nvca yearbook 2012

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INCLUDING STATISTICS FROM THEPricewaterhouseCoopers/National Venture Capital Association

MoneyTree™ Report based on data from Thomson Reuters

NATIONAL VENTURECAPITALASSOCIATION

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YEARBOOK 2012

April 2012

Dear Reader:

These are challenging times characterized by economic and political uncertainty. Despite the tur-moil in many sectors of the economy, the entrepreneurial sector, and in particular, the venture capi-tal ecosystem, is looked to as a major driver of badly-needed economic improvement. The nationcontinues to look to this sector for job creation, economic development, better healthcare, cleanertechnology, and a faster, better, and more secure internet.

The statistics gathered and tracked by Thomson Reuters for ThomsonONE.com (formerlyVentureXpert) and this Yearbook are essential to enabling analysis of venture capital by policy thinktanks and economists and for use by government officials and other decision makers. For example,recent analysis of Thomson Reuters data by IHS Global Insight shows that in 2010, venture capitalbacked companies had revenues corresponding to 21% of US GDP and their headcount made up11% of private sector jobs. Given that venture investment is less than 0.2% of GDP, that shows thepower of these growing businesses.

On behalf of the National Venture Capital Association board of directors and staff, we are pleased topresent you with the latest statistics that describe the activity of the venture capital industry in theUnited States. These statistics reflect strong survey participation by venture capital practitioners.This support has allowed us to responsibly bring transparency to a part of the economy most peopleare aware of but few really understand. Your comments are always welcome at [email protected].

NVCA believes that it is more important than ever to effectively tell the story of venture capital, dif-ferentiate it from other forms of alternative assets, and explain what’s needed to continue creatinggreat, leading-edge companies. We believe that a strong venture capital industry is essential toAmerica’s future and our quality of life.

Very truly yours,

Diana Frazier Mark G. Heesen John S. TaylorFLAG Capital Management NVCA President NVCA Head of ResearchNVCA Director & Chair,NVCA Research

2 Thomson Reuters

NVCA BOARD OF DIRECTORS 2011-2012

Executive Committee

Paul Maeder Ray RothrockChair Chair-ElectHighland Capital Partners Venrock Associates

Michael Greeley Jack LasersohnTreasurer At-LargeFlyBridge Capital Partners The Vertical Group

Josh GreenAt-LargeMohr, Davidow Ventures

Research Committee

Diana Frazier Mike ElliottChair Noro-Moseley PartnersFLAG Capital Management, LLC

Stephen Holmes Jonathan LeffInterWest Partners Warburg Pincus

Board Members At-Large

Jonathan Callaghan David DouglassTrue Ventures Delphi Ventures

Bruce Evans James FlemingSummit Partners Columbia Capital

Norm Fogelsong Robert GoodmanInstitutional Venture Partners Bessemer Venture Partners

Deepak Kamra Ray LeachCanaan Partners Jumpstart, Inc.

David Lincoln Trevor LoyElement Partners Flywheel Ventures

James Marver Jason MendelsonVantage Point Partners Foundry Group

Sherrill Neff Robert NelsenQuaker BioVentures ARCH Venture Partners

Theresia Ranzetta Scott SandellAccel Partners New Enterprise Associates

For the National Venture Capital Association

Prepared by Thomson Reuters

Copyright © 2012 Thomson Reuters

The information presented in this report has been gathered with the utmost carefrom sources believed to be reliable, but is not guaranteed. Thomson Reuters dis-claims any liability including incidental or consequential damages arising fromerrors or omissions in this report.

2012

National Venture Capital Association

Yearbook

Thomson Reuters 3

National Venture Capital Association1655 Fort Myer Drive, Suite 850Arlington, Virginia 22209-3114Telephone: 703-524-2549Telephone: 703-524-3940www.nvca.org

PresidentMark G. Heesen

Head of ResearchJohn S. Taylor

Senior Vice PresidentMolly M. Myers

Senior Vice President of Federal Policy & PoliticalAdvocacy

Jennifer Connell Dowling

Vice President of CommunicationsEmily Mendell

Vice President of Membership & Member FirmLiaisonJanice Mawson

Vice President of Federal Policy & Political AdvocacyEmily A. Baker

Chief Marketing OfficerJeanne Lazarus Metzger

Vice President of Federal Life Science PolicyKelly Slone

Membership Coordinator and Database ManagerTerry Samm

Accounting ManagerBeverley Badley

Manager of Administration and MeetingsAllyson Chappell

Administrative AssistantGwendolyn Taylor

Research LabMavis Moulterd

Thomson Reuters3 Times Square, 18th FloorNewYork, NY 10036Telephone: 646-223-4431Fax: 646-223-4470www.thomsonreuters.com

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Sales Manager – Publications (Buyouts, VCJ, peHUB)Greg Winterton (646-223-6787)

ThomsonONE.com Sales:Dave Sharma (646-223-4048)

4 Thomson Reuters

National Venture Capital Association 2012 Yearbook

Table of Contents

What is Venture Capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 11Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Portfolio Company Post-Money Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Exits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 14

Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 15

Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Portfolio Company Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Appendix A: Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Appendix B: MoneyTree Report Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Appendix C: MoneyTree Geographical Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Appendix D: Industry Codes (VEICs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Appendix G: Data Sources and Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Appendix H: International Convergence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Appendix I: US Accounting Rulemaking and Valuation Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105

Appendix J: Non-US Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

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Venture capital has enabled the United States to sup-port its entrepreneurial talent and appetite by turningideas and basic science into products and servicesthat are the envy of the world. Venture capital fundsbuild companies from the simplest form – perhapsjust the entrepreneur and an idea expressed as a busi-ness plan – to freestanding, mature organizations.

Risk Capital for Business

Venture capital firms are professional, institutionalmanagers of risk capital that enables and supports themost innovative and promising companies. Thismoney funds new ideas that could not be financedwith traditional bank financing, that threaten estab-lished products and services in a corporation, and thattypically require five to eight years to be launched.

Venture capital is quite unique as an institutionalinvestor asset class. When an investment is made in acompany, it is an equity investment in a companywhose stock is essentially illiquid and worthless until acompany matures five to eight years down the road.Follow-on investment provides additional funding asthe company grows. These “rounds,” typically occur-ring every year or two, are also equity investment, withthe shares allocated among the investors and manage-ment team based on an agreed “valuation.” But, unlessa company is acquired or goes public, there is littleactual value. Venture capital is a long-term investment.

More Than Money

The U.S. venture industry provides the capital to cre-ate some of the most innovative and successful com-panies. But venture capital is more than money.Venture capital partners become actively engagedwith a company, typically taking a board seat. With astartup, daily interaction with the management team iscommon. This limits the number of startups in whichany one fund can invest. Few entrepreneurs approach-ing venture capital firms for money are aware thatthey essentially are asking for 1/6 of a person!

Yet that active engagement is critical to the success ofthe fledgling company. Many one- and two-person

companies have received funding but no one- or two-person company has ever gone public! Along the way,talent must be recruited and the company scaled up.Ask any venture capitalist who has had an ultra-suc-cessful investment and he or she will tell you that thecompany that broke through the gravity evolved fromthe original business plan concept with the carefulinput of an experienced hand.

Deal Flows — Where The Buys Are

For every 100 business plans that come to a venturecapital firm for funding, usually only 10 or so get aserious look, and only one ends up being funded. Theventure capital firm looks at the management team,the concept, the marketplace, fit to the fund’s objec-tives, the value-added potential for the firm, and thecapital needed to build a successful business. A busyventure capital professional’s most precious asset istime. These days, a business concept needs to addressworld markets, have superb scalability, be made suc-cessful in a reasonable timeframe, and be truly inno-vative. A concept that promises a 10 or 20 percentimprovement on something that already exists is notlikely to get a close look.

What is Venture Capital?

Venture Capital Backed CompaniesKnown for Innovative Business Models

Employment at IPO and Now

Company As of IPO Current # ChangeThe Home Depot 650 321,000 320,350Starbucks Corporation 2,521 149,000 146,479Staples 1,693 89,019 87,326Whole Foods Market, Inc. 2,350 61,500 59,150eBay 138 27,770 27,632

Venture Capital Backed CompaniesKnown for InnovativeTechnology and Products

Employment at IPO and Now

Company As of IPO Current # ChangeMicrosoft 1,153 90,000 88,847Intel Corporation 460 100,100 99,640Medtronic, Inc. 1,287 45,000 43,713Apple Inc. 1,015 63,300 62,285Google 3,021 32,467 29,446JetBlue 4,011 11,733 7,722

Source: Global Insight; Updated from ThomsonOne 2/2012

Many technologies currently under development byventure capital firms are truly disruptive technologiesthat do not lend themselves to being embraced bylarger companies whose current products could becannibalized by this. Also, with the increased empha-sis on public company quarterly results, many largerorganizations tend to reduce spending on research anddevelopment and product development when thingsget tight. Many talented teams have come to the ven-ture capital process when their projects were turneddown by their companies.

Common Structure — Unique Results

While the legal and economic structures used to cre-ate a venture capital fund are similar to those used byother alternative investment asset classes, venture cap-ital itself is unique. Typically, a venture capital firmwill create a Limited Partnership with the investors asLPs and the firm itself as the General Partner. Each“fund,” or portfolio, is a separate partnership. A newfund is established when the venture capital firmobtains necessary commitments from its investors, say$100 million. The money is taken from investors asthe investments are made. Typically, an initial fundingof a company will cause the venture fund to reservethree or four times that first investment for follow-onfinancing. Over the next three to eight or so years, theventure firm works with the founding entrepreneur togrow the company. The payoff comes after the compa-ny is acquired or goes public. Although the investorhas high hopes for any company getting funded, onlyone in six ever goes public and one in three isacquired.

Economic Alignment of all Stakeholders —An American Success StoryVenture capital is rare among asset classes in that suc-cess is truly shared. It is not driven by quick returns ortransaction fees. Economic success occurs when thestock price increases above the purchase price. Whena company is successful and has a strong public stockoffering, or is acquired, the stock price of the compa-ny reflects its success. The entrepreneur benefits fromappreciated stock and stock options. The rank and fileemployees throughout the organization historicallyalso do well with their stock options. The venture cap-ital fund and its investors split the capital gains per a

pre-agreed formula. Many college endowments, pen-sion funds, charities, individuals, and corporationshave benefited far beyond the risk-adjusted returns ofthe public markets.

Beyond the IPO

Many of the most exciting venture capital backedcompanies left the venture portfolios after they wentpublic. Far from being a destination, the IPO processprovides needed growth capital for a growing compa-ny. A 2009 analysis by IHS Global Insight shows thatmore than 90% of the jobs at today’s venture backedpublic companies were created after it went public.That is, these companies on average are 10% of theirmature size at the time they go public.

What’s AheadMuch of venture capital’s success has come from theentrepreneurial spirit pervasive in the American culture,financial recognition of success, access to good science,and fair and open capital markets. It is dependent upona good flow of science, motivated entrepreneurs, protec-tion of intellectual property, and a skilled workforce.

The nascent deployment of venture capital in othercountries is gated by a country’s or region’s cultur-al fit, tolerance for failure, services infrastructurethat supports developing companies, intellectualproperty protection, efficient capital markets, andthe willingness of big business to purchase fromsmall companies.

The Exit FunnelOutcomes of the 11,686 Companies

First Funded 1991 to 2000

Went/Going Public14%

Acquired33%

Known Failed18%

Still Privateor Unknown*

35%

*Of these, most have quietly failed

8 Thomson Reuters


Thomson Reuters 9

2012 NVCA Yearbook

Introduction

The National Venture Capital Association 2011 Yearbook provides a summary of venture capital activity in the United States. This ranges from investments into portfolio compa-nies to capital managed by general partners to fundraising from limited partners to valuations of companies receiving venture capital investments to exits of the investments by either IPOs or mergers and acquisitions. The statistics for this publication were assembled primarily from the Money-

Tree™ Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters and analyzed through the Thomson ONE.com (for-merly VentureXpert) database of Thomson Reuters, which has been endorsed by the NVCA as the official industry ac-tivity database. Subscribers to Thomson ONE can perform considerable further analysis on the underlying data.

Industry Resources

The activity level of the U.S. venture capital industry is around half what it was at the 2000-era peak. For example, in 2000 more than 1,000 firms invested $5 million or more during the year. In 2011, the amount was roughly half that.

Venture capital under management in the United States by the end of 2011 increased 8% from 2010 levels to $197 bil-lion as calculated by the methodology described in this Year-book. However, looking behind the numbers, we know that the industry continues to contract from the circa 2000 bubble high. The increase in capital was due to 2011 fundraising be-ing stronger than it was eight years prior (2003). Total capital total is well below the bubble peak.

The uptick in firms and capital managed in 2011 belies a

Executive Summary

During 2011, the industry continued to right-size and find equilibrium. The long anticipated decline in industry sizing took a breather in 2011 at least for some of the metrics, while others such as headcount continued to decrease. Despite a difficult fundraising environment and only a few strong IPO exits, the industry increased its level of investment in a number of sec-tors, including clean technology. Investment growth in 2011 took place at both ends of the maturity spectrum. Again, more than 1,000 new companies were funded by venture capital firms in 2011.

The number of initial public offerings in 2011 fell from their modest 2010 levels, although a number of large, high profile issues increased total proceeds. While the number and proceeds from acquisitions increased, total proceeds from all exit activity again fell short of what was needed to provide capital for the many mature companies now in portfolios. The sub-sequent lack of distributions to the institutional investors who provide the capital to the industry has left these institutional investors with little capital to cycle back to the industry. Thus, 2011 remained a difficult year for many venture capital firms to raise money.

A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new business opportuni-ties, known as deal flow, remains very high and the best opportunities are getting funded, stresses remain.

Figure 1.0Venture Capital Under Management

Summary Statistics

1991 2001 2011No. of VC Firms in Existence 362 917 842No. of VC Funds in Existence 640 1,850 1,274No. of Professionals 3,475 8,620 6,125No. of First Time VC Funds Raised 4 45 45No. of VC Funds Raising Money This Year 40 325 173VC Capital Raised This Year ($B) 1.9 39.0 18.7VC Capital Under Management ($B) 26.8 261.7 196.9Avg VC Capital Under Mgt per Firm ($M) 74.0 285.4 233.8Avg VC Fund Size to Date ($M) 37.4 95.4 110.6Avg VC Fund Size Raised This Year ($M) 47.5 120.0 108.1Largest VC Fund Raised to Date ($M) 1,775.0 6,300.0 6,300.0

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Figure 2.0Capital Under ManagementU.S. Venture Funds (Billions)

1985-2011

Figure 3.0Capital Under Management toU.S. Venture Funds (Billions)

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’85 ’86 ’87 ’88 ’89 ’90 ’9 1 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’ 96 ’97 ’99 ’09 ’ 10 ’ 1 1

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2012 NVCA Yearbook

Figure 4.0Capital Under ManagementU.S. Venture Funds (Billions)

1985-2011

Figure 5.0Venture Capital Investments in 2011 By Industry Group

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Investment InvestmentIndustry Group No. Companies No. Deals Amt ($Bil) No. Companies No. Deals Amt ($Bil)Information Technology 1989 2357 16.4 671 671 2.5Medical/Health/Life Science 682 836 7.9 138 138 1.0Non-High Technology 447 529 4.5 164 164 6.6Total 3118 3722 28.8 973 973 10.1

All Investments Initial Investments

contracting industry. The average venture firm dropped in size from 8.0 principals per firm to 7.4. Headcount of these principals continued to decline to 6,231, which is 28% less than just four years earlier.

Commitments

New commitments to venture capital funds in the United States increased in 2011 to $18.7 billion after four consecu-tive years of declines. However, the amount raised by funds in 2011 was less than the amount of MoneyTree investment by funds in companies for the fifth consecutive year. While investment increased 36% from 2010 to 2011, a significant portion of the fundraising was done by several large, estab-lished firms. For many venture firms, especially those with-out established successful track records, it was very difficult

to raise money. In early 2012, a number of U.S. venture firms anticipated beginning new fundraising later in the year or in 2013. Many were waiting for a few more successful IPOs or acquisitions of portfolio companies in current funds to pro-vide investible liquidity to their investors and to demonstrate success.

Investments

With the industry overall continuing to right-size, venture capital firms nonetheless continued to both take on new companies to grow and to fund their existing investments. The number of deals, total dollars invested, and first-time fundings all increased in 2011 from 2010 levels.

Venture capital investment grew from $23.3 billion in 2010

’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’ 96 ’97 ’99 ’09 ’10 ’11

12 Thomson Reuters


Figure 6.02011 Investments

By Company Stage

Figure 7.0Venture Capital Investments in 2011

By Industry Sector

Seed 3%

Early Stage 29%

Expansion 34%

Later Stage 34%

Business Products and Services 1%

Computers and Peripherals 1%

Consumer Products and Services 4%

Electronics/Instrumentation 2%

Biotechnology17%

Financial Services 1%

Healthcare Services 1%

Industrial/Energy 12%

IT Services 8%Media and Entertainment 8%

Medical Devices and Equipment 10%

Networking and Equipment 1%

Retailing/Distribution 1%

Semiconductors 4%

Telecommunications 2%

Software 24%

Thomson Reuters 13

2012 NVCA Yearbook

Figure 8.02011 Investments By State

Figure 9.0Valuations Per Company Industry

2011 Financings ($ Millions)

Number of Pct of Investment Pct of State Companies Total ($ Millions) TotalCalifornia 1,256 40% 14,671.7 51%Massachusetts 316 10% 2,988.9 10%New York 265 8% 2,294.7 8%Texas 132 4% 1,468.9 5%Illinois 78 3% 695.7 2%Virginia 69 2% 649.6 2%Colorado 81 3% 621.5 2%Washington 92 3% 542.4 2%New Jersey 53 2% 533.4 2%Pennsylvania 126 4% 520.1 2%All Others 650 21% 3,688.0 13%Total 3,118 28,675.0

Avg Upper LowerVal Quartile Quartile

Biotechnology 63.6 671.6 57.3 41.3 8.5 1.8Business Products and Services 1.9 1.9 1.9 1.9 1.9 1.9Computers and Peripherals N/A N/A N/A N/A N/A N/AConsumer Products and Services 90.2 90.2 90.2 90.2 90.2 90.2Electronics/Instrumentation 48.6 99.8 63.2 26.6 23.1 19.5Financial Services 77.6 197.9 112.6 27.2 17.4 7.7Healthcare Services 83.6 164.6 100.4 74.4 57.7 21.0Industrial/Energy 404.5 2,250.0 57.7 45.7 28.2 1.6IT Services 100.3 409.4 94.1 43.2 15.7 0.2Media and Entertainment 47.2 200.0 54.2 16.4 5.2 4.6Medical Devices and Equipment 87.9 319.2 105.8 69.6 24.2 11.2Networking and Equipment 41.5 74.4 57.9 41.5 25.1 8.7Other N/A N/A N/A N/A N/A N/ARetailing/Distribution N/A N/A N/A N/A N/A N/ASemiconductors 19.1 33.2 25.0 20.3 11.9 5.0Software 123.7 1,844.2 66.7 34.6 13.3 3.5Telecommunications 25.2 55.0 36.2 20.1 9.0 5.5Total 97.7 2,250.0 75.6 36.6 11.8 0.2

MinCompany Industry Max Median

to $28.7 in 2011, a 23% increase. By contrast, the increase in number of deals from 3,543 in 2010 to 3,722 in 2011 re-flected only a 5% increase. This was largely due to a number of large, later stage deals made during the year into existing portfolio companies in anticipation of an IPO or acquisi-tion in upcoming quarters. The flurry of later stage invest-ments in 2007 and early 2008 slowed considerably after the global economic issues in mid-2008 and has started coming back. That said, the total number of deals done during 2011 (3,722) was less than half the number (8,032) done in 2000.

After years of taking on 1,000 or more new companies each

year, the industry had dipped to a post-bubble low in 2009, when it funded 797 first time companies. That count in-creased in 2011 to 1,173. Regardless of the specific counts, it is important to remember that each first funding represents a fresh commitment by venture capital funds to the future.

Portfolio Company Post-Money Valuations

Overall, both average and median round valuations in-creased in 2011. But it was sector dependent. For median valuations, Biotechnology, Consumer Products and Servic-es, Electronics and Communications, Healthcare Services,

14 Thomson Reuters


Figure 10.0Venture-Backed IPOs

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Industrial/Energy (where many clean technology companies are classified), IT Services, Medical Devices, and Software saw higher valuations in 2011 compared with recent years. Meanwhile, Business Products and Services, Media and En-tertainment, Semiconductors, and Telecom saw declines in their median valuations.

Looking at first fundings, most sectors saw 2011 valua-tions below the aggregate of the prior six years. Notable is the quadrupling of the median first funding for Industrial/Energy companies, which is where many clean technology companies are classified.

IPO valuations have strengthened in 2011, helped by some large, high profile offerings. The ratio of a given compa-ny’s IPO valuation (pre-money) to total venture investment roughly doubled in 2011 from 5.0 to 10.5. Again, this was driven in large part by a handful of very large IPOs. While overall there were fewer venture-backed IPOs in 2011, they provided better returns to their investors.

Exits

While some venture exit metrics improved in 2011, such as total proceeds from IPOs and from acquisitions, overall results fell far short of what was hoped for, and what was

needed. In 2011, the number of IPOs fell to 53 from the prior year’s 75. However, the proceeds of those offers rose from $7.6 billion to $9.9 billion. These results included both large and small IPOs, but several very large IPOs drove the totals. Total IPO valuations in 2011 rose to nearly $80 bil-lion, up from $37 billion in 2010. This large-IPO effect can also be seen in the average valuation at IPO of $1.5 billion compared to a median valuation of one-third that amount.

Exit success through acquisition (“M&A”) in 2011 saw yet again a record count of acquisitions at 458, which was in increase over 442 in 2010, which itself had been a high wa-ter mark. Total dollars realized also increased to $24 billion. While not an all-time record, or even a post-bubble record, it shows 31% growth over 2010. In 2011, 21% of fully report-ed selling prices were 10 times or greater the total venture investment into that company. Almost another third (31%) of the reported acquisitions were for 4-10 times the total ven-ture investment. Both statistics are at the post-bubble high.

Thomson Reuters 15

2012 NVCA Yearbook

The activity level of the U.S. venture capital industry is around half what it was at the 2000-era peak. For example, in 2000 more than 1,000 firms invested $5 million or more during the year. In 2011, the amount was roughly half that.

Venture capital under management in the United States by the end of 2011 increased 8% from 2010 levels to $197 billion as calculated by the methodology described below. However, looking behind the numbers, we know that the industry continues to contract from the circa 2000 bubble high. The increase in capital was due to 2011 fundraising being stronger than the amount raised eight years prior (2003). Even with the increase in 2011, total capital is well below the bubble peak.

The slight uptick in firms and capital managed in 2011 belies a contracting industry. The average venture firm dropped in size from 8.0 principals per firm to 7.4. Headcount of these principals continued to decline to 6,231, which is 28% less than just 4 years earlier. While we expect the number of firms to decline further, the bulk of the recent fundraising was done by larger firms. So while headcount is likely to decline further, the number of principals per firm can be expected to increase.

Geographic location of the largest venture firms is quite concentrated. California domiciled firms manage 46% of the indus-try’s capital although these firms may have investing partners based in other states or even countries. Taken together, the top five states (California, Massachusetts, New York, Connecticut, and Illinois) hold 80% of total venture capital in this country.

Methodology

The number of firms in existence will vary on a rolling eight year basis as firms raise new funds or do not raise funds for more than eight years. Under this methodology, we estimate that there are currently 842 firms with limited partnerships “in existence.” To clarify, this is actually stating that there are 842 firms that have raised a venture capital fund in the last eight years. In reality, fewer firms are actually making new investments in 2012.

For this publication, we are primarily counting the number of firms with limited partnerships and are excluding other types of investment vehicles. From that description, it may appear that the statistics for total industry resources may be under-estimated. However, this must be balanced with the fact that capital under management by captive and evergreen funds is difficult to compare equitably to typical limited partnerships with fixed lives. For this analysis only, the firms counted for capital under management include firms with fixed life part-nerships and venture capital funds raised. If a firm raised both buyout and venture capital funds, only the venture funds would be counted in the calculation of venture capital under management.

Venture capital under management can be a complex statistic

to estimate. Indeed, capital under management reported by firms can differ from firm to firm as there’s not one singular definition. For example, some firms include only cumulative committed capital, others may include committed capital plus capital gains, and still other firms define it as committed capital after subtracting liquidations. To complicate matters, it is difficult to compare these totals to European private eq-uity firms which include capital gains as part of their capital under management measurements.

For purposes of the analysis in this publication, we have tried to clarify the industry definition of capital under manage-ment as the cumulative total of committed capital less liq-uidated funds or those funds that have completed their life cycle. Typically, venture capital firms have a stated 10-year fixed life span, except for life science funds which are often established as 12-year funds. Figure 1.08 shows the reality of fund life.

Thomson Reuters calculates capital under management as the cumulative amount committed to funds on a rolling eight-year basis. Current capital under management is cal-culated by taking the capital under management calculation from the previous year, adding in the current year’s funds’ commitments, and subtracting the capital raised eight years prior.

Industry Resources

16 Thomson Reuters


For this analysis, Thomson Reuters classifies venture capital firms using four distinct types: private independent firms, fi-nancial institutions, corporations, and other entities. ‘Private independent’ firms are made up of independent private and public firms including both institutionally and non-institu-tionally funded firms and family groups. ‘Financial institu-tions’ refers to firms that are affiliates and/or subsidiaries of investment banks and non-investment bank financial enti-ties, including commercial banks and insurance companies. The ‘corporations’ classification includes venture capital

subsidiaries and affiliates of industrial corporations. The capital under management data referred to in this section consist primarily of venture capital firms investing through limited partnerships with fixed commitment levels and fixed lives and does not include non-vintage “evergreen funds” or true captive corporate industrial investment groups without fixed commitment levels. The term ‘evergreen funds’ refers to funds that have a continuous infusion of capital from a parent organization, as opposed to the fixed life and commit-ment level of a closed-end venture capital fund.

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Figure 1.01Capital Under Management

U.S. Venture Funds ($ Billions)1985 to 2011

’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

Thomson Reuters 17

2012 NVCA Yearbook

Figure 1.02Total Capital Under Management

By Firm Type 1985 to 2011 ($ Millions)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Private Independent 13,819 16,631 19,625 21,822 25,573 25,643 24,856 25,495 27,615 31,265 35,865 43,126 54,586 78,834 125,037 199,686 236,650 237,889 239,430 248,393 256,218 270,128 250,255 198,922 172,338 174,498 184,609Financial Institutions 4,054 4,021 3,919 3,751 3,160 3,196 2,738 2,519 2,709 3,177 3,992 5,476 7,617 10,854 16,639 25,166 27,096 26,632 25,976 24,776 24,183 21,675 16,695 8,225 6,726 7,038 10,079Corporations 2,096 1,975 2,365 2,547 2,451 2,455 2,382 2,503 1,674 1,723 1,439 2,406 2,710 3,847 7,623 13,031 14,315 14,357 14,305 13,540 13,350 13,054 9,646 4,367 3,195 3,816 5,086Other 1,028 1,045 1,025 1,025 908 826 706 351 207 298 403 437 813 1,045 1,307 1,873 2,589 2,593 2,561 2,509 2,178 2,122 1,890 1,310 655 635 588Total 20,997 23,672 26,934 29,144 32,091 32,120 30,682 30,868 32,204 36,463 41,698 51,444 65,725 94,580 150,605 239,757 280,651 281,471 282,272 289,218 295,928 306,979 278,485 212,823 182,914 185,987 200,363

Figure 1.03Distribution of Firms

By Capital Management 2011

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Capital Under Management ($ Millions)This chart shows capital committed to US venture firms in active funds. While much of the capital is managed by larger firms, of the 842 firms at the end of 2011, roughly 59% of them (500) managed $100 million or less. By comparison, just 49 firms managed active funds totaling more than $1 billion.

18 Thomson Reuters


Figure 1.04Fund and Firm Analysis

The correct interpretation of this chart is that since the beginning of the industry to the end of 2011, 1,761firms had been founded and 4,545 funds had been raised. Those funds totaled $525.4 billion. At the end of 2011, 842 firms as calculated using our eight-year methodology managed 1,274 individual funds, with each fund typically being a separate limited partnership. Capital under management by those funds at the end of 2011 was $196.9 billion. However, only 526 independent and corporate venture groups invested at least $5 million in MoneyTree TM deals in 2011.

Figure 1.05Principals Information

Figure 1.06Top 5 States

By Capital Under Management 2011

No. Estimated Avg MgtPrincipals Industry Per Principal

Year Per Firm Principals ($M)2007 8.7 8,665 30.02008 8.5 7,293 28.32009 8.6 6,760 26.42010 8.0 6,328 25.72011 7.4 6,231 28.6

The correct interpretation of this chart is that at year end 2011, there were 6,231 principals (people who go to board meetings) in the industry. A principal on average manages $28.6 million and the average firm is made up of 7.4 principals, down from 8.0 principals a year earlier.

State ($ Millions)CA 89,990.7MA 34,211.4NY 20,062.4CT 9,824.9IL 4,408.2Total* 158,497.7

*Total includes above 5 states only

Total Total Total Firms That Raised Capital Avg Avg FirmsCumulative Cumulative Cumulative Existing Funds in the Last Managed Fund Size Firm Size Actively

Year Funds Firms Capital ($B) Funds 8 Vintage Years ($B) ($M) ($M) Investing1985 631 323 20.0 531 294 17.5 33.0 59.5 911986 707 353 23.4 589 324 20.7 35.1 63.9 1091987 810 388 27.4 669 353 23.7 35.4 67.1 1051988 888 407 30.8 700 366 24.7 35.3 67.5 1171989 980 436 35.8 726 381 27.6 38.0 72.4 1131990 1,038 452 38.3 715 384 28.2 39.4 73.4 1001991 1,077 459 40.5 640 362 26.8 41.9 74.0 761992 1,149 479 44.1 602 354 27.2 45.2 76.8 1021993 1,244 509 49.3 613 370 29.4 48.0 79.5 921994 1,341 540 56.7 634 383 33.3 52.5 86.9 1091995 1,498 606 66.3 688 423 38.9 56.5 92.0 1801996 1,647 666 78.6 759 467 47.8 63.0 102.4 2451997 1,862 759 97.7 882 540 61.9 70.2 114.6 3401998 2,098 837 128.8 1,060 611 90.5 85.4 148.1 3871999 2,434 964 183.6 1,357 730 143.1 105.5 196.0 6922000 2,848 1,105 268.1 1,699 859 224.0 131.8 260.8 1,0352001 3,094 1,187 311.1 1,850 917 261.7 141.5 285.4 7442002 3,168 1,202 318.4 1,827 915 261.7 143.2 286.0 5222003 3,271 1,253 328.5 1,773 943 262.2 147.9 278.0 4982004 3,438 1,322 348.6 1,791 980 270.0 150.8 275.5 5572005 3,610 1,390 375.1 1,748 1,002 277.3 158.6 276.7 5242006 3,790 1,465 416.7 1,692 1,012 287.9 170.2 284.5 5482007 4,001 1,550 446.3 1,567 1,004 262.7 167.6 261.7 5942008 4,181 1,612 473.2 1,333 871 205.1 153.9 235.5 5732009 4,286 1,652 489.5 1,192 806 178.4 149.7 221.3 4422010 4,408 1,711 500.6 1,240 833 182.2 146.9 218.7 4952011 4,545 1,761 525.4 1,274 842 196.9 154.6 233.8 526

Thomson Reuters 19

2012 NVCA Yearbook

Figure 1.07Capital Under Management By State 1985 to 2011 ($ Millions)

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011CA 4,795 5,781 6,438 6,588 7,788 7,419 7,514 7,483 8,451 9,136 11,285 14,395 18,975 26,130 49,867 82,679 100,991 101,259 103,496 109,600 114,397 122,908 111,604 94,294 82,484 85,476 89,991MA 2,338 2,667 3,555 3,895 4,303 4,423 4,070 4,939 5,140 5,642 6,941 7,367 10,074 15,264 22,786 37,739 47,267 48,966 48,057 48,664 50,486 55,457 52,148 38,364 32,251 31,476 34,211NY 3,411 4,473 4,387 4,197 5,677 5,900 5,540 5,393 5,969 7,121 8,486 10,400 10,785 20,226 27,368 39,856 40,933 38,827 37,492 36,922 36,902 30,370 26,090 14,875 13,751 15,048 20,062CT 1,281 1,435 1,921 1,976 1,820 1,983 1,835 1,932 2,270 2,429 2,275 2,397 3,915 4,935 7,267 8,872 11,930 11,766 11,729 13,389 13,359 14,687 13,018 12,210 8,499 9,264 9,825IL 468 491 721 847 803 818 781 883 1,149 1,220 1,311 1,254 1,928 2,340 3,643 4,282 4,690 5,408 5,807 5,872 5,381 5,299 4,434 3,799 3,845 2,990 4,408PA 443 519 549 561 730 772 798 794 570 734 820 1,324 1,741 2,096 3,056 5,815 6,023 5,844 6,126 5,729 6,260 6,642 6,665 4,560 4,316 4,407 4,117DC 3 4 4 9 9 9 9 22 23 29 146 1,687 2,348 2,497 2,667 4,345 5,163 5,141 5,021 3,762 3,793 4,791 4,952 4,321 3,594 3,634 4,111TX 452 490 723 719 792 835 771 803 937 1,143 1,155 1,239 1,693 2,977 4,796 6,890 8,005 7,936 7,794 8,270 8,399 8,174 6,474 5,337 4,113 3,970 4,109NJ 623 724 796 779 776 996 924 591 546 729 955 1,480 1,555 2,168 2,701 3,613 4,448 4,364 4,574 4,223 4,213 5,552 5,422 4,553 4,177 4,159 3,765WA 312 407 385 421 395 383 197 241 227 178 298 460 677 1,077 1,793 2,796 3,676 3,681 3,556 4,623 4,589 4,592 5,164 4,623 3,720 3,684 3,703MD 93 97 123 116 158 163 98 114 374 784 911 1,514 2,002 2,638 3,507 5,231 5,354 5,137 5,016 4,790 4,747 4,725 4,411 2,789 3,004 2,893 3,370VA 72 78 78 84 104 91 56 42 35 32 48 73 157 410 1,141 2,400 2,594 2,608 2,776 2,971 3,538 3,565 3,421 2,247 2,593 2,636 2,471MO 555 583 616 590 598 655 651 640 107 137 119 124 147 111 216 306 448 416 406 503 1,231 1,291 1,382 1,316 1,181 1,186 1,411MN 197 295 339 671 743 881 809 762 842 896 875 511 615 712 1,092 2,232 2,183 2,359 2,351 2,358 2,440 2,589 2,466 1,637 1,655 1,315 1,320NC 34 54 87 89 124 113 109 110 108 146 128 280 599 784 989 1,345 1,425 1,576 1,773 1,636 1,467 1,676 1,560 1,210 1,237 1,277 1,148CO 360 429 397 517 617 576 557 531 622 570 478 549 853 1,150 3,321 4,754 5,263 5,408 5,383 5,207 4,875 4,653 2,994 1,596 966 1,122 1,133UT 9 19 19 15 15 15 15 10 10 25 31 31 94 96 131 268 474 447 558 572 530 634 1,232 1,278 1,086 1,149 1,121MI 111 119 125 121 123 38 14 14 13 10 41 41 66 76 439 490 494 492 533 762 796 804 541 776 832 990 1,083TN 102 127 191 183 214 259 275 269 200 291 306 453 463 743 1,058 1,234 1,278 1,159 1,148 1,042 1,089 839 667 570 559 695 693GA 87 95 175 257 261 275 262 261 434 432 433 359 761 1,073 1,162 2,304 2,153 2,147 2,070 2,106 1,835 1,695 1,683 558 530 532 608OK 1 29 29 28 37 38 36 37 38 9 10 32 23 66 66 139 139 139 139 559 654 648 652 590 597 600 602OH 849 891 971 830 254 257 273 302 428 469 446 375 689 763 1,244 1,845 1,868 1,870 1,848 1,983 1,805 1,719 1,326 713 565 520 557FL 124 131 173 192 194 132 110 97 151 223 320 303 378 687 1,070 1,780 1,746 1,679 1,586 1,574 1,802 1,523 1,281 557 540 601 557DE 39 40 40 38 47 41 41 14 41 51 100 121 114 116 115 139 106 115 74 62 62 62 297 277 416 396 446AL 125 131 132 127 134 136 136 137 6 6 6 6 5 24 33 107 107 107 154 173 225 224 216 356 361 362 370IN 44 55 56 77 96 88 80 96 99 109 111 192 176 191 207 661 660 649 681 592 595 607 616 136 342 339 305LA 7 7 7 7 7 5 2 11 22 31 49 89 275 365 444 475 649 646 629 664 504 432 355 338 198 266 282WI 177 96 95 91 101 102 77 78 81 163 167 167 137 139 110 182 182 89 89 99 85 253 266 195 198 233 233AZ 40 43 43 72 74 75 75 34 44 43 44 10 9 38 37 101 103 144 179 180 198 171 172 129 118 263 229KY 15 16 16 16 0 0 0 0 0 7 21 21 21 21 21 21 21 14 14 14 18 216 218 223 225 226 213NM 70 100 135 132 168 255 242 230 205 179 153 151 120 12 12 12 12 12 33 35 69 74 77 79 80 114 84ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14 14 14 14 14 14 84 85 72 73 73 74ME 1 1 20 25 26 26 26 28 29 98 89 86 88 89 207 201 289 217 218 214 215 276 160 164 73 73 69SD 0 0 0 0 0 0 0 0 0 0 0 10 10 84 84 177 177 176 176 172 172 100 110 28 29 45 45HI 2 2 2 2 2 2 2 0 0 0 2 2 2 2 11 11 11 11 9 16 16 16 7 14 14 43 43IA 49 52 104 101 63 64 61 62 54 55 5 5 16 17 16 16 60 60 55 64 53 60 67 69 39 39 39OR 168 176 203 239 242 246 227 116 74 74 77 30 30 40 40 100 99 112 82 85 85 76 78 34 39 28 28VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 16 43 43 43 43 43 43 57 41 14 23 24ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13 13 13 13NH 24 25 25 49 50 51 50 50 27 27 46 19 66 67 66 65 65 83 65 65 19 30 30 31 31 11 11KS 0 0 0 0 0 13 13 13 14 14 37 37 56 43 43 42 42 42 19 19 0 0 0 0 0 8 8SC 1 1 1 1 15 15 15 15 15 15 29 52 37 37 37 36 37 51 38 15 20 20 20 21 20 5 5MS 0 0 0 0 0 0 0 0 0 0 11 11 11 11 11 11 39 39 28 28 28 29 30 30 1 1 1PR 0 0 0 0 0 9 9 9 9 9 9 9 49 40 40 39 68 68 68 68 29 29 30 31 1 1 1NE 0 0 0 1 1 1 1 1 11 11 104 136 138 140 139 175 164 164 71 38 38 38 38 0 0 0 0RI 15 16 16 36 36 37 36 36 22 22 23 0 2 2 2 2 26 25 35 35 33 33 33 34 10 10 0MT 0 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0AK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 117 117 117 117 117 118 118 119 0 0 0 0AR 2 2 2 2 2 2 2 0 0 0 0 0 0 0 19 19 19 19 19 19 19 19 0 0 0 0 0NV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 24 23 23 32 32 33 33 33 9 10 10 0 0WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 21 21 21 21 21 21 21 21 0 0 0 0Total 17,500 20,700 23,700 24,700 27,600 28,200 26,800 27,200 29,400 33,300 38,900 47,800 61,900 90,500 143,100 224,000 261,700 261,700 262,200 270,000 277,300 287,900 262,700 205,100 178,400 182,200 196,900

20 Thomson Reuters


Source: Adams Street Partners, based on 2010 analysis of dissolved funds.This chart tracks the year in which a 10-year fund is, in fact, dissolved.These later periods are referred to as “out years.” Historically, after the 10th year, only a few companies remain in the portfolios that typically do not have huge upside potential. But the slow pace of exits in recent years has resulted in a number of good, mature companies remaining in portfolios well past the nominal 10-year mark. Life science funds tend to have lives two years longer than typical technology funds. In preparing this chart, partial years are rounded to the nearest whole year. So 10.4 years would round to 10 years, and 10.5 years would round up to 11 years. The median life span of a fund in this analysis is 14.17 years.

Figure 1.08List of IT Funds in Years

Life of IT Funds % of In Years Funds<= 10 7%11-12 20%13-14 27%15-16 22%17-18 14%>=19 10%

Thomson Reuters 21

2012 NVCA Yearbook

Methodology

As defined by Thomson Reuters, capital commitments, also known as fundraising, are firm capital commitments to private equity/venture capital limited partnerships by outside investors. For purposes of these statistics, the terms “capital commitments,” “fundraising,” and “fund closes” are used interchangeably. There are three sources of data for capital commitments: (1) SEC filings that are regularly monitored by our research staff, (2) surveys of the industry routinely conducted by Thomson Reuters, and (3) verified industry press and press releases from venture firms.

