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NATIONAL VENTURE CAPITAL ASSOCIATION

YEARBOOK 2012

PREPARED BY

INCLUDING STATISTICS FROM THE


PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report based on data from Thomson Reuters

April 2012 Dear Reader: These are challenging times characterized by economic and political uncertainty. Despite the turmoil in many sectors of the economy, the entrepreneurial sector, and in particular, the venture capital ecosystem, is looked to as a major driver of badly-needed economic improvement. The nation continues to look to this sector for job creation, economic development, better healthcare, cleaner technology, and a faster, better, and more secure internet. The statistics gathered and tracked by Thomson Reuters for ThomsonONE.com (formerly VentureXpert) and this Yearbook are essential to enabling analysis of venture capital by policy think tanks and economists and for use by government officials and other decision makers. For example, recent analysis of Thomson Reuters data by IHS Global Insight shows that in 2010, venture capital backed companies had revenues corresponding to 21% of US GDP and their headcount made up 11% of private sector jobs. Given that venture investment is less than 0.2% of GDP, that shows the power of these growing businesses. On behalf of the National Venture Capital Association board of directors and staff, we are pleased to present you with the latest statistics that describe the activity of the venture capital industry in the United States. These statistics reflect strong survey participation by venture capital practitioners. This support has allowed us to responsibly bring transparency to a part of the economy most people are aware of but few really understand. Your comments are always welcome at research@nvca.org. NVCA believes that it is more important than ever to effectively tell the story of venture capital, differentiate it from other forms of alternative assets, and explain whats needed to continue creating great, leading-edge companies. We believe that a strong venture capital industry is essential to Americas future and our quality of life. Very truly yours, Diana Frazier FLAG Capital Management NVCA Director & Chair, NVCA Research Mark G. Heesen NVCA President John S. Taylor NVCA Head of Research

NVCA BOARD OF DIRECTORS 2011-2012


Executive Committee
Paul Maeder Chair Highland Capital Partners Michael Greeley Treasurer FlyBridge Capital Partners Josh Green At-Large Mohr, Davidow Ventures Ray Rothrock Chair-Elect Venrock Associates Jack Lasersohn At-Large The Vertical Group

Research Committee
Diana Frazier Chair FLAG Capital Management, LLC Stephen Holmes InterWest Partners Mike Elliott Noro-Moseley Partners

Jonathan Leff Warburg Pincus

Board Members At-Large


Jonathan Callaghan True Ventures Bruce Evans Summit Partners Norm Fogelsong Institutional Venture Partners Deepak Kamra Canaan Partners David Lincoln Element Partners James Marver Vantage Point Partners Sherrill Neff Quaker BioVentures Theresia Ranzetta Accel Partners David Douglass Delphi Ventures James Fleming Columbia Capital Robert Goodman Bessemer Venture Partners Ray Leach Jumpstart, Inc. Trevor Loy Flywheel Ventures Jason Mendelson Foundry Group Robert Nelsen ARCH Venture Partners Scott Sandell New Enterprise Associates

Thomson Reuters

National Venture Capital Association Yearbook

2012

For the National Venture Capital Association Prepared by Thomson Reuters

Copyright 2012 Thomson Reuters

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

Thomson Reuters

National Venture Capital Association 2012 Yearbook


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

Thomson Reuters
3 Times Square, 18th Floor New York, NY 10036 Telephone: 646-223-4431 Fax: 646-223-4470 www.thomsonreuters.com
Vice President, Head of Private Equity and Desktop Products Elizabeth Benson

Head of Research John S. Taylor

Vice President of Membership & Member Firm Liaison Janice Mawson

Vice President of Communications Emily Mendell

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

Senior Vice President Molly M. Myers

Vice President, Deals and Private Equity Operations Shariq Kajiji Global Business Manager Private Equity Jim Beecher Editor-in-Charge David Toll

Press Management Matthew Toole Product Manager Lori Ann Silva

Global Private Equity Operations Manager Anna Aquino-Chavez

Vice President of Federal Life Science Policy Kelly Slone

Chief Marketing Officer Jeanne Lazarus Metzger

Vice President of Federal Policy & Political Advocacy Emily A. Baker

Content Specialist Paul Pantalla Data Specialist Francis Base

Membership Coordinator and Database Manager Terry Samm Accounting Manager Beverley Badley

Manager of Administration and Meetings Allyson Chappell Administrative Assistant Gwendolyn Taylor

Sales Manager Publications (Buyouts, VCJ, peHUB) Greg Winterton (646-223-6787) ThomsonONE.com Sales: Dave Sharma (646-223-4048)

Senior Art Director David Cooke

Research Editor Eamon Beltran

Research Lab Mavis Moulterd

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Table of Contents
What is Venture Capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 11 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Portfolio Company Post-Money Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Exits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 14 Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 15 Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Portfolio Company Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Appendix A: Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Appendix C: MoneyTree Geographical Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Appendix B: MoneyTree Report Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Appendix D: Industry Codes (VEICs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Appendix G: Data Sources and Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Appendix H: International Convergence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Appendix I: US Accounting Rulemaking and Valuation Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105 Appendix J: Non-US Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

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What is Venture Capital?


Venture capital has enabled the United States to support its entrepreneurial talent and appetite by turning ideas and basic science into products and services that are the envy of the world. Venture capital funds build companies from the simplest form perhaps just the entrepreneur and an idea expressed as a business plan to freestanding, mature organizations.
Venture Capital Backed Companies Known for Innovative Business Models Employment at IPO and Now
As Company The Home Depot Starbucks Corporation Staples Whole Foods Market, Inc. eBay of IPO 650 2,521 1,693 2,350 138 Current 321,000 149,000 89,019 61,500 27 ,770 # Change 320,350 146,479 87 ,326 59,150 27 ,632

Risk Capital for Business


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

Venture Capital Backed Companies Known for Innovative Technology and Products Employment at IPO and Now
Company Microsoft Intel Corporation Medtronic, Inc. Apple Inc. Google JetBlue As of IPO 1,153 460 1,287 1,015 3,021 4,011 Current 90,000 100,100 45,000 63,300 32,467 11,733 # Change 88,847 99,640 43,713 62,285 29,446 7 ,722

Source: Global Insight; Updated from ThomsonOne 2/2012

companies have received funding but no one- or twoperson company has ever gone public! Along the way, talent must be recruited and the company scaled up. Ask any venture capitalist who has had an ultra-successful investment and he or she will tell you that the company that broke through the gravity evolved from the original business plan concept with the careful input of an experienced hand.

More Than Money


The U.S. venture industry provides the capital to create some of the most innovative and successful companies. But venture capital is more than money. Venture capital partners become actively engaged with a company, typically taking a board seat. With a startup, daily interaction with the management team is common. This limits the number of startups in which any one fund can invest. Few entrepreneurs approaching venture capital firms for money are aware that they essentially are asking for 1/6 of a person! Yet that active engagement is critical to the success of the fledgling company. Many one- and two-person

Deal Flows Where The Buys Are


For every 100 business plans that come to a venture capital firm for funding, usually only 10 or so get a serious look, and only one ends up being funded. The venture capital firm looks at the management team, the concept, the marketplace, fit to the funds objectives, the value-added potential for the firm, and the capital needed to build a successful business. A busy venture capital professionals most precious asset is time. These days, a business concept needs to address world markets, have superb scalability, be made successful in a reasonable timeframe, and be truly innovative. A concept that promises a 10 or 20 percent improvement on something that already exists is not likely to get a close look.

Thomson Reuters

National Venture Capital Association


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

The Exit Funnel Outcomes of the 11,686 Companies First Funded 1991 to 2000
Went/Going Public 14% Still Private or Unknown* 35% Acquired 33%

Common Structure Unique Results


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

Known Failed 18%


*Of these, most have quietly failed

pre-agreed formula. Many college endowments, pension funds, charities, individuals, and corporations have benefited far beyond the risk-adjusted returns of the public markets.

Beyond the IPO


Many of the most exciting venture capital backed companies left the venture portfolios after they went public. Far from being a destination, the IPO process provides needed growth capital for a growing company. A 2009 analysis by IHS Global Insight shows that more than 90% of the jobs at todays venture backed public companies were created after it went public. That is, these companies on average are 10% of their mature size at the time they go public.

Economic Alignment of all Stakeholders An American Success Story


Venture capital is rare among asset classes in that success is truly shared. It is not driven by quick returns or transaction fees. Economic success occurs when the stock price increases above the purchase price. When a company is successful and has a strong public stock offering, or is acquired, the stock price of the company reflects its success. The entrepreneur benefits from appreciated stock and stock options. The rank and file employees throughout the organization historically also do well with their stock options. The venture capital fund and its investors split the capital gains per a

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

Thomson Reuters

2012 NVCA Yearbook

Executive Summary
During 2011, the industry continued to right-size and find equilibrium. The long anticipated decline in industry sizing took a breather in 2011 at least for some of the metrics, while others such as headcount continued to decrease. Despite a difficult fundraising environment and only a few strong IPO exits, the industry increased its level of investment in a number of sectors, including clean technology. Investment growth in 2011 took place at both ends of the maturity spectrum. Again, more than 1,000 new companies were funded by venture capital firms in 2011. The number of initial public offerings in 2011 fell from their modest 2010 levels, although a number of large, high profile issues increased total proceeds. While the number and proceeds from acquisitions increased, total proceeds from all exit activity again fell short of what was needed to provide capital for the many mature companies now in portfolios. The subsequent lack of distributions to the institutional investors who provide the capital to the industry has left these institutional investors with little capital to cycle back to the industry. Thus, 2011 remained a difficult year for many venture capital firms to raise money. A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new business opportunities, known as deal flow, remains very high and the best opportunities are getting funded, stresses remain.

Introduction
The National Venture Capital Association 2011 Yearbook provides a summary of venture capital activity in the United States. This ranges from investments into portfolio companies to capital managed by general partners to fundraising from limited partners to valuations of companies receiving venture capital investments to exits of the investments by either IPOs or mergers and acquisitions. The statistics for this publication were assembled primarily from the MoneyFigure 1.0 Venture Capital Under Management Summary Statistics

Tree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters and analyzed through the Thomson ONE.com (formerly VentureXpert) database of Thomson Reuters, which has been endorsed by the NVCA as the official industry activity database. Subscribers to Thomson ONE can perform considerable further analysis on the underlying data.

Industry Resources
The activity level of the U.S. venture capital industry is around half what it was at the 2000-era peak. For example, in 2000 more than 1,000 firms invested $5 million or more during the year. In 2011, the amount was roughly half that. Venture capital under management in the United States by the end of 2011 increased 8% from 2010 levels to $197 billion as calculated by the methodology described in this Yearbook. However, looking behind the numbers, we know that the industry continues to contract from the circa 2000 bubble high. The increase in capital was due to 2011 fundraising being stronger than it was eight years prior (2003). Total capital total is well below the bubble peak. The uptick in firms and capital managed in 2011 belies a

No. of VC Firms in Existence No. of VC Funds in Existence No. of Professionals No. of First Time VC Funds Raised No. of VC Funds Raising Money This Year VC Capital Raised This Year ($B) VC Capital Under Management ($B) Avg VC Capital Under Mgt per Firm ($M) Avg VC Fund Size to Date ($M) Avg VC Fund Size Raised This Year ($M) Largest VC Fund Raised to Date ($M)

1991 2001 2011 362 917 842 640 1,850 1,274 3,475 8,620 6,125 4 45 45 40 325 173 1.9 39.0 18.7 26.8 261.7 196.9 74.0 285.4 233.8 37.4 95.4 110.6 47.5 120.0 108.1 1,775.0 6,300.0 6,300.0

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National Venture Capital Association


Figure 2.0 Capital Under Management U.S. Venture Funds (Billions) 1985-2011
350 300 250

($ Billions)

200 150 100 50 0

120 100 80 ($ Billions) 60 40 20 0


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

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 96 97 99 09 10 11 Year
0

10

198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1
Figure 3.0 Capital Under Management to U.S. Venture Funds (Billions) 1985-2011
Year

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

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2012 NVCA Yearbook


Figure 4.0 Capital Under Management U.S. Venture Funds (Billions) 1985-2011

100 80 ($ Billions) 60 40 20 0

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

contracting industry. The average venture firm dropped in size from 8.0 principals per firm to 7.4. Headcount of these principals continued to decline to 6,231, which is 28% less than just four years earlier.

Commitments
New commitments to venture capital funds in the United States increased in 2011 to $18.7 billion after four consecutive years of declines. However, the amount raised by funds in 2011 was less than the amount of MoneyTree investment by funds in companies for the fifth consecutive year. While investment increased 36% from 2010 to 2011, a significant portion of the fundraising was done by several large, established firms. For many venture firms, especially those without established successful track records, it was very difficult

Thomson Reuters

198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1
Year
Figure 5.0 Venture Capital Investments in 2011 By Industry Group

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

All Investments No. Companies 1989 682 447 3118 No. Deals 2357 836 529 3722 Investment Amt ($Bil) 16.4 7.9 4.5 28.8

Initial Investments No. Companies 671 138 164 973 No. Deals 671 138 164 973 Investment Amt ($Bil) 2.5 1.0 6.6 10.1

to raise money. In early 2012, a number of U.S. venture firms anticipated beginning new fundraising later in the year or in 2013. Many were waiting for a few more successful IPOs or acquisitions of portfolio companies in current funds to provide investible liquidity to their investors and to demonstrate success.

Investments
With the industry overall continuing to right-size, venture capital firms nonetheless continued to both take on new companies to grow and to fund their existing investments. The number of deals, total dollars invested, and first-time fundings all increased in 2011 from 2010 levels. Venture capital investment grew from $23.3 billion in 2010

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National Venture Capital Association


Figure 6.0 2011 Investments By Company Stage
Seed 3%

Later Stage 34%

Early Stage 29%

Expansion 34%

Figure 7.0 Venture Capital Investments in 2011 By Industry Sector


Telecommunications 2% Biotechnology 17% Business Products and Services 1% Computers and Peripherals 1% Consumer Products and Services 4% Electronics/ Instrumentation 2% Financial Services 1% Healthcare Services 1%

Software 24%

Semiconductors 4% Retailing/ Distribution 1% Networking and Equipment 1% Medical Devices and Equipment 10%
IT Services 8%

Industrial/Energy 12%

Media and Entertainment 8%

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2012 NVCA Yearbook


to $28.7 in 2011, a 23% increase. By contrast, the increase in number of deals from 3,543 in 2010 to 3,722 in 2011 reflected only a 5% increase. This was largely due to a number of large, later stage deals made during the year into existing portfolio companies in anticipation of an IPO or acquisition in upcoming quarters. The flurry of later stage investments in 2007 and early 2008 slowed considerably after the global economic issues in mid-2008 and has started coming back. That said, the total number of deals done during 2011 (3,722) was less than half the number (8,032) done in 2000. After years of taking on 1,000 or more new companies each year, the industry had dipped to a post-bubble low in 2009, when it funded 797 first time companies. That count increased in 2011 to 1,173. Regardless of the specific counts, it is important to remember that each first funding represents a fresh commitment by venture capital funds to the future.

Portfolio Company Post-Money Valuations


Overall, both average and median round valuations increased in 2011. But it was sector dependent. For median valuations, Biotechnology, Consumer Products and Services, Electronics and Communications, Healthcare Services,

Figure 8.0 2011 Investments By State

Number of State Companies California 1,256 Massachusetts 316 New York 265 Texas 132 Illinois 78 Virginia 69 Colorado 81 Washington 92 New Jersey 53 Pennsylvania 126 All Others 650 Total 3,118

Pct of Total 40% 10% 8% 4% 3% 2% 3% 3% 2% 4% 21%

Investment ($ Millions) 14,671.7 2,988.9 2,294.7 1,468.9 695.7 649.6 621.5 542.4 533.4 520.1 3,688.0 28,675.0

Pct of Total 51% 10% 8% 5% 2% 2% 2% 2% 2% 2% 13%

Figure 9.0 Valuations Per Company Industry 2011 Financings ($ Millions)


Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total Avg Val 63.6 1.9 N/A 90.2 48.6 77.6 83.6 404.5 100.3 47.2 87.9 41.5 N/A N/A 19.1 123.7 25.2 97.7 Max 671.6 1.9 N/A 90.2 99.8 197.9 164.6 2,250.0 409.4 200.0 319.2 74.4 N/A N/A 33.2 1,844.2 55.0 2,250.0 Upper Quartile 57.3 1.9 N/A 90.2 63.2 112.6 100.4 57.7 94.1 54.2 105.8 57.9 N/A N/A 25.0 66.7 36.2 75.6 Median 41.3 1.9 N/A 90.2 26.6 27.2 74.4 45.7 43.2 16.4 69.6 41.5 N/A N/A 20.3 34.6 20.1 36.6 Lower Quartile 8.5 1.9 N/A 90.2 23.1 17.4 57.7 28.2 15.7 5.2 24.2 25.1 N/A N/A 11.9 13.3 9.0 11.8 Min 1.8 1.9 N/A 90.2 19.5 7.7 21.0 1.6 0.2 4.6 11.2 8.7 N/A N/A 5.0 3.5 5.5 0.2

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Industrial/Energy (where many clean technology companies are classified), IT Services, Medical Devices, and Software saw higher valuations in 2011 compared with recent years. Meanwhile, Business Products and Services, Media and Entertainment, Semiconductors, and Telecom saw declines in their median valuations. Looking at first fundings, most sectors saw 2011 valuations below the aggregate of the prior six years. Notable is the quadrupling of the median first funding for Industrial/ Energy companies, which is where many clean technology companies are classified. IPO valuations have strengthened in 2011, helped by some large, high profile offerings. The ratio of a given companys IPO valuation (pre-money) to total venture investment roughly doubled in 2011 from 5.0 to 10.5. Again, this was driven in large part by a handful of very large IPOs. While overall there were fewer venture-backed IPOs in 2011, they provided better returns to their investors. needed. In 2011, the number of IPOs fell to 53 from the prior years 75. However, the proceeds of those offers rose from $7.6 billion to $9.9 billion. These results included both large and small IPOs, but several very large IPOs drove the totals. Total IPO valuations in 2011 rose to nearly $80 billion, up from $37 billion in 2010. This large-IPO effect can also be seen in the average valuation at IPO of $1.5 billion compared to a median valuation of one-third that amount. Exit success through acquisition (M&A) in 2011 saw yet again a record count of acquisitions at 458, which was in increase over 442 in 2010, which itself had been a high water mark. Total dollars realized also increased to $24 billion. While not an all-time record, or even a post-bubble record, it shows 31% growth over 2010. In 2011, 21% of fully reported selling prices were 10 times or greater the total venture investment into that company. Almost another third (31%) of the reported acquisitions were for 4-10 times the total venture investment. Both statistics are at the post-bubble high.

Exits
While some venture exit metrics improved in 2011, such as total proceeds from IPOs and from acquisitions, overall results fell far short of what was hoped for, and what was

Figure 10.0 Venture-Backed IPOs

300
No of IPOs

25.00

250

Offer Amount ($B)

20.00

200 No. of IPOs 15.00 150 10.00 100 5.00 Offer ($ Billion)

50

0 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Year '11

0.00

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2012 NVCA Yearbook

Industry Resources
The activity level of the U.S. venture capital industry is around half what it was at the 2000-era peak. For example, in 2000 more than 1,000 firms invested $5 million or more during the year. In 2011, the amount was roughly half that. Venture capital under management in the United States by the end of 2011 increased 8% from 2010 levels to $197 billion as calculated by the methodology described below. However, looking behind the numbers, we know that the industry continues to contract from the circa 2000 bubble high. The increase in capital was due to 2011 fundraising being stronger than the amount raised eight years prior (2003). Even with the increase in 2011, total capital is well below the bubble peak. The slight uptick in firms and capital managed in 2011 belies a contracting industry. The average venture firm dropped in size from 8.0 principals per firm to 7.4. Headcount of these principals continued to decline to 6,231, which is 28% less than just 4 years earlier. While we expect the number of firms to decline further, the bulk of the recent fundraising was done by larger firms. So while headcount is likely to decline further, the number of principals per firm can be expected to increase. Geographic location of the largest venture firms is quite concentrated. California domiciled firms manage 46% of the industrys capital although these firms may have investing partners based in other states or even countries. Taken together, the top five states (California, Massachusetts, New York, Connecticut, and Illinois) hold 80% of total venture capital in this country.

Methodology
The number of firms in existence will vary on a rolling eight year basis as firms raise new funds or do not raise funds for more than eight years. Under this methodology, we estimate that there are currently 842 firms with limited partnerships in existence. To clarify, this is actually stating that there are 842 firms that have raised a venture capital fund in the last eight years. In reality, fewer firms are actually making new investments in 2012. For this publication, we are primarily counting the number of firms with limited partnerships and are excluding other types of investment vehicles. From that description, it may appear that the statistics for total industry resources may be underestimated. However, this must be balanced with the fact that capital under management by captive and evergreen funds is difficult to compare equitably to typical limited partnerships with fixed lives. For this analysis only, the firms counted for capital under management include firms with fixed life partnerships and venture capital funds raised. If a firm raised both buyout and venture capital funds, only the venture funds would be counted in the calculation of venture capital under management. Venture capital under management can be a complex statistic

to estimate. Indeed, capital under management reported by firms can differ from firm to firm as theres not one singular definition. For example, some firms include only cumulative committed capital, others may include committed capital plus capital gains, and still other firms define it as committed capital after subtracting liquidations. To complicate matters, it is difficult to compare these totals to European private equity firms which include capital gains as part of their capital under management measurements. For purposes of the analysis in this publication, we have tried to clarify the industry definition of capital under management as the cumulative total of committed capital less liquidated funds or those funds that have completed their life cycle. Typically, venture capital firms have a stated 10-year fixed life span, except for life science funds which are often established as 12-year funds. Figure 1.08 shows the reality of fund life. Thomson Reuters calculates capital under management as the cumulative amount committed to funds on a rolling eight-year basis. Current capital under management is calculated by taking the capital under management calculation from the previous year, adding in the current years funds commitments, and subtracting the capital raised eight years prior.

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Figure 1.01 Capital Under Management U.S. Venture Funds ($ Billions) 1985 to 2011 350 300 250 ($ Billions) 200 150 100 50 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Year

For this analysis, Thomson Reuters classifies venture capital firms using four distinct types: private independent firms, financial institutions, corporations, and other entities. Private independent firms are made up of independent private and public firms including both institutionally and non-institutionally funded firms and family groups. Financial institutions refers to firms that are affiliates and/or subsidiaries of investment banks and non-investment bank financial entities, including commercial banks and insurance companies. The corporations classification includes venture capital

subsidiaries and affiliates of industrial corporations. The capital under management data referred to in this section consist primarily of venture capital firms investing through limited partnerships with fixed commitment levels and fixed lives and does not include non-vintage evergreen funds or true captive corporate industrial investment groups without fixed commitment levels. The term evergreen funds refers to funds that have a continuous infusion of capital from a parent organization, as opposed to the fixed life and commitment level of a closed-end venture capital fund.

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Figure 1.02 Total Capital Under Management By Firm Type 1985 to 2011 ($ Millions)

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

Private Independent Financial Institutions Corporations Other


Total

13,819 4,054 2,096 1,028

16,631 4,021 1,975 1,045

19,625 3,919 2,365 1,025

21,822 3,751 2,547 1,025

25,573 3,160 2,451 908

25,643 3,196 2,455 826

24,856 25,495 27,615 31,265 35,865 2,738 2,519 2,709 3,177 3,992 2,382 2,503 1,674 1,723 1,439 706 351 207 298 403

43,126 54,586 78,834 125,037 199,686 5,476 7,617 10,854 16,639 25,166 2,406 2,710 3,847 7,623 13,031 437 813 1,045 1,307 1,873

236,650 27,096 14,315 2,589

237,889 26,632 14,357 2,593

239,430 25,976 14,305 2,561

248,393 24,776 13,540 2,509

256,218 24,183 13,350 2,178

270,128 21,675 13,054 2,122

250,255 16,695 9,646 1,890

198,922 172,338 174,498 184,609 8,225 6,726 7,038 10,079 4,367 3,195 3,816 5,086 1,310 655 635 588

20,997 23,672 26,934 29,144 32,091 32,120 30,682 30,868 32,204 36,463 41,698 51,444 65,725 94,580 150,605 239,757 280,651 281,471 282,272 289,218 295,928 306,979 278,485 212,823 182,914 185,987 200,363

Figure 1.03 Distribution of Firms By Capital Management 2011

160 140 120 100 80 60 40 20 0

145 121 115 118

142

98

52

49

010

50

10 -2 5

-10 0

50 0 00 -10

25 00 50

00 25

50

Capital Under Management ($ Millions) This chart shows capital committed to US venture firms in active funds. While much of the capital is managed by larger firms, of the 842 firms at the end of 2011, roughly 59% of them (500) managed $100 million or less. By comparison, just 49 firms managed active funds totaling more than $1 billion.

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10 00

25 -

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Figure 1.04 Fund and Firm Analysis
Total Cumulative Funds 631 707 810 888 980 1,038 1,077 1,149 1,244 1,341 1,498 1,647 1,862 2,098 2,434 2,848 3,094 3,168 3,271 3,438 3,610 3,790 4,001 4,181 4,286 4,408 4,545 Total Cumulative Firms 323 353 388 407 436 452 459 479 509 540 606 666 759 837 964 1,105 1,187 1,202 1,253 1,322 1,390 1,465 1,550 1,612 1,652 1,711 1,761 Total Cumulative Capital ($B) 20.0 23.4 27.4 30.8 35.8 38.3 40.5 44.1 49.3 56.7 66.3 78.6 97.7 128.8 183.6 268.1 311.1 318.4 328.5 348.6 375.1 416.7 446.3 473.2 489.5 500.6 525.4 Existing Funds 531 589 669 700 726 715 640 602 613 634 688 759 882 1,060 1,357 1,699 1,850 1,827 1,773 1,791 1,748 1,692 1,567 1,333 1,192 1,240 1,274 Firms That Raised Funds in the Last 8 Vintage Years 294 324 353 366 381 384 362 354 370 383 423 467 540 611 730 859 917 915 943 980 1,002 1,012 1,004 871 806 833 842 Capital Managed ($B) 17.5 20.7 23.7 24.7 27.6 28.2 26.8 27.2 29.4 33.3 38.9 47.8 61.9 90.5 143.1 224.0 261.7 261.7 262.2 270.0 277.3 287.9 262.7 205.1 178.4 182.2 196.9 Avg Fund Size ($M) 33.0 35.1 35.4 35.3 38.0 39.4 41.9 45.2 48.0 52.5 56.5 63.0 70.2 85.4 105.5 131.8 141.5 143.2 147.9 150.8 158.6 170.2 167.6 153.9 149.7 146.9 154.6 Avg Firm Size ($M) 59.5 63.9 67.1 67.5 72.4 73.4 74.0 76.8 79.5 86.9 92.0 102.4 114.6 148.1 196.0 260.8 285.4 286.0 278.0 275.5 276.7 284.5 261.7 235.5 221.3 218.7 233.8 Firms Actively Investing 91 109 105 117 113 100 76 102 92 109 180 245 340 387 692 1,035 744 522 498 557 524 548 594 573 442 495 526

Year 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

The correct interpretation of this chart is that since the beginning of the industry to the end of 2011, 1,761firms had been founded and 4,545 funds had been raised. Those funds totaled $525.4 billion. At the end of 2011, 842 firms as calculated using our eight-year methodology managed 1,274 individual funds, with each fund typically being a separate limited partnership. Capital under management by those funds at the end of 2011 was $196.9 billion. However, only 526 independent and corporate venture groups invested at least $5 million in MoneyTree TM deals in 2011.

Figure 1.05 Principals Information

Figure 1.06 Top 5 States By Capital Under Management 2011

Year 2007 2008 2009 2010 2011

No. Principals Per Firm 8.7 8.5 8.6 8.0 7.4

Estimated Industry Principals 8,665 7,293 6,760 6,328 6,231

Avg Mgt Per Principal ($M) 30.0 28.3 26.4 25.7 28.6

State CA MA NY CT IL Total*

($ Millions) 89,990.7 34,211.4 20,062.4 9,824.9 4,408.2 158,497.7

*Total includes above 5 states only

The correct interpretation of this chart is that at year end 2011, there were 6,231 principals (people who go to board meetings) in the industry. A principal on average manages $28.6 million and the average firm is made up of 7.4 principals, down from 8.0 principals a year earlier.

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Figure 1.07 Capital Under Management By State 1985 to 2011 ($ Millions)

State CA MA NY CT IL PA DC TX NJ WA MD VA MO MN NC CO UT MI TN GA OK OH FL DE AL IN LA WI AZ KY NM ID ME SD HI IA OR VT ND NH KS SC MS PR NE RI MT AK WY AR NV WV Total

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 4,795 5,781 6,438 6,588 7,788 7,419 7,514 7,483 8,451 9,136 11,285 2,338 2,667 3,555 3,895 4,303 4,423 4,070 4,939 5,140 5,642 6,941 3,411 4,473 4,387 4,197 5,677 5,900 5,540 5,393 5,969 7,121 8,486 1,281 1,435 1,921 1,976 1,820 1,983 1,835 1,932 2,270 2,429 2,275 468 491 721 847 803 818 781 883 1,149 1,220 1,311 443 519 549 561 730 772 798 794 570 734 820 3 4 4 9 9 9 9 22 23 29 146 452 490 723 719 792 835 771 803 937 1,143 1,155 623 724 796 779 776 996 924 591 546 729 955 312 407 385 421 395 383 197 241 227 178 298 93 97 123 116 158 163 98 114 374 784 911 72 78 78 84 104 91 56 42 35 32 48 555 583 616 590 598 655 651 640 107 137 119 197 295 339 671 743 881 809 762 842 896 875 34 54 87 89 124 113 109 110 108 146 128 360 429 397 517 617 576 557 531 622 570 478 9 19 19 15 15 15 15 10 10 25 31 111 119 125 121 123 38 14 14 13 10 41 102 127 191 183 214 259 275 269 200 291 306 87 95 175 257 261 275 262 261 434 432 433 1 29 29 28 37 38 36 37 38 9 10 849 891 971 830 254 257 273 302 428 469 446 124 131 173 192 194 132 110 97 151 223 320 39 40 40 38 47 41 41 14 41 51 100 125 131 132 127 134 136 136 137 6 6 6 44 55 56 77 96 88 80 96 99 109 111 7 7 7 7 7 5 2 11 22 31 49 177 96 95 91 101 102 77 78 81 163 167 40 43 43 72 74 75 75 34 44 43 44 15 16 16 16 0 0 0 0 0 7 21 70 100 135 132 168 255 242 230 205 179 153 0 0 0 0 0 0 0 0 0 0 0 1 1 20 25 26 26 26 28 29 98 89 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 0 0 0 2 49 52 104 101 63 64 61 62 54 55 5 168 176 203 239 242 246 227 116 74 74 77 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 24 25 25 49 50 51 50 50 27 27 46 0 0 0 0 0 13 13 13 14 14 37 1 1 1 1 15 15 15 15 15 15 29 0 0 0 0 0 0 0 0 0 0 11 0 0 0 0 0 9 9 9 9 9 9 0 0 0 1 1 1 1 1 11 11 104 15 16 16 36 36 37 36 36 22 22 23 0 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 17,500 20,700 23,700 24,700 27,600 28,200 26,800 27,200 29,400 33,300 38,900

1996 14,395 7,367 10,400 2,397 1,254 1,324 1,687 1,239 1,480 460 1,514 73 124 511 280 549 31 41 453 359 32 375 303 121 6 192 89 167 10 21 151 0 86 10 2 5 30 0 0 19 37 52 11 9 136 0 0 0 0 0 0 0 47,800

1997 18,975 10,074 10,785 3,915 1,928 1,741 2,348 1,693 1,555 677 2,002 157 147 615 599 853 94 66 463 761 23 689 378 114 5 176 275 137 9 21 120 0 88 10 2 16 30 0 0 66 56 37 11 49 138 2 0 0 0 0 0 0 61,900

1998 26,130 15,264 20,226 4,935 2,340 2,096 2,497 2,977 2,168 1,077 2,638 410 111 712 784 1,150 96 76 743 1,073 66 763 687 116 24 191 365 139 38 21 12 0 89 84 2 17 40 0 0 67 43 37 11 40 140 2 0 0 0 0 0 0 90,500

1999 49,867 22,786 27,368 7,267 3,643 3,056 2,667 4,796 2,701 1,793 3,507 1,141 216 1,092 989 3,321 131 439 1,058 1,162 66 1,244 1,070 115 33 207 444 110 37 21 12 0 207 84 11 16 40 0 0 66 43 37 11 40 139 2 0 0 0 19 24 0 143,100

2000 82,679 37,739 39,856 8,872 4,282 5,815 4,345 6,890 3,613 2,796 5,231 2,400 306 2,232 1,345 4,754 268 490 1,234 2,304 139 1,845 1,780 139 107 661 475 182 101 21 12 14 201 177 11 16 100 16 0 65 42 36 11 39 175 2 0 0 117 19 23 21 224,000

2001 100,991 47,267 40,933 11,930 4,690 6,023 5,163 8,005 4,448 3,676 5,354 2,594 448 2,183 1,425 5,263 474 494 1,278 2,153 139 1,868 1,746 106 107 660 649 182 103 21 12 14 289 177 11 60 99 43 0 65 42 37 39 68 164 26 0 0 117 19 23 21 261,700

2002 101,259 48,966 38,827 11,766 5,408 5,844 5,141 7,936 4,364 3,681 5,137 2,608 416 2,359 1,576 5,408 447 492 1,159 2,147 139 1,870 1,679 115 107 649 646 89 144 14 12 14 217 176 11 60 112 43 0 83 42 51 39 68 164 25 0 0 117 19 32 21 261,700

2003 103,496 48,057 37,492 11,729 5,807 6,126 5,021 7,794 4,574 3,556 5,016 2,776 406 2,351 1,773 5,383 558 533 1,148 2,070 139 1,848 1,586 74 154 681 629 89 179 14 33 14 218 176 9 55 82 43 0 65 19 38 28 68 71 35 0 0 117 19 32 21 262,200

2004 109,600 48,664 36,922 13,389 5,872 5,729 3,762 8,270 4,223 4,623 4,790 2,971 503 2,358 1,636 5,207 572 762 1,042 2,106 559 1,983 1,574 62 173 592 664 99 180 14 35 14 214 172 16 64 85 43 0 65 19 15 28 68 38 35 0 0 117 19 33 21 270,000

2005 114,397 50,486 36,902 13,359 5,381 6,260 3,793 8,399 4,213 4,589 4,747 3,538 1,231 2,440 1,467 4,875 530 796 1,089 1,835 654 1,805 1,802 62 225 595 504 85 198 18 69 14 215 172 16 53 85 43 0 19 0 20 28 29 38 33 0 0 118 19 33 21 277,300

2006 122,908 55,457 30,370 14,687 5,299 6,642 4,791 8,174 5,552 4,592 4,725 3,565 1,291 2,589 1,676 4,653 634 804 839 1,695 648 1,719 1,523 62 224 607 432 253 171 216 74 84 276 100 16 60 76 43 0 30 0 20 29 29 38 33 0 0 118 19 33 21 287,900

2007 111,604 52,148 26,090 13,018 4,434 6,665 4,952 6,474 5,422 5,164 4,411 3,421 1,382 2,466 1,560 2,994 1,232 541 667 1,683 652 1,326 1,281 297 216 616 355 266 172 218 77 85 160 110 7 67 78 57 0 30 0 20 30 30 38 33 0 0 119 0 9 21 262,700

2008 94,294 38,364 14,875 12,210 3,799 4,560 4,321 5,337 4,553 4,623 2,789 2,247 1,316 1,637 1,210 1,596 1,278 776 570 558 590 713 557 277 356 136 338 195 129 223 79 72 164 28 14 69 34 41 13 31 0 21 30 31 0 34 0 0 0 0 10 0 205,100

2009 82,484 32,251 13,751 8,499 3,845 4,316 3,594 4,113 4,177 3,720 3,004 2,593 1,181 1,655 1,237 966 1,086 832 559 530 597 565 540 416 361 342 198 198 118 225 80 73 73 29 14 39 39 14 13 31 0 20 1 1 0 10 0 0 0 0 10 0 178,400

2010 85,476 31,476 15,048 9,264 2,990 4,407 3,634 3,970 4,159 3,684 2,893 2,636 1,186 1,315 1,277 1,122 1,149 990 695 532 600 520 601 396 362 339 266 233 263 226 114 73 73 45 43 39 28 23 13 11 8 5 1 1 0 10 0 0 0 0 0 0 182,200

2011 89,991 34,211 20,062 9,825 4,408 4,117 4,111 4,109 3,765 3,703 3,370 2,471 1,411 1,320 1,148 1,133 1,121 1,083 693 608 602 557 557 446 370 305 282 233 229 213 84 74 69 45 43 39 28 24 13 11 8 5 1 1 0 0 0 0 0 0 0 0 196,900

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Figure 1.08 List of IT Funds in Years

Life of IT Funds In Years <= 10 11-12 13-14 15-16 17-18 >=19

% of Funds 7% 20% 27% 22% 14% 10%

Source: Adams Street Partners, based on 2010 analysis of dissolved funds. This chart tracks the year in which a 10-year fund is, in fact, dissolved. These later periods are referred to as out years. Historically, after the 10th year, only a few companies remain in the portfolios that typically do not have huge upside potential. But the slow pace of exits in recent years has resulted in a number of good, mature companies remaining in portfolios well past the nominal 10-year mark. Life science funds tend to have lives two years longer than typical technology funds. In preparing this chart, partial years are rounded to the nearest whole year. So 10.4 years would round to 10 years, and 10.5 years would round up to 11 years. The median life span of a fund in this analysis is 14.17 years.

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Capital Commitments
New commitments to venture capital funds in the United States increased in 2011 to $18.7 billion after four consecutive years of declines. However, the amount raised by funds in 2011 was less than the amount of MoneyTree investment by funds in companies for the fifth consecutive year. While investment increased 36% from 2010 to 2011, a significant portion of the fundraising was done by several large, established firms. For many venture firms, especially those without established successful track records, it was very difficult to raise money. In early 2012, a number of US venture firms anticipated beginning new fundraising later in the year or in 2013. Many were waiting for a few more successful IPOs or acquisitions of portfolio companies in current funds to provide investible liquidity to their investors and demonstrate success. The 2011 fundraising totals of $18.7 billion was 41% less than the post-bubble total of $31.6 raised in 2006. Looking at annual commitment totals, venture firms had raised considerable funds in 2006 and 2007 and the first part of 2008. As the economy worsened toward the end of 2008, many institutional investors (e.g., pension plans, endowments, money managers) saw the public portion of their portfolios fall and found themselves over-allocated to alternative asset classes, including venture capital. This situation has not changed significantly although activity did increase in 2011. For the seventh year in a row, the top fundraising states were California, Massachusetts, and New York. California, with its venture firms raising $9.8 billion in 2011 has held the top spot for the ninth place in a row. New York firms raised $4.2 billion and Massachusetts firms $2.0 billion in 2011. Firms domiciled in the top five fundraising states in 2011 gathered 91% of the dollars, compared with for 88% in 2010 and 82% in 2009. Please note that the state of fund domicile matters less than has been true historically. Much of the money is managed by large, national funds that tend to be domiciled in any of several states with a broad geographic investing footprint. Readers should not interpret capital available to entrepreneurs in a given state as limited to the capital raised in that state. Venture capital fundraising remains 20-25% of private equity fundraising.

