Nesheim High Tech Start Up Addendum

UPDATE
2017 SPRING
HIGH TECH
START UP
John L. Nesheim

Although the path to startup success has been fundamentally
unchanged s ince High Tech Start Up was updated in 2000, several
significant events and trends have occurred. They have altered the
formation process, the mix of stakeholders in new enterprises, and
the magnitude of ambitions of the venture community.

Entrepreneurship rooted in the Silicon Valley style of new
businesses has spread around the globe. Resulting disruptions have
changed economics and politics of entire countries.

Entrepreneurs incorporating this newness will increase the chances
that their plans will lead to more great start-ups. Investors will
boost their value to founders of new enterprises.

A LOT CHANGED MUCH REMAINS THE SAME

Table of Contents
I. PERSPECTIVE 2000 to 2016: ......................................................................................................................... 3
II. 2000 2016 STARTUP CREATION ISSUES: Primary Startup Challenges Remain Classical ............................. 4
III. TRENDING 2016: ....................................................................................................................................... 5
High Tech Start Up UPDATE 2017 ................................................................................................................ 6
GLOBAL VIEW 2016 ...................................................................................................................................... 28
GLOBAL STARTUP FINANCINGS 2016 ........................................................................................................... 30
NORTH & SOUTH AMERICA 2016 ................................................................................................................ 48
UNITED STATES 2016 ................................................................................................................................... 53

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I. PERSPECTIVE 2000 to 2016:

After a momentary recovery from the 1990s dot.com boom to 2000 bust, the startup scene was hammered
by 9/11 in 2001, and then the Great Recession of 2008.

The venture community began a recovery in 2012 from where it slowly rose and then accelerated to a peak
in Q1 of 2015 then cooled, triggering fears of a bubble yet no balloon popped this time.

Unicorns have emerged as a huge, separate class of startup valued above $1 billion each.

Major battles with established ways of doing business have been triggered by startups that are disruptors
and game changers.

Venture firms have bifurcated, with the top tier focusing on finding billion dollar potential startups.

Crowdsourcing and crowdfunding have become established sources for startup funds as well for smaller
projects.

Schools, colleges and universities have created vast numbers of entrepreneurial classes, contests and
related activities, particularly driven and lead by wealthy startup alumni.

Incubators have morphed into accelerators that include seed financing opportunities, as well as peer
learning environments.

Many new venture firms arrived (while others quietly went out of business). Large public corporations
continued increasing investments in startups.

Replenishment of venture funds has resulted in vast increases in the size of money available to startups,
some managed by top tier firms, into the billions of dollars per firm.

Startup activity continued to be dominated by the Unites States, but other regions have also created world-
class new enterprises, notably the recent emergence of unicorns in India and China.

Venture-backed IPOs gradually increased, but slowed in 2016. Mergers and acquisitions remained active.

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II. 2000 2016 STARTUP CREATION ISSUES:
Primary Startup Challenges Remain Classical

Fundamentals of silicon-valley-style-startups continue to dominate alternatives.

Building an unfair competitive advantage remains the prime directive.

The ultimate goal remains: Be first to dominate a new, large market category. Focus wins.

Branding marketing powers startups to success. Those skills remain scarce and aggressively sought
after. Technology is required and cool, but comes in a distant second.

People remain the most important startup asset. Recruiting the best remains the biggest challenge.

The chances of success remain daunting. Most startups will try and quietly die. Chances of reaching
IPO remain lottery odds.

Leading a startup remains an intense emotional experience. Like riding a gut-wrenching roller
coaster, daily, for years. Thrills and chills.

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High Tech Start Up Update 2017 January

III. TRENDING 2016:

Sources: KPMG Enterprise Venture Pulse Q4 2016; Venture Pulse, Wall Street
Journal, Pitchbook, CB Insights, PWC Moneytree/CB Insights

Global venture capital investment remains substantial, despite major decline in 2016 activity.

Deal metrics suggest investors are still willing to pay up, take big risks.

Asian venture investing holds steady year-over-year, while Americas and Europe slip.

US experiences a significant year-over-year slide in first-time financings, though remaining at

substantial levels.

Corporate merger and acquisition of startups accounts for the bulk of exit value in 2016, but declines
quarter-over-quarter.

Disruption of established industries continued, unicorns spreading it globally.

New York City continues startup rise, now running number two in the US.

Sizable fresh funds have been raised, eager to find startups to finance.

Big disparity in fundraising activity regionally, with Europe showing a seven-year high in raised
venture capital.

Corporations continued to increase their participation in venture financings.

IPOs were fewer in 2016, with only one unicorn arriving. Backlog is substantial in number and size,
suggesting 2017 could see a sharp increase in venture-backed IPOs.

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High Tech Start

Up UPDATE
2017

Commentary

2017 January

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SUMMARY OF FINDINGS:
Primary Startup Challenges Remain Classical with
Fresh Twists

Primary Startup Challenges Remain Classical

advantage so strong that others complain.
WAVES OF TECHNOLOGY TRIGGER The objective is to emerge as victor from the
BURSTS OF EAGER STARTUPS RACING early years of intense competition,
TO BECOME ENTREPRNEURIAL dominating as the gorilla of the new market
SUCCESSES category. Thats the power of creating an
Like waves approaching the shore, fresh unfair competitive advantage.
technologies constantly appear and trigger
possibilities for entrepreneurs to start new THE ULTIMATE GOAL REMAINS: BE
enterprises. The old tech is left to mature FIRST TO DOMINATE A NEW MARKET
while the new is used to do things no one CATEGORY- Thus FOCUS WINS
thought of before. The race in the new space The quest continues: figure out what the next
begins, each company determined to emerge great market is and be first to get it right.
from the fray as victor of a new market space. That is, to figure out how to emerge from the
ensuing competitive fray as the number one
FUNDAMENTALS OF SILICON-VALLEY- dominant leader of the new category (Uber =
STYLE-STARTUPS CONTINUE TO ride sharing). Such singular focus produces
the most startup success.
DOMINATE ALTERNATIVES

No more effective way has yet been derived
for starting a new enterprise that wants to be SEED (ANGEL AND A ROUND) STAGE
world-class. The decades of experience in FINANCING REMAIN THE GREATEST
Silicon Valley are now being successfully MONEY-RAISING CHALLENGE
applied with little modification in cities and In spite of record amounts of startup money
countries worldwide. available, convincing the highest risk
investors to put money into an idea for a
BUILDING AN UNFAIR ADVANTAGE startup continues to be the hardest funding
REMAINS THE PRIME DIRECTIVE goal to achieve. Seed venture capital firms
Serial entrepreneurs and their investors look remain active, though there were fewer in
for ways to start with an initial idea and 2016 than in prior years. Some help has come
proceed to craft it by altering the initial form from better-organized angels and the arrival
of the startup, month after month, always of crowdfunding pools.
focused on eventually creating a competitive
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BRANDING AND MARKETING SKILLS enterprises have become even harder to
REMAIN MOST SCARCE AND find since 2000. A founding team that has
AGGRESIVELY SOUGHT AFTER worked together is rare and greatly boosts
The best marketed product wins. Hard for chances of getting top tier venture funding. A
geeks to accept, yet the pattern continues. real CEO is seldom seen in the initial core
Retail branding skills are especially valuable team.
to the era of consumer-centric startups.
Yet startups that are unicorn hopefuls
PEOPLE REMAIN THE MOST (consumer-centric-millennial-focused-$1
IMPORTANT STARTUP ASSET billion-global market potential) are being led
Its a people business! remains the belief of by youth without prior business experience
the icons of the venture community, those who have gotten well financed.
battle scarred VCs and serial
entrepreneurs. The initial core team of CHANCES OF GETTING TO INITIAL
founders with a handful of employees is still PUBLIC OFFERING REMAIN
central to the decision to invest or not. DAUNTINLY SMALL
Lottery odds face each startup that dreams of
EXPERIENCED STARTUP PEOPLE ARE going IPO in the not-too-distant future. Over
IN VERY SHORT SUPPLY - YET half will go out of business returning zero to
INEXPERIENCE REMAINS NOT A SHOW investors. Techie startup employees learn to
sit very close to the exits.
STOPPER

Founders and techies with startup

experience learned at venture-backed new

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New Twists to Startup Challenges

UNICORN STARTUPS AND HUGE ROUNDS OF VENTURE FINANCING CONTINUE TO
DOMINATE ATTENTION
By the end of 2016, over 175 startups were valued at least at $1 billion. The U.S. continues to lead
the number and valuation of unicorns, but Asia is number two and growing, with Europe a distant
third. More are arriving, though the trend is slowing. Just one has gone IPO by the end of 2016.
And a few more have gone out of business. More than a handful have had down rounds in which
the pricing of the company had to be dropped in order to get the next round of financing.

A couple of unicorn bankruptcies are now on the books (e.g. Powa Technologies raised $200
million and was valued at $2.7 billion; Quirky $185M raised; Homejoy $40M.) A few have had to be
sold instead of go IPO (Ideeli was sold to Groupon for $43 million after raising $107 million from
investors. Fisker Automotive, the maker of hybrid electric vehicles, sold for $149 million after
raising more than $1 billion.).

Rapid, massive, large numbers growth is everything for unicorns (now dubbed hyper-scaling).
That has proven to be very difficult and costly, yet more arrive each year. Confirmed unicorn
successes (profitable) remain to be proven as intense battles continue for leadership and
domination of new market categories. Uber is expected to lose around $3 billion in 2016 as it
fights both governments and competitors already ahead in China and India.