Capital commitments are stated on either a calendar year basis when committed or a vintage year basis once the fund starts investing, depending on the analysis required. The data in this chapter is by calendar year and incrementally

measures how much in new commitments funds raised during the calendar year. For example, a venture capital firm announces a $200 million fund in late 2009, raises $75 million in 2010, and subsequently raises the remaining $125 million in 2011. In this chapter, nothing would be reflected in 2009, $75 million would be counted in 2010, and $125 million would be counted in 2011. Assuming it started investing and made its first capital call in 2011, the entire fund would then be considered to be a 2011 vintage year fund. An important note: the fund commitments presented in this publication do not include those corporate captive venture capital funds that are funded by a corporate parent, which do not typically raise capital from outside investors, nor evergreen funds which do not raise funds by vintage year.

New commitments to venture capital funds in the United States increased in 2011 to $18.7 billion after four consecutive years of declines. However, the amount raised by funds in 2011 was less than the amount of MoneyTree investment by funds in companies for the fifth consecutive year. While investment increased 36% from 2010 to 2011, a significant portion of the fundraising was done by several large, established firms. For many venture firms, especially those without established suc-cessful track records, it was very difficult to raise money. In early 2012, a number of US venture firms anticipated beginning new fundraising later in the year or in 2013. Many were waiting for a few more successful IPOs or acquisitions of portfolio companies in current funds to provide investible liquidity to their investors and demonstrate success.

The 2011 fundraising totals of $18.7 billion was 41% less than the post-bubble total of $31.6 raised in 2006. Looking at annual commitment totals, venture firms had raised considerable funds in 2006 and 2007 and the first part of 2008. As the economy worsened toward the end of 2008, many institutional investors (e.g., pension plans, endowments, money manag-ers) saw the public portion of their portfolios fall and found themselves over-allocated to alternative asset classes, including venture capital. This situation has not changed significantly although activity did increase in 2011. For the seventh year in a row, the top fundraising states were California, Massachusetts, and New York. California, with its venture firms raising $9.8 billion in 2011 has held the top spot for the ninth place in a row. New York firms raised $4.2 billion and Massachusetts firms $2.0 billion in 2011. Firms domiciled in the top five fundraising states in 2011 gathered 91% of the dollars, compared with for 88% in 2010 and 82% in 2009. Please note that the state of fund domicile matters less than has been true historically. Much of the money is managed by large, national funds that tend to be domiciled in any of several states with a broad geographic investing footprint. Readers should not interpret capital available to entrepreneurs in a given state as limited to the capital raised in that state.

Venture capital fundraising remains 20-25% of private equity fundraising.

Capital Commitments

22 Thomson Reuters


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Figure 2.01Capital Commitments

To U.S. Venture Funds ($ Billions)1985 to 2011

Figure 2.02Capital Commitments To Private Equity Funds 1985 to 2011

Venture CapitalBuyouts and Mezzanine

Capital Total Private Equity

Year Sum ($Mil) % of Total PE No. Funds Sum ($Mil) No. Funds Sum ($Mil) No. Funds1985 3,750.7 56% 116 2,971.8 21 6,722.5 1371986 3,587.4 42% 101 5,043.7 32 8,631.1 1331987 4,366.6 21% 115 16,234.6 47 20,601.1 1621988 4,443.9 27% 103 11,750.4 55 16,194.3 1581989 4,918.8 29% 106 12,068.5 78 16,987.3 1841990 3,242.7 27% 86 8,831.5 64 12,074.3 1501991 1,905.7 31% 40 4,242.1 27 6,147.8 671992 5,243.8 33% 80 10,750.5 58 15,994.3 1381993 4,565.3 21% 93 16,961.7 81 21,527.0 1741994 7,744.7 27% 136 20,457.0 100 28,201.7 2361995 9,467.3 26% 162 27,115.7 109 36,583.0 2711996 11,553.6 26% 168 32,981.4 104 44,535.0 2721997 18,119.0 30% 244 43,128.0 137 61,247.1 3811998 30,849.0 33% 290 61,559.5 173 92,408.4 4631999 53,810.5 50% 433 53,534.4 167 107,344.9 6002000 103,734.6 56% 638 80,564.8 171 184,299.4 8092001 39,005.1 43% 325 52,247.8 137 91,252.9 4622002 15,879.3 31% 199 34,866.2 123 50,745.5 3222003 11,473.1 24% 161 35,967.4 122 47,440.6 2832004 18,583.3 24% 211 58,985.0 158 77,568.3 3692005 30,369.1 22% 232 107,918.8 203 138,287.9 4352006 31,588.6 17% 233 151,181.2 208 182,769.7 4412007 30,653.2 11% 237 237,900.0 258 268,553.2 4952008 25,382.9 12% 213 188,565.1 228 213,948.0 4412009 16,410.0 25% 161 50,549.0 144 66,959.0 3052010 13,781.5 21% 169 51,066.1 167 64,847.6 3362011 18,704.6 20% 173 72,597.7 199 91,302.3 372

Thomson Reuters 23

2012 NVCA Yearbook

Figure 2.03Venture Capital Fund Commitments

1985 to 2011 ($ Millions)

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011CA 1,250 945 1,159 903 1,519 831 546 1,331 1,335 1,829 3,107 3,724 5,559 8,487 21,914 43,723 13,527 2,747 5,634 8,732 12,578 13,424 13,009 14,204 8,952 6,721 9,820NY 186 1,460 497 279 2,260 490 474 494 940 1,887 2,364 1,516 3,868 9,346 9,036 16,647 2,983 7,754 1,225 1,848 1,720 2,508 4,310 1,833 1,418 1,244 4,170MA 534 356 973 813 339 675 180 1,068 373 1,158 1,955 1,906 2,716 5,231 7,850 16,677 9,743 2,514 1,597 1,797 9,151 4,366 5,162 2,535 3,574 2,778 1,952MD 4 7 24 0 49 14 50 0 225 479 67 439 145 768 840 1,887 307 381 105 162 380 472 783 369 484 68 544DC 39 0 0 5 0 0 0 0 0 0 130 820 668 392 360 1,423 622 315 0 324 393 1,296 315 1,293 204 0 499IL 57 47 325 158 26 57 94 247 278 183 230 295 575 466 1,304 1,067 1,136 478 701 432 133 452 545 258 216 235 202TX 37 61 231 41 161 143 58 382 137 283 194 326 394 1,407 1,830 3,711 2,232 186 76 894 630 437 289 1,038 78 83 195AZ 0 0 0 37 0 0 0 0 10 0 0 0 0 0 29 60 21 42 41 0 19 0 0 20 0 0 194MI 5 0 7 33 0 0 0 0 3 14 0 26 11 0 321 241 8 0 65 63 112 13 49 256 84 177 192UT 0 11 1 0 0 0 0 0 0 11 0 0 33 50 40 126 224 30 34 40 24 170 213 536 31 16 162TN 20 23 73 0 34 0 0 40 0 116 84 149 109 266 267 262 82 22 101 16 84 62 100 129 89 42 161NC 7 7 31 23 38 1 0 0 0 63 10 184 349 174 180 613 120 75 276 17 108 401 185 103 5 460 130PA 54 73 55 12 118 45 167 30 110 182 114 264 784 177 1,241 2,751 537 86 388 451 688 794 746 963 233 205 126OH 3 0 87 75 0 30 0 67 4 86 10 0 365 58 659 662 330 102 5 210 558 152 81 83 4 30 85NJ 270 61 157 0 125 243 75 110 177 401 213 606 118 1,002 570 1,041 652 392 561 197 204 1,812 235 48 500 112 73AL 150 0 0 0 0 0 0 0 0 0 0 0 5 30 0 137 16 11 49 19 70 19 0 118 101 2 58DE 0 0 0 0 0 0 0 0 0 25 31 65 0 0 28 0 0 22 0 10 0 0 250 0 139 0 57VA 0 4 10 13 15 2 0 0 0 0 7 20 65 256 784 2,287 119 37 196 72 419 555 582 105 14 121 36GA 0 0 15 65 0 14 0 0 56 0 74 34 41 181 30 918 19 0 0 55 104 103 203 19 31 31 26KS 0 0 0 0 0 0 0 0 0 0 25 0 20 0 0 0 0 0 0 0 0 0 0 0 0 0 8CO 32 71 32 70 80 0 0 0 114 0 19 216 253 433 1,942 2,414 513 118 94 84 69 132 351 221 3 253 6ME 0 0 22 948 0 0 0 2 0 59 0 22 0 0 127 0 76 16 3 0 0 46 19 0 0 0 6OR 0 0 30 0 0 0 0 0 0 32 32 0 0 10 0 65 0 14 0 2 0 0 2 5 5 12 2NM 36 28 0 2 0 155 40 0 0 6 2 0 0 0 0 0 0 0 18 20 34 5 7 0 0 35 1CT 299 156 420 388 66 310 150 300 473 388 260 425 1,324 1,083 2,843 2,328 4,204 60 165 1,926 1,143 3,136 904 260 158 938 1FL 10 0 36 11 29 0 35 0 133 105 106 0 78 250 326 955 26 8 56 1 313 11 109 25 32 75 0WA 25 126 37 60 0 0 5 48 40 37 129 239 180 409 640 1,175 888 83 1 955 281 515 1,424 492 5 0 0MN 14 110 51 418 20 162 16 946 66 164 47 36 208 217 107 1,827 17 276 26 50 295 398 275 325 22 0 0LA 0 0 0 0 0 0 0 11 14 169 18 24 88 51 374 70 30 52 8 75 4 12 0 0 0 0 0OK 0 32 0 0 10 0 0 0 0 0 0 24 0 45 0 110 0 0 0 0 12 38 0 0 0 0 0MO 644 0 33 0 0 53 0 0 64 0 11 6 45 25 80 65 286 0 0 80 829 40 210 54 0 72 0SD 0 0 0 0 0 0 0 0 0 0 0 11 0 22 14 131 1 0 0 5 0 0 0 14 0 16 0IN 0 10 0 27 16 5 0 49 0 20 0 116 0 13 20 103 0 10 36 17 6 24 1 29 1 28 0IA 11 0 60 0 0 0 0 56 0 0 5 0 11 2 5 21 26 0 0 10 0 43 0 0 15 0 0HI 0 0 0 0 0 0 0 0 0 0 3 0 0 0 10 0 0 3 0 8 0 0 0 6 0 0 0RI 17 0 0 25 0 0 0 0 0 0 0 0 0 0 0 0 25 0 0 0 0 0 0 0 0 0 0MS 0 0 0 0 0 0 0 0 0 0 12 0 0 0 0 30 0 0 0 0 0 1 0 0 0 0 0NH 49 0 0 40 0 0 15 0 0 0 20 0 50 0 0 0 0 11 9 0 0 5 7 0 0 0 0WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 4 13 2 0 0 0 0 0 0 0 0VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 25 0 0 0 0 0 11 3 0 0 0SC 0 0 0 0 13 5 0 0 0 0 14 0 0 0 0 0 0 15 0 0 6 0 0 0 0 0 0ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 27 0 0 0 0 0 75 0 0 0 0PR 0 0 0 0 0 10 0 0 0 0 0 0 0 0 0 0 31 0 0 0 0 0 1 0 0 0 0NV 0 0 0 0 0 0 0 0 0 0 50 25 0 0 25 0 0 0 0 0 0 0 0 0 0 0 0ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13 0 0 0NE 0 0 0 0 0 0 0 0 0 0 111 36 0 0 0 41 0 0 0 0 0 0 0 0 0 0 0UN 0 0 0 0 0 0 0 63 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 26 0 0 0 0 0 0 0 0 0 0 0AR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 0 0 0 0 0 0 0 0 0 0 0WI 0 0 0 0 0 0 0 0 0 40 0 0 16 0 17 82 14 0 0 11 0 78 101 15 10 27 0KY 0 0 0 0 0 0 0 0 14 7 15 0 42 0 0 0 135 8 2 0 5 65 98 12 0 0 0Total 3,751 3,587 4,367 4,444 4,919 3,243 1,906 5,244 4,565 7,745 9,467 11,554 18,119 30,849 53,810 103,735 39,005 15,879 11,473 18,583 30,369 31,589 30,653 25,383 16,410 13,781 18,705

24 Thomson Reuters


Figure 2.04Top 5 States

By Venture Capital Committed 2011

Figure 2.05Private Equity

Annual Commitment ($ Billions)1985 to 2011

No. of CommittedState Funds ($Mil)California 61 9,819.5 New York 21 4,170.0 Massachusetts 18 1,952.0 Maryland 2 543.5 D. of Columbia 3 498.9 Sub-Total 105 16,983.9 Remaining States 68 1,720.7 Total 173 18,704.6

- 20 40 60 80

100 120 140

160 180 200 220 240 260 280

’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

($ B

illio

ns)

Year

Venture Capital Buyout and Mezzanine Capital

Thomson Reuters 25

2012 NVCA Yearbook

Methodology

As calculated by Thomson Reuters, venture capital invest-ment data are derived from several sources. Primarily, sur-vey information is obtained from the quarterly survey which drives the MoneyTree Report™ from PricewaterhouseCoo-pers and the National Venture Capital Association based on data from Thomson Reuters. This is the official industry da-

tabase of venture capital investment. Secondly, Thomson Re-uters obtains data from SEC filings that are regularly moni-tored by our research staff. Finally, publicly available sources such as press releases and trade publications are used.

For detailed information on which transactions qualify as MoneyTree deals and are therefore counted in this chapter, please refer to Appendix B.

With the industry overall continuing to right-size, venture capital firms nonetheless continued both to take on new compa-nies to grow and to fund their existing investments. The number of deals, total dollars invested, and first-time fundings all increased in 2011 from 2010 levels.

Venture capital investment grew from $23.3 billion in 2010 to $28.7 in 2011, a 23% increase. By contrast, the increase in number of deals from 3,543 in 2010 to 3,722 in 2011 reflected only a 5% increase. This was largely due to a number of large, later stage deals made during the year into existing portfolio companies in anticipation of an IPO or acquisition in upcoming quarters. The flurry of later stage investments in 2007 and early 2008 slowed considerably after the global economic issues in mid-2008. That said, the total number of deals done during 2011 (3,722) was less than half the number (8,032) done in 2000.

After years of taking on 1,000 or more new companies each year, the industry had dipped to a post-bubble low in 2009 when it funded 797 first time companies, but that count increased in 2011 to 1,173. Regardless of the specific counts, it is impor-tant to remember that each first funding represents a fresh commitment by venture capital funds to the future.

The contention for venture capitalist attention (and dollars) between existing later stage portfolio companies and newly-arriving business plans continues. There are still a record number of companies in portfolios in the later stage of develop-ment that in most other positions in the business cycle would have already gone public or otherwise been acquired. As the interest increased in IPOs in 2011 and the number of acquisitions reached record highs, VCs did 874 deals in later stage companies, or 23.5% of the total deals. At the other end of the maturity spectrum, in 2011 49.4% of all the deals consisted of seed and early fundings. This is the highest level since 1995.

The life sciences share of the venture capital investment dollars was virtually unchanged in 2011 versus 2010 and remained at near-record levels. In 2011, 17% of the money went into biotechnology, 10% into devices, and 1% into healthcare ser-vices. By contrast, in 2009, 20% of total dollars went to biotechnology companies, 14% went to medical devices and equip-ment and 1% went to healthcare services. Clean technology was the U.S. venture capital’s most visible emerging sector with a record $4.5 billion invested in 2011, up 15% from the 2010 total. The slight increase in average deal size to 13.3 is a function of two countervailing forces: the significant number of later stage, ergo larger, rounds versus an overall shift to capital efficient business models. The 2011 investment total represents 15.5% of all venture investment.

During 2011, California companies received a record 51.2% of the dollars. At the same time, companies in a record 47 states and DC received venture capital funding. Together, the top 5 states (CA, MA, NY, TX, IL) received 77% of the total dollars invested in the United States.

Corporate venture capital activity increased overall in 2011 by both long-established groups and a number of new entrants.

Investments

26 Thomson Reuters



By Industry Group

Figure 3.01Venture Capital Investments ($ Billions)

1985 to 2011

0

20

40

60

80

100

’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

($ B

illio

ns)

Year

Investment InvestmentIndustry Group # Companies # Deals Amt ($Bil) # Companies # Deals Amt ($Bil)Information Technology 1,989 2,357 16.4 671 671 2.5Medical/Health/Life Science 682 836 7.9 138 138 1.0Non-High Technology 447 529 4.5 164 164 6.6Total 3,118 3,722 28.8 973 973 10.1

All Investments Initial Investments

Figure 3.03Venture Capital Investments

Top 5 States in 2011

Amt State # Companies # Deals Invested ($Bil)California 1,256 1,500 14.7Massachusetts 316 384 3.0New York 265 310 2.3Texas 132 153 1.5Illinois 78 90 0.7Total* 2,047 2,437 22.1

*Total includes top 5 states only

Thomson Reuters 27

2012 NVCA Yearbook


By Industry Sector


By Stage

Business Products and Services 1%

Computers and Peripherals 1%

Consumer Products and Services 4%

Electronics/Instrumentation 2%

Biotechnology17%

Financial Services 1%

Healthcare Services 1%

Industrial/Energy 12%

IT Services 8%Media and Entertainment 8%

Medical Devices and Equipment 10%

Networking and Equipment 1%

Retailing/Distribution 1%

Semiconductors 4%

Telecommunications 2%

Software 24%

Seed 3%

Early Stage 29%

Expansion 34%

Later Stage 34%

28 Thomson Reuters


Figure 3.06Amount of Capital Invested By State in 2011

($ Millions)

Figure 3.07Number of Companies Investd in By State in 2011

542WA

239OR

3MT

4ID

10NV14672

CA

234UT

247AZ

WY

622CO

62NM

1469TX

4ND

3SD

NE

67KS

27OK

266MN

28IA

134MO

AR

22LA

72WI

696IL

83MI

178IN

205OH

MS

103 TN

4AL

343GA

299FL

650 VA8

KY

2VW

520PA

2295NY

24VT

96NH

39ME

2989 MA

40 RI

135 CT533 NJ

26 DE284 MD

49 DC

GU

VIPR

AK

1 HI

92WA

34OR

1256CA

3NV

1ID

2MT

WY

39UT

81CO

8NM

19AZ

132TX

2OK

34KS

NE

1SD

1ND

38MN

3IA

9WI 28

MI

16MO

1AR

6LA

39IL

12IN

54OH

4KY

26 TN

MS 2AL

48GA

3 SC

39 NC

69 VA

1VW

126 PA

265NY

42FL

5VT

16NH

5ME

316 MA

9 RI

46 CT63 NJ

7 DE

66 MD12 DC

GU

VIPR

2 HI

AK

325 NC

22 SC

Thomson Reuters 29

2012 NVCA Yearbook

Figure 3.08Venture Capital Investments in 1985 to 2011

By Region ($ Millions)

Region 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Silicon Valley 721.3 981.8 822.8 938.1 877.3 837.8 711.0 1,032.1 832.2 997.7 1,717.3 3,278.6 4,365.8 5,379.5 16,590.7 31,755.2 11,752.1 6,888.0 6,410.1 7,778.4 8,048.0 9,653.0 11,293.5 11,240.2 8,065.9 9,246.1 11,771.9 New England 406.6 394.6 480.6 465.2 389.3 351.5 257.1 405.5 337.9 421.4 694.0 1,119.6 1,528.0 2,183.0 5,363.2 11,331.9 5,088.6 2,854.4 2,796.8 3,257.3 2,914.4 3,235.6 3,838.7 3,648.2 2,392.0 2,579.5 3,212.7 NY Metro 213.3 196.9 257.7 296.8 348.7 181.3 173.4 206.4 196.8 265.2 428.4 719.1 1,275.6 1,712.0 4,456.0 9,715.3 3,362.9 1,507.8 1,337.7 1,618.2 1,950.0 2,137.4 1,842.8 2,059.5 1,681.8 1,976.9 2,737.9 LA/Orange County 185.0 173.2 267.7 205.4 222.9 163.2 113.3 159.1 151.6 197.8 928.1 636.7 797.0 1,158.9 3,365.0 6,556.1 2,143.4 1,209.1 1,007.4 1,291.8 1,428.3 1,946.8 1,840.3 1,957.8 1,013.1 1,619.0 1,959.6 Texas 220.1 221.9 202.5 227.0 216.3 118.2 132.3 145.1 232.0 253.4 460.0 533.8 783.5 1,095.1 2,912.2 5,873.5 2,837.1 1,120.5 1,146.7 1,123.1 1,180.9 1,425.3 1,483.6 1,213.2 773.2 1,033.0 1,468.9 Midwest 140.9 129.6 196.1 127.9 175.0 146.8 165.4 155.4 248.7 410.7 446.1 685.9 893.0 1,586.3 2,670.5 5,317.0 2,049.5 913.0 853.9 656.1 868.8 951.7 1,097.3 1,216.5 901.8 1,293.4 1,446.8 Southeast 165.6 227.2 251.3 247.8 206.0 138.7 93.9 327.9 389.9 306.3 744.0 1,077.2 1,310.8 1,695.3 4,431.7 7,560.0 2,447.9 1,666.8 1,074.0 1,315.6 1,075.5 1,165.3 1,770.0 1,276.5 1,003.1 1,163.2 1,096.1 DC/Metroplex 86.7 60.3 96.4 116.3 131.9 77.8 39.7 54.0 381.4 132.6 391.3 448.6 539.3 1,070.6 2,102.0 5,279.5 1,940.1 1,041.2 710.1 1,103.2 1,110.0 1,226.7 1,341.0 1,072.1 609.6 924.0 984.4 San Diego 87.6 76.6 100.8 146.3 132.5 103.7 93.0 101.1 128.3 212.6 243.4 444.7 501.1 569.9 1,197.4 2,011.8 1,440.1 936.6 775.8 1,144.6 1,160.2 1,162.6 1,852.8 1,178.1 911.4 873.6 869.0 Northwest 132.5 125.8 127.6 116.2 104.3 88.6 59.4 239.0 114.0 156.6 363.6 512.3 543.6 765.7 2,764.6 3,533.3 1,278.7 713.4 629.5 955.5 980.8 1,205.6 1,558.4 1,018.7 696.8 858.8 788.2 Colorado 70.0 104.7 106.2 95.6 148.7 89.3 50.3 124.3 132.9 192.9 300.9 232.5 378.0 882.1 1,841.4 3,856.9 1,142.3 564.1 632.4 356.3 640.8 639.0 673.9 896.2 525.0 483.5 621.5 SouthWest 40.8 79.6 54.8 58.8 42.2 29.6 26.1 84.6 36.9 32.3 95.5 167.1 306.2 358.8 750.3 1,288.4 489.2 367.9 216.3 368.6 449.5 510.2 555.8 486.2 291.5 274.9 552.5 Philadelphia Metro 50.0 53.0 77.8 69.0 59.3 100.1 29.3 135.4 104.0 133.9 187.4 342.5 415.8 465.1 1,451.7 2,503.1 924.1 471.0 493.4 721.7 585.3 753.9 831.5 840.8 436.4 457.2 485.2 North Central 34.8 40.7 70.8 41.4 47.9 87.0 45.2 81.5 105.8 78.3 215.1 208.4 326.8 386.6 731.0 1,226.2 621.5 385.6 280.7 444.1 379.1 398.4 554.4 632.3 387.7 335.0 373.3 Upstate NY 13.4 10.7 10.2 5.3 7.3 8.1 3.4 9.1 5.1 0.7 28.1 22.4 78.0 186.9 204.1 263.4 126.9 84.2 120.1 102.8 53.0 101.7 135.4 69.7 30.0 45.8 119.3 South Central 13.7 11.4 19.5 12.6 18.5 11.6 9.5 7.1 8.6 11.0 45.2 80.4 67.0 172.5 341.9 388.0 104.8 62.3 64.0 121.8 83.1 58.5 141.9 1,683.4 24.4 77.7 115.8 Sacramento/N.Cal 12.0 34.0 21.2 33.6 4.2 19.3 15.7 7.6 18.8 17.2 17.0 28.6 20.6 85.8 103.3 343.7 194.8 58.8 32.1 36.5 42.5 28.4 88.2 75.5 15.5 15.5 71.2 AK/HI/PR - - - - - - 0.3 0.0 1.0 22.0 7.8 28.7 14.0 5.5 17.4 243.9 69.8 2.3 17.9 11.2 43.1 47.1 20.9 18.3 7.4 16.0 0.6 Unknown - - 0.5 0.8 6.1 13.0 0.2 30.8 0.8 0.1 0.3 2.2 4.4 29.6 2.4 50.4 14.3 - - - - - - - 0.5 - - Total 2,594.4 2,922.1 3,164.4 3,204.2 3,138.4 2,565.6 2,018.4 3,306.0 3,426,7 3,842.8 7,313.4 10,569.2 14,142.6 19,789.2 51,296.7 99,097.6 38,028.0 20,446.9 18,589.9 22,406.7 22,993.3 26,647.2 30,920.6 30,583.2 19,767.1 23,273.0 28,675.0

Figure 3.08bVenture Capital Investments in 1985 to 2011

By Region (Number of Deals)

Region 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Silicon Valley 322 333 336 354 386 394 335 421 314 333 510 777 872 1,046 1,698 2,175 1,116 815 877 957 997 1,223 1,287 1,282 971 1,067 1,176 New England 235 207 248 227 215 215 170 161 149 143 236 337 388 469 660 894 584 457 440 428 440 458 514 507 379 407 442 NY Metro 88 98 124 105 117 87 85 76 77 84 131 157 244 275 495 819 446 233 194 225 194 293 288 338 278 378 380 Midwest 97 112 131 101 127 102 96 91 87 85 131 190 239 251 316 512 279 244 173 173 179 218 268 291 243 263 283 LA/Orange County 90 98 113 101 109 96 90 96 65 58 91 134 165 216 353 520 246 160 145 146 174 224 226 242 167 216 210 Southeast 94 120 134 113 112 128 110 107 118 114 180 229 293 308 454 665 397 268 239 237 204 232 242 218 152 212 189 DC/Metroplex 45 44 63 57 49 60 55 47 38 47 74 112 136 164 270 506 265 200 181 189 219 218 216 209 135 148 166 Northwest 46 46 58 66 64 48 42 49 43 48 87 111 132 131 262 329 194 137 109 146 155 173 208 202 129 156 158 Texas 106 90 105 104 90 85 69 71 68 67 101 135 169 199 315 481 336 171 172 175 179 196 185 161 126 159 153 Philadelphia Metro 37 34 51 43 36 45 43 65 49 46 77 90 140 134 139 227 133 99 86 103 95 115 141 154 99 128 121 San Diego 42 32 50 54 56 47 42 46 49 61 75 106 100 119 152 232 156 113 123 127 139 128 167 133 111 127 107 Colorado 43 56 59 60 50 49 35 52 47 51 57 82 96 129 164 224 113 90 74 71 91 107 107 111 89 88 100 SouthWest 20 30 41 25 30 21 27 35 30 28 37 53 71 86 114 147 91 67 56 60 81 93 105 84 68 59 81 South Central 11 10 12 7 8 5 6 8 6 9 15 22 25 26 30 51 30 23 20 32 8 24 30 41 34 43 63 North Central 37 50 53 52 38 44 40 40 39 39 72 70 116 106 113 149 121 72 73 71 65 69 89 85 63 56 62 Upstate NY 17 10 10 10 12 6 4 9 10 5 8 9 20 32 31 35 29 24 23 30 28 38 33 30 14 22 21 Sacramento/N.Cal 11 17 11 10 6 10 9 9 8 10 7 9 7 17 18 35 27 7 11 8 10 7 16 20 10 7 7 AK/HI/PR 1 - - - - - 3 3 1 2 4 9 6 5 5 15 10 3 8 5 8 14 8 9 3 6 3 Unknown - - 1 2 3 1 1 2 4 2 2 7 7 14 3 16 8 - - - - - - 1 1 1 - Total 1,342 1,387 1,600 1,491 1,508 1,443 1,262 1,388 1,202 1,232 1,895 2,639 3,226 3,727 5,592 8,032 4,581 3,183 3,004 3,183 3,266 3,830 4,130 4,118 3,072 3,543 3,772

30 Thomson Reuters



1985 to 2011 By Stage ($ Millions)

Stage 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Seed 493.3 715.7 613.1 635.3 536.8 374.5 219.4 528.0 593.8 736.2 1,122.6 1,219.2 1,289.4 1,625.7 3,434.6 2,881.2 688.5 306.2 325.8 911.8 969.2 1,253.7 1,755.0 1,788.5 1,806.6 1,758.6 930.9 Early Stage 499.9 589.7 695.4 698.0 677.5 648.1 500.3 529.6 569.0 821.6 1,643.5 2,446.0 3,276.8 5,020.4 10,603.4 23,132.5 7,928.1 3,696.8 3,470.6 3,815.0 3,943.0 4,489.6 5,873.4 5,446.5 4,840.2 5,679.3 8,369.8 Expansion 1,152.2 1,131.1 1,405.6 1,479.1 1,515.0 1,148.1 980.5 1,683.9 1,755.5 1,391.2 3,388.2 5,330.7 7,328.6 9,910.4 28,533.0 57,010.7 21,632.6 11,777.4 9,362.2 9,134.5 8,579.8 11,047.5 11,312.6 12,223.3 6,667.4 8,931.8 9,822.1 Later Stage 449.0 485.6 450.3 391.8 409.1 395.0 318.2 564.6 508.4 893.8 1,159.2 1,573.2 2,253.7 3,232.6 8,725.7 16,073.2 7,778.9 5,066.4 5,440.3 8,545.3 9,501.3 9,856.4 11,979.6 11,124.8 6,452.9 6,903.3 9,552.2 Total 2,594.4 2,922.1 3,164.4 3,204.2 3,184.4 2,565.6 2,018.4 3.306.0 3,426.7 3,842.8 7,313.4 10,569.2 14,148.6 19,789.2 51,296.7 ##### 38,028.0 20,846.9 18,598.9 22,406.7 22,993.3 26,647.2 30,920.6 30,583.2 19,767.1 23,273.0 28,675.0

Figure 3.09bVenture Capital Investments

1985 to 2011 By Stage (Number of Deals)

Stage 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Seed 358 381 387 366 353 260 193 252 288 334 434 508 541 673 812 700 279 178 212 230 263 391 514 527 362 395 404 Early Stage 292 328 394 349 329 370 278 292 184 261 524 767 904 1,024 1,737 2,875 1,304 882 812 886 853 990 1,093 1,111 955 1,234 1,433 Expansion 525 496 603 605 652 593 539 613 523 434 719 1,056 1,437 1,606 2,496 3,759 2,432 1,616 1,375 1,254 1,134 1,401 1,299 1,254 888 1,086 1,011 Later Stage 167 182 216 171 174 220 252 231 207 203 218 308 344 424 547 698 566 507 605 813 1,016 1,048 1,224 1,226 867 828 874 Total 1,342 1,387 1,600 1,491 1,508 1,443 1,262 1,388 1,202 1,232 1,895 2,639 3,226 3,727 5,592 8,032 4,581 3,183 3,004 3,183 3,266 3,830 4,130 4,118 3,072 3,543 3,722

Figure 3.09c-1Quarterly Venture Capital Investments


Stage 1985-1Q 1985-2Q 1985-3Q 1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1Q 1987-2Q 1987-3Q 1987-4Q 1987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 TotalSeed 140.0 139.2 86.0 128.0 493.3 175.5 265.0 102.1 173.1 715.7 142.5 199.7 142.6 128.3 613.1 154.0 142.1 228.2 111.0 635.3Early Stage 91.9 178.8 102.6 126.6 499.9 123.8 124.6 170.7 170.7 589.7 155.8 178.5 177.1 184.0 695.4 140.6 222.1 174.9 160.5 698.0Expansion 191.5 312.7 288.8 359.2 1152.2 266.8 369.1 229.0 266.2 1131.1 390.3 347.0 378.3 290.0 1405.6 299.5 463.7 303.2 412.7 1479.1Later Stage 133.6 82.2 159.6 73.6 449.0 105.3 82.0 167.3 131.0 485.6 93.9 149.9 104.1 102.3 450.3 112.0 76.5 140.7 62.6 391.8Total 557.0 713.0 637.0 687.5 2594.4 671.3 840.8 669.0 741.0 2922.1 782.5 875.1 802.1 704.7 3164.4 706.1 904.4 847.0 746.7 3204.2

1985 1986 1987 1988




1989 1990 1991 1992

Thomson Reuters 31

2012 NVCA Yearbook




1993 1994 1995 1996









Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 2011-1Q 2011-2Q 2011-3Q 2011-4Q 2011 TotalSeed 308.1 593.7 515.5 389.4 1806.6 399.6 781.0 344.7 233.2 1758.6 152.1 413.5 222.0 143.3 930.9Early Stage 724.5 1159.3 1202.5 1754.0 4840.2 1125.5 1694.6 1350.7 1508.5 5679.3 1835.1 2194.3 2049.9 2290.5 8369.8Expansion 1185.0 1724.3 1804.4 1953.8 6667.4 1959.5 2828.7 1732.6 2411.0 8931.8 2258.3 2501.8 2601.0 2461.0 9822.1Later Stage 1551.9 1328.9 1767.8 1804.3 6452.9 1683.3 1874.8 1937.9 1407.3 6903.3 2370.6 2918.1 2437.4 1826.2 9552.2Total 3769.5 4806.2 5290.1 5901.4 19767.1 5167.9 7179.1 5366.0 5560.0 23273.0 6616.1 8027.7 7310.3 6720.9 28675.0

201120102009


1997 1998 1999 2000


2001 2002 2003 2004


20082005 2006 2007

32 Thomson Reuters


Figure 3.09d-1Quarterly Venture Capital Investments


Stage 1985-1Q 1985-2Q 1985-3Q 1985-4Q 1985 Total 1986-1Q 1986-2Q 1986-3Q 1986-4Q 1986 Total 1987-1Q 1987-2Q 1987-3Q 1987-4Q 1987 Total 1988-1Q 1988-2Q 1988-3Q 1988-4Q 1988 TotalSeed 111 88 61 98 358 133 107 62 79 381 115 102 86 84 387 118 78 88 82 366Early Stage 89 69 60 74 292 110 69 71 78 328 125 83 97 89 394 96 92 85 76 349Expansion 140 120 114 151 525 166 135 94 101 496 177 136 155 135 603 154 181 130 140 605Later Stage 60 40 37 30 167 55 51 30 46 182 63 58 46 49 216 50 43 41 37 171Total 400 317 272 353 1342 464 362 257 304 1387 480 379 384 357 1600 418 394 344 335 1491

1985 1986 1987 1988


19911989 1990 1992






1993 1994 1995 1996






1998 19991997 2000


20042001 2002 2003

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2012 NVCA Yearbook





Stage 2009-1Q 2009-2Q 2009-3Q 2009-4Q2009 Total 2010-1Q 2010-2Q 2010-3Q 2010-4Q 2010 Total 2011-1Q 2011-2Q 2011-3Q 2011-4Q 2011 TotalSeed 67 84 99 112 362 89 120 96 90 395 81 126 110 87 404Early Stage 193 212 233 317 955 259 357 296 322 1234 317 375 367 374 1433Expansion 181 220 218 269 888 261 307 247 271 1086 226 272 283 230 1011Later Stage 225 233 186 223 867 192 230 222 184 828 229 264 200 181 874Total 666 749 736 921 3072 801 1014 861 867 3543 853 1037 960 872 3722

201120102009


1985 to 2011 By Industry ($ Millions)

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Software 567 553 483 449 428 499 435 586 433 612 1,090 2,164 3,199 4,188 9,990 23,496 10,210 5,098 4,478 5,275 4,864 5,147 5,721 5,646 3,678 4,907 6,789 Biotechnology 106 212 256 358 308 282 248 517 466 550 747 1,121 1,279 1,436 1,927 4,001 3,271 3,188 3,551 4,229 3,823 4,530 5,432 4,606 3,723 3,896 4,787 Industrial/Energy 187 184 273 205 317 200 150 268 268 282 453 482 693 1,335 1,433 2,480 1,096 703 687 758 1,032 2,012 3,116 6,300 2,640 3,357 3,560 Medical Devices and Equipment 170 173 250 328 331 306 212 461 392 406 569 574 989 1,097 1,411 2,191 1,866 1,777 1,538 1,886 2,229 2,820 3,716 3,496 2,577 2,360 2,863 IT Services 21 31 39 28 36 35 39 28 31 111 161 428 651 1,036 3,825 8,398 2,270 977 702 729 1,083 1,533 1,902 2,107 1,260 1,692 2,416 Media and Entertainment 93 111 146 161 151 93 65 131 247 273 936 1,105 966 1,761 6,844 10,071 2,114 697 628 1,357 1,178 1,845 2,070 1,763 1,500 1,509 2,337 Consumer Products and Services 60 123 152 142 76 133 125 102 135 144 431 486 708 584 2,484 3,004 584 214 141 317 319 391 397 385 443 613 1,182 Semiconductors 242 289 249 289 161 178 74 141 62 129 189 303 565 626 1,245 3,483 2,224 1,577 1,750 2,105 1,882 2,208 2,006 1,503 795 1,117 1,177 Telecommunications 169 166 147 147 118 123 107 200 215 445 816 1,157 1,481 2,691 7,682 15,922 4,831 2,031 1,536 1,769 2,134 2,336 2,123 1,469 571 878 704 Electronics/Instrumentation 108 118 122 76 111 49 68 51 56 65 136 204 259 222 256 722 395 302 230 416 464 734 650 755 328 455 686 Retailing/Distribution 32 116 280 218 206 85 30 96 95 86 315 226 311 566 2,669 2,982 298 145 60 205 201 174 365 273 163 205 409 Financial Services 86 103 69 205 228 59 21 120 125 115 180 306 372 816 2,088 3,917 1,188 312 398 513 912 453 575 446 445 517 395 Networking and Equipment 210 149 130 128 194 155 125 235 495 235 355 608 933 1,374 4,593 11,295 5,529 2,571 1,646 1,514 1,554 1,206 1,448 732 791 654 376 Computers and Peripherals 438 420 384 337 281 225 161 179 149 169 298 344 389 354 861 1,509 573 447 382 561 579 376 500 442 365 355 365 Healthcare Services 79 118 131 89 143 77 50 155 180 175 451 686 901 905 1,386 1,296 518 354 208 366 357 332 304 149 145 278 351 Business Products and Services 24 54 51 42 48 66 75 36 72 40 155 356 382 703 2,511 4,272 1,017 450 664 406 383 549 580 475 294 463 231 Other 3 3 0 0 - 0 33 - 6 6 33 21 71 97 91 58 46 4 - 0 - - 17 35 50 16 48 Total 2,594 2,922 3,164 3,204 3,138 2,566 2,018 3,306 3,427 3,843 7,313 10,569 14,149 19,789 51,297 #### 38,028 20,847 18,599 22,407 22,993 26,647 30,921 30,583 19,767 23,273 28,675

Figure 3.10bVenture Capital Investments

1985 to 2011 By Industry (Number of Deals)

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Software 321 319 298 276 293 301 286 297 241 252 437 688 818 971 1,410 2,149 1,281 991 951 942 927 989 1,014 1,038 756 953 1,022 Biotechnology 73 97 133 149 133 142 139 164 136 140 176 235 243 276 259 356 334 319 355 397 399 474 512 516 440 492 451 Media and Entertainment 55 66 89 72 71 59 53 79 81 97 140 191 220 268 707 945 366 166 128 139 206 324 385 405 268 328 445 IT Services 22 24 31 22 27 30 30 19 18 31 62 126 164 205 445 687 325 170 146 152 173 237 281 291 226 306 358 Medical Devices and Equipment 128 114 164 147 180 188 157 186 149 127 179 214 271 294 289 293 256 234 245 278 288 358 398 394 335 350 347 Industrial/Energy 119 131 157 136 140 151 123 132 101 98 129 158 216 187 204 255 203 129 136 153 151 226 312 366 260 297 310 Telecommunications 86 76 94 79 80 59 66 66 71 73 141 211 269 340 530 860 486 277 217 226 236 309 283 235 131 134 137 Consumer Products and Services 44 50 70 58 48 65 46 51 51 66 115 132 162 163 281 284 118 70 46 65 76 75 103 102 86 112 119 Semiconductors 86 71 90 91 79 78 49 59 45 38 62 72 115 123 152 257 207 171 213 257 222 261 222 201 129 138 118 Business Products and Services 20 37 43 33 30 27 20 25 31 23 49 69 94 138 278 459 174 101 97 81 82 99 109 122 79 83 70 Electronics/Instrumentation 75 67 69 57 61 53 49 39 28 37 51 46 54 58 55 79 62 68 64 73 93 103 99 103 64 71 65 Financial Services 23 29 37 43 43 25 24 24 32 31 47 62 91 116 189 333 142 75 62 66 62 88 81 68 56 77 59 Networking and Equipment 78 73 72 68 73 75 64 86 62 76 81 123 141 215 293 486 341 231 186 192 185 135 147 109 107 65 56 Retailing/Distribution 18 33 71 81 72 46 38 35 35 29 55 69 92 119 225 275 85 49 31 36 38 41 46 45 36 26 52 Computers and Peripherals 159 142 124 132 124 101 79 81 66 67 91 98 113 91 101 135 81 59 56 61 61 57 70 64 51 55 46 Healthcare Services 33 56 56 46 54 41 37 45 52 45 73 137 152 154 158 168 109 70 71 63 65 53 57 54 40 42 45 Other 2 2 2 1 - 2 2 - 3 2 7 8 11 9 16 11 11 3 - 2 2 1 11 5 8 14 22 Total 1,342 1,387 1,600 1,491 1,508 1,443 1,262 1,388 1,202 1,232 1,895 2,639 3,226 3,727 5,592 ### 4,581 3,183 ### 3,183 3,266 3,830 4,130 4,118 3,072 3,543 3,722


