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Silicon Valley Venture Survey Second Quarter 2012

Barry Kramer and Michael Patrick

Fenwick
fenwick & west llp

Background
We analyzed the terms of venture financings for 115 companies headquartered in Silicon Valley that raised money in the second quarter of 2012.

Overview of Fenwick & West Results
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Up rounds exceeded down rounds in 2Q12, 74% to 11%, with 15% of rounds flat. This was better than 1Q12, when up rounds exceeded down rounds 65% to 22%, and the best quarter since 2007. Series B rounds were especially strong, although we note that the percentage of Series B financings in the survey has declined for three straight quarters, perhaps indicating that companies are having difficulty securing Series B funding, but those that do are being rewarded with substantial valuation increases. This was the twelfth quarter in a row in which up rounds exceeded down rounds. The Fenwick & West Venture Capital Barometer™ showed an average price increase of 99% in 2Q12, an increase from 52% in 1Q12. This was the highest Barometer result since we began calculating the Barometer in 2004. That said, we note that there were two financings (one in the internet industry and one in the software industry) that were each up over 1000% (i.e. over 10x), and if they were excluded, the Barometer result would have been 70%. The median price increase in 2Q12 was 30%. The results by industry are set forth below. In general, internet/digital media and software continued to be the strongest industries by far, with Barometer increases of 248% and 123% respectively (which would have been 176% and 86% respectively if the two aforementioned 10x deals were excluded). The median price increase for internet/digital media and software financings were 105% and 56%, respectively. Cleantech and life science trailed significantly.

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Overview of Other Industry Data
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Venture investment was up in the software and internet/digital media industries in 2Q12 versus 1Q12, while cleantech and life science lagged. However, overall venture funding in 2012 is modestly lagging 2011 to date. M&A was up slightly in 2Q12 versus 1Q12, and 2012 is generally flat in dollars compared to 2011. The number of IPOs was down in 2Q12 compared to 1Q12, but dollars raised were up, as the Facebook IPO dominated the quarter. 2012 is ahead of 2011 year to date. Venture fundraising in dollars was up, but the number of funds raising money declined in 2Q12, compared to 1Q12. Fundraising in 2012 is ahead of 2011 in dollars. The venture environment continues to be a “tale of two cities” with software and internet/digital media thriving and life science and cleantech lagging. Additionally, we note that venture investment, M&A and IPOs have all returned to 2007 (pre financial industry meltdown) levels, but fundraising by venture capitalists continues to be significantly below those levels.

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n IPO Activity. 72% of the companies going public were based in Silicon Valley.6 billion.1 billion in 863 venture deals in 2Q12. Similarly. as opposed to 35% in 1Q12. the PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters (the “MoneyTree Report”) reported $7. The MoneyTree reported that the software and internet industries were especially strong. a 19% increase from the 86 transactions reported in 1Q12 (as reported in April 2012). (It appears that Thomson/NVCA includes shares sold by shareholders in the IPO amount. Over half of all venture capital was invested in California in 2Q12. Dow Jones VentureSource (“VentureSource”) reported that U.) Nine of the eleven IPOs were IT companies and all were U. and a 12% increase in transactions. The largest acquisition in the quarter was Facebook’s acquisition of Instagram for $1 billion.-based companies raised $8. a 7% increase in transaction dollars. the growth of super angels and micro VCs discussed below. early stage companies going global sooner and benefitting from venture capitalists with a more global reach) but this increased financial concentration could leave companies with fewer alternatives. with 77 of the 102 deals. Similarly. However. trends in terms of venture financings in silicon valley — second quarter 2012 2 . Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 102 transactions in 2Q12. while life science was weak. However. from the 98 acquisitions for $12. a 21% increase in dollars and a 18% increase in deals from the $5.7 billion in 2Q12 ($6. a 31% increase in dollars and a 20% increase in deals compared to 1Q12. and the commitment of some of the larger funds to continue making smaller investments. IT companies dominated. with 42% of the total in Northern California. n Venture Capital Investment. n Merger and Acquisitions Activity.S.2 billion was raised in 717 deals (as reported in April 2012).8 billion from Facebook) compared to 19 IPOs raising $1. Thomson/NVCA reported 11 IPOs raising $17. VentureSource reported 11 venture-backed IPOs raising $7.7 billion in 1Q12 (as reported in July 2012 – the initial April 2012 numbers were subsequently revised substantially and so are not being used).4 billion in 1Q12 (as reported in April 2012).1 billion in 2Q12 ($15.5 billion in 1Q12. investment in the first half of 2012 slightly lags the first half of 2011. may offset this trend. when $6.0 billion of venture investments in 898 deals in 2Q12.S. while VentureSource does not.8 billion invested in 758 deals in 1Q12 (as reported in April 2012). Dow Jones reported 110 acquisitions of venture-backed companies in 2Q12 for $13. The effects of the increasing concentration of venture capital in fewer funds also bears watching. compared to 20 IPOs raising $1. There are understandable reasons for this trend (capital moving to managers with the best results. based.8 billion from Facebook).

