EY Venture Capital Insights 2013 Year End

8/11/2019 EY Venture Capital Insights 2013 Year End

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Venture Capital Insights 2013 year-end

Global VC landscape, angel and incubator participation trends,and exit landscape

February 2014


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Page 2 Venture Capital Insights 2013 year-end

Insights development team

Bryan Pearce , Global Leader, EY Entrepreneur Of The Year and Venture Capital AdvisoryGroup, EY

Sandra Feldner Vandergriff , Americas Strategic Growth Markets, IPO and Venture CapitalAdvisory Group, EY

Shanta Kumari , EY Knowledge, EY Aseem Goyal , EY Knowledge, EY

Prof. George Foster , Graduate School of Business, Stanford University Dr. Martin Haemmig , Adjunct Professor, Globalization of Venture Capital, CeTIM and

former Senior Advisor on Venture Capital, Stanford University (SPRIE) Prof. Steven Kaplan , Graduate School of Business , University of Chicago


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Venture Capital Insights

This edition of the Venture Capital Insights analyzes global investment activity includingVenture Capital initial equity rounds and fundraising by VC firms. It also examines theincreasingly important role of angel investors and incubators as well as the global exitlandscape for VC-backed companies.

Content overview:

1.3 Global VC fundraising activities

1.1 Global VC investment activityGlobal VC landscape

1.2 Global VC initial equity rounds of financing

Global VC exit landscape through initial public offerings (IPOs) and mergersand acquisitions (M&As)

Angel and incubator participation trends2

1

3


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Section 1: Global VC investment landscapeAnalysis by investment activity, initial equity round of financing and VC fundraising activity


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Section 1: Global VC landscapeSummary

1.1 Global VC investment activity Global VC investment activity was marginally up in 2013 and reached US$48.5 billion, a 2% increase compared to 2012,

though still below 2011 and pre-2009 levels. Although the US economy showed strong signs of growth by the end of 2013, this is yet to be reflected in regional VC

activity. While the total amount invested in the US in 2013 saw a marginal growth of 1% over 2012, the number of rounds fellby 5%. China recorded the lowest yearly total of amount raised, US$3.5 billion, since 2009.

The Bay Area and New England have been the top two hotbeds for the past five years. Europe continued to attract small-ticket deals in 2013, indicating that VC investors continue to be cautious about making large investments in the region.

Following historical trends, the technology sector continued to attract the major share of VC investment as well as number ofdeals in the US, Canada and Israel, while the consumer services sector continued to secure the bulk of VC investment anddeals in Europe, India and China.

Companies at the revenue-generation stage continued to dominate in terms of number of rounds as well as the proportion ofVC investment, indicating the preference of VC investors for these partially de -risked companies across all geographies.


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Section 1: Global VC landscapeSummary

1.2 Global VC initial equity rounds of financing Despite the slower activity in the US in 2013, both in terms of number of initial financing rounds and amount invested, the

average deal size in the region primarily remained comparable to 2012 levels. The first round continued to dominate with highest number of initial financing rounds as well as amount invested recorded

across geographies. Although the number of initial financings recorded in the second round increased for the US and Europein 2013 as compared to 2012, the second round continued to see the lowest activity across all round classes.

1.3 Global VC fundraising activities In 2013, early stage fundraising activity remained strong in the US, recording the highest total value since 2009, whereas,

for the Asia-Pacific region, fundraising activity continued its downward trajectory since 2011 for early-stage and multistagecategories, and there was no late-stage activity in 2013.


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Section 1.1: Global VC investment activityAnalysis by geography, hotbed, sector, stage of development and round class


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Global VC investment activity was marginally up in 2013 and reached US$48.5 billion, a 2% increase compared to 2012. However, it remains below2011 and pre-2009 levels, as recovery in the global economy continues to rebound and grow slowly.

The last quarter of 2013 was significant, marking a quarterly increase over 3Q13 both in terms of deals and dollars. Amounts invested increased by10% to reach US$13.5 billion with an 8% increase in the number of rounds (1,533). The quarter saw the largest number of rounds since 3Q11 and thehighest proceeds in the last eight quarters.

The outlook for VC investments will continue to grow at a modest rate in 2014, with venture-backed companies looking to benefit from the improvingexit conditions. A strong IPO market and improved global economy will continue the momentum in 2014.

68% of the total global dollars invested were in the US, with 26% of the total global dollars invested in the Bay Area.

Global VC activity by amount invested and number of rounds

Source: Dow Jones VentureSource

11.013.7

6.89.8

12.7 10.8 10.2

12.9

13.6

8.4

12.0

14.113.2 12.5

12.6

13.7

8.6

9.6

14.9

11.2 12.3

13.29.9

11.4

14.8

13.0

12.3 13.5

5,805

5,435

4,748

5,3495,820 5,741

5,753

1,547 1,336 1,503 1,518 1,455 1,400 1,533

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 2013

N u m b e r o f r o u n d s

A m o u n t i n v e s t e d ( U S

$ b )

Amount invested during Q1 (US$b) Amount invested during Q2 (US$b)Amount invested during Q3 (US$b) Amount invested during Q4 (US$b)Number of rounds during the year Number of rounds during Q4

Note: Global total includes the US, Europe, Canada, China, Israel (all site) and India only.

49.7 50.8 35.2 46.3 54.7 47.6 48.5

Global VC investment2013 VC investment activity marginally up from 2012; momentum expected to continue in 2014


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1.6 2.2 1.1 1.51.9 1.4 1.5

2.11.8

1.11.6

1.81.9 2.3

1.7 2.0

1.3

1.4

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1,7581,479

1,2881,411 1,322

1,320

1,395

482 436 440 421343 340 357

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200

400

600

800

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1,600

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2007 2008 2009 2010 2011 2012 2013



$ b )


8.0 9.14.7 5.3

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8.6 9.1

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8.8 6.7

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1,500

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3,5004,000

0

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2007 2008 2009 2010 2011 2012 2013



$ b )


US

Europe

34.3 33.3 24.5 29.2 36.2 32.8 33.1

7.6 7.8 5.7 7.1 7.3 6.2 7.4


While the total dollars invested in the US in 2013 saw a marginalgrowth of 1% over 2012, the number of rounds fell by 5%. Althoughthe US economy saw strong signs of growth by the end of 2013, withan upward revision in consumer spending, employment andcontinued policy support, this is yet to be fully reflected in regionalVC activity.

In 2013, European VC investment rebounded to above 2011 levels,largely driven by a positive economic scenario in the two largestEuropean VC hotbeds UK and Germany. In 4Q13, investmentincreased by 18% as compared to 3Q13.

Chinese companies raised a total of US$3.5 billion in 2013, thelowest yearly total since 2009. Despite a 20% increase in the numberof VC rounds, the dollar amount raised declined by almost 30%,compared to 2012. However, the recent reopening of the capitalmarkets with over 700 IPOs in the pipeline is likely to give a boost toVC investment activity going forward.