2005 2006 2007 2008

34 Thomson Reuters


Figure 3.11Venture Capital Investments By State 1985 to 2011 ($ Millions)

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011CA 1,005.9 1,265.6 1,212.4 1,323.4 1,236.8 1,124.1 933.1 1,299.8 1,130.8 1,425.4 2,905.7 4,388.7 5,684.6 7,194.0 21,256.4 40,666.8 15,530.4 9,092.4 8,225.4 10,251.4 10,679.0 12,790.8 15,074.9 14,451.5 10,005.9 11,754.2 14,671.7 MA 370.0 348.7 402.3 358.4 281.5 284.2 215.7 359.0 292.2 370.9 614.3 1,017.9 1,386.8 1,858.9 4,830.7 10,079.6 4,661.7 2,525.8 2,568.1 3,037.1 2,678.1 2,960.3 3,639.6 3,209.6 2,227.8 2,425.3 2,988.9 NY 111.8 68.6 95.5 110.3 156.6 39.7 42.5 137.0 98.5 69.1 260.5 285.5 791.7 1,348.1 3,326.5 6,420.9 1,852.4 708.7 627.8 783.4 1,092.1 1,386.7 1,241.8 1,443.9 1,045.9 1,407.0 2,294.7 TX 220.1 221.9 202.5 227.0 216.3 118.2 132.3 145.1 232.0 253.4 460.0 533.8 783.5 1,095.1 2,912.2 5,873.5 2,837.1 1,120.5 1,146.7 1,123.1 1,180.9 1,425.3 1,483.6 1,213.2 773.2 1,033.0 1,468.9 IL 43.6 29.4 38.5 42.0 89.4 71.5 89.1 68.2 81.6 143.6 181.3 320.3 392.3 393.1 1,269.9 2,197.1 963.1 278.1 359.1 208.4 304.4 405.4 458.8 412.3 252.5 624.1 695.7 VA 30.4 22.8 62.8 64.9 46.9 46.6 11.1 24.7 36.8 72.9 252.9 308.1 324.3 716.8 1,254.2 3,114.8 966.3 420.0 342.1 287.4 499.1 427.1 611.6 541.9 245.9 398.9 649.6 CO 70.0 104.7 106.2 95.6 148.7 89.3 50.3 124.3 132.9 192.9 300.9 232.5 378.0 882.1 1,841.4 3,856.9 1,142.3 564.1 632.4 356.3 640.8 639.0 673.9 896.2 525.0 483.5 621.5 WA 46.6 51.3 74.4 59.5 75.0 56.3 29.1 180.2 95.3 134.1 314.1 418.3 414.9 683.7 2,208.3 2,707.7 1,021.7 540.6 441.8 809.8 815.2 1,063.9 1,293.5 845.2 595.9 648.6 542.4 NJ 71.0 114.5 126.6 97.3 152.9 64.9 65.8 82.1 80.3 178.8 178.6 429.7 451.8 415.6 890.6 2,855.5 1,447.4 893.9 805.0 947.7 877.8 700.6 598.5 727.8 630.0 468.9 533.4 PA 43.0 32.9 77.9 65.7 51.7 101.2 32.3 117.4 101.3 152.3 128.3 293.7 419.1 437.0 1,475.4 2,806.4 984.9 426.6 474.2 606.7 488.2 867.6 874.1 764.3 434.3 541.7 520.1 GA 55.3 106.5 60.6 87.6 53.7 20.9 32.1 178.1 173.5 86.3 110.8 243.3 368.9 420.3 1,019.8 2,142.9 791.5 567.5 286.6 487.2 266.1 405.2 469.6 406.8 294.0 330.3 343.4 NC 17.2 16.8 21.2 13.6 14.8 33.6 10.0 45.8 23.3 61.3 194.4 157.7 276.9 319.3 810.6 1,723.0 542.4 532.3 370.6 310.8 318.5 406.7 492.0 497.6 244.2 517.1 325.2 FL 31.1 33.3 70.0 79.3 43.6 33.4 25.9 70.8 88.2 83.8 230.4 358.2 395.8 612.9 1,565.7 2,564.2 723.8 328.1 298.9 382.5 347.7 285.7 559.4 260.3 334.6 224.6 298.8 MD 36.3 20.8 30.5 45.5 85.0 29.5 27.8 24.4 343.5 55.4 137.7 133.8 185.9 326.6 561.1 1,711.1 812.1 581.7 306.6 730.0 576.5 749.2 658.0 465.0 314.1 414.2 283.6 MN 22.3 27.0 34.3 25.8 35.0 75.7 39.0 58.8 42.4 48.8 183.8 155.0 243.2 325.6 588.3 909.8 439.4 315.6 224.1 379.7 293.7 321.5 446.2 476.7 274.2 148.8 265.9 AZ 15.0 37.6 37.9 43.6 31.4 27.0 16.5 57.2 32.8 31.2 66.3 92.5 170.2 218.7 320.2 604.4 231.5 200.6 80.6 73.0 116.9 265.9 222.1 228.5 112.6 84.0 247.5 OR 84.2 73.8 50.5 56.4 29.3 32.3 29.3 53.8 18.5 22.5 34.3 93.8 125.4 51.8 524.5 801.4 229.7 164.5 135.6 141.7 126.5 117.4 245.9 138.3 71.8 190.5 238.6 UT 5.5 29.5 5.3 11.4 4.4 0.8 3.0 21.4 3.6 - 25.0 60.0 93.9 104.2 391.8 639.1 211.0 122.0 109.9 228.0 198.5 194.1 177.7 196.9 159.3 144.8 233.7 OH 29.4 51.0 45.0 50.9 31.1 22.4 14.6 26.2 32.9 66.5 65.7 153.6 224.9 316.6 468.9 936.0 224.3 252.1 185.1 82.4 107.2 75.6 218.1 243.6 116.8 178.3 205.2 IN 13.3 15.4 17.6 5.6 7.6 10.5 7.9 0.0 15.9 56.1 14.4 20.8 29.7 36.8 37.0 261.8 41.6 39.6 12.0 67.3 139.0 28.9 61.7 79.2 242.4 80.0 177.9 CT 67.5 56.5 94.2 159.1 80.6 129.5 83.8 54.6 32.5 78.5 116.8 139.4 254.9 331.0 906.0 1,476.6 522.5 173.4 205.5 228.9 208.2 280.2 272.0 223.5 192.0 216.5 135.4 MO 3.0 3.9 10.6 1.6 9.4 6.8 34.9 25.2 53.8 70.5 94.6 52.1 67.4 611.7 301.9 592.9 251.8 77.2 74.3 26.0 126.0 55.8 45.7 93.3 18.7 59.0 133.7 TN 45.5 53.9 65.5 39.1 67.6 36.0 19.2 7.0 44.3 40.6 157.7 161.4 101.8 118.0 546.7 456.2 194.5 109.2 75.0 92.9 96.4 31.2 122.0 71.4 70.0 63.9 103.1 NH 3.8 14.7 15.0 27.7 30.9 16.2 27.2 4.3 31.7 7.9 28.7 42.6 44.8 153.9 232.0 665.9 242.6 203.1 143.8 124.3 98.4 119.4 147.6 247.5 37.4 56.9 95.5 MI 34.8 19.1 57.5 15.2 21.8 26.4 5.7 14.8 41.7 8.6 65.8 77.6 83.2 120.0 242.1 286.3 132.4 106.3 87.5 124.1 93.3 125.3 100.3 205.0 143.7 152.2 82.7 WI 11.4 13.0 14.7 12.8 10.9 9.9 5.5 21.1 23.4 8.4 8.9 20.9 61.8 34.4 86.4 164.0 83.8 48.0 37.5 55.4 66.8 70.1 78.6 63.6 23.9 120.0 72.0 KS 2.3 2.2 3.9 5.4 11.4 8.9 7.9 2.3 4.8 1.5 8.7 34.9 9.2 10.4 24.4 211.7 39.6 6.8 24.5 44.9 1.4 31.0 118.5 52.2 7.5 41.7 67.4 NM 20.3 10.0 7.5 3.9 1.0 1.8 4.4 - 0.5 - 3.6 12.9 32.5 7.7 10.5 17.5 13.5 13.7 2.0 20.1 75.4 30.5 126.6 48.2 4.1 12.4 61.8 DC 18.9 14.8 2.9 5.9 0.0 1.7 0.8 4.8 1.1 4.3 0.7 6.7 5.2 26.7 286.7 449.1 160.8 23.5 48.8 80.2 26.3 45.8 61.8 35.3 46.6 107.3 49.0 RI 12.6 9.7 6.6 14.2 30.9 2.7 0.4 5.1 8.7 - 3.4 20.3 11.5 26.0 23.9 74.6 110.7 95.2 53.1 38.3 76.2 80.7 7.0 37.8 29.0 59.3 40.4 ME 18.0 11.6 15.3 8.7 17.2 4.5 0.8 0.2 3.0 - 1.5 1.5 3.7 52.7 42.8 132.4 1.5 16.7 0.9 26.0 4.2 39.9 4.0 5.4 11.4 3.2 38.6 IA 0.7 0.7 7.8 1.3 2.0 1.4 0.7 1.6 2.0 17.4 12.1 22.1 17.1 8.3 3.5 16.4 8.4 2.0 - 5.3 11.2 0.2 25.3 58.2 84.1 51.5 28.4 OK 1.5 4.7 13.7 5.3 7.1 2.6 0.3 - - 6.8 6.1 31.8 27.8 114.5 58.8 49.4 25.3 30.8 35.1 66.4 80.8 14.6 8.1 16.6 4.5 13.0 26.5 DE 0.3 - 4.5 1.4 4.8 1.8 1.2 9.9 3.0 12.4 4.4 3.0 1.1 - 16.8 134.7 14.6 19.4 0.4 2.1 11.1 5.3 5.6 75.6 17.6 30.6 26.4 VT - 6.6 8.0 3.3 7.4 5.5 1.3 3.8 - 5.3 4.2 0.3 3.2 1.4 - 8.4 11.6 1.5 1.2 5.1 35.2 22.3 17.6 41.8 29.2 33.1 24.8 SC 0.9 - 12.7 18.1 23.5 7.6 4.0 1.2 10.7 3.8 34.1 99.4 52.6 162.9 218.2 388.4 97.1 76.5 14.3 13.6 1.6 8.3 88.7 22.7 17.1 26.7 22.0 LA 9.9 3.3 1.9 1.9 - - 1.3 3.8 3.8 2.7 25.5 13.7 26.5 40.6 234.0 93.5 29.5 15.1 2.3 8.5 0.8 11.4 15.1 1,614.6 12.4 18.0 21.9 NV - 2.4 4.1 - 5.5 0.1 2.2 5.9 - 1.2 0.6 1.8 9.7 28.2 27.8 27.3 33.3 31.7 23.8 47.6 58.7 19.6 29.4 12.6 15.4 33.7 9.5 KY 2.4 1.9 7.4 2.8 5.8 - 5.5 3.9 15.4 11.4 21.6 31.1 24.3 30.7 81.2 201.8 88.9 12.7 3.9 48.2 32.0 26.3 53.4 24.2 13.6 16.7 8.5 ND - - 14.0 - - - - - - 0.2 9.8 - 1.1 0.5 2.1 1.0 1.0 - 14.5 2.0 - - 0.2 5.5 4.7 3.2 4.0 ID 0.3 - - - - - - 5.0 0.2 0.1 15.2 0.1 1.2 30.3 16.5 7.5 2.5 8.2 52.1 2.5 10.0 17.8 15.8 18.0 14.6 7.8 4.0 AL 15.3 16.7 21.3 9.6 2.0 2.3 0.3 10.6 48.1 15.5 16.5 46.7 106.3 58.3 35.0 265.8 68.6 52.5 27.8 25.1 35.2 19.9 32.4 17.7 43.2 0.6 3.5 MT 1.5 0.7 2.7 0.4 - - 1.0 - - - - - - - 15.4 16.7 24.8 - - - 25.9 - 3.0 15.6 14.5 1.9 3.2 SD - - - - - - - - - - - - - - 0.4 0.2 0.5 7.4 3.5 1.5 - - 4.0 0.5 0.8 - 3.0 WV 1.1 2.0 0.1 0.0 - - - - - - - - 23.8 0.4 - 4.5 1.0 15.9 12.6 5.6 8.0 4.7 9.7 30.0 3.0 3.8 2.1 HI - - - - - - - - - - - 20.5 1.5 4.2 12.8 199.0 37.8 1.8 17.8 9.9 14.6 32.8 4.9 7.5 7.4 11.5 0.6 AK - - - - - - - - - - - - - - - 2.8 - - - - - - - - - - - AR - 1.2 - - - - - 1.0 - - 5.0 - 3.6 6.9 24.8 33.4 10.4 9.7 2.2 2.0 0.1 1.5 0.2 - - 5.0 - MS 0.3 0.0 - 0.6 0.9 4.9 2.4 14.5 1.7 15.0 - 10.6 8.4 3.5 235.7 19.5 30.0 0.8 0.9 3.4 10.0 8.2 5.9 - - - - NE 0.5 - - 1.5 - - - - 38.0 3.5 0.5 10.4 3.7 17.9 50.3 134.8 88.4 12.6 1.1 0.2 7.4 6.7 0.2 27.8 - 11.5 - PR - - - - - - 0.3 0.0 1.0 22.0 7.8 8.2 12.5 1.3 4.6 42.0 32.0 0.5 0.1 1.3 28.6 14.3 16.0 10.8 - 4.5 - UN - - 0.5 0.8 6.1 13.0 0.2 30.8 0.8 0.1 0.3 2.2 4.4 29.6 2.4 50.4 14.3 - - - - - - - 0.5 - - WY - - - - - - - - - - - - 2.0 - - - - - - 1.5 3.2 6.5 0.2 1.5 - 10.0 - Total 2,594.4 2,922.1 3,164.4 3,204.2 3,138.4 2,565.6 2,018.4 3,306.0 3,426.7 3,842.8 7,313.4 10,569.2 14,148.6 19,789.2 51,296.7 99,097.6 38,028.0 20,846.9 18,598.9 22,406.7 22,993.3 26,647.2 30,920.6 30,583.2 19,767.1 23,273.0 28,675.0

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2012 NVCA Yearbook

Figure 3.11bNumber of Venture Capital Deals By State 1985 to 2011

State 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011CA 465 480 510 519 557 547 476 572 436 462 683 1,026 1,144 1,398 2,221 2,962 1,545 1,095 1,156 1,238 1,320 1,582 1,696 1,677 1,259 1,417 1,500 MA 215 181 215 191 176 171 136 137 131 124 201 295 341 402 591 785 516 388 380 384 388 409 466 453 339 372 384 NY 45 45 60 47 49 31 23 36 35 37 70 88 160 198 357 611 292 159 122 159 134 230 210 259 197 283 310 TX 106 90 105 104 90 85 69 71 68 67 101 135 169 199 315 481 336 171 172 175 179 196 185 161 126 159 153 PA 34 44 57 53 39 42 37 61 46 40 64 83 137 144 147 259 151 106 102 110 104 151 178 193 136 161 146 WA 20 20 26 26 36 27 27 36 29 35 69 81 87 110 207 256 147 108 81 112 119 133 161 159 109 115 116 CO 43 56 59 60 50 49 35 52 47 51 57 82 96 129 164 224 113 90 74 71 91 107 107 111 89 88 100 IL 26 27 31 31 61 34 41 38 27 36 43 56 87 75 128 202 130 81 59 61 60 61 76 73 51 69 90 VA 22 21 30 24 29 27 24 19 18 21 39 59 83 102 155 282 148 93 86 79 89 93 101 88 48 56 78 MD 18 17 24 28 19 28 28 25 18 23 34 48 49 57 98 177 93 92 84 99 114 113 95 106 76 74 74 OH 25 20 27 21 18 21 20 21 20 20 36 55 55 66 52 81 45 51 31 36 37 45 66 62 57 58 71 NJ 43 43 51 42 52 44 48 41 37 40 55 67 83 81 121 187 153 95 88 94 82 91 102 94 79 77 65 CT 33 31 39 44 43 37 33 33 26 35 44 46 66 75 93 120 74 39 34 35 34 30 37 40 42 59 55 GA 32 45 45 39 31 33 34 37 43 46 51 58 80 98 163 229 141 81 62 79 68 90 76 82 46 67 55 KS 1 2 6 4 4 3 3 6 2 2 4 11 6 3 8 22 10 7 12 14 4 9 17 24 17 36 52 FL 21 20 29 25 22 32 20 24 26 19 57 56 72 69 116 187 114 61 63 63 55 56 57 39 35 43 50 NC 15 21 16 11 17 26 19 20 23 22 37 60 81 81 104 156 88 80 75 53 48 59 67 55 36 64 47 UT 2 13 13 6 5 3 8 10 7 - 7 17 31 33 42 60 44 28 23 32 28 43 36 39 33 26 45 MN 23 31 33 29 29 31 31 27 26 22 53 50 89 78 84 109 84 56 59 52 43 42 60 49 36 29 43 OR 24 24 30 35 28 21 12 12 12 12 17 29 41 18 51 67 43 27 23 31 27 34 38 34 15 34 39 TN 17 23 28 30 27 22 24 11 8 12 21 29 25 27 49 51 31 25 22 26 26 12 23 24 18 26 32 MI 20 22 23 12 16 14 9 6 12 3 13 22 29 32 45 55 23 27 17 16 21 20 23 44 35 32 31 AZ 15 11 20 13 23 14 13 21 21 25 27 29 29 38 57 69 36 27 19 13 29 34 35 22 20 18 25 MO 5 6 12 8 11 11 9 9 13 8 17 26 17 21 25 53 18 29 20 9 11 14 16 25 12 14 22 NH 3 9 11 10 13 18 17 10 10 4 10 17 17 24 31 60 37 41 34 22 22 22 23 28 12 10 19 IN 8 15 15 6 6 12 8 1 7 7 8 9 13 9 11 28 7 12 8 10 14 13 16 14 15 17 14 WI 12 16 17 15 6 11 6 9 7 9 7 9 19 15 18 24 20 10 8 10 16 20 20 19 12 20 14 DC 4 5 7 4 1 5 3 3 2 3 1 5 2 4 17 45 22 7 6 8 11 9 15 13 8 14 12 RI 6 4 7 6 7 7 4 2 3 - 3 2 4 5 10 9 11 14 10 8 13 8 4 8 14 11 12 DE 1 1 1 4 3 4 4 3 1 3 4 4 4 - 2 4 1 2 1 1 5 3 5 8 6 7 8 LA 6 2 2 2 - - 2 1 4 2 7 4 12 9 9 14 10 7 2 4 2 2 6 12 13 3 8 NM 3 4 6 6 1 3 2 - 2 1 2 5 4 4 6 8 5 6 5 8 16 9 24 17 12 11 8 VT - 3 3 3 2 3 3 1 - 3 4 1 1 2 1 4 3 5 5 4 5 8 6 7 6 7 8 KY 2 4 7 4 5 - 2 2 2 3 9 7 15 16 16 14 5 3 3 6 3 10 8 9 8 15 6 ME 8 6 5 4 6 6 4 1 2 - 2 5 2 11 11 15 5 5 2 4 3 7 8 4 4 6 6 HI 1 - - - - - - - - - - 3 4 3 3 3 5 2 7 4 6 11 4 7 3 5 3 IA 1 3 2 3 2 2 3 4 1 4 9 6 4 7 2 4 5 1 1 3 3 2 3 8 9 2 3 NV - 2 2 - 1 1 4 4 - 2 1 2 7 11 9 10 6 6 9 7 8 7 10 6 3 4 3 SC 1 - 4 3 7 5 10 7 7 6 5 15 15 17 10 11 5 6 4 5 1 2 12 10 6 10 3 AL 7 10 12 4 7 7 2 4 9 4 9 8 16 14 10 28 15 12 9 6 4 9 5 8 9 2 2 MT 1 2 1 5 - - 3 - - - - - - - 2 3 2 - - - 2 - 1 2 1 2 2 OK 4 5 4 1 4 2 1 - - 5 2 7 5 12 8 10 7 4 3 12 1 8 6 5 4 3 2 WV 1 1 2 1 - - - - - - - - 2 1 - 2 2 8 5 3 5 3 5 2 3 4 2 AR - 1 - - - - - 1 - - 2 - 2 2 5 5 3 5 3 2 1 5 1 - - 1 1 ID 1 - 1 - - - - 1 2 1 1 1 2 3 2 3 2 2 5 2 3 5 7 6 4 4 1 ND - - 1 - - - - - - 1 2 - 1 1 1 1 1 - 2 1 - - 1 4 3 1 1 SD - - - - - - - - - - - - - - 1 1 1 2 1 3 - 1 2 1 3 - 1 AK - - - - - - - 1 - - - - - - - 1 - - - - - - - - - - - MS 1 1 - 1 1 3 1 4 2 5 - 3 4 2 2 3 3 3 4 5 2 4 2 - 2 - - NE 1 - - 5 1 - - - 5 3 1 5 3 5 7 10 10 3 2 2 3 4 3 4 - 4 - PR - - - - - - 3 2 1 2 4 6 2 2 2 11 5 1 1 1 2 3 4 2 - 1 - UN - - 1 2 3 1 1 2 4 2 2 7 7 14 3 16 8 - - - - - - - 1 1 - WY - - - - - - - - - - - - 2 - - - - - - 1 4 1 1 1 - 1 - Total 1,342 1,387 1,600 1,491 1,508 1,443 1,262 1,388 1,202 1,232 1,895 2,639 3,226 3,727 5,592 ### 4,581 3,183 3,004 3,183 3,266 3,830 4,130 4,118 3,072 3,543 3,722

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Figure 3.12Venture Capital Investments First vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

0

20,000

40,000

60,000

80,000

100,000

120,000

'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

($ M

illio

ns)

Year

Follow-on

First


Number of Companies Receiving

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

(Num

ber

of C

ompa

nies

)

Series2

Series1

Follow-on

First

Year

Figure 3.13Venture Capital Investments First vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

Figure 3.15Venture Capital Investments First vs. Follows-on RoundsTotal Number of Companies

Year First Follow-on Total1985 690.0 1,904.4 2,594.4 1986 835.2 2,086.9 2,922.1 1987 969.6 2,194.8 3,164.4 1988 1,024.5 2,179.7 3,204.2 1989 877.1 2,261.3 3,138.4 1990 761.5 1,804.1 2,565.6 1991 490.3 1,528.1 2,018.4 1992 1,203.2 2,102.8 3,306.0 1993 1,182.7 2,244.1 3,426.7 1994 1,576.9 2,265.9 3,842.8 1995 3,739.4 3,574.0 7,313.4 1996 3,954.6 6,614.6 10,569.2 1997 4,630.8 9,517.7 14,148.6 1998 6,585.8 13,203.4 19,789.2 1999 15,190.7 36,106.0 51,296.7 2000 26,256.3 72,841.3 99,097.6 2001 6,924.3 31,103.7 38,028.0 2002 3,955.5 16,891.3 20,846.9 2003 3,556.7 15,042.2 18,598.9 2004 5,220.6 17,186.1 22,406.7 2005 5,817.4 17,175.8 22,993.3 2006 6,203.3 20,443.9 26,647.2 2007 7,605.5 23,315.1 30,920.6 2008 8,067.0 22,516.1 30,583.2 2009 3,512.9 16,254.2 19,767.1 2010 4,388.7 18,884.3 23,273.0 2011 4,969.7 23,705.3 28,675.0

No. of Cos No. of Cos Receiving Receiving No. of Cos

Initial Deals Follow-On Receiving Year Financing Financing Financing*1985 432 754 1,150 1986 493 739 1,193 1987 566 842 1,352 1988 503 779 1,234 1989 441 820 1,211 1990 344 778 1,055 1991 267 710 935 1992 390 715 1,042 1993 352 647 943 1994 431 624 990 1995 901 776 1,572 1996 1,144 1,173 2,118 1997 1,306 1,473 2,578 1998 1,427 1,832 3,027 1999 2,458 2,444 4,467 2000 3,387 3,691 6,417 2001 1,236 2,774 3,847 2002 838 1,966 2,694 2003 769 1,824 2,492 2004 952 1,833 2,677 2005 1,069 1,837 2,780 2006 1,260 2,103 3,184 2007 1,364 2,216 3,415 2008 1,287 2,323 3,428 2009 797 1,870 2,577 2010 1,056 2,000 2,936 2011 1,173 2,095 3,118

* No. of Cos receiving financing can be less than the sum of the prior two columns because a given company can receive initial and follow-on financing in the same year

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2012 NVCA Yearbook

Figure 3.16First Sequence by Stage of Development ($ Millions)

Stage 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995Seed 73.9 47.8 45.7 36.7 42.4 25.2 4.5 21.0 43.1 90.9 166.2 Early Stage 37.5 66.6 71.2 81.7 65.5 65.2 27.6 64.4 46.3 101.7 208.3 Expansion 111.1 47.3 106.8 128.6 143.8 78.3 43.4 150.5 164.2 143.2 916.0 Later Stage 20.9 19.1 10.9 60.8 35.2 34.7 29.9 50.1 23.2 47.5 275.2 Total 243.3 180.8 234.6 307.8 286.9 203.4 105.3 286.0 276.8 383.2 1,565.7

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011107.0 153.0 451.0 829.2 119.1 35.3 52.0 59.9 359.3 309.3 414.2 327.8 298.3 352.2 576.5

392.0 392.4 1,057.0 5,197.4 1,201.0 368.4 212.1 535.1 498.4 430.7 724.4 770.5 332.4 747.1 2,056.7 492.4 774.4 2,336.8 4,211.9 832.8 439.2 309.4 438.8 534.0 558.7 738.4 2,332.6 481.0 753.0 771.7 120.3 97.9 205.8 243.2 96.4 66.4 121.2 211.4 337.2 284.3 393.9 445.3 319.1 479.2 778.3 1,111.6 1,417.7 4,050.7 10,481.7 2,249.3 909.3 694.7 1,245.1 1,729.0 1,583.0 2,270.9 3,876.2 1,430.7 2,331.6 4,183.2

Figure 3.17First Sequence by Stage of Development (Number of Deals)

Figure 3.18First Sequence by Industry ($ Millions)

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Software 84.8 114.5 89.5 121.8 92.8 159.7 100.6 145.4 110.8 281.1 506.2 856.0 1,002.0 1,145.8 2,668.4 5,540.1 1,521.0 1,121.3 843.2 1,227.8 1,139.6 1,219.8 1,374.7 1,075.2 729.9 1,038.1 1,435.7 Biotechnology 31.8 53.4 63.7 64.2 53.0 24.5 14.5 157.0 119.2 151.4 153.5 185.2 342.1 342.1 372.0 717.1 774.3 661.2 393.0 722.6 615.2 987.7 1,087.8 905.1 499.3 593.7 858.3 Media and Entertainment 67.0 42.6 95.7 110.1 80.4 65.2 13.4 80.3 164.7 115.4 771.9 345.4 388.2 650.5 2,090.0 2,656.0 308.1 153.7 230.1 717.8 551.9 628.5 643.2 543.4 246.9 393.8 588.4 IT Services 16.1 9.1 4.5 9.4 20.6 16.7 10.3 8.8 13.1 91.5 46.4 215.5 241.5 353.1 1,457.4 2,470.9 291.5 171.5 156.1 192.1 361.3 379.8 492.4 639.3 308.9 355.6 492.0 Industrial/Energy 85.4 76.2 113.3 118.2 212.3 83.8 58.9 144.1 143.4 153.4 390.2 272.5 369.6 866.2 746.9 993.0 443.2 368.5 241.9 273.6 513.8 734.6 1,259.3 2,811.6 588.3 419.3 452.9 Consumer Products and Services 43.9 59.4 49.3 74.4 29.5 55.6 52.5 71.2 50.5 90.7 274.1 204.7 192.5 228.1 774.5 870.7 117.8 39.1 75.2 121.1 212.4 111.2 196.8 209.9 127.0 159.0 257.3 Medical Devices and Equipment 39.2 71.3 80.1 76.7 67.5 57.9 38.6 90.8 136.3 130.7 158.8 193.6 249.0 238.7 260.9 299.0 258.6 238.0 313.8 296.9 453.1 594.4 735.3 677.1 355.4 279.4 204.4 Semiconductors 45.5 22.4 37.3 56.6 13.2 36.1 7.7 50.5 5.0 38.8 54.5 122.3 174.1 167.5 266.9 977.2 482.0 311.6 368.9 405.5 261.9 243.0 233.7 157.2 34.0 123.0 110.7 Healthcare Services 16.5 61.4 55.8 16.6 48.0 27.8 16.6 62.5 70.4 109.0 297.4 254.5 321.6 238.5 365.2 411.5 84.4 130.6 59.1 85.9 137.6 115.6 78.6 32.0 39.5 133.3 93.5 Retailing/Distribution 19.6 59.0 134.3 54.1 20.3 13.2 10.7 52.5 23.8 51.3 216.5 117.6 105.2 194.9 607.2 832.3 55.8 44.2 11.3 109.1 111.6 41.0 88.3 54.1 17.1 61.0 75.4 Telecommunications 64.3 42.9 37.7 31.9 40.9 52.1 10.8 93.6 59.0 187.1 323.0 383.8 373.2 896.6 1,920.7 4,472.6 833.8 185.6 173.3 262.6 330.8 425.4 427.5 316.4 88.2 197.1 75.3 Financial Services 65.8 79.8 43.9 155.7 71.3 32.6 8.3 100.6 101.9 62.4 113.0 240.9 236.3 394.2 783.0 1,386.5 322.9 76.2 93.7 236.6 641.5 199.2 312.1 248.7 202.8 271.1 75.1 Computers and Peripherals 38.5 51.4 82.2 59.1 40.3 51.2 17.4 52.7 33.3 34.1 149.2 107.2 100.6 116.2 250.7 335.8 233.0 15.5 79.5 81.2 69.2 55.7 115.0 160.3 60.0 48.0 71.4 Networking and Equipment 20.6 28.4 23.9 39.4 54.6 42.0 19.8 53.5 71.0 37.0 86.6 127.4 220.3 313.1 1,540.6 2,456.5 807.9 238.4 116.6 188.2 129.6 138.4 187.2 55.8 55.9 145.3 58.6 Electronics/Instrumentation 43.2 28.2 31.9 25.6 19.1 7.0 15.1 14.1 16.0 8.6 66.7 85.0 83.7 42.9 83.4 148.1 99.5 78.5 57.1 93.5 141.8 135.2 113.3 57.6 43.4 65.7 50.0 Business Products and Services 7.3 33.7 26.5 10.5 13.3 36.0 62.4 25.4 64.2 34.1 121.4 242.5 215.0 375.9 931.9 1,653.7 262.8 117.6 343.8 205.6 146.1 193.6 245.8 123.4 115.3 99.5 43.9 Other 0.5 1.5 - 0.3 - 0.0 32.7 - - 0.2 10.0 0.5 16.1 21.5 70.9 35.2 27.6 4.0 - 0.4 - - 14.5 - 1.1 5.7 27.0 Total 690.0 835.2 969.6 1,024.5 877.1 761.5 490.3 1,203.2 1,182.7 1,576.9 3,739.4 3,954.6 4,630.8 6,585.8 15,190.7 26,256.3 6,924.3 3,955.5 3,556.7 5,220.6 5,817.4 6,203.3 7,605.5 8,067.0 3,512.9 4,388.7 4,969.7

Stage 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Seed 59 59 55 53 73 23 9 26 26 31 54 44 65 102 141 222 71 23 47 42 49 79 129 131 78 122 256Early Stage 33 49 72 55 21 37 15 30 20 20 57 57 102 90 248 709 232 105 74 120 108 139 185 209 140 240 491Expansion 39 40 55 55 53 28 29 35 36 32 93 111 156 146 200 428 158 88 53 79 105 105 116 108 78 120 133Later Stage 12 13 10 10 15 11 9 11 15 6 23 29 18 19 18 30 14 16 18 18 24 43 44 75 42 66 93Total 143 161 192 173 162 99 62 102 97 89 227 241 341 357 607 1,389 475 232 192 259 286 366 474 523 338 548 973

38 Thomson Reuters


Figure 3.19First Sequence by Industry ($ Millions)

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Software 73 74 80 85 67 81 61 67 51 100 223 318 326 331 588 872 307 262 226 250 278 277 301 284 199 298 349 Media and Entertainment 29 33 45 32 33 24 10 27 26 31 70 77 108 114 379 387 72 43 38 57 99 152 172 173 88 133 213 IT Services 11 8 5 8 11 6 5 4 7 19 28 67 64 89 224 329 73 28 34 49 67 93 100 121 78 98 136 Biotechnology 28 32 55 46 35 25 21 53 46 43 53 68 85 105 79 123 109 109 91 110 118 141 143 141 84 122 100 Industrial/Energy 55 58 72 71 73 49 29 33 34 38 81 81 100 85 101 121 84 61 49 67 71 116 147 153 79 87 78 Medical Devices and Equipment 39 51 60 55 58 37 28 43 41 36 55 85 107 97 87 69 60 64 74 77 90 128 118 104 72 68 57 Consumer Products and Services 27 29 31 18 22 26 19 21 17 28 57 53 72 69 138 101 28 23 19 30 43 41 52 55 33 45 49 Telecommunications 26 24 25 21 23 7 13 19 27 23 69 89 93 135 235 390 131 44 40 55 72 102 80 50 26 47 46 Business Products and Services 12 23 21 12 9 8 9 10 17 12 31 39 48 76 147 224 51 26 30 35 38 42 54 51 29 29 35 Financial Services 15 20 24 21 11 7 10 13 18 12 32 39 43 63 100 174 45 28 19 32 29 35 40 32 19 37 17 Other 1 1 - 1 - 2 2 - 1 1 5 1 6 4 10 8 8 2 - 2 2 - 9 3 6 11 17 Retailing/Distribution 13 25 39 26 13 9 6 13 13 10 36 34 33 43 113 121 19 10 5 18 22 11 14 16 10 12 17 Semiconductors 24 13 16 21 12 14 7 11 6 11 23 30 55 46 49 116 79 52 66 77 41 46 39 32 13 15 17 Computers and Peripherals 27 31 31 34 27 18 12 27 16 19 42 37 43 31 32 54 27 11 19 18 16 11 26 21 18 13 11 Electronics/Instrumentation 26 18 23 17 17 8 10 10 6 11 23 20 18 17 18 29 25 18 23 22 35 25 27 30 16 15 11 Healthcare Services 9 32 19 11 8 7 11 16 13 20 42 57 53 38 52 59 21 19 17 16 23 19 18 10 12 18 10 Networking and Equipment 17 21 20 24 22 16 14 23 13 17 31 49 52 84 106 210 97 38 19 37 25 21 24 11 15 8 10 Total 432 493 566 503 441 344 267 390 352 431 901 1,144 ### 1,427 2,458 3,387 1,236 838 769 952 1,069 1,260 1,364 1,287 797 1,056 1,173

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2012 NVCA Yearbook

Figure 3.20Internet-Related Investments

By Year 1985-2011

Year # Companies ($ Millions)1995 416 1,769.2 1996 754 3,880.5 1997 1,023 5,790.3 1998 1,481 10,847.2 1999 3,049 39,802.9 2000 4,587 76,340.3 2001 2,371 24,533.8 2002 1,440 10,582.5 2003 1,221 8,534.4 2004 1,241 10,397.2 2005 1,328 10,488.4 2006 1,611 12,473.8 2007 1,733 14,217.2 2008 1,787 12,553.5 2009 1,384 8,764.6 2010 1,600 10,420.5 2011 1,894 14,854.1 TOTAL 28,920 276,250.4

Figure 3.21Top Five States By Internet-Related Investments

in 2011

State ($ Millions)California 7,790.4 New York 2,002.0 Massachusetts 1,025.6 Texas 580.4 Illinois 428.4 TOTAL* 11,826.9

* Total includes above 5 states only

Figure 3.22Internet-Related Investments

By Regions in 2011

Stage Region ($ Millions)Silicon Valley 6,997.7 NY Metro 2,095.9 New England 1,119.0 Midwest 808.3 LA/Orange County 652.1 Texas 580.4 Southeast 551.3 DC/Metroplex 538.0 Northwest 458.1 SouthWest 339.0 Colorado 301.0 Philadelphia Metro 143.3 San Diego 136.1 North Central 61.3 Upstate NY 40.9 South Central 27.3 Sacramento/N.Cal 4.5 AK/HI/PR - TOTAL 14,854.1

40 Thomson Reuters


STATE AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IND KS KY LA MA MD ME MI MN MO MS MTAL 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.7 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AZ 0.0 0.0 0.0 6.8 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0CA 0.0 0.0 0.0 6.9 7,410.1 149.9 24.6 28.1 6.4 73.6 108.9 0.6 0.0 0.0 230.1 19.4 8.6 0.0 3.6 546.0 66.7 4.0 16.9 54.0 31.4 0.0 1.0CO 0.0 0.0 0.0 7.4 56.0 76.7 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 3.5 0.0 0.0 0.0 0.0 21.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0CT 0.0 0.0 0.0 2.2 260.2 8.8 11.4 0.0 0.0 0.0 7.1 0.0 0.0 0.0 1.1 0.0 9.0 0.7 0.0 50.0 2.1 0.0 3.6 0.5 0.0 0.0 0.0DC 0.0 0.0 0.0 0.0 35.3 2.5 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.0 1.5 0.0 0.0 0.7 0.0 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0DE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0FF 0.0 0.0 0.0 13.7 1,270.1 58.3 15.3 0.0 0.0 36.1 13.4 0.0 0.0 0.0 72.3 0.0 6.5 0.0 0.0 236.5 9.0 0.0 3.6 55.1 0.0 0.0 0.0FL 0.0 0.0 0.0 0.0 14.1 0.0 0.0 0.0 0.0 18.4 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0GA 0.0 0.0 0.0 1.8 43.5 4.7 0.0 0.0 0.0 11.4 62.2 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 3.3 4.0 0.0 0.0 0.0 0.0 0.0 0.0IA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0ID 0.0 0.0 0.0 1.2 0.0 5.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IL 0.0 0.0 0.0 0.0 162.6 11.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 112.3 2.8 1.5 0.0 0.0 36.1 4.5 0.0 3.5 0.0 23.3 0.0 0.0IN 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 31.7 2.5 0.0 0.0 13.1 0.0 0.0 0.0 5.8 0.0 0.0 0.0KS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 24.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0KY 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 1.1 2.2 0.0 0.6 0.0 0.0 0.0 0.0LA 0.0 1.8 0.0 0.0 0.0 0.0 0.3 1.6 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.3 3.4 0.0 0.0 0.0 0.0 8.2 0.0 0.0MA 0.0 0.0 0.0 33.7 802.3 31.0 12.6 0.0 15.0 10.9 15.3 0.0 0.0 0.0 59.2 63.2 2.0 0.7 7.2 860.1 11.5 0.0 1.7 29.8 0.0 0.0 2.2MD 0.0 0.0 0.0 54.9 55.9 19.0 2.1 2.7 0.0 8.5 18.2 0.0 0.0 0.0 7.0 6.8 0.0 0.0 0.0 14.6 24.3 0.0 0.0 7.7 30.4 0.0 0.0ME 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.1 25.0 0.6 0.0 0.0 0.0 0.0 0.0MI 0.0 0.0 0.0 3.0 57.2 6.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.0 0.0 0.0 0.0 2.2 0.4 0.0 17.1 5.0 0.5 0.0 0.0MN 0.0 0.0 0.0 0.0 63.9 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.6 0.0 0.3 0.0 0.0 12.3 0.0 0.0 0.0 21.8 0.0 0.0 0.0MO 0.0 0.0 0.0 0.0 20.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.3 0.0 0.0 0.0 1.1 16.4 0.0 0.0NC 0.0 0.0 0.0 0.0 29.2 0.0 0.0 0.0 0.0 8.2 4.0 0.0 0.0 0.0 16.2 12.5 0.0 0.0 0.0 16.3 5.6 0.0 8.5 0.0 0.0 0.0 0.0ND 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0NE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NH 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.7 0.0 0.3 0.0 0.0 0.0 0.0 0.0NJ 0.0 0.0 0.0 5.8 231.6 3.0 0.0 5.0 0.0 0.9 5.6 0.0 0.0 0.0 3.5 12.5 0.0 0.0 0.0 48.9 5.9 0.0 0.0 8.7 0.0 0.0 0.0NM 0.0 0.0 0.0 0.0 1.7 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0NV 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NY 0.0 0.0 0.0 54.8 946.2 20.7 42.1 0.0 1.0 23.1 27.1 0.0 0.0 0.0 45.2 6.8 5.6 2.5 4.6 203.4 7.4 2.5 3.5 20.9 0.0 0.0 0.0OH 0.0 0.0 0.0 0.0 4.4 0.0 3.7 0.0 0.0 1.2 1.5 0.0 0.0 0.0 1.8 0.8 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.6 0.0 0.0 0.0OK 0.0 0.0 0.0 15.0 6.6 35.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0OR 0.0 0.0 0.0 0.0 16.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0PA 0.0 0.0 0.0 2.8 119.4 17.0 2.9 0.0 1.0 8.8 2.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 68.8 43.5 15.4 1.7 0.0 0.0 0.0 0.0PR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0RI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0SC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0SD 0.0 0.0 0.0 0.0 2.8 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 8.7 0.0 0.0 0.0TN 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 2.0 0.0 3.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.3 0.0 0.0 1.0 0.0 0.0 0.0TX 0.0 0.0 0.0 12.0 71.0 6.6 0.0 0.0 0.0 2.1 7.0 0.0 0.0 0.0 34.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 7.8 0.0 0.0UN 0.0 1.8 0.0 25.4 2,671.2 144.9 20.1 10.0 1.1 68.8 58.8 0.0 28.4 0.0 87.0 14.2 7.0 3.2 1.1 773.3 48.6 15.9 18.0 41.7 11.0 0.0 0.0UT 0.0 0.0 0.0 0.0 32.9 5.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.2 0.7 0.0 0.0 0.0 0.0 0.0 0.0VA 0.0 0.0 0.0 0.0 68.5 9.6 0.0 0.2 0.0 1.9 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.0 15.9 0.0 0.0 0.0 4.6 0.0 0.0VT 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0WA 0.0 0.0 0.0 0.0 213.2 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 2.0 12.4 0.0 0.0 0.0 0.0 6.9 0.0 0.0 0.0 0.3 0.0 0.0 0.0WI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.5 0.0 0.0 0.0 0.0 3.2 0.0 0.0 0.0 0.0 4.3 0.0 0.0 0.4 2.4 0.0 0.0 0.0Total 0.0 3.6 0.0 247.4 14,671.9 621.5 135.5 49.0 26.6 298.9 343.3 0.6 28.4 4.0 695.7 177.9 67.5 8.3 21.9 2,988.7 283.6 38.7 82.7 266.0 133.7 0.0 3.2