Methodology
As defined by Thomson Reuters, capital commitments, also known as fundraising, are firm capital commitments to private equity/venture capital limited partnerships by outside investors. For purposes of these statistics, the terms capital commitments, fundraising, and fund closes are used interchangeably. There are three sources of data for capital commitments: (1) SEC filings that are regularly monitored by our research staff, (2) surveys of the industry routinely conducted by Thomson Reuters, and (3) verified industry press and press releases from venture firms. Capital commitments are stated on either a calendar year basis when committed or a vintage year basis once the fund starts investing, depending on the analysis required. The data in this chapter is by calendar year and incrementally

measures how much in new commitments funds raised during the calendar year. For example, a venture capital firm announces a $200 million fund in late 2009, raises $75 million in 2010, and subsequently raises the remaining $125 million in 2011. In this chapter, nothing would be reflected in 2009, $75 million would be counted in 2010, and $125 million would be counted in 2011. Assuming it started investing and made its first capital call in 2011, the entire fund would then be considered to be a 2011 vintage year fund. An important note: the fund commitments presented in this publication do not include those corporate captive venture capital funds that are funded by a corporate parent, which do not typically raise capital from outside investors, nor evergreen funds which do not raise funds by vintage year.

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Figure 2.01 Capital Commitments To U.S. Venture Funds ($ Billions) 1985 to 2011 120 100 80 ($ Billions) 60 40 20 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Year

Figure 2.02 Capital Commitments To Private Equity Funds 1985 to 2011


Venture Capital Year 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 Sum ($Mil) % of Total PE 3,750.7 56% 3,587.4 42% 4,366.6 21% 4,443.9 27% 4,918.8 29% 3,242.7 27% 1,905.7 31% 5,243.8 33% 4,565.3 21% 7,744.7 27% 9,467.3 26% 11,553.6 26% 18,119.0 30% 30,849.0 33% 53,810.5 50% 103,734.6 56% 39,005.1 43% 15,879.3 31% 11,473.1 24% 18,583.3 24% 30,369.1 22% 31,588.6 17% 30,653.2 11% 25,382.9 12% 16,410.0 25% 13,781.5 21% 18,704.6 20% No. Funds 116 101 115 103 106 86 40 80 93 136 162 168 244 290 433 638 325 199 161 211 232 233 237 213 161 169 173 Buyouts and Mezzanine Capital Sum ($Mil) 2,971.8 5,043.7 16,234.6 11,750.4 12,068.5 8,831.5 4,242.1 10,750.5 16,961.7 20,457.0 27,115.7 32,981.4 43,128.0 61,559.5 53,534.4 80,564.8 52,247.8 34,866.2 35,967.4 58,985.0 107,918.8 151,181.2 237,900.0 188,565.1 50,549.0 51,066.1 72,597.7 No. Funds 21 32 47 55 78 64 27 58 81 100 109 104 137 173 167 171 137 123 122 158 203 208 258 228 144 167 199 Total Private Equity Sum ($Mil) 6,722.5 8,631.1 20,601.1 16,194.3 16,987.3 12,074.3 6,147.8 15,994.3 21,527.0 28,201.7 36,583.0 44,535.0 61,247.1 92,408.4 107,344.9 184,299.4 91,252.9 50,745.5 47,440.6 77,568.3 138,287.9 182,769.7 268,553.2 213,948.0 66,959.0 64,847.6 91,302.3 No. Funds 137 133 162 158 184 150 67 138 174 236 271 272 381 463 600 809 462 322 283 369 435 441 495 441 305 336 372

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Figure 2.03 Venture Capital Fund Commitments 1985 to 2011 ($ Millions)
State CA NY MA MD DC IL TX AZ MI UT TN NC PA OH NJ AL DE VA GA KS CO ME OR NM CT FL WA MN LA OK MO SD IN IA HI RI MS NH WV VT SC ID PR NV ND NE UN WY AR WI KY Total 1985 1986 1987 1988 1,250 945 1,159 903 186 1,460 497 279 534 356 973 813 4 7 24 0 39 0 0 5 57 47 325 158 37 61 231 41 0 0 0 37 5 0 7 33 0 11 1 0 20 23 73 0 7 7 31 23 54 73 55 12 3 0 87 75 270 61 157 0 150 0 0 0 0 0 0 0 0 4 10 13 0 0 15 65 0 0 0 0 32 71 32 70 0 0 22 948 0 0 30 0 36 28 0 2 299 156 420 388 10 0 36 11 25 126 37 60 14 110 51 418 0 0 0 0 0 32 0 0 644 0 33 0 0 0 0 0 0 10 0 27 11 0 60 0 0 0 0 0 17 0 0 25 0 0 0 0 49 0 0 40 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3,751 3,587 4,367 4,444 1989 1990 1991 1,519 831 546 2,260 490 474 339 675 180 49 14 50 0 0 0 26 57 94 161 143 58 0 0 0 0 0 0 0 0 0 34 0 0 38 1 0 118 45 167 0 30 0 125 243 75 0 0 0 0 0 0 15 2 0 0 14 0 0 0 0 80 0 0 0 0 0 0 0 0 0 155 40 66 310 150 29 0 35 0 0 5 20 162 16 0 0 0 10 0 0 0 53 0 0 0 0 16 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 0 0 0 0 0 0 13 5 0 0 0 0 0 10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,919 3,243 1,906 1992 1993 1994 1995 1996 1997 1998 1,331 1,335 1,829 3,107 3,724 5,559 8,487 494 940 1,887 2,364 1,516 3,868 9,346 1,068 373 1,158 1,955 1,906 2,716 5,231 0 225 479 67 439 145 768 0 0 0 130 820 668 392 247 278 183 230 295 575 466 382 137 283 194 326 394 1,407 0 10 0 0 0 0 0 0 3 14 0 26 11 0 0 0 11 0 0 33 50 40 0 116 84 149 109 266 0 0 63 10 184 349 174 30 110 182 114 264 784 177 58 67 4 86 10 0 365 110 177 401 213 606 118 1,002 0 0 0 0 0 5 30 0 0 25 31 65 0 0 0 0 0 7 20 65 256 0 56 0 74 34 41 181 0 0 0 25 0 20 0 0 114 0 19 216 253 433 2 0 59 0 22 0 0 0 0 32 32 0 0 10 0 0 6 2 0 0 0 300 473 388 260 425 1,324 1,083 0 133 105 106 0 78 250 48 40 37 129 239 180 409 946 66 164 47 36 208 217 11 14 169 18 24 88 51 0 0 0 0 24 0 45 0 64 0 11 6 45 25 0 0 0 0 11 0 22 49 0 20 0 116 0 13 56 0 0 5 0 11 2 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 12 0 0 0 0 0 0 20 0 50 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 50 25 0 0 0 0 0 0 0 0 0 0 0 0 111 36 0 0 63 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40 0 0 16 0 0 14 7 15 0 42 0 5,244 4,565 7,745 9,467 11,554 18,119 30,849 1999 21,914 9,036 7,850 840 360 1,304 1,830 29 321 40 267 180 1,241 659 570 0 28 784 30 0 1,942 127 0 0 2,843 326 640 107 374 0 80 14 20 5 10 0 0 0 0 0 0 0 0 25 0 0 0 0 0 17 0 53,810 2000 43,723 16,647 16,677 1,887 1,423 1,067 3,711 60 241 126 262 613 2,751 662 1,041 137 0 2,287 918 0 2,414 0 65 0 2,328 955 1,175 1,827 70 110 65 131 103 21 0 0 30 0 6 20 0 15 0 0 0 41 0 26 20 82 0 103,735 2001 13,527 2,983 9,743 307 622 1,136 2,232 21 8 224 82 120 537 330 652 16 0 119 19 0 513 76 0 0 4,204 26 888 17 30 0 286 1 0 26 0 25 0 0 4 25 0 27 31 0 0 0 0 0 0 14 135 39,005 2002 2,747 7,754 2,514 381 315 478 186 42 0 30 22 75 86 102 392 11 22 37 0 0 118 16 14 0 60 8 83 276 52 0 0 0 10 0 3 0 0 11 13 0 15 0 0 0 0 0 0 0 0 0 8 15,879 2003 2004 2005 5,634 8,732 12,578 1,225 1,848 1,720 1,597 1,797 9,151 105 162 380 0 324 393 701 432 133 76 894 630 41 0 19 65 63 112 34 40 24 101 16 84 276 17 108 388 451 688 5 210 558 561 197 204 49 19 70 0 10 0 196 72 419 0 55 104 0 0 0 94 84 69 3 0 0 0 2 0 18 20 34 165 1,926 1,143 56 1 313 1 955 281 26 50 295 8 75 4 0 0 12 0 80 829 0 5 0 36 17 6 0 10 0 0 8 0 0 0 0 0 0 0 9 0 0 2 0 0 0 0 0 0 0 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 0 2 0 5 11,473 18,583 30,369 2006 2007 2008 2009 13,424 13,009 14,204 8,952 2,508 4,310 1,833 1,418 4,366 5,162 2,535 3,574 472 783 369 484 1,296 315 1,293 204 452 545 258 216 437 289 1,038 78 0 0 20 0 13 49 256 84 170 213 536 31 62 100 129 89 401 185 103 5 794 746 963 233 152 81 83 4 1,812 235 48 500 19 0 118 101 0 250 0 139 555 582 105 14 103 203 19 31 0 0 0 0 132 351 221 3 46 19 0 0 0 2 5 5 5 7 0 0 3,136 904 260 158 11 109 25 32 515 1,424 492 5 398 275 325 22 12 0 0 0 38 0 0 0 40 210 54 0 0 0 14 0 24 1 29 1 43 0 0 15 0 0 6 0 0 0 0 0 1 0 0 0 5 7 0 0 0 0 0 0 0 11 3 0 0 0 0 0 0 75 0 0 0 1 0 0 0 0 0 0 0 0 13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 78 101 15 10 65 98 12 0 31,589 30,653 25,383 16,410 2010 6,721 1,244 2,778 68 0 235 83 0 177 16 42 460 205 30 112 2 0 121 31 0 253 0 12 35 938 75 0 0 0 0 72 16 28 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 27 0 13,781 2011 9,820 4,170 1,952 544 499 202 195 194 192 162 161 130 126 85 73 58 57 36 26 8 6 6 2 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 18,705

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Figure 2.04 Top 5 States By Venture Capital Committed 2011

State
California New York Massachusetts Maryland D. of Columbia Sub-Total Remaining States Total

No. of Funds
61 21 18 2 3 105 68 173

Committed ($Mil)
9,819.5 4,170.0 1,952.0 543.5 498.9 16,983.9 1,720.7 18,704.6

Figure 2.05 Private Equity Annual Commitment ($ Billions) 1985 to 2011

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

Venture Capital

Buyout and Mezzanine Capital

($ Billions)

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

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Investments
With the industry overall continuing to right-size, venture capital firms nonetheless continued both to take on new companies to grow and to fund their existing investments. The number of deals, total dollars invested, and first-time fundings all increased in 2011 from 2010 levels. Venture capital investment grew from $23.3 billion in 2010 to $28.7 in 2011, a 23% increase. By contrast, the increase in number of deals from 3,543 in 2010 to 3,722 in 2011 reflected only a 5% increase. This was largely due to a number of large, later stage deals made during the year into existing portfolio companies in anticipation of an IPO or acquisition in upcoming quarters. The flurry of later stage investments in 2007 and early 2008 slowed considerably after the global economic issues in mid-2008. That said, the total number of deals done during 2011 (3,722) was less than half the number (8,032) done in 2000. After years of taking on 1,000 or more new companies each year, the industry had dipped to a post-bubble low in 2009 when it funded 797 first time companies, but that count increased in 2011 to 1,173. Regardless of the specific counts, it is important to remember that each first funding represents a fresh commitment by venture capital funds to the future. The contention for venture capitalist attention (and dollars) between existing later stage portfolio companies and newlyarriving business plans continues. There are still a record number of companies in portfolios in the later stage of development that in most other positions in the business cycle would have already gone public or otherwise been acquired. As the interest increased in IPOs in 2011 and the number of acquisitions reached record highs, VCs did 874 deals in later stage companies, or 23.5% of the total deals. At the other end of the maturity spectrum, in 2011 49.4% of all the deals consisted of seed and early fundings. This is the highest level since 1995. The life sciences share of the venture capital investment dollars was virtually unchanged in 2011 versus 2010 and remained at near-record levels. In 2011, 17% of the money went into biotechnology, 10% into devices, and 1% into healthcare services. By contrast, in 2009, 20% of total dollars went to biotechnology companies, 14% went to medical devices and equipment and 1% went to healthcare services. Clean technology was the U.S. venture capitals most visible emerging sector with a record $4.5 billion invested in 2011, up 15% from the 2010 total. The slight increase in average deal size to 13.3 is a function of two countervailing forces: the significant number of later stage, ergo larger, rounds versus an overall shift to capital efficient business models. The 2011 investment total represents 15.5% of all venture investment. During 2011, California companies received a record 51.2% of the dollars. At the same time, companies in a record 47 states and DC received venture capital funding. Together, the top 5 states (CA, MA, NY, TX, IL) received 77% of the total dollars invested in the United States. Corporate venture capital activity increased overall in 2011 by both long-established groups and a number of new entrants.

Methodology
As calculated by Thomson Reuters, venture capital investment data are derived from several sources. Primarily, survey information is obtained from the quarterly survey which drives the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. This is the official industry da-

tabase of venture capital investment. Secondly, Thomson Reuters obtains data from SEC filings that are regularly monitored by our research staff. Finally, publicly available sources such as press releases and trade publications are used. For detailed information on which transactions qualify as MoneyTree deals and are therefore counted in this chapter, please refer to Appendix B.

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Figure 3.01 Venture Capital Investments ($ Billions) 1985 to 2011

100 80 ($ Billions) 60 40 20 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Year

Figure 3.02 Venture Capital Investments in 2011 By Industry Group

All Investments Industry Group Information Technology Medical/Health/Life Science Non-High Technology Total # Companies 1,989 682 447 3,118 # Deals 2,357 836 529 3,722 Investment Amt ($Bil) 16.4 7.9 4.5 28.8

Initial Investments # Companies 671 138 164 973 # Deals 671 138 164 973 Investment Amt ($Bil) 2.5 1.0 6.6 10.1

Figure 3.03 Venture Capital Investments Top 5 States in 2011

State California Massachusetts New York Texas Illinois Total*

# Companies 1,256 316 265 132 78 2,047

# Deals 1,500 384 310 153 90 2,437

Amt Invested ($Bil) 14.7 3.0 2.3 1.5 0.7 22.1

*Total includes top 5 states only

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Figure 3.04 Venture Capital Investments in 2011 By Industry Sector
Telecommunications 2% Biotechnology 17% Business Products and Services 1% Computers and Peripherals 1% Consumer Products and Services 4% Electronics/ Instrumentation 2% Financial Services 1% Healthcare Services 1%

Software 24%

Semiconductors 4% Retailing/ Distribution 1% Networking and Equipment 1% Medical Devices and Equipment 10%
IT Services 8%

Industrial/Energy 12%

Media and Entertainment 8%

Figure 3.05 Venture Capital Investments in 2011 By Stage


Seed 3%

Later Stage 34% Early Stage 29%

Expansion 34%

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Figure 3.06 Amount of Capital Invested By State in 2011 ($ Millions)
542 WA 239 OR 96 NH 266 MN 72 WI 28 IA 134 MO 27 OK 1469 TX AR MS 22 LA 4 AL 343 GA 299 FL PR 696 IL 83 MI 178 IN 205 OH 2 VW 24 VT 2295 NY 520 PA 650 VA 325 NC

3 MT 4 ID WY 234 UT

4 ND 3 SD NE 622 CO 67 KS

39 ME 2989 MA 40 RI 533 NJ 26 DE 284 MD 49 DC 135 CT

14672 CA

10 NV

247 AZ

62 NM

8 KY 103 TN

22 SC

AK 1 HI

GU

VI

Figure 3.07 Number of Companies Investd in By State in 2011


92 WA 34 OR 1 ID 3 NV 16 NH

2 MT

1 ND WY 1 SD NE

38 MN 9 WI 3 IA 16 MO 1 AR MS 6 LA 28 MI 39 IL 12 IN 54 OH

5 VT

5 ME 316 MA 9 RI 63 NJ 7 DE 66 MD 12 DC 46 CT

265 NY 126 PA 1 VW 69 VA 39 NC

1256 CA

39 UT 19 AZ

81 CO

34 KS 2 OK 132 TX

8 NM

4 KY 26 TN 2 AL 48 GA

3 SC

AK 2 HI

42 FL PR

GU VI

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Figure 3.08 Venture Capital Investments in 1985 to 2011 By Region ($ Millions)

Region Silicon Valley New England NY Metro LA/Orange County Texas Midwest Southeast DC/Metroplex San Diego Northwest Colorado SouthWest Philadelphia Metro North Central Upstate NY South Central Sacramento/N.Cal AK/HI/PR Unknown Total

1985 721.3 406.6 213.3 185.0 220.1 140.9 165.6 86.7 87.6 132.5 70.0 40.8 50.0 34.8 13.4 13.7 12.0 2,594.4

1986 981.8 394.6 196.9 173.2 221.9 129.6 227.2 60.3 76.6 125.8 104.7 79.6 53.0 40.7 10.7 11.4 34.0 2,922.1

1987 822.8 480.6 257.7 267.7 202.5 196.1 251.3 96.4 100.8 127.6 106.2 54.8 77.8 70.8 10.2 19.5 21.2 0.5 3,164.4

1988 938.1 465.2 296.8 205.4 227.0 127.9 247.8 116.3 146.3 116.2 95.6 58.8 69.0 41.4 5.3 12.6 33.6 0.8 3,204.2

1989 877.3 389.3 348.7 222.9 216.3 175.0 206.0 131.9 132.5 104.3 148.7 42.2 59.3 47.9 7.3 18.5 4.2 6.1 3,138.4

1990 837.8 351.5 181.3 163.2 118.2 146.8 138.7 77.8 103.7 88.6 89.3 29.6 100.1 87.0 8.1 11.6 19.3 13.0 2,565.6

1991 711.0 257.1 173.4 113.3 132.3 165.4 93.9 39.7 93.0 59.4 50.3 26.1 29.3 45.2 3.4 9.5 15.7 0.3 0.2 2,018.4

1992 1,032.1 405.5 206.4 159.1 145.1 155.4 327.9 54.0 101.1 239.0 124.3 84.6 135.4 81.5 9.1 7.1 7.6 0.0 30.8 3,306.0

1993 832.2 337.9 196.8 151.6 232.0 248.7 389.9 381.4 128.3 114.0 132.9 36.9 104.0 105.8 5.1 8.6 18.8 1.0 0.8 3,426,7

1994 997.7 421.4 265.2 197.8 253.4 410.7 306.3 132.6 212.6 156.6 192.9 32.3 133.9 78.3 0.7 11.0 17.2 22.0 0.1 3,842.8

1995 1,717.3 694.0 428.4 928.1 460.0 446.1 744.0 391.3 243.4 363.6 300.9 95.5 187.4 215.1 28.1 45.2 17.0 7.8 0.3 7,313.4

1996 3,278.6 1,119.6 719.1 636.7 533.8 685.9 1,077.2 448.6 444.7 512.3 232.5 167.1 342.5 208.4 22.4 80.4 28.6 28.7 2.2 10,569.2

1997 4,365.8 1,528.0 1,275.6 797.0 783.5 893.0 1,310.8 539.3 501.1 543.6 378.0 306.2 415.8 326.8 78.0 67.0 20.6 14.0 4.4 14,142.6

1998 5,379.5 2,183.0 1,712.0 1,158.9 1,095.1 1,586.3 1,695.3 1,070.6 569.9 765.7 882.1 358.8 465.1 386.6 186.9 172.5 85.8 5.5 29.6 19,789.2

1999 16,590.7 5,363.2 4,456.0 3,365.0 2,912.2 2,670.5 4,431.7 2,102.0 1,197.4 2,764.6 1,841.4 750.3 1,451.7 731.0 204.1 341.9 103.3 17.4 2.4 51,296.7

2000 31,755.2 11,331.9 9,715.3 6,556.1 5,873.5 5,317.0 7,560.0 5,279.5 2,011.8 3,533.3 3,856.9 1,288.4 2,503.1 1,226.2 263.4 388.0 343.7 243.9 50.4 99,097.6

2001 11,752.1 5,088.6 3,362.9 2,143.4 2,837.1 2,049.5 2,447.9 1,940.1 1,440.1 1,278.7 1,142.3 489.2 924.1 621.5 126.9 104.8 194.8 69.8 14.3 38,028.0

2002 6,888.0 2,854.4 1,507.8 1,209.1 1,120.5 913.0 1,666.8 1,041.2 936.6 713.4 564.1 367.9 471.0 385.6 84.2 62.3 58.8 2.3 20,446.9

2003 6,410.1 2,796.8 1,337.7 1,007.4 1,146.7 853.9 1,074.0 710.1 775.8 629.5 632.4 216.3 493.4 280.7 120.1 64.0 32.1 17.9 18,589.9

2004 7,778.4 3,257.3 1,618.2 1,291.8 1,123.1 656.1 1,315.6 1,103.2 1,144.6 955.5 356.3 368.6 721.7 444.1 102.8 121.8 36.5 11.2 22,406.7

2005 8,048.0 2,914.4 1,950.0 1,428.3 1,180.9 868.8 1,075.5 1,110.0 1,160.2 980.8 640.8 449.5 585.3 379.1 53.0 83.1 42.5 43.1 22,993.3

2006 9,653.0 3,235.6 2,137.4 1,946.8 1,425.3 951.7 1,165.3 1,226.7 1,162.6 1,205.6 639.0 510.2 753.9 398.4 101.7 58.5 28.4 47.1 26,647.2

2007 11,293.5 3,838.7 1,842.8 1,840.3 1,483.6 1,097.3 1,770.0 1,341.0 1,852.8 1,558.4 673.9 555.8 831.5 554.4 135.4 141.9 88.2 20.9 30,920.6

2008 11,240.2 3,648.2 2,059.5 1,957.8 1,213.2 1,216.5 1,276.5 1,072.1 1,178.1 1,018.7 896.2 486.2 840.8 632.3 69.7 1,683.4 75.5 18.3 30,583.2

2009 8,065.9 2,392.0 1,681.8 1,013.1 773.2 901.8 1,003.1 609.6 911.4 696.8 525.0 291.5 436.4 387.7 30.0 24.4 15.5 7.4 0.5 19,767.1

2010 9,246.1 2,579.5 1,976.9 1,619.0 1,033.0 1,293.4 1,163.2 924.0 873.6 858.8 483.5 274.9 457.2 335.0 45.8 77.7 15.5 16.0 23,273.0

2011 11,771.9 3,212.7 2,737.9 1,959.6 1,468.9 1,446.8 1,096.1 984.4 869.0 788.2 621.5 552.5 485.2 373.3 119.3 115.8 71.2 0.6 28,675.0

Figure 3.08b Venture Capital Investments in 1985 to 2011 By Region (Number of Deals)

Region 1985 Silicon Valley 322 New England 235 NY Metro 88 Midwest 97 LA/Orange County 90 Southeast 94 DC/Metroplex 45 Northwest 46 Texas 106 Philadelphia Metro 37 San Diego 42 Colorado 43 SouthWest 20 South Central 11 North Central 37 Upstate NY 17 Sacramento/N.Cal 11 AK/HI/PR 1 Unknown Total 1,342

1986 333 207 98 112 98 120 44 46 90 34 32 56 30 10 50 10 17 1,387

1987 336 248 124 131 113 134 63 58 105 51 50 59 41 12 53 10 11 1 1,600

1988 354 227 105 101 101 113 57 66 104 43 54 60 25 7 52 10 10 2 1,491

1989 386 215 117 127 109 112 49 64 90 36 56 50 30 8 38 12 6 3 1,508

1990 1991 1992 1993 1994 394 335 421 314 333 215 170 161 149 143 87 85 76 77 84 102 96 91 87 85 96 90 96 65 58 128 110 107 118 114 60 55 47 38 47 48 42 49 43 48 85 69 71 68 67 45 43 65 49 46 47 42 46 49 61 49 35 52 47 51 21 27 35 30 28 5 6 8 6 9 44 40 40 39 39 6 4 9 10 5 10 9 9 8 10 3 3 1 2 1 1 2 4 2 1,443 1,262 1,388 1,202 1,232

1995 510 236 131 131 91 180 74 87 101 77 75 57 37 15 72 8 7 4 2 1,895

1996 777 337 157 190 134 229 112 111 135 90 106 82 53 22 70 9 9 9 7 2,639

1997 872 388 244 239 165 293 136 132 169 140 100 96 71 25 116 20 7 6 7 3,226

1998 1,046 469 275 251 216 308 164 131 199 134 119 129 86 26 106 32 17 5 14 3,727

1999 1,698 660 495 316 353 454 270 262 315 139 152 164 114 30 113 31 18 5 3 5,592

2000 2,175 894 819 512 520 665 506 329 481 227 232 224 147 51 149 35 35 15 16 8,032

2001 1,116 584 446 279 246 397 265 194 336 133 156 113 91 30 121 29 27 10 8 4,581

2002 815 457 233 244 160 268 200 137 171 99 113 90 67 23 72 24 7 3 3,183

2003 877 440 194 173 145 239 181 109 172 86 123 74 56 20 73 23 11 8 3,004

2004 957 428 225 173 146 237 189 146 175 103 127 71 60 32 71 30 8 5 3,183

2005 997 440 194 179 174 204 219 155 179 95 139 91 81 8 65 28 10 8 3,266

2006 1,223 458 293 218 224 232 218 173 196 115 128 107 93 24 69 38 7 14 3,830

2007 1,287 514 288 268 226 242 216 208 185 141 167 107 105 30 89 33 16 8 4,130

2008 2009 2010 2011 1,282 971 1,067 1,176 507 379 407 442 338 278 378 380 291 243 263 283 242 167 216 210 218 152 212 189 209 135 148 166 202 129 156 158 161 126 159 153 154 99 128 121 133 111 127 107 111 89 88 100 84 68 59 81 41 34 43 63 85 63 56 62 30 14 22 21 20 10 7 7 9 3 6 3 1 1 1 4,118 3,072 3,543 3,772

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Figure 3.09 Venture Capital Investments 1985 to 2011 By Stage ($ Millions)

Stage 1985 1986 1987 Seed 493.3 715.7 613.1 Early Stage 499.9 589.7 695.4 Expansion 1,152.2 1,131.1 1,405.6 Later Stage 449.0 485.6 450.3 Total 2,594.4 2,922.1 3,164.4

1988 635.3 698.0 1,479.1 391.8 3,204.2

1989 536.8 677.5 1,515.0 409.1 3,184.4

1990 374.5 648.1 1,148.1 395.0 2,565.6

1991 219.4 500.3 980.5 318.2 2,018.4

1992 528.0 529.6 1,683.9 564.6 3.306.0

1993 593.8 569.0 1,755.5 508.4 3,426.7

1994 736.2 821.6 1,391.2 893.8 3,842.8

1995 1,122.6 1,643.5 3,388.2 1,159.2 7,313.4

1996 1,219.2 2,446.0 5,330.7 1,573.2 10,569.2

1997 1,289.4 3,276.8 7,328.6 2,253.7 14,148.6

1998 1,625.7 5,020.4 9,910.4 3,232.6 19,789.2

1999 3,434.6 10,603.4 28,533.0 8,725.7 51,296.7

2000 2,881.2 23,132.5 57,010.7 16,073.2 #####

2001 688.5 7,928.1 21,632.6 7,778.9 38,028.0

2002 306.2 3,696.8 11,777.4 5,066.4 20,846.9

2003 325.8 3,470.6 9,362.2 5,440.3 18,598.9

2004 911.8 3,815.0 9,134.5 8,545.3 22,406.7

2005 969.2 3,943.0 8,579.8 9,501.3 22,993.3

2006 1,253.7 4,489.6 11,047.5 9,856.4 26,647.2

2007 1,755.0 5,873.4 11,312.6 11,979.6 30,920.6

2008 1,788.5 5,446.5 12,223.3 11,124.8 30,583.2

2009 1,806.6 4,840.2 6,667.4 6,452.9 19,767.1

2010 1,758.6 5,679.3 8,931.8 6,903.3 23,273.0

2011 930.9 8,369.8 9,822.1 9,552.2 28,675.0

Figure 3.09b Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)

Stage Seed Early Stage Expansion Later Stage Total

1985 358 292 525 167 1,342

1986 381 328 496 182 1,387

1987 387 394 603 216 1,600

1988 366 349 605 171 1,491

1989 353 329 652 174 1,508

1990 260 370 593 220 1,443

1991 193 278 539 252 1,262

1992 252 292 613 231 1,388

1993 288 184 523 207 1,202

1994 334 261 434 203 1,232

1995 434 524 719 218 1,895

1996 508 767 1,056 308 2,639

1997 541 904 1,437 344 3,226

1998 1999 2000 2001 2002 673 812 700 279 178 1,024 1,737 2,875 1,304 882 1,606 2,496 3,759 2,432 1,616 424 547 698 566 507 3,727 5,592 8,032 4,581 3,183

2003 212 812 1,375 605 3,004

2004 230 886 1,254 813 3,183

2005 263 853 1,134 1,016 3,266

2006 391 990 1,401 1,048 3,830

2007 514 1,093 1,299 1,224 4,130

2008 527 1,111 1,254 1,226 4,118

2009 362 955 888 867 3,072

2010 395 1,234 1,086 828 3,543

2011 404 1,433 1,011 874 3,722

Figure 3.09c-1 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions)

Stage Seed Early Stage Expansion Later Stage Total

1985 1986 1987 1988 1985-1Q 1985-2Q 1985-3Q 1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1Q 1987-2Q 1987-3Q 1987-4Q 1987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 Total 140.0 139.2 86.0 128.0 493.3 175.5 265.0 102.1 173.1 715.7 142.5 199.7 142.6 128.3 613.1 154.0 142.1 228.2 111.0 635.3 91.9 178.8 102.6 126.6 499.9 123.8 124.6 170.7 170.7 589.7 155.8 178.5 177.1 184.0 695.4 140.6 222.1 174.9 160.5 698.0 191.5 312.7 288.8 359.2 1152.2 266.8 369.1 229.0 266.2 1131.1 390.3 347.0 378.3 290.0 1405.6 299.5 463.7 303.2 412.7 1479.1 133.6 82.2 159.6 73.6 449.0 105.3 82.0 167.3 131.0 485.6 93.9 149.9 104.1 102.3 450.3 112.0 76.5 140.7 62.6 391.8 557.0 713.0 637.0 687.5 2594.4 671.3 840.8 669.0 741.0 2922.1 782.5 875.1 802.1 704.7 3164.4 706.1 904.4 847.0 746.7 3204.2

Figure 3.09c-2 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions)

Stage Seed Early Stage Expansion Later Stage Total

1989 1990 1991 1992 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 1990 Total 1991-1Q 1991-2Q 1991-3Q 1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 Total 135.6 166.4 102.3 132.4 536.8 76.6 114.5 102.7 80.7 374.5 42.4 79.5 44.7 52.8 219.4 57.8 207.7 60.6 201.8 528.0 243.2 109.7 154.3 170.3 677.5 139.7 190.6 126.5 191.2 648.1 128.6 127.2 118.7 125.8 500.3 117.9 182.1 78.5 151.1 529.6 387.3 427.6 260.1 440.0 1515.0 327.0 300.1 191.7 329.3 1148.1 214.2 227.4 247.0 291.9 980.5 430.6 486.3 308.3 458.6 1683.9 96.4 93.1 78.7 140.9 409.1 82.8 87.8 117.9 106.5 395.0 80.2 91.7 53.1 93.2 318.2 197.1 89.3 96.1 182.1 564.6 862.5 796.8 595.4 883.6 3138.4 626.1 692.9 538.8 707.7 2565.6 465.3 525.9 463.6 563.6 2018.4 803.4 965.5 543.5 993.6 3306.0

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Figure 3.09c-3 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions)
Stage Seed Early Stage Expansion Later Stage Total 1993 1994 1995 1996 1993-1Q 1993-2Q 1993-3Q 1993-4Q 1993 Total 1994-1Q 1994-2Q 1994-3Q 1994-4Q 1994 Total 1995-1Q 1995-2Q 1995-3Q 1995-4Q 1995 Total 1996-1Q 1996-2Q 1996-3Q 1996-4Q 1996 Total 138.0 128.5 162.4 164.9 593.8 183.7 204.4 146.9 201.2 736.2 259.5 385.6 205.7 271.8 1122.6 299.5 421.5 197.4 300.7 1219.2 162.1 153.5 104.7 148.7 569.0 159.0 174.4 170.0 318.2 821.6 393.4 386.8 346.8 516.4 1643.5 548.6 647.1 570.0 680.3 2446.0 334.5 409.0 413.3 598.7 1755.5 304.8 348.2 312.6 425.7 1391.2 614.7 1377.3 735.9 660.3 3388.2 1116.0 1462.1 1214.8 1537.9 5330.7 161.8 95.0 99.0 152.6 508.4 167.1 180.0 227.1 319.6 893.8 310.6 308.5 252.5 287.6 1159.2 233.1 438.7 408.5 492.9 1573.2 796.4 786.0 779.3 1064.9 3426.7 814.6 907.0 856.5 1264.7 3842.8 1578.3 2458.1 1540.8 1736.2 7313.4 2197.2 2969.6 2390.7 3011.8 10569.2

Stage Seed Early Stage Expansion Later Stage Total

1997 1997-1Q 1997-2Q 1997-3Q 1997-4Q 1997 Total 1998-1Q 379.1 306.1 307.4 296.8 1289.4 367.3 716.7 808.4 729.5 1022.3 3276.8 1037.0 1299.7 1908.5 1969.1 2151.3 7328.6 1701.8 478.6 490.4 616.3 668.4 2253.7 720.5 2874.1 3513.4 3622.3 4138.8 14148.6 3826.6

Figure 3.09c-4 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions) 1998 1999 1998-2Q 1998-3Q 1998-4Q 1998 Total 1999-1Q 1999-2Q 1999-3Q 391.4 430.2 436.9 1625.7 484.2 778.9 931.1 971.9 1096.7 1914.8 5020.4 1117.2 1791.9 2502.7 3097.3 2584.5 2526.8 9910.4 3019.2 5048.7 7372.0 854.2 742.2 915.6 3232.6 1355.6 2479.4 2065.4 5314.8 4853.6 5794.1 19789.2 5976.3 10098.9 12871.2 Figure 3.09c-5 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions)

1999-4Q 1999 Total 1240.4 3434.6 5191.6 10603.4 13093.1 28533.0 2825.3 8725.7 22350.4 51296.7

2000-1Q 763.8 6729.5 15655.1 4018.8 27167.1

2000-2Q 865.8 6329.3 15134.5 3970.8 26300.4

2000 2000-3Q 2000-4Q 2000 Total 799.3 452.3 2881.2 5389.4 4684.4 23132.5 14801.4 11419.7 57010.7 4152.5 3931.2 16073.2 25142.5 20487.6 99097.6

Stage Seed Early Stage Expansion Later Stage Total

2001 2002 2003 2004 2001-1Q 2001-2Q 2001-3Q 2001-4Q 2001 Total 2002-1Q 2002-2Q 2002-3Q 2002-4Q 2002 Total 2003-1Q 2003-2Q 2003-3Q 2003-4Q 2003 Total 2004-1Q 2004-2Q 2004-3Q 2004-4Q 2004 Total 234.1 234.6 112.6 107.2 688.5 61.8 90.2 78.3 75.8 306.2 69.0 90.3 85.3 81.2 325.8 95.0 116.2 159.3 541.4 911.8 3286.0 1868.1 1589.0 1185.0 7928.1 1071.0 1086.3 786.4 753.2 3696.8 676.9 984.9 773.8 1034.9 3470.6 886.7 979.8 948.0 1000.6 3815.0 6562.2 6200.6 4231.2 4638.5 21632.6 3635.1 3564.2 2352.8 2225.3 11777.4 2314.5 2368.8 2188.6 2490.3 9362.2 2101.6 2739.7 2043.6 2249.6 9134.5 2238.7 2247.8 1684.6 1607.8 7778.9 1712.6 1104.9 1084.1 1164.8 5066.4 1047.2 1307.8 1338.0 1747.2 5440.3 2139.7 2261.2 1705.3 2439.0 8545.3 12321.1 10551.2 7617.4 7538.4 38028.0 6480.6 5845.6 4301.6 4219.0 20846.9 4107.6 4751.8 4385.8 5353.7 18598.9 5223.0 6097.0 4856.1 6230.5 22406.7

Stage Seed Early Stage Expansion Later Stage Total

2005-1Q 126.9 838.0 2144.0 1985.5 5094.4

2005 2005-2Q 2005-3Q 2005-4Q 2005 Total 2006-1Q 531.0 158.3 153.1 969.2 239.1 1008.3 1139.8 956.9 3943.0 859.0 2360.8 1765.1 2309.9 8579.8 2538.6 2370.2 2868.9 2276.7 9501.3 2768.1 6270.3 5932.1 5696.5 22993.3 6404.9

Figure 3.09c-6 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions) 2006 2007 2006-2Q 2006-3Q 2006-4Q 2006 Total 2007-1Q 2007-2Q 2007-3Q 2007-4Q 2007 Total 2008-1Q 2008-2Q 368.8 347.9 297.8 1253.7 300.1 473.5 445.1 536.2 1755.0 451.0 515.2 908.2 1068.2 1654.2 4489.6 1280.3 1630.3 1233.9 1729.0 5873.4 1332.4 1427.7 3229.7 2919.0 2360.2 11047.5 2858.6 2410.5 3017.3 3026.1 11312.6 3422.9 4227.7 2592.9 2359.8 2135.5 9856.4 2803.6 2986.7 3285.9 2903.4 11979.6 2701.2 3190.4 7099.7 6695.0 6447.7 26647.2 7242.7 7501.0 7982.2 8194.7 30920.6 7907.4 9360.9 Figure 3.09c-7 Quarterly Venture Capital Investments 1985 to 2011 By Stage ($ Millions)

2008 2008-3Q 2008-4Q 2008 Total 486.2 336.2 1788.5 1281.1 1405.4 5446.5 2477.6 2095.1 12223.3 3064.2 2169.0 11124.8 7309.1 6005.7 30583.2

Stage Seed Early Stage Expansion Later Stage Total

2009 2010 2009-1Q 2009-2Q 2009-3Q 2009-4Q2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 308.1 593.7 515.5 389.4 1806.6 399.6 781.0 344.7 233.2 1758.6 724.5 1159.3 1202.5 1754.0 4840.2 1125.5 1694.6 1350.7 1508.5 5679.3 1185.0 1724.3 1804.4 1953.8 6667.4 1959.5 2828.7 1732.6 2411.0 8931.8 1551.9 1328.9 1767.8 1804.3 6452.9 1683.3 1874.8 1937.9 1407.3 6903.3 3769.5 4806.2 5290.1 5901.4 19767.1 5167.9 7179.1 5366.0 5560.0 23273.0

2011-1Q 152.1 1835.1 2258.3 2370.6 6616.1

2011-2Q 413.5 2194.3 2501.8 2918.1 8027.7

2011 2011-3Q 222.0 2049.9 2601.0 2437.4 7310.3

2011-4Q 2011 Total 143.3 930.9 2290.5 8369.8 2461.0 9822.1 1826.2 9552.2 6720.9 28675.0