IPOs of unicorns first began in 2016 with one: Twilio. Snapchat registered and is expected to go
IPO in 2017.

CROWDSOURCING AND CROWDFUNDING HAVE BECOME AN ESTABLISHED SOURCE
FOR STARTUP FUNDS AS WELL FOR OTHER DEALS.
Early in its modest beginning sometime around 2006,
crowdsourcing was used to raise a minor amount of cash to be
used to get a simple product built and launched. Small things
dominated the use of the raised funds (mainly art projects and
simple games).

Only a rare few of the crowdsourced or crowdfunded to have grown successfully
to sizes ready for angel and venture capital rounds of financing. Cash is raised by
paying a fee to a crowdsourcing site such as Kickstarter or Indiegogo. Negative
critics point to nil regulations, projects that are late or never completed, and to a
few frauds where cash recipients ran off with the money, never to be found. Yet
the related pools are growing yearly as measured by cash raised by startups from
such sources.

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ANGELS HAVE BECOME INCREASINGLY ORGANIZED, CONTRIBUTING TO A MORE
RELIABLE SOURCE OF EARLY STAGE STARTUP FUNDING.
With roots in the original Band of Angels in Silicon Valley, several fresh groups formed to fund the
earliest round (seed) of Internet era startups. After the dot-bomb bust in 2000, others formed
throughout the U.S., Asia and Europe, with AngelList (angel.co) becoming prominent over the past
five years.

Recently a new phenomenon has emerged: Aggregation of
wealthy individuals for purposes of diversified investing in
startups. These syndications continue to grow in popularity.
Similar groups have been forming in Asia and Europe.

MAJOR FIGHTS WITH THE ESTABLISHED WAY OF DOING BUSINESS HAVE BEEN
TRIGGERED BY STARTUPS THAT ARE DISRUPTORS AND GAME CHANGERS.
Uber is the poster child of disruptors. Precursors include Facebook
and Google. Such startups now form the class of unicorns referred to
above. Investors are betting on a longer time to IPO (as much as a
decade or more) as such startups race to capture gorilla dominance
in each new category (e.g. the sharing economy). Each year they
burn (use up) large sources of cash (hundreds of millions of
dollars per round). They have to constantly raise more money
because in they have no or insuficient revenue streams for the foreseeable future (high burn
rate). Their focus is singular: Dominance ASAP (of users of their product or service), whatever the
cash required because it will be worth it. Thats what hyper-scaling is all about.

Big trouble including physical violence occurs because the established ways of doing business
(e.g. taxis, hotels, television advertising) experience sudden and severe financial pain. Revenue
streams become inhibited and threatened to end as the old way becomes more and more obsolete.
Thus startup business plans must now include cash to pay for lawyers and lobbyists to fight for
political victory over the angry establishment, in addition to fighting aggressive competitors.

A NEW BREED OF FUNDED INCUBATORS HAS CONTINUED TO RISE IN NUMBERS AND
INFLUENCE.
The new breed of incubator is a mix of school and seed fund. Some like to call them accelerators.
Prior era incubators had no cash to invest. They were a location for a few startup people to work
in for a while, learning from each other, until a seed round was raised from investors outside the
incubator. By 2000 those incubators had expanded, attracting people able to do advising and
supporting.

The new era of accelerators invest small sums (tens of thousands of dollars) in startups they
screen quickly. Critiques say its a blind strategy of spray and pray meaning put tiny sums into as
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many fledgling enterprises as possible, hoping one or more will be
the next Uber and or get to IPO. An early leader of the new batch is
Y Combinator.

And 500 Startups is another that became aggressive in creating a larger
and larger pool of startup capital, even expanding globally in various
partnerships. By 2016 they had become one of the top five sources of
venture capital invested.

For more, hop into this list of examples of leading incubators in the U.S.:
http://www.forbes.com/pictures/elld45fi/10-startup-incubators-that-are-
changing-the-web/

In Europe incubators have emerged like mushrooms
after the rain. Over 100 are known to exist, located
in nearly every country. A prime example is Norway
where oil and gas taxes are being invested
aggressively in startups, hoping they will succeed
and provide jobs before the gas and oil run out.

http://tech.eu/research/29/there-are-roughly-100-active-startup-accelerators-europe/

Youll also find numerous incubators all across Asia, Africa and Latin America. South Korea was
early to use government funds to incubator startups. Now all Asian countries do the same. African
nations have them, as do Middle Eastern countries. Peru is leading them in South America. There
is no lack of government and private funding for them. Most are modeled like their U.S. cousins.

CITIES AND UNIVERSITIES HAVE EMBRACED STARTUPS
Schools, colleges and universities have created vast numbers of entrepreneurial classes and
related activities, particularly driven and lead by wealthy startup alumni. It is hard to find a city or
school that has not created incubators, contests or courses for startups. Some students are seen to
even stop pursuing degrees, dropping out to do a startup.

No student eager to learn about startups will have to go far to find classes and related activities.
Today universities and colleges tout their startup activities and classes on and off campus. It
amounts to a boom covering the full spectrum, from student clubs, to research by PhDs. Large
numbers of fresh textbooks about entrepreneurship have arrived. Incubators have arrived. Alumni
are eagerly sought as class speakers and sources of future generous donations. Endowment funds
have allocated a portion of their investments to venture capital firms of note.

Clubs and small on-campus funds supply forums and cash for real
startups are being operated by young people who are also taking
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degree classes. Amounts awarded to such new enterprises are small, in thousands of dollars
typically. Contests are the most common vehicle for selecting who gets the money.

Here is an example of what to find in entrepreneurship at Cornell University:
http://eship.cornell.edu/ .

And take a look at the Facebook page for Entrepreneurship at Cornell:
https://www.facebook.com/entrepreneurship.cornell?fref=nf

This is what some pundits see in startup talent production from top schools:
http://tech.co/university-college-tech-startup-talent-2015-07 .

NEW YORK CITY HAS ARRIVED AS A VERY HOT PLACE FOR STARTUPS AND VENTURE
INVESTING.
Metropolitan NYC venture activity rose quickly after the Great Recession
of 2008, rising by 2016 into the number two location in the U.S. for
startups and their investors. Metropolitan Boston had long been number
two after Silicon Valley but has stagnated in startup growth.

Stimuli for NYCs startup boom is several. One is the arrival of
advertising-focused Silicon Valley companies (such as Google and
Facebook). Another is due to the successes of consumer Internet startups
that need Madison Avenue big thinkers to create lasting brands. Also is
the citys decision to start a high tech campus in Manhattan, lead by Cornell University: see
http://tech.cornell.edu/.

The state of New York has followed, setting up attractive services and tax advantages in various
parts of the larger state, including Ithaca, home to Cornell University (see http://goo.gl/APd17L )

A NEW GENERATION OF VENTURE PARTNERS HAS ARRIVED, SOME TAKING THE
REINS OF ESTABLISHED ICON VC FIRMS WHILE THE NUMBER OF FRESH VENTURE
PARTNERSHIPS GROWS.
Sequoia Capital and New Enterprise Associates are Silicon Valley examples of pioneering venture
capital firms who have succeeded with the generational change. Kleiner Perkins and others have
followed.

Iconic pioneers have been stepping aside, firm after firm
(http://goo.gl/j19YhD). (Photo is of venture icon DuBose Montgomery
standing by two succeeding generations at Menlo Ventures.)

Methodologies and policies that lead to investment success has settled into
repeatable patterns, been documented, and taught to newcomers in each
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firm who applied it with success. Some firms have established hierarchies and ladders to climb to
the coveted Partner position. Compensation particularly profit sharing in successful startups
has been only modestly modified over the past decade.

GLOBALIZATION SPREADS FOR VENTURE BACKED STARTUPS
Startup activity continues to be dominated by the Unites States, but other regions have also
created world-class new enterprises.

China and India continued startup expansion, the number of deals and amounts reaching new
records. In Africa, embryonic venture investors and startup newcomers continued benefiting from
the rapidly rising local economies. South America began to show signs of hot startup spots, with
Chile being the leader, and the Latin countries moving quickly. Europe continues steady, yet
exhibiting its traditional sluggish startup growth. Nordic countries in Europe continue to
outperform others in that region. Tiny Israel is the hotbed in the Middle East, with rapid startup
growth emerging by 2016 in major capitals of the larger Middle East.

Although the U.S. continues to dominate venture investing, other countries have established active
venture communities. Iconic venture firms in the U.S. have opened offices in Israel, Asia (mainly
China and India) and Europe. More data can be seen here: https://goo.gl/0P8gHJ

Since 2000, Asia has grown from its own version of the painful the dot-bomb era and is now
producing world-class new enterprises, mainly in China, several of which are unicorn in stature.
India is accelerating growth of its embryonic startup communities, especially investing in
consumer services, and unicorns have emerged there.

Beginning in the 1980s, tiny Israel became a hotbed for startups, with a long history preceding the
Asian startup boom. In 2015 unicorns were emerging from Israel as well as a longer list of lesser-
valued new enterprises. See http://goo.gl/SCd5cL

While South American economies have languished (Perus economy being the exception), Africa
has emerged as the next developing continent hot for startups. It leads the world with mobile
payment systems, to the surprise of many. And creation of games and apps has become startup
fuel. Headlines about startups are increasingly common such as 10 African startups that rocked
2014 (see http://goo.gl/CSrAE5 ).

