Convertible debt – a loan which allows the lender to exchange the debt for common shares in a company at a preset conversion ratio. Also known as a “convertible note.” Convertible preferred stock – a type of stock that gives an owner the right to convert to common shares of stock. Usually, preferred stock has certain rights that common stock doesn’t have, such as decision-making management control, a promised return on investment (dividend), or senior priority in receiving proceeds from a sale or liquidation of the company. Typically, convertible preferred NVCA

stock automatically converts to common stock if the company makes an initial public offering (IPO). Convertible preferred is the most common tool for private equity funds to invest in companies. Co-sale right – a contractual right of an investor to sell some of the investor’s stock along with the founder’s or majority shareholder’s stock if either the founder or majority shareholder elects to sell stock to a third-party. Also known as Tag-along right. Cost of capital – see Weighted average cost of capital. Cost of revenue – the expenses generated by the core operations of a company. Covenant – a legal promise to do or not do a certain thing. For example, in a financing arrangement, company management may agree to a negative covenant, whereby it promises not to incur additional debt. The penalties for violation of a covenant may vary from repairing the mistake to losing control of the company. Coverage ratio – describes a company’s ability to pay debt from cash flow or profits. Typical measures are EBITDA/Interest, (EBITDA minus Capital Expenditures)/Interest, and EBIT/Interest. Cram down round – a financing event upon which new investors with substantial capital are able to demand and receive contractual terms that effectively cause the issuance of sufficient new shares by the startup company to significantly reduce (“dilute”) the ownership percentage of previous investors. Cumulative dividends – the owner of preferred stock with cumulative dividends has the right to receive accrued (previously unpaid) dividends in full before dividends are paid to any other classes of stock. Current ratio – the ratio of current assets to current liabilities. Data room – a specific location where potential buyers / investors can review confidential information about a target company. This information may include detailed financial statements, client contracts, intellectual property, property leases, and compensation agreements. Deal flow – a measure of the number of potential investments that a fund reviews in any given period. Defined benefit plan – a company retirement plan in which the benefits are typically based on an employee’s salary and number of years worked. Fixed benefits are paid after the employee retires. The employer bears the investment risk and is committed to providing THOMSON REUTERS

94 | 2014 National Venture Capital Association Yearbook

the benefits to the employee. Defined benefit plan managers can invest in private equity funds. Defined contribution plan – a company retirement plan in which the employee elects to contribute some portion of his or her salary into a retirement plan, such as a 401(k) or 403(b). The employer may also contribute to the employee’s plan. With this type of plan, the employee bears the investment risk. The benefits depend solely on the amount of money made from investing the employee’s contributions. Demand rights – a type of registration right. Demand rights give an investor the right to force a startup to register its shares with the SEC and prepare for a public sale of stock (IPO). Dilution – the reduction in the ownership percentage of current investors, founders and employees caused by the issuance of new shares to new investors. Dilution protection – see Anti-dilution and Full ratchet. Direct secondary transaction – A transaction in which the buyer purchases shares of an operating company from an existing seller. While the transaction is a secondary sale of shares, the transacted interest is a primary issue purchase directly into an operating company. Sellers are often venture capitalists selling their ownership stake in a portfolio company. Buyers are often funds that specialize in such investments. Disbursement – an investment by a fund in a company. Discount rate – the interest rate used to determine the present value of a series of future cash flows. Discounted cash flow (DCF) – a valuation methodology whereby the present value of all future cash flows expected from a company is calculated. Distressed debt – the bonds of a company that is either in or approaching bankruptcy. Some private equity funds specialize in purchasing such debt at deep discounts with the expectation of exerting influence in the restructuring of the company and then selling the debt once the company has meaningfully recovered. Distribution – the transfer of cash or securities to a limited partner resulting from the sale, liquidation or IPO of one or more portfolio companies in which a general partner chose to invest. Dividends – payments made by a company to the owners of certain securities. Typically, dividends are paid quarterly, by approval of the THOMSON REUTERS

board of directors, to owners of preferred stock. Down round – a round of financing whereby the valuation of the company is lower than the value determined by investors in an earlier round. Drag-along rights – the contractual right of an investor in a company to force all other investors to agree to a specific action, such as the sale of the company. Drawdown schedule – an estimate of the gradual transfer of committed investment funds from the limited partners of a private equity fund to the general partners. Due diligence – the investigatory process performed by investors to assess the viability of a potential investment and the accuracy of the information provided by the target company. Dutch auction – a method of conducting an IPO where-by newly issued shares of stock are committed to the highest bidder, then, if any shares remain, to the next highest bidder, and so on until all the shares are committed. Note that the price per share paid by all buyers is the price commitment of the buyer of the last share. Early stage – the state of a company after the seed (formation) stage but before middle stage (generating revenues). Typically, a company in early stage will have a core management team and a proven concept or product, but no positive cash flow. Earnings before interest and taxes (EBIT) – a measurement of the operating profit of a company. One possible valuation methodology is based on a comparison of private and public companies’ value as a multiple of EBIT. Earnings before interest, taxes, depreciation and amortization (EBITDA) – a measurement of the cash flow of a company. One possible valuation methodology is based on a comparison of private and public companies’ value as a multiple of EBITDA. Earn out – an arrangement in which sellers of a business receive additional future payments, usually based on financial performance metrics such as revenue or net income. Elevator pitch – a concise presentation, lasting only a few minutes (an elevator ride), by an entrepreneur to a potential investor about an investment opportunity. Employee Stock Ownership Program (ESOP) – a plan established by a company to reserve shares for employees. Entrepreneur – an individual who starts his or her own business. NVCA

2014 National Venture Capital Association Yearbook | 95

Entrepreneurship – the application of innovative leadership to limited resources in order to create exceptional value. Enterprise Value (EV) – the sum of the market values of the common stock and long term debt of a company, minus excess cash. Equity – the ownership structure of a company represented by common shares, preferred shares or unit interests. Equity = Assets – Liabilities. ESOP – see Employee Stock Ownership Program. Evergreen fund – a fund that reinvests its profits in order to ensure the availability of capital for future investments. Exit strategy – the plan for generating profits for owners and investors of a company. Typically, the options are to merge, be acquired or make an initial public offering (IPO). An alternative is to recapitalize (releverage the company and then pay dividends to shareholders). Expansion stage – the stage of a company characterized by a complete management team and a substantial increase in revenues. Fair value – a financial reporting principle for valuing assets and liabilities, for example, portfolio companies in venture capital fund portfolio. In 2008, more defined rules took effect. See FAS 157. Fairness opinion – a letter issued by an investment bank that charges a fee to assess the fairness of a negotiated price for a merger or acquisition.

rate used is the cost of equity. Free cash flow to the firm (FCFF) – the operating cash flow available after operating expenses, taxes, reinvestment needs and changes in working capital, but before any interest payments on debt are made. In a discounted cash flow model to determine the enterprise value of a firm using FCFF, the discount rate used is the weighted average cost of capital (WACC). Friends and family financing – capital provided by the friends and family of founders of an early stage company. Founders should be careful not to create an ownership structure that may hinder the participation of professional investors once the company begins to achieve success. Full ratchet – an anti-dilution protection mechanism whereby the price per share of the preferred stock of investor A is adjusted downward due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A’s preferred stock is repriced to match the price of investor B’s preferred stock. Usually as a result of the implementation of a ratchet, company management and employees who own a fixed amount of common shares suffer significant dilution. See Narrowbased weighted average anti-dilution and Broad-based weighted average anti-dilution. Fully diluted basis – a methodology for calculating any per share ratios whereby the denominator is the total number of shares issued by the company on the assumption that all warrants and options are exercised and preferred stock.

FAS 157 – the original designation of an accounting standard effective in 2008 for private companies for the fair value measurement of portfolio holdings. Literally, “Financial Accounting Standard number 157,” this standard is now officially Accounting Standard Codification Topic 820 (“ASC 820”) but it is more widely known by its original name. In 2013-2014, the Financial Accounting Foundation conducted a post-implementation review of this standard to determine if it is working as intended.

Fund-of-funds – a fund created to invest in private equity funds. Typically, individual investors and relatively small institutional investors participate in a fund-offunds to minimize their portfolio management efforts.

First refusal – the right of a privately owned company to purchase any shares that employees would like to sell.

General partner (GP) – a class of partner in a partnership. The general partner retains liability for the actions of the partnership. Historically, venture capital and buyout funds have been structured as limited partnerships, with the venture firm as the GP and limited partners (LPs) being the institutional and high net worth investors that provide most of the capital in the partnership. The GP earns a management fee and a percentage of gains (see Carried interest).

Founders stock – nominally priced common stock issued to founders, officers, employees, directors, and consultants. Free cash flow to equity (FCFE) – the cash flow available after operating expenses, interest payments on debt, taxes, net principal repayments, preferred stock dividends, reinvestment needs and changes in working capital. In a discounted cash flow model to determine the value of the equity of a firm using FCFE, the discount NVCA

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

GP – see General partner. GP for hire – In a spin-out or a synthetic secondary, a GP for hire THOMSON REUTERS

96 | 2014 National Venture Capital Association Yearbook

refers to the professional investor who may be hired by a purchasing firm to manage the new fund created from the orphaned assets purchased. In past cases, the GP has often expanded its role to fundraise for and run new funds aside from the initial fund.

to impress potential investors.

Going-private transaction – when a public company chooses to pay off all public investors, delist from all stock exchanges, and become owned by management, employees, and select private investors.

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

Golden handcuffs – financial incentives that discourage founders and / or important employees from leaving a company before a predetermined date or important milestone.

Holding period – amount of time an investment remains in a portfolio.

Hot money – capital from investors that have no tolerance for lack of results by the investment manager and move quickly to withdraw at the first sign of trouble. Hurdle rate – a minimum rate of return required before an investor will make an investment.

Grossing up – an adjustment of an option pool for management and employees of a company which increases the number of shares available over time. This usually occurs after a financing round whereby one or more investors receive a relatively large percentage of the company. Without a grossing up, managers and employees would suffer the financial and emotional consequences of dilution, thereby potentially affecting the overall performance of the company.

Incorporation – the process by which a business receives a state charter, allowing it to become a corporation. Many corporations choose Delaware because its laws are business-friendly and up to date.

Growth stage – the state of a company when it has received one or more rounds of financing and is generating revenue from its product or service. Also known as “middle stage.”

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

Hart-Scott-Rodino Act – a law requiring entities that acquire certain amounts of stock or assets of a company to inform the Federal Trade Commission and the Department of Justice and to observe a waiting period before completing the transaction. Hedge fund – an investment fund that has the ability to use leverage, take short positions in securities, or use a variety of derivative instruments in order to achieve a return that is relatively less correlated to the performance of typical indices (such as the S&P 500) than traditional long-only funds. Hedge fund managers are typically compensated based on assets under management as well as fund performance. High yield debt – debt issued via public offering or public placement (Rule 144A) that is rated below investment grade by S&P or Moody’s. This means that the debt is rated below the top four rating categories (i.e. S&P BB+, Moody’s Ba2 or below). The lower rating is indicative of higher risk of default, and therefore the debt carries a higher coupon or yield than investment grade debt. Also referred to as Junk bonds or Sub-investment grade debt. Hockey stick – the general shape and form of a chart showing revenue, customers, cash or some other financial or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts THOMSON REUTERS

Incubator – a company or facility designed to host startup companies. Incubators help startups grow while controlling costs by offering networks of contacts and shared backoffice resources.

