2013 05-Enterprise Collaboration Report FINAL 05.29.13

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Enterprise Collaboration & Social Software Enterprise Collaboration & Social Software


June 2013

INDUSTRY REPORTEnterprise Collaboration & Social SoftwareINTRODUCTIONThis report focuses on technologies for collaboration and socialization within the enterprise. A number of forces are currently playing out in the enterprise IT environment that are creating an inflection in the adoption and deployment of social and collaboration technologies. This significant uptrend has provided strong growth for the sector and is driving a substantial amount of M&A and investment activity. This report includes a review of the recent M&A and private investing activities in enterprise social and collaboration software, particularly within the areas of group collaboration & workspaces, private social platforms, project and social task management, event scheduling, web collaboration, white boarding & diagramming, and other related technologies. We have also profiled about 50 emerging private players in these subcategories to provide an overview of the breadth and diversity of the players targeting this sector.

OVERVIEWSocialization and collaboration technologies are currently reshaping the established enterprise collaboration market as well as creating whole new categories of offerings, especially around private social platforms. In addition, many other enterprise applications such as CRM and unified communications are heavily transformed through the incorporation of new technologies including group messaging & activity feeds, document collaboration, and analytics. Much of this change is being driven by the consumerization of IT and the incorporation of social technologies. As businesses look to leverage the benefits of improved connecting and network building that employees have experienced with Facebook and other social solutions, a convergence is occurring between the enterprise social software and collaboration markets. While online collaboration platforms like Webex and CRM solutions have been around for years, they are being reinvented through the integration of social and collaboration technologies. Advancements in other technologies including programming & mark-up languages, browser technologies, and other cloud computing capabilities have also helped facilitate the deployment of collaboration and social solutions.

Incorporating Socialization and Collaboration Technologies will drive convergence of legacy applications across the enterprise landscape

Enterprise Collaboration

Traditional Enterprise Applications

Enterprise SocialNetworking

Unied Comm. CRM Conferencing Content & Document Mgmt. Work Flow / Business Process

It is important to think of socialization and collaboration, not just as point solutions, but rather as activities that encompass a wide range of functionalities that can be incorporated into many enterprise applications. Further, we think the idea of social networking for the enterprise has given people the impression that these applications are simply chatty online versions of the proverbial water cooler. In fact, many tasks and projects that must be completed in a business

Contact:Russell Crafton, [email protected]

Redwood Capital885 Third Avenue, 25th FloorNew York, NY 10022www.redcapgroup.com

INSIDE THIS ISSUE

1. Introduction

2. Market Trends

3. Competitive Landscape

4. M&A Activity

5. Private Financings

6. Valution Trends

7. Emerging Private Companies


Enterprise Collaboration & Social Software

context require connecting and collaborating with other works both inside and outside the enterprise. The concept of social software in this regard is really around providing a software platform that helps coordinate these connections around a work activity (such as processing a customer complaint or processing a claim or new account, which requires both connecting with other works as well as completing certain documentation. As a result, private social platforms simply provide a useful means for workers to comment, share, collaborate and follow the flow or completion of a project or task.

Later is this document, we discuss the differences between people-centric platforms vs document centric platforms. While some platforms may truly be document centric (such as an online whiteboarding platform) or people centric (such as a CRM related application), we suspect that over time, many platforms will integrate the concept of both the social as well as the document management side to provide solutions that significantly improve the efficiencies with which workers can perform their daily activities.

One of the most significant dynamics currently playing out is the battle of horizontal platforms and the race among players to gain an established position in their relative markets. As with many other areas in technology, companies that start off focused on specific features, such as chat, click to call, or web conferencing, find the need to incorporate other functions and evolve into broader platforms. Likewise, the larger platform providers must constantly incorporate new capabilities which emerge and that users demand. That is definitely the case in both the collaboration and social spaces. While some functionality can be developed and built into existing offerings, many players turn to M&A to execute this more quickly or lock-up leading technologies. This is evidenced by the many acquisitions undertaken by Jive, Salesforce, Cisco and others (see page 17-18). We believe the battles of these platforms have only begun and will continue to drive M&A activity in future.

As part of the platform battles, we have also heard from a number of players, particularly those with horizontal offerings in private social platforms, on strategies around leveraging their platforms through integration with third parties. These strategies include providing APIs to allow the integration of their platforms with other applications or in building channel networks with ISVs to develop specialized apps that ride in the back of a given platform. We believe this strategy may enable some players to create very large businesses by allowing others to take their horizontal platforms and help create solutions for industry verticals (health care, finance, transportation) or functional areas (customer engagement, content management, unified communications and human resource management) that will better suit the needs of select customers. We discuss this in detail in trends #3 and #9 later in this document.

MARKET GROWTHWhile the enterprise social and collaboration software sector is experiencing substantial growth, as with any new, emerging area, trying to get an accurate estimate of the market size or potential, is challenging. A recent report by IDC estimated that enterprise social networks and collaboration will grow from $800 million to $4.5 billion by 2016. While this certainly implies robust growth, we believe there are a number of relevant categories the IDC study did not include, such as project management software and certain vertical-oriented solutions, which only make the opportunity that much larger. Project management and vertical solutions are particularly important sectors as we expect players focusing on specific industry verticals or functional areas to offer highly compelling ROI propositions to CIOs and thus remain competitive against the larger, horizontal platforms offered by established enterprise software vendors.

$0.85

$4.5

0

1

2

3

4

5

2011 2016

$ bi

llion

s

Enterprise Social Networks & Collaboration Market

Source: IDC



M&A ACTIVITYPerhaps one of the most important signs of an accelerating market, and also reflecting some degree of market maturity, is the amount of M&A activity in which larger players are engaged. Most large enterprise software players have made some initial bet on either the collaboration or the social side. Microsofts recent acquisition of Yammer, and a series of acquisitions carried out by Salesforce, VMware, Google, and Jive represent this trend. These are clear indications that the collaboration and social solutions markets have gone mainstream within large and mid-sized enterprises. In fact, a recent study by McKinsey found that 70% of enterprises had deployed some form of social or collaboration software, and 90% of those had indicated that they believed they were receiving some material benefits.

This belief in a strong ROI should continue to drive a steady amount of M&A activities for many years to come as larger players add new capabilities and expand into adjacent categories through their now established beachheads. We expect this trend to follow a few key paths with players in the areas of unified communications and collaboration (Cisco, Citrix, Polycom, Microsoft) being more acquisitive of collaboration technologies, while players focused on customer engagement, CRM, or a consumer dominated customer base to target the social side. However, over a period of time, the convergence of both social and collaborative technologies into single platforms will dramatically enhance the benefits that these solutions provide. As a result, we expect vendors to increasingly carry out acquisitions in adjacent areas of social or collaboration to bring the benefits of these new features into more fully integrated applications.

M&A Activity Across the Social and Collaboration Landscape

Social Oriented Transactions Buyers Collaboration Oriented Transactions

Social collaboration software platform

Qontext ($26m)Autodesk

Code Mine Online cloud-based image tools and utilities

Instructables ($3m) Web-based documentation platform

Citrix

RingCube ($33m) Managed virtual workspace

Podio ApS Online collaborative work platform

Netviewer AGOffers GoToMeeting to hold online meetings and Web conferences

Podio ApS online collaborative work platform

Web-based instant messaging service company

Meebo

Google

QuickofficeOffice software solutions for mobile phones/smartphones

Mail application for Mac and iPhone

Sparrow SAS DocVerse, Inc.Real time sharing and simultaneous group-editing of Microsoft PowerPoint, Excel, and Word documents

Real time in person hangouts or as a telepresence system to attend meetings.

Bitplay, Inc. Jive Software

Producteev Online task management applications

Offisync ($27m)Collaborate on documents by integrating MSFT Office with Google Docs and Google Apps.

Enterprise social networking portals

Yammer ($1.2b)Microsoft

OracleFatWire

Web experience management solutions for content authoring, site design, content publishing, targeted content delivery.

Instantis, Inc. Project portfolio management solutions

Polycom

Accordent ($50m) Enterprise video management solutions

ViVu Participative event platform that enables live video participation

Pulls all customer conversations into single collaborative desktop

Assistly ($55m) SalesForceDimdim ($37m) web conferencing solution

Stypi real-time collaboration platform.

Collaboration suite to create internal social networks+C27:C58

CubeTree ($49m)

SuccessFactors

social learning platform Jambok ($10m)

Enterprise social software Event Robot VMWareZimbra ($100m)

Open source email, address book, calendar, tasks, and collaboration software.

SlideRocket Online presentation software solutions

Source: Capital IQ (in $ millions)



MARKET ISSUES AND TRENDSBelow are some of the key trends we think are important to watch out for and will have a significant impact in shaping the evolution of the market over the next few years.

1. External Social Tools Well Ahead of Internal Social: While platforms and tools for internal social networking are still in their infancy and enterprises are still in their experimentation phase, platforms for external social activities and customer engagement, typically that work in conjunction with CRM solutions, are already becoming well established and more sophisticated in their use. Since external social tools are more directly associated with revenue generation and customer support, we suspect that enterprises have more quickly embraced these offerings. However, there is a significant opportunity for internal tools as well, especially if they can be integrated with information and data coming from the external social processes.

