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2016

Annual

2016 Annual VC Valuations Report

VC Valuations Report

Contents Introduction 3 Overview 4–6 Seed 7-8 Series A 9-10 Series B 11-12 Series

Contents

Introduction

3

Overview

4–6

Seed

7-8

Series A

9-10

Series B

11-12

Series C

13-14

Series D and Later

15-16

Corporate, Hedge & Mutual Fund Participation

17-18

Valuation Step-Ups, Changes & Time Between Rounds

19-20

Liquidation Participation

21-22

Credits & Contact

PitchBook Data, Inc.

JOHN GABBERT Founder, CEO

ADLEY BOWDEN Vice President,

Market Development & Analysis

Content

NIZAR TARHUNI Analysis Manager

KYLE STANFORD Analyst

BRYAN HANSON Data Analyst

JENNIFER SAM Senior Graphic Designer

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COPYRIGHT © 2017 by PitchBook Data, Inc. All rights reserved. No part of this publication may be reproduced in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, and information storage and retrieval systems—without the express written permission of PitchBook Data, Inc. Contents are based on information from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Nothing herein should be construed as any past, current or future recommendation to buy or sell any security or an offer to sell, or a solicitation of an offer to buy any security. This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in substitution for the exercise of independent judgment.

The PitchBook Platform

The data in this report comes from the PitchBook Platform—our data software for VC, PE and M&A. Contact sales@pitchbook.com to request a free trial.

2

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

US VC valuations still growing Introduction Key takeaways » Despite the overall decline in venture

US VC valuations still growing

Introduction

Key takeaways

» Despite the overall decline in venture capital activity last year, median valuations continued to rise

» VC deals with corporate VC participation have consistently been completed at higher valuations that those without

» Participating liquidation preferences have declined to the lowest levels in the past decade

Valuations are one of the most intriguing parts of VC. A number that at times seems arbitrary, is at other times a driving force behind a bubble. The recent growth of VC valuations may have created an even hazier understanding of how round prices are agreed upon, or even if VC is able to price itself correctly.

This report offers thorough datasets of US VC valuations from the past decade, providing break downs by series, stage, sector and more. In addition, data surrounding corporate VC, mutual funds and hedge funds is provided, as well as a section dedicated to liquidation preferences around the industry.

We hope this report helps inform your analysis around current VC valuation trends. If you have any questions or comments, please feel free to reach out to us at reports@pitchbook.com.

feel free to reach out to us at reports@pitchbook.com . KYLE STANFORD Analyst Look up a

KYLE STANFORD

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3

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

The new normal Overview The general attitude around the venture industry coming into 2016 wasn’t

The new normal

Overview

The general attitude around the venture industry coming into 2016 wasn’t one of excitement, to say the least. The exit market had dramatically slowed in the second half of 2015, and the dislocation between median late-stage private valuations and the falling prices of public tech comparables caused a frenzied response to what was deemed at the time a valuation bubble. Sure, several private tech companies had their valuations marked down by mutual fund investors, but the price of their most recent rounds didn’t change. The growth in private valuations had been undeniably extensive. Never had so many companies been valued at $1 billion than before 2016 began, and never had there been so much unrealized value in the VC market.

US VC activity by year $90 12,000 Deal Value ($B) # of Deals Closed 10,496
US VC activity by year
$90
12,000
Deal Value ($B)
# of Deals Closed
10,496
$80
Angel/Seed
Early VC
10,000
$70
Late VC
$60
8,467
8,000
$50
5,695
6,000
$40
$30
4,000
2,971 2,595
$20
2,000
$10
1,830 1,592
$0
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Source: PitchBook *As of 3/1/2017

US VC activity by quarter $25 Deal Value ($B) # of Deals Closed Angel/Seed Early
US VC activity by quarter
$25
Deal Value ($B)
# of Deals Closed
Angel/Seed
Early VC
$20
Late VC
2,031
$15
$10
1,012
655
$5
364
$0

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

2017

2010

2011

2012

2013

2014

2015

2016

3,000

2,500

2,000

1,500

1,000

500

0

Source: PitchBook *As of 3/1/2017

4

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

At the beginning of 2016, vintage 2009 through vintage 2012 residual value-to-paid in (RVPI) multiples

At the beginning of 2016, vintage 2009 through vintage 2012 residual value-to-paid in (RVPI) multiples all stood above 1.1x. As the industry became stretched with valuations growing and exit opportunities sliding, entrepreneurs and investors alike began to see that capital needed to be invested and raised in a more rational way. The number of unicorn deals declined

significantly last year, falling to just 37 from 60 the year before, but any hesitance created at the top of the market didn’t make its way throughout earlier stages of the industry.

Relative to historical figures, VC activity stayed high in 2016 as 8,467 deals were completed and the decade’s second-highest capital sum made its way into

startups. Deal sizes continued to grow as investors looked for companies with more traction and emphasized slower burn rates. Altogether, median valuations

stayed elevated across the board, growing at nearly every stage in

2016.

