disclosures · source: mattermark as of april 19, 2016; 6 see endnotes for important additional...

© 2016 Social Capital. All rights reserved.

DISCLOSURES THE OPINIONS EXPRESSED IN THIS PRESENTATION ARE CURRENT OPINIONS OF SOCIAL CAPITAL AS MAY 4, 2016 ONLY, AND MAY CHANGE AS SUBSEQUENT CONDITIONS VARY. ANY PROJECTIONS, MARKET OUTLOOKS OR ESTIMATES IN THIS PRESENTATION ARE FORWARD LOOKING STATEMENTS AND ARE BASED UPON CERTAIN ASSUMPTIONS. OTHER EVENTS WHICH WERE NOT TAKEN INTO ACCOUNT MAY OCCUR AND MAY SIGNIFICANTLY AFFECT RETURN OR PERFORMANCE. ANY PROJECTIONS, OUTLOOKS OR ASSUMPTIONS SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE ACTUAL EVENTS WHICH WILL OCCUR. THIS PRESENTATION MAY CONTAIN “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AS AMENDED. BECAUSE SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM ANY EXPECTATIONS, PROJECTIONS OR PREDICTIONS MADE OR IMPLICATED IN SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE THEREFORE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. IN CONSIDERING THE PRIOR PERFORMANCE INFORMATION CONTAINED IN THIS PRESENTATION, INVESTORS SHOULD BEAR IN MIND THAT PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL ACHIEVE RESULTS COMPARABLE TO THOSE OF ANY PRIOR OR EXISTING FUND. THESE MATERIALS DO NOT PURPORT TO BE ALL-INCLUSIVE OR TO CONTAIN ALL THE INFORMATION THAT AN INVESTOR MAY DESIRE. THESE MATERIALS ARE MERELY FOR DISCUSSION ONLY AND MAY NOT BE RELIED UPON FOR MAKING ANY INVESTMENT DECISION. INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS PRESENTATION OR ANY PRIOR OR SUBSEQUENT COMMUNICATION FROM SOCIAL CAPITAL OR ANY OF ITS REPRESENTATIVES OR AFFILIATES, AS LEGAL, TAX, OR INVESTMENT ADVICE. THIS PRESENTATION IS NOT AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY WHICH MAY ONLY BE MADE AT THE TIME A QUALIFIED OFFEREE RECEIVES A CONFIDENTIAL PRIVATE OFFERING MEMORANDUM OR CONFIDENTIAL EXPLANATORY MEMORANDUM (EACH, AN “OFFERING MEMORANDUM”) DESCRIBING THE OFFERING AND RELATED SUBSCRIPTION AGREEMENT AND IN THE CASE OF ANY INCONSISTENCY BETWEEN THE DESCRIPTIONS OR TERMS IN THIS PRESENTATION AND THE OFFERING MEMORANDUM, THE APPLICABLE OFFERING MEMORANDUM SHALL CONTROL. THIS PRESENTATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH DOCUMENTATION, INCLUDING THE RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST DISCLOSURES SET FORTH THEREIN. AN INVESTMENT IN A FUND MANAGED BY SOCIAL CAPITAL (COLLECTIVELY, THE “FUNDS”) IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. WHILE ALL THE INFORMATION CONTAINED IN THIS PRESENTATION IS BELIEVED TO BE ACCURATE, SOCIAL CAPITAL MAKES NO EXPRESS WARRANTY AS TO THE COMPLETENESS OR ACCURACY NOR CAN IT ACCEPT RESPONSIBILITY FOR ERRORS APPEARING IN THE PRESENTATION. IN PARTICULAR, CERTAIN FACTUAL INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM PUBLISHED SOURCES PREPARED BY OTHER PARTIES AND SOCIAL CAPITAL HAS NOT INDEPENDENTLY VERIFIED SUCH INFORMATION.

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‣ To build an ecosystem that advances humanity by solving the world’s hardest problems

3SEE ENDNOTES FOR IMPORTANT ADDITIONAL DETAIL


‣ We are technologists and entrepreneurs who have helped build and scale many of today’s best companies



‣ We are investors in many of the fastest-growing private technology companies in the world



68% 65% 62% 62% 61%

58% 54%

46% 46%

Social C apital AndreessenHorowitz

Accel Partners Founders Fund Benchmark Sequoia C apital G reylock Y C ombinator Kleiner PerkinsC aufield & Byers

6SOURCE: MATTERMARK AS OF APRIL 19, 2016; SEE ENDNOTES FOR IMPORTANT ADDITIONAL INFORMATION

‣ There’s a new sheriff in town… Percentage High Growth Companies in Portfolio


‣ 31% per annum on $1.3B…



SO WHAT’S THE BIG IDEA?

