Download 2015 tech growth equity

2015 TECH
GROWTH EQUITY
Review and Outlook
Year of the
Unicorn
Will 2015 bring the same?
Mike MacKeen
Head of Private Capital Markets
617.674.5507
Thank you for taking time to read our 2015 Tech Growth Equity Annual Review.
2014 was a remarkable year in which the scale and breadth of the private tech equity market established it’s role as the
right source of capital and expertise for the journey from innovation to profitability. Entrepreneurs and early-stage
investors realized the private growth equity market can provide all the capital and connectivity needed to build the
stability a business needs to succeed as a widely-held public company.
Will 2015 deliver more of the same? Will Unicorns be born at the same pace? Do burn rates need to be re-evaluated?
How should entrepreneurs and investors plan to fund growth?
We analyzed every tech growth financing over $15 million in North America and Western Europe to provide you with
perspective on what happened and what we expect to happen. Many organizations publish data on broad venture or
private equity activity. We have a unique viewpoint that focuses on growth investing rather than seed or early stage
investing, is specific to the tech sector and integrates private equity growth tech investment with late stage venture
investing. We believe our analysis provides unique insight to tech company operators and investors focused on how best
to fund the next phase of growth.
Our review delivers details on how investors allocated growth capital across sub-sectors within technology. We also
highlight the most active growth equity, corporate and crossover investors in the market. We review how capital supply
and expected volatility should shape your 2015 financing plan. While Asia is outside the scope of this review, we do
include a snapshot of the recent expansion of Asian growth finance.
We hope you find our analysis useful for your planning. Our team is available to discuss current market conditions and
your options for financing growth or liquidity. We look forward to helping you fund your growth in 2015.
Table of Contents
1.
Executive Summary
2.
2015 Outlook




3.
Tech Capital Supply
IPO Pipeline
M&A Buyers
Market Volatility
2014 Investment Activity



4.
Most Active Investors
Trends in Investment Terms
Geographic Breakdown of Investments
Investor Activity Across Tech Sectors

5.
−
Sales Infrastructure – CRM & SFA
−
Human Capital Management
Key Private Market Trends



6.
Spotlight Sectors
Corporate Investment
Crossover Investment
Growth in Asia
Capital Supply - 2014 GP Fundraising
3
Executive Summary
2014 was a banner year for tech companies raising growth equity in the private market



Investors committed $74B to drive growth and provide liquidity
21 new companies joined the “Unicorn” club with valuations in excess of $1,000,000,000
Uber raised capital at a $41B valuation, a value that would rank it 32nd among NASDAQ listed companies
2014 results create questions for CEOs planning to raise money in 2015




Do investors believe burn rates and valuations are getting too high?
Have the private markets replaced the public markets as the default source of growth equity?
Will corporate and crossover investors exit private investing at first sign of a “Bear” market?
Are the Unicorns really market bellwethers that will become valuable public companies?
The growth equity market remains open in 2015, but there is caution in Q3 / Q4


Supply is strong – Tech growth funds raised $253B in 2014 following $263B raised in 2013
Liquidity should stay strong – M&A will be supported by strong buyer balance sheets and the continuing need to fill product
line gaps. The IPO calendar includes companies of scale that can succeed in the public market
The greatest risk to continued capital access is an expected increase in volatility


2015 should be more volatile due to expected US Federal Reserve attempts to raise interest rates, an increased likelihood
of political events impacting the market and increased commodity price fluctuation
Initial 2015 market activity validates concern over rising volatility
We advise companies to raise 18 – 24 months of needed capital in the first half of 2015
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
4
2015 Outlook
Capital Supply is Strong Entering 2015
Tech Investors Need to Deploy $262 Billion

We estimate that the tech sector private growth capital “overhang” exceeds $250 Billion entering 2015