Certain signs of a plateau did begin to show last year, however. Series D+ valuations dropped year-over-

Median % acquired by series in US 35% 30% 25.7% 24.5% 25% 22.0% 22.0% 20.0%
Median % acquired by series in US
35%
30%
25.7% 24.5%
25%
22.0%
22.0%
20.0%
20.3%
20%
20.2%
18.4%
15%
13.5%
13.1%
10%
Seed
Series A
Series B
5%
Series C
Series D+
0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*

Source: PitchBook *As of 3/1/2017

Median age (years) of early-stage US VC-backed startups

6

5

4

3

2

1

0

5.1 5.1 4.9 3.7 3.4 3.3 2.1 2.0 1.7 Seed Series A Series B
5.1
5.1
4.9
3.7
3.4
3.3
2.1
2.0
1.7
Seed
Series A
Series B

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Source: PitchBook *As of 3/1/2017

US VC activity (#) by stage

2017 1Q* 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q
2017
1Q*
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
0%
20%
40%
60%
80%
100%
Angel/Seed
Early VC
Later VC
2013
2014
2015
2016

Source: PitchBook *As of 3/1/2017

Median age (years) of late-stage US VC-backed startups

12

 

10.4

12   10.4 10   8.7 8 8.2   6.3 6.4 6 6.4 4 2 Series

10

 

8.7

8

8.2
8.2
 
6.3 6.4
6.3
6.4
6.3 6.4

6

6.4

4

2

Series C

Series D+

0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016 2017*

Source: PitchBook *As of 3/1/2017

5

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median US early-stage post-money valuations ($M) by years $60 Seed Series A Series B $50.6
Median US early-stage post-money valuations ($M) by years $60 Seed Series A Series B $50.6
Median US early-stage post-money valuations ($M) by years
$60
Seed
Series A
Series B
$50.6
$50
Source: PitchBook
*As of 3/1/2017
$40
$30

$50.0

$50 Source: PitchBook *As of 3/1/2017 $40 $30 $50.0 $25.8 $21.0 $20 $8.0 $10 $7.7 $0

$25.8

$21.0 $20 $8.0 $10 $7.7
$21.0
$20
$8.0
$10
$7.7

$0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* Median US late-stage
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*
Median US late-stage post-money valuations ($M) by years
$250
$194.8
$200
Series C
Series D+
$160.4
$150
Source: PitchBook
*As of 3/1/2017
$100.4 $100.0
$100
$50
$0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*
Companies (#) with exit value < prior financing post-money valuation 40 37 35 31 30
Companies (#) with exit value < prior financing post-money valuation
40
37
35
31
30
25
20
15

10

5

0

2006

2007

2008

2009

Source: PitchBook *As of 3/1/2017

2010

2011

2012

2013

2014

2015

2

PitchBook *As of 3/1/2017 2010 2011 2012 2013 2014 2015 2 2016 2017* year (YoY) for

2016 2017*

year (YoY) for the first time since 2009, and Series B valuations grew only slightly ($400,000 at the median). Further, the highest

number of companies in the last decade exited at a valuation lower than their most recent private value. We have also seen cracks develop in the previously exalted

ranks of unicorns. Zenefits will cut 50% of its workforce and has replaced its CEO after legal questions around its platform arose; lending marketplace Prosper is reportedly in the process of raising a massive down round; and Uber has been embroiled in a series of controversies over recent months. Put more simply, unicorns are reaching the point where more than just growth metrics matter.

But the overarching theme stays the same: Venture is healthy. Several unicorns have already made their exits thus far in 2017. The high-profile IPO of Snap (NYSE: SNAP) raised $3.4 billion

at a valuation of almost $20 billion. AppDynamics was acquired by Cisco (NYSE: CSCO) for $3.7 billion just before making its public debut. And just last week, Okta ($1.2 billion valuation) and Yext ($566 million valuation) filed for IPOs—while these valuations may not be near the top of venture industry, the appetite shown for their offerings could prove a more appropriate barometer for the greater exit market in 2017. While analyzing private valuations can provide insight into the status of the market, until there are actual exits, we won’t know how well the industry has priced itself in recent years.

6

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Seed stage seeing significant change Seed valuations and trends Access to newer forms of capital

Seed stage seeing significant change

Seed valuations and trends

Access to newer forms of capital have lengthened seed timeline

The growth of new forms of investors, namely accelerators, pre-seed funds and crowdfunding sites, have given entrepreneurs several different routes to launching a business than raising seed capital. The median age of a company before bringing on seed investment lengthened to two years in 2016, resulting in startups entering the venture lifecycle with more developed business ideas and a team of employees. It makes sense then that the median seed size has grown by more than 200% since 2010—to $1.5 million in 2016— equating to a median valuation figure that has increased by 87% during that time to $8 million.

Median seed valuations ($M) by sector $16 Total So�ware $14 Commercial Services Pharma & Biotech
Median seed valuations ($M) by sector
$16
Total
So�ware
$14
Commercial Services
Pharma & Biotech
$12
$10
$8
$6
$4
$2
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Investors holding strong on seed stage stakes Median % acquired at seed by sector 26%
Investors holding strong on seed stage stakes
Median % acquired at seed by sector
26%
Total
So�ware
Commercial Services
24%
22%
20.6%
20.0%
20%
20.0%
18%
16%
14%
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Seed deal sizes roughly double over last three years Median seed round size ($M) by sector

$1.6

 

Total 

$1.4

 

So� ware ware

$1.2

Commercial Services$1.2

Pharma & Biotech$1.6   Total $1.4   So � ware $1.2 Commercial Services $1.0 $0.8 $0.6 $0.4 $0.2

$1.0

$0.8

$0.6

$0.4

$0.2

$0.0

2010

2011

2012

2013

2014

$0.6 $0.4 $0.2 $0.0 2010 2011 2012 2013 2014 2015 2016 Source: PitchBook 7 PITCHBOOK 2016

2015

$0.4 $0.2 $0.0 2010 2011 2012 2013 2014 2015 2016 Source: PitchBook 7 PITCHBOOK 2016 ANNUAL