Figure 3.23Sources and Targets of Invested Capital Investments 2011

Source Target State

Source State includes U.S. states FF = other foreign UN = undisclosed or unknown

Thomson Reuters 41

2012 NVCA Yearbook

Figure 3.23 (continued)Sources and Targets of Invested Capital Investments 2011

Source Target State

Source State includes U.S. states FF = other foreign UN = undisclosed or unknown

STATEALARAZCACOCTDCDEFFFLGAIAIDILINKSKYLAMAMDMEMIMNMONCNDNENHNJNMNVNYOHOKORPAPRRISCSDTNTXUNUTVAVTWAWITotal

NC ND NE NH NJ NM NV NY OH OK ORE PA PR RI SC SD TN TX UN UT VA VI VT WA WI WV WY TOT0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.5 0.0 0.0 2.1 0.0 0.0 0.0 0.0 0.0 0.0 12.60.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.0

87.8 0.0 0.0 22.7 104.9 6.3 8.0 545.3 9.8 0.0 80.9 94.5 0.0 0.0 0.0 0.0 4.0 333.3 0.0 80.9 146.1 0.0 2.0 172.0 1.5 0.0 0.0 10,490.8 4.0 0.0 0.0 0.0 0.0 0.0 0.0 15.4 0.0 0.0 4.0 0.8 0.0 0.0 0.0 0.0 0.0 6.1 0.0 0.0 2.4 0.0 0.0 26.8 0.0 0.0 0.0 225.2

12.2 0.0 0.0 9.3 9.4 0.4 0.0 32.5 1.8 22.5 5.0 1.2 0.0 3.6 4.1 0.0 0.6 27.3 0.0 1.3 9.0 0.0 0.0 12.9 0.0 0.0 0.0 509.90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.2 0.0 0.0 1.3 0.0 0.0 0.0 53.90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5

40.3 0.0 0.0 0.3 65.3 12.0 0.0 263.7 6.3 0.0 42.3 83.4 0.0 0.0 0.0 0.0 0.6 84.8 0.0 1.0 21.9 0.0 0.0 14.8 4.5 0.0 0.0 2,431.1 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 49.10.9 0.0 0.0 2.8 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 3.4 0.0 1.2 0.0 0.0 0.0 1.7 0.0 0.0 0.0 0.0 0.0 0.0 142.20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.30.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 18.3

14.5 0.0 0.0 3.3 0.0 0.0 0.0 4.7 0.0 0.0 0.0 5.3 0.0 0.0 0.0 0.0 3.0 34.1 0.0 4.8 6.6 0.0 0.0 4.2 1.3 0.0 0.0 439.51.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 19.6 0.0 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 75.40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.32.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 1.4 2.6 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 15.70.0 0.0 0.0 0.0 0.0 0.0 0.0 3.4 0.0 0.0 0.0 0.0 0.0 3.6 0.0 0.0 0.0 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30.0

12.6 0.0 0.0 36.5 22.0 9.0 1.0 263.1 12.3 0.0 4.1 51.7 0.0 13.4 0.0 0.0 0.4 41.2 0.0 2.2 14.4 0.0 3.4 38.1 0.0 0.0 0.0 2,483.8 7.1 0.0 0.0 0.0 20.5 0.0 0.0 74.6 2.5 0.0 0.0 5.2 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 67.2 0.0 0.0 0.0 0.0 0.0 0.0 432.3

0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.00.0 0.0 0.0 0.0 9.4 2.0 0.0 4.3 0.9 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 123.11.8 0.0 0.0 0.0 16.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.5 0.0 0.0 0.0 125.70.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 51.3

39.8 0.0 0.0 0.3 0.7 0.0 0.0 1.1 0.0 0.0 0.0 1.2 0.0 0.0 2.2 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 150.10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.40.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.30.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.10.0 4.0 0.0 0.0 30.4 0.0 0.0 17.2 6.5 0.0 0.0 8.2 0.0 0.0 0.0 0.0 0.0 3.3 0.0 4.1 0.6 0.0 0.0 4.7 0.0 0.0 0.0 410.30.0 0.0 0.0 0.0 0.0 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3

35.9 0.0 0.0 5.3 122.7 1.6 0.0 520.1 4.1 0.0 0.2 53.0 0.0 0.0 0.0 0.0 12.6 125.0 0.0 12.7 128.7 0.0 5.5 22.3 20.9 0.0 0.0 2,487.8 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 48.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 65.40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 64.40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.4 3.8 0.0 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.53.7 0.0 0.0 1.3 7.9 0.0 0.0 51.2 6.1 0.0 0.3 82.8 0.0 1.5 0.0 0.0 0.0 18.1 0.0 1.8 52.2 0.0 0.0 2.3 3.0 0.0 0.0 517.90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.70.0 0.0 0.0 0.0 0.0 0.0 0.0 13.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13.30.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 19.20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 39.8 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 56.62.0 0.0 0.0 0.0 0.0 3.0 0.0 26.1 7.8 4.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 239.8 0.0 8.6 0.0 0.0 0.0 5.1 0.0 0.0 0.0 440.6

44.2 0.0 0.0 12.5 119.5 15.5 0.5 397.6 67.6 0.0 74.9 104.8 0.0 18.0 4.1 1.5 32.8 523.4 0.0 48.9 108.8 0.0 12.8 86.4 32.1 0.0 0.0 5,757.6 0.0 0.0 0.0 0.0 0.0 6.4 0.0 8.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 47.5 0.1 0.0 0.0 1.3 0.0 0.0 0.0 104.64.6 0.0 0.0 0.0 0.4 0.0 0.0 26.8 0.0 0.0 0.0 15.5 0.0 0.0 0.0 0.0 1.4 4.1 0.0 1.1 78.8 0.0 0.0 2.3 0.0 2.1 0.0 260.30.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 1.19.5 0.0 0.0 0.0 4.5 0.0 0.0 24.0 3.0 0.0 14.1 0.0 0.0 0.0 0.0 0.0 0.0 3.6 0.0 3.8 0.0 0.0 0.0 140.7 0.0 0.0 0.0 438.50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 4.7 0.0 0.0 29.1

325.2 4.0 0.0 95.7 533.6 61.8 9.5 2,294.5 205.0 26.5 238.6 520.1 0.0 40.5 22.0 3.0 103.0 1,469.1 0.0 233.9 649.8 0.0 24.8 542.4 72.0 2.1 0.0 28,675.0

42 Thomson Reuters


Figure 3.242011 Internet-Related Investments

By Stage

Company Stage ($ Millions)

Seed 323.1 Early Stage 4,063.0 Expansion 6,377.0 Later Stage 4,091.0 TOTAL 14,854.1

Industry Group ($ Millions)Software 6,385.0 IT Services 2,329.0 Media and Entertainment 2,264.3 Consumer Products and Services 1,084.0 Telecommunications 691.2 Retailing/Distribution 403.6 Semiconductors 319.2 Networking and Equipment 308.6 Computers and Peripherals 301.8 Financial Services 243.5 Healthcare Services 185.1 Business Products and Services 150.7 Medical Devices and Equipment 123.0 Industrial/Energy 35.6 Biotechnology 25.4 Electronics/Instrumentation 4.1 TOTAL 14,854.1

Figure 3.252011 Internet-Related Investments

By Industry Sector

Figure 3.262011 Internet-Related vs Non Internet-Related

Investments By Industry Sector ($ Millions)

Industry Internet Related Non-Internet Related TotalSoftware 6,385.0 403.9 6,788.9 IT Services 2,329.0 86.9 2,415.9 Media and Entertainment 2,264.3 72.3 2,336.6 Consumer Products and Services 1,084.0 97.5 1,181.5 Telecommunications 691.2 13.2 704.4 Retailing/Distribution 403.6 5.0 408.6 Semiconductors 319.2 858.3 1,177.4 Networking and Equipment 308.6 67.3 375.8 Computers and Peripherals 301.8 63.0 364.8 Financial Services 243.5 151.1 394.5 Healthcare Services 185.1 165.8 350.9 Business Products and Services 150.7 80.1 230.9 Medical Devices and Equipment 123.0 2,740.0 2,863.0 Industrial/Energy 35.6 3,524.4 3,560.0 Biotechnology 25.4 4,761.8 4,787.1 Electronics/Instrumentation 4.1 682.3 686.4 Other NA 48.2 48.2 Total 14,854.1 13,820.9 28,675.0

Thomson Reuters 43

2012 NVCA Yearbook

Figure 3.272011 Internet-Related vs Non Internet-Related

Investments By Industry Sector (Number of Companies)

Industry Internet Related Non-Internet Related TotalSoftware 794 68 862 IT Services 296 11 307 Media and Entertainment 378 10 388 Consumer Products and Services 84 6 90 Telecommunications 114 19 133 Retailing/Distribution 38 5 43 Semiconductors 21 5 26 Networking and Equipment 45 19 64 Computers and Peripherals 23 41 64 Financial Services 28 9 37 Healthcare Services 13 72 85 Business Products and Services 26 269 295 Medical Devices and Equipment 17 25 42 Industrial/Energy 8 239 247 Biotechnology 5 358 363 Electronics/Instrumentation 4 49 53 Other NA 19 19 Total 1,894 1,224 3,118

Figure 3.28Top Five States By Percentage Invested

Within State in 2011

Pct. InvestedFund Domicile Within StateKansas 78%Ohio 74%California 71%Tennessee 70%Texas 54%

*Minimum $20 million invested

Figure 3.29Top Five States By Portion Received From

In-State Firms 2011

Pct. InvestedCompany Location From StateCalifornia 51%Tennessee 39%Kansas 36%Massachusetts 29%Washington 26%

*Minimum $20 million invested

Figure 3.30Number of States Invested Into in 2011

By State of Venture Firm

Figure 3.31Number of States California Venture Firms

Invested Into By Year

Location ofVenture FirmCalifornia 38Massachusetts 33New York 32Connecticut 28Pennsylvania 26Illinois 22Virginia 21Maryland 20New Jersy 20Texas 17

No. of States Invested In

No. of StatesYear Invested In1991 262001 422011 38

44 Thomson Reuters


Figure 3.32Corporate Investments By Year

Figure 3.33Clean Technology Investments By Year

31.3% 31.4% 36.3% 41.3%

10.2% 9.4% 11.7%

9.9%

58.5% 59.2% 52.0% 48.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1996 2001 2006 2011

Other

SoCal

NoCal

Figure 3.34California Investments as a Percentage

of Overall Investments

Year1995 393.2 5% 126 7%1996 622.3 6% 214 8%1997 849.1 6% 290 9%1998 1,414.4 7% 413 11%1999 6,289.1 12% 1,071 19%2000 11,883.8 12% 1,671 21%2001 3,580.9 9% 795 17%2002 1,393.6 7% 465 15%2003 1,070.2 6% 398 13%2004 1,341.4 6% 474 15%2005 1,163.9 5% 462 14%2006 1,406.3 5% 513 13%2007 1,783.5 6% 580 14%2008 1,492.9 5% 509 12%2009 988.2 5% 314 10%2010 1,245.0 5% 379 11%2011 1,733.5 6% 438 12%

Corp-Backed Investments ($

Millions)

# Corp-Backed

Deals

% of Overall Deals with at Least One

Corp VC% of Overall Investments

Year1995 73.9 35 2.11996 150.3 48 3.11997 165.9 52 3.21998 174.9 42 4.21999 259.4 55 4.72000 565.9 51 11.12001 320.3 61 5.32002 304.6 50 6.12003 211.7 56 3.82004 418.0 82 5.12005 516.4 90 5.72006 1,756.5 153 11.52007 3,018.0 252 12.02008 4,107.7 294 14.02009 2,516.6 231 10.92010 3,874.0 297 13.02011 4,452.5 335 13.3

Clean Technology Investments ($

Millions)# Clean

Technology Deals

Average Investment Per

Deal ($ Millions)

Thomson Reuters 45

2012 NVCA Yearbook

Portfolio Company Valuations

The first six figures in this chapter compare round valuations in 2011 to those of the preceding six years (2005-2010). A number of factors affect round valuations: (1) general eco-nomic conditions, (2) investor competition for deals, (3) in-dustry sector, and (4) maturity of the company. These charts separate rounds by MoneyTree industry sector.

The first pair of charts covers all rounds. Overall, both aver-age and median round valuations increased in 2011. But it was sector dependent. For median valuations, Biotechnol-ogy, Consumer Products and Services, Electronics and Com-munications, Healthcare Services, Industrial/Energy (where many clean technology companies are classified), IT Ser-vices, Medical Devices, and Software saw higher valuations in 2011 compared with recent years. Meanwhile, Business

Products and Services, Media and Entertainment, Semicon-ductors, and Telecom saw declines in their median valua-tions.

The second pair of charts covers first fundings only. Most sectors saw 2011 valuations below the aggregate of the pri-or six years. Notable is the quadrupling of the median first funding for Industrial/Energy companies, which is where many clean technology companies are classified.

The third pair of charts (4.05 and 4.06) analyzes follow-on financings only. Most sectors showed an increase. Notably, Medical Device valuations in 2011 were slightly lower than in the prior six years.

This chapter analyzes trends in round valuations and IPO valuations in recent years. Much has been written about valuation trends for entrepreneurial companies and whether early round valuations were reasonable enough for a venture capital fund to make a financial and time commitment and still realize a successful exit.

Figure 4.01Valuation By Company Industry 2011 Financings ($ Millions)


Biotechnology 63.6 671.6 57.3 41.3 8.5 1.8Business Products and Services 1.9 1.9 1.9 1.9 1.9 1.9Computers and Peripherals N/A N/A N/A N/A N/A N/AConsumer Products and Services 90.2 90.2 90.2 90.2 90.2 90.2Electronics/Instrumentation 48.6 99.8 63.2 26.6 23.1 19.5Financial Services 77.6 197.9 112.6 27.2 17.4 7.7Healthcare Services 83.6 164.6 100.4 74.4 57.7 21.0Industrial/Energy 404.5 2,250.0 57.7 45.7 28.2 1.6IT Services 100.3 409.4 94.1 43.2 15.7 0.2Media and Entertainment 47.2 200.0 54.2 16.4 5.2 4.6Medical Devices and Equipment 87.9 319.2 105.8 69.6 24.2 11.2Networking and Equipment 41.5 74.4 57.9 41.5 25.1 8.7Other N/A N/A N/A N/A N/A N/ARetailing/Distribution N/A N/A N/A N/A N/A N/ASemiconductors 19.1 33.2 25.0 20.3 11.9 5.0Software 123.7 1,844.2 66.7 34.6 13.3 3.5Telecommunications 25.2 55.0 36.2 20.1 9.0 5.5Total 97.7 2,250.0 75.6 36.6 11.8 0.2


46 Thomson Reuters


Figures 4.07-4.08 analyze IPO valuations in recent years. Figure 4.07 is the Holmesian analysis showing the ratio of IPO pre-money valuations to total venture investment into those companies. That is, what multiple of total venture in-vestment was that company’s pre-valuation at the IPO*? In 2011, this ratio more than doubled from 5.0 to 10.5, driven in large part by a handful of very large IPOs. While overall there were fewer venture backed IPOs in 2011, they provided better returns to their investors. See the detailed statistics on exits in the following chapter.

Figure 4.08 shows trends in IPO post-money valuations. That is, it shows the offering share price multiplied by the total number of shares for the company. Despite a lower number of valuations, virtually all metrics at least doubled. The smallest venture backed IPO had a launch valuation of $42.0 million. That’s almost four times the year-earlier statistic. The largest IPO valuation was almost $13 billion.

While there were fewer venture-backed IPOs in 2011, 11 of them had offer valuations of $2 billion or greater. That com-pares with 12 total in the period 2004-2010.

Methodology NotePre-money valuation refers to the resulting valuation of fi-nancing round or IPO minus the proceeds of the financing event. For example, a company receiving a $5 million invest-ment resulting in a $25 million valuation for the company would be said to have a $20 million pre-money valuation. Likewise, in 2011 the combined valuation of all IPOs based on the share price of the offering was $79.3. The offer pro-ceeds totaled $9.9 billion. This meas the class of 2011 IPOs had a combined pre-money IPO valuation of $69.4 billion. As with other statistics throughout this publication, IPO sta-tistics report the economics of the offer itself, at the offer share price, not the first trade, or first day statistics.

Figure 4.02Valuation By Company Industry 2005-2010 ($ Millions)


Biotechnology 66.4 493.5 88.2 39.2 11.8 0.1Business Products and Services 22.8 95.0 20.5 8.5 5.7 2.0Computers and Peripherals 62.5 133.6 91.2 51.2 27.1 10.5Consumer Products and Services 103.0 506.0 165.7 23.0 7.6 1.3Electronics/Instrumentation 42.6 163.3 62.9 20.1 6.5 1.2Financial Services 59.3 384.0 59.4 14.9 8.8 0.2Healthcare Services 33.1 93.6 61.1 16.5 9.9 6.0Industrial/Energy 96.2 1,509.4 71.8 28.4 6.4 0.1IT Services 70.6 329.8 107.7 23.3 12.3 2.9Media and Entertainment 102.8 3,569.0 67.5 26.7 11.7 2.0Medical Devices and Equipment 75.3 423.6 99.0 50.7 15.7 0.1Networking and Equipment 67.9 426.3 79.7 41.7 23.1 3.9Other 157.2 157.2 157.2 157.2 157.2 157.2Retailing/Distribution 134.4 794.7 158.2 34.6 12.2 2.4Semiconductors 64.5 362.9 74.7 43.8 19.5 1.0Software 64.2 1,610.1 59.8 27.3 11.2 1.0Telecommunications 84.2 915.0 138.1 33.6 11.0 1.8Total 73.4 3,569.0 83.0 32.1 11.4 0.1


Thomson Reuters 47

2012 NVCA Yearbook


First Round Financings


Biotechnology 18.5 47.5 31.0 9.2 4.5 1.8Business Products and Services 1.9 1.9 1.9 1.9 1.9 1.9Computers and Peripherals N/A N/A N/A N/A N/A N/AConsumer Products and Services N/A N/A N/A N/A N/A N/AElectronics/Instrumentation N/A N/A N/A N/A N/A N/AFinancial Services N/A N/A N/A N/A N/A N/AHealthcare Services N/A N/A N/A N/A N/A N/AIndustrial/Energy 21.9 40.0 32.1 24.2 12.9 1.6IT Services 7.0 7.0 7.0 7.0 7.0 7.0Media and Entertainment 5.0 5.3 5.2 5.0 4.8 4.6Medical Devices and Equipment N/A N/A N/A N/A N/A N/ANetworking and Equipment 8.7 8.7 8.7 8.7 8.7 8.7Other N/A N/A N/A N/A N/A N/ARetailing/Distribution N/A N/A N/A N/A N/A N/ASemiconductors 5.0 5.0 5.0 5.0 5.0 5.0Software 21.4 78.4 14.0 11.8 9.2 3.5Telecommunications 7.8 10.2 9.0 7.8 6.7 5.5Total 15.1 78.4 14.7 8.4 5.0 1.6


Figure 4.04Valuation By Company Industry 2005-2010 Financings ($ Millions)

First Round Financings


Biotechnology 18.5 115.0 16.3 11.1 2.7 0.1Business Products and Services 11.4 41.7 9.2 8.0 4.8 2.0Computers and Peripherals 27.1 32.5 29.8 27.1 24.4 21.8Consumer Products and Services 16.6 23.0 21.7 20.4 13.4 6.4Electronics/Instrumentation 7.3 23.7 6.5 3.0 2.0 1.2Financial Services 98.5 384.0 110.2 62.0 9.4 4.2Healthcare Services 8.0 10.0 9.9 8.0 6.1 6.0Industrial/Energy 17.0 118.4 10.1 6.0 3.8 0.1IT Services 11.8 26.5 16.9 10.6 5.4 3.4Media and Entertainment 28.9 181.0 17.4 10.0 6.0 2.0Medical Devices and Equipment 15.4 80.9 21.2 9.5 5.0 0.1Networking and Equipment 8.5 15.0 10.8 6.6 5.3 3.9Other N/A N/A N/A N/A N/A N/ARetailing/Distribution 54.7 206.7 50.3 21.7 13.4 7.8Semiconductors 97.0 156.0 126.5 97.0 67.5 38.0Software 13.7 78.7 15.0 8.4 4.7 1.0Telecommunications 12.2 34.7 14.7 10.0 7.5 1.8Total 21.1 384.0 17.8 9.3 4.8 0.1


48 Thomson Reuters



Additional Round Financings


Biotechnology 82.2 671.6 59.9 52.2 27.9 5.4Business Products and Services N/A N/A N/A N/A N/A N/AComputers and Peripherals N/A N/A N/A N/A N/A N/AConsumer Products and Services 90.2 90.2 90.2 90.2 90.2 90.2Electronics/Instrumentation 48.6 99.8 63.2 26.6 23.1 19.5Financial Services 77.6 197.9 112.6 27.2 17.4 7.7Healthcare Services 83.6 164.6 100.4 74.4 57.7 21.0Industrial/Energy 787.1 2,250.0 1,154.9 59.8 55.6 51.4IT Services 108.8 409.4 105.6 54.4 18.5 0.2Media and Entertainment 72.6 200.0 87.0 43.2 25.3 7.5Medical Devices and Equipment 87.9 319.2 105.8 69.6 24.2 11.2Networking and Equipment 74.4 74.4 74.4 74.4 74.4 74.4Other N/A N/A N/A N/A N/A N/ARetailing/Distribution N/A N/A N/A N/A N/A N/ASemiconductors 22.6 33.2 27.0 22.6 18.2 11.9Software 152.9 1,844.2 71.4 47.4 28.8 4.1Telecommunications 42.5 55.0 48.7 42.5 36.2 30.0Total 119.7 2,250.0 88.7 52.4 22.3 0.2


Figure 4.06Valuation By Company Industry 2005-2010 Financings ($ Millions)

Additional Round Financings


Biotechnology 80.1 493.5 98.9 50.3 19.1 2.3Business Products and Services 57.4 95.0 84.0 73.0 38.6 4.2Computers and Peripherals 61.9 131.2 84.0 61.8 21.7 10.5Consumer Products and Services 128.9 506.0 193.9 56.5 8.5 1.3Electronics/Instrumentation 44.6 129.4 70.7 14.2 11.5 4.0Financial Services 13.8 51.7 13.8 10.2 5.2 0.2Healthcare Services 47.8 81.5 64.6 60.0 20.0 13.0Industrial/Energy 134.5 1,509.4 73.5 51.9 23.6 4.1IT Services 79.2 258.2 146.0 49.2 14.1 2.9Media and Entertainment 154.6 3,569.0 71.2 32.3 16.1 4.8Medical Devices and Equipment 83.8 340.0 110.3 71.3 37.3 1.5Networking and Equipment 77.1 426.3 79.7 52.0 31.2 8.0Other 157.2 157.2 157.2 157.2 157.2 157.2Retailing/Distribution 228.6 794.7 295.3 40.5 9.9 2.4Semiconductors 58.5 362.9 72.7 40.2 16.4 1.0Software 65.2 735.0 64.7 31.5 16.8 2.0Telecommunications 101.4 915.0 150.0 40.9 11.8 3.1Total 85.9 3,569.0 96.5 42.0 16.7 0.2


Thomson Reuters 49

2012 NVCA Yearbook

Figure 4.07Ratio of IPO Pre-Money Valuation to Amount Invested

Figure 4.082011 Venture-Backed IPOs Valuations as of IPO


1995 152.9 1,569.0 167.2 105.9 68.4 12.21996 211.0 9,911.4 186.3 110.8 66.9 9.51997 165.4 2,139.2 164.5 109.1 66.7 11.41998 221.2 1,220.6 269.6 182.2 106.6 12.51999 485.9 4,827.7 536.8 333.8 220.5 47.02000 490.7 3,291.7 497.3 244.4 132.6 18.02001 461.5 1,719.2 571.7 322.5 206.0 57.32002 368.8 1,083.3 570.7 242.0 160.6 36.82003 284.7 821.9 359.2 227.7 156.2 41.92004 656.0 23,053.7 389.6 255.8 152.8 21.62005 290.5 1,442.1 387.5 201.9 140.1 23.12006 390.3 2,647.5 406.7 255.3 171.9 70.92007 623.2 7,963.7 580.4 346.0 271.5 50.02008 441.1 1,443.1 380.7 257.7 197.6 88.82009 623.2 1,417.1 816.8 428.3 310.0 212.92010 497.3 5,284.7 473.4 228.3 130.6 11.02011 1,496.5 12,861.1 1,414.7 515.8 275.8 42.0

MinYear of IPO Max Median

Year1995 30.0 7.6 22.4 2.2 10.21996 59.3 12.0 47.3 3.7 12.81997 23.3 4.9 18.4 2.7 6.81998 17.3 3.5 13.7 2.4 5.71999 131.7 18.8 112.9 11.0 10.32000 129.1 23.0 106.1 13.0 8.22001 19.4 3.7 15.6 2.6 6.02002 8.1 2.1 6.0 1.7 3.62003 8.3 2.0 6.3 2.4 2.62004 61.7 10.5 51.2 6.7 7.62005 16.6 4.5 12.1 3.1 3.92006 22.2 5.1 17.1 4.3 4.02007 53.6 10.3 43.3 6.7 6.52008 2.6 0.5 2.2 0.4 6.02009 7.5 1.6 5.8 0.6 9.72010 37.3 7.6 29.7 5.9 5.02011 79.3 9.9 69.4 6.6 10.5

Total Venture Inv. ($ Billion) Ratio

Post Offer Value

($ Billion)Offer Amt ($ Billion)

IPO Pre Money

Valuation

50 Thomson Reuters



Thomson Reuters 51

2012 NVCA Yearbook

Exits: IPOs and Acquisitions

While some venture exit metrics improved in 2011 such as total proceeds from IPOs and from acquisitions, overall results fell far short of what was hoped for, and what was needed. In 2011, the number of IPOs fell to 53 from the prior year 75. However, the proceeds of those offers rose from $7.6 billion to $9.9 billion. These results included both large and small IPOs but several very large IPOs drove the totals. Total IPO valuations in 2011 rose to nearly $80 billion, up from $37 billion in 2010. This large-IPO effect can also be seen in the average valuation at IPO of $1.5 billion compared to a median valuation of one third that amount.

Exit success through acquisition (“M&A”) in 2011 saw yet again a record count of acquisitions at 458 which was in in-crease over 442 in 2010 which itself had been a high water mark. Total dollars realized also increased to $24 billion. While not an all-time record, or even a post-bubble record, it shows 31% growth over 2010. This shift toward better acquisition exits in 2011 is confirmed by Figure 5.13 which shows that 21% of fully reported selling prices were 10 times or greater the total venture investment into that company. Almost another third (31%) of the reported acquisitions were for 4-10 times the total venture investment. Both statistics are at the post bubble high.

While IPOs reportable in this chapter (backed by at least one U.S. venture capital firm and trading on at least one U.S. exchange or market) fell from 75 to 53 in 2011, the number of U.S.-domiciled companies fell from 47 to 40. The biggest drop was among companies in China. In 2010, 25 Chinese companies were included. In 2011, only 9 such companies were reported.

In 2011, IPO and acquisition activity were both far below what is necessary to sustain the industry long term. Remember that the venture industry funds over 1,000 companies for the first time each year. If 10% of them are to go public (for 1990s first fundings, the result was 14%), that suggests that at least 100 companies per year would achieve IPOs. We are far from that result.

0.00

5.00

10.00

15.00

20.00

25.00

0

50

100

150

200

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'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Offe

r ($

Bill

ion)

No.

of I

POs

Year

No of IPOs

Offer Amount ($B)


52 Thomson Reuters


Figure 5.02Number of Venture-Backed IPOs vs. All IPOs

Methodology

Initial and secondary public offerings of companies that are venture-backed are followed and analyzed by Thomson Re-uters. This research is compiled three ways: first, through cross-referencing venture-backed companies with IPOs in registration or that have begun trading, which is tracked

through the new issues online database of Thomson Reuters; second, through daily prospectus research; third, through industry surveys. By using this research process, we have been successful in identifying virtually all companies that have gone public that have had venture backing. However, the term “venture-backed” has different meanings depend-ing on context. There are three decreasingly stringent clas-

2000 351 2632001 83 422002 76 222003 67 292004 188 942005 168 572006 168 572007 160 862008 24 62009 39 122010 104 752011 99 53

# of Venture-Backed IPOs

# of All IPOsYear

Figure 5.03Venture-Backed IPOs 1985 to 2011

Value and Age Characteristics

Year1985 76 1,267 13 17 5,638 39 75 3.8 8.11986 156 3,091 14 22 15,291 54 108 5.5 9.41987 119 2,249 17 22 9,485 56 93 5.4 8.21988 55 847 14 17 3,399 56 67 4.9 5.61989 64 1,202 15 21 5,358 54 94 6.6 8.51990 67 1,285 20 22 4,968 68 84 6.6 8.21991 154 4,746 25 32 19,910 85 133 6.8 9.61992 181 5,504 23 32 18,374 72 106 6.1 8.61993 208 6,140 22 31 20,229 67 101 7.6 9.31994 155 3,798 23 25 14,664 68 96 7.7 10.61995 200 7,568 32 39 29,963 106 153 8.1 10.21996 281 11,980 32 43 59,292 111 211 5.8 8.61997 141 4,926 30 35 23,315 109 165 6.5 10.51998 78 3,543 38 45 17,253 182 221 4.7 6.61999 271 18,758 56 69 131,682 334 486 4.3 5.92000 263 22,959 68 87 129,063 244 491 5.3 7.22001 42 3,748 68 89 19,385 322 462 7.2 15.22002 22 2,067 71 94 8,113 242 369 7.9 15.02003 29 2,006 66 69 8,257 228 285 7.7 8.52004 94 10,482 68 112 61,663 256 656 6.9 8.32005 57 4,482 65 79 16,560 202 291 6.2 8.32006 57 5,117 76 90 22,246 255 390 8.0 9.52007 86 10,326 84 120 53,593 346 623 8.8 9.42008 6 470 71 78 2,646 258 441 9.6 9.62009 12 1,642 97 137 7,479 428 623 10.3 10.52010 75 7,607 83 101 37,301 228 497 9.2 9.62011 53 9,922 97 187 79,316 516 1,497 8.2 8.9

Mean Age @ IPO (yrs)

Num of IPOs

Offer Amount

($Mil)Med Offer

Amt ($Mil)Mean Offer Amt ($Mil)

Post Offer Value ($Mil)

Med Post Value ($Mil)

Mean Post Value ($Mil)

Median Age @ IPO (yrs)

Thomson Reuters 53

2012 NVCA Yearbook

Figure 5.04Venture-Backed IPOs By MoneyTreeTM Industry

Total Offering Size ($ Millions)

Figure 5.05Venture-Backed IPOs By MoneyTreeTM Industry

Total Number of Companies

sifications that Thomson Reuters uses in classifying public companies as venture-backed. The most rigorous is that a venture capitalist must be a shareholder at the time of the public offering and the investment must have been made by a non-buyout venture capital fund. Thus, an investment that was exited prior to going public or a company financed by a buyout firm would not be counted as venture-backed in this

sense. This is the criterion used in publishing venture-backed IPOs in the Venture Capital Journal. The second most strict category still provides that the investment be made in a ven-ture round of financing, but allows that the investment could have been exited at some point prior to the IPO. The third and most comprehensive definition of venture-backed includes companies invested in by either venture capital or buyout

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Media and Entertainment 78 778 196 61 15 45 243 200 590 251 160 651 457 100 2,633 1,320 0 197 65 1,624 352 798 184 0 0 511 3,614Telecommunications 39 73 361 15 41 167 162 247 742 260 477 1,296 317 679 3,736 4,312 150 0 152 1,001 355 719 2,583 0 386 246 1,760Software 47 268 208 132 128 135 400 452 753 363 1,912 1,842 810 671 3,885 3,616 348 155 292 2,050 505 576 1,242 62 456 911 937Industrial/Energy 223 332 390 242 206 399 350 458 636 469 445 1,454 373 130 56 1,154 847 158 0 367 21 257 580 0 0 1,022 918Biotechnology 17 322 173 24 65 63 905 782 499 147 552 976 536 141 254 3,661 335 318 440 1,436 782 855 1,315 0 198 1,150 901IT Services 13 21 32 12 0 0 168 770 49 64 280 457 85 251 1,418 1,510 0 102 0 90 122 191 344 0 0 353 572Computers and Peripherals 177 301 229 108 165 72 68 232 333 217 358 371 194 42 211 513 0 55 0 84 7 0 108 188 0 0 319Business Products and Services 0 51 4 2 0 62 95 61 116 67 78 429 109 81 1,078 578 0 0 97 324 464 0 828 0 0 306 301Semiconductors 13 41 98 74 79 25 196 132 340 131 699 6 276 0 249 1,399 116 0 312 1,407 594 125 636 0 0 479 235Medical Devices and Equipment 74 80 146 20 100 109 505 741 333 476 893 1,512 447 91 48 701 590 282 53 843 327 756 1,241 57 0 98 131Electronics/Instrumentation 6 33 16 0 0 45 66 78 326 201 216 140 77 72 36 243 39 498 0 0 0 0 0 0 380 108 83Financial Services 208 207 56 9 85 0 166 198 72 323 475 1,272 317 7 485 112 494 191 322 699 755 197 0 0 0 877 69Consumer Products and Services 12 128 119 8 174 5 445 401 195 130 280 191 155 509 452 386 180 39 157 250 103 77 202 0 142 1,008 42Other 0 54 0 0 0 0 0 10 0 0 7 0 141 0 0 0 0 0 0 0 0 0 0 0 0 0 42Networking and Equipment 30 135 113 37 52 71 252 241 341 402 282 602 297 271 2,452 3,021 135 0 0 138 0 427 453 0 80 296 0Healthcare Services 83 30 13 0 59 61 359 136 124 240 389 276 185 235 464 182 514 72 52 108 67 0 113 164 0 120 0Retailing/Distribution 247 236 94 106 34 26 366 367 691 57 67 506 150 264 1,301 251 0 0 65 62 28 139 496 0 0 122 0Total 1,267 3,091 2,249 847 1,202 1,285 4,746 5,504 6,140 3,798 7,568 11,980 4,926 3,543 18,758 22,959 3,748 2,067 2,006 10,482 4,482 5,117 10,326 470 1,642 7,606 9,922

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Biotechnology 5 17 13 2 8 4 31 27 25 12 17 34 22 6 6 49 4 4 7 25 14 17 21 0 3 14 11Media and Entertainment 6 15 4 2 1 4 4 7 13 8 5 11 8 3 35 16 0 3 1 10 4 6 2 0 0 5 9Software 3 21 11 8 9 9 15 17 26 18 54 60 26 19 69 55 5 4 4 8 6 6 12 1 4 8 8Telecommunications 8 8 8 2 2 5 3 8 15 10 9 19 9 7 39 41 1 0 2 8 4 3 9 0 2 4 5IT Services 1 2 3 1 1 0 6 1 2 3 7 12 3 5 27 16 0 1 0 2 1 2 4 0 0 4 4Industrial/Energy 14 15 27 15 11 15 14 16 23 19 12 24 11 3 1 10 7 1 0 2 1 3 4 0 0 6 3Semiconductors 1 4 4 5 5 1 9 3 16 8 19 1 7 0 5 14 2 0 3 6 8 2 8 0 0 6 3Computers and Peripherals 12 17 9 6 4 6 3 13 13 8 7 11 7 3 5 7 0 1 0 1 1 0 1 1 0 0 2Medical Devices and Equipment 5 11 9 4 7 10 23 35 20 20 23 45 15 3 1 14 8 3 1 15 8 10 11 2 0 2 2Business Products and Services 0 6 4 1 0 2 5 3 5 3 3 8 2 2 17 8 0 0 2 3 4 0 3 0 0 2 2Consumer Products and Services 2 8 5 1 5 1 12 11 9 4 9 7 6 7 7 4 4 1 3 3 1 1 2 0 1 8 1Electronics/Instrumentation 1 7 4 0 0 2 3 6 13 8 8 8 2 1 1 4 1 1 0 0 0 0 0 0 1 1 1Financial Services 2 7 6 1 4 0 3 7 3 10 8 14 5 1 8 2 3 2 4 7 3 2 0 0 0 8 1Other 0 1 0 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1Networking and Equipment 2 4 6 3 3 2 7 12 9 14 10 11 6 7 27 15 1 0 0 2 0 4 5 0 1 4 0Retailing/Distribution 10 10 5 4 2 2 4 8 12 3 2 10 5 6 16 5 0 0 1 1 1 1 3 0 0 2 0Healthcare Services 4 3 1 0 2 4 12 6 4 7 6 6 6 5 7 3 6 1 1 1 1 0 1 2 0 1 0Totals 76 156 119 55 64 67 154 181 208 155 200 281 141 78 271 263 42 22 29 94 57 57 86 6 12 75 53

54 Thomson Reuters


funds and the investor may or may not have exited prior to the IPO. When the term venture-backed is used in this par-ticular chapter, it usually refers to companies covered by the second category. The term ‘private-equity backed’ will refer to the third category of company.

Thus, in this chapter and throughout this book, we use the definition:

Private Equity = Venture Capital + Buyout/Mezzanine

Therefore, charts reporting private equity activity include venture capital activity.