VC investment by geographyActivity recovered after recording a drop of 13% in 2012; China recorded the lowest yearly totalsince 2010

China

0.51.2

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2.41.7

1.1 0.6

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100

150

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300

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2007 2008 2009 2010 2011 2012 2013



$ b )

Amount invested during Q1 (US$b) Amount invest ed during Q2 (US$b)Amount invested during Q3 (US$b) Amount invest ed during Q4 (US$b)Number of rounds during the year Number of rounds during Q4

3.9 5.0 2.8 6.1 6.5 5.0 3.5


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In Canada, 4Q13 fared the best among the last eight quarters interms of both deal volume and dollars raised. Consequently, theamount invested in 2013 was up 11% over 2012, while deal volumeincreased by 23% during this period.

In 2013, VC activity revived in Israel in terms of deal volume afterrecording a considerable fall in 2012. The number of roundsincreased by 18%, compared to the previous year, on the back ofstrong activity in the business financial services and technologysectors. In terms of proceeds, VC funds invested totalled US$1.7billion, a 55% increase over 2012.

VC activity in India was largely in line with 2012 levels in terms ofdeal value and volume. While the number of deals fell marginally by2% compared to 2012, the amount invested increased by 13%. An

uptick in investment in the consumer services sector led to thisincrease in value.

Israel (all site) India

0.3 0.2 0.2 0.20.3

0.5 0.4

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97 119 95116

180

227 222

32 27 3733 42

49 58

0

50

100

150

200

250

0.0

0.5

1.0

1.5

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2007 2008 2009 2010 2011 2012 2013



$ b )

Amount invested during Q1 (US$b) Amount invest ed during Q2 (US$b)Amount invested during Q3 (US$b) Amount invest ed during Q4 (US$b)Number of rounds during the year Number of rounds during Q4

0.9 1.8 0.8 0.9 1.5 1.6 1.81.9 2.2 0.9 1.9 1.9 1.1 1.7


0.4 0.8 0.2 0.2 0.3 0.2 0.3

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0.6

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282 285

176160 173

141166

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0

50

100

150

200

250

300

0.0

0.5

1.0

1.5

2.0

2.5

2007 2008 2009 2010 2011 2012 2013



$ b )


VC investment by geographyStrong VC activity in Canada and Israel compared to year-ago levels

Canada

0.2 0.2 0.10.2 0.4 0.2 0.2

0.2 0.20.1

0.2

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0.3 0.3

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140

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113141 143

176

34 26 24 2228

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0

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80

100

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0.0

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2007 2008 2009 2010 2011 2012 2013



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1.0 0.8 0.5 1.0 1.2 0.9 1.0


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The Bay Area and New England have been the top two investment destinations for the past five years. In 2013, however, NY Metro, supported by consumer servicessector deals, surpassed Southern California to rank third among global VC hotbeds and is close to overtaking New England in dollars raised.

Europe continued to attract small-ticket deals in 2013. The average round size in European hotbeds (except for Switzerland) remained the smallest across all globalhotbeds, indicating that VC investors continue to be cautious about making large investments in the region.

In 2013, despite reduced VC amounts in Beijing, compared to 2008 levels, the average round size continued to be among the highest globally. This was primarily due tostrong investment in later stage health care and information technology sectors.

Note: Chart scales vary for the purpose of clarity. D ata on Israel is based on Israel all site.

40

80

72

60

248

176

116

247

133166

335

273

444

377

1,125

Number of rounds

402

448

552

566

1,039

1,044

1,220

1,311

1,5191,666

2,170

3,164

3,299

3,733

12,657

Switzerland

Illinois

Shanghai

Bangalore

France

Canada

Potomac

Germany

BeijingIsrael

UK

South Cal

NY Metro

New England

Bay Area

Dollars raised (US$m)

11.3

Avg. round size(US$m)

Top five hotbeds* US$25.0b(72% of the total**)


* Top five hotbeds by amount invested; ** Total of 15 major VC hotbeds listed above

Top five hotbeds* 2,554(66% of the total**)

33

50

109

39

64

268

104

265

127398

285

281

284

372

1,062

Number of rounds

263

496

810

824

874

1,256

1,280

1,367

1,930

2,166

2,189

2,615

3,364

3,448

12,303

Switzerland

Illinois

Canada

Bangalore

Shanghai

France

Potomac

Germany

Beijing

UK

Israel

NY Metro

South Cal

New England

Bay Area

Dollars raised (US$m)

Top five hotbeds* US$23.9b(68% of the total**)

Top five hotbeds* 2,284(61% of the total**)

9.9

7.4

11.6

6.5

10.0

11.4

5.3

10.5

5.9

4.2

9.4

7.7

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11.6

Avg. round size(US$m)

9.3

11.8

9.3

7.7

5.4

15.2

5.2

12.3

4.7

13.7

21.1

7.4

9.98.0

2008 2013

VC investment by hotbedNY Metro surpassed Southern California to rank third in 2013; the average round size inSouthern California, however, was the highest among all VC hotbeds


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Page 12 Venture Capital Insights 2013 year-endSource: Dow Jones VentureSource

By number of rounds: While the information technology (IT) sector attracted the most rounds and investment in the US, Canada and Israel in 2013, the consumer

services sector had the highest number of deals in the other three key markets Europe, China and India. Software and consumer informationservices were the most active sub-segments for those two sectors.

While software deals accounted for close to 70% of the total number of IT deals in the three markets, consumer information deals represented63%, 55% and 47% of total consumer services deals in Europe, China and India, respectively.

By amount invested: Following the historical trend, the IT sector attracted a major share of VC investment in the US, Canada and Israel, accounting for 26%, 44% and

55% shares, respectively, in 2013. The consumer services sector continues to secure the bulk of venture capital investment in Europe, India and China, indicating that venture

investors still have a healthy appetite for consumer internet companies. The sector accounted for more than a 50% share in each of the twoemerging economies; it contributed 28% of total regional proceeds in Europe.

1,034

99

718

81

65190

791

Information technology

Industrial goods and materials

Health care

Energy and utilities

Consumer servicesConsumer goods

Business and financial servicesUS

296

71

229

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39048

304

101

6

20

2

12313

47

71

3

23

1

200

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27

4

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7912

60

Europe China Israel (all site) IndiaBy number of rounds (2013)

8,673

797

8,634

909

5,500

1,031

7,487

Information technology

Industrial goods and materials

Health care


Consumer servicesConsumer goods

Business and financial servicesUS

1,444

288

1,850

463

2,056

118

1,170

762

75

229

26

1,902

199

348

910

70

128

30

160

0

367

53

16

280

36

890

87

405

Europe China Israel (all site) India

By amount invested (US$m) (2013)

VC investment by sectorIT and consumer services dominate the global VC investment landscape in 2013

68

8

26

8

28

5

32

Canada

454

18

136

105

125

3

201

Canada


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By number of rounds:

Companies at the revenue-generation stage continued to lead in terms of number of rounds, indicating the preference of VC investors acrossall markets for these partially de-risked companies.

In 2013, activity at the start-up stage dropped from 2012 for the three key VC hotbeds US (106 from 221 deals), Europe (41 from 53deals) and China (10 from 12 deals).

For China, the percentage of deals entered at the revenue-generation stage fell from 82% in 2012 to 78% in 2013. This is because VC activityat the product-development stage recorded a significant improvement in the region during 2013 (accounting for 12% of total deals compared

to 7% in 2012).By amount invested:

The revenue-generation stage continues to attract the highest percentage of VC investment across all markets. The share of investment atthe revenue-generation stage was higher than 70% in most markets. The percentage increased to more than 80% for both China and Israel in2013.