2016

Source: PitchBook

7

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median seed size and post-money valuation ($M) $9 Post-money valua�on $8.0 $8 Deal Size $6.8
Median seed size and post-money valuation ($M) $9 Post-money valua�on $8.0 $8 Deal Size $6.8
Median seed size and post-money valuation ($M)
$9
Post-money valua�on
$8.0
$8
Deal Size
$6.8
$7
$6.0
$5.8
$6
$5.1
$5.0
$5
$4.3
$4
$3
$2
$1.47
$1
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median commercial services seed round size and post- money valuation ($M)

$9

$8

$7

$6

$5

$4

$3

$2

$1

$0

Post-money valuaon

$8.0

Deal Size

$5.2

$6.9

$6.0

$6.2

$4.5

$3.8

valua � on $8.0 Deal Size $5.2 $6.9 $6.0 $6.2 $4.5 $3.8 2010 2011 2012 2013

2010

2011

2012

2013

2014

2015

2016

Median software seed size and post-money valuation ($M) $9 $8.5 Post-money valua�on Deal Size $8
Median software seed size and post-money
valuation ($M)
$9
$8.5
Post-money valua�on
Deal Size
$8
$7.2
$7
$5.9
$6.0
$6
$5.7
$5.3
$5
$4.5
$4
$3
$2
$1.50
$1
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median pharma & biotech seed round size and post- money valuation ($M) $16 $14.5 Post-money
Median pharma & biotech seed round size and post-
money valuation ($M)
$16
$14.5
Post-money valua�on
$14
Deal Size
$12
$9.9
$10
$8.0
$8
$6.8
$5.6
$6
$4.9
$4
$2.8
$2
$1.43
$0
2010
2011
2012
2013
2014
2015
2016
 

Source: PitchBook

 

Source: PitchBook

Select largest seed valuations of 2016

 
 

Deal size

Post-valuation

       

Company

($M)

($M)

Date

HQ City

State

Industry

Boomcloud 360

$5.5

$132.2

2/25/2016

Austin

TX

Software

Kinetica

$6.0

$78.0

4/10/2016

San Francisco

CA

Software

SafeGraph

$19.5

$78.0

9/12/2016

San Francisco

CA

Software

Stellar Labs

$3.7

$62.6

5/26/2016

Redwood City

CA

Software

SaltStack

$16.0

$60.0

11/4/2016

Lehi

UT

Software

 

Source: PitchBook

8

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Series A financings continue growth Series A valuations and trends Median Series A post-money valuations

Series A financings continue growth

Series A valuations and trends

Median Series A post-money valuations ($M) by sector

$35 Total So�ware $30 Commercial Services Pharma & Biotech $25 $20 $15 $10 $5 $0
$35
Total
So�ware
$30
Commercial Services
Pharma & Biotech
$25
$20
$15
$10
$5
$0
2010
2011
2012
2013
2014

Pharma & biotech financing sizes far outpace other sectors as of late Median Series A round size ($M) by sector

$10

$9

$8

$7

$6

$5

$4

$3

$2

$1

$0

round size ($M) by sector $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0

round size ($M) by sector $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0

Total

Commercial Services

2010

2011

2012

$5 $4 $3 $2 $1 $0 Total Commercial Services 2010 2011 2012 So � ware Pharma

$5 $4 $3 $2 $1 $0 Total Commercial Services 2010 2011 2012 So � ware Pharma

Soware

Pharma & Biotech

2013

2014

2010 2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook The

2015

2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook The vast
2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook The vast
2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook The vast
2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook The vast

2016

Source: PitchBook

The vast number of seed-funded companies gives investors plenty of options

More than 11,000 seed and angel deals were closed between 2014 and 2015, giving Series A investors plenty of choice when startups came back to the table. Knowing this, investors have been able to increase certain benchmarks they are looking for in potential Series A investments. From just 2013, Series A valuations have increased by 57%, with deal sizes growing by roughly the same percentage.

2015 2016 Source: PitchBook Unsurprisingly, lofty financing sizes come with greater percentages acquired Median %
2015
2016
Source: PitchBook
Unsurprisingly, lofty financing sizes come with greater
percentages acquired
Median % acquired at Series A by sector
40%
37.5%
35%
32.8%
30%
25.8%
25.0%
25%
25.5%
25.0%
23.0%
22.7%
20%
Total
So�ware
Commercial Services
Pharma & Biotech
15%
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

9

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median Series A round size and post-money valuation ($M) $25 Post-money valua�on $21.0 Deal Size
Median Series A round size and post-money valuation ($M) $25 Post-money valua�on $21.0 Deal Size
Median Series A round size and post-money valuation
($M)
$25
Post-money valua�on
$21.0
Deal Size
$19.5
$20
$16.6
$15
$13.3
$11.7
$10.5
$10.1
$10
$5.00
$5
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median commercial services Series A round size and post-money valuation ($M) $30 Post-money valua�on $23.9
Median commercial services Series A round size and
post-money valuation ($M)
$30
Post-money valua�on
$23.9
$25
Deal Size
$20.0
$20
$15.2
$15
$11.8
$10.4
$10.1
$9.0
$10
$5
$4.00
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Select largest Series A valuations of 2016

Median software Series A round size and post-money valuation ($M)

