Software2018 Onlinevfinal3 180503132749

2018
QUIET EXPERTISE THAT SPEAKS VOLUMES.
Software 2018
Neeraj Agrawal
Logan Bartlett
Battery Ventures | 1
VENTURE + GROW TH | PRIVATE EQUITY
2018
Disclaimers
This disclaimer applies to this document and the verbal or written comments of any person presenting it. This document, taken
together with such verbal or written comments, is referred to herein as the “presentation.” This presentation is being provided
for informational purposes only. Nothing herein is or should be construed as investment, legal or tax advice, a
recommendation of any kind or an offer to sell or a solicitation of an offer to buy any security. This presentation does not
purport to be complete on any topic addressed. The information in this presentation is provided to you as of May 3rd unless
otherwise noted and Battery Ventures does not intend to update the information after its distribution, even in the event the
presentation becomes materially inaccurate. Certain information in this presentation has been obtained from third party
sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be
guaranteed. Certain logos, tradenames, trademarks and copyrights included in the presentation are strictly for identification
and informational purposes only. Such logos, trade names, trademarks and copyrights may be owned by companies or
persons not affiliated with Battery Ventures and no claim is made that any such company or person has sponsored or endorsed
the use of such logos, trade names, trademarks and copyrights in this presentation. This presentation includes various
examples of companies in which Battery Ventures has invested. These examples are included as illustrations of various
investment strategies. For a complete list of all companies in which Battery Ventures has invested, please visit here.
Information regarding the specific performance of prior investment recommendations is available upon request. Past
performance is not evidence of future results and there can be no assurance that a particular Battery Ventures Fund will
achieve comparable results to any other Battery Ventures Fund. There can be no assurance that the investment objectives of
a Battery Ventures Fund will be achieved or that the investment strategies utilized will be successful.
The information contained herein is based solely on the opinions of Neeraj Agrawal and Logan Bartlett and nothing should be
construed as investment advice. The anecdotal examples throughout are intended for an audience of entrepreneurs in their
attempt to build cloud-focused businesses and not recommendations or endorsements of any particular business.
WHY WE’RE LONG SOFTWARE
2018
Overall software spend continues to grow
30%
19.6% 2016-2021 CAGR

SaaS spend 25%
vs. 20%
SaaS CAGR: 19.6%
8.5% 2016-2021 CAGR

Software spend
15%
vs. 10% Software CAGR: 8.5%
2016-2021 CAGR
3.3% Total IT spend
5%
IT CAGR: 3.3%
0% US GDP CAGR: 2.3%

vs. 2016 2017 2018 2019 2020 2021
IT Growth Rate (Worldwide)

2.3% 2016-2021 CAGR
Total US GDP Software Growth Rate (Worldwide)
SaaS Growth Rate (Worldwide)
US GDP
Source: Gartner Market Databook, 4Q17 Update; Forrester; PwC; IMF

2018
Software has consistently grown through different eras & delivery
models
$600B Global software industry revenue
$500B
$400B
$300B
$200B
$100B
$0B
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Homegrown/Internal Software On-Prem + Mainframe SaaS
Source: Battery Ventures; Forrester; Gartner; the Yankee Group; BEA.gov; Input Research
Note: Homegrown/Internal Software is estimate based on hours worked
2018
Software and IT have had a strong impact on productivity
Productivity - GDP IT's Contribution to Productivity Growth

Per Hour Worked in the US
$70
31% 30%
$60 44%
$50
17%
24%
US Dollars
$40 7%
$30
$20 52% 49% 46%

$10
$0
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
1974-1995 1995-2004 2004-2012

IT Increased Workforce Skills Other
Source: OECD.org; “The U.S. Software Industry: An Engine for Economic Growth and Employment”, SIIA, 2014
Note: Constant currency for 2010 USD
2018
Software has had a demonstrable impact on employment
The US software industry supports nearly 10 million jobs
2.5M directly employed in the software industry
$$
The average annual wage
for software developers is
> 2x the average annual
wage for all US jobs
7.2M software-supported indirect and induced jobs
Source: “The $1 Trillion Economic Impact of Software”, BSA | The Software Alliance, June 2016
2018
The five forces of software’s accelerating growth
1 Existing software markets are growing over time
2 Software is infiltrating what were once niche markets
3 Software is displacing hardware
4 Software is displacing services & labor
5 Every company is becoming a software company
2018
1 Existing software markets are growing over time
*
*
Financials Procurement IT Service Platform-as-
Expense Management Application a-Service
Management Monitoring
Global CRM Market Global ERP Market Global BI Market
$41.8B
$59.6B $39.0B
$36.3B $24.3B
$50.7B $33.9B $22.5B
$31.6B $20.7B
$19.2B
$40.0B $17.7B
$36.5B
$31.0B
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
* Denotes a current or former Battery portfolio company
Left Chart Source: Zion Market Research

Middle and Right Chart Source: Dart Consulting
* Denotes a current or former Battery Portfolio Company. Past performance does not guarantee future results Battery Ventures | 9
2018
2 Software is infiltrating what were once niche markets

Illustrative Vertical Market Examples
Tours/Activities Mortgage Lending Pizza
Disaster Awareness Pharma/Biotech Patient Collections
Illustrative Hyper-Focused Business Processes Examples
**
Cap Table Mgmt Credit Checks SaaS Optimization
Scheduling Meetings Sales Process Mgmt Site Reliability Eng
Illustrative SMB Market Examples
Software Project Mgmt Application Integration Email Marketing
* Denotes a current or former Battery portfolio company
Payroll/Benefits Sales Automation Expense Mgmt
* Denotes a current or former Battery Portfolio Company. Past performance does not guarantee future results
2018
3 Software is displacing hardware
By 2020, spending on cloud IT infrastructure will surpass spending on non-cloud IT infrastructure

Worldwide spending: cloud vs non-cloud IT infrastructure(1)
$100B
$90B 2017-2022 CAGR

$81
Cloud IT Infrastructure:
$80B $72
11.7%
$70B $65
$62 $61
$58
$60B 2017-2022 CAGR
$52 $60
$50B
$47 $58 $57 $56 Non-Cloud IT Infrastructure:
(2.7%)
$40B
2017 2018 2019 2020 2021 2022
Cloud IT Infrastructure Non-Cloud IT Infrastructure
Software engineers are in high demand(2)
Software Engineers Hardware Engineers

Number of jobs: 1,256,200 Number of jobs: 73,600
Job outlook, 2016-2026: 24% Job outlook, 2016-2026: 5%
(1) International Data Corporation (IDC) Worldwide Quarterly Cloud IT Infrastructure Tracker
(2) Bureau of Labor Statistics. Number of jobs in 2016. Job outlook calculated as the projected percent change in employment from 2016 to 2026. The average growth rate for all occupations is 7%
2018
4 Software is displacing services & labor
2018
5 Every company is becoming a software company
2014 2015 2016 2017
Total Deal Total Deal Total Deal Total Deal

Date Acquirer Target Date Acquirer Target Date Acquirer Target Date Acquirer Target
Amount Amount Amount Amount
12/9 $710M 6/15 $4.0B 12/6 $2.8B 8/8 $1.6B
8/3 $2.7B 8/1 $2.4B 12/26 $1.1B
4/20 $1.3B 7/1 $1.5B 10/9 $820M
5/19 $687M 1/25 $970M 9/5 $712M
10/8 $675M 11/14 $915M 10/16 $510M
4/27 $600M 6/21 $900M
8/3 $500M 2/22 * $800M
10/31 $632M
3/11 $581M
Source: 451 Research. Includes all announced software acquisitions by historically non-technology buyers with transaction value over $500M from 11/2014 through 12/2017
* Denotes a current or former Battery Portfolio Company. Past performance is not indicative of future returns
2018
We’re still in the early innings of the software revolution
Global software industry revenue

$600B
$500B
$400B
~5
$300B
$200B
$100B
$0B
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

$7T
$6T
$5T
$4T
~5
$3T
$2T
TODAY
$1T
$0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2018

$7T
$6T
$5T ~5%
$4T
Assumed 2017-2050 CAGR
Global Software Revenue
~5
$3T
$1 TRILLION
$2T
TODAY
$1T
$0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
SOFTWARE IN 2018
The Public Market
2018
SaaS companies are well outpacing broad-based indices

