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Bet ter Data. Bet ter Deci si ons.

PitchBook
Late stage fnancings mirror
the public markets.
PAGE 5
VC VALUATIONS
& TRENDS
2H 201 4 REPORT
PAGE 12: VALUATI ON CHANGES BETWEEN ROUNDS PAGE 1 4: VALUATI ONS AT EXI T

Series B valuations
rocket to $41 million;
Series D+ remains
elevated at $164 million.
PAGE 6
CONTENTS
Introduction
Overview
Median Valuations
Seed Stage
Series A
Series B
Series C
Series D and Later
Valuation Changes Between Rounds
Exits by Valuations
3
4-5
6
7
8
9
10
11
12-13
14-15
CREDI TS & CONTACT
PitchBook Data, Inc.
JOHN GABBERT Founder, CEO
ADLEY BOWDEN Senior Director, Analysis
Content
ALEX LYKKEN Editor
ANDY WHITE Lead Data Analyst
Contact PitchBook
pitchbook.com
RESEARCH
research@pitchbook.com
EDITORIAL
editorial@pitchbook.com
SALES
sales@pitchbook.com
COPYRIGHT 2014 by PitchBook Data,
Inc. All rights reserved. No part of this
publication may be reproduced in any
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and retrieval systemswithout the express
written permission of PitchBook Data, Inc.
Contents are based on information from
sources believed to be reliable, but accuracy
and completeness cannot be guaranteed.
Nothing herein should be construed as any
past, current or future recommendation to
buy or sell any security or an offer to sell, or
a solicitation of an offer to buy any security.
This material does not purport to contain
all of the information that a prospective
investor may wish to consider and is not to
be relied upon as such or used in substitution
for the exercise of independent judgment.
Want to see more detail?
The PitchBook Platform has thousands of valuations on individual
companies and VC rounds waiting for you to explore. Find out
more by emailing demo@pitchbook.com or visiting pitchbook.com.
Introduction
1 , 068
3, 703
29%
2, 423
8, 630
28%
2, 490
8, 483
29%
2, 203
7, 359
30%
1 , 31 7
5, 937
29%
1 , 239
4, 837
27%
1 , 450
5, 363
27%
1 , 1 70
4, 858
24%
7 7 7
3, 761
21%
603
3, 292
18%
2014 2013 2009 2011 2007 2012
# OF
VALUATI ONS
# OF
VC DEALS
% OF
DEALS WI TH
VALUATI ONS
2008 2010 2006 2005
COUNT OF VC VALUATIONS IN THE PITCHBOOK PLATFORM BY
INVESTMENT YEAR
Valuations have become the topic du jour of
the VC industry in recent quarters. A record
number of startups have raised financing at
valuations north of $1 billion, a handful of which are
valued much higher, like Uber ($18. 2 billion) Airbnb
($10.3 billion) and Snapchat ($10 billion). Several
secular trends are at work, as many have pointed
out, to cause valuations at both the late and early
stages to balloon as much as they have. Among
other reasons, successful technology startups have
very large user bases to work with, and technology
adoption rates have rapidly increased in recent
years, which explains why some startups have
amassed upwards of $50 million in funding just
months after being founded. Additionally, non-
traditional investors like hedge funds, mutual funds
and private equity firms have entered the picture in
later rounds, seeking pre-IPO exposure to startups
and competing vigorously for those investments,
pushing valuations up higher. Furthermore, public
markets have been on a tear in recent years, with
private valuations following the same trajectory.
Small surprise, then, that concerns over a bubble
in the public markets have seeped into the private
markets, as well, especially as VC financing activity
is approaching levels not seen since the dot-com
days.
The purpose of this report isnt to weigh in on that
debate, but to add further context to the discussion
by breaking down our collection of valuations,
which numbers over 16,000. In addition to the
familiar later stage valuations that make headlines,
weve also collected thousands of valuations across
the spectrum of the VC cycle, including the seed
and Series A stages. Additionally, we looked at
valuation trends for startups as theyve grown, and
included the percentage changes in valuations from
previous rounds, as well as a breakdown of up, fat
and down rounds by quarter. Finally, we took a look
at valuations in relation to exits, which ultimately
factor into the assumptions of every VC investor. Exit
activity remains strong, with all three of the major
exit ramps (IPOs, acquisitions and buyouts) providing
strong returns due to favorable market conditions
affecting each of them.