$25

Post-money valua�on $21.0 $20.8 $20 Deal Size $17.5 $15 $13.3 $11.9 $10.1 $9.8 $10 $5.00
Post-money valua�on
$21.0
$20.8
$20
Deal Size
$17.5
$15
$13.3
$11.9
$10.1
$9.8
$10
$5.00
$5
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median pharma & biotech Series A round size and post- money valuation ($M) $35 Post-money
Median pharma & biotech Series A round size and post-
money valuation ($M)
$35
Post-money valua�on
$31.0
$30
Deal Size
$25
$20.5
$20.3
$20.0
$20
$16.1
$14.9
$15.1
$15
$10
$8.60
$5
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

 

Deal size

Post-valuation

       

Company

($M)

(SM)

Date

HQ City

State

Industry

Zoox

$50.0

$1,550.0

11/7/2016

Menlo Park

CA

Automotive

Seven Bridges

$45.0

$410.3

2/16/2016

Cambridge

MA

Healthcare systems

Osterhout Design Group

$58.0

$258.0

11/28/2016

San Francisco

CA

Accessories

Headspace

$34.3

$239.0

3/18/2016

Los Angeles

CA

Software

Jive Communications

$7.5

$237.6

8/10/2016

Orem

UT

Wireless service providers

Source: PitchBook

10

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Series B valuations beginning to form plateau Series B valuations and trends Series B sitting

Series B valuations beginning to form plateau

Series B valuations and trends

Series B sitting at a crossroads

Series B valuations grew 83% to a median of $50.5 million between 2010 and 2015. Last year, however, the Series B median valuation flatlined, finishing the year at just $50.7 million. With that, deal sizes at the stage also flattened, realizing a jump of just $400,000 at the median. Despite these plateaus, less than 10% of the deals were raised as down rounds (9.1%), making Series B the stage with the

lowest percentage of down rounds and the only to see a decline YoY in

2016.

Median Series B post-money valuations ($M) by sector

$80

$70

$60

$50

$40

$30

$20

$10

$0

valuations ($M) by sector $80 $70 $60 $50 $40 $30 $20 $10 $0 Total Commercial Services

Total

Commercial Services($M) by sector $80 $70 $60 $50 $40 $30 $20 $10 $0 Total 2010 2011 2012

2010

2011

2012

$40 $30 $20 $10 $0 Total Commercial Services 2010 2011 2012 So � ware Pharma &

Soware

Pharma & Biotech$10 $0 Total Commercial Services 2010 2011 2012 So � ware 2013 2014 2015 2016 Source:

2013

2014

2015

2016

Source: PitchBook

The overall median percentage acquired has increased slightly in recent years Median % acquired at
The overall median percentage acquired has
increased slightly in recent years
Median % acquired at Series B by sector
31%
29%
27.7%
27%
25.0%
25%
23%
22.2%
21.2%
22.0%
21%
21.2%
20.0%
19%
19.7%
17%
Total
So�ware
Commercial Services
Pharma & Biotech
15%
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Pharma & biotech financings continue marching upward in size Median Series B round size ($M) by sector

$25

$20

$15

$10

$5

$0

Series B round size ($M) by sector $25 $20 $15 $10 $5 $0 Total Commercial Services

Series B round size ($M) by sector $25 $20 $15 $10 $5 $0 Total Commercial Services

Total

Commercial Services

2010

2011

2012

$20 $15 $10 $5 $0 Total Commercial Services 2010 2011 2012 So � ware Pharma &

$20 $15 $10 $5 $0 Total Commercial Services 2010 2011 2012 So � ware Pharma &

Soware

Pharma & Biotech

2013

2014

2015

2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook 11 PITCHBOOK
2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook 11 PITCHBOOK
2011 2012 So � ware Pharma & Biotech 2013 2014 2015 2016 Source: PitchBook 11 PITCHBOOK

2016

Source: PitchBook

11

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median Series B round size and post-money valuation ($M) $60 $50 $40 $30 $20 $10

Median Series B round size and post-money valuation ($M)

$60

$50

$40

$30

$20

$10

$0

Post-money valuaon

Deal Size

$50.5

$50.6

$45.2

$11.9

$34.7

$30.1

$30.9

$27.6

$50.6 $45.2 $11.9 $34.7 $ 3 0 . 1 $ 3 0 . 9 $27.6 2010

2010

2011

2012

2013

2014

2015

2016

Source: PitchBook

Median commercial services Series B round size and post-money valuation ($M) $70 Post-money valua�on $61.7
Median commercial services Series B round size and
post-money valuation ($M)
$70
Post-money valua�on
$61.7
$60
Deal Size
$50
$44.5
$41.9
$40
$33.7
$30.8
$30
$27.2
$23.4
$20
$10.0
$10
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Select largest Series B valuations of 2016

Median software Series B round size and post-money valuation ($M)

$60

$50

$40

$30

$20

$10

$0

Post-money valuaon

Deal Size

$56.2

$12.0

$51.7

$46.0

$36.4

$31.4

$30.1

$24.2

Size $56.2 $12.0 $51.7 $46.0 $36.4 $ 3 1 . 4 $30.1 $24.2 2010 2011 2012

2010

2011

2012

2013

2014

2015

2016

Source: PitchBook

Median pharma & biotech Series B round size and post- money valuation ($M) $80 $75.3
Median pharma & biotech Series B round size and post-
money valuation ($M)
$80
$75.3
Post-money valua�on
$70
Deal Size
$64.0
$60
$52.7
$48.9
$49.0
$50
$39.2
$38.0
$40
$30
$20.0
$20
$10
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

 

Deal size

Post-valuation

       

Company

($M)