Capital supply is adequate to support take-private transactions of significant scale
Supply will also allow routine private growth financings equal to the size of a typical growth company IPO
−
Our methodology includes conservative assumptions of likely annual investment capacity
$450.0
$400.0
$350.0
$300.0
$250.0
$200.0
$150.0
$261.8B
$100.0
$50.0
$0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Note: Funds include only funds that have historical interest in Media, Internet, Information Technology, Telecommunications, or HCIT. Sources: S&P CapIQ, BP Analysis
6
IPO Pipeline Includes More Mature Companies That Can Succeed
Company
Year Founded
Money Raised ($M)
Description
2009
$208
Actifio helps hundreds of global enterprise customers and service provider partners virtualize
their data, just as they virtualized their servers and networks
2008
$795
Airbnb operates an online community marketplace for people to list, discover, and book
accommodations worldwide online or from a mobile phone
2008
$207
AppDynamics develops application performance management (APM) solutions that deliver
problem resolution for highly distributed applications
2007
$311
AppNexus operates as a technology company that provides trading solutions and powers
marketplaces for Internet advertising
2007
$142
Auction.com is an online real estate marketplace for all real estate assets, serving all varieties
of customers
2008
$1,200
Cloudera is an enterprise software company that provides Apache Hadoop-based software and
training to data-driven enterprises
2009
$72
CloudFlare is a web performance and security company that provides online services to protect
and accelerate websites online
2007
$193
Credit Karma develops tools and maintains information resources that help users to manage the
credit aspect of their financial health
2000
$517
Deem is a cloud and mobile commerce company, delivering Commerce-as-a-Service (CaaS) to
a large and diverse ecosystem of customers
2003
$460
DocuSign employs cloud-based e-signature technology to allow users to sign and send
documents online
2007
$1,100
Dropbox enables users to protect their files with admin control, dedicated support, and more
2006
$200
Eventbrite is an online ticketing service that enables users to create, promote, and sell tickets
for events
1996
$291
Good is a pioneer and world leader in secure mobility solutions for businesses
2009
$214
Houzz is an online platform for home remodeling, architecture, interior design, decorating,
landscape design, and home improvement
2005
$158
Practice Fusion provides a free, web-based Electronic Health Record (EMR) system and
medical practice management technology to physicians
2001
$292
Proteus develops digital products that collect and aggregate various behavioral, physiological
and therapeutic metrics
2006
$538
Spotify provides a highly customizable music streaming service
2009
$591
Square is a merchant services aggregator and mobile payment company that aims to simplify
commerce through technology
2009
$3,300
Uber provides a smartphone application that connects drivers with people who need a ride
Source: S&P CapIQ, Bulger Partners Research, CB Insight, Forbes, Crunchbase
7
Active M&A Buyers Have Currency to Continue Acquiring
Company
Market Cap ($M)
Cash and Cash Equivalents ($M)
$621,614
$13,844
~$3,200
$141,544
$6,726
$175
$209,590
$3,323
$500
$345,469
$17,628
$555
$70,319
$15,133
$350
$176,236
$2,561
$1,500
$155,515
$10,716
~$160
$381,150
$8,669
$2,500
$191,068
$17,769
$5,200
$118,527
$7,907
$2,400
$35,740
$782
$391
Source: S&P CapIQ, Bulger Partners Research
Recent Select Tech Acquisition
Price ($M)
8
Volatility is Expected to Rise as it Returns to Historical Norms
Investors Can Commit Capital More Easily When a Stable Sense of Pricing Exists
CBOE Volatility S&P 500 Index (^VIX) - Index Value
70.0
60.0
50.0
40.0
30.0
22.4
20.0
16.4
10.0
CBOE Volatility S&P 500 Index (^VIX) - Index Value
2008-Present Average
Issuers Advised to Raise in First Half Due to Greater Predictability

The last eight quarters have been unusually stable
–
The VIX index, a measure of equity volatility, remained below 15 for most of 2014 and only broke 20 three times

With the NASDAQ trading at a forward P/E of 22x and the Dow trading at 15x, the markets are in line with historic norms,
reducing the likelihood of a 2001 style market selloff

Risk to stability is more likely in Q3 / Q4. The US Federal Reserve is expected to attempt to raise rates. Commodity
prices in oil and metals are less certain as demand in China has become less predictable