We hope the information in this report proves
insightful and informs your decision-making process
in the coming quarters. If you have any questions,
comments or suggestions, please contact us at
research@pitchbook.com.
3
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Overview
VC DEAL FLOW BY QUARTER
Despite high valuations,
investors have continued
to funnel signifcant amounts of
capital into startups, including a
post-2001 high $22.8 billion in 2Q
2014. Much of that is from non-
traditional investors like hedge
funds, PE frms and mutual funds,
but a good deal of it comes from
more traditional VC investors, as
well. As the chart above shows,
fnancing activity has cooled
off somewhat since early 2013,
particularly at the angel/seed
and early stages. Many industry
professionals have cited high
valuations for the slowdown.
Indeed, as the chart on the
next page illustrates, valuations
across the VC spectrum have
largely mirrored the run-up in
the public markets. Founders
are arguing (often persuasively)
that their disruptive startups
will one day be as valuable as
the current technology giants
trading on the stock markets.
Moreover, as Wilson Sonsinis
Craig Sherman and Herb Fockler
recently told us, the ability of
later-stage private companies to
successfully go public or sell at an
attractive valuation is driving the
assumptions of VC frms on their
expected returns. At the seed
stage, the median pre-money
valuation has jumped to $5.9
million, easily a ten-year high. The
median Series A valuation remains
elevated at $6.4 million, while the
median Series B valuation came
in at $35.2 million through 1H
2014, a 37% pop over the $25.9
million median recorded in 2013.
That pales in comparison to the
increase in later-stage valuations;
through 1H 2014, the median
pre-money valuation for Series D
and later rounds came in at $171.5
million, a 63% increase over 2013.
The frst half of this year featured
some historically large fnancings,
Financing activity
has dipped in
recent years, but
capital invested is
up
Source: PitchBook
VC DEAL FLOW BY
YEAR
Source: PitchBook
$
1
0
$
8
$
8
$
8
$
1
0
$
1
0
$
9
$
1
1
$
1
5
$
1
5
$
1
3
$
1
2
$
1
3
$
1
3
$
1
2
$
1
2
$
1
2
$
1
3
$
1
3
$
1
4
$
1
7
$
2
3
1,359
1,078
1,151
1,249
1,599
1,458
1,377
1,503
1,991
1,785
1,799
1,784
2,284
2,134
1,999
2,065
2,307
2,251
2,133
1,939
1,851
1,852
0
500
1,000
1,500
2,000
2,500
$0
$5
$10
$15
$20
$25
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2009 2010 2011 2012 2013 2014
Capital Invested ($B) # of Deals Closed Angel/Seed Early Stage Late Stage
$
3
9
$
5
6
$
5
0
$
5
2
$
4
0
5,937
7,359
8,482
8,630
3,703
2010 2011 2012 2013 2014*
Capital Invested ($B)
# of Deals Closed
*as of 6/30/14
4
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
MEDIAN % ACQUIRED BY STAGE AND YEAR
many of which came from those
non-traditional investors. Airbnb,
for instance, raised over $500
million in April at a $10.3 billion
pre-money valuation, led by TPG
Growth. Transportation service
Uber received a $1.2 billion
round (at a $17 billion valuation)
in early June led by Fidelity,
Wellington Management and
BlackRock. Coatue Management,
the New York-based hedge fund,
has invested in fve VC-backed
companies just this year, including
Box, Snapchat, Lyft, Avvo and
Anaplan.
For founders, one of
the benefts to this frothy
environment is that, because
valuations are so high, investors
are willing to take smaller and
smaller stakes in startups, as the
chart above indicates. The rule
of thumb for Series A rounds
used to be about 33% acquired,
but beginning in 2010, the
median percentage acquired in
Series A rounds dipped below
30% for the frst time. Today,
the median stands at 27.7% for
Series A rounds, an almost ten
percentage point drop since
2005. Likewise, Series D and later
rounds are demanding less equity
to be surrendered; through 1H, the
median stands at 12.0%, down from
16.5% in 2005.
As well discuss further in the
last section, exit valuations have
shot up in the last year and a half,
topping out at an 11.2x median
through 1H 2014. Since 2013,
weve seen far more investors
MEDIAN VC VALUATIONS BY STAGE VS. MEDIAN NASDAQ
VALUE BY YEAR
get into the action pre-IPO, as
VC frms have launched funds to
take advantage of pro-rata rights
and increase their stakes in their
portfolio companies before they
go public. More broadly, high exit
valuations are strongly attributable
to the booming stock markets and
cash-rich strategic investors, which
have given VC investors ample
opportunities to fnd their exits.