Indexed stock price since 2008
900%
800% 746%
700%
600%
500%
400%
300% 266%
200% 182%
180%
100%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
SaaS Index S&P 500 Nasdaq Dow Jones
• While the typical market indices are significantly up since 2008, an index of SaaS companies has outperformed all of them by more than 2.5x
in the same time (up 746% since 2008)
Source: Capital IQ
Data as of 3/31/2018
2018
SaaS multiples recently traded up to an all-time high

Median NTM Revenue Multiple
7x 6.5x 6.6x
6.2x
5.7x
5.6x 5.8x
6x 5.6x
5.4x
5.3x
4.9x 4.9x 4.9x 4.8x
4.8x 4.7x
5x 4.6x
4.5x 4.4x 4.4x 4.4x 4.5x
4.4x 4.4x
4.2x
4.1x
3.8x 4.3x
4x
3.4x 3.3x 4.1x
3.3x
3.2x 3.1x3.1x3.2x
2.9x 3.5x
3x
2.4x 3.0x
1.9x
2x
1.6x
1x
0x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
• SaaS multiples have traded up since a recent low-point in the beginning of 2016, recently crossing the previous all-time record for NTM
revenue multiple of 6.5x, which was set in the middle of 2013
Source: Capital IQ
2018
Public markets have shifted to reward growth and profitability

LTM Revenue Growth
12/31/2007 12/31/2012 12/31/2017
25x 30x 30x

R² = 0.3042 R² = 0.4604 R² = 0.5524
TEV / LTM Rev
TEV / LTM Rev
TEV / LTM Rev

20x 25x 25x
20x 20x
15x
15x 15x
10x
10x 10x
5x 5x 5x
0x 0x 0x
0% 50% 100% 150% 0% 50% 100% 150% 0% 20% 40% 60% 80%
LTM Growth Rate LTM Growth Rate LTM Growth Rate
LTM Growth + EBITDA Margin
12/31/2007 12/31/2012 12/31/2017

25x 40x 20x
R² = 0.0117 R² = 0.2191 R² = 0.6443
TEV / LTM Rev
TEV / LTM Rev
TEV / LTM Rev

20x 30x 15x
15x
20x 10x
10x
5x 10x 5x
0x 0x 0x
0% 50% 100% 0% 50% 100% 150% 0% 20% 40% 60% 80%
LTM Growth Rate + EBITDA Margin LTM Growth Rate + EBITDA Margin LTM Growth Rate + EBITDA Margin
• Over the course of the last decade, we have seen the public markets shift from using growth as the primary metric for evaluating companies to
a combination of growth and profitability
• This shift is reflected in the correlations (R2) shown above – growth and EBITDA margin combined have gone from a near zero correlation with
a company’s revenue multiple to being even more correlated than growth alone
Source: Data from Capital IQ. Date in all charts is December 31st of prior year. Includes SaaS companies with LTM Growth >0%
Does not include Castlight Health in 2015 and LogMeIn in 2018 due to material inorganic growth
2018
The Rule of 40 has become a standard in the market with an
understanding of the trade-off between growth and profit
40%
30% Companies
with >40%:
9.3x 2018
EV/Revenue
Unlevered FCF % of Revenue
Multiple
20%
10%
0%
(10%) 0% 10% 20% 30% 40% 50% 60% 70% 80%
(10%) Companies
with <40%:
4.7x 2018
EV/Revenue
Multiple
(20%)
LTM Revenue Growth Rate
• This shift from a focus on growth to a focus on growth and profitability has been standardized around the concept of “The Rule of 40” – a
company’s growth plus profit should be greater than or equal to 40%
• This metric has clearly been priced into companies’ valuations, with businesses that exceed 40% trading at a revenue multiple of 9.3x EV/CY
2018 Revenue while companies with less than 40% trading at 4.7x EV/CY 2018 revenue
Source: Capital IQ
2018
This holds true across all groupings of growth + profit

Public SaaS companies by Rule of 40 (as of 3/31/2018)
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60%+
*
*
CY 2018
Rev Mult
Median 2.4x 3.8x 5.1x 6.8x 8.0x 8.6x 10.8x
Average 2.7x 3.1x 5.4x 6.6x 8.2x 8.6x 10.8x
• Even with funding becoming a commodity for high burn startups, a healthy mix of growth and profitability clearly yields the highest multiples
Source: Capital IQ
Data as of 3/31/2018. Rule of 40 is calculated as LTM Growth Rate + Unlevered FCF Margin
* Denotes a current or former Battery Portfolio Company. Past performance is not indicative of future returns Battery Ventures | 23
2018
2017 was a solid year for IPOs and the highest of the last three years
$2.8B
$2.5B
Total Amount Raised in IPO
$1.7B
$1.6B
$1.3B
$1.2B
*
$948M
*
$771M
* *
$406M
*
*
*
$0M
Median 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Statistics(1)
NTM Rev Mult. NM 6.6x 4.3x 6.2x 4.8x 7.1x 6.9x 5.7x 7.5x 6.9x
NTM Rev Growth NM 13% 15% 42% 19% 25% 24% 28% 29% 25%
IPO Size ($M) NM $97M $90M $161M $103M $105M $100M $94M $133M $131M
NTM Rev ($M) NM $97M $145M $131M $123M $110M $113M $114M $150M $191M
• Software IPOs hit a three year high (both # and $) in 2017 after a particularly weak 2016 – and as we discuss in the update for Q1 2018,
software IPOs have continued this trend in 2018
• As a cohort, the companies that went public in 2017 were larger (in terms of NTM revenue) than any group since 2008, indicative of the
increased opportunity to delay IPOs
(1) Revenue shown at the time of the IPO. Trading information as of first day close
Source: Capital IQ. Inclusive of deals on major US stock exchanges
* Denotes a current or former Battery Portfolio Company. Past performance is not indicative of future returns Battery Ventures | 24
2018
Software companies continue to perform well in the public markets
with all companies up from IPO prices
2015 2016 2017
IPO $ Current ∆ from IPO $ Current ∆ from IPO $ Current ∆ from

Date Raised EV Price IPO Date Raised EV Price IPO Date Raised EV Price IPO
5/20 $131M $13.1B $124.59 633% * 9/29 $238M $8.1B $49.11 207% 3/16 $221M $5.9B $43.98 159%
12/9 $462M $12.5B $53.92 157% 6/22 $150M $3.6B $38.18 155% 4/6 $187M $4.2B $39.85 134%
1/22 $175M $2.8B $20.55 47% * 10/5 $133M $2.5B $45.62 153% 4/27 $225M $4.1B $21.58 44%
11/18 $78M $2.0B $35.43 254% 10/27 $146M $2.1B $39.21 131% 10/18 $192M $3.0B $43.40 81%
6/18 $100M $1.8B $38.90 178% 7/28 $95M $1.4B $48.12 167% 3/23 $126M $2.2B $34.14 144%
11/12 $70M $1.4B $42.15 163% 9/22 $96M $1.2B $28.34 77% 11/16 $240M $2.1B $20.69 72%
6/25 $74M $1.4B $40.85 240% 9/15 $90M $1.0B $36.60 205% 5/24 $75M $1.8B $25.18 110%
7/16 $103M $1.2B $25.57 60% 10/26 $116M $1.5B $32.44 47%
4/23 $87M $537M $17.38 2% 11/14 $131M $1.3B $28.14 76%
6/25 $56M $504M $15.65 96% 4/12 $116M $1.2B $12.65 15%
11/9 $80M $1.2B $32.66 63%
Avg. $134M $3.7B 183% Avg. $135M $2.9B 156% Avg. $148M $2.2B 78%
Median $94M $1.6B 160% Median $133M $2.1B 166% Median $131M $1.8B 67%
• On average, the market capitalization of public software companies have increased between 70-75% every year since going public, with
companies going public in 2015 having grown their market cap’s by 217% on average since the IPO
• The largest positive delta goes to Shopify, which has increased 633% since it’s IPO in 2015, led by continued 75%+ growth at $1B+ in ARR
Source: Capital IQ. Prices and Market Cap as of 3/31/2018. Prices and Market Cap for Apigee and Xactly as of date of acquisition. MuleSoft acquisition not closed as of 3/31/2018
The M&A Market
2018
Software M&A since 2008

Software acquisitions over time
$79.5B
$63.5B $63.8B
$54.9B $56.3B
$51.1B
$45.4B $44.5B
$28.9B
$16.7B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• After a record year in 2016, software M&A was down from $79.5B to $56.3B in 2017, returning back to the level seen from 2010-2013
Source: 451 Group