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Figure 3.09d-1 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)

1985 1986 1987 1988 Stage 1985-1Q 1985-2Q 1985-3Q 1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1Q 1987-2Q 1987-3Q 1987-4Q 1987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 Total Seed 111 88 61 98 358 133 107 62 79 381 115 102 86 84 387 118 78 88 82 366 Early Stage 89 69 60 74 292 110 69 71 78 328 125 83 97 89 394 96 92 85 76 349 Expansion 140 120 114 151 525 166 135 94 101 496 177 136 155 135 603 154 181 130 140 605 Later Stage 60 40 37 30 167 55 51 30 46 182 63 58 46 49 216 50 43 41 37 171 Total 400 317 272 353 1342 464 362 257 304 1387 480 379 384 357 1600 418 394 344 335 1491
Figure 3.09d-2 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)
1989 1990 1991 1992 Stage 1989-1Q 1989-2Q 1989-3Q 1989-4Q 1989 Total 1990-1Q 1990-2Q 1990-3Q 1990-4Q 1990 Total 1991-1Q 1991-2Q 1991-3Q 1991-4Q 1991 Total 1992-1Q 1992-2Q 1992-3Q 1992-4Q 1992 Total Seed 105 97 77 74 353 60 70 58 72 260 51 49 42 51 193 49 68 49 86 252 Early Stage 98 64 82 85 329 88 96 74 112 370 80 70 59 69 278 74 87 52 79 292 Expansion 213 156 122 161 652 150 149 140 154 593 130 129 125 155 539 158 163 105 187 613 Later Stage 47 30 39 58 174 51 55 46 68 220 50 65 54 83 252 70 42 43 76 231 Total 463 347 320 378 1508 349 370 318 406 1443 311 313 280 358 1262 351 360 249 428 1388

Figure 3.09d-3 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)
1993 1994 1995 1996 Stage 1993-1Q 1993-2Q 1993-3Q 1993-4Q 1993 Total 1994-1Q 1994-2Q 1994-3Q 1994-4Q 1994 Total 1995-1Q 1995-2Q 1995-3Q 1995-4Q 1995 Total 1996-1Q 1996-2Q 1996-3Q 1996-4Q 1996 Total Seed 69 68 65 86 288 91 68 82 93 334 126 96 95 117 434 132 141 99 136 508 Early Stage 41 49 39 55 184 64 63 55 79 261 132 137 116 139 524 149 209 181 228 767 Expansion 146 123 119 135 523 106 111 101 116 434 192 184 168 175 719 238 250 245 323 1056 Later Stage 65 50 46 46 207 48 67 38 50 203 56 50 54 58 218 67 75 79 87 308 Total 321 290 269 322 1202 309 309 276 338 1232 506 467 433 489 1895 586 675 604 774 2639

Figure 3.09d-4 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)
1997 1998 1999 2000 Stage 1997-1Q 1997-2Q 1997-3Q 1997-4Q 1997 Total 1998-1Q 1998-2Q 1998-3Q 1998-4Q 1998 Total 1999-1Q 1999-2Q 1999-3Q 1999-4Q 1999 Total 2000-1Q 2000-2Q 2000-3Q 2000-4Q 2000 Total Seed 163 119 120 139 541 152 162 165 194 673 167 212 247 186 812 197 195 171 137 700 Early Stage 204 211 227 262 904 242 223 246 313 1024 249 381 451 656 1737 772 792 687 624 2875 Expansion 316 371 330 420 1437 376 417 412 401 1606 391 577 611 917 2496 1027 1000 906 826 3759 Later Stage 91 77 82 94 344 98 113 101 112 424 128 161 135 123 547 171 150 186 191 698 Total 774 778 759 915 3226 868 915 924 1020 3727 935 1331 1444 1882 5592 2167 2137 1950 1778 8032

Figure 3.09d-5 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)

2001 2002 2003 2004 Stage 2001-1Q 2001-2Q 2001-3Q 2001-4Q 2001 Total 2002-1Q 2002-2Q 2002-3Q 2002-4Q 2002 Total 2003-1Q 2003-2Q 2003-3Q 2003-4Q 2003 Total 2004-1Q 2004-2Q 2004-3Q 2004-4Q 2004 Total Seed 79 73 68 59 279 47 53 40 38 178 56 59 43 54 212 46 76 43 65 230 Early Stage 438 342 270 254 1304 246 246 193 197 882 193 217 189 213 812 208 235 216 227 886 Expansion 657 678 551 546 2432 417 463 348 388 1616 351 322 349 353 1375 294 361 274 325 1254 Later Stage 141 147 135 143 566 149 112 124 122 507 120 151 148 186 605 185 203 176 249 813 Total 1315 1240 1024 1002 4581 859 874 705 745 3183 720 749 729 806 3004 733 875 709 866 3183

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Figure 3.09d-6 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)
2005 2006 2007 2008 Stage 2005-1Q 2005-2Q 2005-3Q 2005-4Q 2005 Total 2006-1Q 2006-2Q 2006-3Q 2006-4Q 2006 Total 2007-1Q 2007-2Q 2007-3Q 2007-4Q 2007 Total 2008-1Q 2008-2Q 2008-3Q 2008-4Q 2008 Total Seed 51 68 68 76 263 80 93 118 100 391 89 138 135 152 514 135 132 152 108 527 Early Stage 213 219 215 206 853 202 243 231 314 990 251 316 247 279 1093 262 290 275 284 1111 Expansion 280 304 247 303 1134 336 365 355 345 1401 282 329 328 360 1299 350 337 286 281 1254 Later Stage 210 266 276 264 1016 278 298 236 236 1048 270 305 324 325 1224 299 332 322 273 1226 Total 754 857 806 849 3266 896 999 940 995 3830 892 1088 1034 1116 4130 1046 1091 1035 946 4118

Figure 3.09d-7 Quarterly Venture Capital Investments 1985 to 2011 By Stage (Number of Deals)
2009 2010 Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total Seed 67 84 99 112 362 89 120 96 90 395 Early Stage 193 212 233 317 955 259 357 296 322 1234 Expansion 181 220 218 269 888 261 307 247 271 1086 Later Stage 225 233 186 223 867 192 230 222 184 828 Total 666 749 736 921 3072 801 1014 861 867 3543 2011-1Q 81 317 226 229 853 2011-2Q 126 375 272 264 1037 2011 2011-3Q 110 367 283 200 960 2011-4Q 2011 Total 87 404 374 1433 230 1011 181 874 872 3722

Figure 3.10 Venture Capital Investments 1985 to 2011 By Industry ($ Millions)


Industry Software Biotechnology Industrial/Energy Medical Devices and Equipment IT Services Media and Entertainment Consumer Products and Services Semiconductors Telecommunications Electronics/Instrumentation Retailing/Distribution Financial Services Networking and Equipment Computers and Peripherals Healthcare Services Business Products and Services Other Total 1985 1986 567 553 106 212 187 184 170 173 21 31 93 111 60 123 242 289 169 166 108 118 32 116 86 103 210 149 438 420 79 118 24 54 3 3 2,594 2,922 1987 1988 483 449 256 358 273 205 250 328 39 28 146 161 152 142 249 289 147 147 122 76 280 218 69 205 130 128 384 337 131 89 51 42 0 0 3,164 3,204 1989 1990 428 499 308 282 317 200 331 306 36 35 151 93 76 133 161 178 118 123 111 49 206 85 228 59 194 155 281 225 143 77 48 66 0 3,138 2,566 1991 1992 435 586 248 517 150 268 212 461 39 28 65 131 125 102 74 141 107 200 68 51 30 96 21 120 125 235 161 179 50 155 75 36 33 2,018 3,306 1993 1994 433 612 466 550 268 282 392 406 31 111 247 273 135 144 62 129 215 445 56 65 95 86 125 115 495 235 149 169 180 175 72 40 6 6 3,427 3,843 1995 1996 1997 1998 1,090 2,164 3,199 4,188 747 1,121 1,279 1,436 453 482 693 1,335 569 574 989 1,097 161 428 651 1,036 936 1,105 966 1,761 431 486 708 584 189 303 565 626 816 1,157 1,481 2,691 136 204 259 222 315 226 311 566 180 306 372 816 355 608 933 1,374 298 344 389 354 451 686 901 905 155 356 382 703 33 21 71 97 7,313 10,569 14,149 19,789 1999 9,990 1,927 1,433 1,411 3,825 6,844 2,484 1,245 7,682 256 2,669 2,088 4,593 861 1,386 2,511 91 51,297 2000 2001 2002 2003 2004 2005 23,496 10,210 5,098 4,478 5,275 4,864 4,001 3,271 3,188 3,551 4,229 3,823 2,480 1,096 703 687 758 1,032 2,191 1,866 1,777 1,538 1,886 2,229 8,398 2,270 977 702 729 1,083 10,071 2,114 697 628 1,357 1,178 3,004 584 214 141 317 319 3,483 2,224 1,577 1,750 2,105 1,882 15,922 4,831 2,031 1,536 1,769 2,134 722 395 302 230 416 464 2,982 298 145 60 205 201 3,917 1,188 312 398 513 912 11,295 5,529 2,571 1,646 1,514 1,554 1,509 573 447 382 561 579 1,296 518 354 208 366 357 4,272 1,017 450 664 406 383 58 46 4 0 #### 38,028 20,847 18,599 22,407 22,993 2006 2007 2008 2009 5,147 5,721 5,646 3,678 4,530 5,432 4,606 3,723 2,012 3,116 6,300 2,640 2,820 3,716 3,496 2,577 1,533 1,902 2,107 1,260 1,845 2,070 1,763 1,500 391 397 385 443 2,208 2,006 1,503 795 2,336 2,123 1,469 571 734 650 755 328 174 365 273 163 453 575 446 445 1,206 1,448 732 791 376 500 442 365 332 304 149 145 549 580 475 294 17 35 50 26,647 30,921 30,583 19,767 2010 2011 4,907 6,789 3,896 4,787 3,357 3,560 2,360 2,863 1,692 2,416 1,509 2,337 613 1,182 1,117 1,177 878 704 455 686 205 409 517 395 654 376 355 365 278 351 463 231 16 48 23,273 28,675

Figure 3.10b Venture Capital Investments 1985 to 2011 By Industry (Number of Deals)
Industry Software Biotechnology Media and Entertainment IT Services Medical Devices and Equipment Industrial/Energy Telecommunications Consumer Products and Services Semiconductors Business Products and Services Electronics/Instrumentation Financial Services Networking and Equipment Retailing/Distribution Computers and Peripherals Healthcare Services Other Total 1985 1986 1987 321 319 298 73 97 133 55 66 89 22 24 31 128 114 164 119 131 157 86 76 94 44 50 70 86 71 90 20 37 43 75 67 69 23 29 37 78 73 72 18 33 71 159 142 124 33 56 56 2 2 2 1,342 1,387 1,600 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 276 293 301 286 297 241 252 437 688 818 971 1,410 2,149 1,281 991 149 133 142 139 164 136 140 176 235 243 276 259 356 334 319 72 71 59 53 79 81 97 140 191 220 268 707 945 366 166 22 27 30 30 19 18 31 62 126 164 205 445 687 325 170 147 180 188 157 186 149 127 179 214 271 294 289 293 256 234 136 140 151 123 132 101 98 129 158 216 187 204 255 203 129 79 80 59 66 66 71 73 141 211 269 340 530 860 486 277 58 48 65 46 51 51 66 115 132 162 163 281 284 118 70 91 79 78 49 59 45 38 62 72 115 123 152 257 207 171 33 30 27 20 25 31 23 49 69 94 138 278 459 174 101 57 61 53 49 39 28 37 51 46 54 58 55 79 62 68 43 43 25 24 24 32 31 47 62 91 116 189 333 142 75 68 73 75 64 86 62 76 81 123 141 215 293 486 341 231 81 72 46 38 35 35 29 55 69 92 119 225 275 85 49 132 124 101 79 81 66 67 91 98 113 91 101 135 81 59 46 54 41 37 45 52 45 73 137 152 154 158 168 109 70 1 2 2 3 2 7 8 11 9 16 11 11 3 1,491 1,508 1,443 1,262 1,388 1,202 1,232 1,895 2,639 3,226 3,727 5,592 ### 4,581 3,183 2003 2004 2005 2006 2007 2008 2009 2010 2011 951 942 927 989 1,014 1,038 756 953 1,022 355 397 399 474 512 516 440 492 451 128 139 206 324 385 405 268 328 445 146 152 173 237 281 291 226 306 358 245 278 288 358 398 394 335 350 347 136 153 151 226 312 366 260 297 310 217 226 236 309 283 235 131 134 137 46 65 76 75 103 102 86 112 119 213 257 222 261 222 201 129 138 118 97 81 82 99 109 122 79 83 70 64 73 93 103 99 103 64 71 65 62 66 62 88 81 68 56 77 59 186 192 185 135 147 109 107 65 56 31 36 38 41 46 45 36 26 52 56 61 61 57 70 64 51 55 46 71 63 65 53 57 54 40 42 45 2 2 1 11 5 8 14 22 ### 3,183 3,266 3,830 4,130 4,118 3,072 3,543 3,722

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Figure 3.11 Venture Capital Investments By State 1985 to 2011 ($ Millions)

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 CA 1,005.9 1,265.6 1,212.4 1,323.4 1,236.8 1,124.1 933.1 1,299.8 1,130.8 1,425.4 MA 370.0 348.7 402.3 358.4 281.5 284.2 215.7 359.0 292.2 370.9 NY 111.8 68.6 95.5 110.3 156.6 39.7 42.5 137.0 98.5 69.1 TX 220.1 221.9 202.5 227.0 216.3 118.2 132.3 145.1 232.0 253.4 IL 43.6 29.4 38.5 42.0 89.4 71.5 89.1 68.2 81.6 143.6 VA 30.4 22.8 62.8 64.9 46.9 46.6 11.1 24.7 36.8 72.9 CO 70.0 104.7 106.2 95.6 148.7 89.3 50.3 124.3 132.9 192.9 WA 46.6 51.3 74.4 59.5 75.0 56.3 29.1 180.2 95.3 134.1 NJ 71.0 114.5 126.6 97.3 152.9 64.9 65.8 82.1 80.3 178.8 PA 43.0 32.9 77.9 65.7 51.7 101.2 32.3 117.4 101.3 152.3 GA 55.3 106.5 60.6 87.6 53.7 20.9 32.1 178.1 173.5 86.3 NC 17.2 16.8 21.2 13.6 14.8 33.6 10.0 45.8 23.3 61.3 FL 31.1 33.3 70.0 79.3 43.6 33.4 25.9 70.8 88.2 83.8 MD 36.3 20.8 30.5 45.5 85.0 29.5 27.8 24.4 343.5 55.4 MN 22.3 27.0 34.3 25.8 35.0 75.7 39.0 58.8 42.4 48.8 AZ 15.0 37.6 37.9 43.6 31.4 27.0 16.5 57.2 32.8 31.2 OR 84.2 73.8 50.5 56.4 29.3 32.3 29.3 53.8 18.5 22.5 UT 5.5 29.5 5.3 11.4 4.4 0.8 3.0 21.4 3.6 OH 29.4 51.0 45.0 50.9 31.1 22.4 14.6 26.2 32.9 66.5 IN 13.3 15.4 17.6 5.6 7.6 10.5 7.9 0.0 15.9 56.1 CT 67.5 56.5 94.2 159.1 80.6 129.5 83.8 54.6 32.5 78.5 MO 3.0 3.9 10.6 1.6 9.4 6.8 34.9 25.2 53.8 70.5 TN 45.5 53.9 65.5 39.1 67.6 36.0 19.2 7.0 44.3 40.6 NH 3.8 14.7 15.0 27.7 30.9 16.2 27.2 4.3 31.7 7.9 MI 34.8 19.1 57.5 15.2 21.8 26.4 5.7 14.8 41.7 8.6 WI 11.4 13.0 14.7 12.8 10.9 9.9 5.5 21.1 23.4 8.4 KS 2.3 2.2 3.9 5.4 11.4 8.9 7.9 2.3 4.8 1.5 NM 20.3 10.0 7.5 3.9 1.0 1.8 4.4 - 0.5 DC 18.9 14.8 2.9 5.9 0.0 1.7 0.8 4.8 1.1 4.3 RI 12.6 9.7 6.6 14.2 30.9 2.7 0.4 5.1 8.7 ME 18.0 11.6 15.3 8.7 17.2 4.5 0.8 0.2 3.0 IA 0.7 0.7 7.8 1.3 2.0 1.4 0.7 1.6 2.0 17.4 OK 1.5 4.7 13.7 5.3 7.1 2.6 0.3 6.8 DE 0.3 4.5 1.4 4.8 1.8 1.2 9.9 3.0 12.4 VT 6.6 8.0 3.3 7.4 5.5 1.3 3.8 5.3 SC 0.9 12.7 18.1 23.5 7.6 4.0 1.2 10.7 3.8 LA 9.9 3.3 1.9 1.9 1.3 3.8 3.8 2.7 NV 2.4 4.1 5.5 0.1 2.2 5.9 1.2 KY 2.4 1.9 7.4 2.8 5.8 5.5 3.9 15.4 11.4 ND 14.0 0.2 ID 0.3 5.0 0.2 0.1 AL 15.3 16.7 21.3 9.6 2.0 2.3 0.3 10.6 48.1 15.5 MT 1.5 0.7 2.7 0.4 1.0 SD - - WV 1.1 2.0 0.1 0.0 - HI - - AK - - AR 1.2 1.0 MS 0.3 0.0 0.6 0.9 4.9 2.4 14.5 1.7 15.0 NE 0.5 1.5 - 38.0 3.5 PR 0.3 0.0 1.0 22.0 UN 0.5 0.8 6.1 13.0 0.2 30.8 0.8 0.1 WY - Total 2,594.4 2,922.1 3,164.4 3,204.2 3,138.4 2,565.6 2,018.4 3,306.0 3,426.7 3,842.8

1995 1996 1997 1998 2,905.7 4,388.7 5,684.6 7,194.0 614.3 1,017.9 1,386.8 1,858.9 260.5 285.5 791.7 1,348.1 460.0 533.8 783.5 1,095.1 181.3 320.3 392.3 393.1 252.9 308.1 324.3 716.8 300.9 232.5 378.0 882.1 314.1 418.3 414.9 683.7 178.6 429.7 451.8 415.6 128.3 293.7 419.1 437.0 110.8 243.3 368.9 420.3 194.4 157.7 276.9 319.3 230.4 358.2 395.8 612.9 137.7 133.8 185.9 326.6 183.8 155.0 243.2 325.6 66.3 92.5 170.2 218.7 34.3 93.8 125.4 51.8 25.0 60.0 93.9 104.2 65.7 153.6 224.9 316.6 14.4 20.8 29.7 36.8 116.8 139.4 254.9 331.0 94.6 52.1 67.4 611.7 157.7 161.4 101.8 118.0 28.7 42.6 44.8 153.9 65.8 77.6 83.2 120.0 8.9 20.9 61.8 34.4 8.7 34.9 9.2 10.4 3.6 12.9 32.5 7.7 0.7 6.7 5.2 26.7 3.4 20.3 11.5 26.0 1.5 1.5 3.7 52.7 12.1 22.1 17.1 8.3 6.1 31.8 27.8 114.5 4.4 3.0 1.1 4.2 0.3 3.2 1.4 34.1 99.4 52.6 162.9 25.5 13.7 26.5 40.6 0.6 1.8 9.7 28.2 21.6 31.1 24.3 30.7 9.8 1.1 0.5 15.2 0.1 1.2 30.3 16.5 46.7 106.3 58.3 23.8 0.4 - 20.5 1.5 4.2 5.0 3.6 6.9 10.6 8.4 3.5 0.5 10.4 3.7 17.9 7.8 8.2 12.5 1.3 0.3 2.2 4.4 29.6 2.0 7,313.4 10,569.2 14,148.6 19,789.2

1999 21,256.4 4,830.7 3,326.5 2,912.2 1,269.9 1,254.2 1,841.4 2,208.3 890.6 1,475.4 1,019.8 810.6 1,565.7 561.1 588.3 320.2 524.5 391.8 468.9 37.0 906.0 301.9 546.7 232.0 242.1 86.4 24.4 10.5 286.7 23.9 42.8 3.5 58.8 16.8 218.2 234.0 27.8 81.2 2.1 16.5 35.0 15.4 0.4 12.8 24.8 235.7 50.3 4.6 2.4 51,296.7

2000 40,666.8 10,079.6 6,420.9 5,873.5 2,197.1 3,114.8 3,856.9 2,707.7 2,855.5 2,806.4 2,142.9 1,723.0 2,564.2 1,711.1 909.8 604.4 801.4 639.1 936.0 261.8 1,476.6 592.9 456.2 665.9 286.3 164.0 211.7 17.5 449.1 74.6 132.4 16.4 49.4 134.7 8.4 388.4 93.5 27.3 201.8 1.0 7.5 265.8 16.7 0.2 4.5 199.0 2.8 33.4 19.5 134.8 42.0 50.4 99,097.6

2001 15,530.4 4,661.7 1,852.4 2,837.1 963.1 966.3 1,142.3 1,021.7 1,447.4 984.9 791.5 542.4 723.8 812.1 439.4 231.5 229.7 211.0 224.3 41.6 522.5 251.8 194.5 242.6 132.4 83.8 39.6 13.5 160.8 110.7 1.5 8.4 25.3 14.6 11.6 97.1 29.5 33.3 88.9 1.0 2.5 68.6 24.8 0.5 1.0 37.8 10.4 30.0 88.4 32.0 14.3 38,028.0

2002 2003 2004 9,092.4 8,225.4 10,251.4 2,525.8 2,568.1 3,037.1 708.7 627.8 783.4 1,120.5 1,146.7 1,123.1 278.1 359.1 208.4 420.0 342.1 287.4 564.1 632.4 356.3 540.6 441.8 809.8 893.9 805.0 947.7 426.6 474.2 606.7 567.5 286.6 487.2 532.3 370.6 310.8 328.1 298.9 382.5 581.7 306.6 730.0 315.6 224.1 379.7 200.6 80.6 73.0 164.5 135.6 141.7 122.0 109.9 228.0 252.1 185.1 82.4 39.6 12.0 67.3 173.4 205.5 228.9 77.2 74.3 26.0 109.2 75.0 92.9 203.1 143.8 124.3 106.3 87.5 124.1 48.0 37.5 55.4 6.8 24.5 44.9 13.7 2.0 20.1 23.5 48.8 80.2 95.2 53.1 38.3 16.7 0.9 26.0 2.0 5.3 30.8 35.1 66.4 19.4 0.4 2.1 1.5 1.2 5.1 76.5 14.3 13.6 15.1 2.3 8.5 31.7 23.8 47.6 12.7 3.9 48.2 14.5 2.0 8.2 52.1 2.5 52.5 27.8 25.1 7.4 3.5 1.5 15.9 12.6 5.6 1.8 17.8 9.9 9.7 2.2 2.0 0.8 0.9 3.4 12.6 1.1 0.2 0.5 0.1 1.3 1.5 20,846.9 18,598.9 22,406.7

2005 10,679.0 2,678.1 1,092.1 1,180.9 304.4 499.1 640.8 815.2 877.8 488.2 266.1 318.5 347.7 576.5 293.7 116.9 126.5 198.5 107.2 139.0 208.2 126.0 96.4 98.4 93.3 66.8 1.4 75.4 26.3 76.2 4.2 11.2 80.8 11.1 35.2 1.6 0.8 58.7 32.0 10.0 35.2 25.9 8.0 14.6 0.1 10.0 7.4 28.6 3.2 22,993.3

2006 12,790.8 2,960.3 1,386.7 1,425.3 405.4 427.1 639.0 1,063.9 700.6 867.6 405.2 406.7 285.7 749.2 321.5 265.9 117.4 194.1 75.6 28.9 280.2 55.8 31.2 119.4 125.3 70.1 31.0 30.5 45.8 80.7 39.9 0.2 14.6 5.3 22.3 8.3 11.4 19.6 26.3 17.8 19.9 4.7 32.8 1.5 8.2 6.7 14.3 6.5 26,647.2

2007 15,074.9 3,639.6 1,241.8 1,483.6 458.8 611.6 673.9 1,293.5 598.5 874.1 469.6 492.0 559.4 658.0 446.2 222.1 245.9 177.7 218.1 61.7 272.0 45.7 122.0 147.6 100.3 78.6 118.5 126.6 61.8 7.0 4.0 25.3 8.1 5.6 17.6 88.7 15.1 29.4 53.4 0.2 15.8 32.4 3.0 4.0 9.7 4.9 0.2 5.9 0.2 16.0 0.2 30,920.6

2008 14,451.5 3,209.6 1,443.9 1,213.2 412.3 541.9 896.2 845.2 727.8 764.3 406.8 497.6 260.3 465.0 476.7 228.5 138.3 196.9 243.6 79.2 223.5 93.3 71.4 247.5 205.0 63.6 52.2 48.2 35.3 37.8 5.4 58.2 16.6 75.6 41.8 22.7 1,614.6 12.6 24.2 5.5 18.0 17.7 15.6 0.5 30.0 7.5 27.8 10.8 1.5 30,583.2

2009 10,005.9 2,227.8 1,045.9 773.2 252.5 245.9 525.0 595.9 630.0 434.3 294.0 244.2 334.6 314.1 274.2 112.6 71.8 159.3 116.8 242.4 192.0 18.7 70.0 37.4 143.7 23.9 7.5 4.1 46.6 29.0 11.4 84.1 4.5 17.6 29.2 17.1 12.4 15.4 13.6 4.7 14.6 43.2 14.5 0.8 3.0 7.4 0.5 19,767.1

2010 11,754.2 2,425.3 1,407.0 1,033.0 624.1 398.9 483.5 648.6 468.9 541.7 330.3 517.1 224.6 414.2 148.8 84.0 190.5 144.8 178.3 80.0 216.5 59.0 63.9 56.9 152.2 120.0 41.7 12.4 107.3 59.3 3.2 51.5 13.0 30.6 33.1 26.7 18.0 33.7 16.7 3.2 7.8 0.6 1.9 3.8 11.5 5.0 11.5 4.5 10.0 23,273.0

2011 14,671.7 2,988.9 2,294.7 1,468.9 695.7 649.6 621.5 542.4 533.4 520.1 343.4 325.2 298.8 283.6 265.9 247.5 238.6 233.7 205.2 177.9 135.4 133.7 103.1 95.5 82.7 72.0 67.4 61.8 49.0 40.4 38.6 28.4 26.5 26.4 24.8 22.0 21.9 9.5 8.5 4.0 4.0 3.5 3.2 3.0 2.1 0.6 28,675.0

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Figure 3.11b Number of Venture Capital Deals By State 1985 to 2011

State CA MA NY TX PA WA CO IL VA MD OH NJ CT GA KS FL NC UT MN OR TN MI AZ MO NH IN WI DC RI DE LA NM VT KY ME HI IA NV SC AL MT OK WV AR ID ND SD AK MS NE PR UN WY Total

1985 1986 1987 1988 1989 465 480 510 519 557 215 181 215 191 176 45 45 60 47 49 106 90 105 104 90 34 44 57 53 39 20 20 26 26 36 43 56 59 60 50 26 27 31 31 61 22 21 30 24 29 18 17 24 28 19 25 20 27 21 18 43 43 51 42 52 33 31 39 44 43 32 45 45 39 31 1 2 6 4 4 21 20 29 25 22 15 21 16 11 17 2 13 13 6 5 23 31 33 29 29 24 24 30 35 28 17 23 28 30 27 20 22 23 12 16 15 11 20 13 23 5 6 12 8 11 3 9 11 10 13 8 15 15 6 6 12 16 17 15 6 4 5 7 4 1 6 4 7 6 7 1 1 1 4 3 6 2 2 2 3 4 6 6 1 3 3 3 2 2 4 7 4 5 8 6 5 4 6 1 1 3 2 3 2 2 2 1 1 4 3 7 7 10 12 4 7 1 2 1 5 4 5 4 1 4 1 1 2 1 1 - 1 1 - 1 - - 1 1 1 1 1 5 1 1 2 3 - 1,342 1,387 1,600 1,491 1,508

1990 547 171 31 85 42 27 49 34 27 28 21 44 37 33 3 32 26 3 31 21 22 14 14 11 18 12 11 5 7 4 3 3 6 2 1 5 7 2 3 1 1,443

1991 1992 1993 1994 1995 476 572 436 462 683 136 137 131 124 201 23 36 35 37 70 69 71 68 67 101 37 61 46 40 64 27 36 29 35 69 35 52 47 51 57 41 38 27 36 43 24 19 18 21 39 28 25 18 23 34 20 21 20 20 36 48 41 37 40 55 33 33 26 35 44 34 37 43 46 51 3 6 2 2 4 20 24 26 19 57 19 20 23 22 37 8 10 7 7 31 27 26 22 53 12 12 12 12 17 24 11 8 12 21 9 6 12 3 13 13 21 21 25 27 9 9 13 8 17 17 10 10 4 10 8 1 7 7 8 6 9 7 9 7 3 3 2 3 1 4 2 3 3 4 3 1 3 4 2 1 4 2 7 2 2 1 2 3 1 3 4 2 2 2 3 9 4 1 2 2 - - 3 4 1 4 9 4 4 2 1 10 7 7 6 5 2 4 9 4 9 3 1 5 2 - - 1 2 1 2 1 1 1 2 1 1 4 2 5 5 3 1 3 2 1 2 4 1 2 4 2 2 1,262 1,388 1,202 1,232 1,895

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1,026 1,144 1,398 2,221 2,962 1,545 1,095 1,156 1,238 1,320 1,582 1,696 1,677 1,259 1,417 1,500 295 341 402 591 785 516 388 380 384 388 409 466 453 339 372 384 88 160 198 357 611 292 159 122 159 134 230 210 259 197 283 310 135 169 199 315 481 336 171 172 175 179 196 185 161 126 159 153 83 137 144 147 259 151 106 102 110 104 151 178 193 136 161 146 81 87 110 207 256 147 108 81 112 119 133 161 159 109 115 116 82 96 129 164 224 113 90 74 71 91 107 107 111 89 88 100 56 87 75 128 202 130 81 59 61 60 61 76 73 51 69 90 59 83 102 155 282 148 93 86 79 89 93 101 88 48 56 78 48 49 57 98 177 93 92 84 99 114 113 95 106 76 74 74 55 55 66 52 81 45 51 31 36 37 45 66 62 57 58 71 67 83 81 121 187 153 95 88 94 82 91 102 94 79 77 65 46 66 75 93 120 74 39 34 35 34 30 37 40 42 59 55 58 80 98 163 229 141 81 62 79 68 90 76 82 46 67 55 11 6 3 8 22 10 7 12 14 4 9 17 24 17 36 52 56 72 69 116 187 114 61 63 63 55 56 57 39 35 43 50 60 81 81 104 156 88 80 75 53 48 59 67 55 36 64 47 17 31 33 42 60 44 28 23 32 28 43 36 39 33 26 45 50 89 78 84 109 84 56 59 52 43 42 60 49 36 29 43 29 41 18 51 67 43 27 23 31 27 34 38 34 15 34 39 29 25 27 49 51 31 25 22 26 26 12 23 24 18 26 32 22 29 32 45 55 23 27 17 16 21 20 23 44 35 32 31 29 29 38 57 69 36 27 19 13 29 34 35 22 20 18 25 26 17 21 25 53 18 29 20 9 11 14 16 25 12 14 22 17 17 24 31 60 37 41 34 22 22 22 23 28 12 10 19 9 13 9 11 28 7 12 8 10 14 13 16 14 15 17 14 9 19 15 18 24 20 10 8 10 16 20 20 19 12 20 14 5 2 4 17 45 22 7 6 8 11 9 15 13 8 14 12 2 4 5 10 9 11 14 10 8 13 8 4 8 14 11 12 4 4 2 4 1 2 1 1 5 3 5 8 6 7 8 4 12 9 9 14 10 7 2 4 2 2 6 12 13 3 8 5 4 4 6 8 5 6 5 8 16 9 24 17 12 11 8 1 1 2 1 4 3 5 5 4 5 8 6 7 6 7 8 7 15 16 16 14 5 3 3 6 3 10 8 9 8 15 6 5 2 11 11 15 5 5 2 4 3 7 8 4 4 6 6 3 4 3 3 3 5 2 7 4 6 11 4 7 3 5 3 6 4 7 2 4 5 1 1 3 3 2 3 8 9 2 3 2 7 11 9 10 6 6 9 7 8 7 10 6 3 4 3 15 15 17 10 11 5 6 4 5 1 2 12 10 6 10 3 8 16 14 10 28 15 12 9 6 4 9 5 8 9 2 2 2 3 2 2 1 2 1 2 2 7 5 12 8 10 7 4 3 12 1 8 6 5 4 3 2 2 1 2 2 8 5 3 5 3 5 2 3 4 2 2 2 5 5 3 5 3 2 1 5 1 1 1 1 2 3 2 3 2 2 5 2 3 5 7 6 4 4 1 1 1 1 1 1 2 1 1 4 3 1 1 1 1 1 2 1 3 1 2 1 3 1 1 3 4 2 2 3 3 3 4 5 2 4 2 2 5 3 5 7 10 10 3 2 2 3 4 3 4 4 6 2 2 2 11 5 1 1 1 2 3 4 2 1 7 7 14 3 16 8 1 1 2 1 4 1 1 1 1 2,639 3,226 3,727 5,592 ### 4,581 3,183 3,004 3,183 3,266 3,830 4,130 4,118 3,072 3,543 3,722

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National Venture Capital Association


Figure 3.12 Venture Capital Investments First vs. Follows-on Rounds Total Dollars Invested ($ Millions)
120,000 100,000
Follow-on
7,000 6,000 Follow-on Series2 5,000 (Number of Companies) 4,000 3,000 2,000 1,000 0 First Series1

Figure 3.14 Venture Capital Investments Number of Companies Receiving

($ Millions)

80,000 60,000 40,000 20,000 0

First

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

'85

'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98 Year

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

Figure 3.13 Venture Capital Investments First vs. Follows-on Rounds Total Dollars Invested ($ Millions)

Figure 3.15 Venture Capital Investments First vs. Follows-on Rounds Total Number of Companies
No. of Cos Receiving Initial Deals Financing 432 493 566 503 441 344 267 390 352 431 901 1,144 1,306 1,427 2,458 3,387 1,236 838 769 952 1,069 1,260 1,364 1,287 797 1,056 1,173 No. of Cos Receiving Follow-On Financing 754 739 842 779 820 778 710 715 647 624 776 1,173 1,473 1,832 2,444 3,691 2,774 1,966 1,824 1,833 1,837 2,103 2,216 2,323 1,870 2,000 2,095 No. of Cos Receiving Financing* 1,150 1,193 1,352 1,234 1,211 1,055 935 1,042 943 990 1,572 2,118 2,578 3,027 4,467 6,417 3,847 2,694 2,492 2,677 2,780 3,184 3,415 3,428 2,577 2,936 3,118

Year 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

First 690.0 835.2 969.6 1,024.5 877.1 761.5 490.3 1,203.2 1,182.7 1,576.9 3,739.4 3,954.6 4,630.8 6,585.8 15,190.7 26,256.3 6,924.3 3,955.5 3,556.7 5,220.6 5,817.4 6,203.3 7,605.5 8,067.0 3,512.9 4,388.7 4,969.7

Follow-on 1,904.4 2,086.9 2,194.8 2,179.7 2,261.3 1,804.1 1,528.1 2,102.8 2,244.1 2,265.9 3,574.0 6,614.6 9,517.7 13,203.4 36,106.0 72,841.3 31,103.7 16,891.3 15,042.2 17,186.1 17,175.8 20,443.9 23,315.1 22,516.1 16,254.2 18,884.3 23,705.3

Total 2,594.4 2,922.1 3,164.4 3,204.2 3,138.4 2,565.6 2,018.4 3,306.0 3,426.7 3,842.8 7,313.4 10,569.2 14,148.6 19,789.2 51,296.7 99,097.6 38,028.0 20,846.9 18,598.9 22,406.7 22,993.3 26,647.2 30,920.6 30,583.2 19,767.1 23,273.0 28,675.0

Year 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

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

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Figure 3.16 First Sequence by Stage of Development ($ Millions)

Stage 1985 1986 Seed 73.9 47.8 Early Stage 37.5 66.6 Expansion 111.1 47.3 Later Stage 20.9 19.1 Total 243.3 180.8

1987 45.7 71.2 106.8 10.9 234.6

1988 36.7 81.7 128.6 60.8 307.8

1989 42.4 65.5 143.8 35.2 286.9

1990 25.2 65.2 78.3 34.7 203.4

1991 1992 1993 4.5 21.0 43.1 27.6 64.4 46.3 43.4 150.5 164.2 29.9 50.1 23.2 105.3 286.0 276.8

1994 90.9 101.7 143.2 47.5 383.2

1995 166.2 208.3 916.0 275.2 1,565.7

1997 107.0 392.0 492.4 120.3 1,111.6

1998 153.0 392.4 774.4 97.9 1,417.7

1999 451.0 1,057.0 2,336.8 205.8 4,050.7

2000 2001 2002 2003 2004 829.2 119.1 35.3 52.0 59.9 5,197.4 1,201.0 368.4 212.1 535.1 4,211.9 832.8 439.2 309.4 438.8 243.2 96.4 66.4 121.2 211.4 10,481.7 2,249.3 909.3 694.7 1,245.1

2005 359.3 498.4 534.0 337.2 1,729.0

2006 309.3 430.7 558.7 284.3 1,583.0

2007 414.2 724.4 738.4 393.9 2,270.9

2008 327.8 770.5 2,332.6 445.3 3,876.2

2009 298.3 332.4 481.0 319.1 1,430.7

2010 352.2 747.1 753.0 479.2 2,331.6

2011 576.5 2,056.7 771.7 778.3 4,183.2

Figure 3.17 First Sequence by Stage of Development (Number of Deals)

Stage Seed Early Stage Expansion Later Stage Total

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 59 59 55 53 73 23 9 26 26 31 54 44 65 102 33 49 72 55 21 37 15 30 20 20 57 57 102 90 39 40 55 55 53 28 29 35 36 32 93 111 156 146 12 13 10 10 15 11 9 11 15 6 23 29 18 19 143 161 192 173 162 99 62 102 97 89 227 241 341 357

1999 141 248 200 18 607

2000 222 709 428 30 1,389

2001 2002 2003 2004 2005 2006 2007 2008 2009 71 23 47 42 49 79 129 131 78 232 105 74 120 108 139 185 209 140 158 88 53 79 105 105 116 108 78 14 16 18 18 24 43 44 75 42 475 232 192 259 286 366 474 523 338

2010 2011 122 256 240 491 120 133 66 93 548 973

Figure 3.18 First Sequence by Industry ($ Millions)

Industry 1985 Software 84.8 Biotechnology 31.8 Media and Entertainment 67.0 IT Services 16.1 Industrial/Energy 85.4 Consumer Products and Services 43.9 Medical Devices and Equipment 39.2 Semiconductors 45.5 Healthcare Services 16.5 Retailing/Distribution 19.6 Telecommunications 64.3 Financial Services 65.8 Computers and Peripherals 38.5 Networking and Equipment 20.6 Electronics/Instrumentation 43.2 Business Products and Services 7.3 Other 0.5 Total 690.0