India saw revenue-generation stage investment decline to 63% of total investment in 2013, down from 82% in 2012. However, investmentmade at the profitable stage during the year was at 33%, which was significantly higher than 14% in 2013. This indicates that investorscontinue to be cautious and prefer investing in companies operating at the later stages of their business cycles.

2%

2%

3%

3%

3%

3%

9%

24%

20%

12%

20%

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85%

70%

72%

78%

72%

70%

4%

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6%

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India

Israel (all site)

Canada

China

Europe

US

Start-up Product development Revenue generation Profitable

0%

0%

1%

1%

0%

1%

4%

12%

12%

5%

20%

19%

63%

85%

78%

81%

73%

75%

33%

3%

9%

14%

6%

5%

India

Israel (allsite)

Canada

China

Europe

US

Start-up Product development Revenue generation Profitable

By number of rounds (2013) By amount invested (US$m) (2013)

VC investment by stage of developmentVC investors cautious; continue to make large investments at the revenue-generation stage

100%=3,477

100%=1,396

100%=176

100%=314

100%=166

100%=222

100%=33,063

100%=7,449

100%=1,044

100%=3,546

100%=1,666

100%=1,797


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Investors in China focus on later-stage investments, versus the US, where investors focus on a strategy that is more balanced throughout the life-cycle of the company.

Median size by round class: Second and later-stage rounds continue to see high median deal sizes across all geographies, with China recording the highest median value

in both the round classes. The median amount invested in China, however, declined from US$15.3 million in 2012 to US$10.0 million in 2013at the second round stage, but remained at the same level (US$20.0 million) at the later stage during this period.

Across the all markets, median deal values at the seed and first round stages fell or saw no change, compared to 2012. This indicates thatinvestors continue to take a measured approach to earlier stage investing.

Median size by stage of development: The profitable stage recorded the highest median deal size across geographies, indicating a willingness to invest larger amounts in companies

at the later stages of business development. At US$45.8 million, India recorded an all-time-high median value at the profitable stage in 2013 the highest value ever seen in any market

across all of the development stages since 2007. While median values across the different stages remained more or less in line with 2012 levels in most markets, China saw a significant drop

in its deal size at the profitable stage, with its median value falling from US$30 million in 2012 to US$10 million in 2013.

2013 median by stage of development (US$m)2013 median by round class (US$m)

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development

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Median deal size by round class and stage of developmentLater-stage rounds were dominant across markets; India saw a particularly high median value atprofitable stage


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Note: Chart scales vary for the purpose of clarity.

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)

US Europe China Canada Israel India S&P 500

Start-up (median round size in US$m)

Activity remained low at the start-up stage across all markets. In 2013 , while median

round size remained insignificant for most markets, only two markets the US andEurope recorded considerable median sizes, although lower than 2012 levels.


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Product development (median round size in US$m)

In 2013, median rounds in Canada (US$1.1 million) and China (US$2.0 million) have

continued their decline since 2011 (when median values were US$5.7 million andUS$4.0 million, respectively). Israel recorded the highest median value during 2013.

8 . 0

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( U S $ m

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Revenue generation (median round size in US$m)

During 2013, the median round sizes were nearly the same as seen in 2012 for mostmarkets. The values were, however, below the levels seen in 2011.

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Profitable (median round size in US$m)

The median round sizes in developing markets India and China, along with Israel, weremuch higher than the values recorded in US and European markets in 2013. For 2013,India recorded a particularly high median round.

Median round size by stage of developmentIndia saw a particularly high median value at profitable stage during 2013


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Median VC pre-money valuations by industryUS companies recorded the highest valuations in most sectors, except for the consumer servicesand IT sectors in 2013.


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i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m

)

1 1

8

1 7

7

3 2

8

1 7

8

N S 3 2 3

7 8

4 3

6 3

5 9

6 9

N S

N S

N S

02004006008001,0001,2001,4001,600

1,800

0

10

20

30

40

50

6070

80

2007 2008 2009 2010 2011 2012 2013

A v e r a g e

i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m

)

1 2

1 9

1 4

1 1

1 1 1

6

6 5 6 5 8

1 4

4 2

3 5

4 1 4

5

4 2

6 2

4 5

1 0

0200400

6008001,000

1,2001,4001,600

1,800

-

10

20

30

40

50 60

70

2007 2008 2009 2010 2011 2012 2013

A v e r a g e

i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m

)

2 8

7 0

2 8

4 3

4 3

2 5

N S 6

1 2

7 4 1 2

2 6

N S

N S

9 0

4 0

8 3

N S

N S

N S

02004006008001,0001,2001,4001,600

1,800

0102030405060708090

100

2007 2008 2009 2010 2011 2012 2013

A v e r a g e

i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m

)

2 3

1 9 2

2

1 7

2 7

2 2 3

0

7 4 6 6 6 9

5

2 0

3 0

4 3

9 2

N S

N S

N S

02004006008001,0001,2001,4001,600

1,800

0102030405060708090

100

2007 2008 2009 2010 2011 2012 2013

A v e r a g e

i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m )

1 2 1

4

1 0

2 6

1 8

3 4

6 8 6 1 0

3 3 N S 5

3 9

3 4 3

9

7 4 7 2

N S

N S

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011 2012 2013

A v e r a g e

i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m

)

2 2 2

3

2 0

1 7 2

0 2 0

1 1

8 9 5 6 5 4 5

2 3

2 6

3 8

4 3 4

7

1 6

1 3

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

05

101520253035404550

2007 2008 2009 2010 2011 2012 2013

A v e r a g e

i n d e x v a

l u e s

M e

d i a n r o u n

d s i z e

( U S $ m

)

Business and financial services (BFSI)


Consumer goods Consumer services

Health care

Industrial goods and materials IT

In 2013, median pre-money valuations were

the highest in the US in the health caresector (US$30 million), in China in thebusiness and financial services sector(US$16 million) and in Europe in theconsumer goods sector (US$8 million).

In the US, except for health care andconsumer goods, the median valuations in2013 declined across sectors, whencompared to 2012. The largest decline(US$ 34 million to US$6 million) was in theindustrial goods and materials sector for thesame period

For 2013, valuations of Chinese companiesremained considerably below historicallevels, across all sectors, as reflected by thelowest median pre-money valuationsrecorded in 2013 since 2007.

For Europe, 2013 median valuations werein line with values recorded in 2012 inalmost all industry sectors.

US Europe China S&P 500


17/42


Section 1.2: Global VC initial equity rounds of financingAnalysis by stage of development and round class


18/42



1 8 1 2

2 3

2 0 2

1 9 2 2

3 5

1 9 9

8 7

6 0 7

4 7 5

5 6 6

7

4 5

4 0

2 1

6 1 4

9 1 6

1 0

1 0

1 1

5 5 4 8 3 4 1 1

1 2

1 1

3 4 1 3 1 0

2 3 5 5 4 3

2007 2008 2009 2010 2011 2012 2013

US Europe China Canada Israel India

Start-up (by number of rounds)

In 2013, the number of initial equity rounds of financing for the US and Europe two

of the most popular hotbeds for early stage investing were at their lowest since2007, perhaps reflecting a VC focus on exiting existing portfolio companies.