2. Analytics Will Be A Key Differentiator: In the age of big data and analytics, one of the biggest opportunities for social software, both internally and externally, is the collection of data and the extraction of important trends & intelligence. In order to facilitate this, social platforms have analytics engines that enable them to process massive quantities of data. A number of analytics start-ups have already been acquired by larger players, such as the acquisition of Radian6 by Salesforce, showing that while the potential benefits of other social or collaboration tools may still be in question, the value obtained through analytics is believed to be high. Further, strong analytics will likely become one of the key differentiators for players in the social space over a period of time.

3. Convergence-Based M&A: As shown on the chart on page 3, many players are using acquisitions to integrate collaboration offerings with social enterprise functionality. Jives acquisitions of Producteev and Offisync provide important collaboration capabilities for Jives social platform while SuccessFactors (SAP subsidiary) acquisitions of Cubetree and Jambok bring incremental social networking capabilities to the companies human resource management platform. Other players like VMware have been active on the collaboration side, acquiring Zimbra and SlideRocket, as well as on the social side with its acquisition of Event Robot. We expect these convergence-based acquisition activities to continue for some time as the opportunity to enhance a wide range of enterprise applications by incorporating social and collaboration technologies is substantial, as per our next point below.

23

34

39

0

10

20

30

40

50

2010 2011 2012

M&A Deals in Enterprise Collaboration Market

Num

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f Dea

ls

Source: Capital IQ

4. A Large ROI May Be Beside the Point: While IT spending in the recently challenging economic environment has focused CIOs and CFOs on mission critical applications and proven ROI, studies are increasingly showing that the increased productivity and incremental revenue opportunities presented by enterprise collaboration and social software are quite significant. A recent study by the McKinsey Global Institute estimated that the annual value that could be unlocked by social technologies could be up to $1.3 trillion. The McKinsey report also states that achieving the benefits will require significant changes on the part of the management and employees to find the right ways to embrace and incorporate collaborative and social activities. However, while the ROI may be large, it can also be difficult to measure. CIOs and CFOs will need to be careful in not trying to be overly exacting in quantifying the economic benefits. Can they estimate the ROI on their telephony system? Whatever it is, telephony is simply a necessity to operate the business. As employees collaborate and communicate in new ways, social and collaboration platforms may simply become a necessity as well as email quickly did after its introduction not so long ago.



5. Yes, Mobile: While weve maintained our focus on social and collaboration activities, enterprise applications cant ignore the need to include mobility as part of their offering. This requires more than just providing mobile access to platforms. Integration of mobility raises issues of synchronization and security, which can be no easy task. However, with workforces that are increasingly mobile and working virtually, ensuring that users can access and participate in the collaboration or social offerings being deployed is critical.

6. Features vs Products: Given the plethora of small start-ups, it is important to distinguish between players that have platforms versus those that are simply features that enhance a broader platform. It is not that platforms are necessarily better, but it is important for feature-oriented companies to understand their position in the competitive landscape and develop their business models and exit strategies accordingly. Businesses that are point solutions or features must develop a sustainable business model around partnering or integrating with other players and establish a revenue model that supports this approach. Feature-oriented businesses also need to keep a close eye on the competitive landscape to ensure they dont become commoditized before they can execute their exit plan.

7. Many Players, A Lot of Shakeout: Our review of over 200 emerging private players constantly had us coming across websites that were closed or announcing the termination of services, especially in the areas of conferencing and group collaboration solutions. While many of these involved small players without any material funding, we expect to see a continued shakeout, including some larger, more established players in crowded spaces. There are literally dozens of players in the areas of project management, group collaboration, web conferencing, and online white boarding & diagramming, many with at least several million in institutional capital. As the markets within these areas mature, there can only be room for a limited number of players to succeed or evolve. As a result, owners and investors must closely watch the competitive landscape to know when to invest, when to sell, or when to throw in the towel. Further, with software businesses becoming increasingly easy and inexpensive to launch, early-stage investors must sort through an ever greater number of options to find which players have truly developed compelling solutions and are worthy of larger funding rounds.

8. Enterprise vs SME Markets: An important segmentation for the collaboration and social software space is the size of the business. There is a clear distinction between the small business market and larger enterprises. Jive Software targets enterprises with over 1,000 employees, of which it estimated that there are around 9,000 in the US. In organizations of this scale, social software can be extremely helpful in allowing employees to stay connected, share information, and manage and collaborate on constantly evolving virtual teams. Employees at smaller businesses, on the other hand, may have less of a need for social technologies and may focus more on platforms offering collaboration. While this may not always be the case, we believe understanding the differences in worker behavior and employee interactions (internal vs external) at large and smaller enterprises is critical for players in determining their target markets, by size of enterprise, and establishing their go-to-market strategies.

9. Vertical Specialization: While the market for collaboration platforms will definitely grow, we believe larger players will quickly dominate the market for horizontal platforms, just as they have done for conferencing. The more interesting opportunities for emerging private players will be along vertical lines, developing project management solutions for specific verticals, such as insurance, industrial design, and media production. In our review of the landscape of emerging private players, some of the more compelling models involve players with vertical solutions targeting areas such as Proxio in the real estate area. Creating industry or niche market-specific solutions can allow players to develop truly compelling solutions that provide high ROI to their customers. For example, in the real estate vertical Proxio has developed a platform like LinkedIn, specifically for real estate agents, which is particularly useful in international markets where the equivalent of an MLS listing does not exist and agents have a tough time ensuring interested buyers learn about their properties, or find new properties for their buy-side clients. There are many verticals like this that have unique problems which result from imperfect or limited information flow and are excellent markets for social technologies.



10. Continued Growth in Venture Funding: Venture funding for the social software and collaboration sectors ramped up significantly in 2012 to over $853 million and we expect this funding to continue. While some categories are maturing and larger players are carrying out acquisitions now, there are many niche markets and platforms that are yet to be developed and existing product offerings that can be improved and completely reinvented through the creative incorporation of collaboration and social technologies. As a result, there will be a continued trend of large number of early-stage companies with promising business models for venture investors to fund and help grow. In fact, while there were a few larger rounds over the past 18 months (see page 20-22), much of the investing activities during this period still involved early-stage (series A & B) investments. In addition, as a number of well-established private players are now emerging with sizeable customer base and profitable businesses, many growth equity players will find attractive opportunities to participate by providing capital to help boost sales as well as market or fund M&A activities.

10

20

30

40

50

60

0

150

300

450

600

750

900

2010 2011 2012

$ mn

Total Capital Raised

Tota

l Cap

ital R

aise

d

Number of Deals

Num

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f Dea

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Private Financings in Enterprise Collaboration Market

Source: Capital IQ



COMPETITIVE LANDSCAPESince the offerings from players in the enterprise social and collaboration sectors include a wide range of differing features, it can be difficult to compare the competitors and their platforms and even determine the categories in which they really compete. Further, the terms collaboration and social software are used with widely different meanings, each often with the intent of including the other. However, socialization and collaboration are different, and while being closely related, involve different functionalities. In order to help break down the space, we find it useful to look at the core focus of an application. In general, most solutions fall into two core areas of focus: document-centric or people-centric.

DOCUMENT-CENTRIC OFFERINGS:Document-centric offerings are based on collaboration, content or data sharing, or presenting content (documents, files, presentations). Players in this area often fall into categories traditionally thought of as collaboration such as online workspaces, project management, file sharing, authoring & commenting tools, webcasting & web conferencing and wikis.

Group Collaboration Workspaces: These platforms allow multiple people to form conferences in real-time or work independently on documents. Project spaces can be created for different teams where files, messages and other content can be created, revised and stored. Functionalities can include video conferencing, calendaring, white boarding & web conferencing and wikis.

Project Management Systems: Allows for the scheduling, tracking, and charting of the steps in a project and may include collaborative workspaces, file sharing, and conferencing. Unlike group collaboration spaces, project management systems are organized around projects, such as construction, software development, or other project-oriented activities. As many project management solutions are now heavily focused on bringing people together for completing tasks, many solutions for task and project management are now as much people-centric as they are document focused (hence our inclusion of the Social Task Management Category in the people-centric section below.

Electronic Calendars & Time Management: Allows users to schedule events and automatically notify and remind group members.

Online Proofing & Editing: Solutions for sharing, reviewing, approving, and rejecting video, proofs, artwork, or photos between editors, producers, designers, customers, and clients.

Mind-mapping and Diagramming: Allows users to collaboratively create mind-maps, flowcharts and other graphics useful for group activities.

Conferencing: Conferencing can take many forms including audio, web and video conferencing. Email and chat or IM capabilities may also be included. While the market for conferencing solutions is mature and commoditized, collaboration functionality is being incorporated into conferencing platforms, by established players like Cisco and Citrix.

Source: Internet



PEOPLE-CENTRIC OFFERINGS: People-centric solutions are focused on human interactions and are designed to make these interactions more productive. While people-centric offerings may include some document-centric tools, their core focus is on human interaction. Players in the space range from offering full platforms for building private social platforms, such as Jive, Yammer and Lithium, to more niche-oriented players focused on specific solutions such as microblogging. While most major enterprise software vendors now include some social offering to enterprises, customers are still early in their adoption and in understanding the right ways to incorporate these solutions into their IT strategies. Below are a few of the key subcategories of people-centric/social software solutions:

Source: Internet

Private Social Platforms: These platforms from players like Jive, Lithium and Unison provide a broad set of social capabilities including messaging & activity stream discussions, employee onboarding (helping to connect new employees and provide training information), collaboration & document sharing, and intranets. While the capabilities vary among players, they can be tailored for each enterprise. Players like Jive, focus on platforms for facilitating communication internally within the enterprise (although Jive supports customer-focused activities as well).