Initial public offering (IPO) – the first offering of stock by a company to the public. New public offerings must be registered with the Securities and Exchange Commission. An IPO is one of the methods that a startup that has achieved significant success can use to raise additional capital for further growth. See Qualified IPO. In-kind distribution – a distribution to limited partners of a private equity fund that is in the form of publicly trades shares rather than cash. Inside round – a round of financing in which the investors are the same investors as the previous round. An inside round raises liability issues since the valuation of the company has no third party verification in the form of an outside investor. In addition, the terms of the inside round may be considered self-dealing if they are onerous to any set of shareholders or if the investors give themselves additional preferential rights. Institutional investor – professional entities that invest capital on behalf of companies or individuals. Examples are: pension plans, insurance companies and university endowments. Intellectual property (IP) – knowledge, techniques, writings and images that are intangible but often protected by law via patents, copyrights, and trademarks. Interest coverage ratio – earnings before interest and taxes (EBIT) NVCA

2014 National Venture Capital Association Yearbook | 97

divided by interest expense. This is a key ratio used by lenders to assess the ability of a company to produce sufficient cash to pay its debt obligation. Internal rate of return (IRR) – the interest rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a specific time in the future. Investment thesis / Investment philosophy – the fundamental ideas which determine the types of investments that an investment fund will choose in order to achieve its financial goals. IPEV – Stands for International Private Equity Valuation guidelines group. This group is made up of representatives of the international and US venture capital industry and has published guidelines for applying US GAAP and international IFRS valuation rules. See www.privateequityvaluation.com. Widely regarded in the US as the global successor to the US-focused PEIGG group. IPO – see Initial public offering. IRR – see Internal rate of return. Issuer – the company that chooses to distribute a portion of its stock to the public. J curve – a concept that during the first few years of a private equity fund, cash flow or returns are negative due to investments, losses, and expenses, but as investments produce results the cash flow or returns trend upward. A graph of cash flow or returns versus time would then resemble the letter “J”. Later stage – the state of a company that has proven its concept, achieved significant revenues compared to its competition, and is approaching cash flow break even or positive net income. Typically, a later stage company is about 6 to 12 months away from a liquidity event such as an IPO or buyout. The rate of return for venture capitalists that invest in later stage, less risky ventures is lower than in earlier stage ventures. LBO – see Leveraged buyout. Lead investor – the venture capital investor that makes the largest investment in a financing round and manages the documentation and closing of that round. The lead investor sets the price per share of the financing round, thereby determining the valuation of the company. Letter of intent – a document confirming the intent of an investor to participate in a round of financing for a company. By signing this document, the subject company agrees to begin the legal and due diligence process prior to the closing of the transaction. Also known NVCA

as a “Term Sheet”. Leverage – the use of debt to acquire assets, build operations and increase revenues. By using debt, a company is attempting to achieve results faster than if it only used its cash available from pre-leverage operations. The risk is that the increase in assets and revenues does not generate sufficient net income and cash flow to pay the interest costs of the debt. Leveraged buyout (LBO) – the purchase of a company or a business unit of a company by an outside investor using mostly borrowed capital. Leveraged recapitalization – the reorganization of a company’s capital structure resulting in more debt added to the balance sheet. Private equity funds can recapitalize a portfolio company and then direct the company to issue a one-time dividend to equity investors. This is often done when the company is performing well financially and the debt markets are expanding. Leverage ratios – measurements of a company’s debt as a multiple of cash flow. Typical leverage ratios include Total Debt / EBITDA, Total Debt / (EBITDA minus Capital Expenditures), and Seniore Debt / EBITDA. L.I.B.O.R. – see The London Interbank Offered Rate. License – a contract in which a patent owner grants to a company the right to make, use or sell an invention under certain circumstances and for compensation. Limited liability company (LLC) – an ownership structure designed to limit the founders’ losses to the amount of their investment. An LLC itself does not pay taxes, rather its owners pay taxes on their proportion of the LLC profits at their individual tax rates. Limited partnership – a legal entity composed of a general partner and various limited partners. The general partner manages the investments and is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The general partner collects a management fee and earns a percentage of capital gains (see Carried interest), while the limited partners receive income, capital gains and tax benefits. Limited partner (LP) – an investor in a limited partnership. The general partner is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The limited partner receives income, capital gains and tax benefits.

THOMSON REUTERS

98 | 2014 National Venture Capital Association Yearbook

Liquidation – the sale of a company. This may occur in the context of an acquisition by a larger company or in the context of selling off all assets prior to cessation of operations (Chapter 7 bankruptcy). In a liquidation, the claims of secured and unsecured creditors, bondholders and preferred stockholders take precedence over common stockholders. Liquidation preference – the contractual right of an investor to priority in receiving the proceeds from the liquidation of a company. For example, a venture capital investor with a “2x liquidation preference” has the right to receive two times its original investment upon liquidation. Liquidity discount – a decrease in the value of a private company compared to the value of a similar but publicly traded company. Since an investor in a private company cannot readily sell his or her investment, the shares in the private company must be valued less than a comparable public company. Liquidity event – a transaction whereby owners of a significant portion of the shares of a private company sell their shares in exchange for cash or shares in another, usually larger company. For example, an IPO is a liquidity event. Lock-up agreement – investors, management and employees often agree not to sell their shares for a specific time period after an IPO, usually 6 to 12 months. By avoiding large sales of its stock, the company has time to build interest among potential buyers of its shares. London Interbank Offered Rate (L.I.B.O.R.) – the average rate charged by large banks in London for loans to each other. LIBOR is a relatively volatile rate and is typically quoted in maturities of one month, three months, six months and one year. Management buyout (MBO) – a leveraged buyout controlled by the members of the management team of a company or a division. Often an MBO is conducted in partnership with a buyout fund. Management fee – a fee charged to the limited partners in a fund by the general partner. Management fees in a private equity fund usually range from 0.75% to 3% of capital under management, depending on the type and size of fund. For venture capital funds, 2% is typical. Management rights – the rights often required by a venture capitalist as part of the agreement to invest in a company. The venture capitalist has the right to consult with management on key operational issues, attend board meetings and review information about the company’s financial situation.

THOMSON REUTERS

Market capitalization – the value of a publicly traded company as determined by multiplying the number of shares outstanding by the current price per share. MBO – see Management buyout. Mezzanine – a layer of financing that has intermediate priority (seniority) in the capital structure of a company. For example, mezzanine debt has lower priority than senior debt but usually has a higher interest rate and often includes warrants. In venture capital, a mezzanine round is generally the round of financing that is designed to help a company have enough resources to reach an IPO. See Bridge financing. MoneyTree™ Report – Officially known as The MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters. This report provides much of the data in this report. It is used for investment statistics in United States based companies. Specific definition information is available in several of the appendices of this Yearbook. Multiples – a valuation methodology that compares public and private companies in terms of a ratio of value to an operations figure such as revenue or net income. For example, if several publicly traded computer hardware companies are valued at approximately 2 times revenues, then it is reasonable to assume that a startup computer hardware company that is growing fast has the potential to achieve a valuation of 2 times its revenues. Before the startup issues its IPO, it will likely be valued at less than 2 times revenue because of the lack of liquidity of its shares. See Liquidity discount. Narrow-based weighted average anti-dilution – a type of antidilution mechanism. A weighted average anti-dilution method adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A’s preferred stock is repriced to a weighed average of investor A’s price and investor B’s price. A narrow-based anti-dilution uses only common stock outstanding in the denominator of the formula for determining the new weighted average price. NDA – see Non-disclosure agreement. No-shop clause – a section of an agreement to purchase a company whereby the seller agrees not to market the company to other potential buyers for a specific time period. Non-cumulative dividends – dividends that are payable to owners of preferred stock at a specific point in time only if there is sufficient cash flow available after all company expenses have been paid. If NVCA

2014 National Venture Capital Association Yearbook | 99

cash flow is insufficient, the owners of the preferred stock will not receive the dividends owed for that time period and will have to wait until the board of directors declares another set of dividends. Non-interference – an agreement often signed by employees and management whereby they agree not to interfere with the company’s relationships with employees, clients, suppliers and sub-contractors within a certain time period after termination of employment. Non-solicitation – an agreement often signed by employees and management whereby they agree not to solicit other employees of the company regarding job opportunities. Non-disclosure agreement (NDA) – an agreement issued by entrepreneurs to protect the privacy of their ideas when disclosing those ideas to third parties. Offering memorandum – a legal document that provides details of an investment to potential investors. See Private placement memorandum. OID – see Original issue discount. Operating cash flow – the cash flow produced from the operation of a business, not from investing activities (such as selling assets) or financing activities (such as issuing debt). Calculated as net operating income (NOI) plus depreciation. Option pool – a group of options set aside for long term, phased compensation to management and employees. Outstanding shares – the total amount of common shares of a company, not including treasury stock, convertible preferred stock, warrants and options. Pay to play – a clause in a financing agreement whereby any investor that does not participate in a future round agrees to suffer significant dilution compared to other investors. The most onerous version of “pay to play” is automatic conversion to common shares, which in essence ends any preferential rights of an investor, such as the right to influence key management decisions. Pari passu – a legal term referring to the equal treatment of two or more parties in an agreement. For example, a venture capitalist may agree to have registration rights that are pari passu with the other investors in a financing round. Participating dividends – the right of holders of certain preferred stock to receive dividends and participate in additional distributions of cash, stock or other assets. NVCA

Participating preferred stock – a unit of ownership composed of preferred stock and common stock. The preferred stock entitles the owner to receive a predetermined sum of cash (usually the original investment plus accrued dividends) if the company is sold or has an IPO. The common stock represents additional continued ownership in the company. PEIGG – acronym for Private Equity Industry Guidelines Group, an ad hoc group of individuals and firms involved in the private equity industry for the purpose of establishing valuation and reporting guidelines. With the implementation of FAS 157 in 2008, the group’s mission was essentially complete. Several of its members then joined IPEV, which is viewed by US VCs as the international successor to PEIGG. Piggyback rights – rights of an investor to have his or her shares included in a registration of a startup’s shares in preparation for an IPO. PIK dividend – a dividend paid to the holder of a stock, usually preferred stock, in the form of additional stock rather than cash. PIK refers to payment in kind. PIPEs – see Private investment in public equity. Placement agent – a company that specializes in finding institutional investors that are willing and able to invest in a private equity fund. Sometimes a private equity fund will hire a placement agent so the fund partners can focus on making and managing investments in companies rather than on raising capital. Portfolio company – a company that has received an investment from a private equity fund. Post-money valuation – the valuation of a company including the capital provided by the current round of financing. For example, a venture capitalist may invest $5 million in a company valued at $2 million “pre-money” (before the investment was made). As a result, the startup will have a post-money valuation of $7 million. PPM – see Private placement memorandum. Preemptive rights – the rights of shareholders to maintain their percentage ownership of a company by buying shares sold by the company in future financing rounds. Preference – seniority, usually with respect to dividends and proceeds from a sale or dissolution of a company. Preferred return – a minimum return per annum that must be THOMSON REUTERS

100 | 2014 National Venture Capital Association Yearbook

generated for limited partners of a private equity fund before the general partner can begin receiving a percentage of profits from investments. Preferred stock – a type of stock that has certain rights that common stock does not have. These special rights may include dividends, participation, liquidity preference, anti-dilution protection and veto provisions, among others. Private equity investors usually purchase preferred stock when they make investments in companies. Pre-money valuation – the valuation of a company prior to the current round of financing. For example, a venture capitalist may invest $5 million in a company valued at $2 million pre-money. As a result, the startup will have a “post-money” valuation of $7 million. Primary shares – shares sold by a corporation (not by individual shareholders). Private Equity Growth Capital Council (PEGCC) – an advocacy, communications and research organization for the buyout industry in the United States. Private equity – equity investments in non-public companies, usually defined as being made up of venture capital funds and buyout funds. Real estate, oil and gas, and other such partnerships are sometimes included in the definition. Private investment in public equity (PIPEs) – investments by a private equity fund in a publicly traded company, usually at a discount and in the form of preferred stock. Private placement – the sale of a security directly to a limited number of institutional and qualified individual investors. If structured correctly, a private placement avoids registration with the Securities and Exchange Commission. Private placement memorandum (PPM) – a document explaining the details of an investment to potential investors. For example, a private equity fund will issue a PPM when it is raising capital from institutional investors. Also, a startup may issue a PPM when it needs growth capital. Also known as “Offering Memorandum”. Private securities – securities that are not registered with the Securities and Exchange Commission and do not trade on any exchanges. The price per share is negotiated between the buyer and the seller (the “issuer”). Prudent man rule – a fundamental principle for professional money management which serves as a basis for the Prudent Investor Act. The principle is based on a statement by Judge Samuel Putnum in 1830: “Those with the responsibility to invest money for others THOMSON REUTERS

should act with prudence, discretion, intelligence and regard for the safety of capital as well as income.” In the 1970s a favorable interpretation of this rule enabled pension fund managers to invest in venture capital for the first time. Qualified IPO – a public offering of securities valued at or above a total amount specified in a financing agreement. This amount is usually specified to be sufficiently large to guarantee that the IPO shares will trade in a major exchange (NASDAQ or New York Stock Exchange). Usually upon a qualified IPO preferred 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 the results of their investments during a particular period of time. Institutional investors often prefer to invest in private equity funds that demonstrate consistent results over time, placing in the upper quartile of the investment results for all funds. Ratchet – a mechanism to prevent dilution. An antidilution clause in a contract protects an investor from a reduction in percentage ownership in a company due to the future issuance by the company of additional shares to other entities. Realization ratio – the ratio of cumulative distributions to paid-in capital. The realization ratio is used as a measure of the distributions from investment results of a private equity partnership compared to the capital under management. Recapitalization – the reorganization of a company’s capital structure. Red herring – a preliminary prospectus filed with the Securities and Exchange Commission and containing the details of an IPO offering. The name refers to the disclosure warning printed in red letters on the cover of each preliminary prospectus advising potential investors of the risks involved. Redemption rights – the right of an investor to force the startup company to buy back the shares issued as a result of the investment. In effect, the investor has the right to take back his/her investment and may even negotiate a right to receive an additional sum in excess of the original investment. Registration – the process whereby shares of a company are registered with the Securities and Exchange Commission under the Securities Act of 1933 in preparation for a sale of the shares to the public. Regulation D – Often referred to as simply “Reg D,” an SEC regulation that governs private placements. Private placements NVCA