Source: PitchBook
0%
5%
10%
15%
20%
25%
30%
35%
40%
2006 2007 2008 2009 2010 2011 2012 2013 2014*
Seed Series A Series B Series C Series D+
*as of 6/30/14
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
NASDAQ Composite Early Stage Later Stage
Source: PitchBook
*as of 6/30/14
The chart above compares the median valuations of early stage and late stage fnancings
versus the median value of the NASDAQ composite broken down by year.
5
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Median Valuations
As both of the charts to the
right indicate, valuations really
started to take off around early 2011,
though we saw some early signs of
infation as far back as 2010. Three
of the biggest quarterly spikes have
occurred this year, including big
jumps in the median valuation for
Series B fnancings in the second
quarter (37%) and Series D and later
rounds in 1Q. In both Series B and D+
rounds, valuations in 2Q are roughly
double the median found only two
years ago in 2Q 2012.
As weve mentioned in previous
reports, much of this boost in
valuations can be explained by a
subtle shift in the venture industry,
namely that the institutionalization
of seed investing has warped the
traditional investment timeline.
Many of the seed investments today
are essentially similar to Series A
investments ten years ago, even
fve years ago. Further down the
spectrum, thats translating into
some massive Series B and Series C
rounds, which used to be reserved
for younger companies. In recent
quarters weve seen some historically
late-stage investors enter into Series
B territory, including a handful of
hedge funds.
Toward the later end of the
spectrum, valuations have also
spiked. The median valuation for
Series D+ rounds in 1Q 2014 came
in at a post- fnancial crisis record of
$181.5 million. Series C rounds are
frothy, as well, at $80.5 million in 2Q
2014. As weve discussed elsewhere
in this report, there are downsides
to such high valuations, including
ambitious performance expectations
and thinner margins for error come
exit time.
EARLY STAGE MEDIAN VALUATIONS
BY QUARTER
$2.0 $2.6
$4.3 $4.2
$4.3
$5.5
$6.2
$7.3
$6.0
$6.8
$7.6 $7.2
$10.0
$9.5
$12.2 $12.1
$17.2
$17.9
$17.5
$21.1
$20.4
$24.7
$22.0
$25.1
$27.4
$30.0
$41.0
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
1Q 2Q3Q4Q1Q 2Q3Q4Q1Q 2Q3Q4Q1Q 2Q3Q4Q1Q 2Q3Q4Q1Q 2Q
2009 2010 2011 2012 2013 2014
Seed Series A Series B
LATE STAGE MEDIAN VALUATIONS
BY QUARTER
$30.1
$28.9
$34.9
$48.3
$66.6
$37.9
$72.2
$54.4
$80.5
$54.3
$44.9
$63.7
$79.8
$97.2
$79.7
$123.8
$125.8
$122.7
$181.5
$164.0
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q
2009 2010 2011 2012 2013 2014
Series C Series D+
6
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Series Seed
SEED VALUATIONS ($M) BY SECTOR
MEDIAN SEED ROUND DETAILS
% ACQUIRED
SOFTWARE
DEAL SIZE ($M)
MEDIA
ALL
COMMERCIAL SERVICES
Valuations in Series Seed rounds
have gradually increased
through the years. The median
valuation for 1H 2014 seed stage deals
reached $5.9 million, a 23% increase
over last years median of $4.8 million.
Back in 2010 the median came in at a
comparatively paltry $3.2 million, but
in the intervening years seed-stage
investing has become much more
institutionalized.
Since 2010, founders have given up
anywhere between 20% and 25% of
their startups at the seed stage, which
lends credence to the argument that
seed investments have become the
new Series A. Interestingly, founders
of software startups have given
away bigger stakes since 2011, from
a median of 20% that year to 23%
through 1H 2014.