Figure 5.06Average and Median Age in Months By

MoneyTreeTM Industry Companies at IPO 2000 to 2011

Industry Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean MedianBiotechnology 84.8 68.0 201.3 74.5 125.8 106.5 86.3 94.0 84.8 75.0 74.0 67.0 107.6 94.0 92.8 99.0 N/A N/A 152.0 145.0 85.5 82.0 105.0 99.0Business Products and Services 43.5 48.5 N/A N/A N/A N/A 61.5 61.5 66.7 66.0 91.8 88.5 N/A N/A 191.3 151.0 N/A N/A N/A N/A 76.0 76.0 57.0 57.0Computers and Peripherals 117.8 103.0 N/A N/A 193.0 193.0 N/A N/A 49.0 49.0 71.0 71.0 N/A N/A 83.0 83.0 127.0 127.0 N/A N/A N/A N/A 109.0 109.0Consumer Products and Services 26.8 25.5 260.5 269.5 107.0 107.0 130.3 59.0 83.7 82.0 190.0 190.0 86.0 86.0 163.0 163.0 N/A N/A 119.0 119.0 106.8 98.5 229.0 229.0Electronics/Instrumentation 62.7 66.0 118.0 118.0 9.0 9.0 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 105.0 105.0 111.0 111.0 N/A N/AFinancial Services 52.0 52.0 122.3 47.0 361.5 361.5 109.7 136.0 131.9 71.0 126.0 66.0 126.5 126.5 N/A N/A N/A N/A N/A N/A 137.6 139.0 79.0 79.0Healthcare Services 122.7 138.0 141.0 100.0 90.0 90.0 80.0 80.0 N/A N/A 137.0 137.0 N/A N/A 121.0 121.0 163.0 163.0 N/A N/A 89.0 89.0 N/A N/AIndustrial/Energy 113.1 82.0 422.7 129.0 40.0 40.0 N/A N/A 44.0 44.0 53.0 53.0 85.0 77.0 102.0 108.5 N/A N/A N/A N/A 107.6 84.0 95.3 100.0IT Services 81.7 57.0 N/A N/A 293.0 293.0 N/A N/A 89.0 89.0 99.0 99.0 131.0 131.0 96.5 82.0 N/A N/A N/A N/A 91.8 103.5 139.3 158.5Media and Entertainment 53.7 52.5 N/A N/A 250.7 65.0 126.0 126.0 162.2 125.0 187.0 123.5 135.3 122.0 78.5 78.5 N/A N/A N/A N/A 102.0 124.0 101.2 91.0Medical Devices and Equipment 177.9 67.5 110.7 68.0 308.7 234.0 123.0 123.0 112.2 95.5 107.8 95.5 118.7 89.0 108.9 88.0 71.0 71.0 N/A N/A 122.0 122.0 74.5 74.5Networking and Equipment 48.7 38.0 48.0 48.0 N/A N/A N/A N/A 101.5 101.5 N/A N/A 117.5 97.0 130.8 95.0 N/A N/A 57.0 57.0 124.8 124.0 N/A N/ARetailing/Distribution 49.5 32.0 N/A N/A N/A N/A 70.0 70.0 114.0 114.0 73.0 73.0 75.0 75.0 161.7 148.0 N/A N/A N/A N/A 327.0 327.0 N/A N/ASemiconductors 110.9 80.5 104.0 104.0 N/A N/A 143.0 141.0 112.2 91.0 111.4 98.0 111.0 111.0 113.3 99.5 N/A N/A N/A N/A 73.7 79.0 107.0 106.0Software 92.4 69.0 70.5 64.0 81.8 62.0 95.0 89.0 88.3 90.0 84.7 75.5 121.0 112.5 126.9 112.5 93.0 93.0 123.3 123.5 161.0 157.5 112.0 124.5Telecommunications 71.9 61.0 18.0 18.0 N/A N/A 102.5 102.5 61.8 58.5 58.8 65.0 94.3 65.0 100.8 94.0 N/A N/A 142.5 142.5 122.8 126.5 119.5 106.5

20112000 20042001 2002 2003 2009200820072006 20102005

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2012 NVCA Yearbook

Figure 5.07Venture-Backed

Merger & Acquisitions by Year

Figure 5.08Private Equity-Backed

Merger & Acquisitions by Year

Number Number ($ Millions)Year Total Known Price Average1985 6 3 271.2 90.41986 10 1 86.8 86.81987 13 4 398.1 99.51988 16 6 481.1 80.21989 18 5 371.8 74.41990 19 8 131.8 16.51991 18 5 221.5 44.31992 75 46 2,344.8 51.01993 70 42 1,656.0 39.41994 98 61 3,383.0 55.51995 97 60 3,788.3 63.11996 119 77 8,531.0 110.81997 161 114 6,937.8 60.91998 212 132 9,459.4 71.71999 237 162 37,641.0 232.42000 317 205 68,029.9 331.92001 351 163 17,655.0 108.32002 323 152 7,467.9 49.12003 283 118 7,405.2 62.82004 345 182 15,376.9 84.52005 351 159 17,081.2 107.42006 377 167 19,337.4 115.82007 376 170 27,973.1 164.52008 351 120 13,769.2 114.72009 274 91 11,610.2 127.62010 442 128 18,382.5 143.62011 458 164 24,072.1 146.8

Number Number ($ Millions)Year Total Known Price Average1985 8 3 271.2 90.41986 16 4 214.7 53.71987 21 8 854.4 106.81988 30 15 1,317.9 87.91989 36 19 1,859.3 97.91990 25 10 413.2 41.31991 34 14 1,059.7 75.71992 92 61 4,203.4 68.91993 112 70 5,715.4 81.61994 134 86 9,947.6 115.71995 156 106 15,312.2 144.51996 190 143 33,581.8 234.81997 260 193 56,411.3 292.31998 324 231 92,096.3 398.71999 344 251 218,466.2 870.42000 373 245 99,934.1 407.92001 398 195 39,305.0 201.62002 360 183 23,778.3 129.92003 326 143 14,424.1 100.92004 391 208 24,828.8 119.42005 451 213 40,338.4 189.42006 515 230 47,083.4 204.72007 568 246 73,336.2 298.12008 505 170 27,654.5 162.72009 340 121 48,236.4 398.62010 614 194 42,545.1 219.32011 646 229 58,040.2 253.5

Average acquisition price is calculated by dividing total known acquisition proceeds by the number of transactions where the proceeds are known, not the total number of transactions.

Average acquisition price is calculated by dividing total known acquisition proceeds by the number of transactions where the proceeds are known, not the total number of transactions. Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactions from Figure 5.07 are included here.

56 Thomson Reuters


Figure 5.09Venture-Backed Acquisitions by MoneyTreeTM Industry

Total Transaction Values 1985 to 2011 ($ Million)

Figure 5.10Venture-Backed Acquisitions by MoneyTreeTM Industry

Number of Companies 1985 to 2011

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Software 0 0 5 40 0 22 83 274 141 521 500 1,022 2,104 2,930 6,110 15,755 3,700 1,914 2,016 4,000 4,727 4,535 5,460 3,846 1,771 3,354 6,271Biotechnology 0 0 0 0 0 0 68 61 25 20 97 388 426 172 780 1,206 419 117 561 701 2,588 1,741 5,688 1,564 910 4,142 4,153Medical Devices and Equipment 101 0 6 4 250 1 0 236 43 295 221 313 553 137 431 358 587 485 465 1,136 1,064 1,533 2,024 584 3,047 1,796 3,664IT Services 0 0 0 0 0 0 0 0 0 0 19 485 80 697 676 2,077 531 603 1,011 1,672 1,957 509 2,395 632 203 1,785 2,313Industrial/Energy 99 0 0 11 0 20 61 180 231 771 79 1,115 245 350 947 2,066 1,240 113 59 554 499 426 1,719 514 660 957 1,623Media and Entertainment 0 0 0 0 0 0 0 0 119 29 45 2,107 1,387 343 10,456 2,518 674 327 285 2,260 1,370 4,470 2,102 1,429 891 1,050 1,177Consumer Products and Services 0 87 0 227 0 0 10 1 0 29 23 362 245 404 420 507 171 61 285 439 388 343 0 284 0 0 1,143Semiconductors 71 0 0 0 15 0 0 0 38 67 327 0 8 468 1,269 5,353 1,439 563 415 705 215 1,015 1,029 687 524 1,006 953Healthcare Services 0 0 0 199 60 0 0 94 0 178 475 130 94 167 325 286 262 855 85 706 789 817 362 27 0 791 643Computers and Peripherals 0 0 0 0 47 79 0 16 161 81 69 889 394 674 388 1,374 357 59 64 738 270 311 60 49 400 354 557Electronics/Instrumentation 0 0 0 0 0 0 0 37 13 49 42 14 117 60 47 4,162 209 20 21 116 72 3 83 117 0 145 510Telecommunications 0 0 0 0 0 0 0 4 298 790 334 419 672 948 2,249 9,463 1,799 1,256 341 1,748 1,182 1,420 1,737 1,969 1,337 1,272 471Financial Services 0 0 0 0 0 0 0 1,407 161 109 734 67 34 463 431 701 489 211 99 10 530 938 1,040 988 0 812 466Networking and Equipment 0 0 0 0 0 0 0 0 347 354 794 1,033 213 1,206 10,518 18,899 5,525 739 789 326 1,382 603 713 609 643 658 129Business Products and Services 0 0 387 0 0 12 0 0 0 0 0 185 207 368 1,639 2,221 245 142 154 255 50 351 2,481 463 294 153 0Retailing/Distribution 0 0 0 0 0 0 0 35 80 90 29 2 161 74 955 1,086 8 3 757 12 0 323 885 10 930 14 0Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 195 0 0 95 0Total 271 87 398 481 372 132 222 2,345 1,656 3,383 3,788 8,531 6,938 9,459 37,641 68,030 17,655 7,468 7,405 15,377 17,081 19,337 27,973 13,769 11,610 18,383 24,072

IndustrySoftwareMedia and EntertainmentIT ServicesMedical Devices and EquipmentBiotechnologyTelecommunicationsIndustrial/EnergyNetworking and EquipmentSemiconductorsHealthcare ServicesFinancial ServicesBusiness Products and ServicesConsumer Products and ServicesComputers and PeripheralsElectronics/InstrumentationOtherRetailing/DistributionTotal

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20111 3 2 4 2 12 14 30 26 22 45 63 56 99 88 118 102 117 125 137 125 130 100 147 1611 0 0 0 1 1 4 2 4 9 14 10 19 32 47 20 13 29 27 25 41 30 27 57 580 2 1 0 0 1 0 0 4 6 6 11 16 19 27 34 26 26 22 20 28 21 15 41 432 2 2 2 0 12 4 8 9 7 14 9 10 7 15 11 8 23 25 22 23 14 20 21 360 1 1 1 2 6 3 4 9 11 10 12 13 14 17 11 14 22 24 28 24 19 19 34 351 0 2 1 1 2 4 5 4 8 11 16 20 29 33 37 30 24 26 29 29 23 21 35 242 2 3 3 4 8 6 12 8 6 13 19 18 11 13 10 7 9 12 10 18 18 12 13 171 0 0 0 0 2 8 10 8 13 5 9 20 21 14 15 18 24 21 25 15 23 18 17 170 0 1 1 3 1 2 3 5 1 1 9 8 16 12 13 12 14 11 16 17 23 18 21 151 1 2 1 1 5 0 9 9 4 5 14 6 10 8 12 4 6 14 9 5 4 4 13 130 0 0 0 0 6 3 3 4 5 5 7 11 8 16 11 9 11 7 13 10 8 5 8 91 1 0 1 1 1 3 1 0 3 3 7 10 14 21 17 14 13 13 19 28 13 9 13 90 1 0 0 1 2 3 2 1 8 8 7 11 10 14 4 6 7 8 4 2 10 1 6 82 1 2 4 1 10 10 5 4 10 10 12 9 7 5 1 9 9 9 8 4 5 3 5 61 2 2 0 1 4 3 2 1 4 7 4 2 4 9 3 3 5 3 5 2 5 1 5 40 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 0 1 1 0 1 1 0 1 20 0 0 1 0 2 3 2 1 2 4 3 8 14 11 6 8 5 3 7 4 4 1 5 113 16 18 19 18 75 70 98 97 119 161 212 237 317 351 323 283 345 351 377 376 351 274 442 458

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2012 NVCA Yearbook

Figure 5.11Private Equity-Backed Acquisitions by MoneyTreeTM Industry

Total Transaction Values 1985 to 2011 ($ Million)

Figure 5.12Private Equity-Backed Acquisitions by MoneyTreeTM Industry

Number of Companies 1985 to 2011

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Industrial/Energy 99 63 25 302 75 20 151 282 953 2,012 2,625 2,122 2,392 3,153 7,973 3,022 2,501 3,822 1,568 6,046 10,037 16,820 9,652 6,552 1,622 9,095 12,768Software 0 0 24 56 443 22 135 696 549 911 1,287 3,626 6,399 4,574 36,132 21,773 3,895 1,914 4,147 4,326 5,000 5,571 6,435 5,107 1,990 4,159 9,378Financial Services 0 0 317 0 0 0 0 1,424 732 1,733 2,759 6,561 18,410 44,588 16,685 1,505 3,066 1,538 253 104 1,005 938 1,370 1,842 485 1,912 8,566Biotechnology 0 0 0 0 809 0 68 228 1,057 332 794 1,017 583 1,846 4,755 2,102 529 2,541 616 701 3,039 1,741 5,726 1,681 4,827 6,125 4,608Medical Devices and Equipment 101 0 6 4 344 167 0 1,221 182 358 614 1,199 3,996 3,150 2,868 442 968 931 488 1,286 2,971 2,202 5,036 716 3,320 2,415 4,250Healthcare Services 0 0 0 199 60 0 0 94 103 1,054 599 1,559 4,748 790 610 286 595 1,020 85 706 1,717 3,402 1,791 718 570 2,046 3,969Media and Entertainment 0 0 0 0 32 0 0 0 143 123 405 3,650 3,809 12,929 24,027 6,733 742 1,087 285 2,260 5,250 4,977 3,535 1,650 1,163 1,612 3,330IT Services 0 0 0 7 0 0 0 0 0 0 19 485 357 1,066 2,178 10,146 720 669 1,809 1,839 2,307 1,051 2,633 632 203 3,206 2,863Business Products and Services 0 0 387 200 0 12 7 0 0 0 750 370 1,383 1,999 2,201 2,261 245 142 196 1,223 96 2,338 3,461 1,663 294 687 2,079Electronics/Instrumentation 0 0 0 81 0 115 0 37 13 49 43 181 427 197 81 4,227 7,582 39 21 332 72 3 3,689 472 0 278 1,761Consumer Products and Services 0 132 95 227 0 0 10 90 454 29 573 1,271 1,087 2,506 503 1,290 657 1,390 1,432 1,152 3,878 1,559 17,509 770 1,072 2,407 1,146Semiconductors 71 0 0 0 15 0 70 0 38 67 327 0 289 792 4,704 5,353 1,564 563 415 705 215 1,258 1,029 687 550 1,631 953Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 190 330 1,039 545 890 324 0 2,365 871Computers and Peripherals 0 19 0 242 67 79 0 16 161 286 264 951 394 730 1,541 2,569 357 59 64 738 270 311 60 769 400 354 557Telecommunications 0 0 0 0 0 0 0 81 298 1,376 2,299 3,155 2,974 3,884 65,791 16,742 7,952 7,145 341 2,054 1,182 2,622 4,842 2,319 29,567 1,527 471Networking and Equipment 0 0 0 0 15 0 0 0 675 1,529 1,482 6,063 1,355 4,278 44,540 18,899 5,525 740 877 326 2,260 819 947 782 1,218 658 364Retailing/Distribution 0 0 0 0 0 0 619 35 357 90 472 1,371 7,810 5,616 3,877 2,586 2,408 178 1,636 703 0 928 4,730 973 955 2,069 107Total 271 215 854 1,318 1,859 413 1,060 4,203 5,715 9,948 15,312 33,582 56,411 92,096 218,466 99,934 39,305 23,778 14,424 24,829 40,338 47,083 73,336 27,655 48,236 42,545 58,040

Industry 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Software 0 3 3 4 5 5 5 14 19 33 30 29 53 75 73 105 91 118 108 119 129 146 142 145 106 159 182Industrial/Energy 2 3 3 6 4 4 9 11 17 18 22 17 33 38 34 21 23 23 19 24 54 60 75 72 29 73 80Media and Entertainment 0 1 1 0 1 0 1 1 5 5 6 16 20 21 28 38 51 21 15 29 31 34 54 35 34 61 65Medical Devices and Equipment 2 1 3 2 5 3 0 15 6 12 13 15 22 18 18 11 18 13 11 24 31 26 28 18 26 34 46IT Services 0 1 0 3 1 1 0 1 0 0 5 6 8 14 21 23 28 36 29 27 23 24 36 21 20 50 44Biotechnology 0 1 0 1 4 1 2 7 6 7 15 14 13 19 22 16 18 13 15 23 27 29 25 21 24 39 39Telecommunications 0 1 1 0 2 1 1 4 4 10 8 11 14 19 25 34 34 41 32 26 26 32 35 30 23 38 27Healthcare Services 0 1 1 1 2 1 1 5 1 11 10 8 8 15 9 10 10 13 4 8 17 20 19 12 6 23 26Business Products and Services 0 0 1 3 0 2 2 1 3 1 2 4 7 10 13 15 23 17 15 16 20 32 43 25 9 24 26Financial Services 0 0 1 0 0 0 0 8 11 8 13 18 28 22 21 12 23 13 11 14 12 15 13 14 9 13 22Consumer Products and Services 0 2 2 3 2 0 2 6 8 3 4 12 18 22 13 15 20 10 9 17 18 21 30 27 9 22 22Networking and Equipment 0 0 2 0 2 0 0 2 10 11 11 15 7 12 27 21 14 16 19 24 25 28 18 24 20 20 20Semiconductors 1 0 0 0 1 1 4 1 2 3 5 1 2 12 10 17 13 13 12 14 12 17 19 26 19 24 18Electronics/Instrumentation 0 0 1 3 2 1 1 4 3 2 2 7 9 6 3 6 13 4 3 7 4 7 9 12 1 8 9Retailing/Distribution 1 0 0 1 1 1 5 2 6 2 3 5 8 8 13 18 13 8 13 7 8 14 14 9 2 14 8Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 1 3 4 2 4 7 0 6 6Computers and Peripherals 2 2 2 3 4 4 1 10 11 8 7 12 10 13 14 9 5 1 10 9 10 8 4 7 3 6 6Total 8 16 21 30 36 25 34 92 112 134 156 190 260 324 344 373 398 360 326 391 451 515 568 505 340 614 646

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactions from Figure 5.09 are included here.

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, transactions from Figure 5.10 are included here.

58 Thomson Reuters


Figure 5.13M&A Transaction Values vs.

Amount Invested


Cos. in Registration vs, Number of Venture-Backed IPOs

Year < TVI 1x-4x TVI 4x-10x TVI >10x TVI2003 37% 38% 17% 8%2004 35% 32% 22% 11%2005 27% 39% 20% 14%2006 26% 36% 20% 18%2007 23% 34% 23% 20%2008 27% 29% 27% 17%2009 39% 24% 27% 10%2010 24% 33% 27% 16%2011 20% 28% 31% 21%

Values vs. Cumulative Total Venture Investment Relationship Between Transaction

This chart is prepared by analyzing all deals where total venture investment and acquisition price are confirmed. Each deal is classified as a ratio of company acquisition (exit) price to total venture investment from all rounds. This chart compares the number of deals in each category. An acquisition where deal price is less than the total venture investment (“<TVI”) clearly did not result in a good return. Four times the investment to 10 times the investment can be a good outcome. An acquisition for more than 10 times venture investment is usually a nice outcome.

Year2003 29 312004 94 572005 57 162006 57 362007 86 312008 6 202009 12 232010 75 312011 53 60

# of Moneytree Cos. in Registration# of Venture Backed IPOs

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2012 NVCA Yearbook

Figure 5.152011 Venture-Backed IPOs Maximum Valuations

Prior to IPO ($ Million)

Figure 5.16Venture-Backed US Company IPOs By Year

By Country


Biotechnology 75.5 147.0 94.5 69.0 50.0 17.0Business Products and Services NA NA NA NA NA NAComputers and Peripherals NA NA NA NA NA NAConsumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy NA NA NA NA NA NAIT Services 219.8 510.0 302.3 155.7 73.2 58.0Media and Entertainment 398.0 1,000.0 590.0 180.0 97.0 14.0Medical Devices and Equipment NA NA NA NA NA NANetworking and Equipment NA NA NA NA NA NAOther NA NA NA NA NA NARetailing/Distribution NA NA NA NA NA NASemiconductors NA NA NA NA NA NASoftware 63.9 165.0 78.8 41.1 26.2 8.6Telecommunications NA NA NA NA NA NATotal 146.6 1,000.0 151.5 69.6 44.7 8.6


*Categories containing less than 3 companies will not be displayed but their valuation amounts will be included in bottom line totals.

2008 6 2,646.5 - N/A - N/A - N/A - N/A - N/A - N/A - N/A - N/A2009 11 6,061.6 1 1,417.1 - N/A - N/A - N/A - N/A - N/A - N/A - N/A2010 47 21,954.0 25 2,981.1 - N/A - N/A - N/A - N/A 1 477.9 1 337.4 1 103.3 2011 40 53,235.6 9 16,635.4 1 8,161.6 1 843.6 1 345.2 1 94.8 - N/A - N/A - N/ATotal 104 83,897.6 35 21,033.7 1 8,161.6 1 843.6 1 345.2 1 94.8 1 477.9 1 337.4 1 103.3

Offer Amt (USD Mil)

# US IPOsYear # China IPOsOffer Amt (USD Mil)

# Canada IPOs

# Netherlands IPOsOffer Amt (USD Mil)

# Russia IPOsOffer Amt (USD Mil)

Offer Amt (USD Mil)

Offer Amt (USD Mil)

# France IPOs

Offer Amt (USD Mil)

# Hong-Kong IPOs

Offer Amt (USD Mil)

# India IPOsOffer Amt (USD Mil)

# Thailand IPOs

To be included in this chart, non-US based companies must be trading on a U.S. exchange/market and have at least 1 U.S. venture fund investor.

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Appendix A: Glossary

“A” round – a financing event whereby angel groupsand / or venture capitalists become involved in a fastgrowth company that was previously financed byfounders and their friends and families.

Accredited investor – a person or legal entity, suchas a company or trust fund, that meets certain networth and income qualifications and is considered tobe sufficiently sophisticated to make investmentdecisions in private offerings. Regulation D of theSecurities Act of 1933 exempts accredited investorsfrom protection of the Securities Act. The Securitiesand Exchange Commission has proposed revisions tothe accredited investor qualifying rules, which mayor may not result in changes for venture investors.The current criteria for a natural person are: $1 mil-lion net worth or annual income exceeding $200,000individually or $300,000 with a spouse. Directors,general partners and executive officers of the issuerare considered to be accredited investors.

Alternative asset class – a class of investments thatincludes venture capital, leverage buyouts, hedgefunds, real estate, and oil and gas, but excludes pub-licly traded securities. Pension plans, college endow-ments and other relatively large institutionalinvestors typically allocate a certain percentage oftheir investments to alternative assets with an objec-tive to diversify their portfolios.

Alpha – a term derived from statistics and financetheory that is used to describe the return produced bya fund manager in excess of the return of a bench-mark index. Manager returns and benchmark returnsare measured net of the risk-free rate. In addition,manager returns are adjusted for the risk of the man-ager’s portfolio relative to the risk of the benchmarkindex. Alpha is a proxy for manager skill.

Angel – a wealthy individual that invests in compa-nies in relatively early stages of development.Usually angels invest less than $1 million per startup.

Anti-dilution – a contract clause that protects aninvestor from a substantial reduction in percentage

ownership in a company due to the issuance by thecompany of additional shares to other entities. Themechanism for making an adjustment that maintainsthe same percentage ownership is called a FullRatchet. The most commonly used adjustment pro-vides partial protection and is called WeightedAverage.

“B” round – a financing event whereby investorssuch as venture capitalists and organized angelgroups are sufficiently interested in a company toprovide additional funds after the “A” round offinancing. Subsequent rounds are called “C”, “D”and so on.

Basis point (“bp”) – one one-hundredth (1/100) of apercentage unit. For example, 50 basis points equalsone half of one percent. Banks quote variable loanrates in terms of an index plus a margin and the mar-gin is often described in basis points, such as LIBORplus 400 basis points (or, as the experts say, “beeps”).

Beta – a measure of volatility of a public stock rela-tive to an index or a composite of all stocks in a mar-ket or geographical region. A beta of more than oneindicates the stock has higher volatility than theindex (or composite) and a beta of one indicatesvolatility equivalent to the index (or composite). Forexample, the price of a stock with a beta of 1.5 willchange by 1.5% if the index value changes by 1%.Typically, the S&P500 index is used in calculatingthe beta of a stock.

Beta product – a product that is being tested bypotential customers prior to being formally launchedinto the marketplace.

Board of directors – a group of individuals, typical-ly composed of managers, investors and experts whohave a fiduciary responsibility for the well being andproper guidance of a corporation. The board is elect-ed by the shareholders.

Book – see Private placement memorandum.

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Bootstrapping – the actions of a startup to minimizeexpenses and build cash flow, thereby reducing oreliminating the need for outside investors.

Bp – see Basis point.

Bridge financing – temporary funding that willeventually be replaced by permanent capital fromequity investors or debt lenders. In venture capital, abridge is usually a short term note (6 to 12 months)that converts to preferred stock. Typically, the bridgelender has the right to convert the note to preferredstock at a price that is a 20% to 25% discount fromthe price of the preferred stock in the next financinground. See Mezzanine and Wipeout bridge.

Broad-based weighted average anti-dilution – Aweighted average anti-dilution method adjusts down-ward the price per share of the preferred stock ofinvestor A due to the issuance of new preferredshares to new investor B at a price lower than theprice investor A originally received. Investor A’s pre-ferred stock is repriced to a weighted average ofinvestor A’s price and investor B’s price. A broad-based anti-dilution method uses all common stockoutstanding on a fully diluted basis (including allconvertible securities, warrants and options) in thedenominator of the formula for determining the newweighted average price. See Narrow-based weightedaverage anti-dilution.

Burn rate – the rate at which a startup with little orno revenue uses available cash to cover expenses.Usually expressed on a monthly or weekly basis.

Business Development Company (BDC) – a pub-licly traded company that invests in private compa-nies and is required by law to provide meaningfulsupport and assistance to its portfolio companies.

Business plan – a document that describes a newconcept for a business opportunity. A business plantypically includes the following sections: executivesummary, market need, solution, technology, compe-tition, marketing, management, operations, exit strat-egy, and financials (including cash flow projections).For most venture capital funds fewer than 10 of every100 business plans received eventually receive fund-ing.

Buyout – a sector of the private equity industry. Also,the purchase of a controlling interest of a companyby an outside investor (in a leveraged buyout) or amanagement team (in a management buyout).

Buy-sell agreement – a contract that sets forth theconditions under which a shareholder must first offerhis or her shares for sale to the other shareholdersbefore being allowed to sell to entities outside thecompany.

C Corporation – an ownership structure that allowsany number of individuals or companies to ownshares. A C corporation is a stand-alone legal entityso it offers some protection to its owners, managersand investors from liability resulting from its actions.

Capital Asset Pricing Model (CAPM) – a methodof estimating the cost of equity capital of a company.The cost of equity capital is equal to the return of arisk-free investment plus a premium that reflects therisk of the company’s equity.

Capital call – when a private equity fund manager(usually a “general partner” in a partnership) requeststhat an investor in the fund (a “limited partner”) pro-vide additional capital. Usually a limited partner willagree to a maximum investment amount and the gen-eral partner will make a series of capital calls overtime to the limited partner as opportunities arise tofinance startups and buyouts.

Capital gap – the difficulty faced by some entrepre-neurs in trying to raise between $2 million and $5million. Friends, family and angel investors are typi-cally good sources for financing rounds of less than$2 million, while many venture capital funds havebecome so large that investments in this size rangeare difficult.

Capitalization table – a table showing the owners ofa company’s shares and their ownership percentagesas well as the debt holders. It also lists the forms ofownership, such as common stock, preferred stock,warrants, options, senior debt, and subordinated debt.

Capital gains – a tax classification of investmentearnings resulting from the purchase and sale ofassets. Typically, a company’s investors and foundershave earnings classified as long term capital gains


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(held for a year or longer), which are taxed at a lowerrate than ordinary income.

Capital stock – a description of stock that applieswhen there is only one class of shares. This class isknown as “common stock”.

Capital Under Management – A frequently-usedmetric for sizing total funds managed by a venturecapital or buyout firm. In practice, there are severalways of calculating this. In the US, this is the totalcommitted capital for all funds managed by a firm onwhich it collects management fees. This calculationignores whether portions of the committed capitalhave not yet been called and whether portions of thefund have been liquidated and distributed. It typical-ly does not include aging funds in their “out years”on which fees are not being collected. For purposesof this book in calculating capital managed in figure1.04, because direct data is not available, the lasteight vintage years of capital commitments is consid-ered a proxy for the industry’s total capital undermanagement.

Capped participating preferred stock – preferredstock whose participating feature is limited so that aninvestor cannot receive more than a specifiedamount. See Participating preferred stock.

Carried interest – the share in the capital gains of aventure capital fund which is allocated to the GeneralPartner. Typically, a fund must return the capitalgiven to it by limited partners plus any preferentialrate of return before the general partner can share inthe profits of the fund. The general partner will typi-cally receive a 20% carried interest, although somesuccessful firms receive 25%-30%. Also known as“carry” or “promote.”

Clawback – a clause in the agreement between thegeneral partner and the limited partners of a privateequity fund. The clawback gives limited partners theright to reclaim a portion of disbursements to a gen-eral partner for profitable investments based on sig-nificant losses from later investments in a portfolio.

Closing – the conclusion of a financing round where-by all necessary legal documents are signed and cap-ital has been transferred.

Club deal – the act of investing by two or more enti-ties in the same target company, usually involving aleveraged buyout transaction.

Co-investment – the direct investment by a limitedpartner alongside a general partner in a portfoliocompany.

Collateral – hard assets of the borrower, such as realestate or equipment, for which a lender has a legalinterest until a loan obligation is fully paid off.

Commitment – an obligation, typically the maxi-mum amount that a limited partner agrees to invest ina fund. See Capital call.

Common stock – a type of security representingownership rights in a company. Usually, companyfounders, management and employees own commonstock while investors own preferred stock. In theevent of a liquidation of the company, the claims ofsecured and unsecured creditors, bondholders andpreferred stockholders take precedence over commonstockholders. See Preferred stock.

Comparable – a private or public company withsimilar characteristics to a private or public companythat is being valued. For example, a telecommunica-tions equipment manufacturer whose market value is2 times revenues can be used to estimate the value ofa similar and relatively new company with a newproduct in the same industry. See Liquidity discount.

Control – the authority of an individual or entity thatowns more than 50% of equity in a company or ownsthe largest block of shares compared to other share-holders.

Consolidation – see Rollup.

Conversion – the right of an investor or lender toforce a company to replace the investor’s preferredshares or the lender’s debt with common shares at apreset conversion ratio. A conversion feature wasfirst used in railroad bonds in the 1800’s.

Convertible debt – a loan which allows the lender toexchange the debt for common shares in a companyat a preset conversion ratio. Also known as a “con-vertible note.”

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Convertible preferred stock – a type of stock thatgives an owner the right to convert to common sharesof stock. Usually, preferred stock has certain rightsthat common stock doesn’t have, such as decision-making management control, a promised return oninvestment (dividend), or senior priority in receivingproceeds from a sale or liquidation of the company.Typically, convertible preferred stock automaticallyconverts to common stock if the company makes aninitial public offering (IPO). Convertible preferred isthe most common tool for private equity funds toinvest in companies.

Co-sale right – a contractual right of an investor tosell some of the investor’s stock along with thefounder’s or majority shareholder’s stock if either thefounder or majority shareholder elects to sell stock toa third-party. Also known as Tag-along right.

Cost of capital – see Weighted average cost of capi-tal.

Cost of revenue – the expenses generated by the coreoperations of a company.

Covenant – a legal promise to do or not do a certainthing. For example, in a financing arrangement, com-pany management may agree to a negative covenant,whereby it promises not to incur additional debt. Thepenalties for violation of a covenant may vary fromrepairing the mistake to losing control of the compa-ny.

Coverage ratio – describes a company’s ability topay debt from cash flow or profits. Typical measuresare EBITDA/Interest, (EBITDA minus CapitalExpenditures)/Interest, and EBIT/Interest.

Cram down round – a financing event upon whichnew investors with substantial capital are able todemand and receive contractual terms that effective-ly cause the issuance of sufficient new shares by thestartup company to significantly reduce (“dilute”)the ownership percentage of previous investors.

Cumulative dividends – the owner of preferredstock with cumulative dividends has the right toreceive accrued (previously unpaid) dividends in fullbefore dividends are paid to any other classes ofstock.

Current ratio – the ratio of current assets to currentliabilities.

Data room – a specific location where potential buy-ers / investors can review confidential informationabout a target company. This information mayinclude detailed financial statements, client con-tracts, intellectual property, property leases, andcompensation agreements.

Deal flow – a measure of the number of potentialinvestments that a fund reviews in any given period.

Defined benefit plan – a company retirement plan inwhich the benefits are typically based on an employ-ee’s salary and number of years worked. Fixed bene-fits are paid after the employee retires. The employerbears the investment risk and is committed to provid-ing the benefits to the employee. Defined benefitplan managers can invest in private equity funds.

Defined contribution plan – a company retirementplan in which the employee elects to contribute someportion of his or her salary into a retirement plan,such as a 401(k) or 403(b). The employer may alsocontribute to the employee’s plan. With this type ofplan, the employee bears the investment risk. Thebenefits depend solely on the amount of money madefrom investing the employee’s contributions. Definedcontribution plan capital cannot be invested in privateequity funds.

Demand rights – a type of registration right.Demand rights give an investor the right to force astartup to register its shares with the SEC and preparefor a public sale of stock (IPO).

Dilution – the reduction in the ownership percentageof current investors, founders and employees causedby the issuance of new shares to new investors.

Dilution protection – see Anti-dilution and Fullratchet.

Direct secondary transaction – A transaction inwhich the buyer purchases shares of an operatingcompany from an existing seller. While the transac-tion is a secondary sale of shares, the transactedinterest is a primary issue purchase directly into anoperating company. Sellers are often venture capital-


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ists selling their ownership stake in a portfolio com-pany. Buyers are often funds that specialize in suchinvestments.

Disbursement – an investment by a fund in a compa-ny.

Discount rate – the interest rate used to determinethe present value of a series of future cash flows.

Discounted cash flow (DCF) – a valuation method-ology whereby the present value of all future cashflows expected from a company is calculated.

Distressed debt – the bonds of a company that iseither in or approaching bankruptcy. Some privateequity funds specialize in purchasing such debt atdeep discounts with the expectation of exerting influ-ence in the restructuring of the company and thenselling the debt once the company has meaningfullyrecovered.

Distribution – the transfer of cash or securities to alimited partner resulting from the sale, liquidation orIPO of one or more portfolio companies in which ageneral partner chose to invest.

Dividends – payments made by a company to theowners of certain securities. Typically, dividends arepaid quarterly, by approval of the board of directors,to owners of preferred stock.

Down round – a round of financing whereby the val-uation of the company is lower than the value deter-mined by investors in an earlier round.

Drag-along rights – the contractual right of aninvestor in a company to force all other investors toagree to a specific action, such as the sale of the com-pany.

Drawdown schedule – an estimate of the gradualtransfer of committed investment funds from the lim-ited partners of a private equity fund to the generalpartners.

Due diligence – the investigatory process performedby investors to assess the viability of a potentialinvestment and the accuracy of the information pro-vided by the target company.

Dutch auction – a method of conducting an IPOwhere-by newly issued shares of stock are committedto the highest bidder, then, if any shares remain, tothe next highest bidder, and so on until all the sharesare committed. Note that the price per share paid byall buyers is the price commitment of the buyer of thelast share.

Early stage – the state of a company after the seed(formation) stage but before middle stage (generatingrevenues). Typically, a company in early stage willhave a core management team and a proven conceptor product, but no positive cash flow.

Earnings before interest and taxes (EBIT) – ameasurement of the operating profit of a company.One possible valuation methodology is based on acomparison of private and public companies’ value asa multiple of EBIT.

Earnings before interest, taxes, depreciation andamortization (EBITDA) – a measurement of thecash flow of a company. One possible valuationmethodology is based on a comparison of private andpublic companies’ value as a multiple of EBITDA.

Earn out – an arrangement in which sellers of a busi-ness receive additional future payments, usuallybased on financial performance metrics such as rev-enue or net income.

Elevator pitch – a concise presentation, lasting onlya few minutes (an elevator ride), by an entrepreneurto a potential investor about an investment opportuni-ty.

Employee Stock Ownership Program (ESOP) – aplan established by a company to reserve shares foremployees.

Entrepreneur – an individual who starts his or herown business.

Entrepreneurship – the application of innovativeleadership to limited resources in order to createexceptional value.

Enterprise Value (EV) – the sum of the market val-ues of the common stock and long term debt of acompany, minus excess cash.

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Equity – the ownership structure of a company rep-resented by common shares, preferred shares or unitinterests. Equity = Assets – Liabilities.

ESOP – see Employee Stock Ownership Program.Evergreen fund – a fund that reinvests its profits inorder to ensure the availability of capital for futureinvestments.

Exit strategy – the plan for generating profits forowners and investors of a company. Typically, theoptions are to merge, be acquired or make an initialpublic offering (IPO). An alternative is to recapitalize(releverage the company and then pay dividends toshareholders).

Expansion stage – the stage of a company character-ized by a complete management team and a substan-tial increase in revenues.

Fair value – a financial reporting principle for valu-ing assets and liabilities, for example, portfolio com-panies in venture capital fund portfolios. This hasreceived much recent attention as the FinancialAccounting Standards Board (FASB) has issueddefinitive guidance (FAS 157) on this long standingprinciple.

Fairness opinion – a letter issued by an investmentbank that charges a fee to assess the fairness of anegotiated price for a merger or acquisition.

FAS 157 – an an accounting standard developed bythe Financial Accounting Standards Board (FASB)regarding the application of a fair value principle.

First refusal – the right of a privately owned compa-ny to purchase any shares that employees would liketo sell.

Founders stock – nominally priced common stockissued to founders, officers, employees, directors,and consultants.

Free cash flow to equity (FCFE) – the cash flowavailable after operating expenses, interest paymentson debt, taxes, net principal repayments, preferredstock dividends, reinvestment needs and changes inworking capital. In a discounted cash flow model todetermine the value of the equity of a firm using

FCFE, the discount rate used is the cost of equity.

Free cash flow to the firm (FCFF) – the operatingcash flow available after operating expenses, taxes,reinvestment needs and changes in working capital,but before any interest payments on debt are made. Ina discounted cash flow model to determine the enter-prise value of a firm using FCFF, the discount rateused is the weighted average cost of capital (WACC).

Friends and family financing – capital provided bythe friends and family of founders of an early stagecompany. Founders should be careful not to create anownership structure that may hinder the participationof professional investors once the company begins toachieve success.

Full ratchet – an anti-dilution protection mechanismwhereby the price per share of the preferred stock ofinvestor A is adjusted downward due to the issuanceof new preferred shares to new investor B at a pricelower than the price investor A originally received.Investor A’s preferred stock is repriced to match theprice of investor B’s preferred stock. Usually as aresult of the implementation of a ratchet, companymanagement and employees who own a fixedamount of common shares suffer significant dilution.See Narrow-based weighted average anti-dilutionand Broad-based weighted average anti-dilution.

Fully diluted basis – a methodology for calculatingany per share ratios whereby the denominator is thetotal number of shares issued by the company on theassumption that all warrants and options are exer-cised and preferred stock.

Fund-of-funds – a fund created to invest in privateequity funds. Typically, individual investors and rela-tively small institutional investors participate in afund-offunds to minimize their portfolio manage-ment efforts.

Gatekeepers – intermediaries which endowments,pension funds and other institutional investors use asadvisors regarding private equity investments.

General partner (GP) – a class of partner in a part-nership. The general partner retains liability for theactions of the partnership. Historically, venture capi-tal and buyout funds have been structured as limited


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partnerships, with the venture firm as the GP andlimited partners (LPs) being the institutional andhigh net worth investors that provide most of the cap-ital in the partnership. The GP earns a managementfee and a percentage of gains (see Carried interest).

GP – see General partner.

GP for hire – In a spin-out or a synthetic secondary,a GP for hire refers to the professional investor whomay be hired by a purchasing firm to manage the newfund created from the orphaned assets purchased. Inpast cases, the GP has often expanded its role tofundraise for and run new funds aside from the initialfund.

Going-private transaction – when a public compa-ny chooses to pay off all public investors, delist fromall stock exchanges, and become owned by manage-ment, employees, and select private investors.

Golden handcuffs – financial incentives that dis-courage founders and / or important employees fromleaving a company before a predetermined date orimportant milestone.

Grossing up – an adjustment of an option pool formanagement and employees of a company whichincreases the number of shares available over time.This usually occurs after a financing round wherebyone or more investors receive a relatively large per-centage of the company. Without a grossing up, man-agers and employees would suffer the financial andemotional consequences of dilution, thereby poten-tially affecting the overall performance of the compa-ny.