2014 National Venture Capital Association Yearbook | 101

are investment offerings for institutional and accredited individual investors, but not the general public.

rather its owners pay taxes on their proportion of the corporation’s profits at their individual tax rates.

Restricted shares – shares that cannot be traded in the public markets.

SBIC – see Small Business Investment Company.

Return on investment (ROI) – the proceeds from an investment, during a specific time period, calculated as a percentage of the original investment. Also, net profit after taxes divided by average total assets. Rights offering – an offering of stock to current shareholders that entitles them to purchase the new issue, usually at a discount. Rights of co-sale with founders – a clause in venture capital investment agreements that allows the VC fund to sell shares at the same time that the founders of a startup chose to sell. Right of first refusal – a contractual right to participate in a transaction. For example, a venture capitalist may participate in a first round of investment in a startup and request a right of first refusal in any following rounds of investment. Risk-free rate – a term used in finance theory to describe the return from investing in a riskless security. In practice, this is often taken to be the return on US Treasury Bills. Road show – presentations made in several cities to potential investors and other interested parties. For example, a company will often make a road show to generate interest among institutional investors prior to its IPO. ROI – see Return on investment. Rollup – the purchase of relatively smaller companies in a sector by a rapidly growing company in the same sector. The strategy is to create economies of scale. For example, the movie theater industry underwent significant consolidation in the 1960’s and 1970’s. Round – a financing event usually involving several private equity investors. Royalties – payments made to patent or copyright owners in exchange for the use of their intellectual property. Rule 144 – a rule of the Securities and Exchange Commission that specifies the conditions under which the holder of shares acquired in a private transaction may sell those shares in the public markets. S corporation – an ownership structure that limits its number of owners to 100. An S corporation does not pay taxes, NVCA

Scalability – a characteristic of a new business concept that entails the growth of sales and revenues with a much slower growth of organizational complexity and expenses. Venture capitalists look for scalability in the startups they select to finance. Scale-down – a schedule for phased decreases in management fees for general partners in a limited partnership as the fund reduces its investment activities toward the end of its term. Scale-up – the process of a company growing quickly while maintaining operational and financial controls in place. Also, a schedule for phased increases in management fees for general partners in a limited partnership as the fund increases its investment activities over time. Secondary market – a market for the sale of limited partnership interests in private equity funds. Sometimes limited partners chose to sell their interest in a partnership, typically to raise cash or because they cannot meet their obligation to invest more capital according to the takedown schedule. Certain investment companies specialize in buying these partnership interests at a discount. Secondary shares – shares sold by a shareholder (not by the corporation). Securities and Exchange Commission (SEC) – the regulatory body that enforces federal securities laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934. Seed capital – investment provided by angels, friends and family to the founders of a startup in seed stage. Seed stage – the state of a company when it has just been incorporated and its founders are developing their product or service. Senior debt – a loan that has a higher priority in case of a liquidation of the asset or company. Seniority – higher priority. Series A preferred stock – preferred stock issued by a fast growth company in exchange for capital from investors in the “A” round of financing. This preferred stock is usually convertible to common shares upon the IPO or sale of the company. Shareholder agreement – a contract that sets out, for example, the THOMSON REUTERS

102 | 2014 National Venture Capital Association Yearbook

basis on which the company will be operated 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 is calculated by subtracting the risk-free rate from the return on a specific investment for a time period (usually one year) and then dividing the resulting figure by the standard deviation of the historical (annual) returns for that investment. The higher the Sharpe Ratio, the better. Small Business Investment Company (SBIC) – a company licensed by the Small Business Administration to receive government capital in the form of debt or equity in order to use in private equity investing. Stock option – a right to purchase or sell a share of stock at a specific price within a specific period of time. Stock purchase options are commonly used as long term incentive compensation for employees and management of fast growth companies. Strategic investor – a relatively large corporation that agrees to invest in a young or a smaller company in order to have access to its proprietary technology, product or service. Subordinated debt – a loan that has a lower priority than a senior loan in case of a liquidation of the asset or company. Also known as “junior debt”. Success rate – the proportion of venture funded companies that are considered successful. A study of companies funded by VCs during the 1990s indicated that 14% of the companies went public and another 11%were acquired. Sweat equity – ownership of shares in a company resulting primarily from work rather than investment of capital. Syndicate – a group of investors that agree to participate in a round of funding for a company. Alternatively, a syndicate can refer to a group of investment banks that agree to participate in the sale of stock to the public as part of an IPO.

Takedown – a schedule of the transfer of capital in phases in order to complete a commitment of funds. Typically, a takedown is used by a general partner of a private equity fund to plan the transfer of capital from the limited partners. Tender offer – an offer to public shareholders of a company to purchase their shares. Term loan – a bank loan for a specific period of time, usually up to ten years in leveraged buyout structures. Term sheet – a document confirming the intent of an investor to participate in a round of financing for a company. By signing this document, the subject company agrees to begin the legal and due diligence process prior to the closing of the transaction. Also known as “Letter of Intent”. Tranche – a portion of a set of securities. Each tranche may have different rights or risk characteristics. 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 one or more milestones. Turnaround – a process resulting in a substantial increase in a company’s revenues, profits and reputation. Under water option – an option is said to be under water if the current fair market value of a stock is less than the option exercise price. Underwriter – an investment bank that chooses to be responsible for the process of selling new securities to the public. An underwriter usually chooses to work with a syndicate of investment banks in order to maximize the distribution of the securities. Venture capital – a segment of the private equity industry which focuses on investing in new companies with high growth potential and accompanying high risk.

Synthetic secondary – A popular method of completing a direct secondary transaction in which the buyer becomes a limited partner (LP) in a special purpose vehicle (SPV) or similar entity which has been set up out of the underlying investments in order to create a limited partnership interest. The term arose because of the synthetic nature of the direct purchase through the LP secondary transaction.

Venture capital method – a pricing valuation method whereby an estimate of the future value of a company is discounted by a certain interest rate and adjusted for future anticipated dilution in order to determine the current value. Usually, discount rates for the venture capital method are considerably higher than public stock return rates, representing the fact that venture capitalists must achieve significant returns on investment in order to compensate for the risks they take in funding unproven companies.

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

Vesting – a schedule by which employees gain ownership over time of a previously agreed upon amount of retirement funding or stock options.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 103

Vintage – the year that a private equity fund stops accepting new investors and begins to make investments on behalf of those investors. Venture funds are generally benchmarked to funds of the same vintage year. Voting rights – the rights of holders of preferred and common stock in a company to vote on certain acts affecting the company. These matters may include payment of dividends, issuance of a new class of stock, merger or liquidation. Warrant – a security which gives the holder the right to purchase shares in a company at a pre-determined price. A warrant is a long term option, usually valid for several years or indefinitely. Typically, warrants are issued concurrently with preferred stocks or bonds in order to increase the appeal of the stocks or bonds to potential investors. Washout round – a financing round whereby previous investors, the founders and management suffer significant dilution. Usually as a result of a washout round, the new investor gains majority ownership and control of the company. Weighted average cost of capital (WACC) – the average of the cost of equity and the after-tax cost of debt. This average is determined using weight factors based on the ratio of equity to debt plus equity and the ratio of debt to debt plus equity. Weighted average anti-dilution – an anti-dilution protection mechanism whereby the conversion rate of preferred stock is adjusted in order to reduce an investor’s loss due to an increase in

NVCA

the number of shares in a company. Without anti-dilution protection, an investor would suffer from a reduction of his or her percentage ownership. Usually as a result of the implementation of a weighted average anti-dilution, company management and employees who own a fixed amount of common shares suffer significant dilution, but not as badly as in the case of a full ratchet. Write-down – a decrease in the reported value of an asset or a company. Write-off – a decrease in the reported value of an asset or a company to zero. Write-up – an increase in the reported value of an asset or a company. Zombie – a company that has received capital from investors but has only generated sufficient revenues and cash flow to maintain its operations without significant growth. Sometimes referred to as “walking dead.” Typically, a venture capitalist has to make a difficult decision as to whether to liquidate a zombie or continue to invest funds in the hopes that the zombie will become a winner. These definitions were graciously provided by the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth. Please refer to the Center’s website for additional definitions and information at http://mba.tuck.dartmouth.edu/pecenter/ resources/glossary.html. Used by permission. Thomson Reuters and National Venture Capital Association are grateful to the Center for its support.

THOMSON REUTERS

104 | 2014 National Venture Capital Association Yearbook

This page is intentionally left blank.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 105

APPENDIX B MoneyTree Report Criteria PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report™, Data: Thomson Reuters

The MoneyTree Report is a quarterly study of venture capital investment activity in the United States. As a collaboration between PricewaterhouseCoopers and the National Venture Capital Association, based upon data from Thomson Reuters, it is the only industry-endorsed research of its kind. The MoneyTree Report is the definitive source of information on emerging companies that receive financing and the venture capital firms that provide it. The study is a staple of the financial community, entrepreneurs, government policymakers and the business press worldwide.

Report Criteria The MoneyTree™ Report records cash for equity investments as the cash is actually received by the company (also called a tranche) as opposed to when financing is committed (often referred to as a “term sheet”) to a company. Accordingly, the amount reported in a given quarter may be less than the total round amount committed to the company at the time when the round of financing closed. The type of financing as it is used in the MoneyTree™ Report refers to the number of tranches a company has received. The number designation (1, 2, 3, etc.) does not refer to the round of financing. Rounds are usually designated alphabetically, e.g. Series A, Series B, and so on. The MoneyTree™ Report does not track rounds.

Summary Description The MoneyTree™ Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. It is based on data provided by Thomson Reuters.

General Definition The report includes the investment activity of professional venture capital firms with or without a US office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spunout of existing companies. The report excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in-kind and venture leasing. Investee companies must be domiciled in one of the 50 US states or DC

NVCA

even if substantial portions of their activities are outside the United States.