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
2010 2011 2012 2013 2014*
All Software Media Commercial Services
15%
20%
25%
30%
'10 '11 '12 '13 '14*
All Software
Media Commercial Services
$3.25
$3.96
$4.40
$4.99
$5.86
$1.00
$1.02
$1.20
$1.25
$1.69
$0
$1
$2
$3
$4
$5
$6
$7
2010 2011 2012 2013 2014*
$3.48
$3.80
$4.23
$4.78
$6.96
$1.00 $1.00
$1.12
$1.25
$1.87
$0
$1
$2
$3
$4
$5
$6
$7
$8
2010 2011 2012 2013 2014*
$2.70
$3.50
$4.05
$4.65
$7.68
$0.93 $0.97
$1.00
$1.30
$1.87
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
2010 2011 2012 2013 2014*
$0
$.5
$1
$1.5
$2
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
$3.23
$4.07
$4.33
$4.80
$5.90
$1.00 $1.02
$1.14
$1.25
$1.67
$0
$1
$2
$3
$4
$5
$6
$7
2010 2011 2012 2013 2014*
Source: PitchBook
*as of 6/30/14
Pre Money Valuation Deal Size
Source: PitchBook
*as of 6/30/14
7
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Series A
SERIES A VALUATIONS ($M) BY SECTOR
MEDIAN SERIES A ROUND DETAILS
% ACQUIRED
SOFTWARE
UP, FLAT & DOWN ROUNDS
MEDIA
DEAL SIZE ($M)
COMMERCIAL SERVICES
The median valuation for
Series A rounds through
1H 2014 came in just under
$12 million. Thats a $2 million
increase from the median
last year ($10.0 million) and
close to double what we saw
for 2010 financings ($6.5
million). Valuations for software
companies consistently outpace
the median across all industries;
the 1H 2014 median was almost
a full $1 million above the overall
Series A median, at $12.9 million
versus $12.0 million. At the same
time, the median deal size for
software companies matched
the overall median for Series A
financings, at $5 million each.
$0
$2
$4
$6
$8
$10
$12
$14
2010 2011 2012 2013 2014*
All Software Media Commercial Services
Source: PitchBook
*as of 6/30/14
$6.67
$7.47
$8.49
$10.41
$12.89
$2.58
$3.00
$3.02
$3.69
$5.00
$0
$2
$4
$6
$8
$10
$12
$14
2010 2011 2012 2013 2014*
$4.83
$7.31
$8.77
$10.32
$11.28
$2.00
$2.50 $2.30
$3.38
$4.00
$0
$2
$4
$6
$8
$10
$12
2010 2011 2012 2013 2014*
$5.40
$7.58 $7.58
$10.10
$11.11
$2.00
$3.00
$2.13
$3.55
$4.00
$0
$2
$4
$6
$8
$10
$12
2010 2011 2012 2013 2014*
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014*
Up Flat Down
$0
$1
$2
$3
$4
$5
$6
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
18%
23%
28%
33%
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
Pre Money Valuation Deal Size
Source: PitchBook
*as of 6/30/14
8
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Series B
SERIES B VALUATIONS ($M) BY SECTOR
MEDIAN SERIES B ROUND DETAILS
% ACQUIRED
SOFTWARE
UP, FLAT & DOWN ROUNDS
MEDIA
DEAL SIZE ($M)
COMMERCIAL SERVICES
Valuations for Series B
fnancings are up substantially
in 2014. Through 1H, the median
valuation at the Series B stage
was $35.2 million, a 36% increase
over the $25.9 million median in
2013. That fgure may come down
a bit as more data is processed
throughout the year, though its
interesting to note that, prior to
1H 2014, the median had never
eclipsed even the $30 million
mark. Between 2010 and 2013, the
median increased $20.9 million to
$25.9 million last year. Meanwhile,
after three consecutive years of
investors taking smaller stakes
at the Series B stage, investors
negotiated higher stakes in 1H,
from 21.7% last year to 22.8% in
2014.