Initial equity rounds of financing by stage of developmentIn 2013, activity in the US was below historical levels, in terms of both value and volume

3 0 8

5 9 3

3 3 4

4 7 4

4 2 9

2 4 3

2 1 6

4 6 1

1 5

6 1

6 9 1

2 0

3 4

1 2 4

0 1 6 5

3 3 8

2 1

1 4

1 2

1 7

2 1 1

5 3 1 1 3

2 1

2 4

2 0

3 3 4 4 1 2

2 1 8 2

1 7

0 1

2007 2008 2009 2010 2011 2012 2013


Start-up (by amount invested in US$m)

During 2013, despite a 54% fall in the number of initial rounds when compared to

2012, the average deal size in the US doubled to US$2.5 million versus US$1.2 millionin 2012. In the US, the average deal size in 2013 was the second highest since 2007.

5 5 6

4 8 0

3 6 9

4 4 5

4 7 0 5

2 3

4

3 4

3 4 3

2 2 7

1 8 7

2 0 0

1 5 4

1 7 5

1 8 1

1 7 3

7 1 8

2 2

2 6

1 6 2

8 1 8

1 3

1 3

1 5

1 2 2

2 2 6 7

0

3 8

2 7

1 8

1 2 1

9 2 6

1 2 1

9 9 6 1

7 2 0

1 8

2007 2008 2009 2010 2011 2012 2013


Product development (by number of rounds)

Except for the US and India, the number of initial rounds in 2013 increased acrossmarkets compared to 2012 . In fact, four markets Europe, Canada, China and Israel reported the highest number of rounds at this stage since 2011.

3 , 1

5 2

2 , 8

1 8

1 , 7

0 5

1 , 7

8 2

1 , 6

7 2

1 , 8

6 1

1 , 5

8 4

7 8 5

5 6 4

7 7 9

4 8 4

3 6 7

2 2 3

4 2 3

4 7 1

9 0

1 0 7

1 8 7

2 2 1

5 1

3 8

6 2

2 5

4 1

3 3

3 0

4 5

4 0

4 0 9

1 0 6

6 2

4 1

2 0

5 7

7 2

4 4

7 4 3

1 5

1 5

4 1 2 5

0

2007 2008 2009 2010 2011 2012 2013


Product development (by amount invested in US$m)

Average deal sizes in Europe and India increased 2x and 5x, respectively, in 2013compared to 2012. The average size declined by 25% and 55% in Canada and China,respectively; however, it was nearly the same fo r the US and Israel,.


19/42



5 4

3 9

1 0

2 5 3

2

2 5 3

3

2 4

1 3

7

1 8

3 3

1 6

3 1

9 1

7 6

6 9

7 8

2 2

8 1 4

1 1 3 1 1 1 6

1 2 0 0 1 1 0 5 5 9 2 2 0 2

2007 2008 2009 2010 2011 2012 2013


5 0 3

5 0 5

3 2 7

4 8 9

7 3 7

8 1 1

7 7 2

5 7 5

4 7 4

3 9 5 4

9 0

4 9 2

5 1 1

5 0 3

1 5 1

1 1 9

1 1 5

1 5 0

2 0 1

1 3 4

1 3 6

4 2

2 4

1 9 2

9 4 3

5 1 6

6 2 8

2 5

1 2

8 1 5 1

6 2 9 4

4 6 5

3 7 5

7 8 9 1

1 8

1 0 5

2007 2008 2009 2010 2011 2012 2013


Revenue generation (by number of rounds)

The historical trend for the revenue generation stage recorded the highest number ofinitial rounds for the development stages in 2013 . The US continues to lead ,followedby Europe, although volume in both markets fell in 2013 over 2012.

Profitable (by number of rounds)

In 2013, the number of initial rounds nearly doubled in China, compared to 2012.The Chinese market has recorded the highest number of initial rounds from 2007 2010 for all geographies; however, that trend has been declining since 2011.


Initial equity rounds of financing by stage of developmentActivity remained softer in most markets in 2013 compared to 2012 levels

3 , 1

6 0

3 , 0

4 3

1 , 9

6 6

2 , 3

3 3 2

, 9 2 1

3 , 2

4 5

2 , 5

6 0

1 , 3

9 2

1 , 3

4 8

6 6 6 1

, 1 2 5

1 , 4

4 2

1 , 0

9 0

1 , 1

2 7

1 , 1

6 8

8 4 3

5 8 1

1 , 1

5 9

1 , 2

7 9

1 , 4

7 0

5 5 1

1 7 0

1 0 0

6 7 1

7 5

1 8 1

1 7 4

1 2 0

1 0 2

6 6

2 0

2 8

7 0 4

9 7 5

4 4 6

4 2 5

1 3 4

2 6 4

3 9 3

4 4 6

2 5 7

2007 2008 2009 2010 2011 2012 2013


Revenue generation (by amount invested in US$m)

Activity remained soft across markets in 2013 compared to 2012, except for Europeand Israel. Although China reported the largest decline (63% drop) in 2013, theaverage deal size was still the highest for China (US$4.1 million), across markets.

5 9 0

3 9 9

3 1 4

3 3 6

7 8 7

2 5 1

1 3 6

8 1

5 1

1 7

1 3 6 2

2 1

1 1 4

9 2

5 6 7 6

5 6

6 5 2 7

2 7

3 6 7

2 0 5

1 8 3

5 2 1

1 7

1 8 0

4 1

1 1 3

1 1 4 7

2 1 3

6 8 9 4

2007 2008 2009 2010 2011 2012 2013


Profitable (by amount invested in US$m)

The activity continued to decline further in 2013 in the three major VC markets theUS, Europe and China. The year 2013 marked Chinas return to the top position since2011, when the US took over the lead in terms of amount invested.


20/42



2 1 2

2 0 5

1 7 9

2 6 3

4 1 9

4 5 8

3 5 5

9 7

9 6

9 1

8 6 1

1 4 1

5 7

1 3 5

1 1

5 3 8 1 7

2 1

2 2

1 1

6 6 7 1 2 1

9 2 6

1 8

1 5

1 4

6 8 5 1 2

7 3 3 4 1 1 1

7 1 3

2007 2008 2009 2010 2011 2012 2013


9 8 4

9 6 8

6 8

8 8 4 3 1

, 0 0 8

1 , 0

3 4

9 7 2

7 8 0

6 5 4

5 2 2 6

2 6 5 9 0

5 7 6 6

1 9

2 2 2

1 8 7

1 5 3

1 8 3

2 0 7

1 2 2

1 6 1

5 4

3 2

2 8

3 7

4 7

5 3 7

3 8 1

5 7

3 5

2 4

2 2 3

3 4 8

5 4 7

5 5 3

5 4 8

4 1 2 1

1 0 5

2007 2008 2009 2010 2011 2012 2013


Seed round (by number of rounds)

First round (by number of rounds)

The first round continued to dominate, with the highest number of initial financingrounds recorded across geographies.

After seeing an increase for the past three years in the number of initial roundsinvested, the US and Europe dropped in 2013. However, the volumes still remainsignificantly higher than 2010 levels.