Trends by country can be examined here: http://goo.gl/4C0WB0 .

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Implications For Startups: The Changes

In spite of 2000s tragic 9/11, plus The Great Recession of 2007-2008, as well as wars, health
epidemics, earthquakes and hurricanes, and the rise and fall of nations the entrepreneurial
world continued to grow and spread in depth and breadth.

Survivors of the dot.com-bomb that peaked in 2000 held on, survived, and figured out how to
grow large enough to thrive. Fresh startups continued to emerge in large numbers, gathered
followers, and went public.

Geographical spread of entrepreneurship lead to noted new enterprises on every continent, with
Africa a surprisingly recent hot spot. Entrepreneurial Canada has risen in stature and Latin
America is building momentum.

Venture capital firms continued investing after underperforming for nearly a decade, and
subsequently significantly improved returns to their institutional investors. Many raised large
sums of fresh capital that continued to be promptly invested in new enterprises. New venture
firms were created, supplanting the many who went out of business. More angels arrived and
began cooperative investing. Schools and incubators added fresh venues to study, learn and apply
lessons from the real world of startups.

A fresh breed of start-up has arrived: Instant start-ups spawn a new category of
enterprise and investing.
Just add water noodle lunch in a cup. An apt description for the new class of startups dubbed
Apps.

Apps for Apples iPhone signaled the arrival of a tsunami of new consumer-centric businesses that
started instantly. Also dubbed spontaneous start-ups, products from such new enterprises are
created by a handful of people and launched as fast as a cooking a meal of noodles-in-a-cup. Some
were raving successes. Most went out of business. Yet optimism reigned and one result: hundreds
of thousands of mostly first-time entrepreneurs around the world dreamed of getting rich as
quickly as Angry Birds went viral.

These startups moved fast and traveled light. In a matter of a few months of mostly part-time
work in dimly lit places, they emerged with (what they thought were) clever software products,
eager to sell them. Cash to finance the initial work came primarily from personal savings.
Commonly thereafter angel money entered, mainly from wealthy individuals, to supply the seed
round. Most venture capital firms remained cautious, preferring to enter only after sales
traction was demonstrated.

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This provoked new forms of investors and they quickly arrived, in a hurry to hop on the tsunami
and ride it to riches. These included fresh renditions of start-up incubators in the form of Y
Combinator (offering both hands-on assistance plus a bit of seed money). Then crowd sourcing
caught on, and up popped new forms of financial intermediaries like Kickstarter (they get a
percent of the cash you raise via their web site). University students started a wave of on-campus
business plan contests, winners rewarded with a modicum of cash, pat on the back and an Internet
announcement.

Classic venture investors and the few larger pools of angel funds continued to monitor progress of
these overnight sensations, supplying capital for growth only after they perceived gold in the
making. Meanwhile they shifted their large capital pools into follow-on rounds of financing for
huge private startups and for others that did multi-billion dollar initial public offerings.

The start-up game has become a gorilla game, one of huge potential, with longer
years of remaining private while raising rounds of pre-IPO financing that are larger
by an order of magnitude.
Global market potential is so huge that the new normal is about dreams of giant consumer-driven
new enterprises becoming the next Google and Facebook. The prime objective of a start-up has
become to swiftly become the dominant company in a new global market category, whether that is
industrial or retail. Life science start-ups launch drugs globally as do businesses selling software
apps for smart phones ringing in countries around the planet.

Modest aspirations and lesser market potential have failed to attract top tier investors or
ambitious employees. But start-ups with huge potential easily find employees and investors
competing for financing bold new global-thinking enterprises.

In its issue of January 12, 2017, CB Insights totaled 183 unicorns, with three arriving in January,
2017.

Much of the longer wait to go IPO stems from the small level of Sales, let alone Profits and Cash
Flow. Investors must accept that it will take a good part of a decade to attain the accounting
numbers needed to justify the huge valuations of unicorns. Investors have to continue to believe in
a giant future as manifest in the dreams and hopes of fast-talking startup founders.

As an example, many of the global-giants-to-be have a business model that requires large amounts
of retail companies to spend in the distant future a lot on advertising on the fledglings web site.
However, those business models (of Twitter and Pinterest and Snapchat) have yet to achieve the
level of sales let alone profits deemed sufficient to support the lofty valuations of the new class
of unicorns.

Historians recall Prove it became the byword after the disasters of premature IPOs during the
decade long dot.com era, ending in 2000 with a terrible crash. This in turn necessitated huge
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rounds of private capital to fuel the cash burned by aggressive hiring rates. Now that has become
the norm. Thus valuations of unicorn companies have soared

Nonetheless, hope remains for less ambitious startups to attract financing.
In 2016 the numbers showed the median later-stage financing was $10 million, with early (A)
stage at $5.3 million and Angel/seed at $1 million. There were 8,136 financings for U.S. venture-
backed companies in 2016 according to Venture Pulse. Those levels of investment and modest
(non-unicorn) valuations are evidence that the door remained open to many startups with less
than unicorn ambitions.

This opened an opportunity for some venture capital firms. Overlooked, the more modest startups
offered attractive return on investment potential. Venture firms unable to join the huge Uber
syndicates focused on earlier, smaller rounds represented by overlooked new enterprises. This
spawned the fresh arrival venture capital firms focused on seed and A rounds. And angels also saw
the opening as advantageous, and moved to create pools of capital dedicated to the smaller, early
rounds of financing.

Founders that get to IPO can expect to be much richer.
Thanks to the global potential of the new markets, larger sales and accompanying valuation at the
moment of liquidity (at the IPO or when the company is sold) mean a larger pie will be divided
among founders and investors. This translates into larger absolute wealth for founders and early
employees in spite of the reduced percentage of ownership from raising large amounts of venture
capital. Thus the adage remains, It is better to be a small fish in a big pond, than a big fish in a
small one. This is one characteristic that has remained a constant over the past three decades of
venture-backed startups.

In absolute terms, the gorilla world-class startups have generated billionaires rather than
millionaires since 2000. While some founders do arrive at IPO owning as much as twenty percent
or more of the company, that is so rare as to be statistically insignificant. More common is a small
single digit ownership worth hundreds of millions of dollars. Meanwhile, unicorn founders are
dreaming of adding one more zero to that.

Retail marketing methods especially positioning and branding have become
ubiquitous and mandatory in all industries.
Internet-era start-ups like Amazon.com demonstrated success by employing marketing methods
created and refined over half a century by world-class American retail marketing and advertising
brains. In the prior decade, Al Ries and a handful of other icons of Madison Avenue (the real Mad
Men) had boldly transformed retail branding and marketing methods, and spread the word to
CEOs. The result was world dominance by the likes of Procter and Gamble. When the Internet era
arrived, startup leaders merged clever techies with such retail branding and marketing to create a
powerful combination that crushed challengers who clung to But the best technology should
win!
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As aggressive use of psychological positioning and product branding (that the real Mad Men
invented and perfected) won in the global branding wars, the same marketing minds of the retail
world turned to startups and technology corporations. They showed industrial powerhouse Intel
how to win using Intel Inside. And they taught a fresh wave of new social-centric enterprises
how to use those marketing tools to create significant winning products that became brands
known worldwide. More post-Facebook era start-ups also began to employ such methods in
efforts to rise above the ever-increasing herd of look-alikes those pesky and large number of me-
too startups.

Industrial enterprises information and life sciences also discovered that those marketing tools
could add power to their less sexy businesses. The successful branding program Intel Inside
stood out as an early example for industrial suppliers to emulate. Geek power diminished,
marketings rose. Features wars led to bloodbaths, but execution of plans for retail-style brand-
building resulted in gorillas such as Google, then Facebook, then Twilio and many more.

This consumer-centric marketing wave opened new cities as places for creating masses of start-
ups focused on consumer products and services. One example is retail and advertising centric New
York City. By 2013 it had risen from start-up obscurity to number two behind Silicon Valley in
start-up activity. And more is coming. Cornell University has begun building a large technology
and entrepreneurial campus in New York City.

Nearly every other large metropolitan region of the world particularly Asia is actively
experiencing the arrival of waves of new consumer-centric enterprises. Africa and Latin America
have also joined the wave. The resulting global competitive intensity increased the value of
creating branding differentiation via consumer marketing skills.

Inexperienced start-up leadership has become the norm.
While many of the startup waves (e.g. big data, artificial intelligence, personalized medicine) have
been founded by techie CEOs, the first-timer, non-techies have also arrived in droves, bringing
consumer knowhow and branding expertise. They are confident of success for several reasons.
New consumer-centric enterprises benefit more from clever marketing than wonders from
engineers. Only lite-technology is required for doing an instant startup such as an iPhone app.
No rocket science is required to do a Twitter or Snapchat. This opened the door to more
opportunities for non-technical and first-timer people to start a new enterprise.

In addition to the skill set shift, another characteristic emerged. First-timers are most often in the
leadership roles (founder CEO and vice presidents) in this recent wave of fast moving start-up.
Part of it is due to the new-great-thing that they understand and the prior generation doesnt
(yet). Uber, Airbnb and such.

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Anybody can do a start-up and get rich is now frequently heard. Among the consequences of
such naivet are common start-up errors and difficulties. A typical and very expensive marketing
blunder is thinking that a lot of clever advertising is needed to build a brand.