$0
$10
$20
$30
$40
$50
$60
2010 2011 2012 2013 2014*
All Software Media Commercial Services
Source: PitchBook
*as of 6/30/14
$14.50
$22.04
$27.35
$24.90
$47.87
$6.31
$8.00 $7.00 $6.90
$8.61
$0
$10
$20
$30
$40
$50
$60
2010 2011 2012 2013 2014*
$16.11
$19.02
$29.71
$23.75
$44.90
$6.31 $6.10
$7.00
$7.50
$9.22
$0
$10
$20
$30
$40
$50
2010 2011 2012 2013 2014*
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014*
Up Flat Down
$0
$5
$10
$15
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
15%
20%
25%
30%
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
Pre Money Valuation Deal Size
Source: PitchBook
*as of 6/30/14
9
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
$17.98
$25.00
$24.39
$28.66
$34.14
$7.00
$8.00 $8.00
$9.11
$10.26
$0
$5
$10
$15
$20
$25
$30
$35
$40
2010 2011 2012 2013 2014*
Series C
SERIES C VALUATIONS ($M) BY SECTOR
MEDIAN SERIES C ROUND DETAILS
% ACQUIRED
SOFTWARE
UP, FLAT & DOWN ROUNDS
MEDIA
DEAL SIZE ($M)
COMMERCIAL SERVICES
Valuations at the Series C
stage are rising in tandem
with deal sizes. Versus 2013, the
median valuation for Series C
rounds was $55.4 million, which
bumped up 26% in 1H 2014 to
$70 million. Correspondingly, the
median deal size ballooned to $16
million through 1H, a 23% increase
over 2013.
More so than earlier stages,
Series C valuations experience
more year-to-year fuctuation,
particularly when we look at
valuation breakdowns at the
industry level. The three charts
at the very bottom of this page
refect the rapid changes in the
median valuations for certain
sectors, most notably the
commercial services segment.
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2010 2011 2012 2013 2014*
All Software Media Commercial Services
Source: PitchBook
*as of 6/30/14
$26.89
$47.69
$62.00
$59.92
$95.16
$8.90 $10.02
$12.04 $13.00
$17.59
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2010 2011 2012 2013 2014*
$42.32
$54.21
$44.22
$80.45
$53.64
$10.00
$8.00 $10.00 $10.00
$16.00
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2010 2011 2012 2013 2014*
$42.32
$76.00
$34.25
$79.88
$51.34
$10.59
$8.10 $9.50
$10.00
$14.51
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2010 2011 2012 2013 2014*
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014*
Up Flat Down
$0
$10
$20
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
10%
15%
20%
25%
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
Pre Money Valuation Deal Size
Source: PitchBook
*as of 6/30/14
10
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Series D and Later
SERIES D+ VALUATIONS ($M) BY SECTOR
MEDIAN SERIES D+ ROUND DETAILS
% ACQUIRED
SOFTWARE
UP, FLAT & DOWN ROUNDS
MEDIA
DEAL SIZE ($M)
COMMERCIAL SERVICES
Source: PitchBook
Compared to all other stages,
valuations for Series D and
later rounds have jumped the
most in recent years, particularly
in 2014. Through the frst half of
this year, the median valuation
increased 63% over 2013 levels,
to $171.5 million. Financing sizes
are also way up this year, to $30.1
million from $17.5 million in 2013.
Later-stage fnancings have
included many non-traditional
investors like hedge funds
looking for pre-IPO exposure.
Accordingly, it isnt surprising
to see smaller stakes being
purchased at the later stages. The
median percentage acquired in 1H
2014 was 12.0%, down noticeably
from 16.3% in 2010.
$0
$50
$100
$150
$200
$250
$300
2010 2011 2012 2013 2014*
All Software Media Commercial Services
*as of 6/30/14
$63.70
$95.34
$87.96
$150.80
$252.33
$10.00
$14.05 $15.12
$19.93
$35.00
$0
$50
$100
$150
$200
$250
$300
2010 2011 2012 2013 2014*
$112.68
$139.36
$119.64
$180.14
$215.17
$15.92 $20.15
$14.18
$20.49
$26.00
$0
$50
$100
$150
$200
$250
2010 2011 2012 2013 2014*
$91.22
$65.20
$112.65
$115.10
$188.88
$10.00
$18.50
$12.00
$16.00
$22.50
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2010 2011 2012 2013 2014*
$0
$10
$20
$30
$40
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014*
Up Flat Down
0%
10%
20%
2010 2011 2012 2013 2014*
All Software
Media Commercial Services
Pre Money Valuation Deal Size
Source: PitchBook
*as of 6/30/14
11
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Valuation Change
Between Rounds
UP, FLAT & DOWN ROUNDS BY QUARTER
UP, FLAT & DOWN ROUNDS BY YEAR
Beginning in mid-2010, more
than half of all VC fnancings
have been up rounds, done
at valuations higher than their
previous rounds. As the graph
to the upper-right shows, weve
seen a gradually increasing trend
toward more up-rounds and fewer
down-rounds. Given the increase
in valuations, that comes as no
surprise, though its worthy to
note how high the percentage has
jumped, with 65% of all fnancings
done at higher valuations in 2Q
2014. Only 2Q 2012 saw a higher
percentage (66%) since the
fnancial crisis. Down rounds,
meanwhile, continue to decline in
frequency, to 15% in 2Q 2014 from
35% in 2Q 2009.