($M)

Date

HQ City

State

Industry

Human Longevity

$220.0

$1,888.0

4/4/2016

San Diego

CA

Pharma & biotech

Quanergy

$90.0

$1,549.9

8/22/2016

Sunnyvale

CA

Electronic components

Denali Therapeutics

$130.0

$1,130.0

6/1/2016

South San Francisco

CA

Pharma & biotech

Gusto.com

$90

$1,090.0

6/1/2016

San Francisco

CA

Software

NextVR

$80

$966.7

8/9/2016

Laguna Beach

CA

Software

Source: PitchBook

12

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median Series C valuation hits decade high Series C valuations and trends Median Series C

Median Series C valuation hits decade high

Series C valuations and trends

Median Series C post-money valuations ($M) by sector

$140

$120

$100

$80

$60

$40

$20

$0

valuations ($M) by sector $140 $120 $100 $80 $60 $40 $20 $0 Total Commercial Services So

Total

Commercial Services($M) by sector $140 $120 $100 $80 $60 $40 $20 $0 Total So � ware Pharma

$140 $120 $100 $80 $60 $40 $20 $0 Total Commercial Services So � ware Pharma &

Soware

Pharma & Biotech$80 $60 $40 $20 $0 Total Commercial Services So � ware 2010 2011 2012 2013 2014

2010

2011

2012

2013

2014

A modest uptick for overall percentages acquired in

2016

Median % acquired at Series C by sector

30% 28% 26% 24% 23.2% 22% 20.8% 20% 18.4% 18% 17.3% 16% 16.5% 16.6% 15.4%
30%
28%
26%
24%
23.2%
22%
20.8%
20%
18.4%
18%
17.3%
16%
16.5% 16.6%
15.4%
14%
14.8%
Total
So�ware
12%
Commercial Services
Pharma & Biotech
10%
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median Series C valuation surpasses $100 million for first time

2015

2016

Source: PitchBook

The median Series C valuation has ballooned by almost $50 million since 2010, reaching over $100 million last year for the first time. As companies have lengthened the amount of time developing at the early stage, businesses are simply larger and in many cases more valuable by the time they reach the Series C stage in today’s market. Further, there has also been a huge increase in late-stage capital in recent years. Since 2014, 21 VC vehicles based in the US have closed on at least $1 billion in commitments, combined totaling more than $30 billion. While not all is earmarked for late-stage, these funds will help sustain the increases we’ve seen in both deal sizes and valuations.

Deal sizes of other sectors have caught up to pharma & biotech Median Series C round size ($M) by sector

$30 Total So�ware Commercial Services Pharma & Biotech $25 $20 $15 $10 $5 $0 2010
$30
Total
So�ware
Commercial Services
Pharma & Biotech
$25
$20
$15
$10
$5
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

13

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median Series C round size and post-money valuation ($M) $120 Post-money valua�on $100.4 $100 Deal
Median Series C round size and post-money valuation ($M) $120 Post-money valua�on $100.4 $100 Deal
Median Series C round size and post-money valuation ($M)
$120
Post-money valua�on
$100.4
$100
Deal Size
$91.1
$80
$75.5
$71.0
$65.0
$63.3
$60
$51.3
$40
$21.7
$20
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median commercial services Series C round size and post-money valuation ($M)

$140

Post-money valua�on $125.8 $120 Deal Size $100 $94.4 $89.2 $80 $72.0 $55.8 $56.4 $60 $52.6
Post-money valua�on
$125.8
$120
Deal Size
$100
$94.4
$89.2
$80
$72.0
$55.8
$56.4
$60
$52.6
$40
$24.5
$20
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Select largest Series C valuations of 2016

Median software Series C round size and post-money valuation ($M) $140 $125.2 Post-money valua�on $115.0
Median software Series C round size and post-money
valuation ($M)
$140
$125.2
Post-money valua�on
$115.0
$120
Deal Size
$104.1
$100
$77.5
$76.1
$80
$58.8
$60
$36.8
$40
$22.4
$20
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Median pharma & biotech Series C round size and post- money valuation ($M) $120 Post-money
Median pharma & biotech Series C round size and post-
money valuation ($M)
$120
Post-money valua�on
$108.0
Deal Size
$100.0
$100
$91.4
$86.6
$80
$75.1
$71.4
$69.7
$60
$40
$24.7
$20
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

 

Deal size

Post-valuation

       

Company

($M)

($M)

Date

HQ City

State

Industry

Magic Leap

$793.5

$4,500.0

2/2/2016

Plantation

FL

Computer hardware

Pivotal Software

$653.0

$3,265.0

5/9/2016

San Francisco

CA

Software development

JetSmarter

$105.0

$1,605.0

12/12/2016

Fort Lauderdale

FL

Software

Unity Technologies

$181.0

$1,500.0

7/13/2016

San Francisco

CA

Software development

Razer

$75.0

$1,500.0

2/23/2016

Irvine

CA

Electronic equipment

Source: PitchBook

14

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

First decline in late-stage valuations since 2009 Series D and later valuations and trends The

First decline in late-stage valuations since 2009

Series D and later valuations and trends

The latest stages cool off as nontraditionals pull back, VCs get rational

Just 21 Series D+ deals came along with a valuation of $1 billion or more in 2016, less than half the average of the previous two years. While this stat alone won’t explain a trend at this stage, it is interesting given that median Series D+ valuations saw the only YoY decline last year, falling 7% to below $193 million. Mutual funds and hedge funds, which had been part of many of the largest deals in 2014 and 2015, pulled back on participation by 42% and 37%, respectively. While certainly this is a notable source of capital, the fact that VC dry powder is at an all-time high lessens any negative impact foudners may feel in terms of capital availability.