Initial equity rounds of financing by round classDespite slow activity in the US, the average deal size in the region primarily remained in line with2012 levels

1 3 3

1 3 0

1 0 4

1 8 8

2 9 1

2 8 3

2 2 1

5 2 7

2

4 9 5

3 6 1

6 3

5 2

1 3

4 2 1 1 2

6 1 1

8 4 1 7 1 2

7 2 2

2 0

6 7 4 7 7 9 5 1 1 3 1 4 2

2007 2008 2009 2010 2011 2012 2013


6 , 1

8 1

6 , 0

6 1

3 , 6

1 9 4 , 4

9 1

4 , 7

5 7

4 , 7

3 5

4 , 3

8 2

1 , 9

2 4

1 , 8

4 6

1 , 3

9 6

1 , 6

4 4

1 , 9

8 7

1 , 3

6 6

1 , 5

8 4

1 , 4

3 6

1 , 3

1 0

7 3 7 1

, 3 5 0

1 , 4

3 4

9 1 8

5 8 9

2 3 1

1 1 5

1 1 7

2 0 1

1 6 7

2 0 6

1 8 1

5 2 1

2 2 6

9 7

9 3

7 7 1

2 0

1 5 3

4 0 5 1

, 0 9 8

1 7 6

2 9 1

3 2 4

2 6 1

2 4 1

2007 2008 2009 2010 2011 2012 2013


Seed round (by amount invested in US$m)

First round (by amount invested in US$m)

In 2013, the average deal sizes for most VC markets were more or less in line with2012 levels. However, average value in Canada and China declined by 36% and 51%,respectively, during the same period.

The average deal sizes for US (US$0.6 million) and Europe (US$0.4 million) largelyremained unchanged in 2013 when compared to 2012 , despite a fall in number ofrounds.


21/42



0 2 0 0 2

1 4

4 2

0 0 0

1 9

3 7

1 5

1 2

1 2

0

1 2

0 0

3 0

0 0 0 0 0 0 0 0 2 0 2 0

1 0

0 0 0

7

0 0 0 0 0

2007 2008 2009 2010 2011 2012 2013


1 , 0

2 7

6 9 5

6 4 5

3 9 2

7 6 7

6 8 6

4 9 3

3 9 5

2 2 6

1 3 6

1 3 4

1 5 6

7 9 1

4 4

3 7 7

4 3 2

6 4 4 7

6 3

4 5 3

7 8 9

2 3 4

1 6

1 1

2 1

3 1 4

6 1 0 9

1 6

2 4

2 0 0 4 0 0

1 4 2

8 2

2 4 8

1 1 0 1 2

0 9

7 2

2007 2008 2009 2010 2011 2012 2013


Second round (by amount invested in US$m)

Later stage (by amount invested in US$m)

Average deal sizes in 2013, recorded a steep decline from 2012 in Canada (fromUS$27.2 million to US$2.3 million), China (from US$30.4 million to US$21.3million) and India (from US$19.0 million to US$6 .6 million).

Since 2011, the amount invested in the US continued its upward trajectory to

reach US$42 million in 2013. However, VC activity in Europe saw a consistentdecline in terms of amount invested in Europe, during the same period.


Initial equity rounds of financing by round classSecond round continued to record the lowest activity across round classes

0

1

0 0

1

3

8

0 0

1

2

4

3

6

1

0

1

0 0

1

0

1

0 0 0

1

0 0

1

0

1

0

2

0 0 0

1

0 0 0 0

1

2007 2008 2009 2010 2011 2012 2013


7 6

6 1

2 9 3

5

5 1 5 7

3 8

6 6

3 4 4

1

3 6

3 5

2 3

2 0

4 4 4

6 5 9

7 0

3 7

2 6

1 1

2 4 4 6 4 4 7 6 3 1 0 1 0 0

1 0

9 4

1 0 1

3 1 1

1 1

2007 2008 2009 2010 2011 2012 2013


Second round (by number of rounds)

Later stage (by number of rounds)

During 2013, the number of initial rounds declined or remained the same acrossmarkets, compared to 2012, except Canada (the volume increased from 4 to 7during the same period).

In 2013, the number of initial financings recorded in the second round increased

for the US and Europe compared to 2012, although the activity remainedsignificantly lower than that seen for other round classes.


22/42


Section 1.3: Global VC fundraising activityAnalysis by geography


23/42


VC fundraising activityEarly-stage fundraising activity remained strong in the US in 2013


Amount closed (US$ b) (2007 13 )

Number of final closings (2007-13)

123127

85

10596

118

153

6751

38

2842

48

3224 28

39

54 78

4837

2007 2008 2009 2010 2011 2012 2013

US Europe Asia-Pacific

20 19

9 10

17

20

17

4

11

34

1 2 31

6

2 2

7

10

2007 2008 2009 2010 2011 2012 2013


73 67

48 49 4842

3154

62

3126 25 23 23

36

48 50 50

38 36

23

2007 2008 2009 2010 2011 2012 2013


Early-stage Late-stage Multistage

Early-stage Late-stage Multi-tage

14.412.0

6.4 6.3 6.2 6.29.4

5.7

5.1

2.4 1.7 2.3 3.42.2

2.5

2.0

1.8 4.1

10.7

3.61.2

2007 2008 2009 2010 2011 2012 2013


8.5

4.2

0.92.7

5.6 5.1 4.5

0.3

0.9

0.2

0.2

0.10.2 0.4

0.0

1.0

0.1

0.0

1.50.2

0.0

2007 2008 2009 2010 2011 2012 2013


15.913.3

7.3 8.1 8.310.2

5.0

3.34.3

2.8 2.0 2.51.3

2.2

3.2 5.4

4.83.0

6.32.8

2.4

2007 2008 2009 2010 2011 2012 2013


In 2013, 153 early-stage funds in the US raised US$9.4 billion, the highest total since 2009, both in terms of va lue and volume. This suggests, US investors will be able to makemore investments in early-stage companies in 2014 and beyond. The fundraising activity for late and multistage focused funds was lower compared to last year.

In Europe, while VC fundraising activity at early stage softened in 2013, both in terms of value and volume , there was stability in the other two stages compared to 2012. For the Asia-Pacific region, fundraising activity continued its downward trajectory begun in 2011 for early-stage and multistage categories, and there was no late-stage activity in

2013. Compared to 2012, the average fund size at early-stage dropped by almost 50% to US$33 million in 2013, and for multistage the average size saw a 31% increase to reachUS$104 million.


24/42


Section 2: Angel and incubator participation trendsAnalysis by geography and stage of development


25/42


Section 2: Angel and incubator participation trends Summary

Participation of angel investors and incubators continues to increase globally While historically the percentage of angel/incubator participation has been the highest in the US (12% in 2013),

the trend is quickly catching up in other markets. For the last two years, the percentage of angel/incubatorparticipation has been the highest in Canada (20%), followed by India (17%).

However, Israel and China are two countries that have the lowest angel/incubator participation in overall VCinvestment.

One in every four start-up stage VC rounds in the US and Europe in 2013 was by an angel investoror incubator In the US and Europe, the start-up stage of VC rounds saw maximum participation by an angel investor or

incubator in 2013, with a significant increase in the angel/incubator participation rate at the start-up stage to 25%and 27% from 15% and 9% in 2010, for US and Europe, respectively. However, the percentage share at subsequentstages of development was far lower for these regions.