2018
The quarterly numbers for 2017 show a lighter beginning of the
year followed by a strong Q3 and Q4
Quarterly M&A amounts
$33B
$28B
$23B
$22B $22B
$20B
$18B $19B
$17B $17B
$15B $14B $14B
$14B
$13B $14B
$12B $13B $12B
$11B $11B $11B $11B $11B
$10B$9B $10B
$9B
$8B $8B $8B
$7B $7B $7B
$5B
$3B $3B
$2B $2B $2B
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• Following two straight nearly record breaking quarters in Q2 and Q3 2016, we saw three consecutive lackluster quarters in software M&A to
end 2016 and begin 2017 before it ultimately ticked up at the end of the 2017
Source: 451 Group

2018
The 2017 M&A slowdown can be seen across both strategic and Legend
PE activity On-Premise Cloud % Cloud (1)
` / / /
Oracle, SAP, Microsoft,
Salesforce, IBM, Cisco
/
/ * /
/ / /
/ /
/ 88%
/ / /
/
/ /
/
/
/
/ /
Other Strategic
/ / *
/ /
/ / /
/ 51%
/ /
Communi
/ /
/ /̀ /
ties
& Sports
/
/ / /
Thoma & Vista
/ /
/ /
/
/ Education
37%
Business
*
/ / /
/
/ /
/
/ / /
Other PE
/ /
/ <1%
/
/ / /
/ / /
/ /
January ‘15 June ‘15 January ‘16 June ‘16 January ‘17 June ‘17 January ‘18
Selected M&A Greater Than $500MM Since January 1, 2015
• Software M&A has lagged on all fronts since its high in 2016, with the biggest delta coming from an absence of acquisitions by Private Equity
firms not named Thomas Bravo or Vista Equity
Source: Qatalyst Partners
2018
The gap between strategics and private equity in both amount and
valuation is closing
Software acquisitions by acquirer type Revenue multiples of acquisitions
100% 10x
90% 9x
80% 8x
70% 7x
Percentage of aqusitions ($)
LTM Revenue Multiple

60% 6x
50% 5x
23%
40% 4x
30% 3x
20% 2x
266%
10% 1x
0% 0x
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Private Equity Strategic Private Equity Strategic
• PE firms are raising larger funds in order to continue to acquire high quality software companies at the high multiples that the market expects
Source: 451 Research Group. Includes deals with announced values in the Application Software and Information/IT Management industries
2018
Part of the reason for a closing gap between strategics and private equity
is that the cloud can make strategic acquisitions more difficult…
Source: Spurrier Capital Partners
2018
…But the cloud is perfect for private equity

What makes software companies attractive
Number of PE software buyouts in the US
targets for PE firms?
Strong future Deals with customers are structured to be contractually

150 revenue visibility recurring, giving visibility into future revenue
134 High gross Software gross margins at scale are typically north of
margin 80%
Cash-flow /
Enterprise software will typically have long-term
102 Working capital
agreements with the cash paid up-front
dynamics
86
Due to the cash-flow dynamics + visibility into revenue,
Ability to handle
75 lenders are usually willing to provide large amounts of
debt
debt
67
56 Low requirements
52 Little on-going investment is required once the product
for capital
is built
44 investment
41
37
28 Products are extremely scalable, with low deployment
23 Scalability
20 and upgrade costs
7 5
The high-switching costs inherent to enterprise software
Stickiness
typically mean you have to do a lot to lose customers
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• The number of software buyouts in the US has continued to grow at a steady pace since 2009, almost ticking over 150 for 2017
Chart Source: 451 Research Group

2018
Not all signs point away from strategic cloud M&A – there is a race
for cloud revenue and a shortage of enterprise targets of scale
• The large strategic acquirers have used M&A to bolster cloud revenue through M&A varying degrees, but there are now a shortage of
acquisition targets of scale and a need by strategics to continue to grow recurring revenue  this could prove a formula for more cloud M&A

Additionally, the old guard of strategics are under threat in their core 2018
business from a number of vectors and may use M&A for both offense and
defense
• The cloud enabled SaaS companies to go around the traditional IT buying process, which has led to a proliferation of solutions that are
attacking legacy vendors from all angles  this could lead to strategic M&A to both defend ground and attack white spaces

2018
And the new tax laws could serve as a potential catalyst for M&A in
2018 ~$400Bn ~$400Bn
Implications of New Tax Laws for M&A
1.
1 Tax repatriation holiday
• Companies will pay 8.0 – 15.5% instead of 35% to repatriate foreign cash holdings
to the US
✓ Key software acquirers have ~$400Bn in foreign cash that
could be repatriated
2 Corporate tax rate reduction

2.
• Corporate tax rate reduced from 35% to 21%
✓ Incremental cash flow available to large serial acquirers from
reduced tax bill
― Disincentivizes multi-national corporations from re-
domiciling or housing revenue generating operations offshore
 Potential multiple re-rating for tax-paying public and private *
companies
 Net operating losses held by potential targets become less
valuable
3 Limitations on Business Interest Expense Deductibility

3.
• Deductions for net business interest expense limited to 30% of an amount that
approximates EBITDA
 Debt-financed acquisitions become less attractive * *
 Sponsor-backed leveraged buyouts require greater equity
check
Source: Capital IQ, PitchBook and company filings Post-tax Cash Firepower $1BN+ Public and Private High
(1) Market data current as of March 2018.
(2) Assumes a 30% M&A premium on public SaaS companies and 50% premium on private SaaS assets. of Key Software Growth Software
(3) Assumes 10% repatriation tax on foreign cash reserves. Acquirors(3) with M&A Premium(1)(2)
• Between potential repatriation and a reduction in the corporate tax rate, the large strategic software acquirers could see a collective ~$400B of
new cash on their balance sheets
• To put that into perspective, ~$400B is enough to acquire 50 leading software companies
The Venture Market
2018
Software investing has more than doubled as a percentage of the
venture industry since 2008
Dollars by sector
100%
90%
80%
53% 51%
70% 59% 60% 57% 58%
68% 65% 66%
60% 82%
50%
40%
30%
47% 49%
20% 41% 40% 43% 42%
32% 35% 34%
10% 18%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Software Other
• Software investing rose from 18% of total Venture dollars in 2008 to a high of 49% of Venture dollars in 2016 before falling back down to 42%
in 2017
• The industry seems to have reached a new normal that began in 2012 with between 40-50% of total Venture dollars being deployed into
software companies
Source: Data from Pitchbook. Includes businesses with a headquarters in the United States, Canada, Europe, Australia and New Zealand
2018
Software companies being financed for the first time are
meaningfully changing
Increasing Usage Decreasing Usage
% of descriptions with term % of descriptions with term