Predictability of a growth financing is expected to be higher in the first half of 2015
Source: S&P CapIQ, Bulger Partners Research
9
2014 Investment Activity
Familiar Names Lead the Most Active Investor List
Top Investors By Volume
Investor
Transactions (#)
Select Investments
39
Top Investors By Value Involvement
Investor
Transactions ($M)
Select Investments
IFTTT
Magic Leap
Reddit
$7,163
Compuware
Riverbed Technology
TravelClick
37
Freshdesk
HootSuite
Prezi
$5,867
Advanced Computer Soft.
Return Path
TIBCO
37
Magic Leap
RelateIQ
Uber
$5,543
First Data Holdings
Magic Leap
Internet Brands
37
Airbnb
MongoDB
Uber
$5,286
Magic Leap
RelateIQ
Uber
28
Jet.com
Mulesoft
WellTok
$4,232
Airbnb
MongoDB
Uber
24
MINDBODY
Pinterest
ClearSlide
$4,165
Mozido
Pure Storage
Uber
24
Comuto
Hortonworks
Pure Storage
$3,866
First Data Holdings
23
Lookout
Maplebear
Stripe
$3,638
HootSuite
Pinterest
Uber
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
11
Private Investors Committed $74 Billion to Tech Economy in 2014
Minority Investments in the Tech Sector ($B)
$70.0
$60.0
$50.0
$40.0
Capital Increased 64%
$30.0
$20.0
$10.0
$36.5
$21.0
$26.8
$22.2
$74B
$0.0
2011
2012
2013
2014
Control Investments in Tech Sector ($B)
$70.0
$60.0
$50.0
Includes Dell
MBO ($27B)
$40.0
$61.6
$30.0
$20.0
$37.3
$35.9
$10.0
$17.1
$0.0
2011
2012
2013
2014
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
12
Private Investment Outpaced the Public Market Again in 2014
Capital Commitment to Tech Sector ($B): 2014 vs 2013
$90.0
$80.0
$73.8
$50.0
$10.0
$0.0
Follow On
IPO
$20.0
$61.6
$22.2
Includes Dell
MBO ($27B)
$37.3
$37.3
$40.0
$30.0
Control
$60.0
Minority
$70.0
$33.2
$25.1
$8.3
$12.2
2013
2014
Public
Market
Public
$36.5
2013
2014
Private
PMMarket
The Private Market has Become the Core Source of Growth Capital for the Tech Sector

Private Market invested nearly 2x more in tech than the Public Market

Most significant 2014 shift was 64% growth in minority capital commitment over 2013

2014 control investment level in tech grew 9% when normalized for unique 2013 Dell MBO
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
13
Volume Expanded 32% in Private Market in 2014
Volume in Tech Sector: 2014 Vs 2013
700
Volume Increased 32%
600
Control
500
400
609
57
462
54
300
552
IPO
100
0
163
169
120
112
43
57
2013
2014
408
Minority
Follow On
200
2013
Public
Market
Public
2014
Private
PMMarket
Private Market Breadth Allows Companies to Stay Private Longer


The private market supported over 600 tech companies in 2014
–
32% above 2013 investment volume
–
Minority private financing volume was nearly 10x above IPO market volume
In a “Bull” market, the public market financing volume was essentially flat
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
14
Private Market Delivered Minority Financings of Scale
Investment ($M)
Target
Investor
BP Primary Classification
$3,500
Kohlberg Kravis Roberts & Co.; Stone Point Capital; Trident Fund V;
KKR 2006 Co-investment Fund
Productivity/ecommerce
$1,800
Kleiner Perkins Caufield & Byers; Menlo Ventures; New Enterprise
Associates; Sequoia Capital; Lone Pine Capital; Fidelity Investments;
Baidu; Wellington Management Company; TPG Growth; Qatar
Investment Authority; Valiant Capital Partners
Consumer Product
$900
T. Rowe Price Group; MSD Capital; Intel Capital; Google Ventures
Enterprise Application Software
$750
The Blackstone Group L; GIC Pte.
Enterprise Application Software
$542
Kleiner Perkins Caufield & Byers; KKR & Co.; Vulcan Capital;
Google; QUALCOMM Ventures; Legend Pictures; Andreessen
Horowitz; Obvious Ventures I; Obvious Ventures
Consumer Product
$450
BlackRock; Fidelity Bank; T. Rowe Price Associates
Enterprise Application Software
$400
Wellington Management Company; MasterCard
eCommerce
$350
Insight Venture Partners; Vostok Nafta Investment.; Kite Ventures
eCommerce
$250
Google Capital
Consumer Internet
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
15
Control Buyers Acquired Tech Sector Assets at Competitive Prices
Investment ($USD)
Target
Investor
BP Primary Classification
$4,534
Vista Equity Partners; Vista Equity Partners Fund V
Enterprise Application Software
$3,579
Elliott International; Elliott Management; Elliott Associates; Elliott
International Capital Advisors
Communication and Data Services
$3,140
Advent International; ATP Private Equity Partners; The ATP Group;
Via Venture Partners A/S; Bain Capital Private Equity
Enterprise Application Software
$2,366
Thoma Bravo
Enterprise Application Software
$1,677
Shanghai Pudong Science and Technology Investment; Hua Capital
Management
Semiconductors/Servers
$1,200
Centerbridge Partners
Enterprise Application Software
$1,140
Vista Equity Partners; Vista Equity Partners Fund V-A; Vepf V Faf;
Vista Equity Partners Fund V Executive; Vista Equity Associates V;
Vista Equity Partners Fund V-B
Enterprise Application Software
$1,100
Hellman & Friedman; Hellman & Friedman Capital Partners VII;
Google Capital
Enterprise Application Software
$1,079
Apax Partners; Apax VIII
IT Services
$1,032
Siris Capital Group; Siris Partners II
Enterprise Application Software
Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
16
Transaction Terms are Favoring Issuers
Up and Down Rounds by Quarter – Equity Financings
100
90
80
70
60
50
40
30
20
10
0
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Up
Q2 2013
Down
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Flat
Up Rounds Are Near Historic Highs and Terms Are Favorable


