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PricewaterhouseCoopers National Venture Capital Association

MoneyTree Report
TM

Q3 2011
Data provide by Thomson Reuters

The Q3 2011 MoneyTree results are in! This special report provides summary results of Q3 2010, Q2 2011, and Q3 2011. More detailed results, including an expanded version of this report, can be found on the MoneyTree website at www.pwcmoneytree.com.

Total equity investments into venture-backed companies

Venture capitalists invested $6.95 billion in 876 deals in the third quarter of 2011. Quarterly venture capital investment activity fell 12 percent in terms of dollars and 14 percent in the number of deals compared to the second quarter of 2011 when $7.9 billion was invested in 1,015 deals. For the first three quarters of 2011, venture capitalists invested $21.2 billion into 2,725 deals, representing 20 percent more dollars and three percent more deals as the first three quarters of 2010.

The Life Sciences (biotechnology and medical device industries combined) and Clean Technology sectors saw marked decreases in both dollars and number of deals while the Software sector enjoyed its strongest quarter in almost 10 years.

$ in millions 20

`03
15

`04

`05

`06

`07

`08

`09

`10 `11

10

7,904 7,110 6,687 6,143 7,203 7,448

7,903 8,135

7,288 5,940 5,855 4,721 5,316 3,776

7,885 7,171 6,952

7,709

6,056 5 4,744 4,423 5,387 5,184

6,192

5,756

6,374

6,376

6,407 5,688 5,307

5,798 4,811 5,045

5,197

4,121

0 Quarter Number of deals Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

(719) (749) (730) (801) (729) (870) (706) (861) (749) (849) (803) (846) (894) (995) (938) (988) (887) (1,084) (1,030) (1,101) (1,044) (1,088) (1,029) (939) (665) (742) (735) (914) (793) (1,005) (850) (848) (834) (1,015) (876)

PwC

Investments by industry
Q3 2010, Q2 2011, and Q3 2011
The Software industry received the highest level of funding for all industries with $2.0 billion invested during the third quarter of 2011. This level of investment represents a 23 percent increase in dollars, compared to the $1.6 billion invested in the second quarter, and the highest quarterly investment in the sector since the fourth quarter of 2001. The Software industry also had the most deals completed in Q3 with 263 rounds, which represents a one percent decrease from the 267 rounds completed in the second quarter of 2011. The Biotechnology industry was the second largest sector for dollars invested with $1.1 billion going into 96 deals, falling 18 percent in dollars and 20 percent in deals from the prior quarter. The Medical Devices and Equipment industry also experienced a decline, dropping 18 percent in Q3 to $728 million, while the number of deals declined 21 percent to 74 deals. Overall, investments in the Life Sciences sector (Biotechnology and Medical Devices) fell 18 percent in dollars and 21 percent in deals, dropping to the second lowest quarterly deal volume since the first quarter of 2005. To the contrary, Healthcare Services investments surged with $152 million going into 11 deals, a 200 percent increase in dollars and 38 percent increase in deal volume over the second quarter. Investment in Internet-specific companies fell in the third quarter to $1.6 billion going into 231 deals. This level of investment represents a 33 percent decrease in dollars and a 21 percent decrease in deals from the second quarter when $2.4 billion went into 292 deals, a ten-year high. The Clean Technology sector saw a 13 percent decrease in dollars to $891 million in Q3 from the second quarter when $1.0 billion was invested. The number of deals completed in the third quarter also declined nine percent to 80 deals compared with 88 deals in the second quarter.

# of Deals

($ in millions) All results rounded

500
$855

1,000
$1,120

1,500
$1,627 $1,319

2,000
$2,008

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

226 267 263 111 120 96 65 90 75 93 94 74 74 139 112 75 87 79 19 35 27 39 26 26 16 19 20 16 8 11 7 19 10 37 30 34 12 23 7 22 25 15 18 17 11 15 14 9 5 2 7 $110 $209 $266 $183 $78 $120 $152 $51 $190 $152 $108 $130 $126 $174 $386 $431 $325 $284 $682 $523 $547 $429 $625 $728 $767 $790