The highest angel/incubator participation in Canada in 2013 was at the product development stage (34%) and notat start-up stage, unlike other geographies.

In China, at the revenue generation stage, there was a significant increase in angel/incubator participation (9 outof 244 rounds in 2013 as compared to just 4 out of 213 rounds in 2012).

In Israel and India, the only two development stages that are attracting some interest from angel investors andincubators are product development and revenue generation, with no angel/incubator participation in the regionsfor start-up stage since 2010.


26/42


97139 113

168249

229 21335

3630

50

121 191 205

2007 2008 2009 2010 2011 2012 2013

US

3,132 3,081 2,786 3,161 3,599 3,648 3,479


Angel/incubator participation trendsParticipation of angel investors and incubators continues to increase globally

Totalnumberof rounds

4661 52 55 60

69 796

168

6 11

29

67

2007 2008 2009 2010 2011 2012 2013

Europe

1,758 1,479 1,288 1,411 1,322 1,320 1,395


3 25

14

1

2

3

2007 2008 2009 2010 2011 2012 2013

China

396 362 315 388 404 261 314Totalnumberof rounds

32

3 3

7

12

1 3

2007 2008 2009 2010 2011 2012 2013

Israel


3 4 2 5

2419

1

2 18

2007 2008 2009 2010 2011 2012 2013

India


Angel participation Incubator/accelerator participation

Historically, the percentage of angel/incubator participation has been the highest in the US (12% in 2013). However, the trend is quickly catching upin other markets, reflected by their increasing percentage share of angel/incubator participation in 2013 over 2012.

Over the last two years, the percentage of angel/incubator participation has been the highest in Canada (20% in 2013), followed by India (17% in2013). However, Israel and China are two countries with the lowest angel/incubator participation in overall VC investment.

No angel/incubator participation

No angel/incubator

participation2 3 2 58

1320

3 3 3

4

9

16

2007 2008 2009 2010 2011 2012 2013

Canada



27/42


11

2516 17

31

137

15

15

1316

34

45

20

2007 2008 2009 2010 2011 2012 2013

Start-up

190 237 226 218 262 221 106



27 46 51

6889

6446

9

14 8

18

53

68 96

2007 2008 2009 2010 2011 2012 2013

Product development

1,086 1,049 940 1 ,075 1,031 943 807Totalnumberof rounds

54 65 45 80

120148 155

10 6 9

15

33

7687

2007 2008 2009 2010 2011 2012 2013

Revenue generation

1,649 1,605 1,492 1,737 2,147 2,342 2,433Totalnumberof rounds

5

31

3

9

45

1

1 1

1

22

2007 2008 2009 2010 2011 2012 2013

Profitable


23 3

5

23

1

42

1

2

711

2007 2008 2009 2010 2011 2012 2013

Start-up

65 78 80 66 72 53 41


1722

1814 14

1812

3

5

23 3

723

2007 2008 2009 2010 2011 2012 2013

Product development


26 34 3136 39

4664

17 4

2 615

32

2007 2008 2009 2010 2011 2012 2013

Revenue generation

1,045 914 823 9 22 89 5 936 1,003Totalnumberof rounds

12

5

231

1

2007 2008 2009 2010 2011 2012 2013

Profitable


In 2013, around 25% of VC rounds in the US and Europe at start-up stage were by an angel or incubator; however, the percentage share was far lowerat all other subsequent stages of development.

In the US, the angel/incubator participation at the start-up stage has increased significantly from 15% in 2010 to 25% in 2013. In Europe, too, theuptrend since 2010 continued through 2013, with angel/incubator participation growing from 9% in 2010 to 27% in 2013.

Angel/incubator participation by stage of developmentIn the US and Europe, one in every four VC rounds at start-up stage in 2013 is by an angelinvestor or incubator

US

Europe

No angel/incubator

participation



28/42


1 1

2

1

1

2007 2008 2009 2010 2011 2012 2013

Start-up

19 6 13 9 16 12 10


1 1

4

2007 2008 2009 2010 2011 2012 2013

Product development


1 13

8

1

1

1

2007 2008 2009 2010 2011 2012 2013

Revenue generation


1 1

2007 2008 2009 2010 2011 2012 2013

Profitable


Unlike other geographies, the highest angel/incubator participation in Canada in 2013 was at product development stage and not at start-up stage.Overall, the country recorded the highest angel/incubator participation among the other geographies for the last two years.

In China, only six out of 85 start-up stage rounds since 2007 involved angel investors or incubators. At the revenue generation stage, there was asignificant increase in angel/incubator participation (9 out of 244 rounds in 2013 as compared to just 4 out of 213 rounds in 2012).

Angel/incubator participation by stage of developmentCanadian companies continue to attract significant angel/incubator interest

China





No angel/incubator

participation


1 1 1 1 1

1

2

1

1

2007 2008 2009 2010 2011 2012 2013

Start-up

12 6 8 6 8 3 5


1 13 2 1

42 11

6

8

2007 2008 2009 2010 2011 2012 2013

Product development


1 1 1

6

11

16

2 1 2

1

2

6

2007 2008 2009 2010 2011 2012 2013

Revenue generation

86 72 51 70 9 6 104 126Totalnumberof rounds

1

2007 2008 2009 2010 2011 2012 2013

Profitable


Canada

No angel/incubator participationNo angel/incubator

participation


29/42


2

2007 2008 2009 2010 2011 2012 2013

Start-up

11 12 11 3 6 2 4



1

5

21

2

2007 2008 2009 2010 2011 2012 2013

Product development


3

2

3

2

1 1

2007 2008 2009 2010 2011 2012 2013

Revenue generation


2007 2008 2009 2010 2011 2012 2013

Profitable


2

1

2007 2008 2009 2010 2011 2012 2013

Start-up

11 2 4 5 5 4 4


12

3

1

1

2

8

2007 2008 2009 2010 2011 2012 2013

Product development


1 3 1 3

2118

10

2007 2008 2009 2010 2011 2012 2013

Revenue generation


2007 2008 2009 2010 2011 2012 2013

Profitable


In Israel and India, product development and revenue generation are the only two development stages that are attracting some interest from angelinvestors and incubators.

In Israel, there was a significant improvement in 2013, when angels/incubators participated in 5 out of 123 rounds, across development stages,compared to just 1 out of 94 rounds in 2012.

Angel/incubator participation by stage of developmentIsrael and India are yet to see any angel/incubator participation at start-up stage since 2010

Israel

India





N/A

N/A N/A N/AN/A N/A

N/A N/AN/A N/A


30/42


Section 3: Global VC exit landscape through IPOs and M&AsAnalysis by median amount raised, median time from initial financing to exit and exit ratio quartile


31/42


Section 3: Global VC investment activitySummary

US and Chinese markets remain popular with VC investors looking to exit through IPO route The US and China continue to be the most active markets for venture-backed IPOs in 2013, although the amount

raised through IPO exits fell significantly in both the markets. In the US, despite nearly a 50% increase in volume, the amount raised fell by 27% in 2013 over 2012. For China,the IPO exit volumes dropped to levels last seen in 2008, primarily due to a year-long IPO ban in the country.