after 8 years out of the market. In general. has recently allocated $1 billion over the next five years to increase access to early stage venture capital – i.S. if desired. And the Kauffman Foundation has indicated similar plans (see “Kauffman Foundation Venture Capital Report” below). due to poor returns on its investments. Some exchanges are working to address this by proactively working with late stage companies to facilitate liquidity arrangements for the companies’ employees and early stage investors with the exchange’s investor base. a 31% increase in dollars over the first half of 2011. The top 5 funds accounted for almost 80% of the total fundraising in the quarter. and that half of late stage primary financings included a secondary component. n Secondary Trading.n Venture Capital Fundraising. triple the amount from five years ago. it seems doubtful that secondary exchange trading of other venture-backed companies will be able to take up the slack in 2012. The Venture Capital Journal reported that 80% of such trading occurred in negotiated one-on-one transactions (as opposed to on secondary exchanges). Thomson/NVCA reported that 38 U.9 billion in 2Q12. and limited partners looking to invest in venture capital. The SBA. However. Dow Jones reported that for the first half of 2012.9 billion raised by 42 funds in 1Q12 (as reported in April 2012). 82 U. That said.e. venture capital funds raised $13 billion. the purchasers are known and the transaction can be combined with a primary sale. trends in terms of venture financings in silicon valley — second quarter 2012 3 . secondary exchanges had a good year in 2011. For example. Mark Heesen. noted that this concentration of capital in fewer funds has narrowed the field of venture funds for both entrepreneurs seeking venture capital. President of the NVCA. with Second Market reporting $558 million in trades and SharesPost reporting $625 million. venture capital funds raised $5.S. Early stage venture funds can borrow from the SBA an amount equal to what they can raise privately. and are leaning towards negotiated sales where information provided to investors can remain confidential. Venture fundraising by venture capital funds in 2Q12 was again less than the amount of venture capital invested in companies in the quarter. a 20% increase in dollar commitments and a 10% decrease in the number of funds compared to the $4. LinkedIn. Secondary trading was estimated to be $10 billion in 2011. with the IPOs of Zynga. Some traditional investors in venture capital are also indicating a reduction in commitment to the asset class when they cannot get into the best funds. GroupOn and now Facebook. the Mercury News has reported that CalPERS will likely decrease its venture commitment from 6% of its private equity portfolio to 1%. companies looking to raise $1 4 million. it seems that late stage companies are becoming more comfortable with secondary sales.