Social Task Management: Social task management, while similar to document-centric project management solutions, is a people-centric distinction. Many private social platforms are essentially focused on task management so this category is also perhaps just a slight narrowing of the broader private social platform concept discussed in the point above. While many of the tasks workers perform focus on a document, email or form, much of this work is often done in collaboration with others. As collaboration and private social platforms integrate these two aspects, many project or task management systems become as much people-centric as document-centric.

Social CRM: Players in the social CRM space, like Lithium, focus on socialization externally, primarily around customers. These solutions aim to help users develop a much better view of the customer by mining available information from other social sites and online information. Players in this area tend to either build social profiles (such as Jigsaw or Reachable) or focus on other types of analytics (such as Reachable).

Peer Review & Ideation: These solutions allow users to share ideas, products and offerings and solicit feedback & guidance. The final goals can vary from getting groups to brainstorm on ideas to soliciting opinions to determining the attractiveness or ranking of something.

Other Social Tools: There are a number of other technologies used to facilitate better social interaction including community-oriented platforms, recommendation engines, and chatting & microblogging solutions. Many of these functionalities are incorporated into broader platforms, or used as point solutions for specific groups.



M&A ActivityM&A ACTIVITY 2010-2012The table below shows that the deal activity in the enterprise collaboration market has continued to grow over the last three years, driven by continued interest among acquirers for the integration of social and collaboration technologies with enterprise software. The number of completed deals grew to 39 in 2012, from 34 in 2011 and 23 in 2010. Over the past three years, the total disclosed value for M&A deals jumped to its highest level of $1.54 billion in 2012 from $667 million in 2011, driven largely by the large Microsoft-Yammer deal for $1.2 billion. The Yammer deal also inflated the average deal value for disclosed deals to its highest level of $192 million ($48 million excluding the deal). However, the median deal value of $23 million in 2012 was lower than the $30 million recorded in 2011. The high deal size and multiples in 2010 were primarily driven by two large deals IBMs acquisition of Unica and Adobe Systems acquisition of Day Software accounting for a combined deal size of $697 million out of $1.06 billion in total for the year. We note that the enterprise collaboration and social software market is still developing and smaller players remain primarily focused on driving revenue growth, which in our view, should lead to more focus on revenue multiples.

Year Deal VolumeTotal

Disclosed Value

Average Deal

Value

Median Deal Value

Average Revenue Multiple

Average EBITDA

Multiple

Median Revenue Multiple

Median EBITDA

Multiple

2012 39 $ 1,539 $ 192 $ 23 2.3x 7.8x 2.0x 7.8x

2011 34 667 39 30 2.7x 18.2x 2.6x 18.2x

2010 23 1,062 118 59 3.5x 35.0x 4.1x 35.0x


15

20

25

30

35

40

0

300

600

900

1,200

1,500

1,800

2010 2011 2012

$ mn

Total Disclosed Value Deal Volume

Tota

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clos

ed V

alue

Deal

Vol

ume

M&A Activity in Enterprise Collaboration Market

Source: Capital IQ

ACTIVITY IN 2011 AND 2012:With the US proving to be a breeding ground for a large number of cloud-capable players, it is no surprise that most of the deal activity over the past three years in the enterprise collaboration space was concentrated in the US. In 2012, target companies in the US accounted for 28 out of the 39 deals we identified, while their corresponding deal value stood at $1.26 billion out of $1.54 billion. In 2011, target companies in the US accounted for 26 out of the 34 deals and $459 million out of the total deal value of $667 million. In 2012, Google was the most active acquirer in the enterprise collaboration space with three acquisitions for an undisclosed amount, namely: Quickoffice (provider of file editing, synching and sharing on mobile platforms), Meebo (provider of social advertising platform) and Sparrow SAS (French email technology developer). Jive Software, a provider of social collaboration software, completed two acquisitions in 2012 including Producteev (provider of cloud-based task management platform) and Meetings.io (and its company, Bitplay), a web browser-based chat and video communication platform.

Until 2012, most of the deals in the enterprise collaboration space were primarily small. However, in 2012, the largest disclosed deal was Microsofts acquisition of enterprise social-networking company, Yammer for $1.2 billion in cash, which marked the first time a deal in this sector crossed the $1 billion threshold. Microsoft acquired Yammer in July 2012 to expand its footprint in the emerging social enterprise software space and retain its domination in the enterprise software market to ward off increasing competition from Salesforce.com, Jive Software and Google. The deal could enable Microsoft to integrate



Yammer into its key software suites such as Office 365 and SharePoint, thereby providing a robust social layer for all its suites.

According to IDC, Yammers revenues grew by 132% y/y to $22 million in 2011, which puts the deal valuation at 54.5x 2011 revenue, significantly higher than the average and median multiple of 2.3x and 2.0x, respectively in 2012. If we assume that Yammer would grow at similar rates, the deal would be at approximately 25x 2012 revenue multiple (the mid-point of 2012 revenue). The high valuations reflect Yammers strong growth prospects, especially from the future integration into Microsofts tools and its strategic importance to the acquirer. In our view, through Yammer, Microsoft intended to establish a major beachhead in the social software space.

The second-largest deal in 2012 was Avayas acquisition of Radvision, an Israeli company engaged in developing high definition (HD) and converged conferencing solutions for $218.9 million. The revenue multiple of 2.1x was in line with the median multiple for the year.

M&A VALUATION TRENDSAlthough the deal value in 2012 was at its highest level for the past three years, the median revenue and EBITDA multiples have continued to moderate. The median for last 12 months revenue and EBITDA multiples of 2.0x and 7.8x in 2012 declined compared to the previous year. In April 2012, venture capital firm, Sofinnova Partners exited from blueKiwi Software, an enterprise collaboration software provider, which was sold to Atos Origin at a substantial valuation of 4.0x revenue, probably reflecting the strength of blueKiwis technology on internal collaboration. In 2011, some deals such as the acquisition of Accordent (provider of video content management technology) by Polycom for $50 million at 5.6x revenue and that of Qumu (provider of corporate video services) by Rimage Corp for $52.8 million at 4.0x revenue were well above the median of 2.6x for the year. The deal with Qumu allowed Rimage to enable its customers to share information using mobile devices, apart from its core physical products such as CDs and DVDs. On the other hand, the deal with Accordent enabled Polycom to better integrate the targets products with Microsofts suites and also with Polycoms own unified communications offering. In 2012, the median EBITDA multiple of 7.8x is based on just one deal, the acquisition of Maple Lake Limited, a Canadian provider of planning and allocation solutions for retailers by TXT e-solutions.

In 2010, Adobe Systems acquired Day Software Holding at 4.3x revenue multiple, a premium compared to the 3.5x average multiple. This multiple reflects the complementary portfolio of enterprise offerings including web content management, digital asset management and social collaboration tools, which Adobe added as part of the deal.

Although financing deals in the enterprise collaboration software market have been steady over the past four quarters, the IPO of Jive Software and the acquisition of Yammer are likely the beginning of more deals of scale as the sector continues to mature. However, we suspect that M&A activity in this space will continue to be characterized by lots of smaller deals as consolidation activity is led by larger players, who add features and functions taken from smaller point players. In addition, we expect some segments to experience further shakeout since many niche areas have numerous small start-ups and as the market evolves, some of these players simply will not be able to achieve sufficient growth and will be forced to seek whatever exit they can find.

ACTIVE SUBSECTORS:One area that has had a surprising amount of activity is video conferencing and video-specific technologies. While the adoption of standard video conferencing may still face some headwinds, the incorporation of video into broader collaboration solutions is clearly underway. Further, with the proliferation of mobile devices such as smartphones and tablets, we believe the next stage of enterprise collaboration will involve even closer personal interaction through different modes such as video.



Date Acquirer Target Trans. Val Major Business Focus [Target/Issuer]

06/05/12 Avaya Radvision 218.9Video conferencing products and testing tools for real-time voice and video over IP

11/05/12 Jive Software Bitplay - Browser-based chat and video communication platform

12/31/12 MSouth Equity Technical Innovation -Video-centric communication solutions for collaborative conference rooms

12/17/12 Nimans Videonations - Video conferencing, audio visual and IP telephony integrator

02/08/12 OVGuide.com Live Matrix - Provides live online video and audio webcasts

10/22/12The Newton Group

Providea Conferencing -

High-definition video conferencing, professional services and audiovisual solutions

12/04/12 Yahoo! OnTheAir - Allows video chats, video conferencing and interviews


From the table above, we can infer that video conferencing technologies provide a compelling opportunity to providers such as Jive and Yahoo! to enhance their current offerings and fill technology gaps in their portfolio. Most of the deal values in this space remain undisclosed, but the largest acquisition was of Radvision by Avaya for $218.9 million. The deal enabled Avaya to add enterprise video products to its unified communications platform, and offer cost-effective video solutions aimed at enterprises and small & medium businesses. The deal also enabled Avaya to provide integrated HD video collaboration products, including the ability to plug-and-play on mobile devices such as iOS and Android, which should support the larger enterprise IT trend towards Bring-Your-Own-Device (BYOD).