Two-thirds of VC fnancings
done at higher valuations will only
add to the concerns in the industry
about asymmetrical risk, for
both investors and for founders.
Higher valuations bring higher
performance expectations, not to
mention higher hurdles come exit
time. As an example, a Series B
investor makes an investment at a
$100 million valuation, and given
the typical return expectations
at that stage (around 5x), the
investment would need to be
exited in the $500 million range. As
several observers have pointed out,
exit opportunities are limited, and
assumptions about future return
expectations may or may not come
to fruition, especially if the M&A or
stock markets slow. Additionally,
high valuations at the Series B stage
inevitably bring higher performance
expectations if the company
65% of VC rounds in 2Q were done at
a higher valuation than the previous
financing.
Source: PitchBook
Source: PitchBook
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Up Flat Down
*as of 6/30/14
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q
2009 2010 2011 2012 2013 2014
Up Flat Down
12
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
UP, FLAT & DOWN ROUNDS BY SECTOR
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2013 2014* 2012 2013 2014* 2012 2013 2014* 2012 2013 2014* 2012 2013 2014*
Software Media Commercial
Services
HC Devices &
Supplies
Pharma & Biotech
Up Flat Down
needs to raise Series C fnancing.
As we noted in a previous report,
valuations dont defy gravity
and cant keep inching upward
indefnitely. As such, we wouldnt
be surprised to see more fat and
down rounds in future quarters,
Source: PitchBook
*as of 6/30/14
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especially if valuations defate from
current levels.
By industry, its interesting to
see the differences in the number
of up, fat and down rounds for
certain segments of the market.
Media and software startups tend
to enjoy more up rounds than
healthcare devices and supplies and
pharmaceutical and biotechnology
companies, which refects the
different dynamics inherant in those
industries more than anything.
13
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Exits by Valuation
MEDIAN EXIT SIZE BY YEAR
EXIT VALUATION TO CAPITAL RAISED BY YEAR
Invariably, valuations for
VC-backed companies are
directly tied to exit opportunities.
Recent exit fgures have given
investors plenty of optimism,
particularly the two charts on this
page. Exit valuations continue
to soar, while capital raised has
remained relatively steady, even
in the last year and a half. The
exit valuation to capital raised
ratio has reached a post-crisis
high of 11.2x through the frst
two quarters of 2014, and even
the 10.0x ratio recorded last
year is very high by historical
standards. As the chart to the
bottom indicates, both IPOs
and acquisitions are proving to
be lucrative exit ramps; strong
stock markets and yield-hungry
investors have been paying up for
VC-backed IPOs, and strategic
acquirers and private equity
frms have plenty of cash to buy
portfolio companies, as well.
Source: PitchBook
Source: PitchBook
3.0x 3.8x 6.0x 2.7x 1.8x 5.8x 5.9x
6.7x
10.0x
11.2x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
$0
$20
$40
$60
$80
$100
$120
$140
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Exit Valuation/Capital Raised Capital Raised ($M) Exit Valuation ($M)
*as of 6/30/14
Source: PitchBook
*as of 6/30/14
Exit activity may well set a record
in 2014, with 654 liquidity events
completed already in 1H. That pace
would put this year ahead of 2013s
fnal tally of 1,204. Furthermore,
the aggregate amount of capital
exited remains high at $35 billion
through 1H, well ahead of schedule
compared to the $56 billion exited
in all of 2013.
The graph at the bottom of
page 15 says as much about VC
43.0 46.5
49.0 22.0
35.0
50.0
39.9
34.4
40.5
75.0
118.3
170.9
21.0
247.0
239.1
228.2
277.9
213.7
252.1
$0
$50
$100
$150
$200
$250
$300
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Acquisition/Buyout IPO
14
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
Exits by Valuation
VC EXIT FLOW BY YEAR
Source: PitchBook
Source: PitchBook
investments as it does about
exits. The time between the last
round of fnancing and exit has
shrunk to a median of 1.9 years
through 1H, down from 2.1 years in
2011. Meanwhile, the percentage
change in valuations for the top
quartile of exits is down to 152%,
a high fgure but considerably
less than the 269% seen in 2012.