$1,079 $804 $749 $893

$89

$89 $115 $72 $79 $123 $59 $68 $89 $56 $93 $115 $55 $4 $11 $6

Q3 2010 Q2 2011 Q3 2011

($ in millions) All results rounded

5,000
$5,307 $6,952 $7,885

10,000

15,000

20,000

Grand Total

850 1,015 876

Definitions of the Industry categories can be found on the MoneyTree Web site at www.pwcmoneytree.com

MoneyTree Report
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Investments by stage of development

Q3 2010, Q2 2011 and Q3 2011
Seed stage investments fell 56 percent in dollars and 26 percent in deals with $179 million invested into 89 deals in the third quarter. Early stage investments also fell seven percent in dollars and six percent in deals with $2.0 billion going into 341 deals. Seed/Early stage deals accounted for 49 percent of total deal volume in Q3, compared to 48 percent in the second quarter. The average Seed deal in the third quarter was $2.0 million, down from $3.3 million in the second quarter. The average Early stage deal was $5.7 million in Q3, down from $5.8 million in the prior quarter. Expansion stage dollars increased two percent in the third quarter, with $2.5 billion going into 260 deals. Overall, Expansion stage deals accounted for 30 percent of venture deals in the third quarter, up from 26 percent in the second quarter of 2011. The average Expansion stage deal was $9.6 million, up from $9.2 million in the prior quarter. Investments in Later stage deals decreased 20 percent in dollars and 30 percent in deals to $2.3 billion going into 186 rounds in the third quarter. Later stage deals accounted for 21 percent of total deal volume in Q3, compared to 26 percent in Q2 when $2.9 billion went into 265 deals. The average Later stage deal in the third quarter was $12.5 million, which increased from $11.0 million in the prior quarter and represents the largest average deal size for Later stage companies since the third quarter of 2001.

# of Deals

0
$304 $403 $179

1,000
$1,294

2,000

3,000

4,000

5,000

6,000

7,000

($ in millions) All results rounded

8,000

9,000

Seed Early Stage Expansion Later Stage

93 121 89 291 363 341 246 266 260 220 265 186

$2,113 $1,957 $1,740 $1,969 $2,320 $2,455 $2,497 $2,914

Q3 2010 Q2 2011 Q3 2011

($ in millions) All results rounded

# of Deals

5,000
$5,307 $6,952 $7,885

10,000

15,000

20,000

25,000

Grand Total

850 1,015 876

Definitions of the Stage of Development categories can be found on the MoneyTree Web site at www.pwcmoneytree.com

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Investments by sequence of financing

Q3 2010, Q2 2011, and Q3 2011
First-time financing (companies receiving venture capital for the first time) dollars decreased 22 percent and the number of deals fell 18 percent with $1.2 billion going into 269 deals. First-time financings accounted for 17 percent of all dollars and 31 percent of all deals in the third quarter, compared to 20 percent of all dollars and 32 percent of all deals in the second quarter of 2011. Companies in the Software, Media & Entertainment, and IT services sectors received the most first time rounds in the third quarter. There was a significant decline in the number and dollar level of first time rounds in the Life Sciences sector. The average first-time deal in the third quarter was $4.5 million, down slightly from $4.7 million in the prior quarter. Seed/Early stage companies received the bulk of first-time investments, garnering 74 percent of the deals.

# of Deals

($ in millions) All results rounded

1,000
$1,263 $1,552 $1,208 $1,562 $1,469

2,000

3,000

4,000

5,000

6,000

7,000

8,000 Q3 2010

First Second & Third Fourth, Fifth, & Sixth Seventh & Beyond

262 327 269 256 308 278 204 247 196 128 133 133

$2,160 $1,978 $2,054 $2,611

Q2 2011 Q3 2011
($ in millions) All results rounded

$1,013

$1,561 $1,713

# of Deals

5,000
$5,307 $7,885 $6,952

10,000

15,000

20,000

25,000

Grand Total

850 1,015 876

Definitions of the Financing Sequence categories can be found on the MoneyTree Web site at www.pwcmoneytree.com

MoneyTree Report
TM

Investments by region
Q3 2010, Q2 2011, and Q3 2011
Silicon Valley received the highest level of funding for all regions with $2.7 billion invested during the third quarter. This level of investment represents a 13 percent decrease in dollars, compared to the $3.1 billion invested in the second quarter of 2011. New York Metro was the second largest region for dollars invested with $891 million going into 103 deals, rising 33 percent from the prior quarter. Texas investment jumped 113 percent in the third quarter, propelled by two large deals in the Biotechnology and Clean Technology spaces. Conversely, funding going to New England was down 45 percent with $586 million going to 108 deals.