1986 114.5 53.4 42.6 9.1 76.2 59.4 71.3 22.4 61.4 59.0 42.9 79.8 51.4 28.4 28.2 33.7 1.5 835.2

1987 89.5 63.7 95.7 4.5 113.3 49.3 80.1 37.3 55.8 134.3 37.7 43.9 82.2 23.9 31.9 26.5 969.6

1988 121.8 64.2 110.1 9.4 118.2 74.4 76.7 56.6 16.6 54.1 31.9 155.7 59.1 39.4 25.6 10.5 0.3 1,024.5

1989 92.8 53.0 80.4 20.6 212.3 29.5 67.5 13.2 48.0 20.3 40.9 71.3 40.3 54.6 19.1 13.3 877.1

1990 159.7 24.5 65.2 16.7 83.8 55.6 57.9 36.1 27.8 13.2 52.1 32.6 51.2 42.0 7.0 36.0 0.0 761.5

1991 100.6 14.5 13.4 10.3 58.9 52.5 38.6 7.7 16.6 10.7 10.8 8.3 17.4 19.8 15.1 62.4 32.7 490.3

1992 145.4 157.0 80.3 8.8 144.1 71.2 90.8 50.5 62.5 52.5 93.6 100.6 52.7 53.5 14.1 25.4 1,203.2

1993 110.8 119.2 164.7 13.1 143.4 50.5 136.3 5.0 70.4 23.8 59.0 101.9 33.3 71.0 16.0 64.2 1,182.7

1994 281.1 151.4 115.4 91.5 153.4 90.7 130.7 38.8 109.0 51.3 187.1 62.4 34.1 37.0 8.6 34.1 0.2 1,576.9

1995 506.2 153.5 771.9 46.4 390.2 274.1 158.8 54.5 297.4 216.5 323.0 113.0 149.2 86.6 66.7 121.4 10.0 3,739.4

1996 856.0 185.2 345.4 215.5 272.5 204.7 193.6 122.3 254.5 117.6 383.8 240.9 107.2 127.4 85.0 242.5 0.5 3,954.6

1997 1,002.0 342.1 388.2 241.5 369.6 192.5 249.0 174.1 321.6 105.2 373.2 236.3 100.6 220.3 83.7 215.0 16.1 4,630.8

1998 1,145.8 342.1 650.5 353.1 866.2 228.1 238.7 167.5 238.5 194.9 896.6 394.2 116.2 313.1 42.9 375.9 21.5 6,585.8

1999 2,668.4 372.0 2,090.0 1,457.4 746.9 774.5 260.9 266.9 365.2 607.2 1,920.7 783.0 250.7 1,540.6 83.4 931.9 70.9 15,190.7

2000 5,540.1 717.1 2,656.0 2,470.9 993.0 870.7 299.0 977.2 411.5 832.3 4,472.6 1,386.5 335.8 2,456.5 148.1 1,653.7 35.2 26,256.3

2001 1,521.0 774.3 308.1 291.5 443.2 117.8 258.6 482.0 84.4 55.8 833.8 322.9 233.0 807.9 99.5 262.8 27.6 6,924.3

2002 1,121.3 661.2 153.7 171.5 368.5 39.1 238.0 311.6 130.6 44.2 185.6 76.2 15.5 238.4 78.5 117.6 4.0 3,955.5

2003 843.2 393.0 230.1 156.1 241.9 75.2 313.8 368.9 59.1 11.3 173.3 93.7 79.5 116.6 57.1 343.8 3,556.7

2004 1,227.8 722.6 717.8 192.1 273.6 121.1 296.9 405.5 85.9 109.1 262.6 236.6 81.2 188.2 93.5 205.6 0.4 5,220.6

2005 1,139.6 615.2 551.9 361.3 513.8 212.4 453.1 261.9 137.6 111.6 330.8 641.5 69.2 129.6 141.8 146.1 5,817.4

2006 1,219.8 987.7 628.5 379.8 734.6 111.2 594.4 243.0 115.6 41.0 425.4 199.2 55.7 138.4 135.2 193.6 6,203.3

2007 1,374.7 1,087.8 643.2 492.4 1,259.3 196.8 735.3 233.7 78.6 88.3 427.5 312.1 115.0 187.2 113.3 245.8 14.5 7,605.5

2008 1,075.2 905.1 543.4 639.3 2,811.6 209.9 677.1 157.2 32.0 54.1 316.4 248.7 160.3 55.8 57.6 123.4 8,067.0

2009 729.9 499.3 246.9 308.9 588.3 127.0 355.4 34.0 39.5 17.1 88.2 202.8 60.0 55.9 43.4 115.3 1.1 3,512.9

2010 1,038.1 593.7 393.8 355.6 419.3 159.0 279.4 123.0 133.3 61.0 197.1 271.1 48.0 145.3 65.7 99.5 5.7 4,388.7

2011 1,435.7 858.3 588.4 492.0 452.9 257.3 204.4 110.7 93.5 75.4 75.3 75.1 71.4 58.6 50.0 43.9 27.0 4,969.7

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Figure 3.19 First Sequence by Industry ($ Millions)

Industry Software Media and Entertainment IT Services Biotechnology Industrial/Energy Medical Devices and Equipment Consumer Products and Services Telecommunications Business Products and Services Financial Services Other Retailing/Distribution Semiconductors Computers and Peripherals Electronics/Instrumentation Healthcare Services Networking and Equipment Total

1985 73 29 11 28 55 39 27 26 12 15 1 13 24 27 26 9 17 432

1986 74 33 8 32 58 51 29 24 23 20 1 25 13 31 18 32 21 493

1987 80 45 5 55 72 60 31 25 21 24 39 16 31 23 19 20 566

1988 85 32 8 46 71 55 18 21 12 21 1 26 21 34 17 11 24 503

1989 67 33 11 35 73 58 22 23 9 11 13 12 27 17 8 22 441

1990 81 24 6 25 49 37 26 7 8 7 2 9 14 18 8 7 16 344

1991 61 10 5 21 29 28 19 13 9 10 2 6 7 12 10 11 14 267

1992 67 27 4 53 33 43 21 19 10 13 13 11 27 10 16 23 390

1993 51 26 7 46 34 41 17 27 17 18 1 13 6 16 6 13 13 352

1994 100 31 19 43 38 36 28 23 12 12 1 10 11 19 11 20 17 431

1995 223 70 28 53 81 55 57 69 31 32 5 36 23 42 23 42 31 901

1996 318 77 67 68 81 85 53 89 39 39 1 34 30 37 20 57 49 1,144

1997 326 108 64 85 100 107 72 93 48 43 6 33 55 43 18 53 52 ###

1998 331 114 89 105 85 97 69 135 76 63 4 43 46 31 17 38 84 1,427

1999 588 379 224 79 101 87 138 235 147 100 10 113 49 32 18 52 106 2,458

2000 872 387 329 123 121 69 101 390 224 174 8 121 116 54 29 59 210 3,387

2001 307 72 73 109 84 60 28 131 51 45 8 19 79 27 25 21 97 1,236

2002 262 43 28 109 61 64 23 44 26 28 2 10 52 11 18 19 38 838

2003 226 38 34 91 49 74 19 40 30 19 5 66 19 23 17 19 769

2004 2005 2006 2007 250 278 277 301 57 99 152 172 49 67 93 100 110 118 141 143 67 71 116 147 77 90 128 118 30 43 41 52 55 72 102 80 35 38 42 54 32 29 35 40 2 2 9 18 22 11 14 77 41 46 39 18 16 11 26 22 35 25 27 16 23 19 18 37 25 21 24 952 1,069 1,260 1,364

2008 284 173 121 141 153 104 55 50 51 32 3 16 32 21 30 10 11 1,287

2009 199 88 78 84 79 72 33 26 29 19 6 10 13 18 16 12 15 797

2010 298 133 98 122 87 68 45 47 29 37 11 12 15 13 15 18 8 1,056

2011 349 213 136 100 78 57 49 46 35 17 17 17 17 11 11 10 10 1,173

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Figure 3.20 Internet-Related Investments By Year 1985-2011 Figure 3.21 Top Five States By Internet-Related Investments in 2011

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOTAL

# Companies 416 754 1,023 1,481 3,049 4,587 2,371 1,440 1,221 1,241 1,328 1,611 1,733 1,787 1,384 1,600 1,894 28,920

($ Millions) 1,769.2 3,880.5 5,790.3 10,847.2 39,802.9 76,340.3 24,533.8 10,582.5 8,534.4 10,397.2 10,488.4 12,473.8 14,217.2 12,553.5 8,764.6 10,420.5 14,854.1 276,250.4

State California New York Massachusetts Texas Illinois TOTAL*

($ Millions) 7,790.4 2,002.0 1,025.6 580.4 428.4 11,826.9

* Total includes above 5 states only

Figure 3.22 Internet-Related Investments By Regions in 2011

Stage Region Silicon Valley NY Metro New England Midwest LA/Orange County Texas Southeast DC/Metroplex Northwest SouthWest Colorado Philadelphia Metro San Diego North Central Upstate NY South Central Sacramento/N.Cal AK/HI/PR TOTAL

($ Millions) 6,997.7 2,095.9 1,119.0 808.3 652.1 580.4 551.3 538.0 458.1 339.0 301.0 143.3 136.1 61.3 40.9 27.3 4.5 14,854.1

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Figure 3.23 Sources and Targets of Invested Capital Investments 2011 Source
STATE AL AR AZ CA CO CT DC DE FF FL GA IA ID IL IN KS KY LA MA MD ME MI MN MO NC ND NE NH NJ NM NV NY OH OK OR PA PR RI SC SD TN TX UN UT VA VT WA WI Total AK 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 AL 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 0.0 0.0 0.0 0.0 0.0 3.6 AR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 AZ CA CO CT DC DE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.8 3.3 0.0 0.0 0.0 0.0 6.9 7,410.1 149.9 24.6 28.1 6.4 7.4 56.0 76.7 0.0 0.7 0.0 2.2 260.2 8.8 11.4 0.0 0.0 0.0 35.3 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 13.7 1,270.1 58.3 15.3 0.0 0.0 0.0 14.1 0.0 0.0 0.0 0.0 1.8 43.5 4.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.2 0.0 5.5 0.0 0.0 0.0 0.0 162.6 11.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 1.6 0.0 33.7 802.3 31.0 12.6 0.0 15.0 54.9 55.9 19.0 2.1 2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 57.2 6.0 0.0 0.0 0.0 0.0 63.9 0.0 0.0 0.0 0.0 0.0 20.7 0.0 0.0 0.0 0.0 0.0 29.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.8 231.6 3.0 0.0 5.0 0.0 0.0 1.7 1.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 54.8 946.2 20.7 42.1 0.0 1.0 0.0 4.4 0.0 3.7 0.0 0.0 15.0 6.6 35.0 0.0 0.0 0.0 0.0 16.7 0.0 0.0 0.0 0.0 2.8 119.4 17.0 2.9 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 4.3 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 2.0 12.0 71.0 6.6 0.0 0.0 0.0 25.4 2,671.2 144.9 20.1 10.0 1.1 0.0 32.9 5.9 0.0 0.0 0.0 0.0 68.5 9.6 0.0 0.2 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 213.2 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 247.4 14,671.9 621.5 135.5 49.0 26.6 FL 6.7 0.0 0.0 73.6 0.0 0.0 0.0 0.0 36.1 18.4 11.4 0.0 0.0 0.0 0.0 0.0 0.0 2.3 10.9 8.5 0.0 0.0 0.5 0.0 8.2 0.0 0.0 0.0 0.9 0.0 0.0 23.1 1.2 0.0 0.0 8.8 5.0 0.0 0.0 0.0 0.0 2.1 68.8 0.0 1.9 0.0 0.0 10.5 298.9 GA 1.8 0.0 0.0 108.9 0.0 7.1 1.7 0.0 13.4 3.0 62.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.3 18.2 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 5.6 0.0 0.0 27.1 1.5 0.0 0.0 2.0 0.0 0.0 0.0 0.0 3.2 7.0 58.8 0.0 2.5 0.0 0.0 0.0 343.3

Target State
HI IA 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 28.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 28.4 ID 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 4.0 IL 0.0 0.1 0.0 230.1 3.5 1.1 1.5 0.0 72.3 0.0 0.0 0.0 0.0 112.3 0.5 0.0 0.0 0.0 59.2 7.0 0.0 0.0 0.6 0.0 16.2 0.0 0.0 0.0 3.5 0.0 0.0 45.2 1.8 0.0 0.0 2.5 0.0 0.0 0.0 0.0 0.0 34.4 87.0 1.3 0.0 0.0 12.4 3.2 695.7 IND KS 0.0 0.0 0.0 0.0 0.0 0.0 19.4 8.6 0.0 0.0 0.0 9.0 0.0 0.0 0.0 0.0 0.0 6.5 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 2.8 1.5 31.7 2.5 0.0 24.5 0.0 0.0 0.0 0.0 63.2 2.0 6.8 0.0 0.0 0.0 6.0 0.0 0.0 0.3 0.0 0.0 12.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5 0.0 0.0 0.0 0.0 0.0 6.8 5.6 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.2 7.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 177.9 67.5 KY 0.0 0.0 0.0 0.0 0.0 0.7 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 0.0 0.0 0.0 0.0 0.0 8.3 LA MA 0.0 0.0 0.0 0.0 1.1 0.1 3.6 546.0 0.0 21.2 0.0 50.0 0.0 1.7 0.0 0.0 0.0 236.5 0.0 6.6 0.0 3.3 0.0 0.0 0.0 0.0 0.0 36.1 0.0 13.1 0.0 0.0 0.0 1.1 4.3 3.4 7.2 860.1 0.0 14.6 0.0 9.1 0.0 2.2 0.0 12.3 0.0 10.3 0.0 16.3 0.0 0.0 0.0 0.0 0.0 12.7 0.0 48.9 0.0 1.9 0.0 0.0 4.6 203.4 0.0 0.0 0.0 3.3 0.0 0.0 0.0 68.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 1.1 773.3 0.0 0.2 0.0 20.0 0.0 0.0 0.0 6.9 0.0 4.3 21.9 2,988.7 MD ME MI MN MO 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.7 4.0 16.9 54.0 31.4 0.0 0.0 0.0 0.0 0.0 2.1 0.0 3.6 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.0 0.0 3.6 55.1 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 4.5 0.0 3.5 0.0 23.3 0.0 0.0 0.0 5.8 0.0 0.0 0.0 0.0 0.0 0.1 2.2 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 8.2 11.5 0.0 1.7 29.8 0.0 24.3 0.0 0.0 7.7 30.4 25.0 0.6 0.0 0.0 0.0 0.4 0.0 17.1 5.0 0.5 0.0 0.0 0.0 21.8 0.0 0.0 0.0 0.0 1.1 16.4 5.6 0.0 8.5 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 5.9 0.0 0.0 8.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.4 2.5 3.5 20.9 0.0 0.0 0.0 1.5 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 43.5 15.4 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.7 0.0 6.3 0.0 0.0 1.0 0.0 0.0 0.0 2.1 0.0 7.8 48.6 15.9 18.0 41.7 11.0 0.7 0.0 0.0 0.0 0.0 15.9 0.0 0.0 0.0 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.4 2.4 0.0 283.6 38.7 82.7 266.0 133.7 MS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 MT 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2

Source State includes U.S. states FF = other foreign UN = undisclosed or unknown

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Figure 3.23 (continued) Sources and Targets of Invested Capital Investments 2011 Source
STATE AL AR AZ CA CO CT DC DE FF FL GA IA ID IL IN KS KY LA MA MD ME MI MN MO NC ND NE NH NJ NM NV NY OH OK OR PA PR RI SC SD TN TX UN UT VA VT WA WI Total NC 0.0 0.0 0.0 87.8 4.0 12.2 0.0 0.0 40.3 0.5 0.9 0.0 0.0 14.5 1.4 0.0 2.1 0.0 12.6 7.1 0.0 0.0 1.8 0.0 39.8 0.0 0.3 0.0 0.0 0.0 0.0 35.9 0.0 0.0 0.0 3.7 0.0 0.0 0.0 0.0 0.0 2.0 44.2 0.0 4.6 0.0 9.5 0.0 325.2 ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 NE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NH 0.0 0.0 0.0 22.7 0.0 9.3 0.0 0.0 0.3 0.0 2.8 0.0 0.0 3.3 0.0 0.0 0.0 0.0 36.5 0.0 0.3 0.0 0.0 0.0 0.3 0.0 0.0 1.1 0.0 0.0 0.0 5.3 0.0 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 12.5 0.0 0.0 0.0 0.0 0.0 95.7 NJ 0.0 0.0 0.0 104.9 0.0 9.4 0.0 0.0 65.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 22.0 20.5 0.0 9.4 16.0 0.0 0.7 0.0 0.0 0.0 30.4 0.0 0.0 122.7 0.0 0.0 0.0 7.9 0.0 0.0 0.0 0.0 0.0 0.0 119.5 0.0 0.4 0.0 4.5 0.0 533.6 NM 0.0 0.0 0.0 6.3 0.0 0.4 0.0 0.0 12.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.3 0.0 1.6 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 15.5 6.4 0.0 0.0 0.0 0.0 61.8 NV NY 0.0 0.0 0.0 0.0 0.0 0.0 8.0 545.3 0.0 15.4 0.0 32.5 0.0 0.0 0.0 0.0 0.0 263.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 4.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.4 1.0 263.1 0.0 74.6 0.0 0.0 0.0 4.3 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.2 0.0 0.0 0.0 0.0 0.0 520.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 51.2 0.0 0.0 0.0 13.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 26.1 0.5 397.6 0.0 8.3 0.0 26.8 0.0 0.0 0.0 24.0 0.0 0.0 9.5 2,294.5 OH 0.0 0.0 0.0 9.8 0.0 1.8 0.0 0.0 6.3 0.0 0.0 0.0 0.0 0.0 19.6 0.0 2.0 0.0 12.3 2.5 0.0 0.9 3.0 0.7 0.0 0.0 0.0 0.0 6.5 0.0 0.0 4.1 48.4 0.0 0.0 6.1 0.0 0.0 0.0 0.0 0.0 7.8 67.6 0.0 0.0 0.0 3.0 2.6 205.0 OK 0.0 0.0 0.0 0.0 0.0 22.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 26.5 ORE 0.0 0.0 1.6 80.9 4.0 5.0 0.0 0.0 42.3 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 8.4 0.3 0.0 0.0 0.0 0.0 0.0 0.0 74.9 0.0 0.0 0.0 14.1 0.0 238.6 PA 0.0 0.0 0.0 94.5 0.8 1.2 0.0 0.4 83.4 0.0 0.0 0.0 0.0 5.3 0.8 0.0 2.3 0.0 51.7 5.2 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 8.2 0.0 0.0 53.0 0.0 0.0 3.8 82.8 1.7 0.0 0.0 0.0 2.3 1.2 104.8 0.0 15.5 0.0 0.0 0.0 520.1

Target State
PR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 RI 0.0 0.0 0.0 0.0 0.0 3.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.6 13.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.4 0.0 0.0 0.0 0.0 18.0 0.0 0.0 0.0 0.0 0.0 40.5 SC 1.7 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 6.5 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 0.0 0.0 22.0 SD TN TX 0.0 0.0 0.5 0.0 0.0 5.0 0.0 0.0 0.0 0.0 4.0 333.3 0.0 0.0 6.1 0.0 0.6 27.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 84.8 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 34.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.4 2.6 0.0 0.0 1.4 0.0 0.4 41.2 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.7 1.2 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.6 125.0 0.0 0.5 0.0 0.0 0.0 4.5 0.0 0.0 2.5 0.0 0.0 18.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 39.8 1.0 0.0 0.0 239.8 1.5 32.8 523.4 0.0 0.0 0.0 0.0 1.4 4.1 0.0 0.0 0.0 0.0 0.0 3.6 0.0 0.0 0.0 3.0 103.0 1,469.1 UN UT VA VI VT WA WI 0.0 0.0 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 80.9 146.1 0.0 2.0 172.0 1.5 0.0 0.0 2.4 0.0 0.0 26.8 0.0 0.0 1.3 9.0 0.0 0.0 12.9 0.0 0.0 0.0 9.2 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 21.9 0.0 0.0 14.8 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.6 0.0 0.0 0.0 0.0 0.0 0.0 4.8 6.6 0.0 0.0 4.2 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 14.4 0.0 3.4 38.1 0.0 0.0 0.0 67.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 5.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 0.6 0.0 0.0 4.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.7 128.7 0.0 5.5 22.3 20.9 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 52.2 0.0 0.0 2.3 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.6 0.0 0.0 0.0 5.1 0.0 0.0 48.9 108.8 0.0 12.8 86.4 32.1 0.0 47.5 0.1 0.0 0.0 1.3 0.0 0.0 1.1 78.8 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 3.8 0.0 0.0 0.0 140.7 0.0 0.0 0.0 0.0 0.0 0.0 1.1 4.7 0.0 233.9 649.8 0.0 24.8 542.4 72.0 WV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 2.1 WY TOT 0.0 12.6 0.0 5.1 0.0 13.0 0.0 10,490.8 0.0 225.2 0.0 509.9 0.0 53.9 0.0 0.5 0.0 2,431.1 0.0 49.1 0.0 142.2 0.0 0.3 0.0 18.3 0.0 439.5 0.0 75.4 0.0 31.3 0.0 15.7 0.0 30.0 0.0 2,483.8 0.0 432.3 0.0 35.0 0.0 123.1 0.0 125.7 0.0 51.3 0.0 150.1 0.0 0.4 0.0 0.3 0.0 14.1 0.0 410.3 0.0 9.8 0.0 0.3 0.0 2,487.8 0.0 65.4 0.0 64.4 0.0 31.5 0.0 517.9 0.0 6.7 0.0 13.3 0.0 0.0 0.0 19.2 0.0 56.6 0.0 440.6 0.0 5,757.6 0.0 104.6 0.0 260.3 0.0 1.1 0.0 438.5 0.0 29.1 0.0 28,675.0

Source State includes U.S. states FF = other foreign UN = undisclosed or unknown

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Figure 3.24 2011 Internet-Related Investments By Stage Figure 3.25 2011 Internet-Related Investments By Industry Sector

Company Stage Seed Early Stage Expansion Later Stage TOTAL

($ Millions) 323.1 4,063.0 6,377.0 4,091.0 14,854.1

Industry Group Software IT Services Media and Entertainment Consumer Products and Services Telecommunications Retailing/Distribution Semiconductors Networking and Equipment Computers and Peripherals Financial Services Healthcare Services Business Products and Services Medical Devices and Equipment Industrial/Energy Biotechnology Electronics/Instrumentation TOTAL

($ Millions) 6,385.0 2,329.0 2,264.3 1,084.0 691.2 403.6 319.2 308.6 301.8 243.5 185.1 150.7 123.0 35.6 25.4 4.1 14,854.1

Figure 3.26 2011 Internet-Related vs Non Internet-Related Investments By Industry Sector ($ Millions)

Industry Software IT Services Media and Entertainment Consumer Products and Services Telecommunications Retailing/Distribution Semiconductors Networking and Equipment Computers and Peripherals Financial Services Healthcare Services Business Products and Services Medical Devices and Equipment Industrial/Energy Biotechnology Electronics/Instrumentation Other Total

Internet Related 6,385.0 2,329.0 2,264.3 1,084.0 691.2 403.6 319.2 308.6 301.8 243.5 185.1 150.7 123.0 35.6 25.4 4.1 NA 14,854.1

Non-Internet Related 403.9 86.9 72.3 97.5 13.2 5.0 858.3 67.3 63.0 151.1 165.8 80.1 2,740.0 3,524.4 4,761.8 682.3 48.2 13,820.9

Total 6,788.9 2,415.9 2,336.6 1,181.5 704.4 408.6 1,177.4 375.8 364.8 394.5 350.9 230.9 2,863.0 3,560.0 4,787.1 686.4 48.2 28,675.0

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Figure 3.27 2011 Internet-Related vs Non Internet-Related Investments By Industry Sector (Number of Companies)

Industry Software IT Services Media and Entertainment Consumer Products and Services Telecommunications Retailing/Distribution Semiconductors Networking and Equipment Computers and Peripherals Financial Services Healthcare Services Business Products and Services Medical Devices and Equipment Industrial/Energy Biotechnology Electronics/Instrumentation Other Total
Figure 3.28 Top Five States By Percentage Invested Within State in 2011

Internet Related 794 296 378 84 114 38 21 45 23 28 13 26 17 8 5 4 NA 1,894

Non-Internet Related 68 11 10 6 19 5 5 19 41 9 72 269 25 239 358 49 19 1,224

Total 862 307 388 90 133 43 26 64 64 37 85 295 42 247 363 53 19 3,118

Figure 3.29 Top Five States By Portion Received From In-State Firms 2011

Fund Domicile Kansas Ohio California Tennessee Texas


*Minimum $20 million invested

Pct. Invested Within State 78% 74% 71% 70% 54%

Company Location California Tennessee Kansas Massachusetts Washington


*Minimum $20 million invested

Pct. Invested From State 51% 39% 36% 29% 26%

Figure 3.30 Number of States Invested Into in 2011 By State of Venture Firm

Figure 3.31 Number of States California Venture Firms Invested Into By Year

Location of Venture Firm California Massachusetts New York Connecticut Pennsylvania Illinois Virginia Maryland New Jersy Texas

No. of States Invested In 38 33 32 28 26 22 21 20 20 17

Year 1991 2001 2011

No. of States Invested In 26 42 38

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Figure 3.32 Corporate Investments By Year Figure 3.33 Clean Technology Investments By Year

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Corp-Backed Investments ($ Millions) 393.2 622.3 849.1 1,414.4 6,289.1 11,883.8 3,580.9 1,393.6 1,070.2 1,341.4 1,163.9 1,406.3 1,783.5 1,492.9 988.2 1,245.0 1,733.5

% of Overall Investments 5% 6% 6% 7% 12% 12% 9% 7% 6% 6% 5% 5% 6% 5% 5% 5% 6%

# CorpBacked Deals 126 214 290 413 1,071 1,671 795 465 398 474 462 513 580 509 314 379 438

% of Overall Deals with at Least One Corp VC 7% 8% 9% 11% 19% 21% 17% 15% 13% 15% 14% 13% 14% 12% 10% 11% 12%

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Clean Technology Investments ($ # Clean Millions) Technology Deals 73.9 35 150.3 48 165.9 52 174.9 42 259.4 55 565.9 51 320.3 61 304.6 50 211.7 56 418.0 82 516.4 90 1,756.5 153 3,018.0 252 4,107.7 294 2,516.6 231 3,874.0 297 4,452.5 335

Average Investment Per Deal ($ Millions) 2.1 3.1 3.2 4.2 4.7 11.1 5.3 6.1 3.8 5.1 5.7 11.5 12.0 14.0 10.9 13.0 13.3

Figure 3.34 California Investments as a Percentage of Overall Investments

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1996 2001 2006 2011 31.3% 31.4% 36.3% 41.3% 11.7% 10.2% 9.4% 9.9% 58.5% 59.2% 52.0% 48.8%

Other SoCal NoCal

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Portfolio Company Valuations


This chapter analyzes trends in round valuations and IPO valuations in recent years. Much has been written about valuation trends for entrepreneurial companies and whether early round valuations were reasonable enough for a venture capital fund to make a financial and time commitment and still realize a successful exit. The first six figures in this chapter compare round valuations in 2011 to those of the preceding six years (2005-2010). A number of factors affect round valuations: (1) general economic conditions, (2) investor competition for deals, (3) industry sector, and (4) maturity of the company. These charts separate rounds by MoneyTree industry sector. The first pair of charts covers all rounds. Overall, both average and median round valuations increased in 2011. But it was sector dependent. For median valuations, Biotechnology, Consumer Products and Services, Electronics and Communications, Healthcare Services, Industrial/Energy (where many clean technology companies are classified), IT Services, Medical Devices, and Software saw higher valuations in 2011 compared with recent years. Meanwhile, Business Products and Services, Media and Entertainment, Semiconductors, and Telecom saw declines in their median valuations. The second pair of charts covers first fundings only. Most sectors saw 2011 valuations below the aggregate of the prior six years. Notable is the quadrupling of the median first funding for Industrial/Energy companies, which is where many clean technology companies are classified. The third pair of charts (4.05 and 4.06) analyzes follow-on financings only. Most sectors showed an increase. Notably, Medical Device valuations in 2011 were slightly lower than in the prior six years.

Figure 4.01 Valuation By Company Industry 2011 Financings ($ Millions)

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 63.6 1.9 N/A 90.2 48.6 77.6 83.6 404.5 100.3 47.2 87.9 41.5 N/A N/A 19.1 123.7 25.2 97.7

Max 671.6 1.9 N/A 90.2 99.8 197.9 164.6 2,250.0 409.4 200.0 319.2 74.4 N/A N/A 33.2 1,844.2 55.0 2,250.0

Upper Quartile 57.3 1.9 N/A 90.2 63.2 112.6 100.4 57.7 94.1 54.2 105.8 57.9 N/A N/A 25.0 66.7 36.2 75.6

Lower Median Quartile 41.3 8.5 1.9 1.9 N/A N/A 90.2 90.2 26.6 23.1 27.2 17.4 74.4 57.7 45.7 28.2 43.2 15.7 16.4 5.2 69.6 24.2 41.5 25.1 N/A N/A N/A N/A 20.3 11.9 34.6 13.3 20.1 9.0 36.6 11.8

Min 1.8 1.9 N/A 90.2 19.5 7.7 21.0 1.6 0.2 4.6 11.2 8.7 N/A N/A 5.0 3.5 5.5 0.2

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Figures 4.07-4.08 analyze IPO valuations in recent years. Figure 4.07 is the Holmesian analysis showing the ratio of IPO pre-money valuations to total venture investment into those companies. That is, what multiple of total venture investment was that companys pre-valuation at the IPO*? In 2011, this ratio more than doubled from 5.0 to 10.5, driven in large part by a handful of very large IPOs. While overall there were fewer venture backed IPOs in 2011, they provided better returns to their investors. See the detailed statistics on exits in the following chapter. Figure 4.08 shows trends in IPO post-money valuations. That is, it shows the offering share price multiplied by the total number of shares for the company. Despite a lower number of valuations, virtually all metrics at least doubled. The smallest venture backed IPO had a launch valuation of $42.0 million. Thats almost four times the year-earlier statistic. The largest IPO valuation was almost $13 billion. While there were fewer venture-backed IPOs in 2011, 11 of them had offer valuations of $2 billion or greater. That compares with 12 total in the period 2004-2010.

Methodology Note
Pre-money valuation refers to the resulting valuation of financing round or IPO minus the proceeds of the financing event. For example, a company receiving a $5 million investment resulting in a $25 million valuation for the company would be said to have a $20 million pre-money valuation. Likewise, in 2011 the combined valuation of all IPOs based on the share price of the offering was $79.3. The offer proceeds totaled $9.9 billion. This meas the class of 2011 IPOs had a combined pre-money IPO valuation of $69.4 billion. As with other statistics throughout this publication, IPO statistics report the economics of the offer itself, at the offer share price, not the first trade, or first day statistics.

Figure 4.02 Valuation By Company Industry 2005-2010 ($ Millions)

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 66.4 22.8 62.5 103.0 42.6 59.3 33.1 96.2 70.6 102.8 75.3 67.9 157.2 134.4 64.5 64.2 84.2 73.4

Max 493.5 95.0 133.6 506.0 163.3 384.0 93.6 1,509.4 329.8 3,569.0 423.6 426.3 157.2 794.7 362.9 1,610.1 915.0 3,569.0

Upper Quartile 88.2 20.5 91.2 165.7 62.9 59.4 61.1 71.8 107.7 67.5 99.0 79.7 157.2 158.2 74.7 59.8 138.1 83.0

Median 39.2 8.5 51.2 23.0 20.1 14.9 16.5 28.4 23.3 26.7 50.7 41.7 157.2 34.6 43.8 27.3 33.6 32.1

Lower Quartile 11.8 5.7 27.1 7.6 6.5 8.8 9.9 6.4 12.3 11.7 15.7 23.1 157.2 12.2 19.5 11.2 11.0 11.4

Min 0.1 2.0 10.5 1.3 1.2 0.2 6.0 0.1 2.9 2.0 0.1 3.9 157.2 2.4 1.0 1.0 1.8 0.1

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Figure 4.03 Valuation By Company Industry 2011 Financings ($ Millions) First Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 18.5 1.9 N/A N/A N/A N/A N/A 21.9 7.0 5.0 N/A 8.7 N/A N/A 5.0 21.4 7.8 15.1

Max 47.5 1.9 N/A N/A N/A N/A N/A 40.0 7.0 5.3 N/A 8.7 N/A N/A 5.0 78.4 10.2 78.4

Upper Quartile 31.0 1.9 N/A N/A N/A N/A N/A 32.1 7.0 5.2 N/A 8.7 N/A N/A 5.0 14.0 9.0 14.7

Lower Median Quartile 9.2 4.5 1.9 1.9 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 24.2 12.9 7.0 7.0 5.0 4.8 N/A N/A 8.7 8.7 N/A N/A N/A N/A 5.0 5.0 11.8 9.2 7.8 6.7 8.4 5.0

Min 1.8 1.9 N/A N/A N/A N/A N/A 1.6 7.0 4.6 N/A 8.7 N/A N/A 5.0 3.5 5.5 1.6

Figure 4.04 Valuation By Company Industry 2005-2010 Financings ($ Millions) First Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 18.5 11.4 27.1 16.6 7.3 98.5 8.0 17.0 11.8 28.9 15.4 8.5 N/A 54.7 97.0 13.7 12.2 21.1

Max 115.0 41.7 32.5 23.0 23.7 384.0 10.0 118.4 26.5 181.0 80.9 15.0 N/A 206.7 156.0 78.7 34.7 384.0

Upper Quartile 16.3 9.2 29.8 21.7 6.5 110.2 9.9 10.1 16.9 17.4 21.2 10.8 N/A 50.3 126.5 15.0 14.7 17.8

Median 11.1 8.0 27.1 20.4 3.0 62.0 8.0 6.0 10.6 10.0 9.5 6.6 N/A 21.7 97.0 8.4 10.0 9.3

Lower Quartile 2.7 4.8 24.4 13.4 2.0 9.4 6.1 3.8 5.4 6.0 5.0 5.3 N/A 13.4 67.5 4.7 7.5 4.8

Min 0.1 2.0 21.8 6.4 1.2 4.2 6.0 0.1 3.4 2.0 0.1 3.9 N/A 7.8 38.0 1.0 1.8 0.1

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Figure 4.05 Valuation By Company Industry 2011 Financings ($ Millions) Additional Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 82.2 N/A N/A 90.2 48.6 77.6 83.6 787.1 108.8 72.6 87.9 74.4 N/A N/A 22.6 152.9 42.5 119.7

Max 671.6 N/A N/A 90.2 99.8 197.9 164.6 2,250.0 409.4 200.0 319.2 74.4 N/A N/A 33.2 1,844.2 55.0 2,250.0

Upper Quartile 59.9 N/A N/A 90.2 63.2 112.6 100.4 1,154.9 105.6 87.0 105.8 74.4 N/A N/A 27.0 71.4 48.7 88.7

Median 52.2 N/A N/A 90.2 26.6 27.2 74.4 59.8 54.4 43.2 69.6 74.4 N/A N/A 22.6 47.4 42.5 52.4

Lower Quartile 27.9 N/A N/A 90.2 23.1 17.4 57.7 55.6 18.5 25.3 24.2 74.4 N/A N/A 18.2 28.8 36.2 22.3

Min 5.4 N/A N/A 90.2 19.5 7.7 21.0 51.4 0.2 7.5 11.2 74.4 N/A N/A 11.9 4.1 30.0 0.2

Figure 4.06 Valuation By Company Industry 2005-2010 Financings ($ Millions) Additional Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 80.1 57.4 61.9 128.9 44.6 13.8 47.8 134.5 79.2 154.6 83.8 77.1 157.2 228.6 58.5 65.2 101.4 85.9

Max 493.5 95.0 131.2 506.0 129.4 51.7 81.5 1,509.4 258.2 3,569.0 340.0 426.3 157.2 794.7 362.9 735.0 915.0 3,569.0

Upper Quartile 98.9 84.0 84.0 193.9 70.7 13.8 64.6 73.5 146.0 71.2 110.3 79.7 157.2 295.3 72.7 64.7 150.0 96.5

Median 50.3 73.0 61.8 56.5 14.2 10.2 60.0 51.9 49.2 32.3 71.3 52.0 157.2 40.5 40.2 31.5 40.9 42.0

Lower Quartile 19.1 38.6 21.7 8.5 11.5 5.2 20.0 23.6 14.1 16.1 37.3 31.2 157.2 9.9 16.4 16.8 11.8 16.7

Min 2.3 4.2 10.5 1.3 4.0 0.2 13.0 4.1 2.9 4.8 1.5 8.0 157.2 2.4 1.0 2.0 3.1 0.2

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Figure 4.07 Ratio of IPO Pre-Money Valuation to Amount Invested

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Post Offer Value ($ Billion) 30.0 59.3 23.3 17.3 131.7 129.1 19.4 8.1 8.3 61.7 16.6 22.2 53.6 2.6 7.5 37.3 79.3

Offer Amt ($ Billion) 7.6 12.0 4.9 3.5 18.8 23.0 3.7 2.1 2.0 10.5 4.5 5.1 10.3 0.5 1.6 7.6 9.9

IPO Pre Money Valuation 22.4 47.3 18.4 13.7 112.9 106.1 15.6 6.0 6.3 51.2 12.1 17.1 43.3 2.2 5.8 29.7 69.4

Total Venture Inv. ($ Billion) 2.2 3.7 2.7 2.4 11.0 13.0 2.6 1.7 2.4 6.7 3.1 4.3 6.7 0.4 0.6 5.9 6.6

Ratio 10.2 12.8 6.8 5.7 10.3 8.2 6.0 3.6 2.6 7.6 3.9 4.0 6.5 6.0 9.7 5.0 10.5

Figure 4.08 2011 Venture-Backed IPOs Valuations as of IPO

Year of IPO 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Avg Val 152.9 211.0 165.4 221.2 485.9 490.7 461.5 368.8 284.7 656.0 290.5 390.3 623.2 441.1 623.2 497.3 1,496.5

Max 1,569.0 9,911.4 2,139.2 1,220.6 4,827.7 3,291.7 1,719.2 1,083.3 821.9 23,053.7 1,442.1 2,647.5 7,963.7 1,443.1 1,417.1 5,284.7 12,861.1

Upper Quartile 167.2 186.3 164.5 269.6 536.8 497.3 571.7 570.7 359.2 389.6 387.5 406.7 580.4 380.7 816.8 473.4 1,414.7

Median 105.9 110.8 109.1 182.2 333.8 244.4 322.5 242.0 227.7 255.8 201.9 255.3 346.0 257.7 428.3 228.3 515.8

Lower Quartile 68.4 66.9 66.7 106.6 220.5 132.6 206.0 160.6 156.2 152.8 140.1 171.9 271.5 197.6 310.0 130.6 275.8

Min 12.2 9.5 11.4 12.5 47.0 18.0 57.3 36.8 41.9 21.6 23.1 70.9 50.0 88.8 212.9 11.0 42.0

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Exits: IPOs and Acquisitions