Median Series D+ post-money valuations ($M) by sector

$300

$250

$200

$150

$100

$50

$0

Total So�ware Commercial Services Pharma & Biotech 2010 2011 2012 2013 2014 2015 2016
Total
So�ware
Commercial Services
Pharma & Biotech
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Percentage acquired in pharma & biotech companies has declined as of late Median % acquired
Percentage acquired in pharma & biotech companies
has declined as of late
Median % acquired at Series D+ by sector
22%
Total
So�ware
Commercial Services
Pharma & Biotech
20%
18%
17.2%
16%
15.6%
15.0%
14%
13.1%
12.3%
12%
12.0%
11.7%
11.8%
10%
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Software’s march upward continues unabated, even as overall flatlines Median Series D+ round size ($M)
Software’s march upward continues unabated, even as
overall flatlines
Median Series D+ round size ($M) by sector
$60
Total
So�ware
$50
Commercial Services
Pharma & Biotech
$40
$30
$20
$10
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

15

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Median Series D+ round size and post-money valuation ($M) $250 $200 $150 $100 $50 $0

Median Series D+ round size and post-money valuation ($M)

$250

$200

$150

$100

$50

$0

and post-money valuation ($M) $250 $200 $150 $100 $50 $0 Post-money valua � on Deal Size

Post-money valuaon

Deal Size

$206.8

$192.7

$27.0

$163.0

$118.4

$107.6

$97.3

$82.9

$192.7 $27.0 $163.0 $ 1 1 8 . 4 $107.6 $97.3 $82.9 2010 2011 2012 2013

2010

2011

2012

2013

2014

2015

2016

Source: PitchBook

Median commercial services Series D+ round size and post-money valuation ($M)

$200

Post-money valua�on $180 $172.0 Deal Size $160.0 $153.9 $160 $140 $116.8 $120 $101.4 $100 $90.5
Post-money valua�on
$180
$172.0
Deal Size
$160.0
$153.9
$160
$140
$116.8
$120
$101.4
$100
$90.5
$80
$58.1
$60
$40
$20
$14.5
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

Select largest Series D+ valuations of 2016

Median software Series D+ round size and post-money valuation ($M)

$300

$250

$200

$150

$100

$50

$0

$273.0

$32.8

valuation ($M) $300 $250 $200 $150 $100 $50 $0 $273.0 $32.8 Post-money valua � on Deal

Post-money valuaon

Deal Size

$118.3

$104.9

$247.5

$253.3

$144.6

$65.4

1 8 . 3 $104.9 $247.5 $ 2 5 3 . 3 $144.6 $65.4 2010 2011

2010

2011

2012

2013

2014

2015

2016

Source: PitchBook

Median pharma & biotech Series D+ round size and post-money valuation ($M) $200 Post-money valua�on
Median pharma & biotech Series D+ round size and
post-money valuation ($M)
$200
Post-money valua�on
$181.2
$180
Deal Size
$160
$149.8
$138.4
$139.7
$140
$118.6
$120
$95.8
$100
$88.7
$80
$60
$40
$22.2
$20
$0
2010
2011
2012
2013
2014
2015
2016

Source: PitchBook

 

Deal size

Post-valuation

       

Company

($M)

($M)

Date

HQ City

State

Industry

Uber

$5,600.0

$66,600.0

5/24/2016

San Francisco

CA

Software

Palantir Technologies

$880.0

$20,529.4

1/29/2016

Palo Alto

CA

Software

Snap

$1,808.6

$20,000.0

5/25/2016

Los Angeles

CA

Software

WeWork

$690.0

$16,900.0

10/12/2016

New York

NY

Real estate services

Stripe

$150.0

$9,200.0

11/25/2016

San Francisco

CA

Software

Source: PitchBook. Note: Uber’s financings in the first half of 2016 were collated into one super round in 2Q 2016 according to PitchBook methodology.

16

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

CVC’s different strategy Corporate, hedge & mutual fund participation Deals with corporate VC (CVC) participation

CVC’s different strategy

Corporate, hedge & mutual fund participation

Deals with corporate VC (CVC) participation have increased from just 455 completed in 2009 to more than 1,000 during each of the past four years. The heightened valuations of these deals has become a point of contention within the venture industry over recent years. While it may be coincidental, the distinct gap

between the median valuation of VC investments with CVC participation and those without exemplifies a fundamental difference in how CVCs are able to invest. In 2016, the median valuation of an early-stage deal with CVC involvement outpaced that of deals without by $11 million ($28 million compared to $17 million), and

the spread of late-stage valuations was almost $40 million. The strategic aspect of CVC dealmaking, along with a lower reliance on financial returns, has given CVC a unique investment profile. That’s not to say that financial gain is off the investors’ radar, but that gain can come in several forms. For example, new technology can be the

US VC activity with corporate VC participation

Median round size ($M) with corporate VC participation

1,304 Deal Value ($B) 1,223 1,153 Deal Count 1,003 803 696 669 662 533 541
1,304
Deal Value ($B)
1,223
1,153
Deal Count
1,003
803
696
669
662
533 541
455
166
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*
$9
$11
$10
$6
$7
$12
$11
$13
$3

Source: PitchBook *As of 3/1/2017

Median post-money valuation ($M) of US early-stage VC rounds with corporate VC participation