n Seed Investment. while Nasdaq was up 5. The Cambridge venture index is net of fees. poor returns from most venture funds. They also plan to increase their direct investing and to move a portion of their capital allocated to venture capital into the public markets. which if successful could act as a counterweight to the decreasing number of venture capital funds (Venture Capital Journal).8%. (VentureSource) And perhaps most interestingly. SV Angel and Andreesen Horowitz in the Start Fund which commits to loan $150. And General Catalyst Partners has joined Yuri Milner. n The Kauffman Foundation Venture Capital Report. incentives for managers to create larger funds to increase management fees. Israeli and German entrepreneurs have each been started in the past year. Accelerators focused on Swiss.30%. as they do not believe that there are enough strong venture capitalists to absorb the available capital. which slightly beat Nasdaq which was up 11. a significant number of super angels/micro VCs are seeking to raise larger funds or taking on LPs. and in which GPs commit at least 5% of the capital. Other suggestions from the Kauffman report include (i) that management fees should be based on a budget. Cambridge Associates reported that the value of its venture capital index increased by 4. both of whom are seed investors. among other things. that “the Limited Partner investment model is broken.” The report based its conclusion on.7% for Nasdaq. based on their 20 year history of venture investing experience in nearly 100 funds. For the ten years ended March 31.7% in 1Q12 (2Q12 information has not been publicly released) compared to 18. It recommended that limited partners require a better alignment of interests between LPs and GPs. vintage year and gross return measurements). 4 trends in terms of venture financings in silicon valley — second quarter 2012 . Danish. In May 2012 the respected Kauffman Foundation issued a report that concluded. and (iii) that there should be more transparency in how the venture capital management company is structured to understand how the individual venture capitalists are incented. The Kauffman Foundation has indicated that it intends to focus its future venture investment in funds of less than $400 million. n Venture Capital Return.000 to each Y Combinator company (foregoing information from Venture Wire). expenses and carried interest. Additionally.4% per year. the venture capital index was up 12. 2012 the Cambridge venture capital index was up 4. or are in the process of being started. Although concern continues that the valuations of seed stage companies are getting frothy. 2012. in Silicon Valley.2%. not a percentage of funds under management. the increasing length of life of venture funds and the relatively small amounts invested personally by many fund managers. the expansion of the accelerator/incubator model continues. the two most active venture capitalists in 2Q12 were 500 Startups and First Round Capital (tied for second with NEA). although for the 12 month period ended March 31. (ii) that investors should receive their funds back plus a preferred return before venture capitalists share in profits. more transparency and better governance provisions. top quartile. with historical performance above what could be achieved in equivalent public market funds (which it believes are better performance measures than IRR.

life science regulation).79 reported in 1Q12. The Silicon Valley Venture Capitalist Confidence Index® produced by Professor Mark Cannice at the University of San Francisco reported that the confidence level of Silicon Valley venture capitalists was 3. trends in terms of venture financings in silicon valley — second quarter 2012 5 .47 on a 5-point scale in 2Q12. healthcare IT and consumer businesses (in order of higher confidence to lower) and were least confident about the medical device. a decrease from the 3. n Nasdaq. financial services. as there was general agreement that the entrepreneurial environment viewed in isolation was strong.9% in 2Q12.n Venture Capital Sentiment. cleantech. biopharmaceuticals. Reasons given for the decrease in confidence were primarily macro oriented (global economy. telecom and semiconductor industries (in order of higher confidence to lower). The Deloitte/NVCA Global Confidence Survey reported that global venture capitalists were most confident about the prospects of the cloud computing. Nasdaq decreased 4. new media.8% in 3Q12 through August 10. but has increased 2. software. 2012.