Another experience in short supply is managers. People familiar with managing employees are in
short supply among this fresh wave of eager entrepreneurs. Many lack free enterprise experience,
that amazing mix of working in young startups plus experiencing the special challenges of real
startups. Its a wild rollercoaster! This shortage of qualified startup leadership is especially
evident in socialistic economies (continental Europe) and in developing countries dominated by
tightly controlling governments, such as those in Asia and Africa.

Investors thus have become especially careful choosing which founders to invest in. For serial
entrepreneurs this is good news. Their experience and successes make them extra attractive to
investors and prospective employees. For the inexperienced, it is a note of caution.

Booms and busts, bubbles and pops continue to be the nature of venture investing,
adding to challenges for start-up founders.
History of the past half century show that each of the big waves of startups exhibits the basic
boom-to-bust nature. The wave attracts a huge number of eager entrepreneurs, creating a tsunami
of startups. They attract thousands of lusting (read that greedy) venture investors. Aggressive
angels and new venture capital firms in
competition with established venture capital
giants rush to get in on the next great land rush.

When the inevitable shakeout occurs, many start-
ups and their investors go out of business.
Surviving venture investors become even more
selective. When the bubble pops, founders seeking
financing experience a sudden gut-wrenching drop
in pools of cash available and struggle to attract
any investor interest. The dot-com era of the
1990s and green energy boom-to-bust of the 2000
2010 era are examples.

By 2013, the rise in huge IPO valuations was coupled with a return to early stage startup
financing. This began tilting the negotiating scales in favor of founders. That is a classical signal
that a new wave has once again trying to form. Prognosticators begin talking about bubbles
forming and speculating on popping dates. Currently that is a continuing topic in the venture
communities many blogs.

For startup founders it all adds to the uncertainty of timing when to begin seeking the first and
then the follow-on rounds of financing.
18

Venture capitalists and startups went through a dry spell finding it difficult to raise
fresh capital until 2014. Since then lots of fresh capital has replenished venture
capital pools.
Following the dot-com bust in 2000, for nearly a half decade established venture capital firms
found it very challenging to raise new funds. And newly incorporated venture firms faced cold
receptions when looking for their first investors. It was tough sledding for any VC firm during
2000 2013. They very closely guarded their remaining cash, thus making it tougher for startups
to raise money.

Lower than historical returns on existing venture capital funds limited interest by university
endowments, pension funds, foundations and other large pools of institutional money. Weak IPO
markets constrained enthusiasm. Many venture firms that barely survived the dot-com-bubble-
burst quietly closed their doors when they ran out of cash for new deals.

This reduced competition among venture investors and moved negotiations for pricing of startup
deals in favor of investors (Sellers market). Start-up founders found it increasingly difficult to
find eager capital.

By 2012 the balance shifted, and began to move away from favoring investors, giving more
negotiating power for founders arriving with clever ideas potentially worth billions at IPO. As the
trend continued to shift in favor of startups (Buyers market) the boom era mentality picked up
speed.

By 2014 the shift was well underway. Venture firms, small and large, had raised record levels of
fresh cash to invest and startups rapidly tapped into those funds. Startup founders rapidly tapped
into those funds.

By 2015 there was a peak in startup founders seeking fresh capital. Angels had become more
organized (such as AngelList) and began giving serious competition to established early stage
venture capital firms that had been historically relied on for seed round financings.

In 2016 more money was raised, adding to venture pools of both new and established venture
pools. This was especially noticeable outside the United States.

Lackluster IPOs delayed liquidity events, constrained enthusiasm for startup
investing until 2013 when the door opened and a few venture backed startup IPOs
emerged.
Initial public offerings have been significantly below historical levels since 2000. Sales and
mergers of start-ups have also lagged. Unwinding the dot-com boom-to-bust cycle has taken far
longer than most expected. The return to normalcy was further hindered by the 9/11 attack and
the deep economic recession of 2008-2009.
19

In 2012 the first of several large IPOs took place, composed of start-ups that had waited over a
decade to generate liquidity for investors. Linked-in lead a brief burst of eager start-ups racing to
list on the U.S. stock exchanges. However the Facebook IPO was over-promoted (hyped) and the
IPO execution was botched. The distribution and initial trading of the new shares was a disaster,
resulting in a sharp pullback by institutional investors in other initial public offerings.

None-the-less more modestly valued start-ups were able to attract the attention of investors and
achieved their coveted initial public offering.

Meanwhile the backlog of over-due IPOs continued to grow. By 2013, 256 venture-backed IPOs
occurred, followed in 2014 by 105. Momentum continued into 2015 but slowed in early 2016 as
the growing number of billion dollar valued unicorns chose to remain private instead of going
IPO, thus raising rounds of capital in the hundreds of millions of dollars each.

Mergers and Acquisitions remains the most likely liquidity exit for venture
investors.
Sale of startup continued to be the most likely exit, with the dream of IPO unable to be reached by
most. A few found this very lucrative such as WhatsApp sold to Facebook for $21.8 billion. Large
public corporations have been very active acquiring Internet of Things and Artificial Intelligence
startups.

Going IPO requires considerably more value and sales potential.
To go IPO, the stock market value required to go public has increased significantly. The minimum
required by investors around 2000 was at least $100 million of value with at least $25 million in
profitable sales for the prior year. Now it has risen to at least $500 million of stock market value
and at least $50 million in annual sales, with profits an afterthought. Even that is considered
barely qualified to go IPO by major investment bankers who sell the new shares. The desired IPO
gold medal is $1 billion of company value.

This is due in great part to expanded expectations generated by the larger potential inherent in
the globalization of consumer and related industrial markets, as well as the nearly instant access
to global sales channels via the Internet. And the disintermediation startups like Uber contribute
more to expectations. Thus to attract top tier venture investors and top talented employees, a
startup that wants to attract their attention must be perceived as able to swiftly become a leader
in a vast, new category and spread worldwide, from first product launch.

The IPO market in the US for VC-backed companies dropped sharply in 2016. Here is what KPMG
reported:
The IPO market in the US for VC-backed companies almost came to a standstill in 2016
following a number of high-profile IPOs earlier in the year that failed to achieve their private
20

sector valuations. In the latter half of the year, a small number of tech companies tested the
IPO waters again. Twilio showed strong Q3 and Q4 pricing, which could be a positive sign for
the IPO market in 2017.
Expectations that a number of large private tech giants will head to IPO early in 2017 are
driving renewed interest in the IPO market. Already, Snap, the parent company of Snapchat,
has filed for an IPO expected to occur in Q117, while others are expected to follow suit,
particularly if Snaps endeavor is successful. The opening up of the IPO market would likely
have a positive ripple effect on broader VC investment.

Global expansion of entrepreneurial zeal continues to spread, particularly in
developing countries.
Fast growing economies have continued to attempt to emulate Silicon Valley style venture-backed
startups. Tiny Israel was first to set an example of how to succeed, shortly after the personal
computer boom of the 1980s. Amazing start-up numbers and successes resulted. Local investors
sought the riches of the classical Silicon Valley style start-up, some teaming up with American
venture capital firms spreading their wings, others forming angel pools. Soon local venture capital
firms were started in Israel. Its venture community prospered and matured.

During the 1990s, investors in China did the same. They spawned several new China based
enterprises that often mimicked U.S. based start-ups: Baidu (Google) and WeChat (WhatsApp) are
examples. Later the Chinese winners went IPO on U.S. stock markets. India was slower to respond
but now has a robust startup and venture community hard at work.

In Germany, during the decade prior to 2014, copycats were aggressively created and funded by
the likes of the Samwer brothers. Their innovation was nil and painted the German startup scene
with negative headlines. Few European startups emerged in any EU country by comparison with
the rest of the world, with Swedens Spotify the rare exception.

Elsewhere there were more startups. South Korea saw a fast rise in digital game startups and
found success in other industries. Most focused on sales in new local markets. Some got to IPO on
local stock exchanges. Peru spawned several agricultural start-up winners. Mexico began to grow
new enterprises such as those in contract manufacturing as wage inflation pushed more of Chinas
factories out of the price sensitive industries.

By 2000, African economies began growing faster than in China, India and South America.
Booming export businesses and local economies in several African countries are now spawning
entrepreneurs with big ideas for creating large businesses. Gaming is one example where some
African startups have started successfully. Latin American has recently emerged aggressively with
fresh venture capital firms and a wave of new enterprises.

21

Large American venture capital firms opened offices in many of those countries, seeking riches in
emerging markets. The results are still embryonic but a few are turning out winning local startups.

Among the consequences is a sharp increase in global competition for start-up ideas. There is no
longer much hope that any idea is original. The Internet makes information spread swiftly,
becoming ubiquitous. Investors hear about a new kind of startup in one country and quickly in
various countries nearly simultaneously seek local start-ups in hopes of getting in early on the
first start-up investment opportunities in the next global winner.

Other Notable Shifts and Alterations
There have been other notable movements among the venture community since 2000. Here is a
snapshot:
Time to Funding
Fast speed to get the money and then to launch the first product became the marks of new
enterprises, particularly consumer-centric startups. The basic steps to create and grow them
remained the same as for other groups, with a marked change: the seed round stage was
commonly begun without a deeply documented written business plan, instead using a deck of
PowerPoint slides. And others just got started by gathering quick cash from crowdsourcing
pools.
Legal and Security

Intellectual property safeguarding concerns were heightened by concerns about legal practices in
developing countries, notably the copying of consumer and industrial products and technologies.