Specific Methodology The focus of the report is on cash received by the company. Therefore, tranches not term sheets are the determining factor. Drawdowns on commitments are recognized at the time the company receives the money rather than recorded as a lump sum amount at the time the term sheet is executed. Convertible debt and bridge loans are recognized only when converted to equity. Once a company has received a qualifying venture capital financing round, all subsequent equity financing rounds are included regardless of whether the round involved a venture capital firm as long as all other investment criteria are met (e.g. cash-for-equity, not buyout or services in kind). Angel, incubator and similar investments are considered pre-venture financing if the company has received no prior qualifying venture capital investment and are not included in the MoneyTree™ results. Angel, incubator and similar investments that are part of a qualifying venture capital round or follow a qualifying venture capital round are included to the extent that such investments can be fully verified as meeting all other criteria (e.g. cash for equity, not buyout or services in kind). Direct investment by corporations (not through a corporate venture capital arm) is excluded unless (a) the investment is clearly demonstrated to be primarily a financial investment rather than outsourced R&D or market development, (b) it is a co-investment in an otherwise qualifying round, or (c) it follows a qualifying venture round in a company and meets all other criteria (e.g. cash-for-equity, not buyout or services in kind). Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Reuters. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.

Disclaimer PricewaterhouseCoopers and the National Venture Capital Association have taken responsible steps to ensure that the information contained in the MoneyTree™ Report has been obtained from reliable sources. However, neither of the parties nor Thomson Reuters can warrant the ultimate validity of the data obtained in this manner. Results are updated periodically. Therefore, all data is subject to change at any time.

THOMSON REUTERS

106 | 2014 National Venture Capital Association Yearbook

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 107

APPENDIX C MoneyTree Geographical Definitions The Geographical Regions identified in the MoneyTreeâ&#x201E;˘ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters and used in this NVCA Yearbook are as follows:

Alaska/Hawaii/Puerto Rico: Alaska, Hawaii, and Puerto Rico

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

Colorado: The state of Colorado

Philadelphia Metro: Eastern Pennsylvania, southern New Jersey, and Delaware

DC/Metroplex: Washington, D.C., Virginia, West Virginia, 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 of Connecticut (excluding Fairfield county) New York Metro: Metropolitan NY area, northern New Jersey, and Fairfield County, Connecticut North Central: Minnesota, Iowa, Wisconsin, North Dakota, South Dakota, and Nebraska

NVCA

Sacramento/Northern California: Northeastern California San Diego: San Diego area Silicon Valley: Northern California, bay area and coastline South Central: Kansas, Oklahoma, Arkansas, and Louisiana Southeast: Alabama, Florida, Georgia, Mississippi, Tennessee, South Carolina, and North Carolina Southwest: Utah, Arizona, New Mexico, and Nevada Texas: The state of Texas Upstate New York: Northern New York state, except Metropolitan New York City area

THOMSON REUTERS

108 | 2014 National Venture Capital Association Yearbook

This page intentionally left blank.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 109

APPENDIX D Industry Codes (VEIC) 1000 Communications and Media 1100 Commercial Communications 1110 Radio & TV Broadcasting Stations 1120 CATV & Pay TV Systems 1125 Cable Service Providers 1130 Radio & TV Broadcasting & Other Related Equipment 1135 Services to Commercial Communications 1199 Other Commercial Communications 1200 Telecommunications 1210 Long Distance Telephone Services 1215 Local Exchange Carriers (LEC) 1220 Telephone Interconnect & Other Equipment 1230 Telephone answering and/or management systems,PBXs 1299 Other Telephone Related 1300 Wireless Communications 1310 Mobile Communications, Pagers & Cellular Radio 1320 Wireless Communications Services 1325 Messaging Services 1330 Wireless Communications Components 1399 Other Wireless Communications 1400 Facsimile Transmission 1500 Data Communications 1510 Local Area Networks (incl. voice/data PBX systems) 1515 Wide Area Networks 1520 Data Communications Components 1521 Communications Processors/Network Management 1522 Protocol Converters & Emulators 1523 Modems and Multiplexers 1524 Other Data Communication Components 1525 Switches/Hubs/Routers/Gateways/ATM 1530 Network test, monitor and support equipment 1549 Other Data Communications 1550 Internet Communications and Infrastructure NEC 1551 Internet Access Services and Service Providers 1552 Internet Multimedia Services 1553 Internet Backbone Infrastructure 1559 Other Internet Communications NEC 1560 E-Commerce Technology 1561 Internet Security and Transaction Services 1562 Ecommerce Services 1563 Ecommerce Enabling Software 1569 Other Ecommerce 1600 Satellite Microwave Communications 1610 Satellite Services/Carriers/Operators 1620 Satellite Ground (and other) Equipment 1630 Microwave Service Facilities 1640 Microwave & Satellite Components 1699 Other Satellite & Microwave 1700 Media and Entertainment 1710 Entertainment 1720 Publishing

NVCA

1800 Other Communications Related 1810 Defense Communications 1825 Other Communications Services NEC 1899 Other Communications Products (not yet classified) 2000 Computer Related 2100 Computers and Hardware 2110 Mainframes & Scientific Computers 2111 Mainframes 2112 Supercomputers and Scientific Computers 2119 Other Mainframes and Scientific Computers 2120 Mini & Personal/Desktop Computers 2121 Fail Safe Computers 2122 Mini Computers 2123 Personal Computers (micro/personal) 2124 Other Mini and Personal Computers 2125 Portable Computers (notebooks/laptops) 2126 Handheld Computing (PDA) 2130 Optical computing 2140 Servers and Workstations 2141 Servers 2142 Web Servers 2143 Workstations 2144 Thin Client Hardware 2149 Other Servers and Workstations 2200 Computer Graphics and Digital Imaging 2210 CAD/CAM, CAE,EDA Systems 2220 Graphic Systems 2230 Scanning Hardware 2234 OCR (Optical Character Recognition) 2236 OBR (Optical Bar Recognition) 2238 MICR (Magnetic Ink Character Recognition) 2239 Other Scanning Related 2250 Graphics Printers/Plotters 2255 Graphics/Enhanced Video Cards 2260 Other Graphics Peripherals 2280 Other Multimedia NEC 2290 Digital Imaging Hardware and Equipment 2295 Digital Imaging Services 2299 Other Computer Graphics 2300 Integrated Turnkey Systems and Solutions 2311 Business and Office 2312 Consumer 2313 Retailing 2315 Transportation 2316 Finance/Insurance/Real Estate 2317 Agriculture 2318 Recreation/Entertainment 2319 Manufacturing/Industrial/Construction 2320 Medical/Health 2321 Computer related 2322 Communications Products/Services 2323 Education 2324 Reference 2325 Scientific 2399 Other Intergrated Systems and Solutions 2500 Peripherals 2510 Terminals 2511 Intelligent Terminals

2512 Portable Terminals 2513 Graphics Terminals 2519 Other Terminals 2520 Printers 2521 Laser Printers 2522 Color Printers 2523 Inkjet Printers 2524 Dot Matrix Printers 2529 Other Printers 2530 Data I/O Devices 2531 Mouse Input Devices 2532 TouchPad Input Devices 2533 Pen based computing 2539 Other Data I/O Devices 2540 Disk Related Memory Devices 2541 Floppy Disks & Drives 2542 Winchester Hard Disks and Drives 2543 Optical Disks & Drives,CD-ROM DVD 2546 Disk Drive Components 2549 Other Disk Related 2550 Tape Related Devices 2551 Magnetic Tapes 2552 Tape Heads & Drives 2553 Continuous Tape Backup Systems 2559 Other Tape Related Devices 2560 Other Memory Devices (excl. semiconductors) 2561 PC or PMCIA cards 2562 Memory Cards 2563 Sound Cards 2564 Communications Cards 2569 Other Peripheral Cards 2590 Other Peripherals (not yet classified) 2600 Computer Services 2630 Time Sharing Firms 2640 Computer Leasing & Rentals 2650 Computer Training Services 2655 Backup and Disaster Recover 2660 Data Processing,Analysis & Input Services 2665 Computer Repair Services 2670 Computerized Billing & Accounting Services 2675 Computer Security Services 2691 Data communications systems management 2699 Other Computer Services 2700 Computer Software 2710 Systems Software 2711 Database & File Management 2712 Operating Systems & Utilities 2713 Program Development Tools/CASE/Languages 2716 Graphics and Digital Imaging Software 2719 Other Systems Software 2720 Communications/Networking Software 2721 Security/Firewalls,Encryption software 2722 Email Software 2723 Groupware 2724 Multimedia software 2729 Other Communications/Networking Software

THOMSON REUTERS

110 | 2014 National Venture Capital Association Yearbook

2730 Applications Software 2731 Business and Office Software 2732 Home Use Software 2733 Educational Software 2734 Manufacturing/Industrial Software 2735 Medical/Health Software 2736 Banks/Financial Institutions Software 2737 Retailing Software 2738 Integrated Software 2739 ERP/Inventory Software 2740 Recreational/Game Software 2741 Scientific Software 2743 Agricultural Software 2744 Transportation Software 2748 Other Industry specific Software 2749 Other Applications Software 2750 Artificial Intelligence Related Software 2751 Expert Systems 2752 Natural Language 2753 Computer-Aided Instruction 2754 Artificial Intel. Programming Aids 2755 Other Artificial Intelligence Related 2760 Software Services 2761 Programming Services/Systems Engineering 2762 Software Consulting Services 2763 Software Distribution/Clearinghouse 2765 Internet/Web Design and programming services 2766 Internet Graphics Services 2768 Other Internet Software Services 2769 Other Software Services 2780 Internet Systems Software 2781 Site Development and Administration Software 2782 Internet Search Software and Engines 2783 WebServer Software 2784 Web Languages (Java/ActiveX/HTML/XML) 2785 Web Authoring/Development Software 2798 Other Internet Systems Software 2799 Other Software Related 2800 Internet and Online Related 2810 E-Commerce--Selling products Online or Internet 2811 Business and Office Products 2812 Consumer Products 2813 Retailing Products 2814 Publishing Products 2815 Transportation Products 2816 Finance/Insurance/Real Estate products 2817 Agricultural Products 2818 Recreation/Entertainment/Music/Movies 2819 Manufacturing/Industrial/Construction 2820 Medical/Health 2821 Computer Related 2822 Communications Products 2823 Education Products 2824 Reference Products 2825 Scientific Products 2826 Legal Products 2829 Other Ecommerce Selling Products 2830 Ecommerce--Selling Services Online/ Internet 2831 Business and Office Services 2832 Consumer Services 2833 Retailing Services 2834 Publishing Services

THOMSON REUTERS

2835 Transportation Services 2836 Finance/Insurance/Real Estate Services 2837 Agricultural Services 2838 Recreation/Entertainment/Music/Movies 2839 Manufacturing/Industrial/Construction 2840 Medical/Health Services 2841 Computer Related services 2842 Communications Products/Services 2843 Education Services 2844 Reference 2845 Scientific 2846 Legal 2848 Recreation/Entertainment Services 2849 Other Ecommerce Selling Services 2850 Web Aggregration/Portal Sites/Exchanges 2851 Business and Office Info/content 2852 Consumer Info/Content 2853 Retailing Info/Content 2854 Publishing Info/Content 2855 Transportation Info/Content 2856 Finance/Real Estate/Insurance Info/ Content 2857 Agriculture Info/Content 2858 Recreation/Entertainment/Music/Movies 2859 Manufac/Industrial/Constr. Info/Content 2860 Medical/Health Info/Content 2861 Computer Related Info/Content 2862 Communications Info/Content 2863 Education Info/Content 2864 Reference Info/Content 2865 Scientific Info/Content 2866 Legal Info/Content 2869 Other Aggregation/Portal/Exchange Sites 2870 Internet Services 2871 Internet Marketing Services 2873 Data Warehousing Services 2879 Other Internet and Online Services NEC 2900 Other Computer Related 2910 Voice Synthesis 2911 Voice Recognition 2990 Other Computer Related (not yet classified) 3000 Other Electronics Related 3100 Electronic Components 3110 Semiconductors 3111 Customized Semiconductors 3112 Standard Semiconductors 3114 Flash Memory 3115 Optoelectronics semiconductors (incl laser diodes) 3119 Other Semiconductors 3120 Microprocessors 3130 Controllers and Sensors 3132 Controllers 3135 Sensors 3139 Other Controllers/Sensors 3140 Circuit Boards 3160 Display Panels 3170 Other Electronics Related (including keyboards) 3200 Batteries 3300 Power Supplies 3310 Uninterruptible Power Supply (UPS) 3400 Electronics Related Equipment 3410 Semiconductor Fabrication Equip. & Wafer Products 3420 Component Testing Equipment