Term ∆ '08-17 Term ∆ '08-17
2008 2017 2008 2017
1 ai 0.2% 2.7% 1,681% 1 solutions 4.1% 0.4% (91%)
2 machine 0.8% 9.1% 1,108% 2 networking 5.7% 1.1% (81%)
3 artificial 0.9% 8.4% 829% 3 advertising 4.2% 1.2% (72%)
4 simplify 0.8% 4.8% 535% 4 web 13.3% 4.4% (67%)
5 algorithms 0.6% 3.5% 481% 5 engine 4.1% 1.5% (63%)
6 learning 2.0% 10.7% 448% 6 social 18.1% 7.4% (59%)
7 insurance 0.8% 3.3% 334% 7 content 11.8% 5.1% (56%)
8 messaging 0.8% 3.0% 303% 8 analysis 4.1% 2.0% (51%)
9 3d 0.5% 1.6% 261% 9 collaboration 4.1% 2.0% (51%)
10 threats 0.5% 1.6% 261% 10 video 8.3% 4.1% (51%)
11 intelligent 0.9% 3.2% 249% 11 media 5.9% 3.0% (48%)
12 saas 1.4% 4.2% 210% 12 search 5.1% 2.7% (48%)
13 risk 0.6% 1.8% 190% 13 sharing 4.7% 2.5% (48%)
14 smart 0.9% 2.6% 184% 14 services 36.2% 19.3% (47%)
15 global 0.9% 2.5% 171% 15 games 9.4% 5.1% (45%)
16 automate 2.7% 7.0% 158% 16 interactive 3.3% 2.0% (40%)
17 monitor 3.0% 7.4% 144% 17 online 25.9% 16.1% (38%)
18 insights 2.9% 5.8% 104% 18 marketing 7.4% 4.8% (35%)
19 payments 3.3% 6.5% 97% 19 platforms 3.3% 2.2% (33%)
20 security 4.4% 8.5% 95% 20 sales 4.8% 3.6% (25%)
21 workflows 1.7% 3.2% 90% 21 tools 12.1% 9.2% (24%)
22 analytics 5.1% 9.6% 87% 22 community 6.3% 4.9% (24%)
23 data 13.0% 23.9% 85% 23 enterprise 10.0% 7.9% (20%)
24 cloud 5.0% 8.1% 62% 24 developers 3.3% 2.7% (19%)
25 real-time 5.0% 7.2% 46% 25 management 17.2% 16.5% (4%)
Total # of companies 663 856 Total # of companies 663 856
Source: Pitchbook
Software Companies headquartered in the US. Company descriptors are all as of 5/2/2018 (not the date of first funding). Analysis is conducted on meaningful terms determined
by Battery research. Singular and plural forms were combined for this analysis Battery Ventures | 38
2018
In 2017, venture investing in software plateaued in terms of dollars
invested and continued to decline in number of deals
Number of dollars and deals into software businesses
$40 5,000
$35.1B
4,500
$35 4,068 $32.5B $32.0B
4,000
$30.0B
$30 3,480
3,800 3,246 3,500
2,980
$25 2,808 3,000
$20 2,160 2,500
$15.2B
2,000
$15
1,456 1,482 $11.9B $12.2B
1,500
1,147
$10 $9.1B
$7.2B
$5.8B 1,000
$5
500
$0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Capital Invested Deal Count
• In 2013, the software industry saw nearly 100% growth in capital invested. Since that jump, we have seen the industry plateau from a dollars
invested standpoint – oscillating between (8%)-9% dollar growth
• From 2009 until 2014, deal count increased by a CAGR of 29%, but since 2014 the number of software deals has declined by 10% a year on
average
2018
To put venture software investing in perspective, Venture investment in
2017 was still well below the R&D of Microsoft, Alphabet and Amazon
Venture investments in software in 2017 R&D spend in 2017
$53.2B
$13.9B
$32.0B
$16.6B
$22.6B
• While $32B of venture spend seems high, it pales in comparison to the overall R&D spend within the industry, led by Alphabet, Amazon, and
Microsoft, which invested a $53.2B in R&D in 2017
Source: Capital IQ
2018
Unpacking the data by stage shows that most rounds are flat in terms of
number of deals with the notable exception of seed rounds, which declined
significantly
Deal count
Seed Series A Series B
’08–’17 growth: 4.5x ’08–’17 growth: 1.6x ’08–’17 growth: 1.3x
1,200 450 417
990 943 939 382 395 375
2,500 2,312 932 400
2,050 2,088 1,000 330 319
799 350 290 305
2,000
1,491 1,609 800 666 715 300
1,500 1,271 568
494 250 208 219
600 431
933 200
1,000 400 150
510
500 281 308 200
100
50
0 0 0
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Series C Series D+
’08–’17 growth: 1.3x ’08–’17 growth: 1.2x
250
200 171 187
195 190
200
154 162
167 171 138 147
142 153
135
150 123 122 126 131
150
94 93
92 100
100
50 50
0 0
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• Unpacking the number of deals by stage shows growth across the board since 2008 with by far the largest growth in seed deals (352% growth
’08-17), but a steady decline since 2014 (82% decline ‘14-17)
• Other stages are up somewhere between 64% (Series A growth ‘08-17) at the highest and 26% (Series B growth ‘08-17) at the lowest
• Every stage peaked in either 2014 or 2015 with the exception of Series B, which continues to rise
2018
All stages are up significantly in terms of dollars deployed annually
since 2008, but recent trends show different stories for each stage
Dollars invested
’08–’17 growth: 12.3x ’08–’17 growth: 3.1x ’08–’17 growth: 2.7x $7.7B
$8B
$3B $8B
$6.9B
$6.3B
$6.2B $5.8B
$2.3B $2.3B $2.3B $5.8B
$6B $5.4B $6B $5.3B
$2.0B
$2B
$1.6B $3.9B $3.6B
$4B $3.3B $4B
$2.9B $3.0B$2.9B
$981M $2.7B
$2.2B $2.1B
$1B $1.6B$1.7B
$595M $2B $1.5B
$2B
$184M $185M$293M
$0M $0.0M $0M

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Series C Series D+
’08–’17 growth: 3.1x ’08–’17 growth: 4.8x
$5.6B
$6B $5.4B $5.4B $18B $15.5B
$4.5B $13.6B
$15B
$11.7B
$4B $12B $9.7B
$2.9B
$2.3B $9B
$2.0B
$1.7B $1.5B
$2B $6B
$1.0B $3.3B$3.0B$3.3B
$2.0B$1.5B$1.5B
$3B
$0M $0M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• Dollars deployed into Series A and B rounds have fairly consistently risen in each year while Seed and Series C rounds have flatten out
• Series D+ deals have been the most manic – this stage largely drove the big jump in overall dollars deployed into software in 2014, the
subsequent rise in 2015 and 2016 and the slight pull back in 2017
2018
Round sizes have proven out a “flight to quality” with the average
increasing fairly consistently across the board
Average round size
’08–’17 growth: 2.7x ’08–’17 growth: 1.9x ’08–’17 growth: 2.1x
$7.5M $20M $18.4M

$2M $1.8M $8M
$6.6M $15.8M
$6.2M $15.5M
$1.4M $5.4M $13.8M
$6M $15M
$1.1M $4.6M$4.8M $11.2M
$3.9M$3.8M $4.0M $10.3M
$9.8M $9.6M
$0.9M $3.4M $8.6M
$1M $0.7M $0.6M $0.8M $4M $10M $7.0M
$0.6M$0.6M $0.7M
$2M $5M
$0M $0M $0M

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Series C Series D+
’08–’17 growth: 2.3x ’08–’17 growth: 4.0x
$35M $31.4M $120M $112.6M
$28.9M
$30M $27.2M $28.5M $100M
$25M $80M $72.8M
$68.3M $66.3M
$17.2M $17.9M
$20M
$13.3M $60M
$15M $12.3M
$11.2M
$10.1M
$40M $27.0M $25.3M
$10M $15.7M
$16.7M $16.2M $23.6M
$5M $20M
$0M $0M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• Rounds sizes have grown steadily across all stages of software investing since 2008 with Series As the lowest (89% growth ‘08-17) and
Series D+ the highest (298% growth ‘08-17)
• Since 2013, Series D+ rounds have followed the inconsistency of the late stage market with a big jump from ‘13-14 and ’15-16 followed by a
big fall from ‘16-17
2018
As round and fund sizes have gone up so to have valuations

Median pre-money valuation indexed since 2008
378% Series D+
314% Series C
281% Series A
261% Series B
168% Seed
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Seed Series A Series B Series C Series D

D+or later
• Valuation increases have tracked fairly consistently with the growth in average deal sizes
• The later stages (Series C and D+) saw a dip in valuation in 2015 and 2016 that was then erased with the growth in valuations in 2017
2018
Interestingly, dilution in the seed stage is consistently up while dilution
in all other rounds is down from the highs of 2008 and 2009
Median dilution by round
31%
29%30%
29%
28% 28%
27% 27%
25%26%
24% 24%24% 24% 24% 24%24%
23% 23% 23%
21% 22%
21%
20% 20%
19%
18% 18% 18%
17% 17% 17%
16% 16%17% 16%
15%
13% 13% 14% 13%13%
12% 12%12%12% 12% 12% 11%
11%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Seed Series A Series B Series C Series D+
• The data around dilution shows that in the Seed stage round size outpaced valuation (leading to more employee dilution), while in all other
stages valuation has outpaced round size – typically this will show the dynamics of supply vs. demand at each stage
• In general, more dilution means less demand at a particular stage while less dilution means more demand
2018
Software investments in the US fell off considerably when
unpacking that data vs. other core geographical markets
Number of dollars into software businesses
$35.1B
$32.5B $32.0B
$3.2B
$30.0B
$3.5B
$2.6B $5.4B
$15.2B
$31.9B
$11.9B $12.2B $1.5B $29.0B
$27.3B $26.7B
$9.1B $901M
$812M
$7.2B
$608M $5.8B
$503M $13.7B
$306M $11.1B $11.3B
$8.5B
$5.5B $6.7B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
United States Europe, Canada and Oceania
• The overall software market fell 9.7% in 2017 from the all-time high in the 2016, but this was outpaced by the fall in the US, which dipped
19.6% from 2016
2018
Investments by US region show that most of the domestic pull-back was
in the Bay Area
Dollars invested into different US geographies
Bay Area Tri-State area
’08-’17 growth: 3.8x ’08-’17 growth: 4.7x
$25B $5B
$20.2B $20.9B
$19.2B
$20B $4B
$16.3B $3.4B $3.5B $3.5B
$15B $3B
$2.2B
$10B $8.5B $2B
$6.8B $7.0B $1.3B $1.4B
$1.0B
$4.3B
$5B $3.3B $4.0B $1B $747M $424M $595M
$0M $0M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
New England Rest of US
$3B ’08-’17 growth: 1.9x ’08-’17 growth: 2.0x