Citrix recently included instant messaging (IM) in its Podio enterprise collaboration software, which it acquired in 2012 to allow employees within an enterprise to engage in individual or group chats, without switching to alternative services for chatting. Since the chat can be archived for future reference, it provides a robust enterprise collaboration tool. After adding IM capabilities, Citrix plans to incorporate individual as well as group video chat functionality to Podio. Further, Jives acquisition of Meetings.io (and its company, Bitplay) could enable it to enhance its collaboration software by offering video chat in the future. With the enterprise collaboration players seeking to integrate video chatting or conferencing capabilities into their collaboration and project management software, and transition towards a unified communications platform, we believe video & conferencing tools will continue to garner a lot of interest in the M&A space. Other major areas where enterprise collaboration M&A was focused were online task management and online document management. Enterprises are slowly beginning to comprehend the benefits of collaboration, including efficient utilization of resources through better employee productivity and communication. The enterprise collaboration software market is currently in the early adoption phase and in our view, it will witness meteoric growth once its adoption gathers steam. We note that the market is still largely fragmented, with the top five players accounting for approximately 40% of the market share in 2011 (as per IDC). With numerous small players in the enterprise collaboration space vying for a substantial pie of the market, we believe competition will become intense. Considering the high stakes, we expect smaller players to be taken over by larger software providers, who may seek to fill the missing pieces in their technology armory and launch an offensive against other collaboration vendors. Moreover, in line with the empirical evidence that we have, the small enterprise collaboration software vendors may seek suitors as they search for alternative financing sources to support their growth and development efforts.



Global M&A Deals - Enterprise Collaboration (2010-12)

Closed Target/Issuer Buyers/Investors Trans. Value EVRevenue Multiple

EBITDA Multiple

Major Business Focus [Target/Issuer]

04/08/2013 Mendeley Limited Elsevier B.V. - - - -Desktop and Web solutions for managing and sharing research papers, discovering research data, and collaborating online

03/01/2013 SlideRocket, Inc. ClearSlide, Inc. - - - - Online presentation software solutions

03/01/2013 SlideRocket Vmware - - - - Online presentation software solutions

02/22/2013 Sazneo Limited Access UK Limited - - - - Browser based real-time group messaging/collaboration services

02/06/2013 4Projects Ltd. Viewpoint Construction Software, Inc. - - - - Software as a service collaboration solution

02/01/2013 Instantis, Inc. Oracle Corporation - - - - Enterprise project portfolio management solutions

12/31/2012 Technical Innovation, LLC MSouth Equity Partners - - - -Video-centric communication solutions for collaborative conference rooms

12/18/2012 Azaleos Corporation Avanade, Inc. - - - -Provides remotely managed email, collaboration, and unified communications services

12/17/2012 Videonations Ltd. Nimans Ltd - - - - Video conferencing, audio visual and IP telephony integrator

12/11/2012 Capable Networks, LLC Magenium Solutions LLC - - - -Social media sites and online community management & training solutions

12/04/2012 OnTheAir Yahoo! - - - - Video chats, video conferencing and interviews

11/18/2012 EPM Live, LLC PowerSteering Software, Inc. - - - -Microsoft SharePoint-based, Software as a Service-based enterprise project, portfolio, and work management solutions

11/05/2012 Producteev Jive Software - - - - Online task management applications

11/05/2012 Bitplay, Inc. Jive Software - - - - Browser-based chat and video communication platform

10/22/2012 Providea Conferencing, LLC The Newton Group, Inc. - - - -High-definition video conferencing, professional services and audiovisual solutions

10/04/2012 Day Software Holding AG Adobe Systems Benelux BV 206.83 181.1 4.3x 25.8x Web content management (WCM), digital asset management and social collaboration solutions and services

10/04/2012 Qontext Inc. Autodesk, Inc 26.0 26.0 - - Enterprise social collaboration software platform solutions

09/28/2012 Maple Lake Limited TXT e-solutions S.p.A. 17.28 17.3 2.0x 7.8x Planning and assortment solutions for the retail industry09/24/2012 Copiun Inc. Good Technology, Inc. - - - - User data management software solutions09/11/2012 Workshare Technology, Inc. SkyDox Ltd - - - - Document collaboration software

08/30/2012 Firestring (Pty) Ltd Britehouse Group Ltd. - - - -Private social networks for internal employees and external stakeholders

08/13/2012 ThinkGrid LimitedColt Technology Services Group Limited - - - -

Infrastructure and control panel platform for IT solution providers to offer cloud services worldwide

08/07/2012 GoLightly, Inc. Advanced Solutions - - - -Online community collaboration tools for non-profit and association customers

07/20/2012 Sparrow SAS Google - - - - Mail application for Mac and iPhone

07/19/2012 Sermo, Inc. WorldOne, Inc. - - - - Online community for physicians

07/01/2012 Northridge Systems, Inc. Perficient Inc. 14.4 14.4 1.2x - Collaboration business consulting services

06/15/2012 Yammer Microsoft $1,200 1,200.0 - - Enterprise social networking portals

06/05/2012 Radvision Ltd. Avaya Inc. 218.93 163.8 2.1x -Video conferencing products and testing tools for real-time voice and video over IP

06/05/2012 Quickoffice Google - - - - Office software solutions for mobile phones/smartphones

06/04/2012 Meebo Google - - - - Web-based instant messaging service company

05/21/2012 Syncplicity, Inc. EMC Corporation - - - - Cloud-based file management and storage solutions

05/01/2012 Socialtext, Inc. Peoplefluent, Inc. - - - - Enterprise social software solutions

05/01/2012 Stypi salesforce.com, inc - - - - Real-time collaboration platform

04/11/2012 blueKiwi Software SA Atos S.A. 26.22 26.2 4.0x - Enterprise social software solutions

04/11/2012 Podio ApS Citrix - 43.6 - - Online collaborative work platform

04/11/2012 Quolos Limited Yammer - - - - Peer-to-peer desktop application software04/05/2012 Automation Technology, Inc. Intertek Group plc 16.0 16.0 - - Web-based collaborative asset management software

03/29/2012 HootSuite Media, Inc. OMERS Ventures 20.0 - - - Web-based social media management solutions

03/19/2012 Pivotal Labs, Inc. EMC Corporation - - - -Planning tool for large public companies, startups, and open source development teams to bring collaboration in software development teams

03/01/2012 First Tech Direct, LLC Columbus A/S - - - -Microsoft Dynamics AX, Microsoft Dynamics GP, Microsoft Dynamics SL, Microsoft Dynamics customer relationship management (CRM), and product lifecycle management solutions

02/27/2012 Cove Inc. Dropbox, Inc. - - - - Online collaboration solutions

02/08/2012 Live Matrix, Inc. OVGuide.com, Inc. - - - - Live online video and audio Webcasts

02/06/2012 Landslide Technologies, Inc. j2 Global, Inc. - - - - Customer relationship management (CRM) solutions

01/31/2012 EthicsPoint, Inc. NAVEX Global, Inc. - - - -Telephone hotline, Web-based reporting, and case management solutions

01/27/2012 Inkubook, Inc. SnapOne, Inc. - - - - Online and Web-based book creation service

12/06/2011 Pringo, Inc. MobileBits Holdings Corp. 30.04 30.0 - - Enterprise-class online portals and social collaboration tools

12/02/2011 Nefsis Corporation Brother Industries, Ltd. - - - - Multipoint HD video conferencing and collaboration tools

11/14/2011 CTSpace ltd IDOX plc 18.34 18.3 0.9x 6.8xOn premises enterprise and software as a service based document management and collaboration workflow applications

10/14/2011 ViVu, Inc. Polycom - - - - Participative event platforms

10/10/2011 Qumu, Inc. Rimage Corporation 52.83 52.8 4.0x - Enterprise video solutions09/30/2011 ilinc Communications, Inc. BroadSoft, Inc. 10.8 10.8 - - SaaS based Web and video collaboration tools09/20/2011 Assistly, Inc. salesforce.com, inc 55.0 - - - Multi-channel support platform09/19/2011 Collaborative Fusion, Inc. Intermedix EMSystems, LLC - - - - Web-based emergency management solutions

08/26/2011 TaskDock Cisco - - - - Software to share Microsoft Office documents08/10/2011 RingCube Citrix $33 32.2 - - Managed virtual workspace

08/05/2011 Alteva, LLC USA Datanet 16.92 16.8 2.6x 29.5xUnified communications and enterprise hosted VoIP communication solutions

08/01/2011 Instructables Autodesk $30 30.2 - - Web-based documentation platform07/31/2011 SambaStream Limited Alfresco Software - - - - Collaborative cloud-based Web applications

07/26/2011 FatWire Corporation Oracle Corporation - - - - Web experience management solutions

07/19/2011 Code Mine Autodesk - - - - Online cloud-based image tools and utilities



07/03/2011 Cloud Sherpas Cloud Sherpas, Inc. - - - - Web-based collaboration tools for business transformation

06/28/2011 Palantiri Systems, Inc. ThingWorx, Inc. - - - - M2M cloud platform

06/14/2011 Social Blaze MartinJAY Digital, Inc. - - - - Enterprise grade social media management applications

06/02/2011 Interactive Softworks, Inc. USAN, Inc. - - - -

Multi-channel portal, analytics and monitoring, business processes and rules, dynamic content management, social media and collaboration, visual process modeling, voice/ACD unification, and integration components and services

06/01/2011 HP- Certain Assets Polycom $89 - - - Video conferencing business

05/31/2011 Event Robot Vmware - - - - Develops enterprise social software for organizations globally

05/18/2011 Offisync Corp. Jive Software, Inc. 26.79 26.8 - - Web based collaboration applications

03/21/2011 Accordent Polycom $50 50.0 5.6x - Enterprise video management solutions03/17/2011 Jambok, Inc. SuccessFactors, Inc. 9.76 9.8 - - Social learning platform

03/03/2011 PresentAll Inc. Andiamo Corporation - - - - Web conferencing software solutions

02/15/2011 Netviewer AG Citrix Online, Inc. - - - - Web conferencing solutions

02/15/2011 Goat Town Ventures, LLC Constant Contact, Inc. 17.4 17.0 - - Online collaborate services in a workspace and fuse communications, content and applications.