Cyber security concerns also rose as hacking succeeded. The need for protection via
implementation of safeguards stimulated creation of related new startups. Hacking has continued
and has gotten so bad that some cyber security startups focused on inventing high technology
weapons to fight hacking were themselves hacked.
Business Plan
Haste to get seed money continued to dominate first-timer founders priorities. Thus they avoided
the considerable time and effort required to complete a forty page written plan. Yet experienced
serial entrepreneurs continued to show up at investor meetings well prepared, including
impressive customer surveys, significant thinking about competitive strategy and documentation
of marketing positioning, branding plans and financial forecasts, as well as details on scaling
swiftly to global proportions.
Team
Shortages of experienced start-up people returned after the Great U.S. Recession. Wages began to
rise and techies were soon in short supply, particularly as Silicon Valley rocketed back into action.

22

The shortage was even greater outside the United States. Developing economies such as China,
South Korea and India proved to be short of entrepreneurs with knowledge and skills required for
doing a Silicon Valley style new enterprise.
Ownership
Basic ownership sharing via stock options spread around the globe. However, compared with
Silicon Valley, lower percentage ownership of shares for employees became the norm. This
reflected the lack of experience and weak negotiating alternatives for employees in countries
outside the U.S..

Several giant start-ups like Facebook had historically higher percentage ownership by founders.
This trend continued with the Ubers and other unicorn startups. It also raised expectations of
individuals who dreamt of creating the next star-studded new enterprise.
Leasing
Equipment leasing continued to be a minor, supplementary source of financing for new
enterprises. A few big thinkers created start-ups that lease jet aircraft and other big-ticket
equipment. Landlords remained open to investing in start-ups in local markets, particularly in
developing countries.
Bankers and Bootstraps

The ranks of investment bankers doing initial public offerings altered noticeably. The specialized,
smaller firms are gone, leaving giants like Goldman Sachs and Morgan Stanley. A handful have
survived several of the ensuing economic crunches and are now leading the IPO market for
startups to be listed on U.S. stock exchanges. Their considerable financial capital and clout are
necessary to do the IPOs of billion dollar new offerings. And they have become leaders in
syndicating rounds of financings for the startup known as unicorns, raising $100 million per
round, and more. Meanwhile the larger M&A market generates high transaction value businesses
for their merger and acquisitions departments.
Angels and Other Sources

Angels have made a noticeable advance, moving from mostly wealthy individuals into groups of
angels pooling resources and meeting regularly. Angel List is an example.

Some angels came from being an early employee in a famous startup (Google). They cashed in
their stock options and began investing in startups, becoming influential super angels. They act
more like venture capital firms and form syndicates, pooling capital that invest in seed and
perhaps follow-on rounds of financing. They are less like angels of prior decades: wealthy
individual angels doing modest seed rounds. Most super angels have shortly thereafter moved on
to become venture capital firms backed by large sums of traditional institutional money.
Mergers, Spinouts, and Corporate Venture Capital

Most corporations invested in start-ups for key strategic reasons, not with cash return on
investment in mind.
23

Intel Capital has set the bar for corporate venture capital when measured by longevity and
successful liquidity events. After 2000, most other American and European corporate venture
efforts ceased. Only over the past five years have a notably more corporate venture departments
become active (e.g. Google, Qualcom). Statistics show as many as one in five of later stage rounds
of financing of a startup had some corporate money.

Samsung and other Asian corporations quietly entered venture investing, mainly in the U.S.,
joining some significant sized deals. Google and Qualcomm joined the ranks

Private start-ups continued to be acquired by young public corporations. Amazon, Google and
Facebook for example continue to purchase billions of dollars of small new enterprises of strategic
importance.

Occasional start-up opportunities remained for entrepreneurs to purchase orphan businesses of
large public corporations.

24

SUMMING IT UP

FUNDAMENTALS OF SILICON-VALLEY-STYLE-STARTUPS CONTINUE TO DOMINATE
ALTERNATIVES

This established process has proven superior to its alternatives. Originally documented in High
Tech Start Up, the methods and techniques have been widely disseminated. Modified to fit the
degree of local maturity in countries (developing Africa, emerging China and India, plus Latin
America) as well as awakening metropolitan areas (New York City), it has generated wave after
wave of fresh enterprises and their high risk venture investors.

Access to investors via introductions remained vital to get the money. Thus networking and
contacts continued to demand time and effort of budding entrepreneurs. The resulting pre-
screening process taxes the energies and emotions of founders in a hurry to get started, yet is the
unavoidable right-of-passage for the first-time entrepreneur.

The starting idea for each startup continues to change often and significantly along the road to
IPO. Radical changes have been dubbed pivoting to signal the marked departure taken.
Morphing, altering and shifting are expected day after day, ever changing. That is one reason
people from large corporations often struggle in their first startup.

Important startup leaders and contributors remain in very short supply. In addition to people
familiar with successful new enterprises (serial entrepreneurs), experienced board directors
continue to be in short supply and remain one of the keys to the success or demise of venture-
backed startups.

Chaos, Launch and Tornado remain the three stages of the enterprise, prior to IPO. Each demands
special skills and thus as the startup grows the founders and their initial core teams most often
must stand aside, making room for new teams. Rare is the new enterprise whose founders are in
place as CEO and VP at time of IPO.

Marathons continue to dominate the time to success, when the cash burn rate is predictable and
the liquidity event for venture investors is the clear (IPO strongly preferred, with a high priced
sale a reluctant okay). Sprints in months to wealth remain make-believe dreams of the nave.

Venture firms investment success per startup remains in the range of ten to one odds that a seed
round investment will go IPO. The odds rise and fall with each boom-to-bust wave. Failure rates
(bankruptcies) continue to be well over half of the startups that got money. Sale of startups fill the
remaining portion, some of it for respectable returns on investment (about half) with the
remaining constituting little more than sale to get some cash back for investors (founders get
zero).
25

The rush to invest continues to generate intense competition between venture firms. Partners get
pushed out (less success), and firms fail (investment funds return zero to institutional investors).
Icons emerge (New Enterprise Associates, Sequoia Capital). That intense competition is used by
serial entrepreneurs to achieve superior valuations for each financing round for their successive
enterprises.

Intuition rather than pure rationale continues to be heavily used by most of the established angels
and venture capitalists in their investment decisions. However, the experienced icons do an
immense amount of digging, research and numbers analysis prior to reaching for their
checkbooks.

The paradox of speed to invest remains a quandary for venture investors: The dread disease is
FOMO, Fear Of Missing Out. We cant miss out on this one! is very real and intense, provoking
fear, greed and the rest of the intense emotions. Do you dare sit out the wave of [insert here the
hot topic of the times: Internet; unicorns. . . ]. Ready, shoot, aim! is often critically cited as the
method by which eager partners invest venture funds, with due diligence checking done at a
minimum in order to not miss the next great startup deal.

Lessons learned have now been repeated countless times in blogs, books, and videos. The Internet
is flooded. Learning about entrepreneurship has never been easier.

Global awareness of the Silicon-Valley-style startup process has spread its experiential knowledge
to governments and universities around the world. Waves of incubators and classes spread the
know-how, stimulating more eager founders.

The fundamental drive to dominate a new market fresh category continues to propel startups.
Arriving as the gorilla of the new space is the objective. Achieving that comes via construction of a
competitive advantage so strong your competition complains it is unfair.

Yes, It is different, this time! yet its still the same.

End of Commentary 2017

26

27


GLOBAL VIEW
2016

28

9
5 4
2
8 7 1
6
10 3
Top 10 global financings in Q4 2016
1 Yixia $500M, Beijing 6 Yiguo $200M, Shanghai

Video platform Food products & e-commerce
Series E Series C
2 51credit $394M, Beijing 7 Xueleyen $200M, Hsinchu

Online credit marketplace Online education platform
Series C Series C
3 Innovent Biologics $260M, Suzhou 8 Payoneer $180M, New York

Pharma & biotech Online payments distribution
Series D Series E
4 BlueRock Therapeutics $225M, Toronto 9 Sigfox $162.1M, Labege

Pharma & biotech Cellular network
Series A Series E
5 Opendoor $210M, San Francisco 10 Yunmanman $160M, Shanghai

Residential real estate platform Mobile logistics
Series D Series D
29
Source: Venture Pulse, Q416, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, January 12, 2017.