$16

$14

$12

$10

$8

$6

$4

$2

$0

$11

$13

VC participation $16 $14 $12 $10 $8 $6 $4 $2 $0 $ 1 1 $13 $10
$10 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
$10
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*

Source: PitchBook *As of 3/1/2017

Median post-money valuation ($M) of US late-stage VC rounds with corporate VC participation

$30

$25

$20

$15

$10

$5

$0

$28

$180

CVC Investor No CVC Investor $26 $25 $160 $140 $23 $120 $100 $17 $16 $80
CVC Investor
No CVC Investor
$26
$25
$160
$140
$23
$120
$100
$17
$16
$80
$60
$40
$20
$0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*

Source: PitchBook *As of 3/1/2017

$164

CVC Investor No CVC Investor $137 $130 $96 $89 $85 2006 2007 2008 2009 2010
CVC Investor
No CVC Investor
$137
$130
$96
$89
$85
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*

Source: PitchBook *As of 3/1/2017

17

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

lead motivation for a CVC investment. By integrating the new technology into its core product,

lead motivation for a CVC investment. By integrating the new technology into its core product, investors can receive additional value from its investment that isn’t tied to a future exit. Startups can also be looked at as a potential acquisition target down the road, providing a source of inorganic growth. These unique differences in strategy leave CVCs less focused on the price of investments, and allow them to make deals at heightened valuations.

With investment goals of their own, mutual fund and hedge fund investment in venture deals boomed in 2014 and 2015. Each investor type dramatically increased their exposure to the asset class, in most occasions being a cornerstone investor in a “private IPO” for a unicorn. This fact alone skews any analysis between investments with mutual or hedge fund participation with that of more traditional VCs simply because investments by these investors were almost exclusively limited to the largest deals of their respective years.

In 2016, however, the activity of both mutual and hedge funds in VC declined by 42% and 37%, respectively. The quick turnaround from investment to IPO that many of these investors had envisioned took a hit when the exit market for VC-backed companies dramatically slowed toward the end of 2015 and on through 2016. With money being pulled out of hedge and mutual funds at the highest clip in some time due to lackluster returns, these “tourist” investors have pivoted back to their core strategies for the time being.

US VC activity with mutual fund participation

Median US round size ($M) with mutual fund participation

114 $70 Deal Value ($B) 103 $60 # of Deals Closed $50 72 65 67
114
$70
Deal Value ($B)
103
$60
# of Deals Closed
$50
72
65
67
$40
59
54
52
$30
42
29
$20
12 $10
$0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*
$1.5
$2.1
$1.8
$1.3
$0.7
$6.0
$2.3
$2.0
$14.5
$0.6

Source: PitchBook *As of 3/1/2017

$65 $40 $29 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
$65
$40
$29
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*

Source: PitchBook *As of 3/1/2017

US VC activity with hedge fund participation

Deal Value ($B) 104 # of Deals Closed 83 67 66 65 53 45 39
Deal Value ($B)
104
# of Deals Closed
83
67
66
65
53
45
39
38
30
33
9
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*
$1.5
$1.8
$2.0
$0.9
$0.8
$2.2
$1.0
$1.7
$5.2
$0.2

Source: PitchBook *As of 3/1/2017

Median US round size ($M) with hedge fund participation $50 $46 $45 $40 $35 $32
Median US round size ($M) with hedge fund participation
$50
$46
$45
$40
$35
$32
$30
$25
$20
$14
$15
$10
$5
$0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017*

Source: PitchBook *As of 3/1/2017

18

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Venture timeline lengthens Valuation step-ups, changes and time between rounds Median valuation step-ups dropped slightly

Venture timeline lengthens

Valuation step-ups, changes and time between rounds

Median valuation step-ups dropped slightly in 2016, falling back to roughly the decade average for both early stage and late- stage financings of 1.6x and 1.3x, respectively. To be fair, a 60% jump in a given valuation step-up at the early stage is still very strong, though comparing it to the 80% multiple from 2014 may make it seem more nominal. As valuations begin to plateau at later stages, the increase in private valuations realized in recent years will take its effect on step-ups moving forward. Still, 75% of companies have raised subsequent rounds with a higher post-valuation than their previous raise, the highest proportion we have tracked in the past decade. The grow-at-all-costs mentality that pervaded VC over the past few years has begun to change. The focus that founders and investors seemed to put on valuation in recent years is moving toward more rational focus on business metrics and capital needs.

Lastly, down rounds have become an only slightly more common occurrence than in 2014 when they comprised just over 10% of transactions, the lowest proportion

since at least 2006. But when compared to years in the past decade, the overall percentage of down rounds in 2016, and even flat rounds, is still relatively low at 14%.

Median time (years) between US VC rounds

2.2

2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

2.0

US VC rounds 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 2.0 1.6

1.6

1.6 1.4 1.5 1.5 1.3 1.5 1.4 1.3 1.3 1.2 1.2 1.2 1.0 Seed Series
1.6
1.4
1.5
1.5
1.3
1.5
1.4
1.3
1.3
1.2
1.2
1.2
1.0
Seed
Series A
Series B
Series C
Series D+
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*

Source: PitchBook *As of 3/1/2017

Median early-stage round step-ups in US

1.8x 1.7x 1.7x 1.7x 1.6x 1.5x 1.6x 1.6x 1.5x 1.5x 1.4x 1.1x
1.8x
1.7x 1.7x
1.7x
1.6x
1.5x 1.6x 1.6x
1.5x
1.5x
1.4x
1.1x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Source: PitchBook *As of 3/1/2017