Series D 42% Q3’11 Q1’12 Q2’12 Series B 40% Price Change 80% 70% 60% 52% 32% 42% 39% 37% 33% Series E and Higher 36% 29% 32% 74% 25% 25% 25% 27% 67% 27% 67% 24% 31% 70% 65% 61% 50% 20% 40% 30% 20% 18% 30% 21% 25% 16% 17% 12% 14% 12% 24% 20% 19% 21% Up rounds Down rounds Flat rounds 22% 15% 15% 15% 13% 11% 10% 0% Q3’10 0% Q3’10 Q4’10 Q4’10 Q1’11 Q1’11 Q2’11 Q2’11 Q3’11 Q3’11 Q4’11 Q4’11 Q1’12 Q2’12 Q2’12 Q1’12 The percentage of down rounds by series were as follows: Percentage of Down Rounds 50% 45% 40% 38% 37% 35% 33% 33% 30% 30% 27% 25% 28% 25% 27% 25% 23% Series B Series C 21% 20% 19% 20% 20% 17% 19% 17% 15% 12% 17% 14% 14% 10% 6% 16% Series D Series E and Higher 15% 14% 10% 12% 10% 14% 12% 5% 0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 0% Q2’12 trends in terms of venture financings in silicon valley — second quarter 2012 6 .40% 30% 60% 20% 62% 25% 15% 17% 13% 57% 25% 59% >3x 10% Fenwick & West Data 0% 0% on Valuation 0% 0% Q3’10 Q4’10 Q1’11 Q2’11 44% 60% 14% 0% 50% Q4’11 57% 0% 0% 0% 0% 46% 47% price change — The direction of price changes for companies receiving financing in a quarter. compared to their Series C 45% prior round of financing.

down and flat) are included.5% 200% 22% 19% 20% 19% 21% 18% 16% * 177% 164% com 15% 160% 9% 7. and results are not weighted for the amount raised in a financing.5% 120% 0% 147% 134% 121% 104% Series B Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 92% Q2’12 Series C Series D Series E and Higher comp x 73% Senior Liquidation Preferences 67% 80% 74% 74% 54% 56% 49% 39% 44% 42% 62% 58% 43% 50% 45% 40% 53% 44% 41% 36% 43% 40% 13% 35% 7% 6% 30% 0% 25% 20% 15% -40% 10% 5% 24% 41% 19% 35% 12% 37% 10% 1% 18%31% 34% 28% com Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 *Please note that the two above mentioned software and internet/digital media companies with greater than 10x up rounds 0% Q2’12 Q3’10 Q4’10 Q1’11 Q2’11 Q4’11 Q1’12 were both Series C rounds. If these were excluded the Barometer result for 2Q12 would have been 70%. 30% Barometer Percentage Change By Series The Barometer results by series are as follows: 22. all Hardware rounds (up. In calculating the average. Barometer Combined Total Lifescience 90% 142% 100% 90% 64% 80% 38% 70% 61% 52% 52% 71% 85% * 99% Internet/Digital Media Cleantech comp x 69% 60% 12% 50% 40% -14% 28% 30% 20% -40% 10% Q3’10 0% Q3’10 com Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 *Please note that one software company had a 1460% up round and one internet/digital media company had a 1190% up Redemption round. compared to the 116% Software price per share at which such companies raised funds in their prior round of financing.168% the fenwick & west venture capital barometer™ (magnitude of price change) — Set forth below is the average ** percentage change between the price per share at which companies raised funds in a quarter. If these were excluded theQ3’11 Barometer result for Series C rounds in 2Q12 would have been 72%. Uncapped Liquidation trends in terms of venture financings in silicon valley — second quarter 2012 70% 64% 7 .