In the US, the median amount raised prior to IPO in 2013 was a substantial $100.9 million. While in the US, time to IPO exit in 2013 marginally came down compared to 2012, for Chinese companies median

time to IPO exit went up significantly from 2.4 to 3.9 years. Chinese VC-backed companies surpassed US companies in terms of median pre-IPO valuations in 2013. IPO exit ratios have continued to fall further in the US and China since 2011. Among the US, Europe and China,

Europe was the exception, where 50th

and 75th

percentile exit ratios went up in 2013 compared to 2012, primarilydue to higher valuations in Europe for VC-backed IPOs in 2013.

M&A exit ratios in 2013 improved across the US, Europe and Israel on the back of improvedvaluations and early exits Global economic uncertainty continued to impact M&A exits as reflected by declining numbers across markets,

except for China. Among the US, Europe and Israel, the US saw the lowest exit ratio quartiles in 2013. For Israel, the third quartile

exit ratio was 48.3, the highest in recent years. Except for the US, the median pre-money valuations were significantly higher than year-ago levels across markets.

During 2013, the median valuations achieved recent high levels in Europe, China, Israel and India, indicating VCinvestment outlook largely remains positive in these markets.

The median amount raised prior to M&A and median time to M&A exit declined in 2013 compared to 2012 for mostVC markets the exceptions being China and Canada.


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9

2

0 0 11

1

9

0

2 2 2

0

22

2

0

6

2 2

1

2007 2008 2009 2010 2011 2012 2013

Canada Israel India

0.4

0.0 0.0 0.0

0.1

0.0 0.00.1

0.0 0.00.0 0.0

0.0

0.20.2 0.2

0.0

0.5

0.0 0.0 0.0

2007 2008 2009 2010 2011 2012 2013

Canada Israel India

80

8

8

47 4650

74

46

103

18 15 16 1526

12

45

141

99

46

15

2007 2008 2009 2010 2011 2012 2013

US Europe China

Amount raised through IPO exits (US$b). Proceeds only include new shareholders.

US and China continue to be the most active markets for VC-backed IPOs in 2013, although the amount raised through IPO exits fell significantly in bothgeographies. Notably, for the US, the average listing size also decreased from US$224 million in 2012 to US$111 million in 2013. Biopharmaceuticals andthe consumer information services sector, respectively, drove the IPO activity in the US and China, in terms of both value and volume

Encouraging economic conditions supported a sudden increase in the number of venture-backed IPOs in the US. For China, however, the IPO exit volumesdropped to levels last seen in 2008, primarily due to the year-long IPO domestic exchange ban in the country.

Number of IPO exits

Global VC-backed IPOsThe US and Chinese markets remain popular with VC investors looking to exit via IPO

7.5

0.6 0.93.2

5.3

11.28.2

1.10.0 0.2

0.6 1.0 0.5 0.63.3

0.64.5

22.0

15.6

4.42.0

2007 2008 2009 2010 2011 2012 2013

US Europe China

Source: Dow Jones VentureSourceNote: Chart scales vary for the purpose of clarity.


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Median amount raised prior to IPO (US$m)

Median pre-IPO valuation (US$m)


6.8

8.77.9 8.0

6.47.3 6.8

6.4

8.1

NS

3.8

9.2

6.26.3

1.8

3.8

2.3 2.62.5 2.4

3.9

2007 2008 2009 2010 2011 2012 2013

US Europe China

Median time from initial VC financing to IPO exit (in years)

306.9

237.8

382.9

296.3

457.2

362.2

289.3

66.08.2

NS

41.7 51.9 27.2

85.6

452.7

112.0

229.6

358.0 365.3

225.1

398.6

2007 2008 2009 2010 2011 2012 2013

US Europe China

In the US, the median amount raised prior to IPO in 2013 was asubstantial $100.9 million. Among the US, European and Chinesecompanies, the US companies continued to raise the highestamounts of VC funding before exiting via the capital markets.

With the Chinese stock exchanges closed for new IPOs for most ofthe year, the median time from initial VC financing to IPO exitincreased to close to 4 years in 2013 from 2.4 years in 2012. In theUS, time to IPO exit in 2013 decreased marginally compared to2012.

In terms of median pre-IPO valuations, Chinese VC-backedcompanies surpassed US companies, recording a median pre-IPOvaluation of around US$400 million in 2013. The US continued thedowntrend from 2012, while there was a trend reversal in bothChina and Europe.

64.4

48.642.5

72.1

82.878.4

100.9

7.2 3.0 NS

21.5 22.4 23.9 26.418.2

3.7 5.0 6.9 5.9 7.4

46.1

2007 2008 2009 2010 2011 2012 2013

US Europe China

Global VC-backed IPOsIn China, IPO exits declined in 2013 while pre-IPO valuations and amount raised pre-IPO went up

l b l b k d


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IPO exit ratio quartiles US

IPO exit ratio quartiles China


3.22.3

10.3

2.3

3.62.9

2.6

6.14.8

13.5

4.1

8.7

5.8

3.6

11.1

9.0

16.3

8.7

15.9

12.3

6.1

2007 2008 2009 2010 2011 2012 2013

25th quartile 50th quartile 75th quartile

3.9

1.3

7.9

2.4

3.42.7 2.3

8.3

3.0

9.5

3.75.5

3.6

5.5

15.2

4.7

11.1

7.0

8.4

5.6

12.0

2007 2008 2009 2010 2011 2012 2013


IPO exit ratio quartiles Europe

10.818.0

31.7 33.042.2

27.69.1

43.142.0

83.0 63.9 80.1

37.7

12.0

110.5

71.1

157.3

181.3

144.8

66.9

17.1

2007 2008 2009 2010 2011 2012 2013


In the US, IPO exit ratios continued to fall further since 2011 levelsin 2013, primarily due to a considerable drop in the amount of IPOvaluation but significant increase in amount raised pre-IPO.

China reported a similar situation as the US in 2013. Exit ratios inChina hit a new low, with exit quartiles recording a steady declinesince 2011

Among the US, Europe and China, Europe was the exception, where50 th and 75 th percentile exit ratios went up in 2013 compared to2012. This was in line with higher valuations in Europe for VC-backed IPOs in 2013. Total amount raised through VC-backed IPOsin Europe was US$643 million, up from US$494 million in 2012.

Global VC-backed IPOsIPO exit ratios continue to fall further since 2011 levels in the US and China

Gl b l VC b k d M&A


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37

30 29

34

24 28

28

24 24

18 19 1819

1010

2

6

17

6

16 13

2007 2008 2009 2010 2011 2012 2013

Canada Israel India

28.0NS

29.3 35.0

156.4

70.0

100.0

33.050.0

25.535.0 30.0 24.9

143.1

NS NS NS

27.0

NS18.4

46.5

2007 2008 2009 2010 2011 2012 2013

Canada Israel India

526

448 429

593 562

490436

329

251

204 217216

162 157

10 9 14 18 11 11 20

2007 2008 2009 2010 2011 2012 2013

US Europe China

M&A median pre-money valuation (US$m)

Except for the US, the median pre-money valuations were significantly higher than year-ago levels across markets in 2013. During 2013, the median valuationsachieved recent high levels in Europe, China, Israel and India, indicating that the VC investing outlook largely remains positive in these markets.