Median late-stage round step-ups in US

1.3x 1.4x 1.3x 1.3x 1.2x 1.2x 1.2x 1.2x 1.3x 1.2x 1.1x 1.0x
1.3x 1.4x
1.3x 1.3x
1.2x 1.2x 1.2x
1.2x
1.3x 1.2x
1.1x
1.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*

Source: PitchBook *As of 3/1/2017

19

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

All up, flat or down rounds (#) by year 100% 90% 80% 70% 60% 50%

All up, flat or down rounds (#) by year

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Up
Flat
Down

Source: PitchBook

The proportion of 2016 pharma & biotech rounds with increased valuation was the highest we have tracked

Commercial Services up, flat or down rounds (#) by year

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012
2013
2014
2015
2016
Up
Flat
Down

Source: PitchBook

While down rounds increased to 13% of deals in 2016, that proportion is still low when compared historically

Software up, flat or down rounds (#) by year

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012
2013
2014
2015
2016
Up
Flat
Down

Source: PitchBook

Pharma & biotech up, flat or down rounds (#) by year

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2012
2013
2014
2015
2016
Up
Flat
Down

Source: PitchBook

Note: Up, flat or down rounds are calculated using a combination of comparing share price and the pre and post valuations of previous and current rounds, e.g. if the price per share in the most recent round was the same as in the prior financing OR the post value of the old round is the same as the new round, then that would be classified as a flat round.

20

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

2016 2017*

2016 2017*

2016 2017*

2013
2014

2013
2014

2013
2014

2015

2015

2015

2016 2017* 2013 2014 2013 2014 2013 2014 2015 2015 2015 Still founder-friendly? Liquidation participation

Still founder-friendly?

Liquidation participation

Participation rates have steadily decreased in venture financings at every stage over the past few years, moving the venture industry into a more founder-friendly territory than it had been even five years ago. While we have seen investors take slightly larger stakes in each round during the last two years, the drop in participating terms, either capped or uncapped, has set up founders to keep better control over their eventual payout, as long as they can continue moving the company forward on schedule. As investors exercise more scrutiny over the companies they back, a negotiating piece they might be able to use to earn a spot at the table with the best companies could be a willingness to defer participation.

Liquidation participation by series in US VC rounds

70%

60%

50%

40%

30%

20%

10%

0%

44.6% 43.1%

2013

2014

25.4%

40% 30% 20% 10% 0% 4 4 . 6 % 43.1% 2013 2014 25.4% 2015 So

2015

Soware

64.5% 55.9% 54.4% 42.5% 33.7% 36.2% 27.2% 21.5% 20.4% 2016 2013 2014 2015 2016 2013
64.5%
55.9% 54.4%
42.5%
33.7% 36.2%
27.2%
21.5%
20.4%
2016
2013
2014
2015
2016
2013
2014
2015
2016
Pharma/Biotech
Commercial Services

Source: PitchBook

Liquidation participation by series in US VC rounds

70%

60%

50%

40%

30%

20%

10%

0%

59.3%

49.3%

47.9%

37.8%

33.3%

27.9%

50% 40% 30% 20% 10% 0% 59.3% 49.3% 47.9% 37.8% 33.3% 27.9% 2 3 . 7

23.7% 23.6%

59.3% 49.3% 47.9% 37.8% 33.3% 27.9% 2 3 . 7 % 23.6% Series A 42.1% 32.5%
59.3% 49.3% 47.9% 37.8% 33.3% 27.9% 2 3 . 7 % 23.6% Series A 42.1% 32.5%

Series A

42.1% 32.5% 27.5% 25.0% Series B 2013 2014 2015 2016 2017*
42.1%
32.5%
27.5%
25.0%
Series B
2013
2014
2015
2016
2017*

42.6%

30.2%

33.3%

29.2%

Series C

54.8%

43.3%

38.3%

42.9%

Series D+

Source: PitchBook *As of 3/1/2017

21

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

Series A liquidation participation in US 100% 90% 80% 70% 60% 50% 40% 30% 20%

Series A liquidation participation in US

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Non-par�cipa�ng Par�cipa�ng - Capped
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Non-par�cipa�ng
Par�cipa�ng - Capped
Par�cipa�ng - Uncapped
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*

Source: PitchBook *As of 3/1/2017

Uncapped participation terms included in Series D+ rounds fell to the lowest proportion in over a decade

Series C liquidation participation in US

Participating liquidation preferences have fallen steadily across VC over recent years

Series B liquidation participation in US

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Non-par�cipa�ng Par�cipa�ng - Capped
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Non-par�cipa�ng
Par�cipa�ng - Capped
Par�cipa�ng - Uncapped
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*

Source: PitchBook *As of 3/1/2017

Series D+ liquidation participation in US

100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30%
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
Non-par�cipa�ng
Par�cipa�ng - Capped
Par�cipa�ng - Uncapped
Non-par�cipa�ng
Par�cipa�ng - Capped
Par�cipa�ng - Uncapped
Source: PitchBook
*As of 3/1/2017
Source: PitchBook
*As of 3/1/2017
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017*

The key distinction between participating preferred stock and non-participating preferred is that in the former, holders not only get their investment back but also share with the common stock on an as-converted basis in any remaining available deal proceeds, while in the latter, investors get either their investment amount back plus an accrued dividend if applicable or their pro rata share based on common stock, whichever is greater.

22

PITCHBOOK 2016 ANNUAL VC VALUATIONS REPORT

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