the Software Barometer would have been 86% and the Internet/Digital Media Barometer would have been 176%. down round results by industry  — The table below sets forth the percentage of “down rounds. Barometer results and number of financings for companies receiving financing in 2Q12.” by industry groups. by industry group. for each of the past eight quarters. Results By Industry Down Rounds Over Time Down Rounds Software Hardware Lifescience Internet/Digital Media Cleantech Other Total all Industries Q3’10 32% 35% 27% 0% 60% 33% 30% Q4’10 7% 36% 36% 25% 14% 0% 21% Q1’11 14% 15% 31% 11% 0% 25% 16% Q2’11 14% 15% 31% 11% 0% 25% 16% Q3’11 14% 12% 22% 18% 11% 0% 15% Q4’11 11% 0% 33% 12% 43% 0% 16% Q1’12 14% 42% 24% 20% 0% 0% 22% Q2’12 8% 15% 6% 0% 75% 50% 11% Barometer Rainbow Table Over Time Barometer Software Hardware Lifescience Internet/Digital Media Q3’10 23% 10% 44% 82% Q4’10 121% 38% -5% 20% Q1’11 75% 43% -8% 77% Q2’11 121% 35% 6% 115% Q3’11 71% 34% 4% 201%* 41% 69% Q4’11 105% 58% 36% 122% -3% 85% Q1’12 85% 5% 26% 72% 61% 52% Q2’12 123%** 46% 11% 248%** -33% 99% 8 Cleantech 5% 73% 54% 24% trends in terms of venture financings in silicon valley — second quarter 2012 Total all Industries 28% 61% 52% 71% . compared to their previous round.Series D Series E and Higher 9% 20% 14% 12% 20% 14% 15% 15% 14% 18% 17% 16% 17% 24% 14% 24% results by industry for current quarter — The table below sets forth the direction of price changes. Companies receiving Series A financings are excluded as they have no previous rounds to compare. Excluding those two companies. Results By Industry Down Rounds Over Time Industry Software Hardware Lifescience Internet/Digital Media Cleantech Other Total all Industries Up Rounds 86% 71% 53% 93% 25% 0% 74% Down Rounds 8% 15% 6% 0% 75% 50% 11% Flat Rounds 5% 14% 41% 7% 0% 50% 15% Barometer +123%* +46% +11% +248%* -34% -33% 99% Number of Financings 37 14 17 14 4 2 88 *These include the two previously mentioned companies with greater than 10x up rounds in 2Q12.

**These include the two previously mentioned companies with greater than 10x up rounds in 2Q12. Barometer Rainbow Table Over Time Barometer Software Hardware Lifescience Internet/Digital Media Cleantech Total all Industries Q3’10 23% 10% 44% 82% 5% 28% Q4’10 121% 38% -5% 20% 73% 61% Q1’11 75% 43% -8% 77% 54% 52% Q2’11 121% 35% 6% 115% 24% 71% Q3’11 71% 34% 4% 201%* 41% 69% Q4’11 105% 58% 36% 122% -3% 85% Q1’12 85% 5% 26% 72% 61% 52% Q2’12 123%** 46% 11% 248%** -33% 99% By Industry Barometer Time is below.Other Total all Industries 33% 30% 0% 21% 25% 16% 25% 16% 0% 15% 0% 16% 0% 22% 50% 11% barometer results by industry  — The table below sets forth Barometer results by industry group for each of the last eight quarters. A Results graphical representation of Over the above Financing Round 246% ** Q3’10 20% 23% 28% 9% 20% Q4’10 13% 26% 35% 14% 12% Q1’11 18% 24% * 24% 20% 14% Q2’11 19% 25% 26% 15% 15% Q3’11 18% 31% 19% 14% 18% Q4’11 24% 24% 19% 17% 16% Q1’12 24% 18% 17% 17% 24% Q2’12 24% 17% 21% 14% 24% Series 220% Series A 194% Series B Series C Series D 168% Series E and Higher 142% ** 116% Software Hardware Lifescience Results By Industry Down Rounds Over Time 90% Industry 64% Up Rounds 86% 71% 53% 93% 25% 0% 74% Q4’10 Q1’11 Down Rounds 8% 15% 6% 0% 75% 50% 11% Q2’11 Q3’11 Flat Rounds 5% 14% 41% 7% 0% 50% 15% Q4’11 Barometer +123%* +46% +11% +248%* -34% -33% 99% Q1’12 Q2’12 Number of Internet/Digital Media Financings Cleantech co Software Hardware 38% Lifescience 12% Internet/Digital Media 37 14 17 14 4 2 88 Cleantech -14% Other Total all Industries Q3’10 -40% *Please note that one internet/digital media company had a 1500% up round in 3Q11. Barometer Percentage Change By Series trends in terms of venture financings in silicon valley — second quarter 2012 200% 9 . the Software Barometer would have been 86% and the Internet/Digital Media Barometer would have been 176%. If this were excluded the Barometer result for the internet/digital media industry in 3Q11 would have been 73%. Excluding those two companies.