The reason for both fgures is due
to more startups raising one last
round of fnancing before their
anticipated exits, usually through
IPOs. Behemoth investors like
hedge funds and mutual funds have
helped strengthen the balance
sheets of VC-backed companies
before they go public, helping both
themselves and the companies,
which have been building stronger
balance sheets before facing the
glare of the public markets. As
many industry professionals have
noted, one of the key differences
in todays VC market compared to
the Internet bubble is that startups
are much healthier pre-IPO. One
7
2
%
1
2
4
%
1
4
6
%
1
1
2
%
4
4
%
9
6
%
7
2
%
9
6
%
6
3
%
8
6
%
1
4
2
%
2
8
3
%
3
3
0
%
2
7
0
%
9
8
%
1
9
9
%
2
6
4
%
2
6
9
%
1
9
4
%
1
5
2
%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Median % Change in Valuation Top Quartile % Change in Valuation
MEDIAN % CHANGE IN VALUATION AT EXIT BY YEAR
of the byproducts of that change
has been fewer post-IPO pops in
stock prices, at least compared to
15 years ago. In effect, professional
investors have captured more
pre-exit value in startups, propping
up later-stage valuations in the
process.
As we mentioned previously,
exits are inextricably linked to
investment valuations. One of the
concerns many observers have is
that, because exit opportunities
are somewhat limited, some of the
recent investments made at high
valuations will handcuff investors
when its time to exit. Well have to
wait and see if that comes to pass.
*as of 6/30/14
*as of 6/30/14
$
2
4
$
3
5
$
5
4
$
3
1
$
2
1
$
3
7
$
5
2
$
6
1
$
5
6
$
3
5
552
690
814
635
624
963
1,000
1,119
1,204
654
0
200
400
600
800
1,000
1,200
1,400
$0
$10
$20
$30
$40
$50
$60
$70
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Capital Exited ($B) Exits Closed
15
PI TCHBOOK 2H 2014
VC VALUATI ONS & TRENDS REPORT
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CAPITAL INVESTED & DEAL COUNT DEALS BY REGIONS
SEARCH RESULTS
Limited Partners
2,716 LPs
SAVED SEARCHES
Europe League Table 40,672
Funds w/ Dry Powder 12,948
Open Funds 89
recent IT deals 51,176
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Total Capital Invested (millions, USD) Deal Count
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Limited Partners Name (2,716) # Limited Partner Type
# Affiliated
Funds
# Affiliated
Investors
AUM
Private
Equity
Private
Equity (%)
HQ Location HQ Ph
1
2
3
4
5
6
7
8
9
10
11
12
13
New York State Common Retirement Fund
Pennsylvania State Employees Retirement S...
Pennsylvania Public School Employee Retire...
Bell Atlantic Master Trust
Teachers Insurance and Annuity Assocation...
Massachusetts Pendon Reserves Investment...
Metropolitan Life Insurance
New York State Teachers Retirement System
Metlife Insurance Company of Connecticut
Massachusetts Mutual Life Insurance Company
China Insurance Company
Public Pension Fund
Public Pension Fund
Public Pension Fund
Corporate Pension
Insurance Company
Public Pension Fund
Insurance Company
Public Pension Fund
Insurance Company
Insurance Company
Public Pension Fund
594
502
348
333
328
313
312
308
304
274
373
312
192
158
157
169
136
185
126
212
163
147
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176,200.00
25,900.00
50,500.00
103.35
178.50
59,700.00
516,206.00
104,300.00
405,900.00
24,700.00
181,980.00
13,919.80
25,900.00
8,040.00
103.35
178.50
5,916.00
516,206.00
7,800.00
405,900.00
24,700.00
18,371.00
8%
12%
22%
17%
42%
12%
7%
8%
4.5%
7.3%
10%
Albany, NY
Harrisburg, PA
Harrisburg, PA
Basking Ridge, NJ
New York, NY
Boston, MA
New York, NY
Albany, NY
Bloomfield, Ct
Springfield, MA
Quebec, Canada
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New York State Teachers Retirement System Public Pension Fund 308 126 104,300.00 7,800.00 8% Albany, NY
Bell Atlantic Master Trust Corporate Pension 333 157 103.35 103.35 17% Basking Ridge, NJ
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