8


‣ There is a multi-trillion dollar monopoly hiding in plain sight

9


‣ 10x in 10y

10


$0

$100

$200

$300

$400

$500

$600

$700

$800

Jan-‐10

Mar-‐10

May

-‐10

Jul-‐1

0

Sep-‐10

Nov-‐10

Jan-‐11

Mar-‐11

May

-‐11

Jul-‐1

1

Sep-‐11

Nov-‐11

Jan-‐12

Mar-‐12

May

-‐12

Jul-‐1

2

Sep-‐12

Nov-‐12

Jan-‐13

Mar-‐13

May

-‐13

Jul-‐1

3

Sep-‐13

Nov-‐13

Jan-‐14

Mar-‐14

May

-‐14

Jul-‐1

4

Sep-‐14

Nov-‐14

Jan-‐15

Mar-‐15

May

-‐15

Jul-‐1

5

Sep-‐15

Nov-‐15

Jan-‐16

Mar-‐16

12

Pric

e Pe

r Sha

re


‣ AMZN will be a $3T company by 2025

13


‣ 24% IRR

14


‣ Retail will be a $1T business by 2025 ‣ AWS will be a $1.5T business by 2025 ‣ Bets and cash will be worth $0.5T by 2025

15


SHOW YOUR WORK!

16


‣ Retail will be a $1T business by 2025

17


55

304

788

2005 2015 2025

‣ Amazon Customer Growth (M)

18


2

46

286

2005 2015 2025

‣ Prime Member Growth (M)

19

36% CAGR


0.4

6

30

2005 2015 2025

‣ Global Retail Units (B)

20

31% CAGR


‣ Retail will be a $1T business by 2025

21

($B)2025 Units (B) 30GMV / Unit $342025 GMV $1,022

EBIT % 5%EBIT $51

COST FY16 Multiple 18xRetail Value $924


‣ AWS will be a $1.5T business by 2025

22


‣ The best spend a large percentage of their revenues on infrastructure

23

29%

19%

16%

TWTR CRM FB


‣ Over time the rest will find it economically unfeasible to build their own infrastructure

24


16% 16%

SC Portfolio Company FB

‣ Costs on AWS are best in class at much smaller scale



‣ 100% of Social Capital portfolio companies are running on AWS

26


‣ AWS will have a big business in existing workloads…

27


‣ …and the majority of new workloads…

28


‣ …because AWS expands the market

29

IBM 5,000 Terminal Customers

Oracle 420,000 Terminal Customers

AWS 1,000,000 Customers Already


‣ AWS is a tax on the internet

30


‣ “Your margin is my opportunity”

31

~$3T

~$2T

2015 G lobal IT Spend 2025 G lobal IT Spend


‣ Infrastructure spend comes in two types: Test + Dev and Production

32


‣ Test + Dev workloads will rapidly shift to the cloud in the next 10 years

33

~$750bn

~$300bn

2015 Test + Dev IT Spend 2025 Test + Dev IT Spend

($B)2025 Test + Dev IT Spend $300Public C loud Market Share 70%AWS Market Share 60%AWS Test + Dev Revenue $126

EBIT % 30%EBIT $38


‣ Production workloads will move slower than Test + Dev but still move rapidly

34

~$2,250bn

~$1,700bn

2015 Production IT Spend 2025 Production IT Spend

($B)2025 Production IT Spend $1,700Public C loud Market Share 30%AWS Market Share 60%AWS Production Revenue $306

EBIT Margin % 30%EBIT $92


‣ AWS will be a $1.5T business by 2025

35

($B)Test + Dev $126Production 306AWS Revenue $432

EBIT Margin % 30%EBIT $130

INTC/ ORCL/ IBM FY16 Multiple 12xAWS Value $1,555


‣ Bets and cash will be worth $0.5T by 2025

36


‣ 5% Margins?

37

$7 $9 $12 $15 $19 $24

$33

$45

$68

$90

$113

$137

$168

5.0%5.2%

4.8%

3.4%

4.5% 4.5%4.8%

4.3%

2.1%

1.4%1.2%

0.8%

1.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

GMV ($B) Reported EBIT Marg in


$0.6 $0.5 $0.8 $1.1 $1.6 $1.9

$1.4 $1.3 $1.3 $1.1

$2.7 $0.1 $0.4 $0.7 $0.7

$1.9

$0.0 $0.2 $0.1

$0.1 $0.1

$0.3 $1.8

$2.8

$3.7 $5.0

$3.9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Reported Retail EBIT ($B) AWS EBIT ($B) Investment ($B)