Q3’10 20% 23% 28% 9% 20% Q4’10 13% 26% 35% 14% 12% Q1’11 18% 24% 24% 20% 14% Q2’11 19% 25% 26% 15% 15% Q3’11 18% 31% 19% 14% 18% Q4’11 24% 24% 19% 17% 16% Q1’12 24% 18% 17% 17% 24% Q2’12 24% 17% 21% 14% 24% Results By Industry Down Rounds Over Time Industry Software Hardware Lifescience Internet/Digital Media Cleantech Other Total all Industries Up Rounds 86% 71% 53% 93% 25% 0% 74% Down Rounds 8% 15% 6% 0% 75% 50% 11% Flat Rounds 5% 14% 41% 7% 0% 50% 15% Barometer +123%* +46% +11% +248%* -34% -33% 99% Number of Financings 37 14 17 14 4 2 88 trends in terms of venture financings in silicon valley — second quarter 2012 10 .Total all Industries 28% 61% 52% 71% 69% 85% 52% 99% Financing Round Series Series A Series B Series C Series D Series E and Higher financing round — This quarter’s financings broke down by series according to the chart below.

Senior Liquidation Preferences 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 28% 41% 43% 37% 31% 34% 35% 41% Uncapped Liquidation Liquidation Preferences The percentage of senior liquidation preference by series was as follows: 70% 80% 64% 58% 60% 54% 71% 60% 50% 40% 47% 51% 40% 62% 32% 59% 30% 60% 20% 10% 60% 57% 57% 46% 0% Q3’10 40% 47% 44% 50% 45% Series B Series C Q4’10 42% Q1’11 42% Q2’11 39% 37% Q3’11 Q4’11 Q1’12 Q2’12 Series D Series E and Higher 33% 36% 29% 32% 27% 27% 24% 32% 25% 25% 25% 24% 31% 20% 12% 20% 19% 21% 0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 11 trends in terms of venture financings in silicon valley — second quarter 2012 .7.5% 0% Q3’10 Q1’11 Terms Q2’11 Fenwick & WestQ4’10 Data on Legal Q3’11 Q4’11 Q1’12 Q2’12 liquidation preference — Senior liquidation preferences were used in the following percentages of financings.

3x >3x 1% Q4’10 0% 17% Q1’11 Q2’11 13% Q3’11 0% 0% Q4’11 Q1’12 14% 0% Q2’12 0% 0% 0% Q3’10 Q4’10 Pay To Play Provisions 0% Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Price Change 15% 16% 80% 14% 67% 67% 61% 52% 70% 65% 20% 74% 70% 12% 60% 8% 50% 40% 4% 30% 7% 6% 5% 5% 25% 16% 15% 8% 6% Up rounds Down rounds Flat rounds 30% 21% 18% 22% trends in terms of venture financingsQ1’11 in silicon valley — second quarter Q3’10 Q4’10 Q2’11 Q3’112012 10% 17% 12% 14% 15% 0% 20% Q4’11 Q1’12 13% 15% 11% Q2’12 12 .4% 4% 4% 4% 3% multiple liquidation preferences — The percentage of senior liquidation preferences that were multiple 1% liquidation preferences were as follows: Multiple Liquidation Preference 0% Q3’10 30% Q4’10 Q1’11 Q2’11 29% 2% Q3’11 Q4’11 Q1’12 Q2’12 Participation In Liquidation 25% 60% 20% 20% 53% 50% 15% 40% 10% 30% 5% 20% 3% 45% 13% 21% 19% 14% 43% 38% 39% 31% 13% 40% 34% 0% 10% Q3’10 0% Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Corporate Reorganizations Q2’12 Q3’10 liquidation Q4’10 preferences Q1’11 that were Q2’11 Q3’11 Q4’11 Of the senior a multiple preference. the ranges Q1’12 of the multiples broke down as follows: 15% Range Of Multiples 12% 100% 9% 85% 90% 9% 80% 100% 83% 86% 100% 100% 7% 62% 5% 13% 75% 5% 70% 6% 60% 50% 3% 40% 30% 0% 20% 15% Q3’10 10% 0% 4% 2% 25% 25% >1x .2x >2x .