01/31/2011 Kabushiki Kaisha salesforce.com salesforce.com, inc 170.9 633.0 - -Customer and collaboration relationship management (CRM) services

01/12/2011 eBook Google - - - - Electronic book systems

01/07/2011 EditMe, LLC Wakefly, Inc. - - - -Hosted wiki software, Web design, development, and application building services

01/06/2011 Dimdim, Inc. salesforce.com, inc 37.13 37.1 - - Web conferencing solutions

01/05/2011 Pharos Communications Limited Evertz Technologies Ltd. 5.01 5.0 0.6x - Collaborative desktop workflow and integrated third party infrastructure management software solutions

01/05/2011 Zosh and Attassa YouSendIt, Inc. - - - - Application software for e-signature services

01/03/2011 Konftel AB Avaya Inc. 14.0 14.0 - - Audio conferencing solutions

12/09/2010 Injoos Web Solutions Pvt. Ltd.KineticGlue Online Communities Pvt. Ltd.

- - - - Web based collaboration applications

12/03/2010 Phonetic Arts Google - - - - Voice techonologies

11/01/2010 Softalk Ltd. Gordano Ltd. - - - - Collaboration and messaging software solutions

10/19/2010 Codesion Inc. CollabNet, Inc. - - - - Cloud-based source code management solutions

10/05/2010 Unica Corporation International Business Machines 489.91 446.8 4.1x 44.3xEnterprise marketing management and cloud-based marketing software solutions

09/27/2010 Bitbucket Atlassian Pty Ltd. - - - -Hosted code collaboration services for mercurial distributed version control systems

09/21/2010 TimeBridge, Inc. MerchantCircle, Inc. - - - - Personal scheduling assistant solutions

08/31/2010 M-Events Conference Systems LLC Ovation Technology LLC - - - -Integrated and automated conference management software solutions

08/25/2010 Webcasting.com, Inc. Granicus, Inc. - - - - Live and on-demand streaming services through internet

08/05/2010 Wimba, Inc. Blackboard Inc. 58.6 56.5 - - Collaborative learning software applications and services

08/04/2010 Elluminate, Inc. Blackboard Inc. 61.99 54.6 2.2x - Live eLearning and Web collaboration solutions

07/20/2010 CubeTree, Inc. SuccessFactors, Inc. 48.9 48.9 - - SaaS based hosted enterprise collaboration suite

05/06/2010 Scout Labs, Inc. Lithium Technologies, Inc. 25.0 25.0 - - Web-based applications for social media tracking and monitoring04/12/2010 Viju Viju AS - - - - Video communications solutions

03/05/2010 DocVerse, Inc. Google Inc. - - - - Solutions for real time sharing and simultaneous group-editing

03/01/2010 CoTweet, Inc. ExactTarget, Inc. 15.71 15.7 - - Web-based social media management solution

02/16/2010 Zimbra, Inc. Vmware 100.0 100.0 - - Open source email, address book, calendar, tasks, and collaboration software

02/09/2010 MicroLink, LLC Autonomy Corp. plc 55.0 55.0 - -Collaborative knowledge management, portal and collaboration, business intelligence, information discovery, and customer relationship management solutions

01/20/2010 Doc.It Inc. Roynat Capital, Inc. - - - Practice-wide document management and archiving solutions01/20/2010 Tomoye Corporation NewsGator Technologies, Inc. - - - - Community collaboration software solutions

01/06/2010 Live Elements, Inc. Technology Solution Partners, Inc. - - - -Content management system; and member management application

12/31/2009 SEFAS Innovation SA Doc@Post SAS - - - - Customer communication software solutions

12/31/2009 ClackPoint Collaboration Spaces Voxeo Corporation - - - - Multi-channel collaboration platform

12/31/2009 WebsiteWiki Wikia, Inc. - - - - Online resource community




Private FinancingPrivate Financings Overview 2010 to 2012

Year # of Deals % of Total Total Capital Raised ($ million) % of Total Avg. Deal Size2012 54 54% $ 853 71% $ 16 2011 27 27% 136 11% 5 2010 19 19% 209 17% 11 Total 100 100% 1,199 100%


10

20

30

40

50

60

0

150

300

450

600

750

900

2010 2011 2012

$ mn

Total Capital Raised

Tota

l Cap

ital R

aise

d

Number of Deals

Num

ber o

f Dea

ls

Private Financings in Enterprise Collaboration Market

Source: Capital IQ

Venture and private equity investing in the enterprise collaboration and social software sector continues to remain robust, with a substantial increase in investment during 2012. The number of investments in the space has steadily grown doubling to 54 investments in 2012, up from 27 deals in 2011. In addition, total private capital flows rose more than six-fold from 2011 to $853 million and the average deal size more than tripled y/y to $16 million. Even after excluding the two largest deals which had a combined value of $250 million, the y/y rise in capital flows was substantial, reflecting the genuine nature of the growth. The average deal size after excluding the largest and smallest deals was $13 million in 2012, which was more than double of that in 2011. This increase is likely due to increased confidence by investors as well as companies raising larger, later-stage rounds as their businesses mature. We expect this trend to continue in 2013 with more companies seeking larger growth and expansion financings. While reviewing the institutional investors active in this space, we find that many of the venture firms, who are active in enterprise software and SaaS space, are investing here. Charles River, Openview, Norwest, Bessemer, Insight, Mayfield and many other branded firms are active. While much of the activity so far has been in early venture-oriented rounds, we do expect opportunities for larger growth equity players to become active as the emerging players grow their business models to a stage that attracts capital for expansion and growth.Our analysis also shows that the investment in the enterprise collaboration and software market is highly correlated to the economic activity and sentiment in the US. This is important as the US accounts for the major chunk of the private financing transactions in this sector, with more than 80% of all the deals identified over the last three years happening in the US. Although the global economic growth declined in 2012 to 2.2% y/y from 2.9% y/y in 2011, the year 2012 was by far the best for private capital flows into the sector. The primary reason for this trend was the improved investment sentiment in the US, buoyed by the signs of economic recovery. In addition, strong response to Jives IPO at the end of 2011, may have boosted investor sentiment. Jives share price mostly traded above its IPO price through the year.The private financing trend in the sector is expected to remain strong. Trends such as consumerization of IT, emergence of cloud computing technology and the increasing use of portable devices such as mobile, laptops, tablets, etc. by the workforce, are causing to enterprises to revisit their information and data management systems. Moreover, enterprise social software products help to foster information sharing and collaboration in ways that could lead to higher employee productivity. We believe the potential of these products will be realized soon and enterprise social software will become an integral part of organizations IT strategies. Moreover, given the highly fragmented nature of the sector and the potential synergies expected from convergence between the players, the sector is poised to see consolidation, which offers immense opportunity for private capital flows into the sector.



Global Enterprise Collaboration Private Financings (2010-12)

Announced Target/Issuer Amount Total Raised To Date Buyers/Investors Major Business Focus [Target/Issue]

03/27/2013 Adapx, Inc. $3.5 $9.5 OVP Venture Partners; Pelion Venture Partners; Paladin Capital Group; Northwest Technology Ventures

Interface software solutions for collaboration, field data collection, and decision making

03/12/2013 Crushpath LLC $6.0 $8.0 Charles River Ventures; The Social+Capital Partnership

Enterprise Solutions

02/28/2013 Ektron, Inc. $2.0 $2.0 Eastward Capital Partners, LLCWeb content and document management software, social software, and marketing optimization solutions

02/22/2013 Handshakez, Inc. $3.6 $3.6 Austin Ventures; Valhalla Partners; First Round Capital; FLOODGATE; Thinktiv, Inc.; CrunchFund

Collaboration and analytics platform

02/12/2013 CollabNet, Inc. $2.5 $2.5 -Web-based collaborative software development solutions

01/28/2013 Zoom Video Communications, Inc. $6.0 $6.0 QUALCOMM Ventures Cloud-based video meeting and conferencing services

01/25/2013 Zulahoo, Inc. $3.0 $3.0 -Business applications platformfor collaboration, organization, production, and communication

12/27/2012 ConnectSolutions Inc. $10.0 $10.0 Frontier Capital LLC Cloud-based unified communications solutions

12/10/2012 PBwiki, Inc. $3.9 $3.9 - Hosted team collaboration solutions

12/07/2012 Intalio, Inc. $21.2 $33.2

Partech International; Sippl MacDonald Ventures; Western Technology Investment; Woodside Fund; SAP Ventures; XML Fund; VMware; Dassault Dveloppement; O'Reilly Media; Cargill Ventures; Inventures Group