GLOBAL STARTUP FINANCINGS 2016

Uncertainties hold back Global VC funding through end
of 2016

Sources: KPMG Enterprise Venture Pulse Q4 2016; CB Insights; Wall Street Journal

After a record breaking 2015, 2016 offered a reality check to the venture capital market
around the globe. Concerned about high valuations and other economic challenges,
they tightened their funding taps and became more cautious with their investments. The
uncertainties associated with the June Brexit vote and its aftermath in the UK, ongoing
concern around the lack of exits and the end-of-year presidential election in the US only
added to the caution.
Despite the nervousness permeating the VC market throughout much of the year, VC
funds conducted what many believe to be a record amount of fundraising. This
fundraising, combined with the settling down of several macroeconomic uncertainties
that plagued 2016 and the belief that the US IPO market will open again in 2017,
however, is giving investors hope that 2017 will see renewed interest and activity in VC
globally.
Global annual VC funding remains high, while deal volume plummets
Globally, the total amount of VC funding in 2016 came second only to the peak of 2015,
making it a reasonably good year overall for the VC market, despite the steep drop-off
experienced in the second half of the year. While 2016s total level of funding may be
relatively good by comparison to previous years, the major decline in the number of
deals suggests a more complicated year for VC investment.
In Q416 in particular, funding dropped to an 11 quarter low, while the total number of
deals fell to a number not seen since Q411. The Americas, Asia and Europe
experienced a marked decrease in both metrics, with Asia and the Americas
experiencing the largest declines. Europes VC market showed some resilience in the
amount of VC invested, although the regions VC market as a whole remains but a
fraction of those in the other regions.
Caution driving investor behaviors

2016 was characterized by far more caution on the part of investors. While many VC
investors were jumping the gun on investments in 2015 so they wouldnt miss the
perceived investment boat, during the second half of 2016, in particular, investors
became more selective and took far more time to evaluate potential investments.
30

Investors increasingly focused on companies that had a concrete business plan and a
proven path to profitability. Companies began to recognize that they could no longer
burn cash if they wanted to attract investors.
Investor caution as a result of IPOs failing to achieve their private sector valuations earlier
in 2016 also drove many investors to request greater down-round protections for
investments. An increasing number of deals also involved convertible debt or options
coverage in the event companies could not meet identified milestones.
IPO market fizzles in 2016, but hope for 2017 renewal

The IPO market in the US for VC-backed companies almost came to a standstill in 2016
following a number of high-profile IPOs earlier in the year that failed to achieve their
private sector valuations. In the latter half of the year, a small number of tech
companies tested the IPO waters again. Twilio showed strong Q3 and Q4 pricing, which
could be a positive sign for the IPO market in 2017.
Expectations that a number of large private tech giants will head to IPO early in 2017 are
driving renewed interest in the IPO market. Already, Snap, the parent company of
Snapchat, has filed for an IPO expected to occur in Q117, while others are expected to
follow suit, particularly if Snaps endeavor is successful. The opening up of the IPO
market would likely have a positive ripple effect on broader VC investment.
Corporate VC participation continues to grow
Corporate investors were particularly active in the VC market during 2016, with Q416
being no exception. Many corporate investors have different KPIs for their investments
than do VC funds, PE firms or institutional investors. A combination of strategic and
investment drivers have kept them active, even in a market dominated by caution
overall.
Corporate investors are also making a broad range of investments beyond simple direct
VC funding. While a number have set up corporate VC funds, other forms of investment
are also growing, including the development of internal business accelerators or the
sponsorship of incubators that align with their future strategies. There is little doubt that
an increasing number of corporates are looking to the long-term value offered by
supporting startups and fostering the innovation ecosystem. As a result, it is expected
that corporate participation will likely remain high or even grow further in the foreseeable
future.
VC Investment in Asia and Americas drops dramatically

VC funding to Asia-based and Americas-based companies dropped dramatically in
Q416. In Asia, the lack of large mega-rounds caused significant declines during the
quarter, with just one $500m+ financing round during Q4 a $500m Series E round to
Beijing-based software company Yixia. In the US, the largest deal of the quarter was
31

less than half of that size a $210m Series D round to San Francisco based software
company Opendoor.
In Asia, the total dollars invested came relatively close to 2015, although the total number
of deals in the region dropped sharply. In the Americas, both deals volume and deal
value dropped considerably compared to the banner year the region experienced in
2015.
Europe shows some resilience in Q4 despite uncertainty
While Europes VC market experienced a challenging year overall, the region showed some
resilience in total capital invested in Q416 compared to the experience of Asia and the
Americas. In a post-Brexit world, investors mostly appear to be taking a business as usual
approach to their investments until more details around the UKs Brexit strategy are released in
2017. While the investment environment remains cautious, a number of positive factors have
helped with building resilience, including several successful IPO exits by European companies.
Government initiatives by the UK, France and Germany also have set the stage for additional
VC investment in 2017.
Governments helping to drive and support innovation economy

One positive trend seen during 2016 is the rising interest in governments supporting innovation
and the development of technology hubs, with initiatives coming from Europe, in particular
during Q4. In the UK, the government announced 1 billion in funding to drive the development
of digital infrastructure, part of which includes measures to support UK-based startups such
as investing 400 million into venture capital firms through the British Business Bank1. This
announcement could reflect the UKs desire to show its ongoing commitment to being a
leading technology center despite plans for an exit from the EU.
The governments of Germany and France are also working together to create a 1billion fund
to assist startups in their countries to grow beyond the seed-stage2. This announcement
suggests the level of importance both countries are placing on helping startups grow. While
companies can typically get access to seed-stage funding or late-stage funding following proof
of concept, middle-stage funding can be more difficult. By bridging the gap, the governments
are showing their commitment to developing a solid ecosystem for startups at all stages of
development.
In China, the Central Government has continued its efforts to implement its 5 year strategic
plan, which includes a large focus on innovation. In Q4, provincial governments within the
country started working on the implementation of specific innovation-focused initiatives. For
example, in Q4 the Hubei province announced $81 billion3 for investments focused on
diversifying the job base as the country works to move from a manufacturing-based economy
to an innovation-driven one. This money will be invested through a number of large investment
companies, such as Sequoia Capital and CBC Capital.
32

Healthtech remains a hot investment area
A number of areas peaked VC investor interest during 2016, including healthtech, fintech,
artificial intelligence, and the Internet of Things. While each of these areas won significant
attention, healthtech and biotech stood out as an investor priority in all regions of the world a
trend expected to continue into the next year. The reality is that many jurisdictions are faced
with major inefficiencies across their healthcare systems. Companies that have strong
solutions to a myriad of healthcare issues, from back- office scheduling to patient record-
keeping and diagnosis, will likely be able to obtain funding. Other areas expected to continue
to attract significant interest over the next year include artificial intelligence, virtual reality and
data analytics.
Cautious optimism heading into 2017

Looking into 2017, there is a sense of cautious optimism with respect to the VC market globally
and in key regions around the world. Should the IPO market open up, as many expect, this
liquidity will likely have a positive impact on the VC market as a whole. At the same time, it is
expected that investors will remain cautious with their investments. The days of companies
being able to burn cash are gone for the foreseeable future. Rather, investors will likely
continue to focus on those companies that have an efficient operating structure, strong
business model and defined path to profitability.
33

Global venture financing by year

2010 2016
18,157 17,992
15,800
13,665
13,006
10,842
8,459
$45 $64 $59 $65 $108 $141 $127

2010 2011 2012 2013 2014 2015 2016
Capital invested ($B) Deal count
Note: Refer to the Methodology section on page 127 to understand any possible data discrepancies between this edition and previous
editions of Venture Pulse.

Amid the ongoing reset in the venture industry worldwide, its worth noting that total VC invested remains
very high, in fact, nearly twice the total seen in 2013. Although driven by mega-financings, the consistent
highs seen in round sizes and valuations on a global basis speak to the demand for worthwhile startups to
fund among venture firms, as well as the demand for exposure to potentially high-growth businesses by
institutional investors via the venture asset class.
34
2017 KPMG International Cooperative (KPMG International). KPMG International provides no client
services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q4VC 10

Global venture financing by stage

2010 2016
$50 6,000
$45
5,000
$40
$35
4,000
$30
$25 3,000
$20
2,000
$15
$10
1,000
$5
$0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2012 2013 2014 2015 2016
Capital invested ($B) # of deals closed Angel/Seed Early VC Later VC

The final quarter of 2016 saw the lowest total of VC invested $21.8 billion for a given quarter since
Q114, which recorded $20.9 billion. As for deal flow, the year-over-year decline from Q415 was just over
30%, while to find a comparably low quarterly tally for total activity, one must look back to the final quarter of
2011. In short, the highs of 2014 and 2015 are on the wane, slowly but steadily.
35

36

37

38

Global financing trends to VC-backed Global financing trends to VC-backed

companies by sector companies by sector
2010 2016, VC invested ($B) 2010 2016, Number of closed deals
100% 100%
Commercial
Services
90% 90%
Consumer
Goods &
80% Recreation 80%
Energy
70% 70%
HC Devices &
Supplies
60% 60%
HC Services &
50% Systems 50%
IT Hardware
40% 40%
Media
30% 30%
Other
20% 20%
10% Pharma &

10%
Biotech
0% Software 0%
2010
2011
2012
2013
2014
2015
2016
2010
2011
2012
2013
2014
2015
2016
The outsized proportion of VC investment attracted by software companies in 2016 is testament to the
gradual pervasion of software into multiple industries with outliers, such as Uber, raking in billions of dollars
as they disrupt traditional sectors. Its also notable that even as overall VC invested climbed over the past
few years, pharma and biotech companies still drew in plenty of VC, attributable to the strong demand for
more innovative therapies.