While some venture exit metrics improved in 2011 such as total proceeds from IPOs and from acquisitions, overall results fell far short of what was hoped for, and what was needed. In 2011, the number of IPOs fell to 53 from the prior year 75. However, the proceeds of those offers rose from $7.6 billion to $9.9 billion. These results included both large and small IPOs but several very large IPOs drove the totals. Total IPO valuations in 2011 rose to nearly $80 billion, up from $37 billion in 2010. This large-IPO effect can also be seen in the average valuation at IPO of $1.5 billion compared to a median valuation of one third that amount. Exit success through acquisition (M&A) in 2011 saw yet again a record count of acquisitions at 458 which was in increase over 442 in 2010 which itself had been a high water mark. Total dollars realized also increased to $24 billion. While not an all-time record, or even a post-bubble record, it shows 31% growth over 2010. This shift toward better acquisition exits in 2011 is confirmed by Figure 5.13 which shows that 21% of fully reported selling prices were 10 times or greater the total venture investment into that company. Almost another third (31%) of the reported acquisitions were for 4-10 times the total venture investment. Both statistics are at the post bubble high. While IPOs reportable in this chapter (backed by at least one U.S. venture capital firm and trading on at least one U.S. exchange or market) fell from 75 to 53 in 2011, the number of U.S.-domiciled companies fell from 47 to 40. The biggest drop was among companies in China. In 2010, 25 Chinese companies were included. In 2011, only 9 such companies were reported. In 2011, IPO and acquisition activity were both far below what is necessary to sustain the industry long term. Remember that the venture industry funds over 1,000 companies for the first time each year. If 10% of them are to go public (for 1990s first fundings, the result was 14%), that suggests that at least 100 companies per year would achieve IPOs. We are far from that result.
Figure 5.01 Venture-Backed IPOs
300
No of IPOs

25.00

250

Offer Amount ($B)

20.00

200 Offer ($ Billion) No. of IPOs 15.00 150 10.00 100 5.00

50

0 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Year '11

0.00

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Methodology
Initial and secondary public offerings of companies that are venture-backed are followed and analyzed by Thomson Reuters. This research is compiled three ways: first, through cross-referencing venture-backed companies with IPOs in registration or that have begun trading, which is tracked through the new issues online database of Thomson Reuters; second, through daily prospectus research; third, through industry surveys. By using this research process, we have been successful in identifying virtually all companies that have gone public that have had venture backing. However, the term venture-backed has different meanings depending on context. There are three decreasingly stringent clas-

Figure 5.02 Number of Venture-Backed IPOs vs. All IPOs

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

# of All IPOs 351 83 76 67 188 168 168 160 24 39 104 99

# of VentureBacked IPOs 263 42 22 29 94 57 57 86 6 12 75 53

Figure 5.03 Venture-Backed IPOs 1985 to 2011 Value and Age Characteristics
Num of IPOs 76 156 119 55 64 67 154 181 208 155 200 281 141 78 271 263 42 22 29 94 57 57 86 6 12 75 53 Offer Amount ($Mil) 1,267 3,091 2,249 847 1,202 1,285 4,746 5,504 6,140 3,798 7,568 11,980 4,926 3,543 18,758 22,959 3,748 2,067 2,006 10,482 4,482 5,117 10,326 470 1,642 7,607 9,922 Med Offer Amt ($Mil) 13 14 17 14 15 20 25 23 22 23 32 32 30 38 56 68 68 71 66 68 65 76 84 71 97 83 97 Mean Offer Post Offer Med Post Mean Post Median Age Amt ($Mil) Value ($Mil) Value ($Mil) Value ($Mil) @ IPO (yrs) 17 5,638 39 75 3.8 22 15,291 54 108 5.5 22 9,485 56 93 5.4 17 3,399 56 67 4.9 21 5,358 54 94 6.6 22 4,968 68 84 6.6 32 19,910 85 133 6.8 32 18,374 72 106 6.1 31 20,229 67 101 7.6 25 14,664 68 96 7.7 39 29,963 106 153 8.1 43 59,292 111 211 5.8 35 23,315 109 165 6.5 45 17,253 182 221 4.7 69 131,682 334 486 4.3 87 129,063 244 491 5.3 89 19,385 322 462 7.2 94 8,113 242 369 7.9 69 8,257 228 285 7.7 112 61,663 256 656 6.9 79 16,560 202 291 6.2 90 22,246 255 390 8.0 120 53,593 346 623 8.8 78 2,646 258 441 9.6 137 7,479 428 623 10.3 101 37,301 228 497 9.2 187 79,316 516 1,497 8.2 Mean Age @ IPO (yrs) 8.1 9.4 8.2 5.6 8.5 8.2 9.6 8.6 9.3 10.6 10.2 8.6 10.5 6.6 5.9 7.2 15.2 15.0 8.5 8.3 8.3 9.5 9.4 9.6 10.5 9.6 8.9

Year 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

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sifications that Thomson Reuters uses in classifying public companies as venture-backed. The most rigorous is that a venture capitalist must be a shareholder at the time of the public offering and the investment must have been made by a non-buyout venture capital fund. Thus, an investment that was exited prior to going public or a company financed by a buyout firm would not be counted as venture-backed in this sense. This is the criterion used in publishing venture-backed IPOs in the Venture Capital Journal. The second most strict category still provides that the investment be made in a venture round of financing, but allows that the investment could have been exited at some point prior to the IPO. The third and most comprehensive definition of venture-backed includes companies invested in by either venture capital or buyout

Figure 5.04 Venture-Backed IPOs By MoneyTreeTM Industry Total Offering Size ($ Millions)
Industry 1985 1986 Media and Entertainment 78 778 Telecommunications 39 73 Software 47 268 Industrial/Energy 223 332 Biotechnology 17 322 IT Services 13 21 Computers and Peripherals 177 301 Business Products and Services 0 51 Semiconductors 13 41 Medical Devices and Equipment 74 80 Electronics/Instrumentation 6 33 Financial Services 208 207 Consumer Products and Services 12 128 Other 0 54 Networking and Equipment 30 135 Healthcare Services 83 30 Retailing/Distribution 247 236 Total 1,267 3,091 1987 196 361 208 390 173 32 229 4 98 146 16 56 119 0 113 13 94 2,249 1988 1989 1990 61 15 45 15 41 167 132 128 135 242 206 399 24 65 63 12 0 0 108 165 72 2 0 62 74 79 25 20 100 109 0 0 45 9 85 0 8 174 5 0 0 0 37 52 71 0 59 61 106 34 26 847 1,202 1,285 1991 243 162 400 350 905 168 68 95 196 505 66 166 445 0 252 359 366 4,746 1992 200 247 452 458 782 770 232 61 132 741 78 198 401 10 241 136 367 5,504 1993 590 742 753 636 499 49 333 116 340 333 326 72 195 0 341 124 691 6,140 1994 251 260 363 469 147 64 217 67 131 476 201 323 130 0 402 240 57 3,798 1995 160 477 1,912 445 552 280 358 78 699 893 216 475 280 7 282 389 67 7,568 1996 1997 1998 1999 2000 651 457 100 2,633 1,320 1,296 317 679 3,736 4,312 1,842 810 671 3,885 3,616 1,454 373 130 56 1,154 976 536 141 254 3,661 457 85 251 1,418 1,510 371 194 42 211 513 429 109 81 1,078 578 6 276 0 249 1,399 1,512 447 91 48 701 140 77 72 36 243 1,272 317 7 485 112 191 155 509 452 386 0 0 0 0 141 602 297 271 2,452 3,021 276 185 235 464 182 506 150 264 1,301 251 11,980 4,926 3,543 18,758 22,959 2001 0 150 348 847 335 0 0 0 116 590 39 494 180 0 135 514 0 3,748 2002 2003 2004 2005 197 65 1,624 352 0 152 1,001 355 155 292 2,050 505 158 0 367 21 318 440 1,436 782 102 0 90 122 55 0 84 7 0 97 324 464 0 312 1,407 594 282 53 843 327 498 0 0 0 191 322 699 755 39 157 250 103 0 0 0 0 0 0 138 0 72 52 108 67 0 65 62 28 2,067 2,006 10,482 4,482 2006 798 719 576 257 855 191 0 0 125 756 0 197 77 0 427 0 139 5,117 2007 2008 2009 2010 2011 184 0 0 511 3,614 2,583 0 386 246 1,760 1,242 62 456 911 937 580 0 0 1,022 918 1,315 0 198 1,150 901 344 0 0 353 572 108 188 0 0 319 828 0 0 306 301 636 0 0 479 235 1,241 57 0 98 131 0 0 380 108 83 0 0 0 877 69 202 0 142 1,008 42 0 0 0 0 42 453 0 80 296 0 113 164 0 120 0 496 0 0 122 0 10,326 470 1,642 7,606 9,922

Figure 5.05 Venture-Backed IPOs By MoneyTreeTM Industry Total Number of Companies


Industry Biotechnology Media and Entertainment Software Telecommunications IT Services Industrial/Energy Semiconductors Computers and Peripherals Medical Devices and Equipment Business Products and Services Consumer Products and Services Electronics/Instrumentation Financial Services Other Networking and Equipment Retailing/Distribution Healthcare Services Totals 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 5 17 13 2 8 4 31 27 25 12 17 34 22 6 6 49 4 4 7 25 14 17 21 0 3 14 11 6 15 4 2 1 4 4 7 13 8 5 11 8 3 35 16 0 3 1 10 4 6 2 0 0 5 9 3 21 11 8 9 9 15 17 26 18 54 60 26 19 69 55 5 4 4 8 6 6 12 1 4 8 8 8 8 8 2 2 5 3 8 15 10 9 19 9 7 39 41 1 0 2 8 4 3 9 0 2 4 5 1 2 3 1 1 0 6 1 2 3 7 12 3 5 27 16 0 1 0 2 1 2 4 0 0 4 4 14 15 27 15 11 15 14 16 23 19 12 24 11 3 1 10 7 1 0 2 1 3 4 0 0 6 3 1 4 4 5 5 1 9 3 16 8 19 1 7 0 5 14 2 0 3 6 8 2 8 0 0 6 3 12 17 9 6 4 6 3 13 13 8 7 11 7 3 5 7 0 1 0 1 1 0 1 1 0 0 2 5 11 9 4 7 10 23 35 20 20 23 45 15 3 1 14 8 3 1 15 8 10 11 2 0 2 2 0 6 4 1 0 2 5 3 5 3 3 8 2 2 17 8 0 0 2 3 4 0 3 0 0 2 2 2 8 5 1 5 1 12 11 9 4 9 7 6 7 7 4 4 1 3 3 1 1 2 0 1 8 1 1 7 4 0 0 2 3 6 13 8 8 8 2 1 1 4 1 1 0 0 0 0 0 0 1 1 1 2 7 6 1 4 0 3 7 3 10 8 14 5 1 8 2 3 2 4 7 3 2 0 0 0 8 1 0 1 0 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 2 4 6 3 3 2 7 12 9 14 10 11 6 7 27 15 1 0 0 2 0 4 5 0 1 4 0 10 10 5 4 2 2 4 8 12 3 2 10 5 6 16 5 0 0 1 1 1 1 3 0 0 2 0 4 3 1 0 2 4 12 6 4 7 6 6 6 5 7 3 6 1 1 1 1 0 1 2 0 1 0 76 156 119 55 64 67 154 181 208 155 200 281 141 78 271 263 42 22 29 94 57 57 86 6 12 75 53

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funds and the investor may or may not have exited prior to the IPO. When the term venture-backed is used in this particular chapter, it usually refers to companies covered by the second category. The term private-equity backed will refer to the third category of company. Thus, in this chapter and throughout this book, we use the definition: Private Equity = Venture Capital + Buyout/Mezzanine Therefore, charts reporting private equity activity include venture capital activity.

Figure 5.06 Average and Median Age in Months By MoneyTreeTM Industry Companies at IPO 2000 to 2011

Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Retailing/Distribution Semiconductors Software Telecommunications

Mean 84.8 43.5 117.8 26.8 62.7 52.0 122.7 113.1 81.7 53.7 177.9 48.7 49.5 110.9 92.4 71.9

2000 Median 68.0 48.5 103.0 25.5 66.0 52.0 138.0 82.0 57.0 52.5 67.5 38.0 32.0 80.5 69.0 61.0

Mean 201.3 N/A N/A 260.5 118.0 122.3 141.0 422.7 N/A N/A 110.7 48.0 N/A 104.0 70.5 18.0

2001 Median 74.5 N/A N/A 269.5 118.0 47.0 100.0 129.0 N/A N/A 68.0 48.0 N/A 104.0 64.0 18.0

Mean 125.8 N/A 193.0 107.0 9.0 361.5 90.0 40.0 293.0 250.7 308.7 N/A N/A N/A 81.8 N/A

2002 Median 106.5 N/A 193.0 107.0 9.0 361.5 90.0 40.0 293.0 65.0 234.0 N/A N/A N/A 62.0 N/A

Mean 86.3 61.5 N/A 130.3 N/A 109.7 80.0 N/A N/A 126.0 123.0 N/A 70.0 143.0 95.0 102.5

2003 Median 94.0 61.5 N/A 59.0 N/A 136.0 80.0 N/A N/A 126.0 123.0 N/A 70.0 141.0 89.0 102.5

Mean 84.8 66.7 49.0 83.7 N/A 131.9 N/A 44.0 89.0 162.2 112.2 101.5 114.0 112.2 88.3 61.8

2004 Median 75.0 66.0 49.0 82.0 N/A 71.0 N/A 44.0 89.0 125.0 95.5 101.5 114.0 91.0 90.0 58.5

Mean 74.0 91.8 71.0 190.0 N/A 126.0 137.0 53.0 99.0 187.0 107.8 N/A 73.0 111.4 84.7 58.8

2005 Median 67.0 88.5 71.0 190.0 N/A 66.0 137.0 53.0 99.0 123.5 95.5 N/A 73.0 98.0 75.5 65.0

Mean 107.6 N/A N/A 86.0 N/A 126.5 N/A 85.0 131.0 135.3 118.7 117.5 75.0 111.0 121.0 94.3

2006 Median 94.0 N/A N/A 86.0 N/A 126.5 N/A 77.0 131.0 122.0 89.0 97.0 75.0 111.0 112.5 65.0

Mean 92.8 191.3 83.0 163.0 N/A N/A 121.0 102.0 96.5 78.5 108.9 130.8 161.7 113.3 126.9 100.8

2007 Median 99.0 151.0 83.0 163.0 N/A N/A 121.0 108.5 82.0 78.5 88.0 95.0 148.0 99.5 112.5 94.0

Mean N/A N/A 127.0 N/A N/A N/A 163.0 N/A N/A N/A 71.0 N/A N/A N/A 93.0 N/A

2008 Median N/A N/A 127.0 N/A N/A N/A 163.0 N/A N/A N/A 71.0 N/A N/A N/A 93.0 N/A

Mean 152.0 N/A N/A 119.0 105.0 N/A N/A N/A N/A N/A N/A 57.0 N/A N/A 123.3 142.5

2009 Median 145.0 N/A N/A 119.0 105.0 N/A N/A N/A N/A N/A N/A 57.0 N/A N/A 123.5 142.5

Mean 85.5 76.0 N/A 106.8 111.0 137.6 89.0 107.6 91.8 102.0 122.0 124.8 327.0 73.7 161.0 122.8

2010 Median 82.0 76.0 N/A 98.5 111.0 139.0 89.0 84.0 103.5 124.0 122.0 124.0 327.0 79.0 157.5 126.5

2011 Mean 105.0 57.0 109.0 229.0 N/A 79.0 N/A 95.3 139.3 101.2 74.5 N/A N/A 107.0 112.0 119.5 Median 99.0 57.0 109.0 229.0 N/A 79.0 N/A 100.0 158.5 91.0 74.5 N/A N/A 106.0 124.5 106.5

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Figure 5.07 Venture-Backed Merger & Acquisitions by Year Figure 5.08 Private Equity-Backed Merger & Acquisitions by Year

Year 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

Number Total 6 10 13 16 18 19 18 75 70 98 97 119 161 212 237 317 351 323 283 345 351 377 376 351 274 442 458

Number Known 3 1 4 6 5 8 5 46 42 61 60 77 114 132 162 205 163 152 118 182 159 167 170 120 91 128 164

($ Millions) Price Average 271.2 90.4 86.8 86.8 398.1 99.5 481.1 80.2 371.8 74.4 131.8 16.5 221.5 44.3 2,344.8 51.0 1,656.0 39.4 3,383.0 55.5 3,788.3 63.1 8,531.0 110.8 6,937.8 60.9 9,459.4 71.7 37,641.0 232.4 68,029.9 331.9 17,655.0 108.3 7,467.9 49.1 7,405.2 62.8 15,376.9 84.5 17,081.2 107.4 19,337.4 115.8 27,973.1 164.5 13,769.2 114.7 11,610.2 127.6 18,382.5 143.6 24,072.1 146.8

Year 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

Number Total 8 16 21 30 36 25 34 92 112 134 156 190 260 324 344 373 398 360 326 391 451 515 568 505 340 614 646

Number Known 3 4 8 15 19 10 14 61 70 86 106 143 193 231 251 245 195 183 143 208 213 230 246 170 121 194 229

($ Millions) Price Average 271.2 90.4 214.7 53.7 854.4 106.8 1,317.9 87.9 1,859.3 97.9 413.2 41.3 1,059.7 75.7 4,203.4 68.9 5,715.4 81.6 9,947.6 115.7 15,312.2 144.5 33,581.8 234.8 56,411.3 292.3 92,096.3 398.7 218,466.2 870.4 99,934.1 407.9 39,305.0 201.6 23,778.3 129.9 14,424.1 100.9 24,828.8 119.4 40,338.4 189.4 47,083.4 204.7 73,336.2 298.1 27,654.5 162.7 48,236.4 398.6 42,545.1 219.3 58,040.2 253.5

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

Average acquisition price is calculated by dividing total known acquisition proceeds by the number of transactions where the proceeds are known, not the total number of transactions. Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactions from Figure 5.07 are included here.

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Figure 5.09 Venture-Backed Acquisitions by MoneyTreeTM Industry Total Transaction Values 1985 to 2011 ($ Million)

Industry Software Biotechnology Medical Devices and Equipment IT Services Industrial/Energy Media and Entertainment Consumer Products and Services Semiconductors Healthcare Services Computers and Peripherals Electronics/Instrumentation Telecommunications Financial Services Networking and Equipment Business Products and Services Retailing/Distribution Other Total

1985 1986 1987 1988 0 0 5 40 0 0 0 0 101 0 6 4 0 0 0 0 99 0 0 11 0 0 0 0 0 87 0 227 71 0 0 0 0 0 0 199 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 387 0 0 0 0 0 0 0 0 0 271 87 398 481

1989 0 0 250 0 0 0 0 15 60 47 0 0 0 0 0 0 0 372

1990 22 0 1 0 20 0 0 0 0 79 0 0 0 0 12 0 0 132

1991 83 68 0 0 61 0 10 0 0 0 0 0 0 0 0 0 0 222

1992 274 61 236 0 180 0 1 0 94 16 37 4 1,407 0 0 35 0 2,345

1993 141 25 43 0 231 119 0 38 0 161 13 298 161 347 0 80 0 1,656

1994 521 20 295 0 771 29 29 67 178 81 49 790 109 354 0 90 0 3,383

1995 500 97 221 19 79 45 23 327 475 69 42 334 734 794 0 29 0 3,788

1996 1,022 388 313 485 1,115 2,107 362 0 130 889 14 419 67 1,033 185 2 0 8,531

1997 2,104 426 553 80 245 1,387 245 8 94 394 117 672 34 213 207 161 0 6,938

1998 1999 2,930 6,110 172 780 137 431 697 676 350 947 343 10,456 404 420 468 1,269 167 325 674 388 60 47 948 2,249 463 431 1,206 10,518 368 1,639 74 955 0 0 9,459 37,641

2000 15,755 1,206 358 2,077 2,066 2,518 507 5,353 286 1,374 4,162 9,463 701 18,899 2,221 1,086 0 68,030

2001 3,700 419 587 531 1,240 674 171 1,439 262 357 209 1,799 489 5,525 245 8 0 17,655

2002 1,914 117 485 603 113 327 61 563 855 59 20 1,256 211 739 142 3 0 7,468

2003 2,016 561 465 1,011 59 285 285 415 85 64 21 341 99 789 154 757 0 7,405

2004 4,000 701 1,136 1,672 554 2,260 439 705 706 738 116 1,748 10 326 255 12 0 15,377

2005 4,727 2,588 1,064 1,957 499 1,370 388 215 789 270 72 1,182 530 1,382 50 0 0 17,081

2006 4,535 1,741 1,533 509 426 4,470 343 1,015 817 311 3 1,420 938 603 351 323 0 19,337

2007 5,460 5,688 2,024 2,395 1,719 2,102 0 1,029 362 60 83 1,737 1,040 713 2,481 885 195 27,973

2008 3,846 1,564 584 632 514 1,429 284 687 27 49 117 1,969 988 609 463 10 0 13,769

2009 2010 1,771 3,354 910 4,142 3,047 1,796 203 1,785 660 957 891 1,050 0 0 524 1,006 0 791 400 354 0 145 1,337 1,272 0 812 643 658 294 153 930 14 0 95 11,610 18,383

2011 6,271 4,153 3,664 2,313 1,623 1,177 1,143 953 643 557 510 471 466 129 0 0 0 24,072

Figure 5.10 Venture-Backed Acquisitions by MoneyTreeTM Industry Number of Companies 1985 to 2011

Industry Software Media and Entertainment IT Services Medical Devices and Equipment Biotechnology Telecommunications Industrial/Energy Networking and Equipment Semiconductors Healthcare Services Financial Services Business Products and Services Consumer Products and Services Computers and Peripherals Electronics/Instrumentation Other Retailing/Distribution Total

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 1 3 2 4 2 12 14 30 26 22 45 63 56 99 88 118 102 117 125 137 125 130 100 147 161 1 0 0 0 1 1 4 2 4 9 14 10 19 32 47 20 13 29 27 25 41 30 27 57 58 0 2 1 0 0 1 0 0 4 6 6 11 16 19 27 34 26 26 22 20 28 21 15 41 43 2 2 2 2 0 12 4 8 9 7 14 9 10 7 15 11 8 23 25 22 23 14 20 21 36 0 1 1 1 2 6 3 4 9 11 10 12 13 14 17 11 14 22 24 28 24 19 19 34 35 1 0 2 1 1 2 4 5 4 8 11 16 20 29 33 37 30 24 26 29 29 23 21 35 24 2 2 3 3 4 8 6 12 8 6 13 19 18 11 13 10 7 9 12 10 18 18 12 13 17 1 0 0 0 0 2 8 10 8 13 5 9 20 21 14 15 18 24 21 25 15 23 18 17 17 0 0 1 1 3 1 2 3 5 1 1 9 8 16 12 13 12 14 11 16 17 23 18 21 15 1 1 2 1 1 5 0 9 9 4 5 14 6 10 8 12 4 6 14 9 5 4 4 13 13 0 0 0 0 0 6 3 3 4 5 5 7 11 8 16 11 9 11 7 13 10 8 5 8 9 1 1 0 1 1 1 3 1 0 3 3 7 10 14 21 17 14 13 13 19 28 13 9 13 9 0 1 0 0 1 2 3 2 1 8 8 7 11 10 14 4 6 7 8 4 2 10 1 6 8 2 1 2 4 1 10 10 5 4 10 10 12 9 7 5 1 9 9 9 8 4 5 3 5 6 1 2 2 0 1 4 3 2 1 4 7 4 2 4 9 3 3 5 3 5 2 5 1 5 4 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 0 1 1 0 1 1 0 1 2 7 4 4 1 5 1 0 0 0 1 0 2 3 2 1 2 4 3 8 14 11 6 8 5 3 13 16 18 19 18 75 70 98 97 119 161 212 237 317 351 323 283 345 351 377 376 351 274 442 458

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Figure 5.11 Private Equity-Backed Acquisitions by MoneyTreeTM Industry Total Transaction Values 1985 to 2011 ($ Million)

Industry Industrial/Energy Software Financial Services Biotechnology Medical Devices and Equipment Healthcare Services Media and Entertainment IT Services Business Products and Services Electronics/Instrumentation Consumer Products and Services Semiconductors Other Computers and Peripherals Telecommunications Networking and Equipment Retailing/Distribution Total

1985 99 0 0 0 101 0 0 0 0 0 0 71 0 0 0 0 0 271

1986 63 0 0 0 0 0 0 0 0 0 132 0 0 19 0 0 0 215

1987 25 24 317 0 6 0 0 0 387 0 95 0 0 0 0 0 0 854

1988 302 56 0 0 4 199 0 7 200 81 227 0 0 242 0 0 0 1,318

1989 75 443 0 809 344 60 32 0 0 0 0 15 0 67 0 15 0 1,859

1990 20 22 0 0 167 0 0 0 12 115 0 0 0 79 0 0 0 413

1991 151 135 0 68 0 0 0 0 7 0 10 70 0 0 0 0 619 1,060

1992 282 696 1,424 228 1,221 94 0 0 0 37 90 0 0 16 81 0 35 4,203

1993 953 549 732 1,057 182 103 143 0 0 13 454 38 0 161 298 675 357 5,715

1994 2,012 911 1,733 332 358 1,054 123 0 0 49 29 67 0 286 1,376 1,529 90 9,948

1995 2,625 1,287 2,759 794 614 599 405 19 750 43 573 327 0 264 2,299 1,482 472 15,312

1996 2,122 3,626 6,561 1,017 1,199 1,559 3,650 485 370 181 1,271 0 0 951 3,155 6,063 1,371 33,582

1997 2,392 6,399 18,410 583 3,996 4,748 3,809 357 1,383 427 1,087 289 0 394 2,974 1,355 7,810 56,411

1998 3,153 4,574 44,588 1,846 3,150 790 12,929 1,066 1,999 197 2,506 792 0 730 3,884 4,278 5,616 92,096

1999 7,973 36,132 16,685 4,755 2,868 610 24,027 2,178 2,201 81 503 4,704 0 1,541 65,791 44,540 3,877 218,466

2000 3,022 21,773 1,505 2,102 442 286 6,733 10,146 2,261 4,227 1,290 5,353 0 2,569 16,742 18,899 2,586 99,934

2001 2,501 3,895 3,066 529 968 595 742 720 245 7,582 657 1,564 0 357 7,952 5,525 2,408 39,305

2002 3,822 1,914 1,538 2,541 931 1,020 1,087 669 142 39 1,390 563 0 59 7,145 740 178 23,778

2003 1,568 4,147 253 616 488 85 285 1,809 196 21 1,432 415 190 64 341 877 1,636 14,424

2004 6,046 4,326 104 701 1,286 706 2,260 1,839 1,223 332 1,152 705 330 738 2,054 326 703 24,829

2005 10,037 5,000 1,005 3,039 2,971 1,717 5,250 2,307 96 72 3,878 215 1,039 270 1,182 2,260 0 40,338

2006 16,820 5,571 938 1,741 2,202 3,402 4,977 1,051 2,338 3 1,559 1,258 545 311 2,622 819 928 47,083

2007 9,652 6,435 1,370 5,726 5,036 1,791 3,535 2,633 3,461 3,689 17,509 1,029 890 60 4,842 947 4,730 73,336

2008 6,552 5,107 1,842 1,681 716 718 1,650 632 1,663 472 770 687 324 769 2,319 782 973 27,655

2009 1,622 1,990 485 4,827 3,320 570 1,163 203 294 0 1,072 550 0 400 29,567 1,218 955 48,236

2010 9,095 4,159 1,912 6,125 2,415 2,046 1,612 3,206 687 278 2,407 1,631 2,365 354 1,527 658 2,069 42,545

2011 12,768 9,378 8,566 4,608 4,250 3,969 3,330 2,863 2,079 1,761 1,146 953 871 557 471 364 107 58,040

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactions from Figure 5.09 are included here.

Figure 5.12 Private Equity-Backed Acquisitions by MoneyTreeTM Industry Number of Companies 1985 to 2011

Industry Software Industrial/Energy Media and Entertainment Medical Devices and Equipment IT Services Biotechnology Telecommunications Healthcare Services Business Products and Services Financial Services Consumer Products and Services Networking and Equipment Semiconductors Electronics/Instrumentation Retailing/Distribution Other Computers and Peripherals Total

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0 3 3 4 5 5 5 14 19 33 30 29 53 75 73 105 91 118 108 119 129 2 3 3 6 4 4 9 11 17 18 22 17 33 38 34 21 23 23 19 24 54 0 1 1 0 1 0 1 1 5 5 6 16 20 21 28 38 51 21 15 29 31 2 1 3 2 5 3 0 15 6 12 13 15 22 18 18 11 18 13 11 24 31 0 1 0 3 1 1 0 1 0 0 5 6 8 14 21 23 28 36 29 27 23 0 1 0 1 4 1 2 7 6 7 15 14 13 19 22 16 18 13 15 23 27 0 1 1 0 2 1 1 4 4 10 8 11 14 19 25 34 34 41 32 26 26 0 1 1 1 2 1 1 5 1 11 10 8 8 15 9 10 10 13 4 8 17 0 0 1 3 0 2 2 1 3 1 2 4 7 10 13 15 23 17 15 16 20 0 0 1 0 0 0 0 8 11 8 13 18 28 22 21 12 23 13 11 14 12 0 2 2 3 2 0 2 6 8 3 4 12 18 22 13 15 20 10 9 17 18 0 0 2 0 2 0 0 2 10 11 11 15 7 12 27 21 14 16 19 24 25 1 0 0 0 1 1 4 1 2 3 5 1 2 12 10 17 13 13 12 14 12 0 0 1 3 2 1 1 4 3 2 2 7 9 6 3 6 13 4 3 7 4 1 0 0 1 1 1 5 2 6 2 3 5 8 8 13 18 13 8 13 7 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 1 3 4 2 2 2 3 4 4 1 10 11 8 7 12 10 13 14 9 5 1 10 9 10 8 16 21 30 36 25 34 92 112 134 156 190 260 324 344 373 398 360 326 391 451

2006 146 60 34 26 24 29 32 20 32 15 21 28 17 7 14 2 8 515

2007 142 75 54 28 36 25 35 19 43 13 30 18 19 9 14 4 4 568

2008 145 72 35 18 21 21 30 12 25 14 27 24 26 12 9 7 7 505

2009 106 29 34 26 20 24 23 6 9 9 9 20 19 1 2 0 3 340

2010 159 73 61 34 50 39 38 23 24 13 22 20 24 8 14 6 6 614

2011 182 80 65 46 44 39 27 26 26 22 22 20 18 9 8 6 6 646

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactions from Figure 5.10 are included here.

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Figure 5.13 M&A Transaction Values vs. Amount Invested

Year 2003 2004 2005 2006 2007 2008 2009 2010 2011

Relationship Between Transaction Values vs. Cumulative Total Venture Investment < TVI 1x-4x TVI 4x-10x TVI >10x TVI 37% 38% 17% 8% 35% 32% 22% 11% 27% 39% 20% 14% 26% 36% 20% 18% 23% 34% 23% 20% 27% 29% 27% 17% 39% 24% 27% 10% 24% 33% 27% 16% 20% 28% 31% 21%

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

Figure 5.14 Venture-Backed IPOs Cos. in Registration vs, Number of Venture-Backed IPOs

Year 2003 2004 2005 2006 2007 2008 2009 2010 2011

# of Venture Backed IPOs 29 94 57 57 86 6 12 75 53

# of Moneytree Cos. in Registration 31 57 16 36 31 20 23 31 60

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Figure 5.15 2011 Venture-Backed IPOs Maximum Valuations Prior to IPO ($ Million)

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 75.5 NA NA NA NA NA NA NA 219.8 398.0 NA NA NA NA NA 63.9 NA 146.6

Upper Max Quartile 147.0 94.5 NA NA NA NA NA NA NA NA NA NA NA NA NA NA 510.0 302.3 1,000.0 590.0 NA NA NA NA NA NA NA NA NA NA 165.0 78.8 NA NA 1,000.0 151.5

Median 69.0 NA NA NA NA NA NA NA 155.7 180.0 NA NA NA NA NA 41.1 NA 69.6

Lower Quartile 50.0 NA NA NA NA NA NA NA 73.2 97.0 NA NA NA NA NA 26.2 NA 44.7

Min 17.0 NA NA NA NA NA NA NA 58.0 14.0 NA NA NA NA NA 8.6 NA 8.6

*Categories containing less than 3 companies will not be displayed but their valuation amounts will be included in bottom line totals.

Figure 5.16 Venture-Backed US Company IPOs By Year By Country

Year 2008 2009 2010 2011 Total

# US IPOs 6 11 47 40 104

Offer Amt (USD Offer Amt Offer Amt Offer Amt # France Offer Amt (USD # Canada Offer Amt (USD Offer Amt # Thailand Offer Amt # Hong- Offer Amt # China IPOs # Russia IPOs # Netherlands IPOs # India IPOs Mil) (USD Mil) (USD Mil) (USD Mil) IPOs Mil) IPOs Mil) (USD Mil) IPOs (USD Mil) Kong IPOs (USD Mil) 2,646.5 6,061.6 21,954.0 53,235.6 83,897.6 1 25 9 35 N/A 1,417.1 2,981.1 16,635.4 21,033.7 1 1 N/A N/A N/A 8,161.6 8,161.6 1 1 N/A N/A N/A 843.6 843.6 1 1 N/A N/A N/A 345.2 345.2 1 1 N/A N/A N/A 94.8 94.8 1 1 N/A N/A 477.9 N/A 477.9 1 1 N/A N/A 337.4 N/A 337.4 1 1 N/A N/A 103.3 N/A 103.3

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

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Appendix A: Glossary
A round a financing event whereby angel groups and / or venture capitalists become involved in a fast growth company that was previously financed by founders and their friends and families. Accredited investor a person or legal entity, such as a company or trust fund, that meets certain net worth and income qualifications and is considered to be sufficiently sophisticated to make investment decisions in private offerings. Regulation D of the Securities Act of 1933 exempts accredited investors from protection of the Securities Act. The Securities and Exchange Commission has proposed revisions to the accredited investor qualifying rules, which may or may not result in changes for venture investors. The current criteria for a natural person are: $1 million net worth or annual income exceeding $200,000 individually or $300,000 with a spouse. Directors, general partners and executive officers of the issuer are considered to be accredited investors. Alternative asset class a class of investments that includes venture capital, leverage buyouts, hedge funds, real estate, and oil and gas, but excludes publicly traded securities. Pension plans, college endowments and other relatively large institutional investors typically allocate a certain percentage of their investments to alternative assets with an objective to diversify their portfolios. Alpha a term derived from statistics and finance theory that is used to describe the return produced by a fund manager in excess of the return of a benchmark index. Manager returns and benchmark returns are measured net of the risk-free rate. In addition, manager returns are adjusted for the risk of the managers portfolio relative to the risk of the benchmark index. Alpha is a proxy for manager skill. Angel a wealthy individual that invests in companies in relatively early stages of development. Usually angels invest less than $1 million per startup. Anti-dilution a contract clause that protects an investor from a substantial reduction in percentage ownership in a company due to the issuance by the company of additional shares to other entities. The mechanism for making an adjustment that maintains the same percentage ownership is called a Full Ratchet. The most commonly used adjustment provides partial protection and is called Weighted Average. B round a financing event whereby investors such as venture capitalists and organized angel groups are sufficiently interested in a company to provide additional funds after the A round of financing. Subsequent rounds are called C, D and so on. Basis point (bp) one one-hundredth (1/100) of a percentage unit. For example, 50 basis points equals one half of one percent. Banks quote variable loan rates in terms of an index plus a margin and the margin is often described in basis points, such as LIBOR plus 400 basis points (or, as the experts say, beeps). Beta a measure of volatility of a public stock relative to an index or a composite of all stocks in a market or geographical region. A beta of more than one indicates the stock has higher volatility than the index (or composite) and a beta of one indicates volatility equivalent to the index (or composite). For example, the price of a stock with a beta of 1.5 will change by 1.5% if the index value changes by 1%. Typically, the S&P500 index is used in calculating the beta of a stock. Beta product a product that is being tested by potential customers prior to being formally launched into the marketplace. Board of directors a group of individuals, typically composed of managers, investors and experts who have a fiduciary responsibility for the well being and proper guidance of a corporation. The board is elected by the shareholders. Book see Private placement memorandum.

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Bootstrapping the actions of a startup to minimize expenses and build cash flow, thereby reducing or eliminating the need for outside investors. Bp see Basis point. Bridge financing temporary funding that will eventually be replaced by permanent capital from equity investors or debt lenders. In venture capital, a bridge is usually a short term note (6 to 12 months) that converts to preferred stock. Typically, the bridge lender has the right to convert the note to preferred stock at a price that is a 20% to 25% discount from the price of the preferred stock in the next financing round. See Mezzanine and Wipeout bridge. Broad-based weighted average anti-dilution A weighted average anti-dilution method adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor As preferred stock is repriced to a weighted average of investor As price and investor Bs price. A broadbased anti-dilution method uses all common stock outstanding on a fully diluted basis (including all convertible securities, warrants and options) in the denominator of the formula for determining the new weighted average price. See Narrow-based weighted average anti-dilution. Burn rate the rate at which a startup with little or no revenue uses available cash to cover expenses. Usually expressed on a monthly or weekly basis. Business Development Company (BDC) a publicly traded company that invests in private companies and is required by law to provide meaningful support and assistance to its portfolio companies. Business plan a document that describes a new concept for a business opportunity. A business plan typically includes the following sections: executive summary, market need, solution, technology, competition, marketing, management, operations, exit strategy, and financials (including cash flow projections). For most venture capital funds fewer than 10 of every 100 business plans received eventually receive funding. Buy-sell agreement a contract that sets forth the conditions under which a shareholder must first offer his or her shares for sale to the other shareholders before being allowed to sell to entities outside the company. C Corporation an ownership structure that allows any number of individuals or companies to own shares. A C corporation is a stand-alone legal entity so it offers some protection to its owners, managers and investors from liability resulting from its actions. Capital Asset Pricing Model (CAPM) a method of estimating the cost of equity capital of a company. The cost of equity capital is equal to the return of a risk-free investment plus a premium that reflects the risk of the companys equity. Capital call when a private equity fund manager (usually a general partner in a partnership) requests that an investor in the fund (a limited partner) provide additional capital. Usually a limited partner will agree to a maximum investment amount and the general partner will make a series of capital calls over time to the limited partner as opportunities arise to finance startups and buyouts. Capital gap the difficulty faced by some entrepreneurs in trying to raise between $2 million and $5 million. Friends, family and angel investors are typically good sources for financing rounds of less than $2 million, while many venture capital funds have become so large that investments in this size range are difficult. Capitalization table a table showing the owners of a companys shares and their ownership percentages as well as the debt holders. It also lists the forms of ownership, such as common stock, preferred stock, warrants, options, senior debt, and subordinated debt. Capital gains a tax classification of investment earnings resulting from the purchase and sale of assets. Typically, a companys investors and founders have earnings classified as long term capital gains Buyout a sector of the private equity industry. Also, the purchase of a controlling interest of a company by an outside investor (in a leveraged buyout) or a management team (in a management buyout).