Cloud computing solutionsfor business process management

12/05/2012 Thrupoint, Inc. $3.0 $6.4 -Unified communications (UC) as a service and mobile collaboration solutions

11/21/2012 Smartsheet.com, Inc. $26.0 $28.5 Insight Venture Partners; Madrona Venture Group

Cloud applications for project management and collaboration

11/19/2012 Atmail Pty Ltd. $2.1 $2.1 Starfish Ventures Pty Ltd Email and collaboration solutions

11/16/2012 Wikia, Inc. $10.9 $10.9 Bessemer Venture Partners; Institutional Venture Partners; Amazon.com Inc., Investment Arm

Hosting services for sharing information

11/12/2012 DoubleDutch, Inc. $4.0 $7.2 FLOODGATE; Lightbank LLC; Bullpen CapitalMobile, cloud-based, and geosocial applications for events, sales teams, and other enterprise workgroups

10/25/2012 Hireku Inc. $2.1 $2.9 Birchmere Ventures; salesforce.com, inc ; Innovation Works; Rincon Venture Partners; ff Venture Capital

Recruiting software

09/26/2012 ThingWorx, Inc. $8.0 $13.0 Safeguard Scientifics, Inc. (NYSE:SFE)Application development platform for connecting people, systems, and devices

09/26/2012 Thinking Phone Networks, LLC $16.9 $23.5 Advanced Technology Ventures; Bessemer Venture Partners

Cloud-based unified communications services

09/11/2012 SkyDox Ltd $32.2 $32.2 Scottish Equity Partners LLP; Business Growth Fund plc

Integrated file sharing and secure collaboration platform

08/30/2012 MetraTech Corp. $30.7 $30.7 - Agreements-based billing and compensation solutions

08/02/2012 Lua Technologies, Inc. $3.0 $5.5 -Digital communication and collaboration platform for mobile workforces

07/26/2012 etouches LLC $7.8 $10.3 Connecticut Innovations, Inc.; Cava Capital; Greycroft Partners LLC; Level Equity Partners

Event planning software

07/25/2012 Box, Inc. $150.0 $308.2

Bessemer Venture Partners; Draper Fisher Jurvetson; General Atlantic LLC; New Enterprise Associates; SAP Ventures; Scale Venture Partners; The Social+Capital Partnership

Content sharing platform

07/18/2012 Asana, Inc. $28.0 $28.0 Benchmark Capital; The Founders Fund; Andreessen Horowitz

Collaboration software tools

07/17/2012 Magor Corporation (TSXV:MCC) $3.1 $4.0 Wesley Clover Corporation; Wesley Clover International Corporation

Visual collaboration solutions

07/12/2012 Poptent, Inc. $5.5 $8.8 MK CapitalSocial community for filmmakers, actors, comedians, grips, and animators

07/11/2012 LiveHive, Inc. $4.7 $4.7 Acero Capital Cloud-based visual and interactive personal workspace

07/03/2012 GitHub Inc. $100.0 $100.0 Andreessen Horowitz; SV Angel Code hosting services

06/28/2012 SugarSync, Inc. $10.0 $27.0 ORIX Venture Finance, LLCMobile cloud services for file sharing and collaboration tools

06/27/2012 Blue Jeans Network, Inc. $25.0 $43.0 Accel Management Co, Inc.; New Enterprise Associates; Norwest Venture Partners

Cloud-based video conferencing services

06/27/2012 Egnyte, Inc. $16.0 $26.0 Kleiner, Perkins, Caufield & Byers; Polaris Partners; Google Ventures

Cloud file server solutions

06/26/2012 FuzeBox, Inc. $20.0 $20.3 Insight Venture Partners; Index Ventures; Khosla Ventures

Internet and mobile based unified communications solutions

06/20/2012 Yesware, Inc. $4.0 $5.0 IDG Ventures; Foundry Group; Google Ventures; Golden Venture Partners, Inc.

Team collaboration, email tracking, custom templates, CRM syncing, and reports and analytic solutions

06/13/2012 GoingOn Networks, Inc. $2.8 $9.2 Beechtree Capital, LLC; Granite Ventures, LLC; Armada Investment Group AG; California Technology Ventures, LLC; Adurion KG

Academic social networking platform

06/05/2012 Clarizen, Inc. $12.0 $24.0 Benchmark Capital; Carmel Ventures; Opus Capital; DAG Ventures, LLC; Vintage Capital Management, LLC

Online project management software

05/31/2012 Rundavoo, Inc. $2.0 $2.0 -Online platform with tools to visualize, plan, and collaborate on group or social activities, events, or parties

05/24/2012 Ninian Solutions Ltd. $24.0 $34.2 Matrix Partners; Eden Ventures (UK) Ltd.; JAFCO Ventures; DAG Ventures, LLC

Online collaboration, live conferencing, project management software, and document sharing solutions

05/22/2012 DotLoop, LLC $7.1 $7.2 Trinity Ventures Online collaborative solutions

05/18/2012 CitizenGlobal Inc. $2.3 $9.3 - Collaborative online studio for mainstream media

05/18/2012 Kontiki, Inc. $6.0 $27.2 New World Ventures; MK Capital; Cross Creek Capital; Hatteras Funds

SaaS provider of enterprise video communications



05/11/2012 Batterii, LLC $2.5 $2.5 CincyTechUSA, Investment Arm Real-time ollaborative platform

05/09/2012 Vidyo, Inc. $2.0 $39.7 - Telepresence solutions for video conferencing

05/04/2012 HootSuite Media, Inc. $50.0 $54.9 - Web-based social media management solutions

05/02/2012 Blueprint Software Systems Inc. $15.9 $30.2 BDC Venture Capital; Walsingham Growth Partners; Tandem

Requirements management solutions for enterprise application development

05/01/2012 Courseload, Inc. $6.0 $8.9 - Web-based universal-access software solution

05/01/2012 DreamFactory Software, Inc. $3.0 $3.5 New Enterprise AssociatesWeb applications and development tools for cloud-based platforms

04/30/2012 Future Simple Inc. $6.9 $8.0 Index Ventures; OCA Venture Partners, LLC; The Social+Capital Partnership; I2A Fund

CRM and sales tracking application for small businesses

04/30/2012 VisiQuate, Inc. $4.5 $5.2 - Web-based content management solutions

04/19/2012 Nirvanix Inc. $35.2 $45.7 Mission Ventures; Windward Ventures; Valhalla Partners; Intel Capital; Khosla Ventures

Enterprise-class cloud storage services

04/18/2012 Symform, Inc. $11.0 $14.0 OVP Venture Partners; Longworth Venture Partners; West River Capital; Second Century Ventures, LLC

Cloud storage solutions

04/04/2012 SugarCRM, Inc. $33.0 $33.0 Draper Fisher Jurvetson; New Enterprise Associates; SVB Capital; Walden International; Gold Hill Capital Management, LLC

Open source customer relationship management (CRM) software

03/29/2012 Catalyst Repository Systems, Inc. $32.0 $30.6 FTV CapitalInternet-based document repositories and case collaboration systems

03/20/2012 PubNub, Inc. $4.5 $4.5 Relay Ventures; TiE AngelsCloud-hosted messaging service for building real-time Web and mobile applications

02/16/2012 GlobalOutlook, Inc. $2.0 $2.0 Naya VenturesHosted Microsoft Communication, SaaS business communication, and collaboration services

02/15/2012 FileTrek Software Inc. $10.0 $22.7 Anthem Venture Partners; Propulsion Ventures Inc.; The Ontario Capital Growth Corporation

Mobile content management and tracking software solutions

02/13/2012 Xobni Corporation $10.0 $10.0 - Enterprise collaboration solutions

01/26/2012 IGLOO, Inc. $5.0 $5.0 RBC Venture Partners; The Ontario Capital Growth Corporation

Social business software solutions

01/20/2012 Lingotek, Inc. $2.4 $3.9 - Collaborative translation technology solutions

01/18/2012 SmartRecruiters Inc. $5.5 $5.5 Mayfield Fund SaaS-based recruiting software

01/09/2012 Wemo Media Inc. $2.0 $2.0 -Online collaboration platform for digital artists and developers

01/06/2012 Piazza Technologies, Inc. $6.0 $7.5 Bessemer Venture Partners; Felicis Ventures; Kapor Capital

Online collaboration and social learning network platform

12/23/2011 Artesian Solutions Limited $3.2 $3.2 Octopus Ventures Ltd.Cloud-based social CRM and brand surveillance software solutions

12/23/2011 KnowledgeVision Systems Incorporated $2.0 $6.4 GrandBanks Capital Inc. Online presentation tools

12/19/2011 Accellion, Inc. $12.2 $12.2 Riverwood CapitalSecure collaboration and managed file transfer solutions

12/02/2011 doo GmbH $6.8 $6.8 DuMont Venture Holding GmbH & Co. KG Cloud-based collaboration service

12/01/2011 Certain Software, Inc. $9.8 $9.8 - Event management software solutions

10/31/2011 Trunity Holdings, Inc. (OTCBB:TNTY) $3.0 $7.0 GreenHills Ventures LLC, Investment Arm Hosted social publishing platform

10/26/2011 BoardSuite Corp. $4.1 $4.1 Urban Select Capital Corporation

Online board portal providing a free SaSS-based solution to manage real-time access to corporate documents, collaboration tools, and a marketplace of business services

09/20/2011 MobileCause Inc. $3.2 $3.2 -Web software for mobile fundraising, CRM, and donor communication