39

Global financing trends to VC-backed companies by continent
2006 2016, VC invested ($B)
$90
Americas Europe Asia
$80
$70
$60
$50
$40
$30
$20
$10
$0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Global financing trends to VC-backed companies by continent

2006 2016, number of closed deals
12,000
Americas Europe Asia
10,000
8,000
6,000
4,000
2,000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
40

Corporate VC participation in global venture deals

2010 2016
15%
13%
12% 12%
11% 12%
11%
$12 $17 $18 $20 $38 $60 $65

2010 2011 2012 2013 2014 2015 2016
Capital invested in associated deals ($B) % of total deal count

As venture capital becomes more institutionalized and corporations hunt for innovation via acquisitions,
participating in the backing of fledgling startups to supplement R&D or to position for ownership down the
road is only becoming more popular, with total VC invested driven by outlier financings of large, late-stage
businesses in which corporate venture arms took part. Investing purely for financial returns is also a
significant driver*.

* The capital invested is the sum of all the round values in which corporate venture capital investors participated, not the amount that corporate
venture capital arms invested themselves. Likewise, the percentage of deals is calculated by taking the number of rounds in which corporate venture
firms participated over total deals.
41

Global first-time venture financings of companies

2010 2016
7,137
6,756
6,024 6,020
5,116
4,070
3,781
$9 $11 $13 $11 $14 $18 $13

2010 2011 2012 2013 2014 2015 2016
One of the primary themes in venture analysis over the past year has been the gradual increase in investor
caution as a driver of declining deal counts. The drop-off in first-time financings of fledgling startups, a year-
over-year decrease of nearly 33% in number between 2015 and 2016, testifies to a shift in investor sentiment
as capital is hardly in short supply and the pipeline of companies looking for funding has not diminished
significantly.
42

Global unicorn rounds

2014 2016
$10 25
$9
$8 20
$7
$6 15
$5
$4 10
$3
$2 5
$1
$0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2014 2015 2016
Capital invested ($B) # of deals closed
The unicorn phenomenon, in which a private company received a post-money venture valuation of
$1 billion or more, peaked in 2015 and has since seen a considerable decline in frequency. Just 6 of such
financings occurred in Q416, the lowest quarterly tally since 2013, when the term was coined. Venture
investors, both traditional and non-traditional are increasingly wary of such expensive financings,
particularly given the current liquidity climate*.

* PitchBook defines a unicorn venture financing as a VC round that generates a post-money valuation of $1 billion or more.
43

Global SaaS investment activity

2010 2016
$12 1,200
$10 1,000
$8 800
$6 600
$4 400
$2 200
$0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2012 2013 2014 2015 2016
The declining number of SaaS venture rounds is more testament to consolidation within the space
beginning to occur and the relative overheating of valuations within the sector than anything else. Relative to
Q415, the final quarter of 2016 saw its tally of completed financings fall by 33%. With outliers in SaaS M&A
such as Qlik Technologies, Demandware and more, certain segments are already seeing considerable
competition from sizable players as they acquire in order to bulk up their offerings.
44

Global healthtech investment activity

2012 2016
$1.4 160
$1.2 140
120
$1.0
100
$0.8
80
$0.6
60
$0.4
40
$0.2 20
$0.0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2012 2013 2014 2015 2016
Healthtech startups enjoyed a considerable uptick in venture investors interest amid the general VC boom
over the past few years. With aging demographics across multiple developed countries, a strong need for
advanced analytics (as government healthcare systems moved to empower healthcare consumers further)
and general costs rising, many firms are looking to back companies that can expedite back-end logistics,
provide easy-to-use digital health offerings and more. Although Q3 and Q416 saw declining totals of VC
invested to $580 million and $540 million apiece, activity remains high.
45

Global cybersecurity investment activity

2012 2016
$1.4 120
$1.2
100
$1.0
80
$0.8
60
$0.6
40
$0.4
20
$0.2
$0.0 0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2012 2013 2014 2015 2016
With such publicity throughout the entirety of 2016, ranging from widely publicized breaches of millions of
customer accounts at Yahoo to allegations of spamming fake news during election cycles, cybersecurity
looks set to remain a hot topic of discussion and investor interest in the coming year, as more enterprises
look to secure their offerings. The final quarter of 2016 may have experienced a sudden drop-off in both
activity and dollars invested but Q316 saw no less than $1.2 billion invested across 84 financings of
cybersecurity-focused startups worldwide.

46

Global venture fundraising (#) by size Global first-time vs. follow-on venture
2010 2016 funds (#)
2010 2016
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
2010
2011
2012
2013
2014
2015
2016
2010
2011
2012
2013
2014
2015
2016
Under $50M $50M-$100M $100M-$250M

$250M-$500M $500M-$1B $1B+ First-time Follow-on
Proportionally, more and more firms are able to raise larger funds, borne on the back of past success in the
upswing of the venture cycle in 2014 and 2015. No less than $13.7 billion was raised across 9 venture
vehicles sized at $1 billion or more in 2016.

47

In Q416 VC-backed
companies in the
Americas raised
across
1,832 deals
48

NORTH &
SOUTH
AMERICA
2016
49

Venture financing trends in the Americas

2010 2016
11,340 11,208
10,187
8,673 8,642
7,219
5,728
$32 $46 $43 $47 $72 $82 $72

2010 2011 2012 2013 2014 2015 2016
In some respects, a downturn was almost inevitable after 2 strong years of venture activity within the
Americas, as a cyclical boom in investing activity led to overheated valuations and consequently larger

financing sizes, resulting in some investors beginning to shy away eventually. The slow rate of the downturn
is evident in the massive sums still invested throughout 2016, even as activity declined significantly,
suggesting that investors are still willing to ply worthwhile companies with plenty of cash if they can meet
more stringent benchmarks of quality.
50

Declining deal count tempered by rising

activity in Canada and Latin America.

Rising Activity beyond the US
While the US accounts for the bulk of activity in the Americas, which is discussed in greater
detail in the US section of this report, Canada and Latin America experienced strong levels of
activity. VC activity in Canada rose to $2.1 billion in 2016, driven by a bevy of mega-financings,
including the largest Q416 funding round in the Americas. Foreign VC interest in Latin
America continued to increase, with startups in Mexico, Brazil and Colombia attracting debut
investments from major US venture firms.

US investors expanding into Latin America
Continuing a trend seen over the past two years, US VC firms are continuing to show their
interest in Latin America startups1. Multiple big players made their first investments in Latin
America in 2016: Sequoia Capital, Founders Fund and QED made their debut Brazilian
investments with fintech firm Nubank; and Andreessen Horowitz chose to back Rappi, a
Colombian grocery delivery service. QED also backed Mexican grocery service Cornershop as
part of their $6.7 million in Series A funding.
Latin America also drew foreign participation in the form of new accelerators. In September
2016 Chinese giant Baidu launched a tech startup program in Brazil in partnership with the
Latin American Angels Society (LAAS), offering mentoring and support as a method of
identifying high-potential scalable ventures.
Brazil corporates drive growth of local tech ecosystem
During 2016, Brazil gained more attention for the growth of its startup ecosystems, particularly
in Sao Paulo. The evolution of these ecosystems is being driven primarily by corporates,
including big banks and telecoms. The recent devaluation of the Real against the American
dollar has also made the country more attractive to foreign based VC investors. Companies
that provide logistics services or ecommerce products that can improve or support logistics are
seen as particularly attractive. While a number of Brazil-based startups have been successful
at raising funds, there has been growing pressure from investors for companies to become
more efficient with funding and to move more quickly to a point of profitability2.
51

Governments investing in entrepreneurship
As Latin American startups attract more international attention and VC funding, governments
are looking for ways to help encourage startup creation, especially within the technology
sector. In Argentina, newly elected President Mauricio Macri introduced legislative changes
that will help facilitate the creation of new companies and encourage entrepreneurship. Similar
efforts are also underway in Brazil and Mexico3.
in Brazil and Mexico3.
52

UNITED STATES
2016
53

54

10
2
1
4 8
3 6
7
Top 10 US financings in Q4 2016
1 Opendoor $210M, San Francisco 6 Zymergen $130M, Emeryville

Residential real-estate platform Biotech
Series D Series B
2 Payoneer $180M, New York 7 Memebox $126M, San Francisco

Online payments and distribution Beauty products
Series E Series C
Unity Biotechnology $116M,
3 Stripe $150M, San Francisco 8 San Francisco
Payments platform
Series D Biotech
Series B
4 Postmates $141M, San Francisco 9 JetSmarter $105M, Fort Lauderdale
Delivery services Private air travel
Series E Series C
5 OfferUp $130M, Bellevue 10 Zibby $103M, New York

Online shopping platform Online payments & leasing
Series C1 55 Early-stage


After 2 strong years, both VC investment and the number of deals in the US declined substantially in
2016. Total VC investment slid to $69.1 billion from 2015s peak of $79.3 billion, while total activity
declined by more than 20 percent. The cooling of the USs venture scene is likely a result of numerous
issues that plagued the market for much of the year, instilling caution in many VC investors. The
completion of the US election in November brought an end to one major uncertainty, while the Federal
Reserves December interest rate increase demonstrated its renewed optimism for the US economy as a
whole. These signs could bode well for the US heading into 2017.
While VC activity by deal stage declined across the board during Q416, higher risk seed-stage deal
activity declined the most as investors focused on their existing portfolios and companies with proven
business plans. Investors are expected to remain cautious headed into 2017, taking more time to
evaluate investment options and conduct due diligence. Companies will likely continue to require a
strong business plan and path to profitability in order to attract investment for the near future.
Unicorns and IPOs almost non-existent in 2016