$8B
$2.1B $6.0B
$6B $5.1B
$2B $1.7B
$1.5B $4.3B
$1.2B $1.3B $3.6B
$4B
$914M $1.0B $2.5B $2.6B
$1B $685M $635M $742M $2.2B $2.2B
$2B $1.1B $1.5B
$0M $0M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• While other geos are still up since 2008, the growth in software investments since 2008 has been largely driven by Silicon Valley and the
greater New York City area
• More recently, the big jump in software investing from 2013 to 2014 and the slight pullback in 2017 was largely a result of the Bay Area
Source: Data from Pitchbook. Includes businesses with a headquarters in the United States
2018
The Bay Area pull-back was specifically in late stage deals in 2017
Seed, Series A, B, C
Bay Area Rest of US
’08-’17 growth: 2.8x $15B ’08-’17 growth: 2.8x
$15B
$10.8B
$9.3B $9.7B $9.7B
$10B $10B $8.5B
$7.2B $7.0B
$6.1B
$4.9B $4.9B $4.4B $5.0B
$5B $3.4B $5B $3.0B $3.0B $3.5B
$3.0B
$2.1B $1.9B $2.2B
$0M $0M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Series D+
Bay Area Rest of US
’08-’17 growth: 7.6x $11.3B $5B ’08-’17 growth: 1.6x

$12B
$9.4B $9.9B $4.0B
$10B $4B
$8B $6.7B $2.6B
$3B
$6B $2.1B $1.9B
$2B
$4B $1.2B $1.2B
$1.9B $2.2B $2.4B $759M $764M
$2B $874M $1.1B $1.0B $1B $356M $491M
$0M $0M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• While early stage investing both inside and outside the Bay Area is 2.8x higher since 2008, Bay Area early stage investing has been mostly
flat-to-down since 2014, while the Rest of the US has marched fairly consistently higher
• In Series D+ investments, the Bay Area has driven nearly all the growth since 2008 – while 2017 was down from a high of $11.3B in 2016, it
still represents 7.6x growth since 2008
2018
Investment in software businesses in the core markets outside of the US
has continued to climb higher in recent years
Dollars into software businesses
$5.4B
$201M
$765M
$3.5B
$163M $3.2B
$508M $223M
$2.6B
$447M
$104M
$477M
$4.4B
$1.5B
$89M $2.9B
$292M $2.5B
$812M $901M
$2.1B
$608M $221M
$503M $188M
$124M $306M $1.1B
$127M
$480M $574M $653M
$225M $368M
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Europe Canada Oceania
• After a couple of years of relative stagnation, VC investment into European, Canadian and Oceanic software companies almost doubled in
2017 to $5.4B as investors look for opportunities outside of domestic geographies
Source: Data from Pitchbook. Includes businesses with a headquarters in the Canada, Europe, Australia and New Zealand
2018
All major geographies have outpaced the US in terms of growth in
software investing since 2008
Dollars by geography
United States Europe
’08–’17 growth: 3.1x $5B ’08–’17 growth: 9.1x

$35B $4.4B
$31.9B
$29.0B
$30B $27.3B $4B
$26.7B
$25B
$2.9B
$3B
$2.5B
$20B
$2.1B
$15B $13.7B $2B
$11.1B$11.3B
$8.5B $1.1B
$10B
$6.7B $1B
$5.5B $480M $574M $653M
$368M
$5B $225M
$0M
$0M '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Canada $120M $75M $127M $188M $221M $292M $475M $508M $446M $764M
‘08–’17 growth: 6.4x
Australia + New Zealand $4M $6M $8M $51M $27M $89M $104M $163M $223M $201M
‘08–’17 growth: 51.9x
• The slight pullback in software investing in 2017 was almost entirely a result of the US while most other areas climbed higher
• Notably, European and Canadian software investing had a banner year in 2017 with 72% and 71% growth respectively from 2016
• Australia + New Zealand have grown to ~$200M+ a year in the last two years
2018
Fund size and fund frequency have both noticeably increased
since 2008
Number of funds raised by fund size Median step-up between funds
8%
Growth
1,105
1,020
37%
Growth
Average time (years) between funds
47%
Growth
398 67%
291 298 Growth
203
30 50
$0 - $99M $100M - $249M $250M - $999M $1B+

2008-2012 2013-2017
• Round and fund sizes are inherently intertwined in a chicken-and-the-egg type of way – it’s unclear which came first but each is directly linked
to the other. Both fund size and fund frequency has grown considerably since 2008
Left Chart Source: Data from Pitchbook as of 3/31/2018. Includes funds with a headquarters in the United States, Canada, Europe, Australia and New Zealand
Right Charts Source: Pitchbook, NVCA Venture Monitor
2018
Software liquidity was down noticeably from a near-high in 2016
and has plateaued between ~$40-70B since 2011
Venture exits by type ($)
$70.8B
$65.6B $2.7B
$6.7B $13.8B
$1.6B
$50.1B
$46.8B
$4.7B $44.6B
$6.7B $41.3B
$39.6B
$3.5B $3.8B
$10.1B
$23.9B $21.5B $2.8B
$57.3B $5.3B
$54.3B
$959M
$36.6B
$12.1B $12.9B $33.1B
$1.7B $25.9B
$6.9B $2.2B $21.5B $22.1B
$11.3B $9.1B
$5.6B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Strategic Acquisitions Private Equity Buyouts IPO
• Both strategic and PE buyout dollars were less than what they had been at their all time high in 2016, which indicates less capital going back
to limited partners in the ecosystem
Source: Pitchbook
Note: Private Equity Buyouts is inclusive of dollars from deals categorized as Buyout and Secondary Buyout. Strategic Acquisitions is inclusive of deals categorized as
Merger/Acquisition, Merger of Equals and Reverse Merger. IPO is inclusive of dollars from deals categorized as IPO and Follow-On Offerings (not enterprise value of IPOs) Battery Ventures | 52
2018
When comparing liquidity to capital invested in the ecosystem,
2017 was the third lowest year since 2008
Liquidity/capital invested
$65.0B $64.4B
$49.1B
$45.4B
$42.9B
$39.4B $40.0B
$34.8B
$32.1B $31.9B
$29.5B
$14.8B
$12.0B $12.3B $11.7B $12.0B
$9.0B
$7.1B
$5.8B $6.3B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ratio of
liquidity/capital 1.33x 1.09x 1.73x 4.19x 3.59x 3.07x 2.20x 1.23x 1.85x 1.25x
invested
Capital Invested Liquidity
• 2017 trailed only 2009 and 2015 in terms of lowest ratio between liquidity and capital invested
• Two of the last three years are in the bottom three of liquidity to capital invested ratio since 2008  this is both a product of increased capital
invested and a decrease in liquidity compared to the prior few years
Source: Pitchbook
Liquidity is equal to IPO (IPO and Secondary Offering), Buyouts and Strategic Acquisitions
2018
This is due to the rise dollars deployed and the lengthening of time
to exit for venture-backed software companies
Time from first financing to liquidity
11
10
9
8 7.9 years
7.6 years
7
6
5
4.4 years
4
3
2
1
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Strategic Acquisitions Private Equity Buyouts IPO
• The lack of liquidity in the market has been impacted by an increased time to exit for venture-backed companies with time to an IPO up to 7+
years
Source: Pitchbook
2018
SoftBank’s fund size stands alone with powerful limited partners
Largest tech funds ever raised globally Vision Fund investors
Year of
final
close
SoftBank Vision Fund $100.0B Pending
Undisclosed/not
Silver Lake Partners V $15.0B 2017 yet raised $4B $1B
$7B
Vista Equity Partners Fund VI $11.0B 2017

$15B $45B
Silver Lake Partners IV $10.3B 2013
Silver Lake Partners III $9.4B 2007 $28B
Thoma Bravo Fund XII $7.6B 2016
• SoftBank’s Vision Fund is orders of magnitude larger than any prior technology-focused fund and has a number of powerful limited partners
Source: Wall Street Journal, CNN

