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Financing for Growth:
Private and Public
Company Alternatives
April 23rd, 2014
Financing for Growth: Private and Public Alternatives
Introduction:
Brendan Maher, Partner, TMT National Industry Leader, KPMG
Moderator:
Chris Chapman, National Leader, Growth Companies, KPMG
Speakers:
Dave Brennan, CFO/COO, Achievers, Toronto
David Charron, CFO, Redknee, Toronto
David Greenberg, Principal, JMI Equity, Baltimore
Paul Sparkes, Executive Vice-Chairman, Difference Capital, Toronto
Shari Mager, Managing Director, KPMG in the US, Silicon Valley
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
1
US Venture Capital Industry and
IPO Trends
Shari Mager
U.S. VC Deal flow
Deal flow fell in 2013 but capital invested held steady at $34B.
$45
6,000
$40
4,804
5,000
4,431
$35
3,579
3,459
$30
4,000
4,067
3,233
$25
2,532
$20
3,000
3,037
2,344
2,049
$15
2,000
$10
$34.0
$34.1
$38.4
$26.9
$23.0
$33.2
$31.4
$25.0
$22.6
$5
$19.7
1,000
$0
0
2004
2005
2006
2007
2008
Capital Invested ($B)
2009
2010
2011
2012
2013
# of Deals Closed
Source: PitchBook
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
3
U.S. VC Deals by stage
The breakdown of deals by stage in 2013 was nearly identical to 2012.
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0%
10%
20%
30%
Seed/Angel
40%
50%
Early Stage
60%
70%
80%
90%
100%
Late Stage
Source: PitchBook
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
4
2013 VC Investors by deal stage
Most Active Seed/Angel
Most Active Early Stage
Most Active Late Stage
■ 500 Starups (131)
■ Andreessen Horowitz (49)
■ Sequoia Capital (40)
■ Y Combinator (66)
■ 500 Startups (47)
■ Intel Capital (34)
■ TechStars (66)
■ Google Ventures (43)
■ KPCB (32)
■ SV Angel (33)
■ Accel Partners (42)
■ Draper Fisher Jurvetson (26)
■ Andreessen Horowitz (32)
■ Finnevera Venture Capital (42)
■ Google Ventures (27)
■ First Round Capital (41)
■ New Enterprise
Associates (23)
■ Connecticut Innovations (25)
■ Connecticut Innovations (39)
■ High-Tech Grunderfonds (22)
■ High-Tech Grunderfonds (36)
■ Lerer Ventures (21)
■ New Enterprise Associates (36)
■ Rothenberg Ventures (21)
■ Intel Capital (35)
■ Index Ventures (22)
■ Accel Partners (21)
■ Battery Ventures (20)
■ Highland Capital Partners (20)
■ Norwest Venture Partners (20)
Source: Pitchbook 2013 Global PE & VC League Tables
Investor Name (Number of Deals)
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
5
U.S. VC Deals by sector
Non-software IT companies are seeing fewer deals as investors explore other sectors.
2013
38%
2009
6%
32%
2004
10%
31%
0%
Software
10%
13%
9%
30%
Non-Software IT
40%
3%
25%
21%
20%
19%
9%
50%
Commercial Services
21%
5%
20%
24%
60%
70%
Healthcare
2%
80%
Energy
14%
90%
100%
Other
Source: PitchBook
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
6
U.S. VC Exit flow
Exit activity started slow in 2013 but gradually accelerated throughout the year.
$60
700
657
592
599
600
$50
574
492
$40
500
408
402
400
349
$30
333
381
300
$20
200
$29.2
$51.5
$36.7
$26.6
$13.4
$19.2
$48.6
$26.6
$16.2
$23.8
$10
$0
100
0
2004
2005
2006
2007
2008
Capital Exited ($B)
2009
2010
2011
2012
2013
# of Exits
Source: PitchBook
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
7
Exits (#) by type
The proportion of IPOs nearly doubled in 2013, reaching the highest level since 2007.
2013
74%
2012
11%
81%
15%
11%
8%
2011
84%
9%
7%
2010
83%
10%
7%
2009
88%
2008
10%
86%
2007
12%
74%
0%
10%
20%
30%
40%
Corporate Acquisition
10%
50%
60%
PE Buyout
70%
80%
2%
3%
16%
90%
100%
IPO
Source: PitchBook
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
8
IPO market records best year since 2004
Monthly U.S. IPO Execution
New issuance activity in 2013 sprang back after nearly four years of subdued activity as 253
issuers debuted for a total of $75.9B in proceeds
Includes closed-end funds
Source: Ipreo
CONFIDENTIAL
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
Permission
granted
from
the New
Yorkof the
Stock
Exchange.
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional
advice after
a thorough
examination
particular
situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
CONFIDENTIAL
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
9
9
Technology closes out 2013 in top spot
U.S. IPO Execution by Industry – 2013 Deal Count
Tech powered past their Healthcare brethren to finish first in number of deals for the year,
repeating their 2012 feat
Source: Ipreo
CONFIDENTIAL
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
Permission
granted
from
the New
Yorkof the
Stock
Exchange.
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional
advice after
a thorough
examination
particular
situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
CONFIDENTIAL
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
10
10
IPOs maintain healthy price performance
IPO Performance by Industry – Offer/Current 2013
*Deal Count
The average IPO returned 41.4% after listing, a considerable improvement from 2012’s 24.2%
Source: Ipreo
CONFIDENTIAL
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
Permission
granted
from
the New
Yorkof the
Stock
Exchange.
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional
advice after
a thorough
examination