Growth stage – the state of a company when it hasreceived one or more rounds of financing and is gen-erating revenue from its product or service. Alsoknown as “middle stage.”

Hart-Scott-Rodino Act – a law requiring entitiesthat acquire certain amounts of stock or assets of acompany to inform the Federal Trade Commissionand the Department of Justice and to observe a wait-ing period before completing the transaction.

Hedge fund – an investment fund that has the abilityto use leverage, take short positions in securities, or

use a variety of derivative instruments in order toachieve a return that is relatively less correlated to theperformance of typical indices (such as the S&P 500)than traditional long-only funds. Hedge fund man-agers are typically compensated based on assetsunder management as well as fund performance.

High yield debt – debt issued via public offering orpublic placement (Rule 144A) that is rated belowinvestment grade by S&P or Moody’s. This meansthat the debt is rated below the top four rating cate-gories (i.e. S&P BB+, Moody’s Ba2 or below). Thelower rating is indicative of higher risk of default,and therefore the debt carries a higher coupon oryield than investment grade debt. Also referred to asJunk bonds or Sub-investment grade debt.

Hockey stick – the general shape and form of a chartshowing revenue, customers, cash or some otherfinancial or operational measure that increases dra-matically at some point in the future. Entrepreneursoften develop business plans with hockey stick chartsto impress potential investors.

Holding period – amount of time an investmentremains in a portfolio.

Hot issue – stock in an initial public offering that isin high demand.

Hot money – capital from investors that have no tol-erance for lack of results by the investment managerand move quickly to withdraw at the first sign oftrouble.

Hurdle rate – a minimum rate of return requiredbefore an investor will make an investment.

Incorporation – the process by which a businessreceives a state charter, allowing it to become a cor-poration. Many corporations choose Delawarebecause its laws are business-friendly and up to date.

Incubator – a company or facility designed to hoststartup companies. Incubators help startups growwhile controlling costs by offering networks of con-tacts and shared backoffice resources.

Indenture – the terms and conditions between abond issuer and bond buyers.

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Initial public offering (IPO) – the first offering ofstock by a company to the public. New public offer-ings must be registered with the Securities andExchange Commission. An IPO is one of the meth-ods that a startup that has achieved significant suc-cess can use to raise additional capital for furthergrowth. See Qualified IPO.

In-kind distribution – a distribution to limited part-ners of a private equity fund that is in the form ofpublicly trades shares rather than cash.

Inside round – a round of financing in which theinvestors are the same investors as the previousround. An inside round raises liability issues sincethe valuation of the company has no third party veri-fication in the form of an outside investor. In addi-tion, the terms of the inside round may be consideredself-dealing if they are onerous to any set of share-holders or if the investors give themselves additionalpreferential rights.

Institutional investor – professional entities thatinvest capital on behalf of companies or individuals.Examples are: pension plans, insurance companiesand university endowments.

Intellectual property (IP) – knowledge, techniques,writings and images that are intangible but often pro-tected by law via patents, copyrights, and trademarks.

Interest coverage ratio – earnings before interestand taxes (EBIT) divided by interest expense. This isa key ratio used by lenders to assess the ability of acompany to produce sufficient cash to pay its debtobligation.

Internal rate of return (IRR) – the interest rate atwhich a certain amount of capital today would haveto be invested in order to grow to a specific value ata specific time in the future.

Investment thesis / Investment philosophy – thefundamental ideas which determine the types ofinvestments that an investment fund will choose inorder to achieve its financial goals.

IPEV – Stands for International Private EquityValuation guidelines group. This group is made up ofrepresentatives of the international and US venture

capital industry and has published guidelines forapplying US GAAP and international IFRS valuationrules. See www.privateequityvaluation.com

IPO – see Initial public offering.IRR – see Internal rate of return.

Issuer – the company that chooses to distribute aportion of its stock to the public.

J curve – a concept that during the first few years ofa private equity fund, cash flow or returns are nega-tive due to investments, losses, and expenses, but asinvestments produce results the cash flow or returnstrend upward. A graph of cash flow or returns versustime would then resemble the letter “J”.

Later stage – the state of a company that has provenits concept, achieved significant revenues comparedto its competition, and is approaching cash flowbreak even or positive net income. Typically, a laterstage company is about 6 to 12 months away from aliquidity event such as an IPO or buyout. The rate ofreturn for venture capitalists that invest in later stage,less risky ventures is lower than in earlier stage ven-tures.

LBO – see Leveraged buyout.

Lead investor – the venture capital investor thatmakes the largest investment in a financing roundand manages the documentation and closing of thatround. The lead investor sets the price per share ofthe financing round, thereby determining the valua-tion of the company.

Letter of intent – a document confirming the intentof an investor to participate in a round of financingfor a company. By signing this document, the subjectcompany agrees to begin the legal and due diligenceprocess prior to the closing of the transaction. Alsoknown as a “Term Sheet”.

Leverage – the use of debt to acquire assets, buildoperations and increase revenues. By using debt, acompany is attempting to achieve results faster thanif it only used its cash available from pre-leverageoperations. The risk is that the increase in assets andrevenues does not generate sufficient net income andcash flow to pay the interest costs of the debt.


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Leveraged buyout (LBO) – the purchase of a com-pany or a business unit of a company by an outsideinvestor using mostly borrowed capital.

Leveraged recapitalization – the reorganization of acompany’s capital structure resulting in more debtadded to the balance sheet. Private equity funds canrecapitalize a portfolio company and then direct thecompany to issue a one-time dividend to equityinvestors. This is often done when the company isperforming well financially and the debt markets areexpanding.

Leverage ratios – measurements of a company’sdebt as a multiple of cash flow. Typical leverageratios include Total Debt / EBITDA, Total Debt /(EBITDA minus Capital Expenditures), and SenioreDebt / EBITDA.

L.I.B.O.R. – see The London Interbank OfferedRate.

License – a contract in which a patent owner grantsto a company the right to make, use or sell an inven-tion under certain circumstances and for compensa-tion.

Limited liability company (LLC) – an ownershipstructure designed to limit the founders’ losses to theamount of their investment. An LLC itself does notpay taxes, rather its owners pay taxes on their propor-tion of the LLC profits at their individual tax rates.

Limited partnership – a legal entity composed of ageneral partner and various limited partners. Thegeneral partner manages the investments and is liablefor the actions of the partnership while the limitedpartners are generally protected from legal actionsand any losses beyond their original investment. Thegeneral partner collects a management fee and earnsa percentage of capital gains (see Carried interest),while the limited partners receive income, capitalgains and tax benefits.

Limited partner (LP) – an investor in a limited part-nership. The general partner is liable for the actionsof the partnership while the limited partners are gen-erally protected from legal actions and any lossesbeyond their original investment. The limited partnerreceives income, capital gains and tax benefits.

Liquidation – the sale of a company. This may occurin the context of an acquisition by a larger companyor in the context of selling off all assets prior to ces-sation of operations (Chapter 7 bankruptcy). In a liq-uidation, the claims of secured and unsecured credi-tors, bondholders and preferred stockholders takeprecedence over common stockholders.

Liquidation preference – the contractual right of aninvestor to priority in receiving the proceeds from theliquidation of a company. For example, a venturecapital investor with a “2x liquidation preference”has the right to receive two times its original invest-ment upon liquidation.

Liquidity discount – a decrease in the value of aprivate company compared to the value of a similarbut publicly traded company. Since an investor in aprivate company cannot readily sell his or her invest-ment, the shares in the private company must be val-ued less than a comparable public company.

Liquidity event – a transaction whereby owners of asignificant portion of the shares of a private compa-ny sell their shares in exchange for cash or shares inanother, usually larger company. For example, anIPO is a liquidity event.

Lock-up agreement – investors, management andemployees often agree not to sell their shares for aspecific time period after an IPO, usually 6 to 12months. By avoiding large sales of its stock, the com-pany has time to build interest among potential buy-ers of its shares.

London Interbank Offered Rate (L.I.B.O.R.) – theaverage rate charged by large banks in London forloans to each other. LIBOR is a relatively volatile rateand is typically quoted in maturities of one month,three months, six months and one year.

Management buyout (MBO) – a leveraged buyoutcontrolled by the members of the management teamof a company or a division. Often an MBO is con-ducted in partnership with a buyout fund.

Management fee – a fee charged to the limited part-ners in a fund by the general partner. Managementfees in a private equity fund usually range from0.75% to 3% of capital under management, depend-

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ing on the type and size of fund. For venture capitalfunds, 2% is typical.

Management rights – the rights often required by aventure capitalist as part of the agreement to invest ina company. The venture capitalist has the right toconsult with management on key operational issues,attend board meetings and review information aboutthe company’s financial situation.

Market capitalization – the value of a publicly trad-ed company as determined by multiplying the num-ber of shares outstanding by the current price pershare.

MBO – see Management buyout.

Mezzanine – a layer of financing that has intermedi-ate priority (seniority) in the capital structure of acompany. For example, mezzanine debt has lowerpriority than senior debt but usually has a higherinterest rate and often includes warrants. In venturecapital, a mezzanine round is generally the round offinancing that is designed to help a company haveenough resources to reach an IPO. See Bridge financ-ing.

MoneyTree™ Report – Officially known as TheMoneyTree Report from PricewaterhouseCoopersand the National Venture Capital Association basedon data provided by Thomson Reuters. This reportprovides much of the data in this report. It is used forinvestment statistics in United States based compa-nies. Specific definition information is available inseveral of the appendices of this Yearbook.

Multiples – a valuation methodology that comparespublic and private companies in terms of a ratio ofvalue to an operations figure such as revenue or netincome. For example, if several publicly traded com-puter hardware companies are valued at approxi-mately 2 times revenues, then it is reasonable toassume that a startup computer hardware companythat is growing fast has the potential to achieve a val-uation of 2 times its revenues. Before the startupissues its IPO, it will likely be valued at less than 2times revenue because of the lack of liquidity of itsshares. See Liquidity discount.

Narrow-based weighted average anti-dilution – a

type of anti-dilution mechanism. A weighted averageanti-dilution method adjusts downward the price pershare of the preferred stock of investor A due to theissuance of new preferred shares to new investor B ata price lower than the price investor A originallyreceived. Investor A’s preferred stock is repriced to aweighed average of investor A’s price and investor B’sprice. A narrow-based anti-dilution uses only com-mon stock outstanding in the denominator of the for-mula for determining the new weighted averageprice.

NDA – see Non-disclosure agreement.

No-shop clause – a section of an agreement to pur-chase a company whereby the seller agrees not tomarket the company to other potential buyers for aspecific time period.

Non-cumulative dividends – dividends that arepayable to owners of preferred stock at a specificpoint in time only if there is sufficient cash flowavailable after all company expenses have been paid.If cash flow is insufficient, the owners of the pre-ferred stock will not receive the dividends owed forthat time period and will have to wait until the boardof directors declares another set of dividends.

Non-interference – an agreement often signed byemployees and management whereby they agree notto interfere with the company’s relationships withemployees, clients, suppliers and sub-contractorswithin a certain time period after termination ofemployment.

Non-solicitation – an agreement often signed byemployees and management whereby they agree notto solicit other employees of the company regardingjob opportunities.

Non-disclosure agreement (NDA) – an agreementissued by entrepreneurs to protect the privacy of theirideas when disclosing those ideas to third parties.

Offering memorandum – a legal document that pro-vides details of an investment to potential investors.See Private placement memorandum.

OID – see Original issue discount.


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Operating cash flow – the cash flow produced fromthe operation of a business, not from investing activ-ities (such as selling assets) or financing activities(such as issuing debt). Calculated as net operatingincome (NOI) plus depreciation.

Option pool – a group of options set aside for longterm, phased compensation to management andemployees.

Outstanding shares – the total amount of commonshares of a company, not including treasury stock,convertible preferred stock, warrants and options.

Pay to play – a clause in a financing agreementwhereby any investor that does not participate in afuture round agrees to suffer significant dilutioncompared to other investors. The most onerous ver-sion of “pay to play” is automatic conversion to com-mon shares, which in essence ends any preferentialrights of an investor, such as the right to influencekey management decisions.

Pari passu – a legal term referring to the equal treat-ment of two or more parties in an agreement. Forexample, a venture capitalist may agree to have reg-istration rights that are pari passu with the otherinvestors in a financing round.

Participating dividends – the right of holders of cer-tain preferred stock to receive dividends and partici-pate in additional distributions of cash, stock or otherassets.

Participating preferred stock – a unit of ownershipcomposed of preferred stock and common stock. Thepreferred stock entitles the owner to receive a prede-termined sum of cash (usually the original invest-ment plus accrued dividends) if the company is soldor has an IPO. The common stock represents addi-tional continued ownership in the company.Participating preferred stock has been characterizedas “having your cake and eating it too”.

PEIGG – acronym for Private Equity IndustryGuidelines Group, an ad hoc group of individualsand firms involved in the private equity industry forthe purpose of establishing valuation and reportingguidelines.

Piggyback rights – rights of an investor to have his orher shares included in a registration of a startup’sshares in preparation for an IPO.

PIK dividend – a dividend paid to the holder of astock, usually preferred stock, in the form of addi-tional stock rather than cash. PIK refers to paymentin kind.

PIPEs – see Private investment in public equity.

Placement agent – a company that specializes infinding institutional investors that are willing andable to invest in a private equity fund. Sometimes aprivate equity fund will hire a placement agent so thefund partners can focus on making and managinginvestments in companies rather than on raising cap-ital.

Portfolio company – a company that has received aninvestment from a private equity fund.

Post-money valuation – the valuation of a companyincluding the capital provided by the current round offinancing. For example, a venture capitalist mayinvest $5 million in a company valued at $2 million“pre-money” (before the investment was made). As aresult, the startup will have a post-money valuationof $7 million.

PPM – see Private placement memorandum.

Preemptive rights – the rights of shareholders tomaintain their percentage ownership of a company bybuying shares sold by the company in future financ-ing rounds.

Preference – seniority, usually with respect to divi-dends and proceeds from a sale or dissolution of acompany.

Preferred return – a minimum return per annumthat must be generated for limited partners of a pri-vate equity fund before the general partner can beginreceiving a percentage of profits from investments.

Preferred stock – a type of stock that has certainrights that common stock does not have. These spe-cial rights may include dividends, participation, liq-uidity preference, anti-dilution protection and veto

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provisions, among others. Private equity investorsusually purchase preferred stock when they makeinvestments in companies.

Pre-money valuation – the valuation of a companyprior to the current round of financing. For example,a venture capitalist may invest $5 million in a compa-ny valued at $2 million pre-money. As a result, thestartup will have a “post-money” valuation of $7 mil-lion.

Primary shares – shares sold by a corporation (notby individual shareholders).

Private equity – equity investments in non-publiccompanies, usually defined as being made up of ven-ture capital funds and buyout funds. Real estate, oiland gas, and other such partnerships are sometimesincluded in the definition.

Private investment in public equity (PIPEs) –investments by a private equity fund in a publiclytraded company, usually at a discount and in the formof preferred stock.

Private placement – the sale of a security directly toa limited number of institutional and qualified indi-vidual investors. If structured correctly, a privateplacement avoids registration with the Securities andExchange Commission.

Private placement memorandum (PPM) – a docu-ment explaining the details of an investment to poten-tial investors. For example, a private equity fund willissue a PPM when it is raising capital from institu-tional investors. Also, a startup may issue a PPMwhen it needs growth capital. Also known as“Offering Memorandum”.

Private securities – securities that are not registeredwith the Securities and Exchange Commission anddo not trade on any exchanges. The price per share isnegotiated between the buyer and the seller (the“issuer”).

Prudent man rule – a fundamental principle forprofessional money management which serves as abasis for the Prudent Investor Act. The principle isbased on a statement by Judge Samuel Putnum in1830: “Those with the responsibility to invest money

for others should act with prudence, discretion, intel-ligence and regard for the safety of capital as well asincome.” In the 1970s a favorable interpretation ofthis rule enabled pension fund managers to invest inventure capital for the first time.

Qualified IPO – a public offering of securities val-ued at or above a total amount specified in a financ-ing agreement. This amount is usually specified to besufficiently large to guarantee that the IPO shareswill trade in a major exchange (NASDAQ or NewYork Stock Exchange). Usually upon a qualified IPOpreferred stock is forced to convert to common stock.

Quartile – one fourth of the data points in a data set.Often, private equity investors are measured by theresults of their investments during a particular periodof time. Institutional investors often prefer to investin private equity funds that demonstrate consistentresults over time, placing in the upper quartile of theinvestment results for all funds.

Ratchet – a mechanism to prevent dilution. Anantidilution clause in a contract protects an investorfrom a reduction in percentage ownership in a com-pany due to the future issuance by the company ofadditional shares to other entities.

Realization ratio – the ratio of cumulative distribu-tions to paid-in capital. The realization ratio is usedas a measure of the distributions from investmentresults of a private equity partnership compared tothe capital under management.

Recapitalization – the reorganization of a compa-ny’s capital structure.

Red herring – a preliminary prospectus filed withthe Securities and Exchange Commission and con-taining the details of an IPO offering. The namerefers to the disclosure warning printed in red letterson the cover of each preliminary prospectus advisingpotential investors of the risks involved.

Redemption rights – the right of an investor to forcethe startup company to buy back the shares issued asa result of the investment. In effect, the investor hasthe right to take back his/her investment and mayeven negotiate a right to receive an additional sum inexcess of the original investment.


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Registration – the process whereby shares of a com-pany are registered with the Securities and ExchangeCommission under the Securities Act of 1933 inpreparation for a sale of the shares to the public.

Regulation D – an SEC regulation that governs pri-vate placements. Private placements are investmentofferings for institutional and accredited individualinvestors but not for the general public. There is anexception that 35 non-accredited investors can partic-ipate.

Restricted shares – shares that cannot be traded inthe public markets.

Return on investment (ROI) – the proceeds from aninvestment, during a specific time period, calculatedas a percentage of the original investment. Also, netprofit after taxes divided by average total assets.

Rights offering – an offering of stock to currentshareholders that entitles them to purchase the newissue, usually at a discount.

Rights of co-sale with founders – a clause in ven-ture capital investment agreements that allows theVC fund to sell shares at the same time that thefounders of a startup chose to sell.

Right of first refusal – a contractual right to partic-ipate in a transaction. For example, a venture capital-ist may participate in a first round of investment in astartup and request a right of first refusal in any fol-lowing rounds of investment.

Risk-free rate – a term used in finance theory todescribe the return from investing in a riskless secu-rity. In practice, this is often taken to be the return onUS Treasury Bills.

Road show – presentations made in several cities topotential investors and other interested parties. Forexample, a company will often make a road show togenerate interest among institutional investors priorto its IPO.

ROI – see Return on investment.

Rollup – the purchase of relatively smaller compa-nies in a sector by a rapidly growing company in the

same sector. The strategy is to create economies ofscale. For example, the movie theater industry under-went significant consolidation in the 1960’s and1970’s.

Round – a financing event usually involving severalprivate equity investors.

Royalties – payments made to patent or copyrightowners in exchange for the use of their intellectualproperty.

Rule 144 – a rule of the Securities and ExchangeCommission that specifies the conditions underwhich the holder of shares acquired in a private trans-action may sell those shares in the public markets.

S corporation – an ownership structure that limits itsnumber of owners to 100. An S corporation does notpay taxes, rather its owners pay taxes on their propor-tion of the corporation’s profits at their individual taxrates.

SBIC – see Small Business Investment Company.

Scalability – a characteristic of a new business con-cept that entails the growth of sales and revenueswith a much slower growth of organizational com-plexity and expenses. Venture capitalists look forscalability in the startups they select to finance.

Scale-down – a schedule for phased decreases inmanagement fees for general partners in a limitedpartnership as the fund reduces its investment activi-ties toward the end of its term.

Scale-up – the process of a company growing quick-ly while maintaining operational and financial con-trols in place. Also, a schedule for phased increasesin management fees for general partners in a limitedpartnership as the fund increases its investment activ-ities over time.

Secondary market – a market for the sale of lim-ited partnership interests in private equity funds.Sometimes limited partners chose to sell theirinterest in a partnership, typically to raise cash orbecause they cannot meet their obligation to investmore capital according to the takedown schedule.Certain investment companies specialize in buying

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these partnership interests at a discount.

Secondary shares – shares sold by a shareholder(not by the corporation).

Securities and Exchange Commission (SEC) – theregulatory body that enforces federal securities lawssuch as the Securities Act of 1933 and the SecuritiesExchange Act of 1934.

Seed capital – investment provided by angels,friends and family to the founders of a startup in seedstage.

Seed stage – the state of a company when it has justbeen incorporated and its founders are developingtheir product or service.

Senior debt – a loan that has a higher priority in caseof a liquidation of the asset or company.

Seniority – higher priority.

SeriesA preferred stock – preferred stock issued bya fast growth company in exchange for capital frominvestors in the “A” round of financing. This pre-ferred stock is usually convertible to common sharesupon the IPO or sale of the company.

Shareholder agreement – a contract that sets out,for example, the basis on which the company will beoperated and the shareholders’ rights and obligations.It provides protection to minority shareholders.

Sharpe Ratio – a method of calculating the risk-adjusted return of an investment. The Sharpe Ratio iscalculated by subtracting the risk-free rate from thereturn on a specific investment for a time period(usually one year) and then dividing the resulting fig-ure by the standard deviation of the historical (annu-al) returns for that investment. The higher the SharpeRatio, the better.

Small Business Investment Company (SBIC) – acompany licensed by the Small BusinessAdministration to receive government capital in theform of debt or equity in order to use in private equi-ty investing.

Stock option – a right to purchase or sell a share of

stock at a specific price within a specific period oftime. Stock purchase options are commonly used aslong term incentive compensation for employees andmanagement of fast growth companies.

Strategic investor – a relatively large corporationthat agrees to invest in a young or a smaller companyin order to have access to its proprietary technology,product or service.

Subordinated debt – a loan that has a lower prioritythan a senior loan in case of a liquidation of the assetor company. Also known as “junior debt”.

Success rate – the proportion of venture fundedcompanies that are considered successful. A study ofcompanies funded by VCs during the 1990s indicat-ed that 14% of the companies went public and anoth-er 11%were acquired.

Sweat equity – ownership of shares in a companyresulting primarily from work rather than investmentof capital.

Syndicate – a group of investors that agree to partic-ipate in a round of funding for a company.Alternatively, a syndicate can refer to a group ofinvestment banks that agree to participate in the saleof stock to the public as part of an IPO.

Synthetic secondary – A popular method of com-pleting a direct secondary transaction in which thebuyer becomes a limited partner (LP) in a specialpurpose vehicle (SPV) or similar entity which hasbeen set up out of the underlying investments in orderto create a limited partnership interest. The termarose because of the synthetic nature of the directpurchase through the LP secondary transaction.

Tag-along right – the right of a minority investor toreceive the same benefits as a majority investor.Usually applies to a sale of securities by investors.Also known as Co-sale right.

Takedown – a schedule of the transfer of capital inphases in order to complete a commitment of funds.Typically, a takedown is used by a general partner ofa private equity fund to plan the transfer of capitalfrom the limited partners.


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Tender offer – an offer to public shareholders of acompany to purchase their shares.

Term loan – a bank loan for a specific period oftime, usually up to ten years in leveraged buyoutstructures.

Term sheet – a document confirming the intent of aninvestor to participate in a round of financing for acompany. By signing this document, the subject com-pany agrees to begin the legal and due diligenceprocess prior to the closing of the transaction. Alsoknown as “Letter of Intent”.

Tranche – a portion of a set of securities. Eachtranche may have different rights or risk characteris-tics. When venture capital firms finance a company,a round may be disbursed in two or three tranches,each of which is paid when the company attains oneor more milestones.

Turnaround – a process resulting in a substantialincrease in a company’s revenues, profits and reputa-tion.

Under water option – an option is said to be underwater if the current fair market value of a stock is lessthan the option exercise price.

Underwriter – an investment bank that chooses tobe responsible for the process of selling new securi-ties to the public. An underwriter usually chooses towork with a syndicate of investment banks in order tomaximize the distribution of the securities.

Venture capital – a segment of the private equityindustry which focuses on investing in new compa-nies with high growth potential and accompanyinghigh risk.

Venture capital method – a pricing valuationmethod whereby an estimate of the future value of acompany is discounted by a certain interest rate andadjusted for future anticipated dilution in order todetermine the current value. Usually, discount ratesfor the venture capital method are considerably high-er than public stock return rates, representing the factthat venture capitalists must achieve significantreturns on investment in order to compensate for therisks they take in funding unproven companies.

Vesting – a schedule by which employees gain own-ership over time of a previously agreed upon amountof retirement funding or stock options.

Vintage – the year that a private equity fund stopsaccepting new investors and begins to make invest-ments on behalf of those investors. Venture funds aregenerally benchmarked to funds of the same vintageyear.

Voting rights – the rights of holders of preferred andcommon stock in a company to vote on certain actsaffecting the company. These matters may includepayment of dividends, issuance of a new class ofstock, merger or liquidation.

Warrant – a security which gives the holder the rightto purchase shares in a company at a pre-determinedprice. A warrant is a long term option, usually validfor several years or indefinitely. Typically, warrantsare issued concurrently with preferred stocks orbonds in order to increase the appeal of the stocks orbonds to potential investors.

Washout round – a financing round whereby previ-ous investors, the founders and management suffersignificant dilution. Usually as a result of a washoutround, the new investor gains majority ownership andcontrol of the company.

Weighted average cost of capital (WACC) – theaverage of the cost of equity and the after-tax cost ofdebt. This average is determined using weight factorsbased on the ratio of equity to debt plus equity andthe ratio of debt to debt plus equity.

Weighted average anti-dilution – an anti-dilutionprotection mechanism whereby the conversion rate ofpreferred stock is adjusted in order to reduce aninvestor’s loss due to an increase in the number ofshares in a company. Without anti-dilution protection,an investor would suffer from a reduction of his or herpercentage ownership. Usually as a result of the imple-mentation of a weighted average anti-dilution, compa-ny management and employees who own a fixedamount of common shares suffer significant dilution,but not as badly as in the case of a full ratchet.

Write-down – a decrease in the reported value of anasset or a company.

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Write-off – a decrease in the reported value of anasset or a company to zero.

Write-up – an increase in the reported value of anasset or a company.

Zombie – a company that has received capital frominvestors but has only generated sufficient revenuesand cash flow to maintain its operations without sig-nificant growth. Sometimes referred to as “walkingdead.” Typically, a venture capitalist has to make adifficult decision as to whether to liquidate a zombieor continue to invest funds in the hopes that the zom-bie will become a winner.

These definitions were graciously provided by theCenter for Private Equity and Entrepreneurship at theTuck School of Business at Dartmouth. Please referto the Center’s website for additional definitions andinformation at http://mba.tuck.dartmouth.edu/-pecenter/resources/glossary.html. Used by permis-sion. Thomson Reuters and National Venture CapitalAssociation are grateful to the Center for its support.


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Appendix B: MoneyTree Report Criteria

The MoneyTree Report is a quarterly study of ven-ture capital investment activity in the United States.As a collaboration between PricewaterhouseCoopersand the National Venture Capital Association, basedupon data from Thomson Reuters, it is the onlyindustry-endorsed research of its kind. TheMoneyTree Report is the definitive source of infor-mation on emerging companies that receive financ-ing and the venture capital firms that provide it. Thestudy is a staple of the financial community, entre-preneurs, government policymakers and the businesspress worldwide.

Report Criteria

The MoneyTree™ Report records cash for equityinvestments as the cash is actually received by thecompany (also called a tranche) as opposed to whenfinancing is committed (often referred to as a “termsheet”) to a company. Accordingly, the amountreported in a given quarter may be less than the totalround amount committed to the company at the timewhen the round of financing closed.The type of financing as it is used in theMoneyTree™ Report refers to the number of tranch-es a company has received. The number designation(1, 2, 3, etc.) does not refer to the round of financing.Rounds are usually designated alphabetically, e.g.Series A, Series B, and so on. The MoneyTree™Report does not track rounds.

Summary Description

The MoneyTree™ Report measures cash-for-equityinvestments by the professional venture capital com-munity in private emerging companies in the U.S. Itis based on data provided by Thomson Reuters.

General Definition

The report includes the investment activity of profes-

sional venture capital firms with or without a USoffice, SBICs, venture arms of corporations, institu-tions, investment banks and similar entities whoseprimary activity is financial investing. Where thereare other participants such as angels, corporations,and governments in a qualified and verified financ-ing round the entire amount of the round is included.Qualifying transactions include cash investments bythese entities either directly or by participation invarious forms of private placement. All recipientcompanies are private, and may have been newly-cre-ated or spun-out of existing companies.The report excludes debt, buyouts, recapitalizations,secondary purchases, IPOs, investments in publiccompanies such as PIPES (private investments inpublic entities), investments for which the proceedsare primarily intended for acquisition such as roll-ups, change of ownership, and other forms of privateequity that do not involve cash such as services-in-kind and venture leasing.Investee companies must be domiciled in one of the50 US states or DC even if substantial portions oftheir activities are outside the United States.

Specific Methodology

The focus of the report is on cash received by thecompany. Therefore, tranches not term sheets are thedetermining factor. Drawdowns on commitments arerecognized at the time the company receives themoney rather than recorded as a lump sum amount atthe time the term sheet is executed. Convertible debtand bridge loans are recognized only when convertedto equity.Once a company has received a qualifying venturecapital financing round, all subsequent equity financ-ing rounds are included regardless of whether theround involved a venture capital firm as long as allother investment criteria are met (e.g. cash-for-equi-ty, not buyout or services in kind).Angel, incubator and similar investments are consid-

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PricewaterhouseCoopers/National Venture Capital AssociationMoneyTree™ Report, Data:Thomson Reuters

ered pre-venture financing if the company hasreceived no prior qualifying venture capital invest-ment and are not included in the MoneyTree™results. Angel, incubator and similar investments thatare part of a qualifying venture capital round or fol-low a qualifying venture capital round are included tothe extent that such investments can be fully verifiedas meeting all other criteria (e.g. cash for equity, notbuyout or services in kind).Direct investment by corporations (not through a cor-porate venture capital arm) is excluded unless (a) theinvestment is clearly demonstrated to be primarily afinancial investment rather than outsourced R&D ormarket development, (b) it is a co-investment in anotherwise qualifying round, or (c) it follows a quali-fying venture round in a company and meets all othercriteria (e.g. cash-for-equity, not buyout or servicesin kind).Data is primarily obtained from a quarterly survey ofventure capital practitioners conducted by Thomson

Reuters. Information is augmented by other researchtechniques including other public and privatesources. All data is subject to verification with theventure capital firms and/or the investee companies.Only professional independent venture capital firms,institutional venture capital groups, and recognizedcorporate venture capital groups are included in ven-ture capital industry rankings.

Disclaimer

PricewaterhouseCoopers and the National VentureCapital Association have taken responsible steps toensure that the information contained in theMoneyTree™ Report has been obtained from reli-able sources. However, neither of the parties norThomson Reuters can warrant the ultimate validity ofthe data obtained in this manner. Results are updatedperiodically. Therefore, all data is subject to changeat any time.


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Appendix C: MoneyTree GeographicalDefinitions

Alaska/Hawaii/Puerto Rico: Alaska, Hawaii, andPuerto Rico

Colorado: The state of Colorado

DC/Metroplex: Washington, D.C., Virginia, WestVirginia, and Maryland

LA/Orange County: Los Angeles, Ventura, Orange,and Riverside Counties (i.e., southern California,except San Diego)

Midwest: Illinois, Missouri, Indiana, Kentucky,Ohio, Michigan, and western Pennsylvania

New England: Maine, New Hampshire, Vermont,Massachusetts, Rhode Island, and parts ofConnecticut (excluding Fairfield county)

New York Metro: Metropolitan NY area, northernNew Jersey, and Fairfield County, Connecticut

North Central: Minnesota, Iowa, Wisconsin, NorthDakota, South Dakota, and Nebraska

Northwest: Washington, Oregon, Idaho, Montana,and Wyoming

Philadelphia Metro: Eastern Pennsylvania, south-ern New Jersey, and Delaware

Sacramento/Northern California: NortheasternCalifornia

San Diego: San Diego area

Silicon Valley: Northern California, bay area andcoastline

South Central: Kansas, Oklahoma, Arkansas, andLouisiana

Southeast: Alabama, Florida, Georgia, Mississippi,Tennessee, South Carolina, and North Carolina

Southwest:Utah,Arizona, NewMexico, and NevadaTexas: The state of Texas

Upstate NewYork: Northern NewYork state, exceptMetropolitan NewYork City area

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The Geographical Regions identified in the MoneyTree™ Report by PricewaterhouseCoopers and the NationalVenture Capital Association based on data provided by Thomson Reuters and used in the 2011 NVCAYearbookare as follows:



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Appendix D: Industry Codes (VEIC)

Company VE Primary Company VE Primary Company VE Primary Company VE PrimaryIndustry Class Industry Sub-Group 1 Industry Sub-Group 2 Industry Sub-Group 3

1000 Information Technology 1000 Communications 1100 Commer. Comm. 1000 Communications and Media1100 Commercial Communications1110 Radio & TV Broadcasting Stations1120 CATV & Pay TV Systems1125 Cable Service Providers1130 Radio & TV Broadcasting & Other Related

Equipment1135 Services to Commercial Communications1199 Other Commercial Communications1700 Media and Entertainment1710 Entertainment1720 Publishing1800 Other Communications Related

1200 Telephone Rel. 1200 Telecommunications1210 Long Distance Telephone Services1215 Local Exchange Carriers (LEC)1220 Telephone Interconnect & Other Equipment1230 Telephone answering and/or

management systems, PBXs1299 Other Telephone Related

1300 Wireless Communications 1300 Wireless Communications1310 Mobile Communications, Pagers & Cellular

Radio1320 Wireless Communications Services1325 Messaging Services1330 Wireless Communications Components1399 Other Wireless Communications

1400 Facsimile Trans 1400 Facsimile Transmission

1500 Data Comm. 1500 Data Communications1510 Local Area Networks (incl. voice/data PBX

systems)1515 Wide Area Networks1520 Data Communications Components1521 Communications Processors/Network

Management1522 Protocol Converters & Emulators1523 Modems and Multiplexers1524 Other Data Communication Components1525 Switches/Hubs/Routers/Gateways/ATM1530 Network test, monitor and support equipment1549 Other Data Communications

1600 Satellite Comm 1600 Satellite Microwave Communications1610 Satellite Services/Carriers/Operators1620 Satellite Ground (and other) Equipment1630 Microwave Service Facilities1640 Microwave & Satellite Components1699 Other Satellite & Microwave

1800 Comm. Other 1810 Defense Communications1825 Other Communications Services NEC1899 Other Communications Products (not yet

classified)

2100 Computer Hardware 2100 Computers Hardware 2100 Computers and Hardware2110 Mainframes & Scientific Computers2111 Mainframes2112 Supercomputers and Scientific Computers2119 Other Mainframes and Scientific

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2120 Mini & Personal/Desktop Computers2121 Fail Safe Computers2122 Mini Computers2123 Personal Computers (micro/personal)2124 Other Mini and Personal Computers2125 Portable Computers (notebooks/laptops)2126 Handheld Computing (PDA)2130 Optical computing2140 Servers and Workstations2141 Servers2143 Workstations2144 Thin Client Hardware2149 Other Servers and Workstations

2200 Digital Imaging and 2200 Computer Graphics and Digital ImagingComputer Graphics

2210 CAD/CAM, CAE,EDA Systems2220 Graphic Systems2230 Scanning Hardware2234 OCR (Optical Character Recognition)2236 OBR (Optical Bar Recognition)2238 MICR (Magnetic Ink Character Recognition)2239 Other Scanning Related2250 Graphics Printers/Plotters2255 Graphics/Enhanced Video Cards2260 Other Graphics Peripherals2280 Other Multimedia NEC2290 Digital Imaging Hardware and Equipment2295 Digital Imaging Services2299 Other Computer Graphics

2300 Turnkey Integrated Systems 2300 Integrated Turnkey Systems and Solutionsand Solutions

2311 Business and Office2312 Consumer2313 Retailing2315 Transportation2316 Finance/Insurance/Real Estate2317 Agriculture2318 Recreation/Entertainment2319 Manufacturing/Industrial/Construction2320 Medical/Health2321 Computer related2322 Communications Products/Servcies2323 Education2324 Reference2325 Scientific2399 Other Intergrated Systems and Solutions

2500 Computer Peripherals 2500 Peripherals2510 Terminals2511 Intelligent Terminals2512 Portable Terminals2513 Graphics Terminals2519 Other Terminals2520 Printers2521 Laser Printers2522 Color Printers2523 Inkjet Printers2524 Dot Matrix Printers2529 Other Printers2530 Data I/O Devices2531 Mouse Input Devices2532 TouchPad Input Devices2533 Pen based computing


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2539 Other Data I/O Devices2540 Disk Related Memory Devices2541 Floppy Disks & Drives2542 Winchester Hard Disks and Drives2543 Optical Disks & Drives,CD-ROM DVD2546 Disk Drive Components2549 Other Disk Related2550 Tape Related Devices2551 Magnetic Tapes2552 Tape Heads & Drives2553 Continuous Tape Backup Systems2559 Other Tape Related Devices2560 Other Memory Devices (excl. semiconductors)2561 PC or PMCIA cards2562 Memory Cards2563 Sound Cards2564 Communications Cards2569 Other Peripheral Cards2590 Other Peripherals (not yet classified)

2700 Computer Software 2600 Computer Services 2600 Computer Services2630 Time Sharing Firms2640 Computer Leasing & Rentals2650 Computer Training Services2655 Backup and Disaster Recover2660 Data Processing,Analysis & Input Services2665 Computer Repair Services2670 Computerized Billing & Accounting

Services2675 Computer Security Services2691 Data communications systems management2699 Other Computer Services

2700 Computer Software 2700 Computer Software2710 Systems Software2711 Database & File Management2712 Operating Systems & Utilities2713 Program Development

Tools/CASE/Languages2716 Graphics and Digital Imaging Software2719 Other Systems Software2720 Communications/Networking Software2721 Security/Firewalls,Encryption software2722 Email Software2723 Groupware2724 Multimedia software2729 Other Communications/Networking

Software2730 Applications Software2731 Business and Office Software2732 Home Use Software2733 Educational Software2734 Manufacturing/Industrial Software2735 Medical/Health Software2736 Banks/Financial Institutions Software2737 Retailing Software2738 Integrated Software2739 ERP/Inventory Software2740 Recreational/Game Software2741 Scientific Software2743 Agricultural Software2744 Transportation Software2748 Other Industry specific Software2749 Other Applications Software2750 Artificial Intelligence Related Software

2012 NVCA Yearbook

Thomson Reuters 85


2751 Expert Systems2752 Natural Language2753 Computer-Aided Instruction2754 Artificial Intel. Programming Aids2755 Other Artificial Intelligence Related2799 Other Software Related

2710 Computer Programming 2760 Software Services2761 Programming Services/Systems

Engineering2762 Software Consulting Services2763 Software Distribution/Clearinghouse2769 Other Software Services

2800 Internet Specific 1550 Internet Communications 1550 Internet Communications andInfrastructure NEC

1551 Internet Access Services and ServiceProviders

1552 Internet Multimedia Services1553 Internet Backbone Infrastructure1559 Other Internet Communications NEC

1560 E-Commerce Technology 1560 E-Commerce Technology1561 Internet Security and Transaction Services1562 Ecommerce Services1569 Other Ecommerce

2100 Computers Hardware 2142 Web Servers

2780 Internet Software 1563 Ecommerce Enabling Software2780 Internet Systems Software2781 Site Development and Administration

Software2782 Internet Search Software and Engines2783 WebServer Software2784 Web Languages (Java/ActiveX/HTML/XML)2785 Web Authoring/Development Software2798 Other Internet Systems Software

2785 Internet Programming 2765 Internet/Web Design and programmingservices

2766 Internet Graphics Services2768 Other Internet Software Services

2800 Internet Ecommerce 2800 Internet and Online Related2810 E-Commerce—Selling products Online or

Internet2811 Business and Office Products2812 Consumer Products2813 Retailing Products2814 Publishing Products2815 Transportation Products2816 Finance/Insurance/Real Estate products2817 Agricultural Products2818 Recreation/Entertainment/Music/Movies2819 Manufacturing/Industrial/Construction2820 Medical/Health2821 Computer Related2822 Communications Products2823 Education Products2824 Reference Products2825 Scientific Products2826 Legal Products2829 Other Ecommerce Selling Products2830 Eccommerce—Selling Services

Online/Internet2831 Business and Office Services2832 Consumer Services2833 Retailing Services