Global economic uncertainty continues to impact M&A exits, reflected by declining numbers across all markets, except for China. The number of exits increasedfrom 11 in 2012 to 20 in 2013 in China.

Number of M&A exits

Global VC-backed M&AsM&A median pre-money valuations were the highest since 2007, for most VC markets

58.3

31.5 25.037.8

60.0 60.0 57.5

24.9 27.3 24.8 23.0

40.5

26.7

63.867.5

0.0

27.6

61.4

80.0

33.0

87.5

2007 2008 2009 2010 2011 2012 2013

US Europe China

Source: Dow Jones VentureSourceNote: Chart scales vary for the purpose of clarity.

Gl b l VC b k d M&A


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5.2

5.15.9

7.1

4.4 6.7

3.3

7.5

4.2

8.69.7

6.7

7.5

5.95.9

NS

4.2

3.54.1 4.0

2.5

2007 2008 2009 2010 2011 2012 2013

Canada Israel India

6.5

5.85.5 5.3 5.3 5.2 5.0

6.5 6.7

5.55.7 5.5 5.9

6.3

3.5 3.73.4 3.8

4.1 4.43.5

2007 2008 2009 2010 2011 2012 2013US Europe China

Median amount raised prior to M&A (US$m)

Historically, the median amount raised prior to M&A has been the highest in the US, followed by Israel. In the US, Europe, Israel and India, the medianvalues have declined compared to 2012.

Since 2010, the median time from initial VC financing to exit continued to be the highest for Israeli companies. However, median time in Israel came downin 2013 compared to 2012 levels, in line with all other geographies other than Europe.

Median time from initial VC financing to M&A exit (in years)


20.2 19.9 19.719.0

15.6 16.8

11.4

4.4 3.94.8 4.8 5.7

7.1

5.5

15.3

9.0 9.6

13.5 12.8

3.0

10.2

2007 2008 2009 2010 2011 2012 2013US Europe China

5.710.0

11.3

8.7

6.8

7.5

10.012.8 11.4

20.6

17.9

13.2

14.7

6.89.5

NS NS

5.7

15.1

5.53.0

2007 2008 2009 2010 2011 2012 2013

Canada Israel India

Global VC-backed M&AsMedian amount raised prior to M&A and median time to M&A exit declined in 2013 compared to2012


Gl b l VC b k d M&A


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M&A exit ratio quartiles US

M&A exit ratio quartiles Israel


0.90.4 0.4

0.61.3 1.3 1.3

2.7

1.61.3

1.8

3.6 3.3 3.6

6.25.3

5.35.3

7.58.3 8.5

2007 2008 2009 2010 2011 2012 2013


1.52.0

1.22.1 1.2 1.9

3.03.24.1

2.9

3.7 4.4

2.6

5.47.0

9.7

7.1 6.2

12.0

5.0

12.1

2007 2008 2009 2010 2011 2012 2013


M&A exit ratio quartiles Europe

2.62.7

0.4 0.5 0.7 0.9 4.55.1

5.5

0.91.9

1.54.6

15.06.1

40.2

5.1 4.46.0

19.5

48.3

2007 2008 2009 2010 2011 2012 2013


Looking at the last three years of data for median M&A exit ratios,VC-backed companies in the US had been valued about 3.5 times onthe funds raised prior to executing their M&A. In 2013, the medianexit ratio was just slightly up from 2012.

Among the US, Europe and Israel, the US saw the lowest exit ratioquartiles in 2013.

Historically, Israel has recorded higher exit ratios than those in theUS and Europe. In 2013, the third quartile exit ratio was as high as48.3, the highest in recent years.

Global VC-backed M&AsM&A exit ratios in 2013 improved across the US, Europe and Israel on the back of improvedvaluations and early exits

S ti 4 T 10 VC i t i l t 365 d


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Section 4: Top 10 VC investors in last 365 daysAnalysis by amount invested and number of investments

T 10 VC i t


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InvestorNumber ofinvestment

rounds

Amountinvested(US$m)

Acquired/mergedcompanies (as a

percentage oftotal)

Publicly heldcompanies (as a

percentage of total)Year founded

Kleiner Perkins Caufield & Byers 71 1,920 25% 25% 1972

Accel Partners 73 1,671 35% 14% 1983

Andreessen Horowitz 81 1,660 8% 3% 2008

Sequoia Capital 89 1,539 27% 19% 1972

Bessemer Venture Partners 53 1,440 37% 17% 1971

New Enterprise Associates 72 1,386 32% 19% 1978

Index Ventures 62 1,322 25% 6% 1992

Greylock Partners 51 1,269 39% 23% 1965

Google Ventures 80 1,160 9% 2% 2009

Institutional Venture Partners 21 1,110 38% 26% 1980

Notes:(1) Sector focus: software for all investors except for Index Ventures, for which it is consumer information services(2) Round class focus: first round for all investors except for Institutional Venture Partners, for which it is second round

Top 10 VC investorsBy amount of investment in last 365 days through 13 February 2014


T 10 VC i t


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Investor

Number of

investmentrounds

Amount

invested(US$m)

Acquired/merged

companies (as apercentage of total)

Publicly held

companies (as apercentage of total) Year founded

500 Startups LP 133 206 9% 0% 2010

Sequoia Capital 89 1,539 27% 19% 1972

Andreessen Horowitz 81 1,660 8% 3% 2008

Google Ventures 80 1,160 9% 2% 2009

Accel Partners 73 1,671 35% 14% 1983

New Enterprise Associates 72 1,386 32% 19% 1978

Kleiner Perkins Caufield &Byers 71 1,920 25% 25% 1972

Intel Capital 69 937 35% 10% 1991

Index Ventures 62 1,322 25% 6% 1992

First Round Capital 59 635 23% 0.5% 2004

Notes:(1) Sector focus: software segment for all investors except for 500 Startups LP, Index Ventures and First Round Capital, for which itis consumer information services(2) Round class focus: first round for all investors except for Intel Capital, for which it is second round

Top 10 VC investorsBy number of investments in last 365 days through 13 February 2014


A di d fi iti d t l ifi ti


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Appendix: definitions and sector classification

Definitions

Incubators: Incubators are organizations, public or private, that supportthe entrepreneurial process and in general try to increasethe survival rate for innovative start-up companies. Theprimary purpose of the incubator is to invest in privatelyheld companies.

Angel Investors: An angel group is defined as a group of accredited

investors that make investment decisions based on theconsensus of the membership.

Sector Sub-sector

Business and financial services Business support servicesConstruction and civil engineeringFinancial institutions and servicesWholesale trade and shipping

Consumer goods Food and beverageHousehold and office goodsPersonal goodsVehicles and parts

Consumer services Consumer information servicesMedia and contentRetailers

Travel and leisureEnergy and utilities Non-renewable energy

Renewable energyUtilities

Health care BiopharmaceuticalsHealth care servicesMedical devices and equipmentMedical software and information services

Industrial goods and materials Aerospace and defenseAgriculture and forestryMachinery and industrial goodsMaterials and chemicals

Information technology Communications and networkingElectronics and computer hardwareSemiconductorsSoftware


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EY Venture Capital Insights 2013 Year End

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