3499 Other Electronics Related Equipment 3500 Laser Related 3510 Laser Components (incl. beamsplitters, excimers) 3599 Other Laser Related 3600 Fiber Optics 3610 Fiber Optic Cables 3620 Fiber Optic Couplers and Connectors 3630 Fiber Optic Communication Systems (see 1510) 3699 Other Fiber Optics 3700 Analytical & Scientific Instrumentation 3710 Chromatographs & Related Laboratory Equipment 3720 Other Measuring Devices 3799 Other Analytical & Scientific Instrumentation 3800 Other Electronics Related 3810 Military Electronics (excluding communications) 3820 Copiers 3830 Calculators 3835 Security/Alarm/Sensors 3899 Other Electronics Related (incl. alarm systems) 3900 Optoelectronics 3910 Photo diodes 3920 Optoelectronics fabrication equipment 3930 Lenses with Optoelectronics applications 3940 Advanced photographic processes (incl lithographs) 3989 Other Optoelectrinics Related 3990 Other Electronc Semiconductor 4000 Biotechnology and Pharmacology 4100 Human Biotechnology 4110 Medical Diagnostic Biotechnology Products 4111 In Vitro Monoclonal Antibody Diagnostics 4112 In Vivo Monoclonal Antibody Diagnostics/ Imaging 4113 DNA/RNA Probes 4119 Other Medical Diagnostic Biotechnology 4120 Therapeutic Biotechnology Products 4121 Therapeutic Monoclonal Antibodies 4122 Immune Response Effectors (interferons,vaccines) 4123 Other Therapeutic Proteins (incl. hormones & TPA) 4129 Other Therapeutic Biotechnology 4130 Genetic Engineering 4200 Agricultural/Animal Biotechnology 4210 Genetically Engineered Plants 4220 Genetic. Eng. Microorganisms to raise plant yield 4230 Other Plant Related Biotechnology 4240 Biotech Related Animal Health & Nutrition Products 4250 Genetically Engineered Animals 4290 Other Animal Related Biotechnology 4300 Industrial Biotechnology 4310 Biochemical Products 4311 Biotech Related Fine Chemicals (NOT Pharmaceuts.) 4312 Biotech Related Commodity Chemicals 4319 Other Biochemical Products 4320 Biotech Processes for Food Industrial Applications

NVCA

2014 National Venture Capital Association Yearbook | 111

4321 Biotech Related Food Enzymes and Cultures 4322 Biotech Related Food Diagnostics 4329 Other Biotech Process for Food/Industrial Products 4330 Biotech Processes for Pollution/Toxic Waste Contrl 4340 Biotech Processes for Enhanced Oil Recovery/Mining 4390 Other Industrial Biotechnology 4400 Biosensors 4410 Biosensors for Medical Diagnostic Applications 4420 Biosensors for Industrial Applications 4490 Other Biosensors 4500 Biotech Related Research & Production Equipment 4510 Biotech Related Analytical Instruments & Apparatus 4520 Biotech Related Production Equipment 4525 Biotech laser and optronic applications 4599 Other Biotech Research & Production Equipment 4600 Biotech Related Research & Other Services 4610 Pure & Contract Biotechnology Research 4699 Other Biotechnology Services 4900 Other Biotechnology Related 5000 Medical/Health Related 5100 Medical Diagnostics 5110 Diagnostic Services 5120 Medical Imaging 5121 X-Rays 5122 CAT Scanning 5123 Ultra Sound Imaging 5124 Nuclear Imaging 5125 Other Medical Imaging 5130 Diagnostic Test Products & Equipment 5140 Other Medical Diagnostics 5200 Medical Therapeutics 5210 Therapeutic Services 5220 Surgical Instrumentation & Equipment 5221 Surgical lasers (including laser delivery fibers) 5230 Pacemakers & Artificial Organs 5240 Drug Delivery & Other Equipment 5299 Other Therapeutic (including defibrillators) 5300 Medical Health Related Products 5310 Disposable Medical Products 5340 Handicap Aids 5350 Medical Monitoring Equipment 5380 Health related optics (including glasses, lenses) 5399 Other Medical/Health (NEC) 5400 Medical Health Services 5410 Hospitals/Clinics/Primary Care 5412 Long Term Care/Home Care/Elder Care 5414 Dependent Care (child care/assisted living 5420 Managed care (including PPO/PPM) 5429 Other Healthcare Facilities 5430 Emergency Services/Ambulance 5440 Hospital & Other Institutional Management 5499 Other Medical/Health Services 5500 Pharmaceuticals 5510 Pharmaceutical Research 5520 Pharmaceutical Production

NVCA

5530 Pharmaceutical Services 5540 Pharmaceutical Equipment 5550 Pharmaceuticals/Fine Chemicals (nonbiotech) 5599 Other Pharmaceutical NEC 6000 Energy Related 6100 Oil & Gas Exploration and Production 6200 Oil & Gas Exploration Services 6300 Oil & Gas Drilling & Support Services 6400 Oil & Gas Drilling,Exploration & Extraction Equip. 6410 Oil & Gas Drilling & Extraction Equipment 6420 Oil & Gas Drilling Instrumentation 6430 Oil & Gas Exploration Equip. Instrumentation 6499 Other Oil & Gas (NEC) 6500 Alternative Energy 6510 Solar Energy 6511 Photovoltaic Solar 6512 Other Solar 6520 Wind Energy 6530 Geothermal Energy 6540 Energy Co-Generation 6599 Other Alternative Energy (incl. nuclear energy) 6600 Enhanced Oil Recovery/Heavy Oil/Shale 6700 Coal Related 6710 Coal Mining 6720 Coal Related Equipment 6799 Other Coal Related 6800 Energy Conservation Related 6900 Other Energy Related 7000 Consumer Related 7100 Entertainment and Leisure 7110 Movies,Movie Products & Theater Operations 7120 Amusement & Recreational Facilities 7125 Casino and Gambling 7130 Toys & Electronic Games 7140 Sporting Goods,Hobby Equipment & Athletic Clothes 7150 Sports Facilities (Gyms and Clubs) 7155 Sports 7160 TVs,Radio,Stereo Equipment & Consumer Electronics 7170 Music,Records,Production and Instruments 7199 Other Leisure/Recreational Products and Services 7200 Retailing Related 7210 Drug Stores 7220 Clothing and Shoe Stores 7230 Discount Stores 7240 Computer Stores 7245 Retail Publishing (books,magazines, newspapers) 7246 Office Supply Stores 7247 Music/Electronics 7248 Specialty Department and retail stores 7250 Franchises(NEC) 7299 Other Retailing Related 7300 Food and Beverages 7310 Wine & Liquors 7320 Health Food 7330 Soft Drinks & Bottling Plants

7340 Food Supplements/Vitamins 7350 General Food Products 7399 Other Food and Beverages 7400 Consumer Products 7410 Clothing,Shoes & Accessories (incl. jewelry) 7420 Health & Beauty Aids 7430 Home Furnishing & Housewares 7431 Housewares 7432 Furnishings & Furniture 7433 Garden and Horticultural Products 7434 Other Home Furnishings (NEC) 7450 Mobile Homes 7499 Other Consumer Products 7500 Consumer Services 7510 Fast Food Restaurants 7520 Other Restaurants 7530 Hotels and Resorts 7540 Auto Repair Shops 7550 Education & Educational Products and Materials 7560 Travel Agencies and Services 7599 Other Consumer Services 7999 Other Consumer Related (not yet classified) 8000 Industrial Products 8100 Chemicals & Materials 8110 Plastic Fabricators 8111 Homogeneous Injections/Extrusions 8112 Non-Homogeneous Injections/Extrusions 8113 Fiber-Reinforced (Plastic) Composites 8114 Other Fabricated Plastics 8115 Processes for Working with Plastics 8119 Other Plasti Fabricators 8120 Coatings & Adhesives Manufacturers 8121 Optical coatings 8129 Other Coatings & Adhesives 8130 Membranes & Membrane-Based Products 8140 Specialty/Performance Materials 8141 Semiconductor Materials (eg. silicon wafers) 8142 III/V Semiconductor Mater. (eg. gallium arsenide) 8143 Specialty Metals (incl. coatings, alloys, clad) 8144 Ceramics 8145 Lubricants & Functional Fluids 8146 Other Specialty Materials 8147 Specialty materials for laser generation 8148 Superconducting materials 8149 Other Special Performance Materials 8150 Commodity Chemicals & Polymers 8151 Industrial Chemicals 8152 Polymer (Plastics) Materials 8160 Specialty/Performance Chemicals 8161 Electronic Chemicals 8162 Other Industrial Chemicals 8170 Agricultural Chemicals 8189 Other Commidity Chemicals and Polymers 8199 Other Chemicals & Materials (not yet classified) 8200 Industrial Automation 8210 Energy Management 8220 Industrial Measurement & Sensing Equipment 8221 Laser related measuring & sensing equipment 8230 Process Control Equipment & Systems

THOMSON REUTERS

112 | 2014 National Venture Capital Association Yearbook

8240 Robotics 8250 Machine Vision Software & Systems 8260 Numeric & Computerized Control of Machine Tools 8299 Other Industrial Automation (NEC) 8300 Industrial Equipment and Machinery 8310 Machine Tools, Other Metalworking Equipment 8320 Hoists,Cranes & Conveyors 8330 Pumps,Ball Bearings,Compressors,Indus. Hardware 8340 Mining Machinery 8350 Industrial Trucks and Tractors 8360 Other Industrial Process Machinery 8370 Power Transmission Equipment (generators & motors) 8399 Other Industrial Equipment & Machinery 8500 Environmental Related 8510 Air Filters & Air Purification & Monitoring Equip. 8520 Chemical and Solid Material Recycling 8530 Water Treatment Equipment & Waste Disposal Systems 8599 Other Environmental Related 8600 Other Industrial Products (not yet classified) 8700 Industrial Services 9000 Other Services and Manufacturing 9100 Transportation 9110 Airlines and Aviation Related 9120 Trucking 9125 Railway related 9130 Leasing of Railcars,Buses and Cars 9140 Mail and Package Shipment

THOMSON REUTERS

9150 Motor Vehicles,Transporation Equipment & Parts 9160 Airfield and Other Transportation Services 9180 Advanced Aircraft/Aerospace 9199 Other Transportation 9200 Financial Services 9210 Insurance Related 9220 Real Estate 9230 Banking 9235 Non Bank Credit 9240 Securities & Commodities Brokers and Services 9250 Investment Groups 9254 Venture Capital and Private Equity Investors 9255 Financial Transactions Services 9299 Financial Services,0ther 9300 Services 9310 Engineering Services 9320 Advertising and Public Relations 9330 Leasing (not elsewhere classified) 9340 Distributors,Importers and Wholesalers 9350 Consulting Services 9360 Media Related Services 9399 Other Services NEC 9400 Product Manufacturing 9410 Business Products and Supplies 9415 Office Automation Equipment 9420 Office Furniture & Other Professional Furnishings 9430 Textiles (Synthetic & Natural) 9440 Hardware, Plumbing Supplies 9450 Publishing 9460 Packaging Products & Systems 9470 Printing & Binding

9499 Other Manufacturing (not elsewhere classified) 9500 Agriculture,Forestry,Fishing,Animal Husbandry,etc. 9510 Agriculture related 9520 Forestry related 9530 Fishing related 9540 Animal husbandry 9599 Other Agriculture,Forestry,Fishing 9600 Mining and Minerals (non-energy related) 9700 Construction & Building Products 9710 Construction 9720 Manufacture of Building Products 9730 Manufacture of Pre-Fabricated Buildings & Systems 9740 Distribution of Building Products & Systems 9750 Construction Services 9799 Other Construction & Building Products Related 9800 Utilities and Related Firms 9810 Electric Companies 9820 Water,Sewage,Chem. & Solid Waste Treatment Plants 9830 Gas Transmission & Distribution 9899 Other Utilities & Related Firms 9900 Other Products and Services 9910 Conglomerates 9912 Socially Responsible 9914 Environment Responsible 9915 Women-Owned 9918 Minority-Owned 9920 Holding Companies 9999 Other Products and Services