86 Thomson Reuters


2834 Publishing Services2835 Transportation Services2836 Finance/Insurance/Real Estate Services2837 Agricultural Services2838 Recreation/Entertainment/Music/Movies2839 Manufacturing/Industrial/Construction2840 Medical/Health Services2841 Computer Related services2842 Communications Products/Services2843 Education Services2844 Reference2845 Scientific2846 Legal2848 Recreation/Entertainment Services2849 Other Ecommerce Selling Services

2810 Internet Content 2850 Web Aggregration/Portal Sites/Exchanges2851 Business and Office Info/content2852 Consumer Info/Content2853 Retailing Info/Content2854 Publishing Info/Content2855 Transportation Info/Content2856 Finance/Real Estate/Insurance Info/Content2857 Agriculture Info/Content2858 Recreation/Entertainment/Music/Movies2859 Manufac/Industrial/Constr. Info/Content2860 Medical/Health Info/Content2861 Computer Related Info/Content2862 Communications Info/Content2863 Education Info/Content2864 Reference Info/Content2865 Scientific Info/Content2866 Legal Info/Content2869 Other Aggregation/Portal/Exchange Sites

2820 Internet Services 2870 Internet Services2871 Internet Marketing Services2873 Data Warehousing Services2879 Other Internet and Online Services NEC

2900 Computer Other 2900 Computer Other 2000 Computer Related2900 Other Computer Related2910 Voice Synthesis2911 Voice Recognition2990 Other Computer Related (not yet classified)

3000 Semiconductor/Electr 3100 Semiconductors/Other 3100 Electronic ComponentsElectronics

3110 Semiconductors3111 Customized Semiconductors3112 Standard Semiconductors3114 Flash Memory3115 Optoelectronics semiconductors (incl laser

diodes)3119 Other Semiconductors3120 Microprocessors3130 Controllers and Sensors3132 Controllers3135 Sensors3139 Other Controllers/Sensors3140 Circuit Boards3160 Display Panels

3200 Batteries 3200 Batteries

3300 Power Supplies 3300 Power Supplies3310 Uninterruptible Power Supply (UPS)

3400 Electronics Equipment 3400 Electronics Related Equipment

2012 NVCA Yearbook

Thomson Reuters 87


3410 Semiconductor Fabrication Equip. & WaferProducts

3420 Component Testing Equipment3499 Other Electronics Related Equipment

3500 Laser Related 3500 Laser Related3510 Laser Components (incl. beamsplitters,

excimers)3599 Other Laser Related

3600 Fiber Optics 3600 Fiber Optics3610 Fiber Optic Cables3620 Fiber Optic Couplers and Connectors3630 Fiber Optic Communication Systems

(see 1510)3699 Other Fiber Optics

3700 Scientific Instrumentation 3700 Analytical & Scientific Instrumentation3710 Chromatographs & Related Laboratory

Equipment3720 Other Measuring Devices3799 Other Analytical & Scientific

Instrumentation

3800 Electronics, Other 3000 Other Electronics Related3170 Other Electronics Related (including

keyboards)3800 Other Electronics Related3810 Military Electronics (excluding

communications)3820 Copiers3830 Calculators3835 Security/Alarm/Sensors3899 Other Electronics Related (incl. alarm

systems)

3900 Optoelectronics 3900 Optoelectronics3910 Photo diodes3920 Optoelectronics fabrication equipment3930 Lenses with Optoelectronics applications3940 Advanced photographic processes (incl

lithographs)3989 Other Optoelectrinics Related3990 Other Electronc Semiconductor

4000 Medical/Health/Life Science 4000 Biotechnology 4100 Biotech-Human 4100 Human Biotechnology4110 Medical Diagnostic Biotechnology Products4111 In Vitro Monoclonal Antibody Diagnostics4112 In Vivo Monoclonal Antibody Diagnostics/

Imaging4113 DNA/RNA Probes4119 Other Medical Diagnostic Biotechnology4120 Therapeutic Biotechnology Products4121 Therapeutic Monoclonal Antibodies4122 Immune Response Effectors (interferons,

vaccines)4123 Other Therapeutic Proteins (incl. hormones

& TPA)4129 Other Therapeutic Biotechnology4130 Genetic Engineering

4200 Biotech-Animal 4200 Agricultural/Animal Biotechnology4210 Genetically Engineered Plants4220 Genetic. Eng. Microorganisms to raise plant

yield4230 Other Plant Related Biotechnology4240 Biotech Related Animal Health & Nutrition

Products4250 Genetically Engineered Animals


88 Thomson Reuters


4290 Other Animal Related Biotechnology

4300 Biotech-Industrial 4300 Industrial Biotechnology4310 Biochemical Products4311 Biotech Related Fine Chemicals (NOT

Pharmaceuts.)4312 Biotech Related Commodity Chemicals4319 Other Biochemical Products4320 Biotech Processes for Food Industrial 1

Applications4321 Biotech Related Food Enzymes and Cultures4322 Biotech Related Food Diagnostics4329 Other Biotech Process for Food/Industrial

Products4330 Biotech Processes for Pollution/Toxic Waste

Control4340 Biotech Processes for Enhanced Oil

Recovery/Mining4390 Other Industrial Biotechnology

4400 Biosensors 4400 Biosensors4410 Biosensors for Medical Diagnostic

Applications4420 Biosensors for Industrial Applications4490 Other Biosensors

4500 Biotech Equipment 4500 Biotech Related Research & ProductionEquipment

4510 Biotech Related Analytical Instruments &Apparatus

4520 Biotech Related Production Equipment4525 Biotech laser and optronic applications4599 Other Biotech Research & Production

Equipment

4600 Biotech Research 4600 Biotech Related Research & Other Services4610 Pure & Contract Biotechnology Research4699 Other Biotechnology Services

4700 Biotech Other 4000 Biotechnology and Pharmacology4900 Other Biotechnology Related

5000 Medical/Health 5100 Medical Diagnostics 5100 Medical Diagnostics5110 Diagnostic Services5120 Medical Imaging5121 X-Rays5122 CAT Scanning5123 Ultra Sound Imaging5124 Nuclear Imaging5125 Other Medical Imaging5130 Diagnostic Test Products & Equipment5140 Other Medical Diagnostics

5200 Medical Therapeutics 5200 Medical Therapeutics5210 Therapeutic Services5220 Surgical Instrumentation & Equipment5221 Surgical lasers (including laser delivery fibers)5230 Pacemakers & Artificial Organs5240 Drug Delivery & Other Equipment5299 Other Therapeutic (including defibrillators)

5300 Med/Health Products 5000 Medical/Health Related5300 Medical Health Related Products5310 Disposable Medical Products5340 Handicap Aids5350 Medical Monitoring Equipment5380 Health related optics (including glasses,

lenses)5399 Other Medical/Health (NEC)

2012 NVCA Yearbook

Thomson Reuters 89


5400 Med/Health Services 5400 Medical Health Services5410 Hospitals/Clinics/Primary Care5412 Long Term Care/Home Care/Elder Care5414 Dependent Care (child care/assisted living5420 Managed care (including PPO/PPM)5429 Other Healthcare Facilities5430 Emergency Services/Ambulance5440 Hospital & Other Institutional Management5499 Other Medical/Health Services

5500 Pharmaceutical 5500 Pharmaceuticals5510 Pharmaceutical Research5520 Pharmaceutical Production5530 Pharmaceutical Services5540 Pharmaceutical Equipment5550 Pharmaceuticals/Fine Chemicals (non-

biotech)5599 Other Pharmaceutical NEC

6000 Non-High Technology 7000 Consumer Related 7100 Entertainment and Leisure 7100 Entertainment and Leisure7110 Movies,Movie Products & Theater Operations7120 Amusement & Recreational Facilities7125 Casino and Gambling7130 Toys & Electronic Games7140 Sporting Goods,Hobby Equipment &

Athletic Clothes7150 Sports Facilities (Gyms and Clubs)7155 Sports7160 TVs, Radio, Stereo Equipment & Consumer

Electronics7170 Music,Records,Production and Instruments7199 Other Leisure/Recreational Products and

Services

7200 Retailing Related 7200 Retailing Related7210 Drug Stores7220 Clothing and Shoe Stores7230 Discount Stores7240 Computer Stores7245 Retail Publishing (books, magazines, news-

papers)7246 Office Supply Stores7247 Music/Electronics7248 Specialty Department and retail stores7250 Franchises(NEC)7299 Other Retailing Related

7300 Food and Beverage 7300 Food and Beverages7310 Wine & Liquors7320 Health Food7330 Soft Drinks & Bottling Plants7340 Food Supplements/Vitamins7350 General Food Products7399 Other Food and Beverages

7400 Consumer Products 7400 Consumer Products7410 Clothing,Shoes & Accessories (incl. jewelry)7420 Health & Beauty Aids7430 Home Furnishing & Housewares7431 Housewares7432 Furnishings & Furniture7433 Garden and Horticultural Products7434 Other Home Furnishings (NEC)7450 Mobile Homes7499 Other Consumer Products

7500 Consumer Services 7500 Consumer Services7510 Fast Food Restaurants


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7520 Other Restaurants7530 Hotels and Resorts7540 Auto Repair Shops7550 Education & Educational Products and

Materials7560 Travel Agencies and Services7599 Other Consumer Services

7600 Consumer, Other 7000 Consumer Related7999 Other Consumer Related (not yet classified)

8000 Industrial/Energy 3100 Semiconductors/Other 8141 Semiconductor Materials (eg. siliconElectronics wafers)

8142 III/V Semiconductor Mater. (eg. galliumarsenide)

6100 Oil & Gas Exploration 6100 Oil & Gas Exploration and Production6200 Oil & Gas Exploration Services6300 Oil & Gas Drilling & Support Services6400 Oil & Gas Drilling,Exploration & Extraction

Equip.6410 Oil & Gas Drilling & Extraction Equipment6420 Oil & Gas Drilling Instrumentation6430 Oil & Gas Exploration Equip.

Instrumentation6499 Other Oil & Gas (NEC)

6500 Energy, Alternative 6500 Alternative Energy6510 Solar Energy6511 Photovoltaic Solar6512 Other Solar6520 Wind Energy6530 Geothermal Energy6540 Energy Co-Generation6599 Other Alternative Energy (incl. nuclear

energy)

6600 Energy, Enhanced Recovery 6600 Enhanced Oil Recovery/Heavy Oil/Shale

6700 Energy, Coal 6700 Coal Related6710 Coal Mining6720 Coal Related Equipment6799 Other Coal Related

6800 Energy, Conservation 6800 Energy Conservation Related

6900 Energy, Other 6000 Energy Related6900 Other Energy Related

8100 Chemicals and Materials 8100 Chemicals & Materials8110 Plastic Fabricators8111 Homogeneous Injections/Extrusions8112 Non-Homogeneous Injections/Extrusions8113 Fiber-Reinforced (Plastic) Composites8114 Other Fabricated Plastics8115 Processes for Working with Plastics8119 Other Plasti Fabricators8120 Coatings & Adhesives Manufacturers8121 Optical coatings8129 Other Coatings & Adhesives8130 Membranes & Membrane-Based Products8140 Specialty/Performance Materials8143 Specialty Metals (incl. coatings, alloys, clad)8144 Ceramics8145 Lubricants & Functional Fluids8146 Other Specialty Materials8147 Specialty materials for laser generation8148 Superconducting materials8149 Other Special Performance Materials8150 Commodity Chemicals & Polymers

2012 NVCA Yearbook

Thomson Reuters 91


8151 Industrial Chemicals8152 Polymer (Plastics) Materials8160 Specialty/Performance Chemicals8161 Electronic Chemicals8162 Other Industrial Chemicals8170 Agricultural Chemicals8189 Other Commidity Chemicals and Polymers8199 Other Chemicals & Materials (not yet

classified)

8200 Industrial Automation 8200 Industrial Automation8210 Energy Management8220 Industrial Measurement & Sensing Equipment8221 Laser related measuring & sensing equipment8230 Process Control Equipment & Systems8240 Robotics8250 Machine Vision Software & Systems8260 Numeric & Computerized Control of

Machine Tools8299 Other Industrial Automation (NEC)

8300 Industrial Equipment 8300 Industrial Equipment and Machinery8310 Machine Tools, Other Metalworking

Equipment8320 Hoists, Cranes & Conveyors8330 Pumps, Ball Bearings, Compressors, Indus.

Hardware8340 Mining Machinery8350 Industrial Trucks and Tractors8360 Other Industrial Process Machinery8370 Power Transmission Equipment (generators

& motors)8399 Other Industrial Equipment & Machinery

8500 Pollution and Recycling 8500 Environmental Related8510 Air Filters & Air Purification & Monitoring

Equip.8520 Chemical and Solid Material Recycling8530 Water Treatment Equipment & Waste

Disposal Systems8599 Other Environmental Related

8600 Industrial Products, Other 8000 Industrial Products8600 Other Industrial Products (not yet classified)

8700 Industrial Services 8700 Industrial Services

9100 Transportation 9100 Transportation 9100 Transportation

9110 Airlines and Aviation Related9120 Trucking9125 Railway related9130 Leasing of Railcars,Buses and Cars9140 Mail and Package Shipment9150 Motor Vehicles,Transporation Equipment &

Parts9160 Airfield and Other Transportation Services9180 Advanced Aircraft/Aerospace9199 Other Transportation

9200 Financial Services 9200 Financial Services 9200 Financial Services9210 Insurance Related9220 Real Estate9230 Banking9235 Non Bank Credit9240 Securities & Commodities Brokers and

Services9250 Investment Groups9254 Venture Capital and Private Equity Investors9255 Financial Transactions Services


92 Thomson Reuters


9299 Financial Services, 0ther

9300 Business Serv. 9300 Business Services 9300 Services9310 Engineering Services9320 Advertising and Public Relations9330 Leasing (not elsewhere classified)9340 Distributors,Importers and Wholesalers9350 Consulting Services9360 Media Related Services9399 Other Services NEC

9400 Manufact. 9400 Manufacturing 9400 Product Manufacturing9410 Business Products and Supplies9415 Office Automation Equipment9420 Office Furniture & Other Professional

Furnishings9430 Textiles (Synthetic & Natural)9440 Hardware,Plumbing Supplies9450 Publishing9460 Packaging Products & Systems9470 Printing & Binding9499 Other Manufacturing (not elsewhere

classified)

9500 Agr/Forestr/Fish 9500 Agricultural, Forestry 9500 Agriculture, Forestry, Fishing, AnimalHusbandry,etc.

9510 Agriculture related9520 Forestry related9530 Fishing related9540 Animal husbandry9599 Other Agriculture,Forestry,Fishing9600 Mining and Minerals (non-energy related)

9700 Construction 9700 Construction 9700 Construction & Building Products9710 Construction9720 Manufacture of Building Products9730 Manufacture of Pre-Fabricated Buildings &

Systems9740 Distribution of Building Products & Systems9750 Construction Services9799 Other Construction & Building Products

Related

9800 Utilities 9800 Utilities 9800 Utilities and Related Firms9810 Electric Companies9820 Water,Sewage,Chem. & Solid Waste

Treatment Plants9830 Gas Transmission & Distribution9899 Other Utilities & Related Firms

9900 Other 9900 Other 9000 Other Services and Manufacturing9900 Other Products and Services9910 Conglomerates9912 Socially Responsible9914 Environment Responsible9915 Women-Owned9918 Minority-Owned9920 Holding Companies9999 Other Products and Services

2012 NVCA Yearbook

Thomson Reuters 93




94 Thomson Reuters

Appendix E: Industry SectorVEIC Ranges

Biotechnology4000, 4100, 4110, 4111, 4112, 4113, 4119, 4120, 4121, 4122, 4123, 4129, 4130, 4200, 4210, 4220, 4230,4240, 4250, 4290, 4300, 4310, 4311, 4312, 4319, 4320, 4321, 4322, 4329, 4330, 4340, 4390, 4400, 4410,4420, 4490, 4500, 4510, 4520, 4525, 4599, 4600, 4610, 4699, 4900, 5500, 5510, 5520, 5530, 5540, 5550, 5599

Business Products and Services2811, 2824, 2831, 2844, 9300, 9310, 9320, 9330, 9340, 9350, 9360, 9399

Computers and Peripherals2000, 2100, 2110, 2111, 2112, 2119, 2120, 2121, 2122, 2123, 2124, 2125, 2126, 2130, 2140, 2141, 2142,2143, 2144, 2149, 2220, 2230, 2234, 2236, 2238, 2239, 2250, 2255, 2260, 2280, 2290, 2295, 2299, 2500,2510, 2511, 2512, 2513, 2519, 2520, 2521, 2522, 2523, 2524, 2529, 2530, 2531, 2532, 2533, 2539, 2540,2541, 2542, 2543, 2546, 2549, 2550, 2551, 2552, 2553, 2559, 2560, 2561, 2562, 2563, 2564, 2569, 2590, 3170

Consumer Products and Services2812, 2832, 7000, 7300, 7310, 7320, 7330, 7340, 7399, 7400, 7410, 7420, 7430, 7431, 7432, 7433, 7434,7450, 7499, 7500, 7510, 7520, 7530, 7540, 7550, 7560, 7599, 7999

Computer Software1563, 2200, 2210, 2300, 2311, 2312, 2313, 2315, 2316, 2317, 2318, 2319, 2320, 2321, 2322, 2323, 2324,2325, 2399, 2700, 2710, 2711, 2712, 2713, 2716, 2719, 2720, 2721, 2722, 2723, 2724, 2729, 2730, 2731,2732, 2733, 2734, 2735, 2736, 2737, 2738, 2739, 2740, 2741, 2743, 2744, 2748, 2749, 2750, 2751, 2752,2753, 2754, 2755, 2780, 2781, 2782, 2783, 2784, 2785, 2798, 2799, 2900, 2910, 2911, 2990, 8250

Electronics/Instrumentation3000, 3100, 3160, 3200, 3300, 3310, 3400, 3420, 3499, 3500, 3510, 3599, 3700, 3710, 3720, 3799, 3800,3810, 3820, 3830, 3835, 3899

Financial Services2816, 2836, 9200, 9210, 9220, 9230, 9235, 9240, 9250, 9254, 9255, 9299

Healthcare Services2820, 2840, 5400, 5410, 5412, 5414, 5420, 5429, 5430, 5440, 5499

Industrial/Energy2819, 2837, 2839, 6000, 6100, 6200, 6300, 6400, 6410, 6420, 6430, 6499, 6500, 6510, 6511, 6512, 6520,6530, 6540, 6599, 6600, 6700, 6710, 6720, 6799, 6800, 6900, 8000, 8100, 8110, 8111, 8112, 8113, 8114,

Thomson Reuters 95

Industry analysis is based upon the following industry sectors: Biotechnology, Business Products and Services,Computers and Peripherals, Consumer Products and Services, Computer Software, Electronics/-Instrumentation, Financial Services, Healthcare Services, Industrial/Energy, IT Services, Media andEntertainment, Medical Devices and Equipment, Networking and Equipment, Retailing/Distribution,Semiconductors, Telecommunications and Other. These sectors are based on the 17 industry classifications ofthe MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based ondata from Thomson Reuters.

8115, 8119, 8120, 8121, 8129, 8130, 8140, 8143, 8144, 8145, 8146, 8147, 8148, 8149, 8150, 8151, 8152,8160, 8161, 8162, 8170, 8189, 8199, 8200, 8210, 8220, 8221, 8230, 8240, 8260, 8299, 8300, 8310, 8320,8330, 8340, 8350, 8360, 8370, 8399, 8500, 8510, 8520, 8530, 8599, 8600, 8700, 9000, 9100, 9110, 9120,9125, 9130, 9140, 9150, 9160, 9180, 9199, 9400, 9410, 9415, 9420, 9430, 9440, 9460, 9470, 9499, 9500,9510, 9520, 9530, 9540, 9599, 9600, 9700, 9710, 9720, 9730, 9740, 9750, 9799, 9800, 9810, 9820, 9830, 9899

IT Services1560, 1561, 1562, 1569, 2600, 2630, 2640, 2650, 2655, 2660, 2665, 2670, 2675, 2691, 2699, 2760, 2761,2762, 2763, 2765, 2766, 2768, 2769, 2800, 2870, 2871, 2873, 2879

Media and Entertainment1110, 1120, 1125, 1130, 1135, 1199, 1700, 1720, 2814, 2818, 2834, 2838, 2843, 2848, 2850, 2851, 2852,2853, 2854, 2855, 2856, 2857, 2858, 2859, 2860, 2861, 2862, 2863, 2864, 2865, 2866, 2869, 7100, 7110,7120, 7125, 7130, 7140, 7150, 7155, 7160, 7170, 7199, 9450

Medical Devices and Equipment5000, 5100, 5110, 5120, 5121, 5122, 5123, 5124, 5125, 5130, 5140, 5200, 5210, 5220, 5221, 5230, 5240,5299, 5300, 5310, 5340, 5350, 5380, 5399

Networking and Equipment1400, 1500, 1510, 1515, 1520, 1521, 1522, 1523, 1524, 1525, 1530, 1549, 3600, 3610, 3620, 3630, 3699

Retailing/Distribution2810, 2813, 2815, 2817, 2821, 2823, 2825, 2826, 2829, 2830, 2833, 2835, 2841, 2845, 2846, 2849, 7200,7210, 7220, 7230, 7240, 7245, 7246, 7247, 7248, 7250, 7299, 7350

Semiconductors3110, 3111, 3112, 3114, 3115, 3119, 3120, 3130, 3132, 3135, 3139, 3140, 3410, 3900, 3910, 3920, 3930,3940, 3989, 3990, 8141, 8142

Telecommunications1000, 1100, 1200, 1210, 1215, 1220, 1230, 1299, 1300, 1310, 1320, 1325, 1330, 1399, 1550, 1551, 1552,1553, 1559, 1600, 1610, 1620, 1630, 1640, 1699, 1710, 1800, 1810, 1825, 1899, 2822, 2842

Other9900, 9910, 9912, 9914, 9915, 9918, 9920, 9999


96 Thomson Reuters

Appendix F: Stage Definitions

SEED STAGE FINANCING

This stage is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept.This involves product development and market research as well as building a management team and develop-ing a business plan, if the initial steps are successful. This is a pre-marketing stage.

EARLY STAGE FINANCING

This stage provides financing to companies completing development where products are mostly in testing orpilot production. In some cases, product may have just been made commercially available. Companies may bein the process of organizing or they may already be in business for three years or less. Usually such firms willhave made market studies, assembled the key management, developed a business plan, and are ready or havealready started conducting business.

EXPANSION STAGE FINANCING

This stage involves working capital for the initial expansion of a company that is producing and shipping andhas growing accounts receivables and inventories. It may or may not be showing a profit. Some of the uses ofcapital may include further plant expansion, marketing, working capital, or development of an improved prod-uct. More institutional investors are more likely to be included along with initial investors from previousrounds. The venture capitalist’s role in this stage evolves from a supportive role to a more strategic role.

LATER STAGE

Capital in this stage is provided for companies that have reached a fairly stable growth rate; that is, not grow-ing as fast as the rates attained in the expansion stages. Again, these companies may or may not be profitable,but are more likely to be than in previous stages of development. Other financial characteristics of these com-panies include positive cash flow. This also includes companies considering IPO.

ACQUISITION FINANCING

An acquisition of 49% stake or less. Firm acquires minority shares of a company. Thomson VentureEconomics includes these deals in standard venture capital disbursement data when calculating venture capi-tal disbursements where the funding is by a venture capital firm.

ACQUISITION FOR EXPANSION

Funds provided to a company to finance its acquisition of other companies or assets. A consolidator of com-panies in specific industries.

MANAGEMENT/LEVERAGED BUYOUT

These funds enable an operating management group to acquire a product line or business, at any stage of devel-opment, from either a public or private company. Often these companies are closely held or family owned.Management/leveraged buyouts usually involve revitalizing an operation, with entrepreneurial managementacquiring a significant equity interest.

Thomson Reuters 97

RECAP/TURNAROUNDFinancing provided to a company at a time of operational or financial difficulty with the intention of improv-ing the company’s performance.

SECONDARY BUYOUT

A buyout deal on top of a buyout deal. Secondary buyouts are distinguished when the initial firm investor isdifferent from the current investing firm.


98 Thomson Reuters

Appendix G: Data Sources and Resources

Data Sources and ResourcesMoneyTree™ Data

PricewaterhouseCoopers, Thomson Reuters, and theNational Venture Capital Association joined forces inDecember 2001 to produce what was then known asthe PricewaterhouseCoopers/Thomson VentureEconomics/National Venture Capital AssociationMoneyTree™ Survey. Conducted on a quarterlyba-sis, the designated PwC/NVCA MoneyTree Reportallows Thomson Reuters unparalleled access to pri-mary sources of information from general partners.

Sources of DataThe online database of Thomson Reuters isThomsonONE.com (VentureXpert), the foremostinformation provider for private equity professionalsworldwide. The private equity portion of ThomsonReuters offers an incomparable range of products fromdirectories to conferences, journals, newsletters,research reports, and the ThomsonONE.com PrivateEquity database. As of March 2012, the databaseincluded over 97,000 portfolio companies, over 16,000private equity firms, nearly 30,000 private equityfunds, and over 200,000 financing rounds. By estab-lishing working relationships with private equity andventure capital firms, institutional investors, and indus-try associations such as the NVCA, Pricewaterhouse-Coopers and other such entities around the world,

Thomson Reuters has been able to gather, on a timelybasis, complete and accurate information.

Timeliness of DataMany of the tables and charts presented in this reportcan be produced by using ThomsonONE.com. One ofadvantages of using ThomsonONE.com is that thereader can customize a report to better fit the needs ofwhat they are seeking. In addition, because the onlinedatabase is continuously updated, the informationavailable is more up-to-date than what can be present-ed in this report. Readers should note that timely indus-try information on details concerning venture capitalinvestment is available from other sources such asPricewaterhouseCoopers at www.pwcmoneytree.com,the ‘Industry Stats’ section of the NVCA website,www.nvca.org, and the Private Equity section ofThomson Reuters’ Deals Intelligence found athttp://dmi.thomsonreuters.com/PrivateEquity

Verification and Updating of DataCollectively, PricewaterhouseCoopers, ThomsonReuters, and the NVCA have the utmost commitmentto provide an accurate historical record of venturecapital activity. On a daily basis, the database is con-stantly analyzed for consistency, crosschecked withother data sources, and updated as new informationcomes in. On a quarterly basis, we have worked with

Thomson Reuters 99

For this publication, the main source for data was ThomsonONE.com, the online research database of ThomsonReuters. ThomsonONE.com (which replaced VentureXpert™, and Thomson One Banker) is endorsed by theNVCA as the official United States venture capital activity database. By using data gathered through theMoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on datafrom Thomson Reuters, ThomsonONE.com contains investment, fund raising, portfolio company information,and Reuters News along with other statistical data. Over 1.1 million global private companies can be analyzedwithin ThomsonONE.com, including historical revenue figures on over 450,000 companies and detailed finan-cials on over 160,000 companies with up to a five year history. Through a partnership withVC Experts.com, Inc.the historical breadth and depth of the Thomson Reuters venture capital content is integrated with private com-pany valuation and deal terms. ThomsonONE.com includes blogs, events, and articles from the peHUB and theVenture Capital Journal, two of the industry’s most widely-read publications. Other information contained in thisdatabase is gathered through a variety of public and proprietary source. This publication is produced on anannual basis primarily using year-end data. However, the underlying databases can be accessed online to pro-vide the most up-to-date and comprehensive global private equity statistics and profile information available.

many venture firms to ensure that that their currentand past data is correct. Primarily for this reason, theprivate equity news releases of Thomson Reuters willoften restate statistics from prior news releases. Withthe availability of the online data access, users areencouraged to always use the most current numberseven regarding historical activity so as to maintainaccuracy and comparability.

Reporting Functionality ofThomsonONE.comUsers can access information in terms of profiles onprivate equity companies, funds, firms, executives,IPOs, and limited partners. In addition, users canaccess the analytics portion of the database, whichcontains investment, valuation, IPO analytics, merg-er analytics, fund performance, and fund raisinginformation along with venture capital informationsuch as aggregate fund raising, investments, andIPOs broken out into state and nation profiles.

Comprehensiveness ofThomsonONE.comBoth the breadth and depth of ThomsonONE.comcan perhaps best be shown in that it, among othertypes of information, the user can find the answers tothe following questions:• Which venture firms actively co-invest with a firmI am considering co-investing with?• Which venture firms are most active in funding onlinefinancial services companies in the Ohio Valley?• What does Yearbook Figure 3.15 look like for justbiotech?• How much money was raised by each fund stage in2010?• What was a particular venture-backed IPO’s oneyear return at the end of 2010?• As of December 2011, was the 10-year return to smallbuyout funds larger than that of large buyout funds?• Who are the most active acquirers of ecommercesecurity companies?• How much money was committed to mezzaninefunds from 1997 to 2011?• How much money was invested in the venture cap-ital industry from 1987 to 2011?• What is the performance at quarter end for privateequity funds that were formed from 1998 to 2011?

• In 2011, how much money was invested at eachdevelopment stage in Research TrianglePharmaceutical companies?

In addition, there are also advantages of using thedatabase for a general partner as well. Although thisis not an inclusive list, utilizing the database by gen-eral partners can be helpful to them for among thefollowing reasons:• Plan your companies’ exits with data on both ven-ture-backed IPOs and mergers and acquisitions• Aid in recruiting talented executives from otherventure-backed companies• Quickly spot venture-backed companies in compe-tition with your own portfolio companies• Create industry analyses to benchmark both per-formance and portfolio investments• Find other venture capitalists likely to support fol-low-on rounds• Provide clarity to investment decisions by compar-ing them to current market conditions• Compile valuation reports for comparable portfoliocompanies• Identify prospective investors and their investmenthistories• Benchmark valuations among recent transactionsand obtain valuation comparables• Analyze investment trends by industry• Utilize returns information to limited partners usingappropriate benchmarks• Tailor your pitch to investor focus size and limitedpartner type

AccessingThomsonONE.com and OtherServicesFor more information on ThomsonONE.com, pleasevisit http://thomsonreuters.com/products_services/-f inancial/f inancial_products/deal_making/privat-e_equity/private_equity_venture_capital or by phoneat 1-800-782-5555. For information on NVCA mem-bership, which can include a free trial and discountson an annual subscription, please contact JaniceMawson at the NVCA. You may contact her onlinethrough the link on the member benefits section of theNVCA website or at 703-524-2549. For informationon services PricewaterhouseCoopers provides forventure capital firms as well as emerging companies,please visit their website at www.pwcmoneytree.com.


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Appendix H: International Convergence

The Dialogue and SEC Decision: Shouldinternational rules become accepted asU.S. GAAP?A recent flurry of media coverage has focused on thepossible upcoming convergence of U.S. and interna-tional accounting standards. Much of this coveragediscusses which accounting system casts which pub-lic companies in the most favorable light, and corre-spondingly, which companies are made to look worse.

For years, the United States has been developing gen-eralized accounting principles referred to asGenerally Accepted Accounting Principles(“GAAP”). The keeper/arbiter/decider of GAAP isthe FinancialAccounting Standards Board (“FASB”).The FASB develops and updates GAAP and the SEChas adopted these accounting rules for public compa-ny reporting and other situations over which the SEChas jurisdiction. In recent years, on a parallel track, aseparate set of rules emerged from the InternationalAccounting Standards Board (“IASB”), which wasEurope-centric. These rules became known as theInternational Financial Reporting Standards (“IFRS,”pronounced “IFF-ers”).

Over recent years, a large number of multinationalcorporations complained that they had to endurekeeping two sets of books and this prompted the con-cept of convergence. In early September 2008, theSEC and the FASB announced steps to pave the wayfor U.S. public companies to convert from U.S.GAAP to IFRS. The SEC “roadmap” provided for athree-year run-up to an SEC “go-no go” decision in2011, but the decision was deferred. At about thesame time, the FASB and the IASB met to review andre-orient their convergence plan to be consistent withthe SEC’s proposed schedule. The 2008-2009 worldfinancial crisis deferred and deprioritized much ofthe work in this area.

We would expect this dialogue to center on trans-parency, reliability, relevance, comparability, andongoing costs in addition to any conversion costs,which might be significant. More relevant to the U.S.venture capital industry are matters specificallyaffecting fund reporting, the financial statementsprovided by GPs to LPs under the eventual rules. Ifthe current international rules become the new U.S.rules, much will change for the worse.

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Despite all the discussion and work done on moving toward one global accounting standard, the passage of timeand the efforts of a number of groups have not really made the picture much clearer. As this is written in early2012, activity centers on four major areas:

• Decision on whether to adopt international accounting rules, or a modification thereof, as the acceptedaccounting practice in the United States;

• Decision on the direction of private company accounting;• Convergence of specific U.S. and international accounting rules that affect reporting by venture capital

and private equity funds to their investors (i.e., whether portfolio company financials must be consoli-dated with those of the fund); and

• Accounting to be used by management companies (i.e., whether fund assets must be consolidated intothe management company financials.

While making a decision on the adoption of international rules for United States financial statement issuersremains on the agenda of the Securities and Exchange Commission for 2012, it is not clear what the priority ofthis expensive and time-consuming effort is given all of the other must-do items on the national agenda. SeeAppendix I for a discussion of private company accounting in the U.S. Meanwhile, The FASB and the IASBcontinue work on converging certain U.S. and international accounting rules that affect this industry. NVCAstaff and the NVCA CFO Task Force have been putting considerable effort into the rules convergence.

How U.S. GAAP and International IFRSCompare – Never Generalize

Even viewed from 30,000 feet, it is difficult to gen-eralize on how the two systems compare. First, whilethe IASB produces plain vanilla IFRS standards,there is no one flavor of IFRS in use. Much like theoriginal UNIX kernel, each country/jurisdiction hasbeen able to create its own version of IFRS. Butunlike UNIX, sometimes the differences among thelocalized IFRS versions are large. So an apples-to-apples comparison of “IFRS-compliant” financialsfrom different jurisdictions can be difficult. Second,it is true that IRFS itself is a very thin documentcompared to GAAP, which has grown to roughly atwo-foot stack of written rules. However, to imple-ment IFRS, you need the implementation guide thatcombines with the original document to create itsown two-foot stack. Again, much of the surface com-parisons are not useful. Until now, U.S. venture capi-tal firms have been using U.S. GAAP accountingstandards exclusively.

While seemingly distant from the U.S. venture capi-tal industry, it is important that all business con-stituencies weigh in on which system (current U.S.GAAP vs. International vs. neither) is the best sys-tem overall for the U.S. business community goingforward.

GP-to LP Reporting – Can MeaningfulStatements Continue?

A key priority for the U.S. venture capital industry isbeing able to continue producing quarterly financialstatements using investment company (IC) account-ing. Virtually all LP agreements (or accompanyingdocuments) require GPs to provide GAAP-compliantfinancial reports to LPs. Annual audits include test-ing to ensure GAAP compliance. Under GAAP, theU.S. venture capital industry now provides fair valueportfolio reports under the special rules of “invest-ment company reporting.” Historically, IFRS hasspecial investment company rules for portfolios ofpublicly-traded companies, but no such provisionsfor portfolios of private companies.

The lack of provisions in the international rules forIC reporting of private holdings is the crux of theproblem. If current foreign rules were adopted, port-

folio companies would have to be consolidated intofund financials and investors would no longer receivethe “fair value” of their holdings. This would causesignificant subsequent reporting problems forinvestors, not the least of which would be reportsrequired for ERISA purposes. Venture fund state-ments to their investors would become unusable.

How the Status Quo Currently Works forInternational Funds

We are often asked how international funds subject toIFRS reporting structure can provide their investorsmeaningful financial statements under that structure.The response is that they do not. International ven-ture capital and private equity firms currently subjectto international rules are also preparing a side sched-ule showing U.S. GAAP net asset value, or providingjust the U.S. GAAP report and ignoring the IFRSrequirements. If either (1) U.S. GAAP investmentcompany accounting were removed for private hold-ings from GAAP going forward, for example, and/or(2) the current international rules replaced it, GPswould likely have to keep an additional set of books.One set would be used to create audited GAAPfinancial statements, although it not clear who theaudience for those statements might be. The other setwould be to provide meaningful portfolio informa-tion to investors and other stakeholders. Over the pastcouple of years, the FASB and the IASB efforts atconvergence seem to have preserved the key aspectsof U.S. investment company accounting for privateportfolio companies. That is, the U.S. approach onFIN 46, now called Topic 946, seems to have pre-vailed over IAS 27. Now that separate efforts arebeing converged and language must be agreed upon,there is much to be worked out.

Recent Events

Even as the U.S. industry works toward compliancewith the FASB’s Statement 157 (now officially called“Topic 820”) on fair value measurement starting with2008 financials, dialogue has begun on convergence.In March 2008, the International Private Equity &Venture Capital Valuation (IPEV) board reconstitutedand relaunched itself. IPEV was expanded to includefive practitioners from the United States who arefamiliar with the venture industry. The initial focus ofthe group is on convergence of U.S. Private Equity


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Industry Guidelines Group (“PEIGG”) and IPEV fairvalue guidelines. Details, and the September 2009International Private Equity and Venture CapitalValuation Guidelines, are online atwww.privateequityvaluation.com. Check that site forupdates, the press release issued with those guide-lines, FAQs, etc.

Going Forward

With the international and domestic attention onother economic matters, it is not clear how quicklyany accounting standard convergence activities willmove. As this is being written in early 2012, theSecurities and Exchange Commission (SEC) contin-ues to develop its recommendation on the direction

of GAAP and IFRS. Separately, The FASB and theIASB continue their program of converging certainstandards, such as the fair value measure and disclo-sure, consolidation, and investment companyaccounting rules.

In fact, the FASB’s work on U.S.-only accountingissues that affect venture capital and private equitywound down a couple of years ago. Instead, anticipat-ing a single global set of rules at some point in thefuture, unresolved accounting issues in the U.S. anddifferences between the two systems are beingworked under the moniker of “convergence.” That is,these current issues are being addressed jointly byboth the FASB and the IASB. For more information,please contact NVCA at [email protected].

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Appendix I: US Accounting Rulemakingand Valuation Guidelines

Guidelines fall into two categories. The first is port-folio performance presentation formats, calculations,and disclosure. An example of the former is thePrivate Equity Provisions of the Global InvestmentPerformance Standards (GIPS). This was developedby the CFA Institute. While many of the specifica-tions and terminology line up with current practice inthe United States, the NVCA has not endorsed orotherwise commented on these standards. NeitherNVCA nor Thomson Reuters has determined howwidespread the adoption of those standards is or willlikely be. This document and accompanying guid-ance can be currently found athttp://www.cfainstitute.org/centre/codes/gips/.Much more attention is being paid to the other cate-gory: portfolio company valuation guidelines. Thechronology and sections below refer to this category.

WhyValuation Guidelines Matter

What ultimately matters to the investors and private

equity practitioners is the cash that has been distrib-uted to the investors during the life of the fund com-pared with the original money put in. However, thelife of a typical venture fund is at least 10 years,longer in the life sciences arena. During that period,the venture capital fund reports progress to the limit-ed partners. In many cases, this means quarterly port-folio updates and a complete audited annual financialstatement. For a typical venture fund, very littlemoney is paid out in the first four or five years. Also,while every portfolio company receives funding withhigh expectations, it can take several years to deter-mine if a particular company is a likely winner.Therefore, understanding progress in the portfoliorequires some estimate of the success of the investeecompanies by the venture capital or private equityfirm. While many investors and fund managers agreethat financial measurements mean little for the firstthree or so years of a fund, after that the fund wantsto communicate progress to the investors. This iswhere specific valuation rules and processes become

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In the United States, a venture capital fund is usually organized as a limited partnership. The institutionalinvestors providing capital to a fund typically become the limited partners (LPs). The venture firm itselfbecomes a general partner (GP) in the limited partnership. In most of the limited partnership agreements defin-ing GP-LP relationship, the GPs are required to provide financial reports quarterly (unaudited) and annually(audited) prepared according to United States Generally Accepted Accounting Principles (“GAAP”). GAAPcalls for the use of investment company accounting which, mandates that a fair value be assigned to the indi-vidual portfolio companies. This is consistent with the LP’s need for fair values of their investments, as well asthird party or regulatory requirements, e.g., ERISA-regulation. In recent years, the GP-to-LP financial state-ments have been subject to numerous rule “clarifications,” convergence with non-U.S. accounting, expandeddisclosures, and more formal presentations. A group of practitioners developed the PEIGG portfolio companyvaluation guidelines in 2004. The chronology of events and complete text is printed in this appendix.

A parallel group called the International Private Equity Valuation Guidelines board (“IPEV”) created guide-lines that they believe conform to IASB rules. Now, alumni of both groups are working to create a single set ofinternational guidelines – a goal that has become something of a moving target as the FASB and the IASB workto converge various aspects of the standards.