2018
The Vision Fund has been deploying entire country GDPs into
businesses
B2C
$19.5B
B2B
$16.9B
(2)
(1)
$38.4B
deployed (1)
(1)
(1)
$61.7B
remaining *
Bio-tech
(1) $2.0B
• Most of the noise in the market has been around SoftBank’s investment in consumer-focused companies like Uber and WeWork, but the
Vision Fund has made a number of B2B-focused investments as well
• With a little under 40% deployed, the SoftBank is rumored to be in discussions to raise another fund
(1) SoftBank investments expected to be offered to the Vision Fund

(2) Combined $4.4 billion from both SoftBank Group and SoftBank Vision Fund. Split not disclosed
Source: SoftBank announcements and disclosures, news reports. Based on Recode as of 3/12/2018 Battery Ventures | 56
Note: Since final deal values are not disclosed, value of funding rounds led by SoftBank used.
2018
And the Vision Fund’s impact is likely only starting to be felt

Description Example
• Many late-stage, private companies with large valuations think

Delayed Initial Public about IPOs as a way to raise significant capital, but with the Vision
Offerings Fund’s $100B behind them, there is less incentive to go through the
time-intensive process
• SoftBank is able to bake off competitors against one another with

King Making the risk that if a company doesn’t take SoftBank’s offer, their
competitor will get funded with near unlimited capital
• Given SoftBank’s extended investment horizon (“300-year plan”

and “thinking in decades”), the Vision Fund has shown early
indications of less price sensitivity than more traditional institutional
Inflated Valuations investors
• In simple supply-demand terms – the demand to put money to work
has outpaced the supply of quality companies, which will continue
to cause more dollars into fewer deals
• SoftBank will invest both primary and secondary capital in many of

their investments, and these secondary investments give early
Additional Liquidity
investors and shareholders the opportunity to take early liquidity if
desired
• Given all these implications, other funds will be sure to respond to

Response from Other
help companies counteract the SoftBank effect, particularly the
Funds
“King Making” impact
The Themes in the Market
2018
IT budget growth is expected to be mostly in-line with prior years

How do you expect your IT budget to compare to the last year?
60%
53%
50%
43%
41%
40% 37% 37%
34% 35%
30%
21%
20% 17%
15% 15%
13%
10% 8% 8%
6% 5%
3% 2% 3% 4% 3% 2.7%2.1% 2.4%
0%
<(5%) (5%)-0% Flat 0-5% >5% Weighted Average
Growth Rate
2015 2016 2017 2018
• 74% of CIOs expect their budget to grow in 2018, which is the same percentage as the percentage that expected it to grow in 2017
• A recent high of 37% CIOs expect their budget to grow more than 5% in 2018
Source: Piper Jaffrey CIO Survey

2018
Security continues to drive most of the growth in IT spend

Which technologies will you increase/decrease spending on in 2018
100%
88%
82%
80% 76%
73%
66%
60%
60%
49%
45%
34% 40%
37%
40% 35% 33% 34% 33%
30% 28% 30% 31%
28%
23% 22%21% 21% 23% 21% 24% 25% 26% 26%
22%
18% 20% 20%
20% 16% 15% 15%
13% 12%
4%
(13%) 1% 2%
(6%) (11%)
0%
(20%)
2016 2017 2018
• Security still remains a top initiative for IT buyers, largely a result of the decentralization of the cloud and the number of high-profile breaches
in the last few years
• As cloud software IT spend also gains momentum, we have seen spend on servers, switching/routing equipment, and storage decrease over
the last couple of years
Source: Piper Jaffrey CIO Survey
2018
We are approach the tipping point where cloud passes traditional
data center spend
Percentage of workloads in public cloud today vs.
Enterprise infrastructure spend
expected in three years
38%
9% 11% 13% 15% 17% 34%
33%
14%
17%
20%
22%
25%
20%
19% 19%
18%
16%
77% 14%
72%
67%
63% 11%
58%
9%
6%
5%
4%
2013 2014 2015 2016 2017 December '14 August '15 December '15 June '16 December '16 June '17 December '17
Today In 3 Years
Traditional Data Center Public Cloud Private Cloud
• The public + private cloud vendors continue to take share from the traditional data center with it likely that the combined clouds will surpass
traditional data center spend in the next few years
• This rate of adoption will likely continue, with enterprises stating that 34% of their workloads will be in the cloud in three years vs. 19% today
Left Chart Source: IDC Worldwide Quarterly Cloud IT Infrastructure Tracker
Right Chart Source: Goldman Sachs. Note percentage of survey respondents
2018
The cloud wars continue, with each carving off respective areas of
domain expertise
• AWS reigns supreme with $17.1B in revenue and 40% growth in their public cloud off the backs of aggressive product expansion into a best-
of-suite vendor
• Azure continues to leverage its reputation in the enterprise to pace as the clear number two in the market, with GCP trailing by a decent
margin
Source: Work-Bench Almanac 2017
2018
The adoption of both Microsoft Azure as well as multi clouds is
most pronounced in the enterprise
Enterprise adoption of cloud Enterprise cloud usage by type
82% of enterprises
68% using multi cloud
Single
Multiple Private
58% Public,
Clouds, 10%
9%
No Plans,
50% Multiple 5%
Public Single
Clouds, Private,
21% 4%
35%
26%
19%
15% 15%
IBM Cloud Google Cloud Azure AWS

Hybrid Cloud, 51%
Adoption Year-over-Year Growth Rate
• Microsoft Azure and IBM have shown the strongest adoption in the enterprise, with it possible that Azure will pass Amazon for organizations
with over 1,000 employees
• Enterprises are intentionally architecting cloud strategy to prevent vendor lock-in, focusing on multi and hybrid clouds
Source: RightScale 2018 State of Cloud Report

Note: Includes only respondents over 1,000 employees
2018
AI represents huge promise, but is early and difficult for companies
CEOs are aware of the AI implications… but are early in their deployment
What do you expect the impact from artificial intelligence to be? What do you expect the impact from artificial intelligence to be?
Don't know, 37% of CEOs
5% expect significant 35%
business impact
None, 18% from AI 25%
Major, 24%
21%
14%
Transformational, 4%
Minor, 15% 13%
Have already In short-term In medium- or On the radar, No interest

invested and planning/actively long-term but no action
Moderate, 25% deployed experimenting planning planned
And face significant talent and hiring challenges to get up and running
What are your top issues in getting up and running with AI?
54%
37% 35% 35%

30% 27%
23%
Lack of necessary staff Defining our AI Strategy Identifying use case for Funding for AI initiatives Security or privacy Complexity of integrating Determining how to
skills AI concerns AI with our existing measure value from
infrastructure using AI
• CEOs recognize the need for AI to automate their businesses, but seem to be struggling to identify what their business use-case will be and to
find the right talent to deploy it properly
Source: Gartner
2018
2016 was the year that Kubernetes established itself as the mainstream container
orchestration tool, while 2017 saw it pace further ahead of the pack
Plans for Container Orchestration Container tool usage by stage
40% 45%
36%
6%
10%
18% 18%
15% 17% 17%
14% 14%
2% 1% 4% 4%
29%
9% 2% 3% 3% 2%
3% 4%
3%
3%
12% 13% 12%
9% 10%
8%
Currently in use Considering in Not familiar Have no plans to

next 2 years use in next 2
years
Production Dev/QA PoC
• Container orchestration is still early in mainstream adoption, but Kubernetes has established itself as the solution of choice – well ahead of a
pack of other solutions vying for second place
Left Chart Source: 451 Research, Voice of Enterprise: Cloud

Right Chart Source: OpenStack Developer Survey
2018
Serverless breaks out as the new compute platform