The wealth of up rounds suggests investors are giving companies the benefit of the doubt and placing credence in future
growth plans
–
Up rounds in 2014 made up about 80% of the transactions
–
Only about 70% of rounds in 2012 and 2013 were up rounds
Terms are moving closer to standardization
–
Non-participating preferred structure
–
Dividends, but non-cumulative
–
No pay to play provisions
Source: WSGR Entrepreneurs Report
17
California Companies Still Overweight in Market
2014 Geographic Allocation of Growth Equity Capital
California Bias an Issue

39% of growth capital invested in the
western hemisphere went to California
companies

Uber impacted allocation, but the figure is
still 35% CA normalized for Uber

Investor preference toward California
companies remains an issue for nonCalifornia issuers to overcome
Wisconsin
Quebec
Massachusetts
Madrid
Michigan
Berlin
New York & Berlin Gain, Texas is Light
Greater
London
California
39%
Akershus
Utah
Utah
Arizona
Texas
Georgia
Florida
Capital Region
Of Denmark

New York is attracting growth capital as
ad tech and social media gain share

Berlin attracted almost as much growth
capital as London

Texas and North Carolina companies
attracted surprisingly little growth capital
given strong start-up communities in
Austin and RTP

Strength in Michigan, Georgia, Wisconsin
and Denmark was driven by large buyout
investments (Compuware, First Data,
Renaissance Learning and Nets
Holdings)
Surrey
Stockholm
County
New
Jersey
New York
Vaud
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
18
Investor Activity Across Tech Sectors
Enterprise Applications and Consumer / eCommerce Expanded
Percent of Total Tech Growth Equity Investment Volume by Sub-Sector
2013
2014
Enterprise Application Software
eCommerce
Consumer Internet
Communication and Data Services
Semiconductors/Servers
Enterprise Infrastructure Software
Consumer Product
CleanTech
IT Services
Other
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Enterprise Application Software Has the Continued Interest of Investors

Enterprise Application Software had a robust year, attracting almost 40% of total tech growth equity capital

Social and mobile evolution drove increase in Consumer Internet investment

IT Services investment declined as the migration to cloud changed the enterprise software deployment model

Despite continued innovation, CleanTech remained challenged as the Solyndra bankruptcy still hangs over sector
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
20
Horizontal Applications Displaced Vertical Applications
Percent of Total Enterprise Application Software Investments by Sub Sector
2013
2014
BI/Analytics
Productivity/Other
CRM/SFA
ERP/Supply Chain
HCM
Education
FinTech
Engineering Software
Marketing Automation
HCIT
Vertical Other
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Investor Focus on SaaS Business Models Created Bias Toward Horizontal Applications

Investment in sales infrastructure shifted from marketing automation to sales execution tools within the CRM / SFA
segment