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(held for a year or longer), which are taxed at a lower rate than ordinary income. Capital stock a description of stock that applies when there is only one class of shares. This class is known as common stock. Capital Under Management A frequently-used metric for sizing total funds managed by a venture capital or buyout firm. In practice, there are several ways of calculating this. In the US, this is the total committed capital for all funds managed by a firm on which it collects management fees. This calculation ignores whether portions of the committed capital have not yet been called and whether portions of the fund have been liquidated and distributed. It typically does not include aging funds in their out years on which fees are not being collected. For purposes of this book in calculating capital managed in figure 1.04, because direct data is not available, the last eight vintage years of capital commitments is considered a proxy for the industrys total capital under management. Capped participating preferred stock preferred stock whose participating feature is limited so that an investor cannot receive more than a specified amount. See Participating preferred stock. Carried interest the share in the capital gains of a venture capital fund which is allocated to the General Partner. Typically, a fund must return the capital given to it by limited partners plus any preferential rate of return before the general partner can share in the profits of the fund. The general partner will typically receive a 20% carried interest, although some successful firms receive 25%-30%. Also known as carry or promote. Clawback a clause in the agreement between the general partner and the limited partners of a private equity fund. The clawback gives limited partners the right to reclaim a portion of disbursements to a general partner for profitable investments based on significant losses from later investments in a portfolio. Closing the conclusion of a financing round whereby all necessary legal documents are signed and capital has been transferred. Club deal the act of investing by two or more entities in the same target company, usually involving a leveraged buyout transaction. Co-investment the direct investment by a limited partner alongside a general partner in a portfolio company. Collateral hard assets of the borrower, such as real estate or equipment, for which a lender has a legal interest until a loan obligation is fully paid off. Commitment an obligation, typically the maximum amount that a limited partner agrees to invest in a fund. See Capital call. Common stock a type of security representing ownership rights in a company. Usually, company founders, management and employees own common stock while investors own preferred stock. In the event of a liquidation of the company, the claims of secured and unsecured creditors, bondholders and preferred stockholders take precedence over common stockholders. See Preferred stock. Comparable a private or public company with similar characteristics to a private or public company that is being valued. For example, a telecommunications equipment manufacturer whose market value is 2 times revenues can be used to estimate the value of a similar and relatively new company with a new product in the same industry. See Liquidity discount. Control the authority of an individual or entity that owns more than 50% of equity in a company or owns the largest block of shares compared to other shareholders. Consolidation see Rollup. Conversion the right of an investor or lender to force a company to replace the investors preferred shares or the lenders debt with common shares at a preset conversion ratio. A conversion feature was first used in railroad bonds in the 1800s. Convertible debt a loan which allows the lender to exchange the debt for common shares in a company at a preset conversion ratio. Also known as a convertible note.

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Convertible preferred stock a type of stock that gives an owner the right to convert to common shares of stock. Usually, preferred stock has certain rights that common stock doesnt have, such as decisionmaking management control, a promised return on investment (dividend), or senior priority in receiving proceeds from a sale or liquidation of the company. Typically, convertible preferred stock automatically converts to common stock if the company makes an initial public offering (IPO). Convertible preferred is the most common tool for private equity funds to invest in companies. Co-sale right a contractual right of an investor to sell some of the investors stock along with the founders or majority shareholders stock if either the founder or majority shareholder elects to sell stock to a third-party. Also known as Tag-along right. Cost of capital see Weighted average cost of capital. Cost of revenue the expenses generated by the core operations of a company. Covenant a legal promise to do or not do a certain thing. For example, in a financing arrangement, company management may agree to a negative covenant, whereby it promises not to incur additional debt. The penalties for violation of a covenant may vary from repairing the mistake to losing control of the company. Coverage ratio describes a companys ability to pay debt from cash flow or profits. Typical measures are EBITDA/Interest, (EBITDA minus Capital Expenditures)/Interest, and EBIT/Interest. Cram down round a financing event upon which new investors with substantial capital are able to demand and receive contractual terms that effectively cause the issuance of sufficient new shares by the startup company to significantly reduce (dilute) the ownership percentage of previous investors. Cumulative dividends the owner of preferred stock with cumulative dividends has the right to receive accrued (previously unpaid) dividends in full before dividends are paid to any other classes of stock. Current ratio the ratio of current assets to current liabilities. Data room a specific location where potential buyers / investors can review confidential information about a target company. This information may include detailed financial statements, client contracts, intellectual property, property leases, and compensation agreements. Deal flow a measure of the number of potential investments that a fund reviews in any given period. Defined benefit plan a company retirement plan in which the benefits are typically based on an employees salary and number of years worked. Fixed benefits are paid after the employee retires. The employer bears the investment risk and is committed to providing the benefits to the employee. Defined benefit plan managers can invest in private equity funds. Defined contribution plan a company retirement plan in which the employee elects to contribute some portion of his or her salary into a retirement plan, such as a 401(k) or 403(b). The employer may also contribute to the employees plan. With this type of plan, the employee bears the investment risk. The benefits depend solely on the amount of money made from investing the employees contributions. Defined contribution plan capital cannot be invested in private equity funds. Demand rights a type of registration right. Demand rights give an investor the right to force a startup to register its shares with the SEC and prepare for a public sale of stock (IPO). Dilution the reduction in the ownership percentage of current investors, founders and employees caused by the issuance of new shares to new investors. Dilution protection see Anti-dilution and Full ratchet. Direct secondary transaction A transaction in which the buyer purchases shares of an operating company from an existing seller. While the transaction is a secondary sale of shares, the transacted interest is a primary issue purchase directly into an operating company. Sellers are often venture capital-

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ists selling their ownership stake in a portfolio company. Buyers are often funds that specialize in such investments. Disbursement an investment by a fund in a company. Discount rate the interest rate used to determine the present value of a series of future cash flows. Discounted cash flow (DCF) a valuation methodology whereby the present value of all future cash flows expected from a company is calculated. Distressed debt the bonds of a company that is either in or approaching bankruptcy. Some private equity funds specialize in purchasing such debt at deep discounts with the expectation of exerting influence in the restructuring of the company and then selling the debt once the company has meaningfully recovered. Distribution the transfer of cash or securities to a limited partner resulting from the sale, liquidation or IPO of one or more portfolio companies in which a general partner chose to invest. Dividends payments made by a company to the owners of certain securities. Typically, dividends are paid quarterly, by approval of the board of directors, to owners of preferred stock. Down round a round of financing whereby the valuation of the company is lower than the value determined by investors in an earlier round. Drag-along rights the contractual right of an investor in a company to force all other investors to agree to a specific action, such as the sale of the company. Drawdown schedule an estimate of the gradual transfer of committed investment funds from the limited partners of a private equity fund to the general partners. Due diligence the investigatory process performed by investors to assess the viability of a potential investment and the accuracy of the information provided by the target company. Dutch auction a method of conducting an IPO where-by newly issued shares of stock are committed to the highest bidder, then, if any shares remain, to the next highest bidder, and so on until all the shares are committed. Note that the price per share paid by all buyers is the price commitment of the buyer of the last share. Early stage the state of a company after the seed (formation) stage but before middle stage (generating revenues). Typically, a company in early stage will have a core management team and a proven concept or product, but no positive cash flow. Earnings before interest and taxes (EBIT) a measurement of the operating profit of a company. One possible valuation methodology is based on a comparison of private and public companies value as a multiple of EBIT. Earnings before interest, taxes, depreciation and amortization (EBITDA) a measurement of the cash flow of a company. One possible valuation methodology is based on a comparison of private and public companies value as a multiple of EBITDA. Earn out an arrangement in which sellers of a business receive additional future payments, usually based on financial performance metrics such as revenue or net income. Elevator pitch a concise presentation, lasting only a few minutes (an elevator ride), by an entrepreneur to a potential investor about an investment opportunity. Employee Stock Ownership Program (ESOP) a plan established by a company to reserve shares for employees. Entrepreneur an individual who starts his or her own business. Entrepreneurship the application of innovative leadership to limited resources in order to create exceptional value. Enterprise Value (EV) the sum of the market values of the common stock and long term debt of a company, minus excess cash.

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Equity the ownership structure of a company represented by common shares, preferred shares or unit interests. Equity = Assets Liabilities. ESOP see Employee Stock Ownership Program. Evergreen fund a fund that reinvests its profits in order to ensure the availability of capital for future investments. Exit strategy the plan for generating profits for owners and investors of a company. Typically, the options are to merge, be acquired or make an initial public offering (IPO). An alternative is to recapitalize (releverage the company and then pay dividends to shareholders). Expansion stage the stage of a company characterized by a complete management team and a substantial increase in revenues. Fair value a financial reporting principle for valuing assets and liabilities, for example, portfolio companies in venture capital fund portfolios. This has received much recent attention as the Financial Accounting Standards Board (FASB) has issued definitive guidance (FAS 157) on this long standing principle. Fairness opinion a letter issued by an investment bank that charges a fee to assess the fairness of a negotiated price for a merger or acquisition. FAS 157 an an accounting standard developed by the Financial Accounting Standards Board (FASB) regarding the application of a fair value principle. First refusal the right of a privately owned company to purchase any shares that employees would like to sell. Founders stock nominally priced common stock issued to founders, officers, employees, directors, and consultants. Free cash flow to equity (FCFE) the cash flow available after operating expenses, interest payments on debt, taxes, net principal repayments, preferred stock dividends, reinvestment needs and changes in working capital. In a discounted cash flow model to determine the value of the equity of a firm using FCFE, the discount rate used is the cost of equity. Free cash flow to the firm (FCFF) the operating cash flow available after operating expenses, taxes, reinvestment needs and changes in working capital, but before any interest payments on debt are made. In a discounted cash flow model to determine the enterprise value of a firm using FCFF, the discount rate used is the weighted average cost of capital (WACC). Friends and family financing capital provided by the friends and family of founders of an early stage company. Founders should be careful not to create an ownership structure that may hinder the participation of professional investors once the company begins to achieve success. Full ratchet an anti-dilution protection mechanism whereby the price per share of the preferred stock of investor A is adjusted downward due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor As preferred stock is repriced to match the price of investor Bs preferred stock. Usually as a result of the implementation of a ratchet, company management and employees who own a fixed amount of common shares suffer significant dilution. See Narrow-based weighted average anti-dilution and Broad-based weighted average anti-dilution. Fully diluted basis a methodology for calculating any per share ratios whereby the denominator is the total number of shares issued by the company on the assumption that all warrants and options are exercised and preferred stock. Fund-of-funds a fund created to invest in private equity funds. Typically, individual investors and relatively small institutional investors participate in a fund-offunds to minimize their portfolio management efforts. Gatekeepers intermediaries which endowments, pension funds and other institutional investors use as advisors regarding private equity investments. General partner (GP) a class of partner in a partnership. The general partner retains liability for the actions of the partnership. Historically, venture capital and buyout funds have been structured as limited

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partnerships, with the venture firm as the GP and limited partners (LPs) being the institutional and high net worth investors that provide most of the capital in the partnership. The GP earns a management fee and a percentage of gains (see Carried interest). GP see General partner. GP for hire In a spin-out or a synthetic secondary, a GP for hire refers to the professional investor who may be hired by a purchasing firm to manage the new fund created from the orphaned assets purchased. In past cases, the GP has often expanded its role to fundraise for and run new funds aside from the initial fund. Going-private transaction when a public company chooses to pay off all public investors, delist from all stock exchanges, and become owned by management, employees, and select private investors. Golden handcuffs financial incentives that discourage founders and / or important employees from leaving a company before a predetermined date or important milestone. Grossing up an adjustment of an option pool for management and employees of a company which increases the number of shares available over time. This usually occurs after a financing round whereby one or more investors receive a relatively large percentage of the company. Without a grossing up, managers and employees would suffer the financial and emotional consequences of dilution, thereby potentially affecting the overall performance of the company. Growth stage the state of a company when it has received one or more rounds of financing and is generating revenue from its product or service. Also known as middle stage. Hart-Scott-Rodino Act a law requiring entities that acquire certain amounts of stock or assets of a company to inform the Federal Trade Commission and the Department of Justice and to observe a waiting period before completing the transaction. Hedge fund an investment fund that has the ability to use leverage, take short positions in securities, or High yield debt debt issued via public offering or public placement (Rule 144A) that is rated below investment grade by S&P or Moodys. This means that the debt is rated below the top four rating categories (i.e. S&P BB+, Moodys Ba2 or below). The lower rating is indicative of higher risk of default, and therefore the debt carries a higher coupon or yield than investment grade debt. Also referred to as Junk bonds or Sub-investment grade debt. Hockey stick the general shape and form of a chart showing revenue, customers, cash or some other financial or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts to impress potential investors. Holding period amount of time an investment remains in a portfolio. Hot issue stock in an initial public offering that is in high demand. Hot money capital from investors that have no tolerance for lack of results by the investment manager and move quickly to withdraw at the first sign of trouble. Hurdle rate a minimum rate of return required before an investor will make an investment. Incorporation the process by which a business receives a state charter, allowing it to become a corporation. Many corporations choose Delaware because its laws are business-friendly and up to date. Incubator a company or facility designed to host startup companies. Incubators help startups grow while controlling costs by offering networks of contacts and shared backoffice resources. Indenture the terms and conditions between a bond issuer and bond buyers. use a variety of derivative instruments in order to achieve a return that is relatively less correlated to the performance of typical indices (such as the S&P 500) than traditional long-only funds. Hedge fund managers are typically compensated based on assets under management as well as fund performance.

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Initial public offering (IPO) the first offering of stock by a company to the public. New public offerings must be registered with the Securities and Exchange Commission. An IPO is one of the methods that a startup that has achieved significant success can use to raise additional capital for further growth. See Qualified IPO. In-kind distribution a distribution to limited partners of a private equity fund that is in the form of publicly trades shares rather than cash. Inside round a round of financing in which the investors are the same investors as the previous round. An inside round raises liability issues since the valuation of the company has no third party verification in the form of an outside investor. In addition, the terms of the inside round may be considered self-dealing if they are onerous to any set of shareholders or if the investors give themselves additional preferential rights. Institutional investor professional entities that invest capital on behalf of companies or individuals. Examples are: pension plans, insurance companies and university endowments. Intellectual property (IP) knowledge, techniques, writings and images that are intangible but often protected by law via patents, copyrights, and trademarks. Interest coverage ratio earnings before interest and taxes (EBIT) divided by interest expense. This is a key ratio used by lenders to assess the ability of a company to produce sufficient cash to pay its debt obligation. Internal rate of return (IRR) the interest rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a specific time in the future. Investment thesis / Investment philosophy the fundamental ideas which determine the types of investments that an investment fund will choose in order to achieve its financial goals. IPEV Stands for International Private Equity Valuation guidelines group. This group is made up of representatives of the international and US venture capital industry and has published guidelines for applying US GAAP and international IFRS valuation rules. See www.privateequityvaluation.com IPO see Initial public offering. IRR see Internal rate of return. Issuer the company that chooses to distribute a portion of its stock to the public. J curve a concept that during the first few years of a private equity fund, cash flow or returns are negative due to investments, losses, and expenses, but as investments produce results the cash flow or returns trend upward. A graph of cash flow or returns versus time would then resemble the letter J. Later stage the state of a company that has proven its concept, achieved significant revenues compared to its competition, and is approaching cash flow break even or positive net income. Typically, a later stage company is about 6 to 12 months away from a liquidity event such as an IPO or buyout. The rate of return for venture capitalists that invest in later stage, less risky ventures is lower than in earlier stage ventures. LBO see Leveraged buyout. Lead investor the venture capital investor that makes the largest investment in a financing round and manages the documentation and closing of that round. The lead investor sets the price per share of the financing round, thereby determining the valuation of the company. Letter of intent a document confirming the intent of an investor to participate in a round of financing for a company. By signing this document, the subject company agrees to begin the legal and due diligence process prior to the closing of the transaction. Also known as a Term Sheet. Leverage the use of debt to acquire assets, build operations and increase revenues. By using debt, a company is attempting to achieve results faster than if it only used its cash available from pre-leverage operations. The risk is that the increase in assets and revenues does not generate sufficient net income and cash flow to pay the interest costs of the debt.

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Leveraged buyout (LBO) the purchase of a company or a business unit of a company by an outside investor using mostly borrowed capital. Leveraged recapitalization the reorganization of a companys capital structure resulting in more debt added to the balance sheet. Private equity funds can recapitalize a portfolio company and then direct the company to issue a one-time dividend to equity investors. This is often done when the company is performing well financially and the debt markets are expanding. Leverage ratios measurements of a companys debt as a multiple of cash flow. Typical leverage ratios include Total Debt / EBITDA, Total Debt / (EBITDA minus Capital Expenditures), and Seniore Debt / EBITDA. L.I.B.O.R. see The London Interbank Offered Rate. License a contract in which a patent owner grants to a company the right to make, use or sell an invention under certain circumstances and for compensation. Limited liability company (LLC) an ownership structure designed to limit the founders losses to the amount of their investment. An LLC itself does not pay taxes, rather its owners pay taxes on their proportion of the LLC profits at their individual tax rates. Limited partnership a legal entity composed of a general partner and various limited partners. The general partner manages the investments and is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The general partner collects a management fee and earns a percentage of capital gains (see Carried interest), while the limited partners receive income, capital gains and tax benefits. Limited partner (LP) an investor in a limited partnership. The general partner is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The limited partner receives income, capital gains and tax benefits. Liquidation the sale of a company. This may occur in the context of an acquisition by a larger company or in the context of selling off all assets prior to cessation of operations (Chapter 7 bankruptcy). In a liquidation, the claims of secured and unsecured creditors, bondholders and preferred stockholders take precedence over common stockholders. Liquidation preference the contractual right of an investor to priority in receiving the proceeds from the liquidation of a company. For example, a venture capital investor with a 2x liquidation preference has the right to receive two times its original investment upon liquidation. Liquidity discount a decrease in the value of a private company compared to the value of a similar but publicly traded company. Since an investor in a private company cannot readily sell his or her investment, the shares in the private company must be valued less than a comparable public company. Liquidity event a transaction whereby owners of a significant portion of the shares of a private company sell their shares in exchange for cash or shares in another, usually larger company. For example, an IPO is a liquidity event. Lock-up agreement investors, management and employees often agree not to sell their shares for a specific time period after an IPO, usually 6 to 12 months. By avoiding large sales of its stock, the company has time to build interest among potential buyers of its shares. London Interbank Offered Rate (L.I.B.O.R.) the average rate charged by large banks in London for loans to each other. LIBOR is a relatively volatile rate and is typically quoted in maturities of one month, three months, six months and one year. Management buyout (MBO) a leveraged buyout controlled by the members of the management team of a company or a division. Often an MBO is conducted in partnership with a buyout fund. Management fee a fee charged to the limited partners in a fund by the general partner. Management fees in a private equity fund usually range from 0.75% to 3% of capital under management, depend-

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ing on the type and size of fund. For venture capital funds, 2% is typical. Management rights the rights often required by a venture capitalist as part of the agreement to invest in a company. The venture capitalist has the right to consult with management on key operational issues, attend board meetings and review information about the companys financial situation. Market capitalization the value of a publicly traded company as determined by multiplying the number of shares outstanding by the current price per share. MBO see Management buyout. Mezzanine a layer of financing that has intermediate priority (seniority) in the capital structure of a company. For example, mezzanine debt has lower priority than senior debt but usually has a higher interest rate and often includes warrants. In venture capital, a mezzanine round is generally the round of financing that is designed to help a company have enough resources to reach an IPO. See Bridge financing. MoneyTree Report Officially known as The MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters. This report provides much of the data in this report. It is used for investment statistics in United States based companies. Specific definition information is available in several of the appendices of this Yearbook. Multiples a valuation methodology that compares public and private companies in terms of a ratio of value to an operations figure such as revenue or net income. For example, if several publicly traded computer hardware companies are valued at approximately 2 times revenues, then it is reasonable to assume that a startup computer hardware company that is growing fast has the potential to achieve a valuation of 2 times its revenues. Before the startup issues its IPO, it will likely be valued at less than 2 times revenue because of the lack of liquidity of its shares. See Liquidity discount. Narrow-based weighted average anti-dilution a type of anti-dilution mechanism. A weighted average anti-dilution method adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor As preferred stock is repriced to a weighed average of investor As price and investor Bs price. A narrow-based anti-dilution uses only common stock outstanding in the denominator of the formula for determining the new weighted average price. NDA see Non-disclosure agreement. No-shop clause a section of an agreement to purchase a company whereby the seller agrees not to market the company to other potential buyers for a specific time period. Non-cumulative dividends dividends that are payable to owners of preferred stock at a specific point in time only if there is sufficient cash flow available after all company expenses have been paid. If cash flow is insufficient, the owners of the preferred stock will not receive the dividends owed for that time period and will have to wait until the board of directors declares another set of dividends. Non-interference an agreement often signed by employees and management whereby they agree not to interfere with the companys relationships with employees, clients, suppliers and sub-contractors within a certain time period after termination of employment. Non-solicitation an agreement often signed by employees and management whereby they agree not to solicit other employees of the company regarding job opportunities. Non-disclosure agreement (NDA) an agreement issued by entrepreneurs to protect the privacy of their ideas when disclosing those ideas to third parties. Offering memorandum a legal document that provides details of an investment to potential investors. See Private placement memorandum. OID see Original issue discount.

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Operating cash flow the cash flow produced from the operation of a business, not from investing activities (such as selling assets) or financing activities (such as issuing debt). Calculated as net operating income (NOI) plus depreciation. Option pool a group of options set aside for long term, phased compensation to management and employees. Outstanding shares the total amount of common shares of a company, not including treasury stock, convertible preferred stock, warrants and options. Pay to play a clause in a financing agreement whereby any investor that does not participate in a future round agrees to suffer significant dilution compared to other investors. The most onerous version of pay to play is automatic conversion to common shares, which in essence ends any preferential rights of an investor, such as the right to influence key management decisions. Pari passu a legal term referring to the equal treatment of two or more parties in an agreement. For example, a venture capitalist may agree to have registration rights that are pari passu with the other investors in a financing round. Participating dividends the right of holders of certain preferred stock to receive dividends and participate in additional distributions of cash, stock or other assets. Participating preferred stock a unit of ownership composed of preferred stock and common stock. The preferred stock entitles the owner to receive a predetermined sum of cash (usually the original investment plus accrued dividends) if the company is sold or has an IPO. The common stock represents additional continued ownership in the company. Participating preferred stock has been characterized as having your cake and eating it too. PEIGG acronym for Private Equity Industry Guidelines Group, an ad hoc group of individuals and firms involved in the private equity industry for the purpose of establishing valuation and reporting guidelines. Piggyback rights rights of an investor to have his or her shares included in a registration of a startups shares in preparation for an IPO. PIK dividend a dividend paid to the holder of a stock, usually preferred stock, in the form of additional stock rather than cash. PIK refers to payment in kind. PIPEs see Private investment in public equity. Placement agent a company that specializes in finding institutional investors that are willing and able to invest in a private equity fund. Sometimes a private equity fund will hire a placement agent so the fund partners can focus on making and managing investments in companies rather than on raising capital. Portfolio company a company that has received an investment from a private equity fund. Post-money valuation the valuation of a company including the capital provided by the current round of financing. For example, a venture capitalist may invest $5 million in a company valued at $2 million pre-money (before the investment was made). As a result, the startup will have a post-money valuation of $7 million. PPM see Private placement memorandum. Preemptive rights the rights of shareholders to maintain their percentage ownership of a company by buying shares sold by the company in future financing rounds. Preference seniority, usually with respect to dividends and proceeds from a sale or dissolution of a company. Preferred return a minimum return per annum that must be generated for limited partners of a private equity fund before the general partner can begin receiving a percentage of profits from investments. Preferred stock a type of stock that has certain rights that common stock does not have. These special rights may include dividends, participation, liquidity preference, anti-dilution protection and veto

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provisions, among others. Private equity investors usually purchase preferred stock when they make investments in companies. Pre-money valuation the valuation of a company prior to the current round of financing. For example, a venture capitalist may invest $5 million in a company valued at $2 million pre-money. As a result, the startup will have a post-money valuation of $7 million. Primary shares shares sold by a corporation (not by individual shareholders). Private equity equity investments in non-public companies, usually defined as being made up of venture capital funds and buyout funds. Real estate, oil and gas, and other such partnerships are sometimes included in the definition. Private investment in public equity (PIPEs) investments by a private equity fund in a publicly traded company, usually at a discount and in the form of preferred stock. Private placement the sale of a security directly to a limited number of institutional and qualified individual investors. If structured correctly, a private placement avoids registration with the Securities and Exchange Commission. Private placement memorandum (PPM) a document explaining the details of an investment to potential investors. For example, a private equity fund will issue a PPM when it is raising capital from institutional investors. Also, a startup may issue a PPM when it needs growth capital. Also known as Offering Memorandum. Private securities securities that are not registered with the Securities and Exchange Commission and do not trade on any exchanges. The price per share is negotiated between the buyer and the seller (the issuer). Prudent man rule a fundamental principle for professional money management which serves as a basis for the Prudent Investor Act. The principle is based on a statement by Judge Samuel Putnum in 1830: Those with the responsibility to invest money for others should act with prudence, discretion, intelligence and regard for the safety of capital as well as income. In the 1970s a favorable interpretation of this rule enabled pension fund managers to invest in venture capital for the first time. Qualified IPO a public offering of securities valued at or above a total amount specified in a financing agreement. This amount is usually specified to be sufficiently large to guarantee that the IPO shares will trade in a major exchange (NASDAQ or New York Stock Exchange). Usually upon a qualified IPO preferred stock is forced to convert to common stock. Quartile one fourth of the data points in a data set. Often, private equity investors are measured by the results of their investments during a particular period of time. Institutional investors often prefer to invest in private equity funds that demonstrate consistent results over time, placing in the upper quartile of the investment results for all funds. Ratchet a mechanism to prevent dilution. An antidilution clause in a contract protects an investor from a reduction in percentage ownership in a company due to the future issuance by the company of additional shares to other entities. Realization ratio the ratio of cumulative distributions to paid-in capital. The realization ratio is used as a measure of the distributions from investment results of a private equity partnership compared to the capital under management. Recapitalization the reorganization of a companys capital structure. Red herring a preliminary prospectus filed with the Securities and Exchange Commission and containing the details of an IPO offering. The name refers to the disclosure warning printed in red letters on the cover of each preliminary prospectus advising potential investors of the risks involved. Redemption rights the right of an investor to force the startup company to buy back the shares issued as a result of the investment. In effect, the investor has the right to take back his/her investment and may even negotiate a right to receive an additional sum in excess of the original investment.

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Registration the process whereby shares of a company are registered with the Securities and Exchange Commission under the Securities Act of 1933 in preparation for a sale of the shares to the public. Regulation D an SEC regulation that governs private placements. Private placements are investment offerings for institutional and accredited individual investors but not for the general public. There is an exception that 35 non-accredited investors can participate. Restricted shares shares that cannot be traded in the public markets. Return on investment (ROI) the proceeds from an investment, during a specific time period, calculated as a percentage of the original investment. Also, net profit after taxes divided by average total assets. Rights offering an offering of stock to current shareholders that entitles them to purchase the new issue, usually at a discount. Rights of co-sale with founders a clause in venture capital investment agreements that allows the VC fund to sell shares at the same time that the founders of a startup chose to sell. Right of first refusal a contractual right to participate in a transaction. For example, a venture capitalist may participate in a first round of investment in a startup and request a right of first refusal in any following rounds of investment. Risk-free rate a term used in finance theory to describe the return from investing in a riskless security. In practice, this is often taken to be the return on US Treasury Bills.
Road show presentations made in several cities to

same sector. The strategy is to create economies of scale. For example, the movie theater industry underwent significant consolidation in the 1960s and 1970s. Round a financing event usually involving several private equity investors. Royalties payments made to patent or copyright owners in exchange for the use of their intellectual property. Rule 144 a rule of the Securities and Exchange Commission that specifies the conditions under which the holder of shares acquired in a private transaction may sell those shares in the public markets. S corporation an ownership structure that limits its number of owners to 100. An S corporation does not pay taxes, rather its owners pay taxes on their proportion of the corporations profits at their individual tax rates. SBIC see Small Business Investment Company. Scalability a characteristic of a new business concept that entails the growth of sales and revenues with a much slower growth of organizational complexity and expenses. Venture capitalists look for scalability in the startups they select to finance. Scale-down a schedule for phased decreases in management fees for general partners in a limited partnership as the fund reduces its investment activities toward the end of its term. Scale-up the process of a company growing quickly while maintaining operational and financial controls in place. Also, a schedule for phased increases in management fees for general partners in a limited partnership as the fund increases its investment activities over time. Secondary market a market for the sale of limited partnership interests in private equity funds. Sometimes limited partners chose to sell their interest in a partnership, typically to raise cash or because they cannot meet their obligation to invest more capital according to the takedown schedule. Certain investment companies specialize in buying

potential investors and other interested parties. For example, a company will often make a road show to generate interest among institutional investors prior to its IPO.

ROI see Return on investment. Rollup the purchase of relatively smaller companies in a sector by a rapidly growing company in the

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these partnership interests at a discount. Secondary shares shares sold by a shareholder (not by the corporation). Securities and Exchange Commission (SEC) the regulatory body that enforces federal securities laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934. Seed capital investment provided by angels, friends and family to the founders of a startup in seed stage. Seed stage the state of a company when it has just been incorporated and its founders are developing their product or service. Senior debt a loan that has a higher priority in case of a liquidation of the asset or company. Seniority higher priority. Series A preferred stock preferred stock issued by a fast growth company in exchange for capital from investors in the A round of financing. This preferred stock is usually convertible to common shares upon the IPO or sale of the company. Shareholder agreement a contract that sets out, for example, the basis on which the company will be operated and the shareholders rights and obligations. It provides protection to minority shareholders. Sharpe Ratio a method of calculating the riskadjusted return of an investment. The Sharpe Ratio is calculated by subtracting the risk-free rate from the return on a specific investment for a time period (usually one year) and then dividing the resulting figure by the standard deviation of the historical (annual) returns for that investment. The higher the Sharpe Ratio, the better. Small Business Investment Company (SBIC) a company licensed by the Small Business Administration to receive government capital in the form of debt or equity in order to use in private equity investing. Stock option a right to purchase or sell a share of stock at a specific price within a specific period of time. Stock purchase options are commonly used as long term incentive compensation for employees and management of fast growth companies. Strategic investor a relatively large corporation that agrees to invest in a young or a smaller company in order to have access to its proprietary technology, product or service. Subordinated debt a loan that has a lower priority than a senior loan in case of a liquidation of the asset or company. Also known as junior debt. Success rate the proportion of venture funded companies that are considered successful. A study of companies funded by VCs during the 1990s indicated that 14% of the companies went public and another 11%were acquired. Sweat equity ownership of shares in a company resulting primarily from work rather than investment of capital. Syndicate a group of investors that agree to participate in a round of funding for a company. Alternatively, a syndicate can refer to a group of investment banks that agree to participate in the sale of stock to the public as part of an IPO. Synthetic secondary A popular method of completing a direct secondary transaction in which the buyer becomes a limited partner (LP) in a special purpose vehicle (SPV) or similar entity which has been set up out of the underlying investments in order to create a limited partnership interest. The term arose because of the synthetic nature of the direct purchase through the LP secondary transaction. Tag-along right the right of a minority investor to receive the same benefits as a majority investor. Usually applies to a sale of securities by investors. Also known as Co-sale right. Takedown a schedule of the transfer of capital in phases in order to complete a commitment of funds. Typically, a takedown is used by a general partner of a private equity fund to plan the transfer of capital from the limited partners.

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Tender offer an offer to public shareholders of a company to purchase their shares. Term loan a bank loan for a specific period of time, usually up to ten years in leveraged buyout structures. Term sheet a document confirming the intent of an investor to participate in a round of financing for a company. By signing this document, the subject company agrees to begin the legal and due diligence process prior to the closing of the transaction. Also known as Letter of Intent. Tranche a portion of a set of securities. Each tranche may have different rights or risk characteristics. When venture capital firms finance a company, a round may be disbursed in two or three tranches, each of which is paid when the company attains one or more milestones. Turnaround a process resulting in a substantial increase in a companys revenues, profits and reputation. Under water option an option is said to be under water if the current fair market value of a stock is less than the option exercise price. Underwriter an investment bank that chooses to be responsible for the process of selling new securities to the public. An underwriter usually chooses to work with a syndicate of investment banks in order to maximize the distribution of the securities. Venture capital a segment of the private equity industry which focuses on investing in new companies with high growth potential and accompanying high risk. Venture capital method a pricing valuation method whereby an estimate of the future value of a company is discounted by a certain interest rate and adjusted for future anticipated dilution in order to determine the current value. Usually, discount rates for the venture capital method are considerably higher than public stock return rates, representing the fact that venture capitalists must achieve significant returns on investment in order to compensate for the risks they take in funding unproven companies. Vesting a schedule by which employees gain ownership over time of a previously agreed upon amount of retirement funding or stock options. Vintage the year that a private equity fund stops accepting new investors and begins to make investments on behalf of those investors. Venture funds are generally benchmarked to funds of the same vintage year. Voting rights the rights of holders of preferred and common stock in a company to vote on certain acts affecting the company. These matters may include payment of dividends, issuance of a new class of stock, merger or liquidation. Warrant a security which gives the holder the right to purchase shares in a company at a pre-determined price. A warrant is a long term option, usually valid for several years or indefinitely. Typically, warrants are issued concurrently with preferred stocks or bonds in order to increase the appeal of the stocks or bonds to potential investors. Washout round a financing round whereby previous investors, the founders and management suffer significant dilution. Usually as a result of a washout round, the new investor gains majority ownership and control of the company. Weighted average cost of capital (WACC) the average of the cost of equity and the after-tax cost of debt. This average is determined using weight factors based on the ratio of equity to debt plus equity and the ratio of debt to debt plus equity. Weighted average anti-dilution an anti-dilution protection mechanism whereby the conversion rate of preferred stock is adjusted in order to reduce an investors loss due to an increase in the number of shares in a company. Without anti-dilution protection, an investor would suffer from a reduction of his or her percentage ownership. Usually as a result of the implementation of a weighted average anti-dilution, company management and employees who own a fixed amount of common shares suffer significant dilution, but not as badly as in the case of a full ratchet. Write-down a decrease in the reported value of an asset or a company.

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Write-off a decrease in the reported value of an asset or a company to zero. Write-up an increase in the reported value of an asset or a company. Zombie a company that has received capital from investors but has only generated sufficient revenues and cash flow to maintain its operations without significant growth. Sometimes referred to as walking dead. Typically, a venture capitalist has to make a difficult decision as to whether to liquidate a zombie or continue to invest funds in the hopes that the zombie will become a winner.

These definitions were graciously provided by the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth. Please refer to the Centers website for additional definitions and information at http://mba.tuck.dartmouth.edu/pecenter/resources/glossary.html. Used by permission. Thomson Reuters and National Venture Capital Association are grateful to the Center for its support.

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Appendix B: MoneyTree Report Criteria


PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report, Data: Thomson Reuters

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

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

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

Specific Methodology
The focus of the report is on cash received by the company. Therefore, tranches not term sheets are the determining factor. Drawdowns on commitments are recognized at the time the company receives the money rather than recorded as a lump sum amount at the time the term sheet is executed. Convertible debt and bridge loans are recognized only when converted to equity. Once a company has received a qualifying venture capital financing round, all subsequent equity financing rounds are included regardless of whether the round involved a venture capital firm as long as all other investment criteria are met (e.g. cash-for-equity, not buyout or services in kind). Angel, incubator and similar investments are consid-

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

General Definition
The report includes the investment activity of profes-

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ered pre-venture financing if the company has received no prior qualifying venture capital investment and are not included in the MoneyTree results. Angel, incubator and similar investments that are part of a qualifying venture capital round or follow a qualifying venture capital round are included to the extent that such investments can be fully verified as meeting all other criteria (e.g. cash for equity, not buyout or services in kind). Direct investment by corporations (not through a corporate venture capital arm) is excluded unless (a) the investment is clearly demonstrated to be primarily a financial investment rather than outsourced R&D or market development, (b) it is a co-investment in an otherwise qualifying round, or (c) it follows a qualifying venture round in a company and meets all other criteria (e.g. cash-for-equity, not buyout or services in kind). Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Reuters. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.