2x >2x . the percentages that were not capped were as follows: Uncapped Liquidation 100% 90% 85% 70% 80% 70% 60% 60% 50% 50% 40% 40% 58% 100% 100% 100% 83% 64% 60% 86% 75% 54% 47% 51% 62% >1x .1% 7.5% 0% Q2’12 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 0% Q2’12 Q3’10 in liquidation Q4’10 Q2’11 Q3’11 Q4’11 for participation Q1’12 participation — TQ1’11 he percentages of financings that provided were as follows: Participation In Liquidation 53% 60% Senior Liquidation Preferences 50% 50% 45% 40% 40% 35% 30% 30% 41% 45% 43% 43% 38% 37% 39% 31% 34% 40% 41% 34% 35% 28% 31% 20% 25% 20% 10% 15% 10% 0% 5%Q3’10 0% Q3’10 Q4’10 Q4’10 Q1’11 Q1’11 Q2’11 Q2’11 Q3’11 Q3’11 Q4’11 Q4’11 Q1’12 Q1’12 Q2’12 Q2’12 Range Of Multiples Of the financings that had participation.3x 40% 32% 30% 30% 20% 15% 20% 10% 10% 0% 0% Q3’10 Q4’10 Q1’11 0% 17% 25% 13% 0% 0% 0% 25% 14% 0% 0% 0% 0% >3x Q3’10 Q4’10 Q1’11 Q2’11 Q2’11 Q3’11 Q3’11 Q4’11 Q4’11 Q1’12 Q1’12 Q2’12 Q2’12 Price Change 80% 74% 70% 60% 52% 67% 67% 61% 70% 65% 50% 40% 30% 20% 18% 30% 21% 25% 16% 17% 15% 15% 13% 11% 22% Up rounds Down rounds Flat rounds 15% 2012 14% trends quarter 10% in terms of venture 12% financings in silicon valley — second 13 0% .

2x >2x .3x 25% 17% 13% 0% 0% 0% 0% 14% 0% 0% 0% 25% >3x 0% trends in terms of venture financings in silicon valley — second quarter 2012 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 14 .4% 3% 2% 1% 0% cumulative dividends – Cumulative dividends were provided for in the following percentages of financings: Q2’12 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Cumulative Dividends 8% 7% Provisions Pay To Play 8% 7% 20% 6% 6% 5% 6% 5% 15% 16% 4% 12% 3% 14% 4% 4% 4% 2% 8% 1% 4% 0% 0% 7% 6% 5% 5% 6% 8% Q3’10 Q4’10 Q1’11 Q2’11 Q2’11 Q3’11 Q3’11 Q4’11 Q4’11 Q1’12 Q1’12 Q2’12 Q2’12 Q3’10 Q4’10 Q1’11 Participation In Liquidation antidilution provisions –The uses of antidilution provisions in the financings were as follows: 60% 53% Provisions Anti-Dilution 50% 100% 40% 80% 30% 60% 20% 40% 10% 20% 0% 93% 95% 45% 92% 43% 97% 92% 97% 97% 96% 38% 39% 31% 40% 34% Ratchet Weighted Average None 4% Q3’10 3% 2% Q4’10 5% 3% Q1’11 5% 3% Q2’11 2% 1% Q3’11 3% 0% Q4’11 2% 1% Q1’12 2% 2% Q2’12 0% 3% Q3’10 Range Of Multiples Q4’10 100% 85% 83% Q1’11 Q2’11 Q3’11 100% Q4’11 Q1’12 Q2’12 100% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 15% 0% 86% 75% 62% >1x .