Human Capital Management gained attention as next generation talent recruiting platforms began to scale and benefits
management continued to move to cloud-centric solutions

Platforms for deploying Hadoop and its derivatives attracted capital within the BI / Analytics segment as the enterprise
begins to convert Big Data from lab projects into production systems
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
21
Sector Spotlight: Sales Infrastructure – CRM & SFA
Percentage Allocation to CRM/SFA Increased In 2014
2013
2014
0%
1%
2%
3%
4%
Interesting 2014 Minority Investments
5%
6%
7%
8%
9%
10%
Interesting Companies to Watch in 2015
Last Round: $22M Total
Raised: $33M
Founded: 2007
Last Round: N/M
Private Placement
Private Placement
Private Placement
$100M
$50M
$90M
Total Raised: N/M
Founded: 2011
Last Round: $31M
Total Raised: $44M
Founded: 2010
Last Round: $20M
Private Placement
Private Placement
Private Placement
$50M
$100M
$20M
Top Financial Investors
Total Raised: $34M
Founded: 2010
Top Corporate Investors
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
22
Sector Spotlight: Human Capital Management
Percentage Allocation to HCM Investments Jumped in 2014
2013
2014
0%
1%
2%
3%
Interesting 2014 Minority Investments
4%
5%
6%
7%
8%
Interesting Companies to Watch in 2015
Last Round: $16M
Total Raised: $63M
Founded: 2009
Last Round: $25M
Private Placement
Private Placement
Private Placement
$750M
$63M
$67M
Total Raised: $52M
Founded: 2004
Last Round: $41M
Total Raised: $41M
Founded: 2005
Last Round: $20M
Private Placement
Private Placement
Private Placement
$85M
$51M
$20M
Top Financial Investors
Total Raised: $25M
Founded: 2007
Top Corporate Investors
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
23
Key Private Market Trends
Key Trend: Corporate Investment On the Rise
Large corporates continued moving from business partner to investment partner. Trend should
continue in 2015 as tech corporate balance sheets remain strong
Top Corporate Investors
Corporate Investments Increased
(# of transactions)
190
200
159
150
140
129
119
117
100
100
69
50
0
2007
2008
2009
2010
2011
2012
2013
2014
Corporate Involvement Grew > 2x
($ in billion)
$14.2
$12.0
$10.4
$10.0
$6.7
$7.8
$7.5
$6.7
$5.9
$6.0
$11.2
$8.0
Uber
($3.0)
$14.0
$4.4
$4.0
$2.0
$0.0
2007
2008
2009
2010
2011
2012
2013
2014
# of Transactions
Google
25
Intel
21
Sapphire Ventures (SAP)
14
salesforce.com
11
QUALCOMM
9
Cisco
7
Samsung
6
SoftBank
4
Comcast
4
Nokia
4
UMC Capital
4
Mitsui & Co. Global
3
Alibaba
3
DoCoMo
3
Tencent
3
GE
3
MasterCard
3
Juniper
3
Accenture
3
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
25
Most Active Corporate Investors By Technology Sub-Sector
Enterprise Application
Enterprise Infrastructure
Consumer Internet
eCommerce
Intel
Sapphire Ventures (SAP)
Google
Tengelmann
salesforce.com
Google
Recruit Holdings
Scripps Networks
Google
Samsung
MGM Resorts International
Nokia
Sapphire Ventures (SAP)
Cisco
Access Industries
Bertelsmann
QUALCOMM
Intel
Advanced Micro Devices
SoftBank
Cisco
Telstra
Amazon.com
Comcast
Horizons Ventures Limited
NTT DoCoMo
Bertelsmann
MasterCard
Adobe
United Microelectronics
IAC/InterActiveCorp
Conde Nast
SoftBank
QUALCOMM
Rocket Internet AG
Comcast
salesforce.com
Difference Capital Financial
CRM/SFA
Marketing Automation
HCIT
HCM
salesforce.com
SoftBank
QUALCOMM
Sapphire Ventures (SAP)
Google
WPP Digital
Wellcome Trust
Google
News Corporation
Adobe
HCA
Recruit Holdings
TripleFive
Intel
salesforce.com
Adobe
Akamai Technologies
CHV Capital
Cisco
salesforce.com
Google
Intel
Comcast
Foundation Medical Partners
Samsung
GE Ventures
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public
markets include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the
US, Canada, and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
26
Key Trend: Crossover Investors Expanded Presence
17% of Minority Growth Equity Syndicates Now Include a Crossover Investor
Percentage of Minority Growth Rounds That Included a Crossover Public Market Investor
18%
17%
16%
14%
12%
12%
9%
10%
8%
8%
6%
4%
2%
0%
2011
2012
H
2013
M
2014
Total Crossover
Hedge Funds, Mutual Funds and Global Institutions Now Active in the Private Market