NVCA

2014 National Venture Capital Association Yearbook | 113

APPENDIX E Industry Codes (VEIC) 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, Media and Entertainment, Medical Devices and Equipment, Networking and Equipment, Retailing/Distribution, Semiconductors, Telecommunications and Other. These sectors are based on the 17 industry classifications of the MoneyTreeâ&#x201E;˘ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. Biotechnology 4000, 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/Instrumentation 3000, 3100, 3160, 3200, 3300, 3310, 3400, 3420, 3499, 3500, 3510, 3599, 3700, 3710, 3720, 3799, 3800, 3810, 3820, 3830, 3835, 3899 Financial Services 2816, 2836, 9200, 9210, 9220, 9230, 9235, 9240, 9250, 9254, 9255, 9299 Healthcare Services 2820, 2840, 5400, 5410, 5412, 5414, 5420, 5429, 5430, 5440, 5499 Industrial/Energy 2819, 2837, 2839, 6000, 6100, 6200, 6300, 6400, 6410, 6420, 6430, 6499, 6500, 6510, 6511, 6512, 6520, 6530, 6540, 6599, 6600, 6700, 6710, 6720, 6799, 6800, 6900, 8000, 8100, 8110, 8111, 8112, 8113, 8114, 8115, 8119, 8120, 8121, 8129, 8130, 8140, 8143, 8144, 8145, 8146, 8147, 8148, 8149, 8150, 8151, 8152, 8160, 8161, 8162, 8170, 8189, 8199, 8200, 8210, 8220, 8221, 8230, 8240, 8260, 8299, 8300, 8310, 8320, 8330, 8340, 8350, 8360, 8370, 8399, 8500, 8510, 8520, 8530, 8599, 8600, 8700, 9000, 9100, 9110, 9120, 9125, 9130, 9140, 9150, 9160, 9180, 9199, 9400, 9410, 9415, 9420, 9430, 9440, 9460, 9470, 9499, 9500, 9510, 9520, 9530, 9540, 9599, 9600, 9700, 9710, 9720, 9730, 9740, 9750, 9799, 9800, 9810, 9820, 9830, 9899 IT Services 1560, 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

NVCA

THOMSON REUTERS

114 | 2014 National Venture Capital Association Yearbook

Media and Entertainment 1110, 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 Equipment 5000, 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 Equipment 1400, 1500, 1510, 1515, 1520, 1521, 1522, 1523, 1524, 1525, 1530, 1549, 3600, 3610, 3620, 3630, 3699 Retailing/Distribution 2810, 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 Semiconductors 3110, 3111, 3112, 3114, 3115, 3119, 3120, 3130, 3132, 3135, 3139, 3140, 3410, 3900, 3910, 3920, 3930, 3940, 3989, 3990, 8141, 8142 Telecommunications 1000, 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 Other 9900, 9910, 9912, 9914, 9915, 9918, 9920, 9999

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 115

APPENDIX F Stage Definitions

SEED STAGE FINANCING This stage is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept. This involves product development and market research as well as building a management team and developing a business plan, if the initial steps are successful. This is a pre-marketing stage.

EARLY STAGE FINANCING This stage provides financing to companies completing development where products are mostly in testing or pilot production. In some cases, product may have just been made commercially available. Companies may be in the process of organizing or they may already be in business for three years or less. Usually such firms will have made market studies, assembled the key management, developed a business plan, and are ready or have already started conducting business.

EXPANSION STAGE FINANCING This stage involves working capital for the initial expansion of a company that is producing and shipping and has growing accounts receivables and inventories. It may or may not be showing a profit. Some of the uses of capital may include further plant expansion, marketing, working capital, or development of an improved product. More institutional investors are more likely to be included along with initial investors from previous rounds. The venture capitalistâ&#x20AC;&#x2122;s role in this stage evolves from a supportive role to a more strategic role.

LATER STAGE Capital in this stage is provided for companies that have reached a fairly stable growth rate; that is, not growing as fast as the rates attained in the expansion stages. Again, these companies may or may not be profitable, but are more likely to be than in previous stages of development. Other financial characteristics of these companies include positive cash flow. This also includes companies considering IPO.

ACQUISITION FINANCING An acquisition of 49% stake or less. Firm acquires minority shares of a company. Thomson Reuters includes these deals in standard venture capital disbursement data when calculating venture capital disbursements where the funding is by a venture capital firm.

ACQUISITION FOR EXPANSION Funds provided to a company to finance its acquisition of other companies or assets. A consolidator of companies in specific industries.

MANAGEMENT/LEVERAGED BUYOUT These funds enable an operating management group to acquire a product line or business, at any stage of development, from either a public or private company. Often these companies are closely held or family owned. Management/leveraged buyouts usually involve revitalizing an operation, with entrepreneurial management acquiring a significant equity interest.

NVCA

THOMSON REUTERS

116 | 2014 National Venture Capital Association Yearbook

RECAP/TURNAROUND

Financing provided to a company at a time of operational or financial difficulty with the intention of improving the companyâ&#x20AC;&#x2122;s performance.

SECONDARY BUYOUT A buyout deal on top of a buyout deal. Secondary buyouts are distinguished when the initial firm investor is different from the current investing firm.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 117

APPENDIX G Data Sources and Resources For this publication, the main source for data was ThomsonONE.com, the online research database of Thomson Reuters. ThomsonONE.com (which replaced VentureXpert™, and Thomson One Banker) is endorsed by the NVCA as the official United States venture capital activity database. By using data gathered through the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters, ThomsonONE.com contains investment, fund raising, portfolio company information, and Reuters News along with other statistical data. Over 950,000 global private companies can be analyzed within ThomsonONE.com, including historical revenue figures on over 670,000 companies and detailed financials on over 200,000 companies. Through a partnership withVC Experts.com, Inc.the historical breadth and depth of the Thomson 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, two of the industry’s most widely-read publications. Other information contained in this database is gathered through a variety of public and proprietary source. This publication is produced on an annual basis primarily using year-end data. However, the underlying databases can be accessed online to provide the most up-to-date and comprehensive global private equity statistics and profile information available.

DATA SOURCES AND RESOURCES MONEYTREE™ DATA PricewaterhouseCoopers, Thomson Reuters, and the National Venture Capital Association joined forces in December 2001 to produce what was then known as the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey. Conducted on a quarterly basis, the designated PwC/NVCA MoneyTree Report allows Thomson Reuters unparalleled access to primary sources of information from general partners.

SOURCES OF DATA The online database of Thomson Reuters is ThomsonONE.com (VentureXpert), the foremost information provider for private equity professionals worldwide. The private equity portion of Thomson Reuters offers an incomparable range of products from directories to conferences, journals, newsletters, research reports, and the ThomsonONE.com Private Equity database. As of January 2014, the database included over 110,000 portfolio companies, over 18,000 private equity firms, over 31,000 private equity funds, and nearly 250,000 financing rounds. By establishing working relationships with private equity and venture capital firms, institutional investors, and industry associations such as the NVCA, PricewaterhouseCoopers and other such entities around the world, Thomson Reuters has been able to gather, on a timely basis, complete and accurate information.

TIMELINESS OF DATA Many of the tables and charts presented in this reportcan be produced by using ThomsonONE.com. One of advantages of using ThomsonONE. com is that the reader can customize a report to better fit the needs of what they are seeking. In addition, because the online database is continuously updated, the information available is more up-to-date than what can be presented in this report. Readers should note that timely industry information on details concerning venture capital investment is available from other sources such as PricewaterhouseCoopers at www.pwcmoneytree.com, the ‘Industry Stats’ section of the NVCA website, www.nvca. org, and the Private Equity section ofThomson Reuters’ Deals Intelligence found at http://dmi.thomsonreuters.com/PrivateEquity.

NVCA

VERIFICATION AND UPDATING OF DATA Collectively, PricewaterhouseCoopers, Thomson Reuters, and the NVCA have the utmost commitment to provide an accurate historical record of venture capital activity. On a daily basis, the database is constantly analyzed for consistency, crosschecked with other data sources, and updated as new information comes in. On a quarterly basis, we have worked with many venture firms to ensure that that their current and past data is correct. Primarily for this reason, the private equity news releases of Thomson Reuters will often restate statistics from prior news releases. With the availability of the online data access, users are encouraged to always use the most current numbers even regarding historical activity so as to maintain accuracy and comparability.

REPORTING FUNCTIONALITY OF THOMSONONE.COM Users can access information in terms of profiles on private equity companies, funds, firms, executives, IPOs, and limited partners. In addition, users can access the analytics portion of the database, which contains investment, valuation, IPO analytics, merger analytics, fund performance, and fund raising information along with venture capital information such as aggregate fund raising, investments, and IPOs broken out into state and nation profiles.

COMPREHENSIVENESS OF THOMSONONE.COM Both the breadth and depth of ThomsonONE.com can perhaps best be shown in that it, among other types of information, the user can find the answers to the 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 Ohio Valley? • What does Yearbook Figure 3.15 look like for just biotech? • How much money was raised by each fund stage in 2010? • What was a particular venture-backed IPO’s one year return at the end of 2010? • As of December 2011, was the 10-year return to small buyout funds larger than that of large buyout funds?

THOMSON REUTERS

118 | 2014 National Venture Capital Association Yearbook

• Who are the most active acquirers of ecommerce security companies? • How much money was committed to mezzanine funds from 1997 to 2011? • How much money was invested in the venture capital industry from 1987 to 2011? • What is the performance at quarter end for private equity funds that were formed from 1998 to 2011? • In 2011, how much money was invested at each development stage in Research Triangle Pharmaceutical companies? In addition, there are also advantages of using the database for a general partner as well. Although this is not an inclusive list, utilizing the database by general partners can be helpful to them for among the following reasons: • Plan your companies’ exits with data on both venture-backed IPOs and mergers and acquisitions • Aid in recruiting talented executives from otherventure-backed companies • Quickly spot venture-backed companies in competition with your own portfolio companies • Create industry analyses to benchmark both performance and portfolio investments • Find other venture capitalists likely to support follow-on rounds • Provide clarity to investment decisions by comparingthem to current market conditions

THOMSON REUTERS

• 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

ACCESSING THOMSONONE.COM AND OTHER SERVICES For more information on ThomsonONE.com, please visit http://thomsonreuters.com/private-equity-venture-capital/ or by phone at 1-877-3651455. For information on NVCA membership, which can include a free trial and discounts on an annual subscription, please contact Hannah Veith at the NVCA. You may contact her online through the link on the member benefits section of the NVCA website or at 703-524-2549. For information on services PricewaterhouseCoopers provides for venture capital firms as well as emerging companies, please visit their website at www. pwcmoneytree.com.

NVCA

2014 National Venture Capital Association Yearbook | 119

APPENDIX H International Convergence The discussions and work focused on moving toward one high quality set of standards for financial reporting have begun to provide a picture of the future. While that picture is more gray scale than vivid color, the following facts and expectations highlight the current state of play at this point in time: • The SEC issued a report in 2012, without a recommendation, on whether to adopt international accounting rules, or a modification thereof, as the accepted accounting practice in the United States. It appears increasingly unlikely that the SEC will move 100% into the International Financial Reporting Standards (IFRS) camp; • FASB’s parent, the Financial Accounting Foundation, created a new Private Company Council (PCC) to advise them on private company accounting. Their work is just beginning; • The AICPA is considering whether the PCC will provide an appropriate framework for private companies or if the AICPA should continue with efforts to develop an alternative non-GAAP basis of accounting for private companies; • The International Accounting Standards Board (IASB) modified IFRS consolidation rules to effectively create Investment Company accounting substantially similar to that used under U.S. GAAP; and • While Fair Value accounting rules are now virtually identical under U.S. GAAP and IFRS, auditors are raising questions related to “unit of account” and valuing minority positions that could impact how venture capital and private equity funds estimate Fair Value.