Growth of serverless market
Abstraction
Google Functions
Azure Functions $7.7B
AWS Functions
Serverless
IBM Functions
Containers
$1.9B
Cloud Hosting
VM
2016 2021
VM VM
Virtual Machines
Bare Metal
Time
• While new in name only, 2017 was the year that serverless broke out as a platform and the term became nearly ubiquitous even though
adoption is still early
• In order to further abstract infrastructure management, AWS, Azure, GCP, and IBM have all created serverless functions
Left Graph Source: Adapted from CNCF Blog
Right Chart Source: Research and Markets Function-as-a-Service Report
It might not be crazy to compete with cloud giants after all… 2018
Select Private Vendor
Cloud Computing Azure VM
Cloud Data
Warehouse
Azure Data Warehouse
Application
Monitoring
Azure Monitor Google App Engine
Data Processing Azure HDInsight Google Dataproc
Machine Learning *
Platform
Azure Machine Learning
Cloud Security Azure Security Center NA
Data Streaming Azure Event Hub Google Dataflow
Security and
Access Control
Amazon Cognito Azure Active Directory Google Identity Management
CDN Amazon Cloudfront Azure CDN Google CDN
Cost Management Amazon Trusted Advisor Azure Cost Management NA
Provisioning NA NA
Key Management Amazon KMS/ Azure KeyVault Google Key Management
• With Okta’s IPO, the acquisition of Evident.io, and large rounds by CloudHealth, Confluent, Dataiku*, HashiCorp and Snowflake, the last 18
months have proven that that private vendors can beat cloud giants either head-to-head or in a slight adjacencies
2018
New web standards are beginning to emerge
Unix Model Web 1.0 Modern Web
Client Client Client
Third
Your
Server Web Server Party
Services
Services
API
Microservice
App Server Centric
Microservice CDN
Database Microservice DNS

And many more…
~1970-1997 ~1997-2017 ~2017–Present
• The web has moved from a monolithic, inflexible architecture to one that is more distributed and API-centric, where enterprises no longer need
to build all functionality into their app, but instead connect through API or SDK to other independent vendors for additional functionality
2018
Blockchain was everywhere in 2017, but it is still extremely
nascent in the B2B world
CEO’s perspective of Blockchain’s impact Blockchain market for businesses over-time
$4B 140%
25% of CEOs 133%
Transformational
Don't Know expect
7%
16% significant 120%
Major business
$3.2B
18% 105%
impact from $3B 100%
Blockchain 100%
83% $2.2B
80% 84% 80%
76%
None $2B 64%
22%
60%
$1.3B 46%
Minor Moderate 50%
17% 20% 40%
$1B 35%
$720M
28%
25%
$360M 20%
Sample Impact – Settling Financial Transactions $176M
$4M $5M $9M $21M $37M $50M $64M $96M
$0M 0%
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Business Value ($Bs) Growth
• Few dispute that there is opportunity for Blockchain in the

enterprise (with Gartner estimating the market to be $3.2B by
2030), but the actual impact is much more hypothetical (like
Settling Financial Transactions) than it is in use
Top Left and Right Chart Source: Gartner

Bottom Left Image Source: Accenture
2018
Data governance and data sovereignty is now a need-to-have
GDPR impacts are broad reaching Facebook isn’t helping public perception
Select vendors that can help you CYA

• May 2018 is the official go-live date of GDPR in
Europe, but Enterprises and SMBs alike spent 2017 *
and the beginning of 2018 accounting for data and
data processes
• This has become an even more relevant as the
public outrage over Facebook’s handling of data
makes headlines around the world
Top Left Image Source: Europa.eu

Top Right Image Source: Denver Post
Bottom Right Select Vendors Source: GDPR Index
2018
Digital transformation reaches peak hype but adoption has lagged

IT spending or digital transformation
Google Trends analysis for “digital transformation”
mentions on earnings calls
140 100
90
120
80
100 70
60
80
50
60 40
40 30
20
20 10
0 0
2016 2017 2013 2014 2015 2016 2017 2018
CIO survey: What best classifies your digital transformation

CEO survey: CEOs feeling the pressure
efforts?
Experiencing pressure from the
board of directors to make Have specific job title 28% 26%
progress in digital business "chief digital officer" 20%
14%
9%
3%
35%
47%
Delivering
Desire
Designing
Scaling
No digital
Harvesting
Building Breaking the
Inactive foundation barrier
• 2017 was the year that we saw enterprises double down on their “enterprise transformation” focus but few have turned the words into practice
yet
Top Left Chart Source: Goldman Sachs

Top Right Chart Source: Google
Bottom Left Chart Source: Gartner 2018
Bottom Right Chart Source: Gartner 2017
2018
ASC 606 is impacting public companies and software accounting

Accounting Treatment of Revenue and Licenses
GAAP ASC 606
Perpetual Upfront Upfront
Term Ratable Upfront
Cloud Ratable Ratable
• ASC 606 does not have a fundamental impact on the operations of software businesses but does impact the timing of revenue recognition and
the expensing of software commissions
• Public companies were forced to deal with this in the back-half of 2017 and throughout 2018, and it is something that should be top-of-mind for
all companies that are thinking about an IPO
• Businesses with term licenses will have the largest impact with revenue recognition more closely tracking the bookings/billings seasonality.
Sales commissions will also be required to be capitalized and amortized over the expected life-time of the contract
Image Sources: Goldman Sachs Equity Research

2018
Glassdoor / Culture Matters
 Battery is thrilled to partner with Glassdoor* for the second annual

Battery Ventures/Glassdoor Highest Rated Cloud Computing
Companies to Work For project.
 Two lists: Top 25 Public List & Top 50 Private List
 This project highlights private and public B2B-focused cloud

companies with stellar records of employee satisfaction as measured
by employee feedback shared on Glassdoor.
 Such ratings are increasingly important as cloud and other

technology firms fight harder than ever to attract and retain new
talent.
* Denotes a current or former Battery portfolio company. For a full list of all Battery investments and exits, please click here.
2018
Methodology
 To be considered, a cloud company must have received at least 30
company reviews on Glassdoor as of 3/18/18.
 The private-company report tracks independent, non-public cloud
companies that, according to Battery research and data from research
service Crunchbase,
–are based in the U.S.;
–have a B2B business model; are categorized as Saas, cloud-
computing and/or enterprise software, according to Crunchbase;
–have more than 200 employees (as of 4/13/2018, according to
company data provided to LinkedIn and Battery research); and
–have raised funding over the past three years (on or after 7/1/14).
 The public-company report tracks public cloud companies globally with a
B2B business model that have at least $500 million in total enterprise
value as of April 15, 2018, according to CapIQ.
 A company’s CEO approval rating and positive business outlook rating
was not taken into account to determine rank on either list.
Views contained herein are for informational purposes only and should neither be considered investment advice nor construed or used as an offer and/or recommendation to
buy or sell a security.
2018
Glassdoor stats that you should know
 50 Million monthly unique visitors; 72% of Glassdoor users have

a 4-year or higher college degree
 Of all company reviews on Glassdoor, 53% are from current

employees and 47% are from former employees (at time of review).
 Among those surveyed, nearly half (48%) of Glassdoor users read

at least 7 reviews before forming an opinion of a company
 Among those surveyed, 3 in 4 (76%) Glassdoor users are more

likely to apply to an open job if the employer is active on
Glassdoor (e.g. responds to reviews, updates their profile, shares
updates on the culture and work environment). (It’s free to respond!)
Source: Glassdoor Research

2018
Private company list

Rank Company Score Rank Company Score Rank Company Score
1 Algolia 4.9 18 Looker 4.7 34 WalkMe 4.5
2 Asana 4.9 19 ForgeRock 4.7 35 Pipedrive 4.5
3 Canopy 4.9 20 BounceX* 4.7 36 Chef* 4.5
4 SalesLoft 4.8 21 InVision* 4.6 37 Mavenlink 4.5
5 Sprout Social 4.8 22 ThousandEyes 4.6 38 Smartsheet 4.5
6 Procore 4.8 23 ServiceTitan* 4.6 39 Tanium 4.5
7 Outreach 4.8 24 Elementum 4.6 40 Gainsight* 4.5
8 Datorama 4.8 25 HireVue 4.6 41 Addepar 4.5
9 Greenhouse 4.7 26 Intercom 4.5 42 Demandbase 4.5
10 Health Catalyst 4.7 27 OutSystems 4.5 43 Qubole 4.5
11 Lucid Software 4.7 28 Duo Security 4.5 44 Dataminr 4.5
12 Podium 4.7 29 C3 IoT 4.5 45 Pluralsight 4.4
13 Segment 4.7 30 ThoughtSpot 4.5 46 Carbon Black 4.4
14 Justworks 4.7 31 Dynamic Signal 4.5 47 Cohesity* 4.4
15 PagerDuty 4.7 32 Salsify 4.5 48 M-Files 4.4
16 Slack 4.7 Collective 49 TrendKite* 4.4
17 nCino 4.7 33 Health 4.5 50 Tradeshift 4.4
Smartsheet is now a public company (NYSE: SMAR). They were not yet public at the cutoff date for the public list (4/15/2018).
2018
Bar is getting higher for private companies
2018
Our private list
Source: LinkedIn, Pitchbook