09/15/2011 Mavenlink, LLC $3.9 $3.9 Quest Software Inc.; Madden Capital Partners, LLC Web-based project management solution

09/12/2011 WP Technology Inc. $3.5 $3.5 Union Square Ventures; Version One Ventures; Golden Venture GmbH

Online social community

08/18/2011 Kindling Inc. $2.4 $2.4 Milestone Venture PartnersWeb-based idea management application and collaboration tool

08/15/2011 Cinchcast Inc. $6.0 $8.0 Guggenheim Partners, LLC cloud-based collaboration platform

07/26/2011 Crowdtap LLC $7.0 $7.0 Tribeca Venture Partners; Mr. Youth LLC; Foundry Group

Online platform for real-time research, collaboration or word-of-mouth marketing

07/05/2011 Oblong Industries, Inc. $21.0 $21.0 Morgan Stanley Alternative Investment Partners LP; Foundry Group; Energy Technology Ventures

Spatial interfaces to control applications and data spread across various displays

06/30/2011 Central Desktop Inc. $3.0 $3.0 Hercules Technology Growth Capital, Inc. Social collaboration platform

06/15/2011 ProtonMedia, Inc. $4.5 $4.5 Osage Partners LLC; Kaplan Ventures; Originate Ventures

SaaS-based social learning and business collaboration software solutions

05/18/2011 Speechbobble Inc. $2.9 $4.4 - Cloud social networking platform

05/12/2011 Vidtel, Inc. $4.6 $4.6 - Cloud-based video conferencing services

04/30/2011 Surfingbird.ru $2.9 $2.9 - Collaborative content discovery service

04/26/2011 Brightleaf Corporation $3.0 $5.9 Foundry Group Document automation solutions

03/31/2011 InXpo, Inc. $3.5 $3.5 Hercules Technology Growth Capital, Inc. Webcasting platform

03/11/2011 Collaborative Software Initiative Inc. $3.7 $3.7 OVP Venture Partners; Oregon Angel Fund Enterprise software products

02/25/2011 inSORS Integrated Communications, Inc. $4.5 $4.5 -Enterprise video conferencing and collaboration software and solutions

02/16/2011 Sermo, Inc. $3.5 $3.5 MMV Financial Inc, Investment Arm Online community for physicians

02/10/2011 Podio ApS $4.0 $4.0 Sunstone Capital A/S Online collaborative work platform

02/02/2011 nGenx Corporation $5.2 $5.2 -Cloud computing solutions for collaborative communication

01/04/2011 Assistly, Inc. $3.0 $5.2 Index Ventures; True Ventures; Social Leverage, LLC; Bullpen Capital

Multi-channel support platform

11/11/2010 Primobox SAS $3.4 $3.4 Grant & Partners; Counsellior SADematerialization, electronic document management and software as a service (SaaS) mode collaborative services

10/14/2010 HBR Labs, LLC. $2.0 $2.0 - Web collaboration and meeting solutions

09/30/2010 Collaborative Learning Inc. $6.3 $5.9 - Productivity software solutions

09/28/2010 Koofers, Inc. $5.0 $5.0 Altos Ventures; New Atlantic Ventures; QED Investors LLC; Revolution Ventures

Online social learning



09/20/2010 Qumu, Inc. $8.8 $8.8

Advanced Technology Ventures; Garage Technology Ventures; SAP Ventures; The Angels' Forum LLC; Storm Ventures LLC; The Halo Funds; MMV Financial Inc, Investment Arm

Enterprise video solutions

09/15/2010 COPIA Interactive, LLC $20.0 $20.0 DMC Capital Funding, LLC Social media and content delivery platform

07/20/2010 Jive Software, Inc. (NasdaqGS:JIVE) $30.0 $30.0 Kleiner, Perkins, Caufield & Byers; Sequoia Capital Social business software platform

07/14/2010 Atlassian Pty Ltd. $60.0 $60.0 Accel Management Co, Inc.Issue tracking, collaboration, and software development tools

07/12/2010 iLevel Solutions, LLC $6.0 $6.0 Swift River Investment LLC; Egis Capital Partners LLC; Epiphany Ventures

Inter-enterprise collaboration in the alternative asset management industry

06/10/2010 Octoshape ApS $4.8 $4.8 Nexit Ventures OyLive and on-demand streaming audio and video technology

05/28/2010 Covia Labs Incorporated $5.2 $5.2 -Software platforms for unifying and controlling interoperable communications

05/18/2010 ProspX, Inc. $8.0 $8.0 Adams Capital Management, Inc.; HPI Real Estate Services & Investments

On-demand sales collaboration and business intelligence solution

03/30/2010 Event Robot, Inc. $8.0 $8.0 Menlo Ventures; True Ventures Enterprise social software

03/29/2010 Glowpoint, Inc. (AMEX:GLOW) $10.0 $9.8

Iroquois Capital; Highbridge Capital Management; North Sound Capital; Coghill Capital Management; Vicis Capital; Escalate Capital Partners; Eos Funds

Cloud and managed visual communication solutions

02/17/2010 eXpresso Corp. $3.8 $3.8 Novus Ventures; Rocket Ventures; The Individuals' Venture Fund

Real-time collaboration and editing control solutions

02/16/2010 PanTerra Networks, Inc. $4.0 $4.0 -Cloud-based unified communications Software-as-a-Service solutions

01/27/2010 Landslide Technologies, Inc. $8.0 $8.0 Adams Capital Management, Inc.; Osage Partners LLC; Draper Triangle, LLC

Customer relationship management (CRM) solutions

01/25/2010 Confer LLC $2.0 $2.0 - Communication, collaboration, and consolidation tools01/22/2010 FatWire Corporation $13.5 $13.1 EMC Corporation Web experience management solutions




Valuation TrendsIn this valuation section, we look at the larger public players in several related and adjacent areas and consider the performance of their stocks over the past few years as well as their relative valuations. We have included three different universes:

Collaboration and Customer Engagement: Jive Software, J2 Global, ExactTarget, Constant Contact, Salesforce.com, LivePerson, Workday and LinkedIn

Unified Communications: Cisco, ShoreTel, Polycom, Broadsoft

Large Enterprise Software: Microsoft, Google, IBM, Adobe, Citrix

Because the collaboration and social software spaces are still relatively new, there are few good public comparables Jive is perhaps the only solid public pure-play for social and along with LinkedIn. On the collaboration side, players like J2 and Polycom are certainly good comparables. We have also included a number of other players like LivePerson (customer engagement) and email marketing companies such as ExactTarget and Constant Contact that we think help round out the universe and are benefiting from some of the same underlying growth trends.

Our other two universes, Large Enterprise Software and Unified Communications are also worth understanding as many players in these areas may serve as acquirers and competitors for the smaller, private emerging growth players

PUBLIC VALUATION MULTIPLESThe table below provides a summary of the trading multiples for the companies in our three indexes. Clearly, the companies in the Collaboration and Customer Engagement Segment trade at very rich multiples, due to their strong growth performance and high growth expectations in the future.

Multiples SnapshotCompany Name Price Mkt.Cap EV D/E EV/Revenue EV/EBITDA P/E LT EPS

Growth LTM 2013E LTM 2013E LTM 2013E

Collaboration and Customer Engagement

LinkedIn $ 175.59 $ 19,379 $ 18,549 - 16.7x 12.4x 124.1x 52.8x 493.9x 125.2x 54.6%

salesforce.com 42.24 24,888 24,669 0.28 8.1x 8.1x 293.7x 47.6x n.a 111.3x 27.8%

Workday 63.80 10,628 9,863 0.04 36.0x 36.5x n.a n.a n.a n.a 42.5%

LivePerson 12.95 713 610 - 3.9x 3.3x 32.1x 18.8x 112.2x 39.8x 25.4%

Constant Contact 14 442 345 - 1.3x 1.2x 18.1x 7.7x 36.8x 21.7x 28.9%

ExactTarget 21.34 1,482 1,374 - 4.7x 3.7x 337.6x 187.9x n.a n.a 30.0%

j2 Global 41.31 1,899 1,820 0.41 4.9x 3.6x 9.9x 8.2x 15.6x 14.9x 10.8%

Jive Software 14.72 981 847 0.08 6.9x 5.6x n.a n.a n.a n.a 30.0%

Average 0.10 10.3x 9.3x 135.9x 53.8x 164.6x 62.6x 31.2%

Median 0.02 5.9x 4.6x 78.1x 33.2x 74.5x 39.8x 29.4%

Unified Communications

Cisco Systems $ 20.83 $ 111,065 $ 80,990 0.29 1.7x 1.7x 6.1x 5.2x 11.9x 10.5x 9.3%