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

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Appendix C: MoneyTree Geographical Definitions


The Geographical Regions identified in the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters and used in the 2011 NVCA Yearbook are as follows:

Alaska/Hawaii/Puerto Rico: Alaska, Hawaii, and Puerto Rico Colorado: The state of Colorado DC/Metroplex: Washington, D.C., Virginia, West Virginia, and Maryland LA/Orange County: Los Angeles, Ventura, Orange, and Riverside Counties (i.e., southern California, except San Diego) Midwest: Illinois, Missouri, Indiana, Kentucky, Ohio, Michigan, and western Pennsylvania New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and parts of Connecticut (excluding Fairfield county) New York Metro: Metropolitan NY area, northern New Jersey, and Fairfield County, Connecticut North Central: Minnesota, Iowa, Wisconsin, North Dakota, South Dakota, and Nebraska

Northwest: Washington, Oregon, Idaho, Montana, and Wyoming Philadelphia Metro: Eastern Pennsylvania, southern New Jersey, and Delaware Sacramento/Northern California: Northeastern California San Diego: San Diego area Silicon Valley: Northern California, bay area and coastline South Central: Kansas, Oklahoma, Arkansas, and Louisiana Southeast: Alabama, Florida, Georgia, Mississippi, Tennessee, South Carolina, and North Carolina Southwest: Utah, Arizona, New Mexico, and Nevada Texas: The state of Texas Upstate New York: Northern New York state, except Metropolitan New York City area

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Appendix D: Industry Codes (VEIC)


Company VE Primary Industry Class 1000 Information Technology Company VE Primary Industry Sub-Group 1 1000 Communications Company VE Primary Industry Sub-Group 2 1100 Commer. Comm. Company VE Primary Industry Sub-Group 3 1000 Communications and Media 1100 Commercial Communications 1110 Radio & TV Broadcasting Stations 1120 CATV & Pay TV Systems 1125 Cable Service Providers 1130 Radio & TV Broadcasting & Other Related Equipment 1135 Services to Commercial Communications 1199 Other Commercial Communications 1700 Media and Entertainment 1710 Entertainment 1720 Publishing 1800 Other Communications Related 1200 Telecommunications 1210 Long Distance Telephone Services 1215 Local Exchange Carriers (LEC) 1220 Telephone Interconnect & Other Equipment 1230 Telephone answering and/or management systems, PBXs 1299 Other Telephone Related 1300 Wireless Communications 1310 Mobile Communications, Pagers & Cellular Radio 1320 Wireless Communications Services 1325 Messaging Services 1330 Wireless Communications Components 1399 Other Wireless Communications 1400 Facsimile Transmission 1500 Data Communications 1510 Local Area Networks (incl. voice/data PBX systems) 1515 Wide Area Networks 1520 Data Communications Components 1521 Communications Processors/Network Management 1522 Protocol Converters & Emulators 1523 Modems and Multiplexers 1524 Other Data Communication Components 1525 Switches/Hubs/Routers/Gateways/ATM 1530 Network test, monitor and support equipment 1549 Other Data Communications 1600 Satellite Microwave Communications 1610 Satellite Services/Carriers/Operators 1620 Satellite Ground (and other) Equipment 1630 Microwave Service Facilities 1640 Microwave & Satellite Components 1699 Other Satellite & Microwave 1810 Defense Communications 1825 Other Communications Services NEC 1899 Other Communications Products (not yet classified) 2100 Computers and Hardware 2110 Mainframes & Scientific Computers 2111 Mainframes 2112 Supercomputers and Scientific Computers 2119 Other Mainframes and Scientific

1200 Telephone Rel.

1300 Wireless Communications

1400 Facsimile Trans 1500 Data Comm.

1600 Satellite Comm

1800 Comm. Other

2100 Computer Hardware

2100 Computers Hardware

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 2120 Mini & Personal/Desktop Computers 2121 Fail Safe Computers 2122 Mini Computers 2123 Personal Computers (micro/personal) 2124 Other Mini and Personal Computers 2125 Portable Computers (notebooks/laptops) 2126 Handheld Computing (PDA) 2130 Optical computing 2140 Servers and Workstations 2141 Servers 2143 Workstations 2144 Thin Client Hardware 2149 Other Servers and Workstations 2200 Digital Imaging and 2200 Computer Graphics and Digital Imaging Computer Graphics 2210 CAD/CAM, CAE,EDA Systems 2220 Graphic Systems 2230 Scanning Hardware 2234 OCR (Optical Character Recognition) 2236 OBR (Optical Bar Recognition) 2238 MICR (Magnetic Ink Character Recognition) 2239 Other Scanning Related 2250 Graphics Printers/Plotters 2255 Graphics/Enhanced Video Cards 2260 Other Graphics Peripherals 2280 Other Multimedia NEC 2290 Digital Imaging Hardware and Equipment 2295 Digital Imaging Services 2299 Other Computer Graphics 2300 Integrated Turnkey Systems and Solutions and Solutions 2311 Business and Office 2312 Consumer 2313 Retailing 2315 Transportation 2316 Finance/Insurance/Real Estate 2317 Agriculture 2318 Recreation/Entertainment 2319 Manufacturing/Industrial/Construction 2320 Medical/Health 2321 Computer related 2322 Communications Products/Servcies 2323 Education 2324 Reference 2325 Scientific 2399 Other Intergrated Systems and Solutions 2500 Peripherals 2510 Terminals 2511 Intelligent Terminals 2512 Portable Terminals 2513 Graphics Terminals 2519 Other Terminals 2520 Printers 2521 Laser Printers 2522 Color Printers 2523 Inkjet Printers 2524 Dot Matrix Printers 2529 Other Printers 2530 Data I/O Devices 2531 Mouse Input Devices 2532 TouchPad Input Devices 2533 Pen based computing

2300 Turnkey Integrated Systems

2500 Computer Peripherals

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 2539 Other Data I/O Devices 2540 Disk Related Memory Devices 2541 Floppy Disks & Drives 2542 Winchester Hard Disks and Drives 2543 Optical Disks & Drives,CD-ROM DVD 2546 Disk Drive Components 2549 Other Disk Related 2550 Tape Related Devices 2551 Magnetic Tapes 2552 Tape Heads & Drives 2553 Continuous Tape Backup Systems 2559 Other Tape Related Devices 2560 Other Memory Devices (excl. semiconductors) 2561 PC or PMCIA cards 2562 Memory Cards 2563 Sound Cards 2564 Communications Cards 2569 Other Peripheral Cards 2590 Other Peripherals (not yet classified) 2700 Computer Software 2600 Computer Services 2600 Computer Services 2630 Time Sharing Firms 2640 Computer Leasing & Rentals 2650 Computer Training Services 2655 Backup and Disaster Recover 2660 Data Processing,Analysis & Input Services 2665 Computer Repair Services 2670 Computerized Billing & Accounting Services 2675 Computer Security Services 2691 Data communications systems management 2699 Other Computer Services 2700 Computer Software 2710 Systems Software 2711 Database & File Management 2712 Operating Systems & Utilities 2713 Program Development Tools/CASE/Languages 2716 Graphics and Digital Imaging Software 2719 Other Systems Software 2720 Communications/Networking Software 2721 Security/Firewalls,Encryption software 2722 Email Software 2723 Groupware 2724 Multimedia software 2729 Other Communications/Networking Software 2730 Applications Software 2731 Business and Office Software 2732 Home Use Software 2733 Educational Software 2734 Manufacturing/Industrial Software 2735 Medical/Health Software 2736 Banks/Financial Institutions Software 2737 Retailing Software 2738 Integrated Software 2739 ERP/Inventory Software 2740 Recreational/Game Software 2741 Scientific Software 2743 Agricultural Software 2744 Transportation Software 2748 Other Industry specific Software 2749 Other Applications Software 2750 Artificial Intelligence Related Software

2700 Computer Software

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 2751 Expert Systems 2752 Natural Language 2753 Computer-Aided Instruction 2754 Artificial Intel. Programming Aids 2755 Other Artificial Intelligence Related 2799 Other Software Related 2710 Computer Programming 2760 Software Services 2761 Programming Services/Systems Engineering 2762 Software Consulting Services 2763 Software Distribution/Clearinghouse 2769 Other Software Services 1550 Internet Communications and Infrastructure NEC 1551 Internet Access Services and Service Providers 1552 Internet Multimedia Services 1553 Internet Backbone Infrastructure 1559 Other Internet Communications NEC 1560 E-Commerce Technology 1561 Internet Security and Transaction Services 1562 Ecommerce Services 1569 Other Ecommerce 2142 Web Servers 1563 Ecommerce Enabling Software 2780 Internet Systems Software 2781 Site Development and Administration Software 2782 Internet Search Software and Engines 2783 WebServer Software 2784 Web Languages (Java/ActiveX/HTML/XML) 2785 Web Authoring/Development Software 2798 Other Internet Systems Software 2765 Internet/Web Design and programming services 2766 Internet Graphics Services 2768 Other Internet Software Services 2800 Internet and Online Related 2810 E-CommerceSelling products Online or Internet 2811 Business and Office Products 2812 Consumer Products 2813 Retailing Products 2814 Publishing Products 2815 Transportation Products 2816 Finance/Insurance/Real Estate products 2817 Agricultural Products 2818 Recreation/Entertainment/Music/Movies 2819 Manufacturing/Industrial/Construction 2820 Medical/Health 2821 Computer Related 2822 Communications Products 2823 Education Products 2824 Reference Products 2825 Scientific Products 2826 Legal Products 2829 Other Ecommerce Selling Products 2830 EccommerceSelling Services Online/Internet 2831 Business and Office Services 2832 Consumer Services 2833 Retailing Services

2800 Internet Specific

1550 Internet Communications

1560 E-Commerce Technology

2100 Computers Hardware 2780 Internet Software

2785 Internet Programming

2800 Internet Ecommerce

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 2834 Publishing Services 2835 Transportation Services 2836 Finance/Insurance/Real Estate Services 2837 Agricultural Services 2838 Recreation/Entertainment/Music/Movies 2839 Manufacturing/Industrial/Construction 2840 Medical/Health Services 2841 Computer Related services 2842 Communications Products/Services 2843 Education Services 2844 Reference 2845 Scientific 2846 Legal 2848 Recreation/Entertainment Services 2849 Other Ecommerce Selling Services 2810 Internet Content 2850 Web Aggregration/Portal Sites/Exchanges 2851 Business and Office Info/content 2852 Consumer Info/Content 2853 Retailing Info/Content 2854 Publishing Info/Content 2855 Transportation Info/Content 2856 Finance/Real Estate/Insurance Info/Content 2857 Agriculture Info/Content 2858 Recreation/Entertainment/Music/Movies 2859 Manufac/Industrial/Constr. Info/Content 2860 Medical/Health Info/Content 2861 Computer Related Info/Content 2862 Communications Info/Content 2863 Education Info/Content 2864 Reference Info/Content 2865 Scientific Info/Content 2866 Legal Info/Content 2869 Other Aggregation/Portal/Exchange Sites 2870 Internet Services 2871 Internet Marketing Services 2873 Data Warehousing Services 2879 Other Internet and Online Services NEC 2000 Computer Related 2900 Other Computer Related 2910 Voice Synthesis 2911 Voice Recognition 2990 Other Computer Related (not yet classified) 3100 Electronic Components 3110 Semiconductors 3111 Customized Semiconductors 3112 Standard Semiconductors 3114 Flash Memory 3115 Optoelectronics semiconductors (incl laser diodes) 3119 Other Semiconductors 3120 Microprocessors 3130 Controllers and Sensors 3132 Controllers 3135 Sensors 3139 Other Controllers/Sensors 3140 Circuit Boards 3160 Display Panels 3200 Batteries 3300 Power Supplies 3400 Electronics Equipment 3200 Batteries 3300 Power Supplies 3310 Uninterruptible Power Supply (UPS) 3400 Electronics Related Equipment

2820 Internet Services

2900 Computer Other

2900 Computer Other

3000 Semiconductor/Electr 3100 Semiconductors/Other Electronics

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 3410 Semiconductor Fabrication Equip. & Wafer Products 3420 Component Testing Equipment 3499 Other Electronics Related Equipment 3500 Laser Related 3500 Laser Related 3510 Laser Components (incl. beamsplitters, excimers) 3599 Other Laser Related 3600 Fiber Optics 3610 Fiber Optic Cables 3620 Fiber Optic Couplers and Connectors 3630 Fiber Optic Communication Systems (see 1510) 3699 Other Fiber Optics 3700 Analytical & Scientific Instrumentation 3710 Chromatographs & Related Laboratory Equipment 3720 Other Measuring Devices 3799 Other Analytical & Scientific Instrumentation 3000 Other Electronics Related 3170 Other Electronics Related (including keyboards) 3800 Other Electronics Related 3810 Military Electronics (excluding communications) 3820 Copiers 3830 Calculators 3835 Security/Alarm/Sensors 3899 Other Electronics Related (incl. alarm systems) 3900 Optoelectronics 3910 Photo diodes 3920 Optoelectronics fabrication equipment 3930 Lenses with Optoelectronics applications 3940 Advanced photographic processes (incl lithographs) 3989 Other Optoelectrinics Related 3990 Other Electronc Semiconductor 4100 Human Biotechnology 4110 Medical Diagnostic Biotechnology Products 4111 In Vitro Monoclonal Antibody Diagnostics 4112 In Vivo Monoclonal Antibody Diagnostics/ Imaging 4113 DNA/RNA Probes 4119 Other Medical Diagnostic Biotechnology 4120 Therapeutic Biotechnology Products 4121 Therapeutic Monoclonal Antibodies 4122 Immune Response Effectors (interferons, vaccines) 4123 Other Therapeutic Proteins (incl. hormones & TPA) 4129 Other Therapeutic Biotechnology 4130 Genetic Engineering 4200 Agricultural/Animal Biotechnology 4210 Genetically Engineered Plants 4220 Genetic. Eng. Microorganisms to raise plant yield 4230 Other Plant Related Biotechnology 4240 Biotech Related Animal Health & Nutrition Products 4250 Genetically Engineered Animals

3600 Fiber Optics

3700 Scientific Instrumentation

3800 Electronics, Other

3900 Optoelectronics

4000 Medical/Health/Life Science 4000 Biotechnology

4100 Biotech-Human

4200 Biotech-Animal

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 4300 Biotech-Industrial Company VE Primary Industry Sub-Group 3 4290 Other Animal Related Biotechnology 4300 Industrial Biotechnology 4310 Biochemical Products 4311 Biotech Related Fine Chemicals (NOT Pharmaceuts.) 4312 Biotech Related Commodity Chemicals 4319 Other Biochemical Products 4320 Biotech Processes for Food Industrial 1 Applications 4321 Biotech Related Food Enzymes and Cultures 4322 Biotech Related Food Diagnostics 4329 Other Biotech Process for Food/Industrial Products 4330 Biotech Processes for Pollution/Toxic Waste Control 4340 Biotech Processes for Enhanced Oil Recovery/Mining 4390 Other Industrial Biotechnology 4400 Biosensors 4410 Biosensors for Medical Diagnostic Applications 4420 Biosensors for Industrial Applications 4490 Other Biosensors 4500 Biotech Related Research & Production Equipment 4510 Biotech Related Analytical Instruments & Apparatus 4520 Biotech Related Production Equipment 4525 Biotech laser and optronic applications 4599 Other Biotech Research & Production Equipment 4600 Biotech Related Research & Other Services 4610 Pure & Contract Biotechnology Research 4699 Other Biotechnology Services 4000 Biotechnology and Pharmacology 4900 Other Biotechnology Related 5100 Medical Diagnostics 5110 Diagnostic Services 5120 Medical Imaging 5121 X-Rays 5122 CAT Scanning 5123 Ultra Sound Imaging 5124 Nuclear Imaging 5125 Other Medical Imaging 5130 Diagnostic Test Products & Equipment 5140 Other Medical Diagnostics 5200 Medical Therapeutics 5210 Therapeutic Services 5220 Surgical Instrumentation & Equipment 5221 Surgical lasers (including laser delivery fibers) 5230 Pacemakers & Artificial Organs 5240 Drug Delivery & Other Equipment 5299 Other Therapeutic (including defibrillators) 5000 Medical/Health Related 5300 Medical Health Related Products 5310 Disposable Medical Products 5340 Handicap Aids 5350 Medical Monitoring Equipment 5380 Health related optics (including glasses, lenses) 5399 Other Medical/Health (NEC)

4400 Biosensors

4500 Biotech Equipment

4600 Biotech Research

4700 Biotech Other 5000 Medical/Health 5100 Medical Diagnostics

5200 Medical Therapeutics

5300 Med/Health Products

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 5400 Med/Health Services Company VE Primary Industry Sub-Group 3 5400 Medical Health Services 5410 Hospitals/Clinics/Primary Care 5412 Long Term Care/Home Care/Elder Care 5414 Dependent Care (child care/assisted living 5420 Managed care (including PPO/PPM) 5429 Other Healthcare Facilities 5430 Emergency Services/Ambulance 5440 Hospital & Other Institutional Management 5499 Other Medical/Health Services 5500 Pharmaceuticals 5510 Pharmaceutical Research 5520 Pharmaceutical Production 5530 Pharmaceutical Services 5540 Pharmaceutical Equipment 5550 Pharmaceuticals/Fine Chemicals (nonbiotech) 5599 Other Pharmaceutical NEC 7100 Entertainment and Leisure 7110 Movies,Movie Products & Theater Operations 7120 Amusement & Recreational Facilities 7125 Casino and Gambling 7130 Toys & Electronic Games 7140 Sporting Goods,Hobby Equipment & Athletic Clothes 7150 Sports Facilities (Gyms and Clubs) 7155 Sports 7160 TVs, Radio, Stereo Equipment & Consumer Electronics 7170 Music,Records,Production and Instruments 7199 Other Leisure/Recreational Products and Services 7200 Retailing Related 7210 Drug Stores 7220 Clothing and Shoe Stores 7230 Discount Stores 7240 Computer Stores 7245 Retail Publishing (books, magazines, newspapers) 7246 Office Supply Stores 7247 Music/Electronics 7248 Specialty Department and retail stores 7250 Franchises(NEC) 7299 Other Retailing Related 7300 Food and Beverages 7310 Wine & Liquors 7320 Health Food 7330 Soft Drinks & Bottling Plants 7340 Food Supplements/Vitamins 7350 General Food Products 7399 Other Food and Beverages 7400 Consumer Products 7410 Clothing,Shoes & Accessories (incl. jewelry) 7420 Health & Beauty Aids 7430 Home Furnishing & Housewares 7431 Housewares 7432 Furnishings & Furniture 7433 Garden and Horticultural Products 7434 Other Home Furnishings (NEC) 7450 Mobile Homes 7499 Other Consumer Products 7500 Consumer Services 7510 Fast Food Restaurants

5500 Pharmaceutical

6000 Non-High Technology

7000 Consumer Related

7100 Entertainment and Leisure

7200 Retailing Related

7300 Food and Beverage

7400 Consumer Products

7500 Consumer Services

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 7520 Other Restaurants 7530 Hotels and Resorts 7540 Auto Repair Shops 7550 Education & Educational Products and Materials 7560 Travel Agencies and Services 7599 Other Consumer Services 7600 Consumer, Other 8000 Industrial/Energy 3100 Semiconductors/Other Electronics 7000 Consumer Related 7999 Other Consumer Related (not yet classified) 8141 Semiconductor Materials (eg. silicon wafers) 8142 III/V Semiconductor Mater. (eg. gallium arsenide) 6100 Oil & Gas Exploration and Production 6200 Oil & Gas Exploration Services 6300 Oil & Gas Drilling & Support Services 6400 Oil & Gas Drilling,Exploration & Extraction Equip. 6410 Oil & Gas Drilling & Extraction Equipment 6420 Oil & Gas Drilling Instrumentation 6430 Oil & Gas Exploration Equip. Instrumentation 6499 Other Oil & Gas (NEC) 6500 Alternative Energy 6510 Solar Energy 6511 Photovoltaic Solar 6512 Other Solar 6520 Wind Energy 6530 Geothermal Energy 6540 Energy Co-Generation 6599 Other Alternative Energy (incl. nuclear energy) 6600 Enhanced Oil Recovery/Heavy Oil/Shale 6700 Coal Related 6710 Coal Mining 6720 Coal Related Equipment 6799 Other Coal Related 6800 Energy Conservation Related 6000 Energy Related 6900 Other Energy Related 8100 Chemicals & Materials 8110 Plastic Fabricators 8111 Homogeneous Injections/Extrusions 8112 Non-Homogeneous Injections/Extrusions 8113 Fiber-Reinforced (Plastic) Composites 8114 Other Fabricated Plastics 8115 Processes for Working with Plastics 8119 Other Plasti Fabricators 8120 Coatings & Adhesives Manufacturers 8121 Optical coatings 8129 Other Coatings & Adhesives 8130 Membranes & Membrane-Based Products 8140 Specialty/Performance Materials 8143 Specialty Metals (incl. coatings, alloys, clad) 8144 Ceramics 8145 Lubricants & Functional Fluids 8146 Other Specialty Materials 8147 Specialty materials for laser generation 8148 Superconducting materials 8149 Other Special Performance Materials 8150 Commodity Chemicals & Polymers

6100 Oil & Gas Exploration

6500 Energy, Alternative

6600 Energy, Enhanced Recovery 6700 Energy, Coal

6800 Energy, Conservation 6900 Energy, Other 8100 Chemicals and Materials

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 Company VE Primary Industry Sub-Group 2 Company VE Primary Industry Sub-Group 3 8151 Industrial Chemicals 8152 Polymer (Plastics) Materials 8160 Specialty/Performance Chemicals 8161 Electronic Chemicals 8162 Other Industrial Chemicals 8170 Agricultural Chemicals 8189 Other Commidity Chemicals and Polymers 8199 Other Chemicals & Materials (not yet classified) 8200 Industrial Automation 8210 Energy Management 8220 Industrial Measurement & Sensing Equipment 8221 Laser related measuring & sensing equipment 8230 Process Control Equipment & Systems 8240 Robotics 8250 Machine Vision Software & Systems 8260 Numeric & Computerized Control of Machine Tools 8299 Other Industrial Automation (NEC) 8300 Industrial Equipment and Machinery 8310 Machine Tools, Other Metalworking Equipment 8320 Hoists, Cranes & Conveyors 8330 Pumps, Ball Bearings, Compressors, Indus. Hardware 8340 Mining Machinery 8350 Industrial Trucks and Tractors 8360 Other Industrial Process Machinery 8370 Power Transmission Equipment (generators & motors) 8399 Other Industrial Equipment & Machinery 8500 Environmental Related 8510 Air Filters & Air Purification & Monitoring Equip. 8520 Chemical and Solid Material Recycling 8530 Water Treatment Equipment & Waste Disposal Systems 8599 Other Environmental Related 8000 Industrial Products 8600 Other Industrial Products (not yet classified) 8700 Industrial Services 9100 Transportation 9110 Airlines and Aviation Related 9120 Trucking 9125 Railway related 9130 Leasing of Railcars,Buses and Cars 9140 Mail and Package Shipment 9150 Motor Vehicles,Transporation Equipment & Parts 9160 Airfield and Other Transportation Services 9180 Advanced Aircraft/Aerospace 9199 Other Transportation 9200 Financial Services 9200 Financial Services 9200 Financial Services 9210 Insurance Related 9220 Real Estate 9230 Banking 9235 Non Bank Credit 9240 Securities & Commodities Brokers and Services 9250 Investment Groups 9254 Venture Capital and Private Equity Investors 9255 Financial Transactions Services

8200 Industrial Automation

8300 Industrial Equipment

8500 Pollution and Recycling

8600 Industrial Products, Other 8700 Industrial Services 9100 Transportation 9100 Transportation

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Company VE Primary Industry Class Company VE Primary Industry Sub-Group 1 9300 Business Serv. Company VE Primary Industry Sub-Group 2 9300 Business Services Company VE Primary Industry Sub-Group 3 9299 Financial Services, 0ther 9300 Services 9310 Engineering Services 9320 Advertising and Public Relations 9330 Leasing (not elsewhere classified) 9340 Distributors,Importers and Wholesalers 9350 Consulting Services 9360 Media Related Services 9399 Other Services NEC 9400 Product Manufacturing 9410 Business Products and Supplies 9415 Office Automation Equipment 9420 Office Furniture & Other Professional Furnishings 9430 Textiles (Synthetic & Natural) 9440 Hardware,Plumbing Supplies 9450 Publishing 9460 Packaging Products & Systems 9470 Printing & Binding 9499 Other Manufacturing (not elsewhere classified) 9500 Agriculture, Forestry, Fishing, Animal Husbandry,etc. 9510 Agriculture related 9520 Forestry related 9530 Fishing related 9540 Animal husbandry 9599 Other Agriculture,Forestry,Fishing 9600 Mining and Minerals (non-energy related) 9700 Construction & Building Products 9710 Construction 9720 Manufacture of Building Products 9730 Manufacture of Pre-Fabricated Buildings & Systems 9740 Distribution of Building Products & Systems 9750 Construction Services 9799 Other Construction & Building Products Related 9800 Utilities and Related Firms 9810 Electric Companies 9820 Water,Sewage,Chem. & Solid Waste Treatment Plants 9830 Gas Transmission & Distribution 9899 Other Utilities & Related Firms 9000 Other Services and Manufacturing 9900 Other Products and Services 9910 Conglomerates 9912 Socially Responsible 9914 Environment Responsible 9915 Women-Owned 9918 Minority-Owned 9920 Holding Companies 9999 Other Products and Services

9400 Manufact.

9400 Manufacturing

9500 Agr/Forestr/Fish

9500 Agricultural, Forestry

9700 Construction

9700 Construction

9800 Utilities

9800 Utilities

9900 Other

9900 Other

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Appendix E: Industry Sector VEIC Ranges


Industry analysis is based upon the following industry sectors: Biotechnology, Business Products and Services, Computers and Peripherals, Consumer Products and Services, Computer Software, Electronics/Instrumentation, Financial Services, Healthcare Services, Industrial/Energy, IT Services, Media and Entertainment, Medical Devices and Equipment, Networking and Equipment, Retailing/Distribution, Semiconductors, Telecommunications and Other. These sectors are based on the 17 industry classifications of the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. Biotechnology 4000, 4100, 4110, 4111, 4112, 4113, 4119, 4120, 4121, 4122, 4123, 4129, 4130, 4200, 4210, 4220, 4230, 4240, 4250, 4290, 4300, 4310, 4311, 4312, 4319, 4320, 4321, 4322, 4329, 4330, 4340, 4390, 4400, 4410, 4420, 4490, 4500, 4510, 4520, 4525, 4599, 4600, 4610, 4699, 4900, 5500, 5510, 5520, 5530, 5540, 5550, 5599 Business Products and Services 2811, 2824, 2831, 2844, 9300, 9310, 9320, 9330, 9340, 9350, 9360, 9399 Computers and Peripherals 2000, 2100, 2110, 2111, 2112, 2119, 2120, 2121, 2122, 2123, 2124, 2125, 2126, 2130, 2140, 2141, 2142, 2143, 2144, 2149, 2220, 2230, 2234, 2236, 2238, 2239, 2250, 2255, 2260, 2280, 2290, 2295, 2299, 2500, 2510, 2511, 2512, 2513, 2519, 2520, 2521, 2522, 2523, 2524, 2529, 2530, 2531, 2532, 2533, 2539, 2540, 2541, 2542, 2543, 2546, 2549, 2550, 2551, 2552, 2553, 2559, 2560, 2561, 2562, 2563, 2564, 2569, 2590, 3170 Consumer Products and Services 2812, 2832, 7000, 7300, 7310, 7320, 7330, 7340, 7399, 7400, 7410, 7420, 7430, 7431, 7432, 7433, 7434, 7450, 7499, 7500, 7510, 7520, 7530, 7540, 7550, 7560, 7599, 7999 Computer Software 1563, 2200, 2210, 2300, 2311, 2312, 2313, 2315, 2316, 2317, 2318, 2319, 2320, 2321, 2322, 2323, 2324, 2325, 2399, 2700, 2710, 2711, 2712, 2713, 2716, 2719, 2720, 2721, 2722, 2723, 2724, 2729, 2730, 2731, 2732, 2733, 2734, 2735, 2736, 2737, 2738, 2739, 2740, 2741, 2743, 2744, 2748, 2749, 2750, 2751, 2752, 2753, 2754, 2755, 2780, 2781, 2782, 2783, 2784, 2785, 2798, 2799, 2900, 2910, 2911, 2990, 8250 Electronics/Instrumentation 3000, 3100, 3160, 3200, 3300, 3310, 3400, 3420, 3499, 3500, 3510, 3599, 3700, 3710, 3720, 3799, 3800, 3810, 3820, 3830, 3835, 3899 Financial Services 2816, 2836, 9200, 9210, 9220, 9230, 9235, 9240, 9250, 9254, 9255, 9299 Healthcare Services 2820, 2840, 5400, 5410, 5412, 5414, 5420, 5429, 5430, 5440, 5499 Industrial/Energy 2819, 2837, 2839, 6000, 6100, 6200, 6300, 6400, 6410, 6420, 6430, 6499, 6500, 6510, 6511, 6512, 6520, 6530, 6540, 6599, 6600, 6700, 6710, 6720, 6799, 6800, 6900, 8000, 8100, 8110, 8111, 8112, 8113, 8114,

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8115, 8119, 8120, 8121, 8129, 8130, 8140, 8143, 8144, 8145, 8146, 8147, 8148, 8149, 8150, 8151, 8152, 8160, 8161, 8162, 8170, 8189, 8199, 8200, 8210, 8220, 8221, 8230, 8240, 8260, 8299, 8300, 8310, 8320, 8330, 8340, 8350, 8360, 8370, 8399, 8500, 8510, 8520, 8530, 8599, 8600, 8700, 9000, 9100, 9110, 9120, 9125, 9130, 9140, 9150, 9160, 9180, 9199, 9400, 9410, 9415, 9420, 9430, 9440, 9460, 9470, 9499, 9500, 9510, 9520, 9530, 9540, 9599, 9600, 9700, 9710, 9720, 9730, 9740, 9750, 9799, 9800, 9810, 9820, 9830, 9899 IT Services 1560, 1561, 1562, 1569, 2600, 2630, 2640, 2650, 2655, 2660, 2665, 2670, 2675, 2691, 2699, 2760, 2761, 2762, 2763, 2765, 2766, 2768, 2769, 2800, 2870, 2871, 2873, 2879 Media and Entertainment 1110, 1120, 1125, 1130, 1135, 1199, 1700, 1720, 2814, 2818, 2834, 2838, 2843, 2848, 2850, 2851, 2852, 2853, 2854, 2855, 2856, 2857, 2858, 2859, 2860, 2861, 2862, 2863, 2864, 2865, 2866, 2869, 7100, 7110, 7120, 7125, 7130, 7140, 7150, 7155, 7160, 7170, 7199, 9450 Medical Devices and Equipment 5000, 5100, 5110, 5120, 5121, 5122, 5123, 5124, 5125, 5130, 5140, 5200, 5210, 5220, 5221, 5230, 5240, 5299, 5300, 5310, 5340, 5350, 5380, 5399 Networking and Equipment 1400, 1500, 1510, 1515, 1520, 1521, 1522, 1523, 1524, 1525, 1530, 1549, 3600, 3610, 3620, 3630, 3699 Retailing/Distribution 2810, 2813, 2815, 2817, 2821, 2823, 2825, 2826, 2829, 2830, 2833, 2835, 2841, 2845, 2846, 2849, 7200, 7210, 7220, 7230, 7240, 7245, 7246, 7247, 7248, 7250, 7299, 7350 Semiconductors 3110, 3111, 3112, 3114, 3115, 3119, 3120, 3130, 3132, 3135, 3139, 3140, 3410, 3900, 3910, 3920, 3930, 3940, 3989, 3990, 8141, 8142 Telecommunications 1000, 1100, 1200, 1210, 1215, 1220, 1230, 1299, 1300, 1310, 1320, 1325, 1330, 1399, 1550, 1551, 1552, 1553, 1559, 1600, 1610, 1620, 1630, 1640, 1699, 1710, 1800, 1810, 1825, 1899, 2822, 2842 Other 9900, 9910, 9912, 9914, 9915, 9918, 9920, 9999

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Appendix F: Stage Definitions


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

EARLY STAGE FINANCING


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

EXPANSION STAGE FINANCING


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

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

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

ACQUISITION FOR EXPANSION


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

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

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RECAP/TURNAROUND
Financing provided to a company at a time of operational or financial difficulty with the intention of improving the companys performance.

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

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Appendix G: Data Sources and Resources


For this publication, the main source for data was ThomsonONE.com, the online research database of Thomson Reuters. ThomsonONE.com (which replaced VentureXpert, and Thomson One Banker) is endorsed by the NVCA as the official United States venture capital activity database. By using data gathered through the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters, ThomsonONE.com contains investment, fund raising, portfolio company information, and Reuters News along with other statistical data. Over 1.1 million global private companies can be analyzed within ThomsonONE.com, including historical revenue figures on over 450,000 companies and detailed financials on over 160,000 companies with up to a five year history. Through a partnership with VC Experts.com, Inc. the historical breadth and depth of the Thomson Reuters venture capital content is integrated with private company valuation and deal terms. ThomsonONE.com includes blogs, events, and articles from the peHUB and the Venture Capital Journal, two of the industrys most widely-read publications. Other information contained in this database is gathered through a variety of public and proprietary source. This publication is produced on an annual basis primarily using year-end data. However, the underlying databases can be accessed online to provide the most up-to-date and comprehensive global private equity statistics and profile information available.

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

Data Sources and Resources MoneyTree Data

Thomson Reuters has been able to gather, on a timely basis, complete and accurate information.

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

Sources of Data
The online database of Thomson Reuters is ThomsonONE.com (VentureXpert), the foremost information provider for private equity professionals worldwide. The private equity portion of Thomson Reuters offers an incomparable range of products from directories to conferences, journals, newsletters, research reports, and the ThomsonONE.com Private Equity database. As of March 2012, the database included over 97,000 portfolio companies, over 16,000 private equity firms, nearly 30,000 private equity funds, and over 200,000 financing rounds. By establishing working relationships with private equity and venture capital firms, institutional investors, and industry associations such as the NVCA, PricewaterhouseCoopers and other such entities around the world,

Verification and Updating of Data


Collectively, PricewaterhouseCoopers, Thomson Reuters, and the NVCA have the utmost commitment to provide an accurate historical record of venture capital activity. On a daily basis, the database is constantly analyzed for consistency, crosschecked with other data sources, and updated as new information comes in. On a quarterly basis, we have worked with

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many venture firms to ensure that that their current and past data is correct. Primarily for this reason, the private equity news releases of Thomson Reuters will often restate statistics from prior news releases. With the availability of the online data access, users are encouraged to always use the most current numbers even regarding historical activity so as to maintain accuracy and comparability. In 2011, how much money was invested at each development stage in Research Triangle Pharmaceutical companies? In addition, there are also advantages of using the database for a general partner as well. Although this is not an inclusive list, utilizing the database by general partners can be helpful to them for among the following reasons: Plan your companies exits with data on both venture-backed IPOs and mergers and acquisitions Aid in recruiting talented executives from other venture-backed companies Quickly spot venture-backed companies in competition with your own portfolio companies Create industry analyses to benchmark both performance and portfolio investments Find other venture capitalists likely to support follow-on rounds Provide clarity to investment decisions by comparing them to current market conditions Compile valuation reports for comparable portfolio companies Identify prospective investors and their investment histories Benchmark valuations among recent transactions and obtain valuation comparables Analyze investment trends by industry Utilize returns information to limited partners using appropriate benchmarks Tailor your pitch to investor focus size and limited partner type

Reporting Functionality of ThomsonONE.com


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

Comprehensiveness of ThomsonONE.com
Both the breadth and depth of ThomsonONE.com can perhaps best be shown in that it, among other types of information, the user can find the answers to the following questions: Which venture firms actively co-invest with a firm I am considering co-investing with? Which venture firms are most active in funding online financial services companies in the Ohio Valley? What does Yearbook Figure 3.15 look like for just biotech? How much money was raised by each fund stage in 2010? What was a particular venture-backed IPOs one year return at the end of 2010? As of December 2011, was the 10-year return to small buyout funds larger than that of large buyout funds? Who are the most active acquirers of ecommerce security companies? How much money was committed to mezzanine funds from 1997 to 2011? How much money was invested in the venture capital industry from 1987 to 2011? What is the performance at quarter end for private equity funds that were formed from 1998 to 2011?

Accessing ThomsonONE.com and Other Services


For more information on ThomsonONE.com, please visit http://thomsonreuters.com/products_services/financial/financial_products/deal_making/private_equity/private_equity_venture_capital or by phone at 1-800-782-5555. For information on NVCA membership, which can include a free trial and discounts on an annual subscription, please contact Janice Mawson at the NVCA. You may contact her online through the link on the member benefits section of the NVCA website or at 703-524-2549. For information on services PricewaterhouseCoopers provides for venture capital firms as well as emerging companies, please visit their website at www.pwcmoneytree.com.

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Appendix H: International Convergence


Despite all the discussion and work done on moving toward one global accounting standard, the passage of time and the efforts of a number of groups have not really made the picture much clearer. As this is written in early 2012, activity centers on four major areas: Decision on whether to adopt international accounting rules, or a modification thereof, as the accepted accounting practice in the United States; Decision on the direction of private company accounting; Convergence of specific U.S. and international accounting rules that affect reporting by venture capital and private equity funds to their investors (i.e., whether portfolio company financials must be consolidated with those of the fund); and Accounting to be used by management companies (i.e., whether fund assets must be consolidated into the management company financials.

While making a decision on the adoption of international rules for United States financial statement issuers remains on the agenda of the Securities and Exchange Commission for 2012, it is not clear what the priority of this expensive and time-consuming effort is given all of the other must-do items on the national agenda. See Appendix I for a discussion of private company accounting in the U.S. Meanwhile, The FASB and the IASB continue work on converging certain U.S. and international accounting rules that affect this industry. NVCA staff and the NVCA CFO Task Force have been putting considerable effort into the rules convergence.

The Dialogue and SEC Decision: Should international rules become accepted as U.S. GAAP?
A recent flurry of media coverage has focused on the possible upcoming convergence of U.S. and international accounting standards. Much of this coverage discusses which accounting system casts which public companies in the most favorable light, and correspondingly, which companies are made to look worse. For years, the United States has been developing generalized accounting principles referred to as Generally Accepted Accounting Principles (GAAP). The keeper/arbiter/decider of GAAP is the Financial Accounting Standards Board (FASB). The FASB develops and updates GAAP and the SEC has adopted these accounting rules for public company reporting and other situations over which the SEC has jurisdiction. In recent years, on a parallel track, a separate set of rules emerged from the International Accounting Standards Board (IASB), which was Europe-centric. These rules became known as the International Financial Reporting Standards (IFRS, pronounced IFF-ers).

Over recent years, a large number of multinational corporations complained that they had to endure keeping two sets of books and this prompted the concept of convergence. In early September 2008, the SEC and the FASB announced steps to pave the way for U.S. public companies to convert from U.S. GAAP to IFRS. The SEC roadmap provided for a three-year run-up to an SEC go-no go decision in 2011, but the decision was deferred. At about the same time, the FASB and the IASB met to review and re-orient their convergence plan to be consistent with the SECs proposed schedule. The 2008-2009 world financial crisis deferred and deprioritized much of the work in this area. We would expect this dialogue to center on transparency, reliability, relevance, comparability, and ongoing costs in addition to any conversion costs, which might be significant. More relevant to the U.S. venture capital industry are matters specifically affecting fund reporting, the financial statements provided by GPs to LPs under the eventual rules. If the current international rules become the new U.S. rules, much will change for the worse.

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How U.S. GAAP and International IFRS Compare Never Generalize
Even viewed from 30,000 feet, it is difficult to generalize on how the two systems compare. First, while the IASB produces plain vanilla IFRS standards, there is no one flavor of IFRS in use. Much like the original UNIX kernel, each country/jurisdiction has been able to create its own version of IFRS. But unlike UNIX, sometimes the differences among the localized IFRS versions are large. So an apples-toapples comparison of IFRS-compliant financials from different jurisdictions can be difficult. Second, it is true that IRFS itself is a very thin document compared to GAAP, which has grown to roughly a two-foot stack of written rules. However, to implement IFRS, you need the implementation guide that combines with the original document to create its own two-foot stack. Again, much of the surface comparisons are not useful. Until now, U.S. venture capital firms have been using U.S. GAAP accounting standards exclusively. While seemingly distant from the U.S. venture capital industry, it is important that all business constituencies weigh in on which system (current U.S. GAAP vs. International vs. neither) is the best system overall for the U.S. business community going forward. folio companies would have to be consolidated into fund financials and investors would no longer receive the fair value of their holdings. This would cause significant subsequent reporting problems for investors, not the least of which would be reports required for ERISA purposes. Venture fund statements to their investors would become unusable.

How the Status Quo Currently Works for International Funds


We are often asked how international funds subject to IFRS reporting structure can provide their investors meaningful financial statements under that structure. The response is that they do not. International venture capital and private equity firms currently subject to international rules are also preparing a side schedule showing U.S. GAAP net asset value, or providing just the U.S. GAAP report and ignoring the IFRS requirements. If either (1) U.S. GAAP investment company accounting were removed for private holdings from GAAP going forward, for example, and/or (2) the current international rules replaced it, GPs would likely have to keep an additional set of books. One set would be used to create audited GAAP financial statements, although it not clear who the audience for those statements might be. The other set would be to provide meaningful portfolio information to investors and other stakeholders. Over the past couple of years, the FASB and the IASB efforts at convergence seem to have preserved the key aspects of U.S. investment company accounting for private portfolio companies. That is, the U.S. approach on FIN 46, now called Topic 946, seems to have prevailed over IAS 27. Now that separate efforts are being converged and language must be agreed upon, there is much to be worked out.

GP-to LP Reporting Can Meaningful Statements Continue?