# of Deals

0
$345 $375 $280

500

1,000

1,500

2,000
$2,054

2,500
$2,668

3,000
$3,053

3,500

($ in millions) All results rounded

4,000

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

242 337 273 87 104 103 46 44 38 102 120 108 42 60 51 36 36 42 65 78 57 60 45 45 35 46 32 32 32 21 21 23 24 36 29 36 13 18 14 17 16 13 5 7 5 4 2 1 5 17 12 2 1 1 $94 $242 $401 $228 $164 $304 $282 $280 $423 $671 $891

$596 $506 $586 $616 $1,059

$344 $293 $242 $237 $202 $213 $202 $208 $158 $268 $358

$126 $89 $120 $149 $98 $116 $73 $105 $4 $49 $24 $5 $28 $16 $5 $26 $6 $5 0 0 $256

Q3 2010 Q2 2011 Q3 2011

($ in millions) All results rounded

1,000

2,000

3,000

4,000

5,000
$5,307

6,000

7,000
$6,952

8,000
$7,885

Grand total

850 1,015 876

Definitions of the Region categories can be found on the MoneyTree Web site at www.pwcmoneytree.com Unknown region totals not included

PwC

Q3 2011 most active venture investors

New Enterprise Associates was the most active investor for the quarter. Kleiner Perkins Caufield & Byers and First Round Capital followed with 23 and 22 deals respectively. The most active venture investors took part in 18 percent of total venture-backed deals in the third quarter. Most active are those investors who participated in 9 or more deals.

Firm
New Enterprise Associates, Inc. Kleiner Perkins Caufield & Byers First Round Capital Sequoia Capital Intel Capital US Venture Partners Accel Partners InterWest Partners Google Ventures Rho Capital Partners, Inc. General Catalyst Partners Polaris Venture Partners August Capital Management Canaan Partners Kansas Technology EnterpriseCorporation

City
Menlo Park, CA Menlo Park, CA West Conshohocken, PA Menlo Park, CA Santa Clara, CA Menlo Park, CA Palo Alto, CA Menlo Park, CA Mountain View, CA New York, NY Cambridge, MA Waltham, MA Menlo Park, CA Westport, CT Topeka, KS

# of deals
27 23 22 16 15 15 14 14 13 13 12 12 11 11 11

Firm
Lightspeed Venture Partners Menlo Ventures Advanced Technology Ventures Battery Ventures, L.P. Foundation Capital Greylock Partners Matrix Partners Mayfield Fund Mohr Davidow Ventures Sutter Hill Ventures ARCH Venture Partners Ignition Partners North Bridge Venture Partners Norwest Venture Partners Oak Investment Partners

City
Menlo Park, CA Menlo Park, CA Waltham, MA Waltham, MA Menlo Park, CA Cambridge, MA Waltham, MA Menlo Park, CA Menlo Park, CA Palo Alto, CA Chicago, IL Bellevue, WA San Mateo, CA Palo Alto, CA Westport, CT

# of deals
11 11 10 10 10 10 10 10 10 10 9 9 9 9 9

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Contacts
Tracy T. Lefteroff Global Managing Partner Venture Capital Practice tracy.t.lefteroff@us.pwc.com David Silverman Emerging Company Services Practice Co-lead david.silverman@us.pwc.com Danny Wallace Emerging Company Services Practice Co-lead danny.wallace@us.pwc.com Deborah Volpe MoneyTree Project Manager deborah.volpe@us.pwc.com

PricewaterhouseCoopers and the National Venture Capital Association have taken responsible steps to ensure that the information contained in the MoneyTreeTM Report has been obtained from reliable sources. However, neither of the parties nor Thomson Reuters can warrant the ultimate validity of the data obtained in this manner. Results are updated periodically. Therefore, all data is subject to change at any time. Before making any decision or taking any action, you should consult a competent professional adviser.

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