ShoreTel 4.16 244 226 0.19 0.7x 0.7x n.a 13.3x n.a n.a 23.3%

Polycom 10.73 1,851 1,168 - 0.8x 0.8x 10.5x 5.7x n.a 16.9x 12.5%

BroadSoft 26.00 728 652 0.54 4.0x 3.5x 21.0x 14.5x 60.3x 21.1x 18.0%

Average 0.26 1.8x 1.7x 12.5x 9.7x 36.1x 16.1x 15.8%

Median 0.24 1.3x 1.2x 10.5x 9.5x 36.1x 16.9x 15.3%

Large Enterprise Software

Microsoft $ 33.49 $ 279,679 $ 220,656 0.19 2.9x 2.8x 7.2x 6.7x 17.0x 12.1x 9.0%

Google 845.72 280,581 237,859 0.10 4.4x 4.0x 14.1x 11.0x 25.1x 18.3x 16.1%

IBM 204.51 226,759 248,220 1.74 2.5x 2.4x 9.4x 8.9x 13.7x 12.2x 11.4%

Adobe Systems 47.01 23,596 21,467 0.23 4.9x 5.2x 16.6x 18.3x 33.1x 32.4x 13.8%

Citrix Systems 63.49 11,848 11,190 - 4.2x 3.8x 18.5x 12.0x 34.4x 20.6x 16.6%

Average 0.45 3.8x 3.6x 13.2x 11.4x 24.7x 19.1x 13.4%

Median 0.19 4.2x 3.8x 14.1x 11.0x 25.1x 18.3x 13.8%

Source: Capital IQ (in $ millions except for share price, as of 04/30/2013)



While multiples vary greatly, and in many cases, EBTIDA multiples are not meaningful due to very low EBITDA for players like Jive, LivePerson or LinkedIn, we do think it is important for smaller players that aspire to sell to a larger strategic player to understand how different potential acquirers trade. In early stage tech M&A, valuation is often heavily weighed by what the acquirer thinks about its own stock and how it trades. While Microsoft did see its way to paying a very high multiple for Yammer, more often, we see larger strategic players with more normalized valuation multiples struggle to pay high multiples for start-ups. A player like Jive trading at 7x revenue can often justify paying 10x revenue for a start-up than someone like Polycom, which trades at less than 1x. As smaller deals get lost in the overall revenue stream of a large public player, the fear of dilution and an insufficient credit given by the market for its bold new acquisitions lead to suppressed offer prices for acquisitions.

For smaller private players who are trying to grasp their takeout value, it is important to realize that the valuation must be determined on a case-to-case basis based both on the strategic fit and potential benefit to that acquirer as well as on how that acquirer is itself valued in the market.

As a result, we have undertaken a thorough review of each of the public players in our indices in the hope that this will provide some useful insights into how these public players may think about valuation.

COLLABORATION AND CUSTOMER ENGAGEMENTAs indicated in the chart below, the companies in our Custom Enterprise Collaboration Index have comfortably outperformed the broader equity markets. During the 16 months till April 2013, the S&P 500 Index gained 27.0%, while the NASDAQ Composite Index returned 27.8%, benefiting from favorable macroeconomic events in the US, such as the avoidance of the fiscal cliff and positive economic indicators that ignited the hopes of an economic upturn. However, these were dwarfed by a return of 89.2% delivered by our Collaboration and Customer Engagement Index. In fact, with rising acceptance of the benefits of collaboration and social technologies, the extent of outperformance has increased with time, as indicated by the two areas highlighted in the chart.

Stock Performance:

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Nasdaq S&P500 MSCI World IT Collaboration and Customer Engagement

Source: Bloomberg (for the period between 01/01/2012 to 04/30/2013)

The most notable name in this universe is Jive Software that went public in 2011. In its December 2011 IPO, Jive garnered net proceeds of $132.3 million by selling 15.5 million shares, priced at $12/share. Both the number of shares offered and the price were higher than the original plan to offer 11.7 million shares at a range of $8-10. On its first day of trading on December 13, 2011, the stock closed 25% higher at $15.05, indicating strong investor appetite for pure-play social business software stocks. In the subsequent months until August, the stock traded mostly above the price achieved on the initial trading day. The stock touched a high of $27.52 on April 3, 2012, implying a return of close to 130% on its IPO price. However, since August 2012, the stock is hovering around the $15 mark and it even dipped below its IPO price of $12 on November 2, 2012, closing at $11.14. While Jives stock may have gone a little ahead of itself, and thus corrected accordingly, there are concerns of competition as well, since other emerging players continue to grow. Currently, Jives stock is trading at a revenue multiple of 6.6x 2013E and 5x 2014E.



Jive Software performance since IPO, December 13, 2011

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The upbeat performance of our index was primarily led by the strong gains of index heavy-weights such as Salesforce.com (up 74.5%) and LinkedIn (up 231.3%), as investor confidence in these companies continued to improve. At LinkedIn, healthy growth in its subscriber base (from 32 million in 2009 to 200 million currently) underlined the companys growth potential. On the other hand, Salesforce.com witnessed rising adoption of its products and achieved global leadership in the global Customer Relationship Management (CRM) software market in 2012. However, both stocks went through a rough patch during the May-July 2012 period. With Facebooks IPO performing significantly below expectations, investors have generally become more cautious about social networking stocks, including LinkedIn. At Salesforce.com, the issues were more specific: the company witnessed two power outages in two weeks, which led to service disruptions and raised concerns about the stability of its systems. Notably, both stocks recovered quickly from these temporary setbacks and continued with their uptrend.

Although, Constant Contact (down 35.1%) did manage to recover some of the losses after posting strong Q1 2013 results and provide an upgraded guidance, it was still an underperformer for the period, as investors stayed away from the stock after analysts had earlier downgraded the stock on lower-than-expected earnings performance.

In 2012, two companies from the ECSS universe above successfully completed their IPOs ExactTarget in March and Workday in October. Workdays market capitalization has increased 30.9% since its IPO, on the back of its ongoing product innovation as well as stronger-than-expected financial performance. On the other hand, ExactTarget has fallen 16.9% since listing despite strong results. According to industry sources, investors were unsure whether email marketing (ExactTargets main source of revenue) would serve as a long-term source of strong top-line growth. Moreover, the stock also faced pressures after promoters sold significant number of shares in September at the end of their lock-in period.



UNIFIED COMMUNICATIONSAs evident from the chart below, except Broadsoft, all the unified communications stocks considered for our analysis underperformed the S&P 500 Index in 2012. The extent of underperformance is notable. The S&P 500 Index gained 13%, while Cisco, the networking giant, gained 9%. At the same time, Shoretel and Polycom posted negative returns of 34% and 36%, respectively. This underachievement continued in the subsequent months, with Shoretels performance worsening further.

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S&P500 Cisco Shoretel Polycom Broadsoft


Cisco ended 2012 with seven consecutive earnings beats, but the stock still underperformed the broader equity market, which highlights the fact that the market places higher emphasis on future outlook. Investors are more worried about the companys future growth potential due to its declining core routing and switching revenues, and the absence of any major move on the acquisition front. These factors coupled with Ciscos struggling end-markets primarily government and telecom have weighed down on the stocks performance. The stock has gained 6.5% during January-April 2013 on value buying, however, it is still lagging the broader index that gained 12%.

Similarly, Shoretel and Polycom lagged the S&P 500 index in 2012, but in contrast to Cisco, both these stocks registered negative returns. Polycoms disappointing performance reflects the severity of issues the company is facing, such as inconsistent growth and unstable management (four high-profile executives left the company last year). It is clearly evident from the chart that after the significant dip in Polycoms share price in the first week of April 2012, the stock has not recovered. In fact, its underperformance has further worsened. On April 5, 2012, the stock fell 20% the most during our coverage period after the company issued weaker-than-expected Q1 2012 guidance. Similarly, Shoretel has been an underachiever since the beginning of 2012, and its performance has further deteriorated during the coverage period. The stock registered its highest decline of 19% on February 2, 2012, after it issued a weaker-than-expected guidance for Q3 2012, a day before.Broadsoft has been the most volatile among the stocks under consideration. Broadsofts inconsistent growth was the primary reason for the stocks fluctuation and underperformance. The company has lagged street expectations on more than one occasion and that too by a wide margin. On May 7, 2012, the stock fell by 19%, after the company issued a Q2 2012 revenue and EPS guidance, which missed consensus by 5% and 29%, respectively. On another occasion, on February 28, 2013, the decline in the share price was even steeper, when the company issued its 2013 guidance, with revenue falling 6% short of expectations and EPS missing consensus by 29%. However, things were not that gloomy for Broadsoft; the stock gained 34% in a single day on August 7, 2012, when the company raised its 2012 profit guidance above the consensus estimates and announced its acquisition of Adaption Technologies Ventures Ltd.



LARGE ENTERPRISE SOFTWAREAll the large enterprise software stocks in our index posted positive returns in 2012. However, 2012 would not be remembered as one of the best years for these stocks, as barring Adobe, none of them outperformed the broader equity markets. In 2012, the S&P 500 Index gained 13.4%, much higher than the returns posted by technology bellwethers such as Microsoft (2.9%), Google (9.5%) and IBM (4.2%). Although, Microsoft and Google witnessed significant surge in their share prices over the subsequent months, they were still mostly in line with the broader market, when compared on a cumulative basis from January 2012 to April 2013.

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S&P500 Microsoft Google IBM Adobe Citrix


The primary reason for this trend has been the lackluster capital spending by corporate enterprises and the telecom sector. The performance of technology companies is directly correlated with the IT spending by corporate enterprises and the telecom sector. We believe liquidity and financing are not the major problems for corporate enterprises, given the current regime of all time low interest rates across the globe, especially in the US. However, in the light of recessionary conditions in Europe, concerns of growth slowdown in China and uncertainty over the strength of the US economic recovery, corporate enterprises have adopted a wait and watch approach on capital spending. Nonetheless, a reversal in trend has started to appear, which is visible during January to April 2013

2013 05-Enterprise Collaboration Report FINAL 05.29.13

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