Hedge and mutual funds entered the private market more aggressively in 2014

Mutual funds primarily focused on pre-IPO rounds

Hedge fund investors appear to be seeking absolute return, joining syndicates for late-stage venture rounds

2015 activity from crossover buyers will depend upon successful IPO exits within current private portfolios
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
27
The Largest Public Market Investors Have Entered Growth Equity
Name Brand Funds Are Investing
Most Actives
Mutual Funds:

T. Rowe Price was an early crossover investor
adding names such as Domo, Doximity, Houzz,
Dropbox, Eventbrite and Cloudera

Fidelity was more active in 2014 joining syndicates
for Pinterest, Pure Storage, Domo, Uber and
Hootsuite

Wellington assembled a broad private tech portfolio
including Lookout, New Relic, Apigee, DataLogix,
Veracode and Mozido

Wasatch and Firsthand Capital continued long
patterns of crossover investment in growth tech
Global Investors:

Sovereign funds such as Temasek increased
growth tech investment, as did global institutional
investors like Goldman Sachs

Tiger Global created a platform dedicated to
growth tech equity on a global scale
Hedge Funds:

A core set of hedge funds are frequent
investors in late-stage venture syndicates:
− Coatue
− Passport
− ICONIQ
− Dragoneer
− Valiant
− Altimeter
Note: Tech private placement include investments greater than $14.9M, including pending transactions. Tech IPOs are completed offerings greater than $14.9M. Public markets
include companies traded on all major North American exchanges and LSE AIM Market. Private markets include companies receiving investments with HQs in the US, Canada,
and developed Europe. Sources: Capital IQ, SEC Filings, Bulger Partners Analysis
28
Key Trend: Increased Growth Investing Across Asia
Asian Markets Witnessing Growth




Total Volume of Minority Growth Equity Transactions
Expansion of mobile broadband has created
significant interest in mobile commerce
platforms serving large consumer markets
70
Both capital committed and volume of
transactions have increased steadily over the
past four years
50
US firms such as Matrix, Sequoia and Tiger
Global are increasing activity
Corporate investors including JD.com, Alibaba
and Tencent are active in large growth
syndicates
59
60
40
30
32
26
20
10
0
2011
Select Investments
$2,500M
23
2012
2013
2014
Total Value of Minority Investments ($B)
$6.0
$5.5
$5.0
$3.7
$4.0
$680M
$2.8
$3.0
$2.0
$1.1
$1.0
$330M
$0.0
2011
2012
2013
2014
Source: S&P Capital IQ, Bulger Partners Research Note: Tech private placement include investments greater than $14.9M, including pending transactions. Private markets include
companies receiving investments with HQs in Hong Kong, Japan, Korea, Singapore, New Zealand, or India
29
Capital Supply - 2014 GP Fundraising
Tech Sector had Another Solid Year of Allocation from LPs
Tech Funds Capital Raised ($B) and # Funds
Effective Tech Growth Equity Overhang $262B
$500.0
400
$450.0
350
$450.0
306
$400.0
$400.0
300
$350.0
250
$300.0
$253
$350.0
$300.0
$250.0
200
$200.0
150
$200.0
100
$150.0
50
$100.0
$150.0
$100.0
$50.0
$0.0
0
2007 2008 2009 2010 2011 2012 2013 2014
Amount Raised
Number of funds
$250.0
$261.8B
$50.0
$0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Investors Will Not be Constrained by Capital Supply

Pension fund and endowment investors have returned to alternative assets, like private equity, as the liquidity issues of
the 2008 financial crisis have subsided

Tech growth equity investors are losing the call rights on large 2007 and 2008 vintage funds, but they have performed well
enough post-crisis to attract significant new commitments in 2013 and 2014