pull 97% 97% 97% but likely not 96% 100% 95% 30% 92% up provisions.5% 0% 3% 3% 2% 19% 5% 20% 3% 5% 3% 21% 2% 1% 3% 0% 2% 1% 18% 2% 2% 19% 15% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 16% Q2’12 9% 7. 93% 20% 80% 10% 0% Q3’10 60% Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Ratchet redemption – The percentages of financings providing for mandatory redemption or redemption at the option of Weighted Aver the investor were as follows: None Redemption 40% 30% 20% 4% 22% 22. all. The above information economic includes some.5% 0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 Senior Liquidation Preferences 50% 45% 41% 43% 41% 40% 37% trends in terms of venture financings in silicon valley — second quarter 2012 35% 28% 31% 15 34% 35% .0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 1% Q2’12 pay-to-play provisions – The percentages of financings having pay-to-play provisions were as follows: Pay To Play Provisions 20% 16% 15% 14% 12% Barometer Combined Total 8% 7% 8% 6% 5% 5% 85% 71% 100% 90% 4% 80% 6% * 99% 0% 70% 60% 69% Q3’10 61% Q4’10 Q1’11 52% Q2’11 Q3’11 Q4’11 52% Q1’12 Q2’12 50% that anecdotal evidence indicates that companies are increasingly using contractual “pull up” Note Anti-Dilution Provisions provisions instead of charter based “pay to play” provisions. and accordingly may understate 92% the use of these provisions. These two types of provisions have similar 40% 28% effect but are implemented differently.

g. and that by definition we are not taking into account those companies that were unable to raise a new financing (and that likely resulted in a loss to investors). typically provided in October. a Barometer increase in the 40% range should be considered normal. which was in general 12 to 1814% months prior.). Ratchet and there can be no assurance that the information provided herein is error-free. © 2012 Fenwick & West LLP trends in terms of venture financings in silicon valley — second quarter 2012 16 . Such situations are set forth in our report with a parenthetical as to the date the information 97% 97% 97% 96% 100% 95% was initially reported. 5% Up Information 5% 2% 3% 0% 2% 2% 60% 40% com x 20% n 4% Contact/Sign 3% 2% 0% 3% 3% 2% 1% 1% For additional information about3% this report please contact Barry Kramer at 650-335-7278. including any errors or incompleteness. compilations and analysis. 7% 6% 6% 8% 8% com x When comparing current period results to prior period results based on third party data (e. amount of M&A proceeds. etc. associates. bkramer@fenwick. as legal advice or opinion. Q2’12 Q3’10 Q4’10 Q1’11or Michael Q2’11 Q3’11 Q4’11 mpatrick@fenwick. Pay To Play Provisions 20% 16% 15% 12% When interpreting the Barometer results please bear in mind that the results reflect the average price increase of companies raising money in a given quarter compared to their prior round of financing. and should not be considered. not the results that have been updated with additional 0% information over time. reverse splits or conversion of shares into another series or classes of shares) were as follows: Corporate Reorganizations 15% 12% 9% 7% 13% 5% 4% 5% 9% 6% com x 3% 2% 1% 0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 n Notes on Methodology. Given that venture capitalists (and their investors) generally look for at least a 20% IRR to justify the risk that they are taking.com/vcsurvey and go to the sign-up link at the bottom of the page. to provide better comparability with the current period published results. we use the prior period results initially published by the third party for the period. when comparing fourth quarter results to third quarter results. 4% 93% 92% 92% 80% n Disclaimer. The contents of this report are not intended. For Q2’12 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 example. Neither Fenwick & Weighted Average West LLP nor any of its partners.. we use the initially published third quarter results. at Fenwick & West. staff or agents shall have any liabilityNone for any information contained herein. amounts 5% 5% invested by venture capitalists. not the updated results that are typically Anti-Dilution Provisions provided in January.e.5% 3% 0% Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11 Q1’12 Q2’12 corporate reorganizations – The percentages of post-Series A financings involving a corporate reorganization (i. The preparation of the information contained herein involves assumptions.com Patrick at 650-335-7273.com Q1’12 To be placed on an email list for future editions of this survey please visit fenwick.