The Dialogue and SEC Decision: Should international rules become accepted as U.S. GAAP? For years, the United States has been developing generalized accounting principles referred to as Generally Accepted Accounting Principles (“GAAP”). The keeper/arbiter/ decider of GAAP is the Financial Accounting Standards Board (“FASB”). The FASB develops and updates GAAP and the SEC has adopted these accounting rules for public company reporting and other situations over which the SEC has jurisdiction. In recent years, on a parallel track, a separate set of rules emerged from the International Accounting Standards Board (“IASB”), which was Europe-centric. These rules became known as the International Financial Reporting Standards (“IFRS,” pronounced “EYE-fers”). IFRS has now been adopted by most developed and many developing countries around the world, with the exception of the United States. Over recent years, a large number of multinational corporations complained that they had to endure keeping two sets of books and this prompted the concept of convergence. In early September 2008, the SEC and the FASB announced steps to pave the way for United States public companies to convert from U.S. GAAP to IFRS. The SEC “roadmap” provided for a three-year runup to an SEC “go-no go” decision in 2011, but the decision was deferred. At about the same time, the FASB and the IASB met to review and reorient their convergence plan to be consistent with the SEC’s proposed schedule. The 2008-2009 world financial crisis deferred and deprioritized much of the work in this area. The SEC’s 2012 staff report on adopting IFRS did not make a recommendation, but raised questions about consistent application, transparency, reliability, relevance, comparability, and ongoing costs in addition to any conversion costs, which might be significant. More relevant to the

NVCA

United States venture capital industry are matters specifically affecting fund reporting, the financial statements provided by GPs to LPs under the eventual rules. Because of the recent change in IFRS consolidation rules, United States venture capital firms would conceptually not be impacted by a change to IFRS.

How United States GAAP and International IFRS Compare – Never Generalize Even viewed from 30,000 feet, it is difficult to generalize on how the two systems compare. First, while the IASB produces plain vanilla IFRS standards, there is no one flavor of IFRS in use. Much like the original UNIX kernel, each country/jurisdiction has been able to create its own version of IFRS. But unlike UNIX, sometimes the differences among the localized IFRS versions are large. So apples-to apples comparison of “IFRScompliant” financials from different jurisdictions can be difficult. Second, it is true that IRFS itself is a very thin document compared to GAAP, which has grown to roughly a two-foot stack of written rules. However, to implement IFRS, you need the implementation guide that combines with the original document to create its own two-foot stack. Again, much of the surface comparisons are not useful. Until now, United States venture capital firms have been using U.S. GAAP accounting standards exclusively. While seemingly distant from the United States venture capital industry, it is important that all business constituencies weigh in on which system (current U.S. GAAP vs. International vs. neither) is the best system overall for the United States business community going forward.

GP-to LP Reporting – Can Meaningful Statements Continue? A key priority for the United States venture capital industry is being able to continue producing quarterly financial statements using investment company (IC) accounting. Virtually all LP agreements (or accom-

THOMSON REUTERS

120 | 2014 National Venture Capital Association Yearbook

panying documents) require GPs to provide GAAP-compliant financial reports to LPs. Annual audits include testing to ensure GAAP compliance. Under GAAP, the United States venture capital industry now provides Fair Value portfolio reports under the special rules of “investment company reporting.” In 2012, IFRS was modified to effectively create a financial reporting framework substantially similar to U.S. GAAP.

GP’s should not lose sight of the fact their LP’s who prepare financial statements using either U.S. GAAP or IFRS, in almost all cases, must report their LP fund positions on a Fair Value basis. LPs are increasingly awakening to the specific conditions outlined in a change to U.S. GAAP from 2009, which codified an LP’s ability to use Net Asset Value (NAV) as an LP’s estimate of the Fair Value of their fund interest. These conditions include that the LP must satisfy themselves that the GP reported NAV is based on the Fair Value of underlying investments, that NAV is “in-phase” (no time lag, unless deemed insignificant), and that the LP interest is in a fund as defined by ASC Topic 946. If these three conditions are not met, or if the LP chooses not to use NAV, then Fair Value would be determined using other techniques. The point here for GPs is that LPs need robustly determined Fair Value on a timely basis, generally at least quarterly.

How the Same Words have Different Meanings The 2012 change in IFRS consolidation rules for Investment Entities and the 2011 adoption of a common definition of Fair Value for U.S. GAAP and IFRS should have created a framework where financial reporting to investors would be identical for funds using IFRS and funds using U.S. GAAP. If it were only that easy! While we enter 2013 with a consistent framework under U.S. GAAP and IFRS where venture capital and private equity funds report all investments at Fair Value; and while we now have an identical definition of Fair Value (the amount a market participant would pay in an orderly transaction), schisms are developing. Because of nuances in the way IFRS is drafted, IFRS auditors are ques-

THOMSON REUTERS

tioning whether Fair Value should be determined based on the “investment” or on a “single share” basis. While the reasons for such a question are beyond the scope of this document, the question and potential results could mean that IFRS and U.S. GAAP, though identical in principle, would result in different Fair Value estimates (as an aside, this is an example of one situation that concerns the SEC in moving the United States towards IFRS). At the same time, many auditors of U.S. GAAP, as a reaction to their regulators the PCAOB, and because of pressure from the SEC, which now regulates private equity funds, are questioning whether or not the sale or exit of an enterprise can be assumed when determining the Fair Value of minority positions. Some auditors have gone so far as to indicate that they may require the use of option pricing models for determining the Fair Value of all minority positions.

Going Forward With questions regarding whether or not IFRS should be interpreted as requiring all Fair Value estimates to be on a single share basis, and with U.S. auditors appearing to feel some pressure to use mathematical models to document their audit conclusions, both GPs and LPs in the venture capital and private equity industry could be faced with financial reporting that is either very costly and/or is not representative of how deals are done in the industry. In December 2012, the International Private Equity & Venture Capital Valuation (IPEV) Board updated its Valuation Guidelines. The updated valuation guidelines address both the “unit of account” and mathematical model questions. In addition, IPEV released Investor Reporting Guidelines in October 2012. While each fund manager must decide both what information to report and how to estimate Fair Value, the IPEV Valuation Guidelines and the IPEV Investor Reporting Guidelines provide balanced, and industry created, assistance in dealing with reporting and valuation questions. NVCA and Thomson Reuters acknowledge and appreciate the assistance of David Larsen of Duff and Phelps in updating and refocusing the material in this Appendix.

NVCA

2014 National Venture Capital Association Yearbook | 121

APPENDIX I US Accounting Rulemaking and Valuation Guidelines In the United States, a venture capital fund is usually organized as a limited partnership. The institutional investors providing capital to a fund typically become the limited partners (LPs). The venture firm itself becomes a general partner (GP) in the limited partnership. In most of the limited partnership agreements defining the GP-LP relationship, 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 the use of investment company accounting, which mandates that a Fair Value be assigned to the individual investments (portfolio companies). This is consistent with the LP’s need for Fair Value of their investments, as well as third-party or regulatory requirements, e.g., ERISA-regulation. In recent years, the GP-to-LP financial statements have been subject to numerous rule “clarifications,” convergence with non-U.S. accounting, expanded disclosures, and more formal presentations. Industry groups (PEIGG a decade ago and IPEV today) have released guidelines that, if adopted, can reduce questions from LPs and provide a basis to respond to questions posed by auditors.

Guidelines fall into two categories. The first is portfolio performance presentation formats, calculations, and disclosure. Examples of such Guidelines are the Private Equity Provisions of the Global Investment Performance Standards (GIPS), developed by the CFA Institute and the IPEV Investor Reporting Guidelines. While many of the specifications and terminology line up with current practice in the United States, the NVCA has not endorsed or otherwise commented on these Guidelines. Neither NVCA nor Thomson Reuters has determined how widespread the adoption of those guidelines is or will likely be. These documents and accompanying guidance can be currently found at http://www.cfainstitute. org/centre/codes/gips/ and www.privateequityvaluation.com.

require the venture firm to provide quarterly and annual financial statements using Generally Accepted Accounting Principles (GAAP). GAAP requires Fair Value measurement for portfolio positions. Therefore, most GPs must issue financial statements using Fair Value.

The second important category of guidelines is focused on valuation.

The Evolution of Reporting and Valuation Guidelines

Why Valuation Guidelines Matter What ultimately matters to investors and private equity practitioners is the cash that has been distributed to the investors during the life of the fund compared with the original money put in. However, the specified life of a typical venture fund is at least 10 years and often longer in the life sciences arena. During that period, the venture capital fund reports progress to the limited partners. In many cases, this means quarterly portfolio updates and a complete annual audited financial statement. For a typical venture fund, very little money is paid out in the first four or five years. Also, while every portfolio company receives funding with high expectations, it can take several years to determine if a particular company is a likely winner. Therefore, understanding progress in the portfolio requires some estimate of the success of the investee companies by the venture capital or private equity firm. While many investors and fund managers agree that financial measurements mean little for the first three or so years of a fund, investors are required to report the Fair Value of their fund positions on a quarterly or annual basis. This is where specific valuation rules and processes become important. The agreed valuation procedures for individual portfolio companies become the basis for progress assessment as the fund matures and ultimately distributes cash to the investors. Thus, while portfolio company valuations are more of an art than a science, especially for pre-revenue or even pre-EBITDA companies, most limited partner agreements (LPAs) establishing a venture capital fund

NVCA

Most important, if industry-created valuation guidelines are not used, those outside the industry, such as auditors or regulators could impose their view on the industry. A non-industry view could adversely impact the LPs desire and ability to invest if interim values are not representative of the way the industry sees value, and costs for determining valuation could increase.

To understand the pressure on valuation and reporting in today’s environment, a historical background review is instructive. • 1940 – United States Investment Company legislation (“the 40 Act”) required investment companies to report the Fair Value of investments. While the application of accounting standards has evolved over the past 70+ years, the underlying basis of reporting has always been Fair Value. • 1989-90 – A group of investors, private equity fund managers, and fund-of-fund managers formed a group to develop a set of portfolio company valuation guidelines for financial reporting. Contrary to a very persistent rumor, the NVCA did not endorse, adopt, bless, publish, or otherwise opine on the guidelines. Using the principle of conservatism, these non-endorsed guidelines used cost or the value of the last round of financing to approximate Fair Value. • Decade of the 1990s – Two noteworthy developments occurred in the 1990s. Despite no endorsement by the NVCA, these guidelines became accepted practice by much of the United States industry, especially in the venture capital side of private equity. These guidelines were referred to by many as being issued by the NVCA but in fact they were not. The second development is that international venture associations created localized guidelines based heavily on these guidelines. These were created in Europe and other international regions. In fact, by 2005, there had been multiple iterations of the European and British guidelines, again generally focused on cost or the value of the last round of financing.

THOMSON REUTERS

122 | 2014 National Venture Capital Association Yearbook

• December 2003/September 2004 – The Private Equity Industry Guidelines Group (PEIGG), a self-appointed group of private equity practitioners, fund managers, LPs and others, issued U.S. Private Equity Valuation Guidelines. The Guidelines were issued after extensive input and review soliciting feedback and input from a number of industry groups that included NVCA. • 2 005 – In part as a reaction to the PEIGG Guidelines, three Europebased venture capital associations (AFIC, BVCA, EVCA) created the International Private Equity and Venture Capital (IPEV) Valuation Board. • April 2006 – IPEV released its Valuation Guidelines. • September 2006 – Financial Accounting Standards Board (FASB) issued its long-awaited and long anticipated Fair Value measurement standard as FAS 157. Only a few of its 145 pages relate directly to typical venture capital and private equity funds. Because the FASB maintains that this is a clarification and further definition of Fair Value that was already required for portfolio accounting, some auditors began requiring selective compliance in advance of the 2008 effective date. • March 2007 – PEIGG issued a revised portfolio company valuation guidelines document to reflect the Fair Value Measurement standard (FAS 157). • September 2007 – NVCA board reaffirmed its prior position on the PEIGG guidelines to refer to the most recent version. • March 2008 – the IPEV Board reconstituted and re-launched itself and adds five practitioners from the United States. The initial focus of the group was on convergence of U.S. PEIGG and IPEV valuation guidelines. Details at www.privateequityvaluation.com. • July 2009 – Effective July 1, authoritative GAAP became contained in a single codification and the prior nomenclature went away. Existing U.S. GAAP was recast into 90 topics, which include all related FASB pronouncements, AICPA guidance and EITFs under single “Topics.” Familiar standards would no longer exist. For example, FAS 157 became Topic 820 Fair Value Measurements and Disclosure. Investment Company accounting became ASC Topic 946.