More recently (2010-2012), in the U.S., considerable progress has being made to pay particular attention to thereporting requirements of private companies. This will affect how virtually all venture capital funds and theirportfolio companies report to their respective stakeholders. With a fairly universal realization that the currentrules have resulted in expensive, complex, and irrelevant calculations and disclosures, appropriate reliefappears to be in sight.

important. The agreed valuation procedures for indi-vidual portfolio companies become the basis forprogress assessment as the fund matures and ulti-mately distributes cash to the investors.

So while portfolio company valuations are more ofan art than a science, especially for pre-revenue oreven pre-EBITDA companies, most limited partneragreements (LPAs) establishing a venture capitalfund require the venture firm to provide quarterlyand annual financial statements using GenerallyAccepted Accounting Principles (GAAP). GAAPrequires fair value measurement for portfolio posi-tions.Therefore, most GPs must issue financial statementsusing fair value.

The Evolution of Reporting andValuation Guidelines: 1989 to 2009

This section reviews the various efforts to createcomprehensive portfolio company valuation guide-lines for U.S. private equity.

1989-1990 – A group of investors, private equityfund managers, and fund-of-fund managers formed agroup to develop a set of portfolio company valua-tion guidelines. Contrary to a very persistent rumor,the NVCA did not endorse, adopt, bless, publish, orotherwise opine on the guidelines.

Decade of the 1990s – Two noteworthy developmentsoccurred in the 1990s. Despite no endorsement by theNVCA these guidelines became accepted practice bymuch of the U.S. industry, especially in the venturecapital side of private equity. These guidelines werereferred to by many as being issued by the NVCA butin fact they were not. The second development isinternational venture associations creating localizedguidelines based heavily on these guidelines. Thesewere created in Europe and other internationalregions. In fact, by 2005, there had been multiple iter-ations of the European and British guidelines.

2003 –A self-appointed group of private equity prac-titioners, fund managers, fund-of-fund managers andothers formed the Private Equity Industry GuidelinesGroups (PEIGG). The overall constitution of thisgroup was not hugely different from the 1989-1990group. The PEIGG group announced that it was con-

templating taking on four initiatives, of which portfo-lio company valuation guidelines was the first one.

December 2003 – After an extensive input phase andreview by various industry groups and serviceproviders, the first version of the PEIGG guidelineswere issued. Throughout the process PEIGG hadbeen actively soliciting feedback and input from anumber of industry groups including the NVCA.

March 2004 – NVCA board issued statement of sup-port, but not endorsement as some pundits had hoped.NVCA’s position was widely consistent with inputprovided by members of the NVCA CFO Task Force,members at large, and the NVCA Board of Directors.The text of NVCA’s statement is printed below.

March/April 2004 – The Institutional LimitedPartners Association (ILPA) hails NVCA support aswelcome support – especially as it relates to the GPand LPs mutually agreeing to the valuation process.PEIGG also hails the NVCA support.

July 2004 – After consulting quietly with variousindustry groups, PEIGG issues guidance on contro-versial paragraph 30 which was the most discussedand debated provision in the guidelines.

September 2004 – Based on input from ILPA andothers, PEIGG agrees to minor wording changes intwo paragraphs. This becomes PEIGG guidelines ver-sion 2. These two wording changes were consistentwith, and in part inspired by, language the NVCAboard used in its March 2004 statement of support.

October 2004 – ILPA endorses the amended PEIGGguidelines.

December 2004 –As most fund accounting year’s end,GPs prepare for their first audits since the effective dateofAICPA’s SAS 101 rule. Essentially that rule says thatif a reporting entity claims to be reporting “fair value”– which is required by GAAP – then the auditors mustdocument and test that this is, in fact, true. It was notclear to what extent this increased scrutiny would affectvaluation expectation and practices.

March 2005 – NVCA board issues an updated state-ment, which now refers to the September 2004 ver-sion of the PEIGG guidelines. The NVCA also decid-


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ed to make the PEIGG document widely available toits members. The text of that statement is below.

April 2006 – Guidelines issued by a consortium ofthree Europe-based venture capital associations(AFIC, BVCA, EVCA) are released. The authors citecompliance with IASB rules. Informal feedbackfrom U.S. venture capital professionals reviewingthis document was that the document was more for-mulaic than PEIGG’s counterpart and only partiallycompliant with U.S. GAAP as defined at that time.Subsequently, 30 non-U.S. private equity and venturecapital associations endorsed this document. Go tohttp://www.privateequityvaluation.com. This efforthas since become known as IPEV, and this group iscurrently working on a single set of guidelines con-sistent with IFRS and GAAP.

September 2006 – Financial Accounting StandardsBoard (FASB) issues its long-awaited and long antic-ipated fair value measurement standard as FAS 157.Only a few of its 145 pages relate directly to typicalventure capital and private equity funds. Because theFASB maintains that this is a clarification and furtherdefinition of fair value which was already requiredfor portfolio accounting, some auditors began requir-ing selective compliance in advance of the 2008effective date.

March 2007 – PEIGG issues a revised portfoliocompany valuation guidelines document to reflectthe Fair Value Measurement standard (FAS 157).

September 2007 – NVCA board reaffirms its priorposition on the PEIGG guidelines to refer to the mostrecent version.

March 2008 – the International Private EquityValuation & Venture Capital Valuation (IPEV) Boardreconstitutes and re-launches itself and adds 5 practi-tioners from the United States. The initial focus ofthe group is on convergence of U.S. PEIGG andIPEV valuation guidelines. Details atwww.privateequityvaluation.com.

September 2008 –At this point, visible signs of trou-ble just 4 months ahead of the first year-end underFAS 157 are hard to miss. Anticipation of a smoothimplementation of FAS 157 is dashed by a downdrafteconomy, uncertain public and private markets, no

precedent, and little guidance.

December 2008 – Public market valuations continueto fall. This makes valuation of even on-track, pre-rev-enue companies tricky. The NVCA issues a one pageinformation letter to its members to shed light onapplying FAS 157 in a valuation microburst/whirlpool.(Text below)

July 2009 – Effective July 1, authoritative GAAPbecame contained in a single Codification and theprior nomenclature went away. Existing U.S. GAAPwas recast in 90 topics which include all relatedFASB pronouncements, AICPA guidance and EITFsunder single “Topics.” Familiar standards will nolonger exist. For example, FAS157 became Topic 820Fair Value Measurements and Disclosure.

2010 – Work continues by the FASB and the IASB on“converging” certain accounting topics such as FAS157 fair value, investments, revenue recognition andconsolidation.

January 2011 – FAF’s Blue Ribbon Panel issues itsreport calling for an overhaul of private companyaccounting standard setting by a separate group withsignificant standing vis-à-vis FASB.

February 2011 – As the FASB and the IASB con-verge on a “final” Fair Value Measurements andDisclosure standards, some proposed disclosuresraise concerns that these disclosures will be costlyand are unwanted by users. A dialogue with theFASB and the IASB leads to some changes in thefinal disclosure requirements and some efforts at theend of the year to re-examine Level 3 disclosures.

July 2011 – FASB, anticipating the eventual creation ofa more focused standards mechanism for private com-panies, issues “Path to a Differential Standard-SettingFramework” for private companies. Particularly note-worthy is the list of 6 differentiating factors betweenprivate and company financial statement user needs,formally articulated for the first time. The discussionframes well the issues raised by NVCA.

October 2011 – In response to the FAF Blue RibbonPanel recommendations, FAF proposes the creationof a private company financial reporting Council andannounces a series of roundtables to get input from

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OVERVIEW

Introduction1. As the U.S. private equity industry (defined asventure, buyout, mezzanine, and other investmentsin private companies) has grown and matured, itsparticipants have become increasingly interested inthe appropriate reporting of fund values. The inter-est stems from a number of sources, such as aninvestor’s desire to measure interim performance,investor’s need for fair value data to report invest-ments in their own financial statements, a manager’sneed to report and measure valuations in accordancewith fund agreements, and the need to determine theallocation of distributions of fund realizations. Thishas led to increased scrutiny of portfolio companyvalues and the need for greater consistency of valu-ation methodologies employed by managers of pri-

vate equity funds. However, by its very nature pri-vate equity is an asset class in which judgment playsa significant role. Accordingly, investors in thesame company may have different, but supportable,views on valuation.

2. The objective of the Updated U.S. Private EquityValuation Guidelines (“Guidelines”) is to providemanagers a framework for valuing investments inportfolio companies at fair value and to providegreater consistency within the private equity indus-try with regard to valuations. Historically therewere few authoritative guidelines compliant withU.S. generally accepted accounting principles(GAAP) that required specific procedures for esti-mating fair value of investments in portfolio compa-nies held by private equity investors. In September,2006, the Financial Accounting Standards Boardreleased Statement of Financial AccountingStandards No. 157, Fair Value Measurements. TheUpdated U.S. Private Equity Valuation Guidelinesare intended to assist managers in their estimationof fair value and are intended to be consistent withGAAP (FASB Statement No. 157) and the AICPAAudit and Accounting Guide - Audits of InvestmentCompanies. The AICPA Guide’s definition ofInvestment Companies includes Private EquityInvestors (paragraph 1.03) and requires investmentsto be reported at fair value (paragraph 1.32).

3. These Guidelines were created jointly by managers(i.e., general partners) and investors (i.e., limited part-ners) incorporating feedback from a wide number ofindustry participants. The Guidelines are not intend-ed to be all encompassing, nor are they intended toeliminate all subjectivity. Rather, they are to be aguide to assist managers and investors in agreeing toa valuation framework while allowing a manager toexercise its best judgment in applying the Guidelines.

4. Included in these Guidelines are terms that aresubjective in nature, such as materiality, and couldhave different meanings in various factual situa-tions. While it is outside the scope of theseGuidelines to force specific definitions upon itsusers, the manager, in consultation with theValuation Policy Committee (as discussed below)may develop and document appropriate definitionsof these subjective terms.

The PEIGG Guidelines

While the NVCA has not specifically endorsed thePEIGG portfolio company valuation guidelines(see statement in next section below), it believesthat the guidelines document should be readilyaccessible to its members for reference and use. Besure to refer to www.peigg.org for the latest ver-sion and guidance on the document. The NVCAthanks the members of PEIGG for their efforts andfor their permission to reprint the guidelines here.The guidelines as updated in March 2007 to reflectFAS 157 are printed below.

all relevant constituencies. NVCA, among others,issues a comment letter stating strong conceptualsupport for the proposal subject to certain gover-nance and structural changes to ensure sufficientstanding for its recommendations.

January-March 2012 – FAF conducts a series ofroundtables. NVCA board and CFO task forcemembers actively participate. A general consensusemerges that a separate group focused on privatecompany standards is needed, that much of the ini-tial focus needs to be on the irrelevant and cumber-some disclosures for private companies, and thatboth measurement and disclosure rules needreview.

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5. The Guidelines are not intended in any way tomodify the provisions of the fund agreement relat-ing to the subject matter hereof. To the extent theGuidelines are adopted by a manager and aValuation Policy Committee and in one or morerespects the Guidelines are inconsistent with thefund agreement, the fund agreement would govern(absent a specific amendment thereto).

Fair Value Concept6. The Guidelines seek to have all investments inportfolio companies reported at fair value on a con-sistent, transparent and prudent basis. Fair value asdefined in accordance with GAAP is “the price thatwould be received to sell an asset or paid to transfera liability in an orderly transaction between marketparticipants at the measurement date” (FASBStatement No. 157, paragraph 5). The objective isto estimate the exchange price at which hypotheticalwilling marketplace participants would agree totransact in the principal market, or lacking a princi-pal market, the most advantageous market. No mat-ter which market is deemed most appropriate, fairvalue is the estimated “exit price” in that market.

7. Securities of private companies, by definition,will not have quoted market prices available.However, private companies at times engage inarm’s-length transactions for issuances of their equi-ty or debt securities. The value of these transactionscould serve as an observable market price similar toa quoted market price if the transaction is bothrecent and between willing parties for the samesecurities as those for which the fair value determi-nation is being made (deemed a level 2 input byFASB Statement No. 157), and could therefore beused as an estimate of the theoretical exit price.

8. When quoted market prices or arm’s-lengthtransaction prices as described above are not avail-able, the estimate of fair value should incorporateall reasonably available information about the busi-ness and utilize assumptions that market partici-pants would normally use in their estimates ofvalue. The estimate of fair value should seek to bestreplicate the amount at which the investment couldbe sold in a current transaction between willing par-ties.

9. In determining the fair value of individual invest-ments using these Guidelines, managers are expect-ed to use their judgment. In utilizing judgment,substance takes precedence over form. For exam-ple, when a manager’s past experience indicates thatliquidation preferences will likely be renegotiated ormay not be fully enforced at the time of liquidation,the manager is strongly encouraged to use theexpected results rather than the form of the agree-ment.

10. Valuations should be updated on each measure-ment date, generally on a quarterly basis. Ofcourse, valuations used for annual and quarterlyperformance reporting should be used in privateplacement memorandums and other marketingmaterials.

Valuation Policy Committee11. These Guidelines acknowledge the perceptionthat bias exists or has the potential to exist in a non-independent (versus independent) valuation per-formed by a fund’s manager. As a result, it is rec-ommended that the manager of each private equityfund establish a Valuation Policy Committee con-sisting of a subset of the fund’s investor representa-tives. The Valuation Policy Committee could be allof, or a portion of, a fund’s advisory committee, ifsuch a committee exists. (Neither these Guidelinesnor GAAP require managers to obtain independentvaluations).

12. The fund manager, in consultation with theValuation Policy Committee, should establish thewritten valuation parameters to be consistently fol-lowed by the fund’s manager using these Guidelines.The agreed upon valuation policy and deviationsfrom that policy should be communicated to theValuation Policy Committee and the limited part-ners by the manager. Private equity fund managersare solely responsible for establishing and docu-menting valuation policy, practices, procedures andmethodologies as well as valuing their investmentsin portfolio companies The Valuation PolicyCommittee should not set, formulate or approve thevaluations, except as required by the fund agree-ment. The Valuation Policy Committee should peri-odically discuss the level of the manager’s adher-ence to the fund’s valuation policy parameters.


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II. PRIVATE COMPANYVALUATIONMETHODOLOGIES

General Guidelines13. Managers are to fairly value the investments intheir portfolio companies on a consistent, transpar-ent and prudent basis. Since value is often realizedthrough a liquidity event of the entire company, thevalue of the company as a whole at the reportingdate will often provide the best evidence of thevalue of the investment in that company. As a result,the methodologies discussed in this section involveestimating the value of the company as a whole asan initial step for valuing the company’s privatelyissued securities. The manager will then need todetermine how the total enterprise value is distrib-uted among the various securities of the company.

14. Managers of funds should, without undue costand effort, contact other sophisticated investors todiscuss the valuations of common investments andthe factors considered in their valuations. However,managers are not required to use other investors’valuations since the estimate of fair value is theresponsibility of the managers.

15. To value an investment, managers should placethe most weight on valuation methodologies that areclearly objective and timely. On each valuation datemanagers need to take into account available infor-mation from market participants, the relevant mar-ketplace and the global economy along with specif-ic facts and circumstances in determining the fairvalue of their investments.

16. Historically, the Private Equity Industry usedcost or the value of the latest round of financing asan approximation of fair value; often without takinginto account other facts and circumstances. Such anapproach is incompatible with the concept of fairvalue described above. At each valuation date amanager must make a determination of fair valuefor each investment. As further outlined below,these Guidelines provide a consistent and transpar-ent methodology for determining fair value.However, a manager may conclude, after consider-ing the facts and circumstances as outlined below,that the best indication of fair value is provided bycost or the value of the latest round of financing.

17. FASB Statement No. 157 allows managers toutilize three valuation techniques, either alone or incombination. These Guidelines encourage managersto use the “market approach” in most situations (seeFASB Statement No. 157, paragraph 18a) utilizingComparable Company Transactions or PerformanceMultiple inputs, as the primary technique to esti-mate the fair value of equity securities in privatecompanies. For Private Equity, the market approachusually is the most appropriate.

18. In addition to the market approach techniquediscussed above, there are other valuation method-ologies, some of which are discussed in paragraphs41 and 42. These other methodologies or techniquesmay be appropriate in certain circumstances, andinclude discounting cash flows, valuing net assets,and industry-specific benchmarking (described inFASB Statement No.157 as the income and costapproaches).

19. Other valuation matters, including valuing inter-est bearing securities, PIK dividends, warrants, liqui-dation preferences, convertible securities, escrows,and other rights, privileges and preferences of pre-ferred securities are discussed in paragraph 47.

20. Determination of valuation adjustments shouldtypically be based upon actual positive and negativeevents, not upon expected accomplishments andperformance.

21. Regardless of the valuation methodology used,once used, it should continue to be used until a newmethodology will provide a better approximation ofthe investment’s current fair value. It is expectedthat there would not be frequent changes in valua-tion methodology.

Cost / Latest Round of Financing22. While entry prices and exit prices are differentconceptually, for the Private Equity Industry theseGuidelines presume the manager at the time of theinitial investment has considered near term compa-ny performance in determining investment valua-tion. Therefore, cost (the transaction price) may befair value (the exit price) upon purchase. The trans-action price may not represent fair value upon pur-chase when:

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a) The transaction is between related parties;b) The transaction occurs under duress;c) The transaction price includes transaction costs(transaction costs are expensed under GAAP);d) The market in which the initial transaction takesplace is different than the principal or most advanta-geous market in which the exit transaction wouldtake place.

23. Managers should reconsider a company’s fairvalue in connection with each material equityfinancing, regardless of the manager’s participation.The value of the last round of financing is a factorin determining fair value, but it is not necessarilythe only factor.

24. A subsequent equity financing that includessubstantially the same group of investors as theprior financing is an appropriate factor to considerin valuing prior investments unless it can be demon-strated that the financing no longer represents fairvalue. This approach may be different from historicpractice, where, typically the value of prior invest-ments was not increased in a subsequent higherpriced financing round unless a new investor ‘vali-dated’ the new pricing.

25. If a private financing will be completed with ahigh degree of certainty in the near future, and thepricing of the transaction has been substantiallyagreed, to establish the value of a previous investment,a manager should consider their best estimate of theupcoming new financing if it can be objectively deter-mined that the prospective financing is at fair value.

26. Occasionally a round of financing includes asignificant investment from a strategic investor pay-ing a premium due to benefits accruing uniquely toitself. The manager must evaluate whether such apremium is representative of what the most likelybuyers of the company would also pay upon exit,and therefore, whether the price paid by the strate-gic investor is deemed to be the exit price (fairvalue) expected from market participants.

Deviations from Cost / Latest Round ofFinancing

27. After some period of time, cost or the latest

round of financing becomes less reliable as anapproximation of fair value. Therefore, the manag-er must assess whether fair value has changed eventhough there has not been a new round of financing.Examples of changes in circumstances which indi-cate a change in fair value may include, but are notlimited to, the following:

a) The current performance of the company is sig-nificantly above or below the expectations at thetime of the original investment. Potential indicatorsof this situation will include evaluation of the com-pany’s success or failure in attaining certain mile-stones, achieving technology breakthroughs, devel-oping proprietary technology, progressing throughclinical trials or significantly exceeding or failing tomeet budgets.

b) Market, economic or company specific condi-tions have significantly improved or deterioratedsince the time of the original investment. Potentialindicators of this situation will include evaluation ofbroad changes in the economic climate, changes inthe financing markets, changes in the legal or regu-latory environment in which the company operates,changes in the company’s cost structure, increasedor decreased risk factors faced by the company, orsignificant fluctuations in share prices of quotedcompanies operating in the same or a related indus-try.

c) Substantial decreases in the value of quoted, moresenior securities of the company (e.g., public debt),defaults on any obligations of the company, a bank-ruptcy filing, significant ownership dilution causedby recapitalization of the company, or liquidity con-cerns that are expected to be more than short termin nature are circumstances which may indicate apotential impairment in value.

28. Estimating the extent of a change in fair value,if any, may not easily lend itself to an analyticalprocess. As a result, the manager will be required toexercise prudent judgment and carefully considerthe broad indicators of potential changes to fairvalue (such as market conditions, relevant stockmarket indices, and other factors as discussedabove).


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29. The result of such consideration will provideindications whether the carrying value of the invest-ment should be increased or decreased to representfair value. The longer that fair value has been esti-mated using cost or the price paid at the most recentround of financing, the more consideration shouldbe given to reviewing changed circumstances andpotentially determining fair value utilizing otherinputs. Managers may consider historic cost or theprice paid at the most recent round of financing inmaking their fair value determination, but shouldnot use cost or the most recent financing price as thesole determinate of fair value.

30. These Guidelines recognize that building long-term value in a private equity backed business is notan easy task. Usually, many positive events need tohappen in order for portfolio companies to succeed.However, managers often become aware that certainof their investments are likely to fail given theirinsight into the company. Even private companiesthat have significant manager involvement face adaunting task to create value for investors. Thus, itis natural that decreases in value may be more easi-ly identified and justified than increases in value.However, both decreases and increases in invest-ment fair value should be recognized when warrant-ed. Because of the difficultly in building sustain-able, long-term value in a private equity backedbusiness, increases in value should only be madewhere the manager can support the increase usingthe methodologies discussed in these guidelines orusing other techniques common to the marketplace,remembering that fair value is defined as the exitprice on the measurement date in a hypotheticaltransaction. Diligence, prudence and cautionshould be applied when valuing private companies,and in particular when considering the valuationwrite-up of early-stage companies, in the absence ofmarket-based financing events. All such changesand the factors upon which the changes are madeshould be reviewed with the Valuation PolicyCommittee. However, managers must recognizethat there should be no bias toward either increasingor decreasing carrying value to record fair value.

31. When valuation adjustments are necessary, themethodology used should be based on relevant com-parable data wherever possible (“relevant compara-

ble data” as used in these Guidelines is intended tobe consistent with the input hierarchy discussed inparagraphs 22-31 of FASB Statement No. 157).Recommended methodologies are discussed below.

Comparable Company Transactions32. This methodology involves deriving the valueof a company through examination of third-partyinvestments in comparable equity securities of thecompany, examination of transactions in equitysecurities of comparable companies and direct com-parisons to similar companies. These comparisonsshould be appropriately adjusted for any controlpremiums, synergistic benefits or other excess ben-efits or detriments that accrue to the owner whendetermining a proper comparable valuation.

33. These Guidelines acknowledge that until a com-pany achieves marketplace acceptance for its prod-uct or service, it is unlikely that truly comparablecompanies with determinable fair values will bereadily identifiable.

34. To the extent comparable transactions cannot beascertained and fair value cannot be reasonablyassessed and reliably measured using comparabletransactions, the following Performance Multiplemethodology should be used, if applicable.

Performance Multiple35. The performance multiple methodology appliesa relevant multiple to the performance of the com-pany being valued in order to derive the value of thecompany. This approach is most applicable to com-panies that have achieved positive and sustainableoperating performance.

36. The valuation determined using this methodologyis calculated by applying the most appropriate andreasonable multiple derived from reference to marketbased conditions of quoted companies or recent pri-vate transactions. The multiple to be used, whichmay need to be adjusted for differences in terms ofgrowth prospects and risk attributes (depending onthe size of the comparison sample, among other fac-tors), should be one of the following:

a) Current average comparable public companymultiple for similar companies in the industry;

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b) Current average multiples for recent private trans-actions of similar companies in the industry; and

c) The original acquisition multiple when no othersimilar public or private multiples can be ascertained.

The most appropriate and reasonable multiple asdetermined above will be applied to the relevantoperating performance metrics of the company toestimate fair value.

37. The manager should be confident that reason-able, relevant and sustainable performance metricsare utilized, which may necessitate the adjustmentfor one-time and non-recurring items.

38. There may be significant changes in the financial,regulatory, economic or legal climate in which thecompany operates which harm or enhance theprospects of the company, but these changes may notyet have affected performance. The manager needsto consider these changes in evaluating a company’ssustainable performance. Managers should sharewith the Valuation Policy Committee the factual dataand their assumptions that support the sustainableperformance used in the valuation determination.

39. The multiples used should be those that are usedregularly and routinely to value companies in theindustry in which the subject company is operating.If the multiples used are derived from public com-pany comparables, a discount to a private company’sequity value may be appropriate. Discounts appliedto private securities may be higher than thoseapplied to restricted public securities, which are dis-cussed in paragraph 46. Managers should share withthe Valuation Policy Committee the factual data thatgenerates the multiples used in the valuationprocess.

40. To the extent fair value cannot be reasonablyassessed and reliably measured using performancemultiples, the following methodologies may be con-sidered.

Other Valuation Methodologies41. A few other valuation methodologies, whichmay be appropriate in certain circumstances, are asfollows:

a)00000 Because of the need to use significant esti-mates and forward-looking information, discountedcash flow (DCF) methodologies should only be usedin limited situations using a discount rate commen-surate with the risks involved. These situationswould involve instances where the methodologiespreviously discussed in these Guidelines prove inca-pable of addressing the specific circumstances.

b) Net asset valuation methodologies should beused for valuing investments in businesses whosevalue is derived primarily from the underlying valueof their tangible assets rather than their perform-ance.

c) Industry-specific benchmarks, which are cus-tomarily and routinely used in specific industriessuch as price per subscriber or other industry norms,should only be used in estimating fair value whereappropriate.

42. In those circumstances where there are indica-tions that a change in carrying value is appropriatebased on paragraph 27, but the methodologiesdescribed in paragraphs 32-41 are not applicable,the manager should exercise prudent judgment inconsidering assumptions that marketplace partici-pants would utilize in their estimate of fair value.

III. VALUATION OF PUBLICLYTRADEDSECURITIES

Unrestricted

43. Actively traded public equity and public debtsecurities are required to be valued at the closingprice or bid price, except as discussed below. Activemarkets are defined as a market in which transactionsoccur with sufficient frequency (daily) and sufficientvolume to provide pricing information on an ongoingbasis, regardless of the size of the position held.

44. Discount (blockage) factors for unrestrictedsecurities that trade in an active market are prohib-ited by GAAP (FASB Statement No. 157).

Restricted45. A discount from values of actively traded securi-ties should be taken for holdings of securities when


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there is a formal restriction that limits sale of thesecurities. Examples of restrictions that may warranta discount include rule 144 holding periods andunderwriter’s lock-ups. Discounts for restricted equi-ty securities from their market price typically rangefrom 0% to 30%. When determining a discount toactively traded restricted securities, factors thatshould be taken into consideration include the com-pany’s trading characteristics (the extent to which themarket for the security is active), the investor’s abili-ty to sell its position when the restriction expires, andthe term of the restriction. The adjustment of the dis-count will vary depending on the duration of therestriction. As the remaining length of the restrictiondecreases, the amount of the discount should alsodecrease. Limitations on sale based on rule 144’svolume tests or based on a closed trading window forboard members do not qualify as formal restrictionsrelated to the security itself. Therefore discounts arenot allowed by GAAP in these situations.

Inactive46. A quoted price is not readily available for secu-rities which trade in inactive markets, where trans-actions do not occur with sufficient frequency andvolume to provide ongoing pricing data. Therefore,the last transacted price may not provide the bestindication of fair value. In such situations, anadjustment to the last transacted price may beappropriate or other valuation techniques may beutilized based on all relevant factors.

IV. OTHER MATTERS

47. There are a wide variety of securities and capi-tal structures used in the private equity industry.Such securities should be valued consistent with theGuidelines set forth above. Some examples and val-uation guidance for securities and structures whichhave not been specifically addressed by theseGuidelines include:

a) The carrying value of private interest bearingsecurities should be based on the underlying compa-ny’s ability to service and repay debt.

b) PIK dividends should be accrued in accordancewith the terms of the underlying security. A valua-tion discount may be necessary depending on the

health of the company and the realizability of theunderlying securities.

c) Valuations of securities denominated in curren-cies other than the base currency of the fund shouldbe adjusted for changes in the spot prices of the cur-rency.

d) Warrants should be carried at their fair value.

e) The rights associated with preferred stock aregenerally divided into two broad categories—eco-nomic rights and control rights. Once the enterprisevalue of the company is determined in accordancewith these Guidelines, fair value should be deter-mined by allocating value to shares of preferred andcommon stock based on their relative economic andcontrol rights.

In addition, when making their fair value determina-tion managers should recognize that liquidationpreferences are often granted to investors as aninducement to invest in a company. When a manag-er’s past experience indicates that liquidation prefer-ences will be renegotiated or will not be fullyenforced at the time of liquidation, the manager isstrongly encouraged to use the expected results indetermining the valuation of a security which has aliquidation preference.

f) Currently convertible securities should be valuedat the excess of the value of the underlying securityover the conversion price as if the security was con-verted when the conversion feature is “in themoney” (appropriately discounted if restricted). Ifthe security is not currently convertible, the use ofan appropriate discount in valuing the underlyingsecurity should be considered. If the value of theunderlying security is less than the conversion price,the carrying value of the convertible security shouldbe based on the underlying company’s ability toservice and repay the security.

g) If deemed determinable beyond a reasonabledoubt (virtually certain) escrows from the sale of aportfolio company should be valued at an amountthat the manager, using its best estimate, ultimatelyexpects to receive from the buyer in light of theescrow’s various conditions.

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h) Because of the inefficiencies of the secondarymarket, purchase and sale transactions of partner-ship interests in and of themselves may not beappropriate in determining the value of portfoliocompany valuations or positions in funds.

48. FASB’s Statement No. 157 Fair ValueMeasurements utilizes a hierarchy described as Level1, 2 and 3 inputs (Statement No. 157 paragraphs 21-31). The FASB valuation hierarchy has not beenrestated in these Guidelines. The concepts outlinedin these Guidelines are intended to be consistent withLevel 1, 2 and 3 inputs as defined. The input level isa required GAAP disclosure and provides users offinancial statements with additional clarity in how amanager made their determination of fair value.

V. CONCLUSION

49. As the private equity industry has matured in theUnited States, there is a need for greater consistencyof valuation standards/methodologies by both man-agers of, and investors in, private equity funds.These Guidelines are designed to provide a frame-work for addressing the majority of the private equi-ty industry’s valuation questions on a consistent,transparent and prudent basis. It is recommendedthat managers and investors collaborate to shareexperiences and best practices across relationships.This collaboration will narrow the range of specificdefinitions of subjective terms and will enhance theconsistent application of these Guidelines.

50. The key goals of these Guidelines are as follows:

• Encourage managers to approach valuation from aconsistent, transparent and prudent basis.

• Focus the private equity industry on the need todetermine fair value for each of their investments ina manner that is consistent with these Guidelines.

• Provide greater transparency into valuation resultsthrough the use of the Valuation Policy Committeeas described in the Guidelines.

51. The Guidelines are not intended to be all encom-passing, nor are they intended to eliminate all sub-jectivity. Rather, they are to be a guide to assist

managers and investors in agreeing to a valuationframework while allowing a manager to exercise itsbest judgment in applying the Guidelines.

52. The Private Equity Industry Guidelines Groupacknowledges that the application of these guide-lines may result in a departure from past valuationpractices. It is recommended that managers andinvestors work jointly to develop a timetable toimplement these guidelines. It is expected that overtime the broad use of these Guidelines will becomeindustry practice

53. These Guidelines are consistent with USGenerally Accepted Accounting Principles. If man-agers adopt these Guidelines it is expected that theirdetermination of fair value will be GAAP compliant.However, it is also understood that a manager maybe GAAP compliant without utilizing theseGuidelines.

NVCA Position on Portfolio CompanyValuation Guidelines (March 2007Version)

The NVCA Board of Directors reaffirmed its sup-port for the latest iteration (March 2007) of thePEIGG Guidelines on September 18, 2007. Whilethe NVCA has not specifically endorsed thePEIGG or other valuation guidelines, the NVCAboard statement of support is below:

The NVCA recommends that its members create,follow and communicate clearly the specific pro-cedures and methodologies used for valuing theirportfolios. These methodologies should be agreedto by the firm’s investors (LPs), and conform,when required, to Generally Accepted AccountingPrinciples and fair value measurement standards,recognizing that the ultimate responsibility forvaluations remains with the general partner.When evaluating current valuation procedures ordeveloping new approaches, the NVCA suggestsits members include a review of the Private EquityIndustry Guidelines Group (PEIGG) December2003 “Private Equity Valuations Guidelines” doc-ument, as reissued in March 2007 (found atwww.peigg.org). We commend the fine efforts of


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PEIGG, an independent group which sought andreflected input from the NVCA and other industrystakeholders. The NVCA encourages diligence, pru-dence, and caution when implementing the specificelements of any guideline, such as valuation changesto early-stage companies in the absence of market-based financing events.

NVCA Member Alert – Fair ValueConsiderations for Venture Capitalists -December 2008The following alert was sent to the NVCA member-ship to highlight certain issues and considerations tobe explored in the application of FAS 157, the fairvalue measurement standard. The NVCA thanksDavid Larsen of Duff and Phelps and several mem-bers of the NVCA CFO Task Force for their role indrafting this document:

“We are operating in a severely distressed investmentenvironment that has deteriorated rapidly in the pastfew months. What does this mean for venture capitalinvestors as they attempt to value privately-heldinvestments at December 31, 2008? The short answeris: despite the current very challenging economicenvironment, Fund managers must continue to exer-cise their sound judgment in estimating the FairValue of each portfolio company after consideringthe relevant facts, including current market condi-tions. The valuation process does not change, butmuch more judgment is required when we are in aperiod of economic discontinuity.Virtually all LP agreements require GPs to use USGAAP for financial reporting. US GAAP requiresFair Value reporting for virtually all VC firmsbecause they are “investment companies.” US GAAPcontinues to define Fair Value as: “the price thatwould be received to sell an asset…in an orderlytransaction between market participants at the meas-urement date.”

Fund managers need to establish Fair Values eventhough they may not currently need to sell, or cannotsell, their private investments in this market. GPsmust use their judgment in estimating the current FairValues of their investments, even though “exit mar-kets” may have few buyers, IPO markets appearclosed, and there are few, if any, relevant comparabletransactions. Such judgment should take into account

all relevant information, including a financinground’s specific terms and conditions.

There are no easy outs, rules of thumb or safe harborsfor establishing Fair Value.

As always, best considerations for Fair Value deter-mination include the following:

• The Fair Value of an investment portfolio is the sumof the Fair Value determined for each portfoliocompany using a “bottoms up” approach. Applyinga “top-down” overall percentage adjustment to theaggregate portfolio’s value is not compliant withUS GAAP.

• Valuations should reflect specific factors in abuy/sell context. For example, a GP could ask:“Given my portfolio company’s current cash posi-tion, cash burn rate, performance compared to plan,probability of meeting forecasts, the projected envi-ronment for its product or technology, etc., as aboard member, what is the lowest price that I wouldsell the company’s stock today in an orderly salewith a willing buyer?” [Footnote: A fund managershould not assume a “fire sale” of the stock, butshould assume “exposure to the market for a periodprior to the measurement date to allow for market-ing activities that are usual and customary…” -SFAS 157, Paragraph 7].

• The valuations set by the most recent financinground – perhaps even one in the third quarter of2008 – may be stale and inappropriate for determin-ing Fair Value, especially given current market con-ditions.

• The Fair Value at December 31 in many cases willlikely be different from the value at September 30,given the deterioration of the macro economic envi-ronment.

• Each valuation should reflect a company’s degreeof progress from the prior reporting date to the cur-rent one.

• To determine a portfolio company’s Fair Value, GPsshould apply their judgment in a consistent mannerand evaluate the same data they use for monitoringa company’s performance and progress. There is no

magic formula or weighting of factors.

In summary, determining Fair Value continues torequire the exercise of judgment based on objectiveevidence, such as calibrating the original investmentdecision with the current performance of the compa-ny and the current economic environment. The factthat the macro market is distressed probably adverse-ly impacts the value of most companies. This nega-tive impact may be compounded by disappointingcompany performance or mitigated by tangible andsustainable company progress.

If you need more details about Fair Value, you mightconsider the 18-page PEIGG Valuation Guidelines atwww.peigg.org, or you can download the 158-pageSFAS 157 at www.fasb.org.”

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2012 NVCA Yearbook

Appendix J: Non-US Private Equity

IntroductionThis appendix highlights various aspects of private equity activity outside of the United States and provides valuable information for comparison to the United States private equity environment. However, this appendix is not directly comparable to domestic data found in this Yearbook due to differences in definitions between the regions and variations in the currencies of each region. Additionally, this appendixprovides a brief overview of non-US private equity; data herein is not as comprehensive as the United States data pre-sented elsewhere in this publication. Despite this, the reader can use this appendix to analyze trends in private equity out-side of the United States. All data is provided by Thomson Reuters. As mentioned previously, readers should note the differences in methodology and definitions of private equity between United States and other regions before analyzing the data. For example, private equity outside of the United States provides equity capital for entities not publicly traded and consists of buyouts and venture capital. The category of buyouts includes management buyouts (management from inside the company investing with private equity investors), leveraged buyouts (the target taking on a high level of debt secured by assets), institutional buyouts (outside investors buying a business from existing shareholders), and man-agement buy-ins (management from outside the company investing with private equity investors). On the other hand, venture capital describes the process of financing companies at the seed, start-up, or expansion stages. The United States places more emphasis on the early stages of development than do other regions, based on historical analysis of invest-ments by stage. Like in the United States, non-US venture capital is considered a subset of private equity. For ease of analysis and to avoid differences in definitions between ven-ture capital and buyouts inside and outside of the United States, it is perhaps most comparable to analyze aggregate private equity in the two regions as opposed to any classifica-tions contained within.

**Special Note: The methodology used to generate the data within this appendix differs slightly from the methodology used in previous years, causing data to vary slightly from previous Yearbook issues. However, trends reported in the past remain intact. Addition-ally, most data is now replicable on ThomsonONE.com.

CommitmentsPrivate equity commitment levels, outside of the United States, totaled $115.8 billion in 2011. Asian based funds raised $53.9 billion equal to 47% of this amount. Meanwhile, European funds had $48.2 billion in fundraising commit-ments which is 42% of the total. Funds in the Other Regions raised $13.7 billion or 12%. Buyout commitments outside the United States accounted for 47% of the total. Meanwhile, Venture Capital funds represented 34%. Gen-eralist funds raised $12.9 billion in 2011. Mezzanine fund commitments totaled 2.2% of the total or $2.6 billion. Fund of Funds raised $3.6 billion and the Other Private Equity/Special Situation funds raised an additional $2.8 billion dur-ing 2011. It should be noted that these totals reflect not only the amount raised by independent funds, but also include capital gains and the amount raised by captive funds.

InvestmentsPrivate equity investing outside of the United States reached $109.4 billion in 2011. Buyout stage financing led investment activity, accounting for 69% of total dollars. The Venture Capital investments followed with 19% of the total. By number of deals, venture capital investments led with 56% and the buyouts investments followed with 35% of the total deal activity outside of the United States. Leading all activity outside of the United States, investments in the China totaled $16.8 billion during 2011 accounting for 15% of the total dollars. Canada followed with $12 billion. Australian

As interest in globalization increases with each year, private equity investors have continued to broaden their investment criteria to include overseas ventures so as to increase portfolio diversification and search for higher returns. As such, Appendix J is produced for readers to analyze non-US private equity data. All data is reported in US dollars.

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investments reached $11.7 billion or 11% of the total investment activity outside of the U.S.

Private equity commitments and investments saw

an increase outside of the United States in 2011. Commitments jumped 59% in 2011 from $72.7 billion in the previous year. Similarly, the private equity investments increased 5% from $103.7 billion in 2010.

Figure J1Private Equity Commitments Outside of the United States in 2011

Figure J2Private Equity Commitments Outside of the United States By Fund Stage in 2011

Figure J3Private Equity Commitments Outside of the United States By Location in 2011

Figure J4Private Equity Commitments Outside of the United States By Stage in 2011

Fund World Location # Firms # FundsAmount Raised in Range (USD Mil)

Asia 232 281 53,900.1Europe 119 123 48,176.3Other Regions 71 85 13,705.7TOTAL 420 489 115,782.1

Fund Stage # Firms # FundsAmount Raised in Range (USD Mil)

Buyouts 82 91 54,682.0Venture Capital 285 317 39,124.1Generalist 39 41 12,970.6Mezzanine Stage 10 11 2,603.5Fund of Funds 17 20 3,573.7Other Private Equity/Special Situations 9 9 2,828.2TOTAL 420 489 115,782.1

Company Stage # Deals # CompaniesSum of Equity Invested

(USD Mil)Buyout/Acquisition 1,880 1,780 75,330.9Venture Capital 2,971 2,758 20,200.1Other 480 439 13,848.7TOTAL 5,331 4,913 109,379.7

Company Nation # Deals # CompaniesSum of Equity Invested

(USD Mil)China 712 667 16,752.0Canada 862 752 11,967.8Australia 109 101 11,656.2Ireland 67 60 11,495.9France 578 557 8,930.0United Kingdom 633 586 8,338.3Other Nations 2,370 2,190 40,239.6TOTAL 5,331 4,913 109,379.7

PREPARED BY3 Times Square18th Floor

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INCLUDING STATISTICS FROM THEPricewaterhouseCoopers/National Venture Capital Association

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