2018
Public company list

Rank Company Score Rank Company Score
1 HubSpot 4.6 13 Dropbox 4.3
Ultimate Cornerstone
2 4.5 14 4.2
Software OnDemand
Guidewire 15 Box 4.2
3 4.5
Software* 16 Five9 4.2
4 SendGrid 4.5 17 Coupa* 4.2
5 Paylocity 4.4 18 Zuora 4.2
6 Instructure 4.4 19 Twilio 4.1
7 Nutanix* 4.3 20 Talend 4.1
8 Zendesk 4.3 21 Salesforce 4.1
9 AppFolio 4.3 22 Xero 4.0
10 Shopify 4.3 23 Paycom 4.0
11 Okta 4.3 24 Adobe 4.0
12 Wix 4.3 25 Mimecast 4.0
2018
Our public List
$300B Cumulative Market Cap

(as of 4/27/2018)
Founding Year for Public List

6
3 3
2 2 2 2
1 1 1 1 1
Source: CapIQ, Pitchbook

2018
Cloud companies compare favorably to Glassdoor overall
Average Overall Company Rating
Source: Glassdoor
2018
Average CEO Approval Rating
Source: Glassdoor
2018
Average Positive Business Outlook Rating
Source: Glassdoor
2018
Geographic diversity
Source: LinkedIn
2018
Industry diversity
Source: Battery Research

2018
Liquidity for our 2016 private list
CONCLUSION
2018
Q1 Update: 2018 is currently on pace to be a record setting year
for software
Venture funding market M&A market
$45B 2018 run-rate: $90B $79.5B 2018 run-rate:
$41.9B $76.2B
$35.1B $75B
$32.5B $32.0B $63.5B$63.8B
$30.0B
$54.9B $56.3B
$30B $60B $51.1B
$45.4B $44.5B
$45B
$15.2B $28.9B
$15B $11.9B$12.2B $30B
$9.1B $16.7B
$7.2B Q1: $10.5B Q1: $19.1B
$5.8B $15B
$0M $0B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Software IPO market

$2.8B
(1)
$2.4B
$1.7B
$1.6B
$1.3B
$1.2B
$948M Q1: $948M
$771M
$406M
$0M
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
• Extrapolating the run-rate activity in Q1 for the rest of the year shows that 2018 could be a record breaking year for the software market across
the Venture funding, M&A and IPO markets
(1) Reported by Recode
Top Left Chart Source: Pitchbook
Top Right Chart Source: 451 Group Battery Ventures | 88
Bottom Chart Source: Capital IQ
2018
It’s not easy to get there…

7,300
companies
2,300
companies
970
companies 600 200
companies companies
5,000+
1,000+ employees
500+ employees
employees
200+
employees
50+
employees
• The road to 1K employees is a long one for many start-ups, with over 100K software companies in the US and only 600 over 1,000
employees
Source: LinkedIn employee data on software companies

2018
But disruptive software companies will be started in all markets
Nasdaq composite index
5,000
*
4,000
*
*
3,000
*
* *
2,000
1,000 * *
* *
*
0
2013
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2014
* Denotes a current or former Battery portfolio company. Past performance is not indicative of future returns
Note: Includes public cloud companies with TEV >$500M as of 4/15/18 according to Capital IQ, cloud companies acquired for over $500M since 2009 according to Pitchbook,
and private cloud companies valued at over $1.5B as of 4/15 according to Crunchbase. Excludes companies based in Asia
2018
We’re just getting started

$7000B *
*
*
*
$6000B
*
* Your Logo Here?

$5000B
$4000B
~5
*
*
$3000B *
$2000B * *
*
$1000B
$0B
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
* Denotes a current or former Battery portfolio company. Past performance is not indicative of future returns
Note: Includes public cloud companies with TEV >$500M as of 4/15/18 according to Capital IQ, cloud companies acquired for over $500M since 2009 according to Pitchbook,
and private cloud companies valued at over $1.5B as of 4/15 according to Crunchbase. Excludes companies based in Asia
2018
Who are we?
Neeraj Agrawal
Neeraj joined Battery in 2000 and invests in SaaS and internet companies across all stages. He was a
founding investor in BladeLogic and has invested in several other companies that have gone on to
stage IPOs, including Bazaarvoice, Coupa, Guidewire Software, Marketo, Nutanix, Omniture,
RealPage and Wayfair. He also invested in several Battery portfolio companies that have experienced
M&A events. Neeraj’s current private investments include Amplitude, Braze, BloomReach, Catchpoint,
Chef, Clubhouse, Cohesity, Dataiku, Glassdoor.com, InVision, OpsGenie, Optimizely, Outlyer, Pendo,
SmarterHQ, Sprinklr, StellaService, Tealium, TrendKite and Yesware. He has been recognized as a
top-100 global venture capitalist on the Forbes Midas List for the past eight consecutive years.
Twitter: @neerajvc
Email: neeraj@battery.com
Logan Bartlett
Logan is a vice president in Battery’s Boston office, focused on growth investments for
business-to-business software companies. He is currently involved in Battery’s
investments in Amplitude, Braze, Clubhouse, Dataiku, Narvar, Pendo, and TrendKite. In
2017, Logan was named to Forbes’ “30 Under 30” list of leading young entrepreneurs,
innovators and game changers. Logan graduated with a BS from Washington and Lee
University, where he played men’s lacrosse.
Twitter: @jloganbartlett
Email: logan@battery.com
Special thanks to Brandon Gleklen, Mike Hoeksema and Galit Krifcher for their work on this with us

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2018

QUIET EXPERTISE THAT SPEAKS VOLUMES.

Overall software spend continues to grow

19.6% 2016-2021 CAGR

8.5% 2016-2021 CAGR

vs. 10% Software CAGR: 8.5%

0% US GDP CAGR: 2.3%

IT Growth Rate (Worldwide)

Source: Gartner Market Databook, 4Q17 Update; Forrester; PwC; IMF

$600B Global software industry revenue

Homegrown/Internal Software On-Prem + Mainframe SaaS

Software and IT have had a strong impact on productivity

Productivity - GDP IT's Contribution to Productivity Growth

$20 52% 49% 46%

1974-1995 1995-2004 2004-2012

Software has had a demonstrable impact on employment

The US software industry supports nearly 10 million jobs

2.5M directly employed in the software industry

7.2M software-supported indirect and induced jobs

The five forces of software’s accelerating growth

1 Existing software markets are growing over time

2 Software is infiltrating what were once niche markets

3 Software is displacing hardware

4 Software is displacing services & labor

5 Every company is becoming a software company

1 Existing software markets are growing over time

Global CRM Market Global ERP Market Global BI Market

Left Chart Source: Zion Market Research

2 Software is infiltrating what were once niche markets

Tours/Activities Mortgage Lending Pizza

Disaster Awareness Pharma/Biotech Patient Collections

Illustrative Hyper-Focused Business Processes Examples

Scheduling Meetings Sales Process Mgmt Site Reliability Eng

Illustrative SMB Market Examples

Software Project Mgmt Application Integration Email Marketing

* Denotes a current or former Battery portfolio company

Payroll/Benefits Sales Automation Expense Mgmt

3 Software is displacing hardware

By 2020, spending on cloud IT infrastructure will surpass spending on non-cloud IT infrastructure

$90B 2017-2022 CAGR

Cloud IT Infrastructure Non-Cloud IT Infrastructure

Software engineers are in high demand(2)

Software Engineers Hardware Engineers

4 Software is displacing services & labor

5 Every company is becoming a software company

2014 2015 2016 2017

Total Deal Total Deal Total Deal Total Deal

12/9 $710M 6/15 $4.0B 12/6 $2.8B 8/8 $1.6B

8/3 $2.7B 8/1 $2.4B 12/26 $1.1B

4/20 $1.3B 7/1 $1.5B 10/9 $820M

5/19 $687M 1/25 $970M 9/5 $712M

10/8 $675M 11/14 $915M 10/16 $510M

4/27 $600M 6/21 $900M

8/3 $500M 2/22 * $800M

We’re still in the early innings of the software revolution

Global software industry revenue

We’re still in the early innings of the software revolution

Global software industry revenue

We’re still in the early innings of the software revolution

Global software industry revenue

SaaS companies are well outpacing broad-based indices

SaaS Index S&P 500 Nasdaq Dow Jones

SaaS multiples recently traded up to an all-time high