particular
situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
CONFIDENTIAL
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
11
11
IPO performance remains healthy (continued)
IPO Industry Pricing Statistics – 2013
Sector
Total
Proceeds
# of
($mm)
Deals
Pricing Range
Above
40%
Consumer
$11,251.7
25
Energy
$10,225.0
20
Financials
$10,713.2
44
7%
Healthcare
$9,654.2
52
15%
Industrials
$3,276.1
7
Materials
$1,815.7
9
$11,621.3
55
$900.0
2
Tech/Telecom
Utilities
Within
Below
44%
25%
16%
32.2
40.9
6.1
10.8
16%
2.9
5.9
17%
19.4
34.6
57%
4.1
11.9
56%
6.1
14.7
30.2
41.7
14.8
16.6
50%
25%
77%
67%
43%
11%
33%
35%
45%
100%
% Change
Offer / Offer /
1 Day
1 Mo
20%
Individually, 26 IPOs have doubled since listing last year, while on the flip-side, 45 deals are
now trading below their offer prices
Data excludes closed-end funds, equity unit offerings, and blank checks
Source: Ipreo
CONFIDENTIAL
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
Permission
granted
from
the New
Yorkof the
Stock
Exchange.
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional
advice after
a thorough
examination
particular
situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
CONFIDENTIAL
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
12
12
Smaller deals dominate pipeline activity
IPO Backlog by Sector
Healthcare pulled ahead in December and now leads on deal count as the sector accounted
for half of December’s total filings to finish the year strong
Source: Ipreo
CONFIDENTIAL
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
Permission
granted
from
the New
Yorkof the
Stock
Exchange.
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate
professional
advice after
a thorough
examination
particular
situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
CONFIDENTIAL
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
13
13
Scale and liquidity of recent IPO companies
Revenue
Net Income (loss)
Cash Resources
Monthly Operating
Cash Flow
Months of Cash
Resources
Barracuda Networks
$57,790
($2,175)
$30,192
$2,014
N/A
Chegg
$61,587
($24,904)
$15,927
$8,016
N/A
Fireeye
$33,222
($40,235)
$54,085
($2,117)
25
Jive
$20,819
($7,580)
$72,605
($786)
92
Marin Software
$17,051
($7,256)
$31,540
($1,591)
20
Marketo
$19,736
($9,524)
$36,176
($1,635)
22
Nimble Storage
$33,411
($10,136)
$34,719
($992)
35
Palo Alto Networks
$65,700
$796
$90,283
$6,497
N/A
RingCentral
$37,704
($13,619)
$19,366
($2,060)
9
Rocket Fuel
$54,369
($3,839)
$21,985
($437)
50
ServiceNow
$47,431
($5,640)
$95,484
$5,360
N/A
Splunk
$43,199
($1,276)
$31,599
$1,218
N/A
Veeva
$49,581
$5,998
$52,875
$3,377
N/A
Violin Memory
$26,505
($30,648)
$33,463
($3,991)
8
Workday
$62,702
($26,881)
$122,651
$2,439
N/A
Xoom
$22,162
($1,473)
$70,202
($63)
1,114
YuMe
$26,612
($3,338)
$26,834
$103
N/A
Twitter
$168,580
($64,601)
$320,075
$--
N/A
Zulily
$166,655
($2,251)
$120,633
$3,249
N/A
Company
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
14
$ in thousands
A Canadian Perspective
Chris Chapman
Profile of Canadian Private Growth Companies
Number of Companies & Estimated Enterprise Value
+300
EV
$20-50M
+100
EV
$50-150M
+25
EV
$150-500M
+10
+$500M
SaaS, mobile, social media & e-commerce marketplace companies continued to be valued at high
times revenue multiples. The IPO market on both sides of the boarder is positive but with very
different dynamics and metrics. M&A activity remains very strong
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without
appropriate
professionalReuters,
advice after aKPMG
thorough examination
of the particular situation.
Source:
Thompson
TMT Analysis
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
16
Current financing & liquidity environment

Inbound interest from US growth and private equity investors
remains high
Growth & private
 As do valuations for double digit reoccurring revenue growth
equity interest remains
 Competition for startup and growth stage deals positive
high
 Cdn. & US co-investments increasing awareness of Canadian
companies
Strong US IPO &
promising Canadian
market
Seed & venture capital
alternatives
encouraging

US IPO market strong, but threshold is beyond most Cdn. firms

TSX appearing viable option for the 1st time in over a decade

Public company costs, governance & post listing liquidity still a
concern

Seed investment activity is encouraging

Series A venture limited & to post product, revenue firms

Pre-IPO financing and secondary alternatives available but
limited to very specific situations
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
17
High Growth Rates Really Matter
SaaS companies have valuations more than double enterprise firms AND SaaS
companies with +20% growth rate are double their lower growth rate peers
SaaS companies should focus on getting MRR (monthly recurring revenue) growth rate above 10%
while ‘enterprise evolvers’ should aim to show rapid growth in % of SaaS revenue
Source: Martinwolf MW IT Index
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
18
Financing for Growth:
Private and Public
Company Alternatives
April 23rd, 2014
Growth and Valuation Relationship
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2014 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
20
Thank you !
Q&A