Private company leaders should not consider private capital supply a limiting factor in funding growth or acquisition plans
–
Capital is available for even large-scale ideas such as the 2013 Dell MBO
–
Credit market remains open to increase buying capacity of equity capital base
Note: Funds included only funds that had historic interest in Media, Internet, Information Technology,, Telecommunications, or HCIT. Sources: S&P CapIQ, BP Analysis
31
Many Active Investors Have Fresh Capital to Deploy
$5,775M
$3,650M
$2,230M
$1,000M
$1,200M
$1,500M
$1,475M
$1,200M
$1,700M
$714M
$1,000M
$565M
Note: Funds examined were constrained to only funds that had expressed interest in Media, Internet, Information Technology,, Telecommunications, or HCIT Sources: S&P
CapIQ, BP Analysis
32
Institutional Investors Are Committing Evenly to Venture and PE
Private Equity and Venture Capital Fund Volume
2013
Style Balance
2014
45%
55%
50%
Total: 263

The number of tech funds was evenly
split in 2014 between Private Equity
(152 Funds) and Venture Capital (154
Funds)

Capital raised was predictably skewed
towards Private Equity with 85%
($215B) vs Venture Capital’s 15%
($37B)
50%
Total: 306
Private Equity
Venture Capital
Expected Impact
Private Equity and Venture Capital ($) Raised
2013
2014
10%

The minority investment market is
coming into balance with multi-stage
venture raising $37B and investing
$37B

The control PE market has a larger
overhang with > $200B in new 2014
commitments and only $37B deployed

We expect the overhang to drive PE
firms to be aggressive in new platform
investments and to bid competitively
with corporate buyers for acquisitions
that expand these platforms
15%
85%
90%
Total: $262.7B
Total: $252.6B
Private Equity
Venture Capital
Note: Funds included only funds that had expressed interest in Media, Internet, Information Technology,, Telecommunications, or HCIT Sources: S&P CapIQ, BP Analysis
33
Mike MacKeen
Mike MacKeen
Managing Director
Head of Private Capital Markets Group and Co-Head of
Investment Banking
Expertise
Representative Clients
Capital formation for high-growth companies, venture capital and private equity investment, secondary direct
investments, business planning, diligence and strategy and presentation training. Deep experience across
media and technology sectors including consumer and enterprise application software, mobile applications,
network infrastructure, tech-enabled services and financial technology.
About Mike
Mike leads our investment banking activities with global leadership responsibility for Private Capital Markets.
Mike is one of the most active and experienced bankers in direct equity private placements for the technology,
media and telecommunications sectors. He has spent two decades focused exclusively on providing growth
capital for entrepreneurial companies. During this time Mike has provided growth companies with over
$1,000,000,000 in new equity capital. He maintains active relationships with leading growth equity, strategic
and family office investors around the world.
Mike has great enthusiasm for innovation and new products. He has helped entrepreneurs fund innovation at
market disrupting companies such as VistaPrint, Cardlytics, TopCoder, Nexidia and Tongal. Mike began his
career on the team that launched Hyundai Motor Corp in the US market. He is a co-author of a book on New
Product introductions where he wrote about the launch of MTV. Mike serves as a mentor and advisor to young
companies and a judge in business plan competitions.
Prior to joining Bulger Partners, Mike helped launch Revolution Partners which he helped build into a leading
investment bank serving middle market technology companies. Prior to Revolution, Mike was a key member of
the Robertson Stephens Private Capital Markets Group, which became the largest and most active private
placement group in the technology and healthcare industries.
Mike holds degrees from the McDonough School at Georgetown University and the Carroll School at Boston
College. He is also a Chartered Financial Analyst.
CV Summary
Advisory Boards of wymsee, MyNetDiary & Phyre
Executive Committee - Boston College Technology Council
Revolution Partners, Group Head, Management Committee
Robertson Stephens, Private Capital Markets Group
BankBoston Corp, Media and Communications Group
Ford Motor Company, Zone Manager
Hyundai Motor America, District Manager
Chartered Financial Analyst
Georgetown University, McDonough School of Business, MBA
University of Oxford. Brasenose College, Executive Program
on Globalization
Boston College, Carroll School of Management, BS
34