Both unicorn births and IPOs were in short supply during 2016. The 2016 IPO market for VC-backed
companies in particular is said to have been the worst since 2013. Poor IPO results earlier in the year led
to significant market skepticism of potential valuations. There are indications, however, that the tide is
turning for the IPO market, particularly in the US. The success of Twilio has spurred some optimism that
the IPO market will open up again in 2017.
Already Snap, the parent company of Snapchat, has filed for an IPO which is expected toward the end of
Q117. Other companies are also predicted to follow suit. With a number of unicorn companies in the
group of rumored IPOs, any early successes could be a boost for the remainder of the year. A
successful IPO market would help renew the VC market at the same time.
Riskier seed-stage businesses struggle to find backing

The US election prompted a significant amount of economic uncertainty throughout 2016. While the
election was resolved midway through Q416, the pending change in administration may continue to hold
investors back heading into Q117 as the change could spark both new opportunities and new risks for
VC investors. While the expected lessening of regulations and corporate tax rates could have a positive
impact on the VC market, other trade-focused initiatives could cause consternation. Some investors are
likely to take a wait and see approach to making any major changes to their investments until after the
new president has taken office.
Looking ahead: Healthcare, AI, IoT and Cloud remain big bets
The outlook for the VC market in the Americas is optimistic for 2017. Should the IPO market open as
expected, there could be a positive resonance across the VC market. While the first quarter may begin
cautiously as investors wait and see whether the new Trump administration in the US moves quickly on
its promises to reduce regulation and lower corporate tax rates. The speed and extent of movement on
these fronts could significantly impact the appetite for VC investment and the overall exit market.
Heading into the next year, a number of sectors are expected to remain particularly attractive in the
Americas, including healthcare and biotech, artificial intelligence, the Internet of Things and cloud SaaS.
While some of these sectors have seen a pullback in 2016, each is expected to rebound now that market
uncertainties are stabilizing.

ervices and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q4VC 48
56

57

58


59


60

61

Venture-backed exit activity (#) by Venture-backed exit activity ($B)

type in the US by type in the US
2010 2016 2010 2016
1,200 $90.0 Strategic Acquisition Buyout IPO

Strategic Acquisition
Buyout
$80.0
IPO
1,000
$70.0
800 $60.0
$50.0
600
$40.0
400 $30.0
$20.0
200
$10.0
0 $0.0
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Especially as the IPO market fell into doldrums in 2016, corporate M&A became even more crucial for
venture investors liquidity prospects. The $42.4 billion in exit value achieved via that exit route was the
second-highest tally of the decade, only below the massive $68.8 billion notched in 2014.

62

US venture fundraising
2010 2016
268
255 253
204
190
153
141
$20 $23 $24 $21 $35 $35 $42

2010 2011 2012 2013 2014 2015 2016
Capital raised ($B) Fund count
The significant year-over-year 18.3% increase in total VC raised by US VC firms, from $35.2 billion to
$41.6 billion, signifies continued appetite for exposure to the asset class on the part of limited partners. It
also speaks to the maturation of much of the VC firm population, as they raise larger and larger vehicles
throughout the course of the decade.

63

Venture fundraising (#) by size in the First-time vs. follow-on venture funds
US (#) in the US
2010 2016 2010 2016
100%
90% 100%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40% 40%
30% 30%
20% 20%
10%
10%
0%
0%
2010
2011
2012
2013
2014
2015
2016
2010
2011
2012
2013
2014
2015
2016
Under $50M $50M-$100M $100M-$250M First-time Follow-on

$250M-$500M $500M-$1B $1B+
First-time fundraising in the US essentially flat-lined between 2015 and 2016, with only 23 raised in the
former and 22 in the latter. Follow-on fundraising stayed steady as well. In fact, the total number of follow-on
funds raised from 2014 to 2016 has hovered around 230. Again, this testifies to the maturation of a significant
number of venture fund managers that have been active from before or since the financial crisis. On another
note, the decline in smaller fundraises (with 96 sub-$50 million vehicles closed in 2016, more on par with
2012 and 2013 totals), suggests crowding in the market, as well as a lull in limited partner (LP) enthusiasm
for smaller, newer managers.
64


65

EUROPE & ASIA

2016
66

7
6
2 5 10
8
3 9
4
1
Top 10 European financings in Q4 2016
1 SigFox $162.1M, Labege 6 Carrick Therapeutics $95M, Dublin

Cellular network Pharma & biotech
Series E Early-stage
Oxford Nanopore Technologies $124.4M,
2 Oxford 7 HelloFresh $91.9M, Berlin
Food products
Biotech Series G
Late-stage
3 Devialet $108.1M, Paris 8 Nova Lumos $90M, Amsterdam
Drug discovery Electricity distributor
Series C Early-stage
Sonnen (battery storage) $85M,
4 ADC Therapeutics $105M, Epalinges 9 Wildpolsried
Pharma & biotech
Solar-based battery developer
Early-stage
Late-stage
5 Kymab $100M, Cambridge 67 10 GoEuro $70M, Berlin

Pharma & Biotech Travel search platform
Series C Series C

1
2 7
8 6
10 4
3 5
9
Top 10 financings in Q4 2016 in Asia
1 Yixia $500M, Beijing 6 Yunmanman $160M, Shanghai

Online fashion & e-commerce Mobile logistics
Series E Series D
2 51credit $394M, Beijing 7 Ofo $130M, Beijing

Online credit marketplace Bikesharing platform
Series C Series C
3 Innovent Biologics $260M, Suzhou 8 Sensetime $120M, Beijing

Pharma & biotech AI & Big Data analytics
Series D Series B
4 Yiguo $200M, Shanghai 9 Changing Education $118M,

Guangzhou
Food products & e-commerce
Series C Online teaching platform
Series C
5 Xueleyen $200M, Hsinchu 10 Huochebang $115M, Guiyang
Online education platform Logistics & shipping
Series C Series B1
68

UPDATE
2017 SPRING
HIGH TECH
START UP
John L. Nesheim
Although the path to startup success has been fundamentally unchanged s ince
High Tech Start Up was updated in 2000, several significant events and trends
have occurred. They have altered the formation process, the mix of
stakeholders in new enterprises, and the magnitude of ambitions of the
venture community.

Entrepreneurship rooted in the Silicon Valley style of new businesses has
spread around the globe. Resulting disruptions have changed economics and
politics of entire countries.

Entrepreneurs incorporating this newness will increase the chances that their
plans will lead to more great start-ups. Investors will boost their value to
founders of new enterprises.

END of UPDATE
69

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UPDATE

Fundamentals of silicon-valley-style-startups continue to dominate alternatives.

Building an unfair competitive advantage remains the prime directive.

III. TRENDING 2016:

US experiences a significant year-over-year slide in first-time financings, though remaining at

Corporations continued to increase their participation in venture financings.

High Tech Start

New Twists to Startup Challenges

Legal and Security

Bankers and Bootstraps

Angels and Other Sources

Mergers, Spinouts, and Corporate Venture Capital

Top 10 global financings in Q4 2016

1 Yixia $500M, Beijing 6 Yiguo $200M, Shanghai

2 51credit $394M, Beijing 7 Xueleyen $200M, Hsinchu

3 Innovent Biologics $260M, Suzhou 8 Payoneer $180M, New York

4 BlueRock Therapeutics $225M, Toronto 9 Sigfox $162.1M, Labege

5 Opendoor $210M, San Francisco 10 Yunmanman $160M, Shanghai

GLOBAL STARTUP FINANCINGS 2016

Caution driving investor behaviors

IPO market fizzles in 2016, but hope for 2017 renewal

VC Investment in Asia and Americas drops dramatically

Governments helping to drive and support innovation economy

Cautious optimism heading into 2017

Global venture financing by year

$45 $64 $59 $65 $108 $141 $127

Capital invested ($B) Deal count

Global venture financing by stage

Capital invested ($B) # of deals closed Angel/Seed Early VC Later VC

Global financing trends to VC-backed Global financing trends to VC-backed

10% Pharma &

Global financing trends to VC-backed companies by continent

Corporate VC participation in global venture deals

$12 $17 $18 $20 $38 $60 $65

Capital invested in associated deals ($B) % of total deal count

Global first-time venture financings of companies

$9 $11 $13 $11 $14 $18 $13

Capital invested ($B) Deal count

Global unicorn rounds

Global SaaS investment activity

Capital invested ($B) # of deals closed

Global healthtech investment activity

Capital invested ($B) # of deals closed

Global cybersecurity investment activity

Capital invested ($B) # of deals closed

Under $50M $50M-$100M $100M-$250M

Venture financing trends in the Americas

$32 $46 $43 $47 $72 $82 $72

Declining deal count tempered by rising

Brazil corporates drive growth of local tech ecosystem

in Brazil and Mexico3.

Top 10 US financings in Q4 2016

1 Opendoor $210M, San Francisco 6 Zymergen $130M, Emeryville

2 Payoneer $180M, New York 7 Memebox $126M, San Francisco

5 OfferUp $130M, Bellevue 10 Zibby $103M, New York

Unicorns and IPOs almost non-existent in 2016

Riskier seed-stage businesses struggle to find backing

Venture-backed exit activity (#) by Venture-backed exit activity ($B)

1,200 $90.0 Strategic Acquisition Buyout IPO

$20 $23 $24 $21 $35 $35 $42

Capital raised ($B) Fund count

Under $50M $50M-$100M $100M-$250M First-time Follow-on

EUROPE & ASIA

Top 10 European financings in Q4 2016