• February 25, 2014 – The Financial Accounting Foundation (FASB’s parent organization) issues its findings of a Post Implementation Review of the fair value measurement standard (Topic 820) which is better known by its original nomenclature: FAS 157. FAF’s overall finding was that overall the FASB got the standard basically correct, a point with which NVCA does not disagree. However, the findings acknowledged concerns raised by NVCA, LPs, and others while simultaneously declaring no unintended consequences.

NVCA Position on Portfolio Company Valuation Guidelines While publicly supportive of prior peer and eco-system generated valuation guidance (for example, PEIGG), NVCA’s endorsement of IPEV valuation guidelines in May 2013 is the first such action it has taken.

NVCA Member Alert –Fair Value Considerations for Venture Capitalists–December 2008 In 2008, as a response to the economic crisis at the time, the NVCA issued a membership alert. Much of that alert remains relevant today. The following alert was sent to the NVCA membership to highlight certain issues and considerations to be explored in the application of FAS 157, the Fair Value measurement standard. The NVCA thanks David Larsen of Duff and Phelps and several members of the NVCA CFO Task Force for their role in drafting this document: “We are operating in a severely distressed investment environment that has deteriorated rapidly in the past few months. What does this mean for venture capital investors as they attempt to value privately-held investments at December 31, 2008? The short answer is: despite the current very challenging economic environment, fund managers must continue to exercise their sound judgment in estimating the Fair Value of each portfolio company after considering the relevant facts, including current market conditions. The valuation process does not change, but much more judgment is required when we are in a period of economic discontinuity. Virtually all LP agreements require GPs to use U.S. GAAP for financial reporting. U.S. GAAP requires Fair Value reporting for virtually all VC firms because they are “investment companies.” U.S. GAAP continues to define Fair Value as: “the price that would be received to sell an asset…in an orderly transaction between market participants at the measurement date.”

• December 2012 – IPEV updated its Valuation Guidelines to harmonize with ASC Topic 820 and IFRS 13.

Fund managers need to establish Fair Values even though they may not currently need to sell, or cannot sell, their private investments in this market. GPs must use their judgment in estimating the current Fair Values of their investments, even though “exit markets” may have few buyers, IPO markets appear closed, and there are few, if any, relevant comparable transactions. Such judgment should take into account all relevant information, including a financing round’s specific terms and conditions. There are no easy outs, rules of thumb or safe harbors for establishing Fair Value. As always, best considerations for Fair Value determination include the following:

• May 28, 2013 – In an unprecedented action, the NVCA Board formally endorsed the IPEV valuation guidelines issued in December 2012. NVCA was joined in doing this by the Private Equity and Growth Capital Council (PEGCC).

• T he Fair Value of an investment portfolio is the sum of the Fair Value determined for each portfolio company using a “bottoms up” approach. Applying a “top-down” overall percentage adjustment to the aggregate portfolio’s value is not compliant with U.S. GAAP.

• May 2011 – FASB amended ASC Topic 820 and the IASB issues IFRS 13, resulting in nearly identical Fair Value guidance. • October 2012 – IPEV released Investor Reporting Guidelines

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 123

• V aluations should reflect specific factors in a buy/sell context. For example, a GP could ask: “Given my portfolio company’s current cash position, cash burn rate, performance compared to plan, probability of meeting forecasts, the projected environment for its product or technology, etc., as a board member, what is the lowest price that I would sell the company’s stock today in an orderly sale with a willing buyer?” [Footnote: A fund manager should not assume a “fire sale” of the stock, but should assume “exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary …” from SFAS 157, Paragraph 7]. • T he valuations set by the most recent financing round – perhaps even one in the third quarter of 2008 – may be stale and inappropriate for determining Fair Value, especially given current market conditions. • T he Fair Value at December 31 in many cases will likely be different from the value at September 30, given the deterioration of the macroeconomic environment. • E ach valuation should reflect a company’s degree of progress from the prior reporting date to the current one. • T o determine a portfolio company’s Fair Value, GPs should apply their judgment in a consistent manner and evaluate the same data they use for monitoring a company’s performance and progress. There is no magic formula or weighting of factors. In summary, determining Fair Value continues to require the exercise of judgment based on objective evidence, such as calibrating the original investment decision with the current performance of the company and the current economic environment. The fact that the macro market is distressed probably adversely impacts the value of most companies. This negative impact may be compounded by disappointing company performance or mitigated by tangible and sustainable company progress. If you need more details about Fair Value, you might consider the IPEV Valuation Guidelines at www.privateequityvaluation.com.”

a. LPs are revisiting their internal valuation policies. b. LPs are asking more detailed valuation questions of the GP. 2. T he IASB has created “investment company accounting” by requiring venture capital and private equity funds to report all investments at Fair Value rather than consolidating control positions. 3. A uditors of IFRS have raised questions concerning the level of aggregation (unit of account) that should be used to value venture capital and private equity investments. a. Some auditors believe that unit of account is a single share of an investee company. b. Single share valuations would likely result in reporting understated Fair Values. c. Reporting understated Fair Values would exacerbate the “J” curve, and could cause some LPs to reduce investments in the industry because of lower interim returns. d. IFRS could deviate from U.S. GAAP even though the Fair Value principles are identical. 4. A uditors of U.S. GAAP have raised questions concerning how to estimate the Fair Value of non-control positions. a. Is it appropriate to assume that the entire enterprise is being sold when estimating Fair Value? b. For non-control positions, is it appropriate or required to use option pricing models and theory to estimate Fair Value? The IASB is expected to address the Unit of Account question during early 2013. The AICPA has formed a task force to provide guidance on investments of venture capital and private equity funds. Part of the reason the AICPA has formed a task force is because the IPEV guidelines have not been as widely accepted or acknowledged in the U.S. as they have been in Europe. Further, while some parties have voiced concern that the AICPA task force conclusions may be relatively auditor-friendly, several members of that task force are from NVCA members.

As noted above, new pressure is emerging that could impact how venture capital and private equity managers estimate Fair Value. Key factors include:

All of this raises the question: could GPs reduce LP questions and increase LP valuation comfort by stating that they comply with the IPEV Valuation Guidelines? Will current efforts at non-authoritative accounting guidance provide a framework with which the great compliance community will be comfortable? Over the next year, greater clarity should emerge.

1. L Ps are awakening to the fact that they need to obtain more information from the GP about how the GP estimates Fair Value so the LP can use NAV to estimate the Fair Value of their LP interest.

NVCA and Thomson Reuters acknowledge and appreciate the assistance of David Larsen of Duff and Phelps in updating and refocusing the material in this Appendix

2014 Headwinds

NVCA

THOMSON REUTERS

124 | 2014 National Venture Capital Association Yearbook

This page is intentionally left blank.

THOMSON REUTERS

NVCA

2014 National Venture Capital Association Yearbook | 125

APPENDIX J Non-US Private Equity As interest in globalization increases with each year, private equity investors have continued to broaden their investment criteria to include overseas ventures so as to increase portfolio diversification and search for higher returns. As such, Appendix J is produced for readers to analyze non-US private equity data. All data is reported in US dollars.

INTRODUCTION This appendix highlights various aspects of private equity activity outside of the United States and provides valuable information for comparison to the United States private equity environment. However, this appendix is not directly comparable to domestic data found in this Yearbook due to differences in definitions between the regions and variations in the currencies of each region. Additionally, this appendix provides a brief overview of non-US private equity; data herein is not as comprehensive as the United States data presented elsewhere in this publication. Despite this, the reader can use this appendix to analyze trends in private equity outside of the United States. All data is provided by Thomson Reuters. As mentioned previously, readers should note the differences in methodology and definitions of private equity between United States and other regions before analyzing the data. For example, private equity outside of the United States provides equity capital for entities not publicly traded and consists of buyouts and venture capital. The category of buyouts includes management buyouts (management from inside the company investing with private equity investors), leveraged buyouts (the target taking on a high level of debt secured by assets), institutional buyouts (outside investors buying a business from existing shareholders), and management buyins (management from outside the company investing with private equity investors). On the other hand, venture capital describes the process of financing companies at the seed, start-up, or expansion stages. The United States places more emphasis on the early stages of development than do other regions, based on historical analysis of investments by stage. Like in the United States, non-US venture capital is considered a subset of private equity. For ease of analysis and to avoid differences in definitions between venture capital and buyouts inside and outside of the United States, it is perhaps most comparable to analyze aggregate private equity in the two regions as opposed to any classifications contained within. **Special Note: The methodology used to generate the data within this appendix differs slightly from the methodology used in previous years, causing data to vary slightly from previous Yearbook issues. However, trends reported in the past remain intact. Additionally, most data is now replicable on ThomsonONE.com.

$19.9 billion or 15% of the total. Venture Capital funds represented 8% ($10.2 billion). Private Real Estate funds raised $13.5 billion or 10% of the share. Fund of funds, Generalist, and Mezzanine funds raised $6 billion, $10 billion, and $3.1 billion, respectively. It should be noted that these totals reflect not only the amount raised by independent funds, but also include capital gains and the amount raised by captive funds.

INVESTMENTS Overall, private equity investing outside of the United States reached $46.6 billion. Buyout stage financing led investment activity, accounting for 43% of the total dollars. The Venture Capital investments followed with 32% of the total. By number of deals, Venture Capital investments led with 56% and the Buyouts investments followed with 37% of the total deal activity outside of the United States. Canada received the biggest share of private equity outside the United States in 2013 with $9 billion worth of investments or 19% of the total value. The United Kingdom followed with $5.2 billion. China comes in at third with $4.9 billion or 10% of the total. Private equity commitments experienced an increase while investments saw a decrease outside of the United States in 2013. Commitments saw an increase of 16% from $113 billion in 2012. Private equity investments dropped 21% from $59 billion of the previous year.

Figure J1 Private Equity Commitments Outside of the United States in 2013 Fund World Location

# Funds

Amount Raised in Range (USD Mil)

Europe

170

77,544.94

Asia

116

30,943.34

Other Regions

22,354.11

Total

374

130,842.38

COMMITMENTS Private equity commitment levels, outside of the United States, totaled $130.8 billion in 2013. European-based funds raised the bulk, raising $77.5 billion, equal to 59% of this amount. Meanwhile, Asian funds had $30.9 billion in fundraising commitments which is 24% of the total. Funds in the Other Regions raised the remaining $22.4 billion or 17% of the total. In the stage level, Buyout commitments outside the United States accounted for $68.3 billion or 52% of the total. The second largest part of the commitments was Other Private Equity/Special Situations which raised

NVCA

THOMSON REUTERS

126 | 2014 National Venture Capital Association Yearbook

Figure J2 Private Equity Commitments Outside of the United States by Fund Stage in 2013 Fund Stage

# Funds

Amount Raised in Range (USD Mil)

Buyouts

68,253.15

Venture Capital

137

10,181.76

Generalist

9,952.74

Mezzanine Stage

3,065.56

Fund of Funds

5,984.68

Other Private Equity/ Special Situations

19,856.58

Real Estate

13,547.92

Total

374

130,842.38

Figure J3 Private Equity Investments Outside of the United States By Location in 2013 Company Nation

# Deals

# Companies

Sum of Equity Invested (USD Mil)

Canada

845

747

9,018.66

United Kingdom

742

696

5,223.91

China

310

291

4,862.14

Germany

442

405

4,821.09

India

355

321

3,169.58

Other Nations

2343

2215

19,455.95

Total

5037

4675

46,551.33

Figure J4 Private Equity Investments Outside of the United States By Stage in 2013 Company Stage

THOMSON REUTERS

# Deals

# Companies

Sum of Equity Invested (USD Mil)

Buyout/Acquisition

1881

1769

20,119.97

Venture Capital

2805

2609

14,752.98

Other

351

327

11,678.38

Total

5037

4675

46,551.33

NVCA