‣ AMZN has invested $18B over the past 10 years to…

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2005 – 2015: $18B


‣ …turn every major cost into a source of revenue…

2005 Income Statement

39

2015 Business Lines

(in millions, except per share data) Year Ended December 31 , % of 2005 Revenue

Net Sales $ 8,490Product Costs 6,212 73%Shipping Costs 239 3%G ross Profit $ 2,039

O perating Expenses:Fulfillment $ 522 6%Technology & Content 406 5%Marketing 192 2%Payment Processing 207 2%General & Administrative 146 2%Income from O perations $ 566 7%


‣ …a significant source of revenue & value 2015 Revenue 2015 Value

$3 $6

$0.5 $1

$1.5 $3

$0.3 $3

$5 $25

$8 $150 $4 $50

$0.1 $1 Total $239

40

($B)


‣ $239B of value created in 10 years from $18B invested

41


‣ 33% compounding

42


‣ 5% EBIT margin

43

3.1% reported

1.9% re-invested


$2.7 $6.3 $7.6 $9.1 $10.8 $13.0 $15.6

$18.7 $22.4

$26.8 $32.1

$3.9

$3.7 $4.5

$5.3 $6.4

$7.7 $9.2

$11.0

$13.2

$15.8

$19.0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Reported Retail EBIT ($B) Investment ($B)

‣ So what about 2015 – 2025?

44

2015 – 2025: $96B


‣ $96B invested @ 15% vs 33% historically

45


‣ 2025 enterprise value created = $163B

46


‣ And the surplus cash from 2015 – 2025? ‣ $362B…

47

$4 $5 $6 $8 $9 $11 $13 $16

$19 $22

$0 $0 $4 $7

$10 $16

$25

$38

$59

$90

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Retail FCF ($B) AWS FCF ($B)


($B) 2015 2025

Retail $200 $924

AWS 150 1,555

Investments 0 163

Net Cash on BS 8 369Total $358 $3,012


‣ It’s still Day 1…

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ENDNOTES SLIDE 4: LOGOS PRESENTED REPRESENT THE PAST EMPLOYERS OF SELECT PAST AND PRESENT EMPLOYEES, ENTREPRENEURS IN RESIDENCE AND BOARD PARTNERS OF SOCIAL CAPITAL. SLIDE 5: LOGOS PRESENTED REPRESENT A REPRESENTATIVE SET OF SOCIAL CAPITAL’S FIFTEEN LARGEST INVESTMENTS SINCE SOCIALCAPITAL’S INCEPTION IN 2011 AS WELL AS SIX REPRESENTATIVE EXITED COMPANIES FROM THE SEED PORTFOLIOS OF SOCIAL CAPITAL AND EMBARCADERO VENTURES, A FUND ESTABLISHED AND MANAGED BY CHAMATH PALIHAPITIYA’S PRIOR TO THE ESTABLISHMENT OF SOCIAL CAPITAL SLIDE 6: HIGH GROWTH IS A MATTERMARK, INC. PROPRIETARY METRIC THAT TAKES INTO ACCOUNT CHANGE OVER TIME OF FUNDING, EMPLOYEE COUNT, SOCIAL MEDIA, WEB & APP TRAFFIC. COMPARABLE FUNDS PRESENTED ARE SILICON VALLEY-BASED FUNDS WITH GREATER THAN $250M ASSETS UNDER MANAGEMENT THAT HAVE BEEN ACTIVELY INVESTING SINCE 2011 OR EARLIER, THE YEAR OF SOCIAL CAPITAL’S INCEPTION. SLIDE 7: 1. 31% ANNUALIZED RETURN THE ANNUALIZED RETURN PRESENTED REPRESENTS THE COMBINED ANNUALIZED INTERNAL RATE OF RETURN FROM THE INCEPTION OF EACH OF THE SOCIAL+CAPITAL PARTNERSHIP, L.P., THE SOCIAL+CAPITAL PARTNERSHIP II, L.P., THE SOCIAL+CAPITAL PARTNERSHIP III, L.P. AND THE SOCIAL+CAPITAL PARTNERSHIP OPPORTUNITIES FUND, L.P., THROUGH 3/31/2016 ON INVESTED CAPITAL OF EACH SUCH FUND BASED ON ALL CONTRIBUTIONS, INCLUDING FOR MANAGEMENT FEES AND OTHER FEES AND EXPENSES PAYABLE FROM EACH OF THE SOCIAL+CAPITAL PARTNERSHIP, L.P., THE SOCIAL+CAPITAL PARTNERSHIP II, L.P., THE SOCIAL+CAPITAL PARTNERSHIP III, L.P. AND THE SOCIAL+CAPITAL PARTNERSHIP OPPORTUNITIES FUND, L.P., RESPECTIVELY, DISTRIBUTIONS (INCLUDING TAX DISTRIBUTIONS), AND NET UNREALIZED VALUE OF EACH SUCH FUND AS OF 3/31/2016, WHICH IS NET OF EACH GENERAL PARTNER'S CARRIED INTEREST (IF ANY). THE COMBINED NET IRR FOR THE SOCIAL+CAPITAL PARTNERSHIP, L.P.'S, THE SOCIAL+CAPITAL PARTNERSHIP II, L.P.'S, THE SOCIAL+CAPITAL PARTNERSHIP III, L.P.'S AND THE SOCIAL+CAPITAL PARTNERSHIP OPPORTUNITIES FUND, L.P.'S IS PRESENTED FROM INCEPTION TO 3/31/2016, AS IF ALL INVESTORS COMMITTED CAPITAL AS OF THE FIRST CLOSING OF EACH OF THE SOCIAL+CAPITAL PARTNERSHIP, L.P., THE SOCIAL+CAPITAL PARTNERSHIP II, L.P., THE SOCIAL+CAPITAL PARTNERSHIP III, L.P. AND THE SOCIAL+CAPITAL PARTNERSHIP OPPORTUNITIES FUND, L.P. AN INDIVIDUAL LIMITED PARTNER'S NET IRR MAY VARY FROM THE REPORTED NET IRR BASED UPON THE SPECIFIC TERMS OF THE CAPITAL TRANSACTIONS RELATING TO SUCH LIMITED PARTNER.