A key priority for the U.S. venture capital industry is being able to continue producing quarterly financial statements using investment company (IC) accounting. Virtually all LP agreements (or accompanying documents) require GPs to provide GAAP-compliant financial reports to LPs. Annual audits include testing to ensure GAAP compliance. Under GAAP, the U.S. venture capital industry now provides fair value portfolio reports under the special rules of investment company reporting. Historically, IFRS has special investment company rules for portfolios of publicly-traded companies, but no such provisions for portfolios of private companies. The lack of provisions in the international rules for IC reporting of private holdings is the crux of the problem. If current foreign rules were adopted, port-

Recent Events
Even as the U.S. industry works toward compliance with the FASBs Statement 157 (now officially called Topic 820) on fair value measurement starting with 2008 financials, dialogue has begun on convergence. In March 2008, the International Private Equity & Venture Capital Valuation (IPEV) board reconstituted and relaunched itself. IPEV was expanded to include five practitioners from the United States who are familiar with the venture industry. The initial focus of the group is on convergence of U.S. Private Equity

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Industry Guidelines Group (PEIGG) and IPEV fair value guidelines. Details, and the September 2009 International Private Equity and Venture Capital Valuation Guidelines, are online at www.privateequityvaluation.com. Check that site for updates, the press release issued with those guidelines, FAQs, etc. of GAAP and IFRS. Separately, The FASB and the IASB continue their program of converging certain standards, such as the fair value measure and disclosure, consolidation, and investment company accounting rules. In fact, the FASBs work on U.S.-only accounting issues that affect venture capital and private equity wound down a couple of years ago. Instead, anticipating a single global set of rules at some point in the future, unresolved accounting issues in the U.S. and differences between the two systems are being worked under the moniker of convergence. That is, these current issues are being addressed jointly by both the FASB and the IASB. For more information, please contact NVCA at research@nvca.org.

Going Forward
With the international and domestic attention on other economic matters, it is not clear how quickly any accounting standard convergence activities will move. As this is being written in early 2012, the Securities and Exchange Commission (SEC) continues to develop its recommendation on the direction

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Appendix I: US Accounting Rulemaking and Valuation Guidelines


In the United States, a venture capital fund is usually organized as a limited partnership. The institutional investors providing capital to a fund typically become the limited partners (LPs). The venture firm itself becomes a general partner (GP) in the limited partnership. In most of the limited partnership agreements defining GP-LP relationship, the GPs are required to provide financial reports quarterly (unaudited) and annually (audited) prepared according to United States Generally Accepted Accounting Principles (GAAP). GAAP calls for the use of investment company accounting which, mandates that a fair value be assigned to the individual portfolio companies. This is consistent with the LPs need for fair values of their investments, as well as third party or regulatory requirements, e.g., ERISA-regulation. In recent years, the GP-to-LP financial statements have been subject to numerous rule clarifications, convergence with non-U.S. accounting, expanded disclosures, and more formal presentations. A group of practitioners developed the PEIGG portfolio company valuation guidelines in 2004. The chronology of events and complete text is printed in this appendix. A parallel group called the International Private Equity Valuation Guidelines board (IPEV) created guidelines that they believe conform to IASB rules. Now, alumni of both groups are working to create a single set of international guidelines a goal that has become something of a moving target as the FASB and the IASB work to converge various aspects of the standards. More recently (2010-2012), in the U.S., considerable progress has being made to pay particular attention to the reporting requirements of private companies. This will affect how virtually all venture capital funds and their portfolio companies report to their respective stakeholders. With a fairly universal realization that the current rules have resulted in expensive, complex, and irrelevant calculations and disclosures, appropriate relief appears to be in sight. Guidelines fall into two categories. The first is portfolio performance presentation formats, calculations, and disclosure. An example of the former is the Private Equity Provisions of the Global Investment Performance Standards (GIPS). This was developed by the CFA Institute. While many of the specifications and terminology line up with current practice in the United States, the NVCA has not endorsed or otherwise commented on these standards. Neither NVCA nor Thomson Reuters has determined how widespread the adoption of those standards is or will likely be. This document and accompanying guidance can be currently found at http://www.cfainstitute.org/centre/codes/gips/. Much more attention is being paid to the other category: portfolio company valuation guidelines. The chronology and sections below refer to this category. equity practitioners is the cash that has been distributed to the investors during the life of the fund compared with the original money put in. However, the life of a typical venture fund is at least 10 years, longer in the life sciences arena. During that period, the venture capital fund reports progress to the limited partners. In many cases, this means quarterly portfolio updates and a complete audited annual financial statement. For a typical venture fund, very little money is paid out in the first four or five years. Also, while every portfolio company receives funding with high expectations, it can take several years to determine if a particular company is a likely winner. Therefore, understanding progress in the portfolio requires some estimate of the success of the investee companies by the venture capital or private equity firm. While many investors and fund managers agree that financial measurements mean little for the first three or so years of a fund, after that the fund wants to communicate progress to the investors. This is where specific valuation rules and processes become

Why Valuation Guidelines Matter


What ultimately matters to the investors and private

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important. The agreed valuation procedures for individual portfolio companies become the basis for progress assessment as the fund matures and ultimately distributes cash to the investors. So while portfolio company valuations are more of an art than a science, especially for pre-revenue or even pre-EBITDA companies, most limited partner agreements (LPAs) establishing a venture capital fund require the venture firm to provide quarterly and annual financial statements using Generally Accepted Accounting Principles (GAAP). GAAP requires fair value measurement for portfolio positions. Therefore, most GPs must issue financial statements using fair value. templating taking on four initiatives, of which portfolio company valuation guidelines was the first one. December 2003 After an extensive input phase and review by various industry groups and service providers, the first version of the PEIGG guidelines were issued. Throughout the process PEIGG had been actively soliciting feedback and input from a number of industry groups including the NVCA. March 2004 NVCA board issued statement of support, but not endorsement as some pundits had hoped. NVCAs position was widely consistent with input provided by members of the NVCA CFO Task Force, members at large, and the NVCA Board of Directors. The text of NVCAs statement is printed below. March/April 2004 The Institutional Limited Partners Association (ILPA) hails NVCA support as welcome support especially as it relates to the GP and LPs mutually agreeing to the valuation process. PEIGG also hails the NVCA support. July 2004 After consulting quietly with various industry groups, PEIGG issues guidance on controversial paragraph 30 which was the most discussed and debated provision in the guidelines. September 2004 Based on input from ILPA and others, PEIGG agrees to minor wording changes in two paragraphs. This becomes PEIGG guidelines version 2. These two wording changes were consistent with, and in part inspired by, language the NVCA board used in its March 2004 statement of support. October 2004 ILPA endorses the amended PEIGG guidelines. December 2004 As most fund accounting years end, GPs prepare for their first audits since the effective date of AICPAs SAS 101 rule. Essentially that rule says that if a reporting entity claims to be reporting fair value which is required by GAAP then the auditors must document and test that this is, in fact, true. It was not clear to what extent this increased scrutiny would affect valuation expectation and practices. March 2005 NVCA board issues an updated statement, which now refers to the September 2004 version of the PEIGG guidelines. The NVCA also decid-

The Evolution of Reporting and Valuation Guidelines: 1989 to 2009


This section reviews the various efforts to create comprehensive portfolio company valuation guidelines for U.S. private equity. 1989-1990 A group of investors, private equity fund managers, and fund-of-fund managers formed a group to develop a set of portfolio company valuation guidelines. Contrary to a very persistent rumor, the NVCA did not endorse, adopt, bless, publish, or otherwise opine on the guidelines. Decade of the 1990s Two noteworthy developments occurred in the 1990s. Despite no endorsement by the NVCA these guidelines became accepted practice by much of the U.S. industry, especially in the venture capital side of private equity. These guidelines were referred to by many as being issued by the NVCA but in fact they were not. The second development is international venture associations creating localized guidelines based heavily on these guidelines. These were created in Europe and other international regions. In fact, by 2005, there had been multiple iterations of the European and British guidelines. 2003 A self-appointed group of private equity practitioners, fund managers, fund-of-fund managers and others formed the Private Equity Industry Guidelines Groups (PEIGG). The overall constitution of this group was not hugely different from the 1989-1990 group. The PEIGG group announced that it was con-

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ed to make the PEIGG document widely available to its members. The text of that statement is below. April 2006 Guidelines issued by a consortium of three Europe-based venture capital associations (AFIC, BVCA, EVCA) are released. The authors cite compliance with IASB rules. Informal feedback from U.S. venture capital professionals reviewing this document was that the document was more formulaic than PEIGGs counterpart and only partially compliant with U.S. GAAP as defined at that time. Subsequently, 30 non-U.S. private equity and venture capital associations endorsed this document. Go to http://www.privateequityvaluation.com. This effort has since become known as IPEV, and this group is currently working on a single set of guidelines consistent with IFRS and GAAP. September 2006 Financial Accounting Standards Board (FASB) issues its long-awaited and long anticipated fair value measurement standard as FAS 157. Only a few of its 145 pages relate directly to typical venture capital and private equity funds. Because the FASB maintains that this is a clarification and further definition of fair value which was already required for portfolio accounting, some auditors began requiring selective compliance in advance of the 2008 effective date. March 2007 PEIGG issues a revised portfolio company valuation guidelines document to reflect the Fair Value Measurement standard (FAS 157). September 2007 NVCA board reaffirms its prior position on the PEIGG guidelines to refer to the most recent version. March 2008 the International Private Equity Valuation & Venture Capital Valuation (IPEV) Board reconstitutes and re-launches itself and adds 5 practitioners from the United States. The initial focus of the group is on convergence of U.S. PEIGG and IPEV valuation guidelines. Details at www.privateequityvaluation.com. September 2008 At this point, visible signs of trouble just 4 months ahead of the first year-end under FAS 157 are hard to miss. Anticipation of a smooth implementation of FAS 157 is dashed by a downdraft economy, uncertain public and private markets, no precedent, and little guidance. December 2008 Public market valuations continue to fall. This makes valuation of even on-track, pre-revenue companies tricky. The NVCA issues a one page information letter to its members to shed light on applying FAS 157 in a valuation microburst/whirlpool. (Text below) July 2009 Effective July 1, authoritative GAAP became contained in a single Codification and the prior nomenclature went away. Existing U.S. GAAP was recast in 90 topics which include all related FASB pronouncements, AICPA guidance and EITFs under single Topics. Familiar standards will no longer exist. For example, FAS157 became Topic 820 Fair Value Measurements and Disclosure. 2010 Work continues by the FASB and the IASB on converging certain accounting topics such as FAS 157 fair value, investments, revenue recognition and consolidation. January 2011 FAFs Blue Ribbon Panel issues its report calling for an overhaul of private company accounting standard setting by a separate group with significant standing vis--vis FASB. February 2011 As the FASB and the IASB converge on a final Fair Value Measurements and Disclosure standards, some proposed disclosures raise concerns that these disclosures will be costly and are unwanted by users. A dialogue with the FASB and the IASB leads to some changes in the final disclosure requirements and some efforts at the end of the year to re-examine Level 3 disclosures. July 2011 FASB, anticipating the eventual creation of a more focused standards mechanism for private companies, issues Path to a Differential Standard-Setting Framework for private companies. Particularly noteworthy is the list of 6 differentiating factors between private and company financial statement user needs, formally articulated for the first time. The discussion frames well the issues raised by NVCA. October 2011 In response to the FAF Blue Ribbon Panel recommendations, FAF proposes the creation of a private company financial reporting Council and announces a series of roundtables to get input from

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all relevant constituencies. NVCA, among others, issues a comment letter stating strong conceptual support for the proposal subject to certain governance and structural changes to ensure sufficient standing for its recommendations. January-March 2012 FAF conducts a series of roundtables. NVCA board and CFO task force members actively participate. A general consensus emerges that a separate group focused on private company standards is needed, that much of the initial focus needs to be on the irrelevant and cumbersome disclosures for private companies, and that both measurement and disclosure rules need review. vate equity funds. However, by its very nature private equity is an asset class in which judgment plays a significant role. Accordingly, investors in the same company may have different, but supportable, views on valuation. 2. The objective of the Updated U.S. Private Equity Valuation Guidelines (Guidelines) is to provide managers a framework for valuing investments in portfolio companies at fair value and to provide greater consistency within the private equity industry with regard to valuations. Historically there were few authoritative guidelines compliant with U.S. generally accepted accounting principles (GAAP) that required specific procedures for estimating fair value of investments in portfolio companies held by private equity investors. In September, 2006, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 157, Fair Value Measurements. The Updated U.S. Private Equity Valuation Guidelines are intended to assist managers in their estimation of fair value and are intended to be consistent with GAAP (FASB Statement No. 157) and the AICPA Audit and Accounting Guide - Audits of Investment Companies. The AICPA Guides definition of Investment Companies includes Private Equity Investors (paragraph 1.03) and requires investments to be reported at fair value (paragraph 1.32). 3. These Guidelines were created jointly by managers (i.e., general partners) and investors (i.e., limited partners) incorporating feedback from a wide number of industry participants. The Guidelines are not intended to be all encompassing, nor are they intended to eliminate all subjectivity. Rather, they are to be a guide to assist managers and investors in agreeing to a valuation framework while allowing a manager to exercise its best judgment in applying the Guidelines. 4. Included in these Guidelines are terms that are subjective in nature, such as materiality, and could have different meanings in various factual situations. While it is outside the scope of these Guidelines to force specific definitions upon its users, the manager, in consultation with the Valuation Policy Committee (as discussed below) may develop and document appropriate definitions of these subjective terms.

The PEIGG Guidelines


While the NVCA has not specifically endorsed the PEIGG portfolio company valuation guidelines (see statement in next section below), it believes that the guidelines document should be readily accessible to its members for reference and use. Be sure to refer to www.peigg.org for the latest version and guidance on the document. The NVCA thanks the members of PEIGG for their efforts and for their permission to reprint the guidelines here. The guidelines as updated in March 2007 to reflect FAS 157 are printed below.

OVERVIEW Introduction
1. As the U.S. private equity industry (defined as venture, buyout, mezzanine, and other investments in private companies) has grown and matured, its participants have become increasingly interested in the appropriate reporting of fund values. The interest stems from a number of sources, such as an investors desire to measure interim performance, investors need for fair value data to report investments in their own financial statements, a managers need to report and measure valuations in accordance with fund agreements, and the need to determine the allocation of distributions of fund realizations. This has led to increased scrutiny of portfolio company values and the need for greater consistency of valuation methodologies employed by managers of pri-

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5. The Guidelines are not intended in any way to modify the provisions of the fund agreement relating to the subject matter hereof. To the extent the Guidelines are adopted by a manager and a Valuation Policy Committee and in one or more respects the Guidelines are inconsistent with the fund agreement, the fund agreement would govern (absent a specific amendment thereto). 9. In determining the fair value of individual investments using these Guidelines, managers are expected to use their judgment. In utilizing judgment, substance takes precedence over form. For example, when a managers past experience indicates that liquidation preferences will likely be renegotiated or may not be fully enforced at the time of liquidation, the manager is strongly encouraged to use the expected results rather than the form of the agreement. 10. Valuations should be updated on each measurement date, generally on a quarterly basis. Of course, valuations used for annual and quarterly performance reporting should be used in private placement memorandums and other marketing materials.

Fair Value Concept


6. The Guidelines seek to have all investments in portfolio companies reported at fair value on a consistent, transparent and prudent basis. Fair value as defined in accordance with GAAP is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (FASB Statement No. 157, paragraph 5). The objective is to estimate the exchange price at which hypothetical willing marketplace participants would agree to transact in the principal market, or lacking a principal market, the most advantageous market. No matter which market is deemed most appropriate, fair value is the estimated exit price in that market. 7. Securities of private companies, by definition, will not have quoted market prices available. However, private companies at times engage in arms-length transactions for issuances of their equity or debt securities. The value of these transactions could serve as an observable market price similar to a quoted market price if the transaction is both recent and between willing parties for the same securities as those for which the fair value determination is being made (deemed a level 2 input by FASB Statement No. 157), and could therefore be used as an estimate of the theoretical exit price. 8. When quoted market prices or arms-length transaction prices as described above are not available, the estimate of fair value should incorporate all reasonably available information about the business and utilize assumptions that market participants would normally use in their estimates of value. The estimate of fair value should seek to best replicate the amount at which the investment could be sold in a current transaction between willing parties.

Valuation Policy Committee


11. These Guidelines acknowledge the perception that bias exists or has the potential to exist in a nonindependent (versus independent) valuation performed by a funds manager. As a result, it is recommended that the manager of each private equity fund establish a Valuation Policy Committee consisting of a subset of the funds investor representatives. The Valuation Policy Committee could be all of, or a portion of, a funds advisory committee, if such a committee exists. (Neither these Guidelines nor GAAP require managers to obtain independent valuations). 12. The fund manager, in consultation with the Valuation Policy Committee, should establish the written valuation parameters to be consistently followed by the funds manager using these Guidelines. The agreed upon valuation policy and deviations from that policy should be communicated to the Valuation Policy Committee and the limited partners by the manager. Private equity fund managers are solely responsible for establishing and documenting valuation policy, practices, procedures and methodologies as well as valuing their investments in portfolio companies The Valuation Policy Committee should not set, formulate or approve the valuations, except as required by the fund agreement. The Valuation Policy Committee should periodically discuss the level of the managers adherence to the funds valuation policy parameters.

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II. PRIVATE COMPANY VALUATION METHODOLOGIES General Guidelines
13. Managers are to fairly value the investments in their portfolio companies on a consistent, transparent and prudent basis. Since value is often realized through a liquidity event of the entire company, the value of the company as a whole at the reporting date will often provide the best evidence of the value of the investment in that company. As a result, the methodologies discussed in this section involve estimating the value of the company as a whole as an initial step for valuing the companys privately issued securities. The manager will then need to determine how the total enterprise value is distributed among the various securities of the company. 14. Managers of funds should, without undue cost and effort, contact other sophisticated investors to discuss the valuations of common investments and the factors considered in their valuations. However, managers are not required to use other investors valuations since the estimate of fair value is the responsibility of the managers. 15. To value an investment, managers should place the most weight on valuation methodologies that are clearly objective and timely. On each valuation date managers need to take into account available information from market participants, the relevant marketplace and the global economy along with specific facts and circumstances in determining the fair value of their investments. 16. Historically, the Private Equity Industry used cost or the value of the latest round of financing as an approximation of fair value; often without taking into account other facts and circumstances. Such an approach is incompatible with the concept of fair value described above. At each valuation date a manager must make a determination of fair value for each investment. As further outlined below, these Guidelines provide a consistent and transparent methodology for determining fair value. However, a manager may conclude, after considering the facts and circumstances as outlined below, that the best indication of fair value is provided by cost or the value of the latest round of financing. 17. FASB Statement No. 157 allows managers to utilize three valuation techniques, either alone or in combination. These Guidelines encourage managers to use the market approach in most situations (see FASB Statement No. 157, paragraph 18a) utilizing Comparable Company Transactions or Performance Multiple inputs, as the primary technique to estimate the fair value of equity securities in private companies. For Private Equity, the market approach usually is the most appropriate. 18. In addition to the market approach technique discussed above, there are other valuation methodologies, some of which are discussed in paragraphs 41 and 42. These other methodologies or techniques may be appropriate in certain circumstances, and include discounting cash flows, valuing net assets, and industry-specific benchmarking (described in FASB Statement No.157 as the income and cost approaches). 19. Other valuation matters, including valuing interest bearing securities, PIK dividends, warrants, liquidation preferences, convertible securities, escrows, and other rights, privileges and preferences of preferred securities are discussed in paragraph 47. 20. Determination of valuation adjustments should typically be based upon actual positive and negative events, not upon expected accomplishments and performance. 21. Regardless of the valuation methodology used, once used, it should continue to be used until a new methodology will provide a better approximation of the investments current fair value. It is expected that there would not be frequent changes in valuation methodology.

Cost / Latest Round of Financing


22. While entry prices and exit prices are different conceptually, for the Private Equity Industry these Guidelines presume the manager at the time of the initial investment has considered near term company performance in determining investment valuation. Therefore, cost (the transaction price) may be fair value (the exit price) upon purchase. The transaction price may not represent fair value upon purchase when:

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a) The transaction is between related parties; b) The transaction occurs under duress; c) The transaction price includes transaction costs (transaction costs are expensed under GAAP); d) The market in which the initial transaction takes place is different than the principal or most advantageous market in which the exit transaction would take place. 23. Managers should reconsider a companys fair value in connection with each material equity financing, regardless of the managers participation. The value of the last round of financing is a factor in determining fair value, but it is not necessarily the only factor. 24. A subsequent equity financing that includes substantially the same group of investors as the prior financing is an appropriate factor to consider in valuing prior investments unless it can be demonstrated that the financing no longer represents fair value. This approach may be different from historic practice, where, typically the value of prior investments was not increased in a subsequent higher priced financing round unless a new investor validated the new pricing. 25. If a private financing will be completed with a high degree of certainty in the near future, and the pricing of the transaction has been substantially agreed, to establish the value of a previous investment, a manager should consider their best estimate of the upcoming new financing if it can be objectively determined that the prospective financing is at fair value. 26. Occasionally a round of financing includes a significant investment from a strategic investor paying a premium due to benefits accruing uniquely to itself. The manager must evaluate whether such a premium is representative of what the most likely buyers of the company would also pay upon exit, and therefore, whether the price paid by the strategic investor is deemed to be the exit price (fair value) expected from market participants. round of financing becomes less reliable as an approximation of fair value. Therefore, the manager must assess whether fair value has changed even though there has not been a new round of financing. Examples of changes in circumstances which indicate a change in fair value may include, but are not limited to, the following: a) The current performance of the company is significantly above or below the expectations at the time of the original investment. Potential indicators of this situation will include evaluation of the companys success or failure in attaining certain milestones, achieving technology breakthroughs, developing proprietary technology, progressing through clinical trials or significantly exceeding or failing to meet budgets. b) Market, economic or company specific conditions have significantly improved or deteriorated since the time of the original investment. Potential indicators of this situation will include evaluation of broad changes in the economic climate, changes in the financing markets, changes in the legal or regulatory environment in which the company operates, changes in the companys cost structure, increased or decreased risk factors faced by the company, or significant fluctuations in share prices of quoted companies operating in the same or a related industry. c) Substantial decreases in the value of quoted, more senior securities of the company (e.g., public debt), defaults on any obligations of the company, a bankruptcy filing, significant ownership dilution caused by recapitalization of the company, or liquidity concerns that are expected to be more than short term in nature are circumstances which may indicate a potential impairment in value. 28. Estimating the extent of a change in fair value, if any, may not easily lend itself to an analytical process. As a result, the manager will be required to exercise prudent judgment and carefully consider the broad indicators of potential changes to fair value (such as market conditions, relevant stock market indices, and other factors as discussed above).

Deviations from Cost / Latest Round of Financing


27. After some period of time, cost or the latest

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29. The result of such consideration will provide indications whether the carrying value of the investment should be increased or decreased to represent fair value. The longer that fair value has been estimated using cost or the price paid at the most recent round of financing, the more consideration should be given to reviewing changed circumstances and potentially determining fair value utilizing other inputs. Managers may consider historic cost or the price paid at the most recent round of financing in making their fair value determination, but should not use cost or the most recent financing price as the sole determinate of fair value. 30. These Guidelines recognize that building longterm value in a private equity backed business is not an easy task. Usually, many positive events need to happen in order for portfolio companies to succeed. However, managers often become aware that certain of their investments are likely to fail given their insight into the company. Even private companies that have significant manager involvement face a daunting task to create value for investors. Thus, it is natural that decreases in value may be more easily identified and justified than increases in value. However, both decreases and increases in investment fair value should be recognized when warranted. Because of the difficultly in building sustainable, long-term value in a private equity backed business, increases in value should only be made where the manager can support the increase using the methodologies discussed in these guidelines or using other techniques common to the marketplace, remembering that fair value is defined as the exit price on the measurement date in a hypothetical transaction. Diligence, prudence and caution should be applied when valuing private companies, and in particular when considering the valuation write-up of early-stage companies, in the absence of market-based financing events. All such changes and the factors upon which the changes are made should be reviewed with the Valuation Policy Committee. However, managers must recognize that there should be no bias toward either increasing or decreasing carrying value to record fair value. 31. When valuation adjustments are necessary, the methodology used should be based on relevant comparable data wherever possible (relevant comparable data as used in these Guidelines is intended to be consistent with the input hierarchy discussed in paragraphs 22-31 of FASB Statement No. 157). Recommended methodologies are discussed below.

Comparable Company Transactions


32. This methodology involves deriving the value of a company through examination of third-party investments in comparable equity securities of the company, examination of transactions in equity securities of comparable companies and direct comparisons to similar companies. These comparisons should be appropriately adjusted for any control premiums, synergistic benefits or other excess benefits or detriments that accrue to the owner when determining a proper comparable valuation. 33. These Guidelines acknowledge that until a company achieves marketplace acceptance for its product or service, it is unlikely that truly comparable companies with determinable fair values will be readily identifiable. 34. To the extent comparable transactions cannot be ascertained and fair value cannot be reasonably assessed and reliably measured using comparable transactions, the following Performance Multiple methodology should be used, if applicable.

Performance Multiple
35. The performance multiple methodology applies a relevant multiple to the performance of the company being valued in order to derive the value of the company. This approach is most applicable to companies that have achieved positive and sustainable operating performance. 36. The valuation determined using this methodology is calculated by applying the most appropriate and reasonable multiple derived from reference to market based conditions of quoted companies or recent private transactions. The multiple to be used, which may need to be adjusted for differences in terms of growth prospects and risk attributes (depending on the size of the comparison sample, among other factors), should be one of the following: a) Current average comparable public company multiple for similar companies in the industry;

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b) Current average multiples for recent private transactions of similar companies in the industry; and c) The original acquisition multiple when no other similar public or private multiples can be ascertained. The most appropriate and reasonable multiple as determined above will be applied to the relevant operating performance metrics of the company to estimate fair value. 37. The manager should be confident that reasonable, relevant and sustainable performance metrics are utilized, which may necessitate the adjustment for one-time and non-recurring items. 38. There may be significant changes in the financial, regulatory, economic or legal climate in which the company operates which harm or enhance the prospects of the company, but these changes may not yet have affected performance. The manager needs to consider these changes in evaluating a companys sustainable performance. Managers should share with the Valuation Policy Committee the factual data and their assumptions that support the sustainable performance used in the valuation determination. 39. The multiples used should be those that are used regularly and routinely to value companies in the industry in which the subject company is operating. If the multiples used are derived from public company comparables, a discount to a private companys equity value may be appropriate. Discounts applied to private securities may be higher than those applied to restricted public securities, which are discussed in paragraph 46. Managers should share with the Valuation Policy Committee the factual data that generates the multiples used in the valuation process. 40. To the extent fair value cannot be reasonably assessed and reliably measured using performance multiples, the following methodologies may be considered. a)00000 Because of the need to use significant estimates and forward-looking information, discounted cash flow (DCF) methodologies should only be used in limited situations using a discount rate commensurate with the risks involved. These situations would involve instances where the methodologies previously discussed in these Guidelines prove incapable of addressing the specific circumstances. b) Net asset valuation methodologies should be used for valuing investments in businesses whose value is derived primarily from the underlying value of their tangible assets rather than their performance. c) Industry-specific benchmarks, which are customarily and routinely used in specific industries such as price per subscriber or other industry norms, should only be used in estimating fair value where appropriate. 42. In those circumstances where there are indications that a change in carrying value is appropriate based on paragraph 27, but the methodologies described in paragraphs 32-41 are not applicable, the manager should exercise prudent judgment in considering assumptions that marketplace participants would utilize in their estimate of fair value.

III. VALUATION OF PUBLICLY TRADED SECURITIES Unrestricted


43. Actively traded public equity and public debt securities are required to be valued at the closing price or bid price, except as discussed below. Active markets are defined as a market in which transactions occur with sufficient frequency (daily) and sufficient volume to provide pricing information on an ongoing basis, regardless of the size of the position held. 44. Discount (blockage) factors for unrestricted securities that trade in an active market are prohibited by GAAP (FASB Statement No. 157).

Other Valuation Methodologies


41. A few other valuation methodologies, which may be appropriate in certain circumstances, are as follows:

Restricted
45. A discount from values of actively traded securities should be taken for holdings of securities when

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there is a formal restriction that limits sale of the securities. Examples of restrictions that may warrant a discount include rule 144 holding periods and underwriters lock-ups. Discounts for restricted equity securities from their market price typically range from 0% to 30%. When determining a discount to actively traded restricted securities, factors that should be taken into consideration include the companys trading characteristics (the extent to which the market for the security is active), the investors ability to sell its position when the restriction expires, and the term of the restriction. The adjustment of the discount will vary depending on the duration of the restriction. As the remaining length of the restriction decreases, the amount of the discount should also decrease. Limitations on sale based on rule 144s volume tests or based on a closed trading window for board members do not qualify as formal restrictions related to the security itself. Therefore discounts are not allowed by GAAP in these situations. health of the company and the realizability of the underlying securities. c) Valuations of securities denominated in currencies other than the base currency of the fund should be adjusted for changes in the spot prices of the currency. d) Warrants should be carried at their fair value. e) The rights associated with preferred stock are generally divided into two broad categorieseconomic rights and control rights. Once the enterprise value of the company is determined in accordance with these Guidelines, fair value should be determined by allocating value to shares of preferred and common stock based on their relative economic and control rights. In addition, when making their fair value determination managers should recognize that liquidation preferences are often granted to investors as an inducement to invest in a company. When a managers past experience indicates that liquidation preferences will be renegotiated or will not be fully enforced at the time of liquidation, the manager is strongly encouraged to use the expected results in determining the valuation of a security which has a liquidation preference. f) Currently convertible securities should be valued at the excess of the value of the underlying security over the conversion price as if the security was converted when the conversion feature is in the money (appropriately discounted if restricted). If the security is not currently convertible, the use of an appropriate discount in valuing the underlying security should be considered. If the value of the underlying security is less than the conversion price, the carrying value of the convertible security should be based on the underlying companys ability to service and repay the security. g) If deemed determinable beyond a reasonable doubt (virtually certain) escrows from the sale of a portfolio company should be valued at an amount that the manager, using its best estimate, ultimately expects to receive from the buyer in light of the escrows various conditions.

Inactive
46. A quoted price is not readily available for securities which trade in inactive markets, where transactions do not occur with sufficient frequency and volume to provide ongoing pricing data. Therefore, the last transacted price may not provide the best indication of fair value. In such situations, an adjustment to the last transacted price may be appropriate or other valuation techniques may be utilized based on all relevant factors.

IV. OTHER MATTERS


47. There are a wide variety of securities and capital structures used in the private equity industry. Such securities should be valued consistent with the Guidelines set forth above. Some examples and valuation guidance for securities and structures which have not been specifically addressed by these Guidelines include: a) The carrying value of private interest bearing securities should be based on the underlying companys ability to service and repay debt. b) PIK dividends should be accrued in accordance with the terms of the underlying security. A valuation discount may be necessary depending on the

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h) Because of the inefficiencies of the secondary market, purchase and sale transactions of partnership interests in and of themselves may not be appropriate in determining the value of portfolio company valuations or positions in funds. 48. FASBs Statement No. 157 Fair Value Measurements utilizes a hierarchy described as Level 1, 2 and 3 inputs (Statement No. 157 paragraphs 2131). The FASB valuation hierarchy has not been restated in these Guidelines. The concepts outlined in these Guidelines are intended to be consistent with Level 1, 2 and 3 inputs as defined. The input level is a required GAAP disclosure and provides users of financial statements with additional clarity in how a manager made their determination of fair value. managers and investors in agreeing to a valuation framework while allowing a manager to exercise its best judgment in applying the Guidelines. 52. The Private Equity Industry Guidelines Group acknowledges that the application of these guidelines may result in a departure from past valuation practices. It is recommended that managers and investors work jointly to develop a timetable to implement these guidelines. It is expected that over time the broad use of these Guidelines will become industry practice 53. These Guidelines are consistent with US Generally Accepted Accounting Principles. If managers adopt these Guidelines it is expected that their determination of fair value will be GAAP compliant. However, it is also understood that a manager may be GAAP compliant without utilizing these Guidelines.

V. CONCLUSION
49. As the private equity industry has matured in the United States, there is a need for greater consistency of valuation standards/methodologies by both managers of, and investors in, private equity funds. These Guidelines are designed to provide a framework for addressing the majority of the private equity industrys valuation questions on a consistent, transparent and prudent basis. It is recommended that managers and investors collaborate to share experiences and best practices across relationships. This collaboration will narrow the range of specific definitions of subjective terms and will enhance the consistent application of these Guidelines. 50. The key goals of these Guidelines are as follows: Encourage managers to approach valuation from a consistent, transparent and prudent basis. Focus the private equity industry on the need to determine fair value for each of their investments in a manner that is consistent with these Guidelines. Provide greater transparency into valuation results through the use of the Valuation Policy Committee as described in the Guidelines. 51. The Guidelines are not intended to be all encompassing, nor are they intended to eliminate all subjectivity. Rather, they are to be a guide to assist

NVCA Position on Portfolio Company Valuation Guidelines (March 2007 Version)


The NVCA Board of Directors reaffirmed its support for the latest iteration (March 2007) of the PEIGG Guidelines on September 18, 2007. While the NVCA has not specifically endorsed the PEIGG or other valuation guidelines, the NVCA board statement of support is below: The NVCA recommends that its members create, follow and communicate clearly the specific procedures and methodologies used for valuing their portfolios. These methodologies should be agreed to by the firms investors (LPs), and conform, when required, to Generally Accepted Accounting Principles and fair value measurement standards, recognizing that the ultimate responsibility for valuations remains with the general partner. When evaluating current valuation procedures or developing new approaches, the NVCA suggests its members include a review of the Private Equity Industry Guidelines Group (PEIGG) December 2003 Private Equity Valuations Guidelines document, as reissued in March 2007 (found at www.peigg.org). We commend the fine efforts of

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PEIGG, an independent group which sought and reflected input from the NVCA and other industry stakeholders. The NVCA encourages diligence, prudence, and caution when implementing the specific elements of any guideline, such as valuation changes to early-stage companies in the absence of marketbased financing events. all relevant information, including a financing rounds specific terms and conditions. There are no easy outs, rules of thumb or safe harbors for establishing Fair Value. As always, best considerations for Fair Value determination include the following: The Fair Value of an investment portfolio is the sum of the Fair Value determined for each portfolio company using a bottoms up approach. Applying a top-down overall percentage adjustment to the aggregate portfolios value is not compliant with US GAAP. Valuations should reflect specific factors in a buy/sell context. For example, a GP could ask: Given my portfolio companys current cash position, cash burn rate, performance compared to plan, probability of meeting forecasts, the projected environment for its product or technology, etc., as a board member, what is the lowest price that I would sell the companys stock today in an orderly sale with a willing buyer? [Footnote: A fund manager should not assume a fire sale of the stock, but should assume exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary SFAS 157, Paragraph 7]. The valuations set by the most recent financing round perhaps even one in the third quarter of 2008 may be stale and inappropriate for determining Fair Value, especially given current market conditions. The Fair Value at December 31 in many cases will likely be different from the value at September 30, given the deterioration of the macro economic environment. Each valuation should reflect a companys degree of progress from the prior reporting date to the current one. To determine a portfolio companys Fair Value, GPs should apply their judgment in a consistent manner and evaluate the same data they use for monitoring a companys performance and progress. There is no

NVCA Member Alert Fair Value Considerations for Venture Capitalists December 2008
The following alert was sent to the NVCA membership to highlight certain issues and considerations to be explored in the application of FAS 157, the fair value measurement standard. The NVCA thanks David Larsen of Duff and Phelps and several members of the NVCA CFO Task Force for their role in drafting this document: We are operating in a severely distressed investment environment that has deteriorated rapidly in the past few months. What does this mean for venture capital investors as they attempt to value privately-held investments at December 31, 2008? The short answer is: despite the current very challenging economic environment, Fund managers must continue to exercise their sound judgment in estimating the Fair Value of each portfolio company after considering the relevant facts, including current market conditions. The valuation process does not change, but much more judgment is required when we are in a period of economic discontinuity. Virtually all LP agreements require GPs to use US GAAP for financial reporting. US GAAP requires Fair Value reporting for virtually all VC firms because they are investment companies. US GAAP continues to define Fair Value as: the price that would be received to sell an assetin an orderly transaction between market participants at the measurement date. Fund managers need to establish Fair Values even though they may not currently need to sell, or cannot sell, their private investments in this market. GPs must use their judgment in estimating the current Fair Values of their investments, even though exit markets may have few buyers, IPO markets appear closed, and there are few, if any, relevant comparable transactions. Such judgment should take into account

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magic formula or weighting of factors. In summary, determining Fair Value continues to require the exercise of judgment based on objective evidence, such as calibrating the original investment decision with the current performance of the company and the current economic environment. The fact that the macro market is distressed probably adversely impacts the value of most companies. This negative impact may be compounded by disappointing company performance or mitigated by tangible and sustainable company progress. If you need more details about Fair Value, you might consider the 18-page PEIGG Valuation Guidelines at www.peigg.org, or you can download the 158-page SFAS 157 at www.fasb.org.

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Appendix J: Non-US Private Equity


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

Commitments
Private equity commitment levels, outside of the United States, totaled $115.8 billion in 2011. Asian based funds raised $53.9 billion equal to 47% of this amount. Meanwhile, European funds had $48.2 billion in fundraising commitments which is 42% of the total. Funds in the Other Regions raised $13.7 billion or 12%. Buyout commitments outside the United States accounted for 47% of the total. Meanwhile, Venture Capital funds represented 34%. Generalist funds raised $12.9 billion in 2011. Mezzanine fund commitments totaled 2.2% of the total or $2.6 billion. Fund of Funds raised $3.6 billion and the Other Private Equity/ Special Situation funds raised an additional $2.8 billion during 2011. It should be noted that these totals reflect not only the amount raised by independent funds, but also include capital gains and the amount raised by captive funds.

Investments Private equity investing outside of the United States reached $109.4 billion in 2011. Buyout stage financing led investment activity, accounting for 69% of total dollars. The Venture Capital investments followed with 19% of the total. By number of deals, venture capital investments led with 56% and the buyouts investments followed with 35% of the total deal activity outside of the United States. Leading all activity outside of the United States, investments in the China totaled $16.8 billion during 2011 accounting for 15% of the total dollars. Canada followed with $12 billion. Australian 119

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investments reached $11.7 billion or 11% of the total an increase outside of the United States in 2011. investment activity outside of the U.S. Commitments jumped 59% in 2011 from $72.7 billion in the previous year. Similarly, the private equity Private equity commitments and investments saw investments increased 5% from $103.7 billion in 2010.
Figure J1 Private Equity Commitments Outside of the United States in 2011

Fund World Location Asia Europe Other Regions TOTAL

# Firms 232 119 71 420

# Funds 281 123 85 489

Amount Raised in Range (USD Mil) 53,900.1 48,176.3 13,705.7 115,782.1

Figure J2 Private Equity Commitments Outside of the United States By Fund Stage in 2011

Fund Stage Buyouts Venture Capital Generalist Mezzanine Stage Fund of Funds Other Private Equity/Special Situations TOTAL

# Firms 82 285 39 10 17 9 420

# Funds 91 317 41 11 20 9 489

Amount Raised in Range (USD Mil) 54,682.0 39,124.1 12,970.6 2,603.5 3,573.7 2,828.2 115,782.1

Figure J3 Private Equity Commitments Outside of the United States By Location in 2011

Company Nation China Canada Australia Ireland France United Kingdom Other Nations TOTAL

# Deals 712 862 109 67 578 633 2,370 5,331

# Companies 667 752 101 60 557 586 2,190 4,913

Sum of Equity Invested (USD Mil) 16,752.0 11,967.8 11,656.2 11,495.9 8,930.0 8,338.3 40,239.6 109,379.7

Figure J4 Private Equity Commitments Outside of the United States By Stage in 2011

Company Stage Buyout/Acquisition Venture Capital Other TOTAL

# Deals 1,880 2,971 480 5,331

# Companies 1,780 2,758 439 4,913

Sum of Equity Invested (USD Mil) 75,330.9 20,200.1 13,848.7 109,379.7

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