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ENDNOTES SLIDE 7: 2. ON $1.3B THE ASSETS UNDER MANAGEMENT PRESENTED REPRESNET THE COMBINED NET ASSET VALUE OF EACH OF THE SOCIAL+CAPITAL PARTNERSHIP, L.P., THE SOCIAL+CAPITAL PARTNERSHIP II, L.P., THE SOCIAL+CAPITAL PARTNERSHIP III, L.P. AND THE SOCIAL+CAPITAL PARTNERSHIP OPPORTUNITIES FUND, L.P., THROUGH 3/31/2016. THE VALUE OF EACH ASSET IS BASED ON SUCH ASSET’S FAIR VALUE, AS DEFINED UNDER ACCOUNTING STANDARDS CODIFICATION TOPIC 820, AS DETERMINED PURSUANT TO THE SOCIAL CAPITAL SECURITIES VALUATION POLICY. THE SOCIAL CAPITAL SECURITIES VALUATION POLICY, IN ACCORDANCE WITH AUTHORITATIVE GUIDANCE ON FAIR VALUE MEASUREMENTS AND DISCLOSURES UNDER GENNERALLY ACCEPTED ACCOUNTING PRINCIPLES, DISCLOSES AND RECOGNIZES THE FAIR VALUE OF ASSETS AND LIABILITIES BASED ON A VARIETY OF FACTORS AND UTILIZES INPUTS AND VALUATION TECHNIQUES DESIGNED TO ASCERTAIN FAIR VALUE, INCLUDING WITHOUT LIMITATION, THE MARKET COMPARABLES APPROACH, OPTION PRICING MODELS, PROBABILITY WEIGHTED EXPECTED RETURN ANALYSES, THE INCOME APPROACH AND COMMON STOCK EQUIVALENT METHODOLOGIES. WHILE SOCIAL CAPITAL BELIEVES ITS VALUATION METHODS ARE APPROPRIATE AND CONSISTENT WITH THOSE USED BY OTHER MARKET PARTICIPANTS, THE USE OF DIFFERENT METHODOLOGIES OR ASSUMPTIONS TO DETERMINE THE FAIR VALUE OF CERTAIN ASSETS COULD RESULT IN MATERIALLY DIFFERENT ESTIMATES OF FAIR VALUE. AS SUCH, THE FINAL, REALIZED, INTERNAL RATES OF RETURN FOR SC 1 AND SC 2 AND THE FINAL REALIZED VALUE OF SC1 AND SC2 ASSETS MAY DIFFER SIGNIFICANTLY FROM THE VALUES REFLECTED ON THE SLIDES TITLED “PRIVATE FUNDS: SC 1 OVERVIEW” AND “PRIVATE FUNDS: SC 2 OVERVIEW”. SLIDE 25: SC PORTFOLIO COMPANY IS AN ILLUSTRATIVE COMPANY FROM SOCIAL CAPITAL’S PORTFOLIO THAT UTILIZES AMAZON WEB SERVICES AND WAS CHOSEN FOR ITS COMPARABLE USAGE CHARACTERISTICS TO TWITTER, FACEBOOK AND SALESFORCE.

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disclosures · source: mattermark as of april 19, 2016; 6 see endnotes for important additional...

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