1. State of the Markets
The Innovation Economy Responds to Recalibration
Mid-Year 2016 Report
Written by SVB Analytics:
Steve Allan, CFA
Head of Analytics
Sean Lawson
Manager
Steven Kakowski
Associate
Steven Pipp
Associate
John Ortelle
Manager

2. State of the Markets
State of the Markets 2
1
Market Dynamics:
Investment and Exit Trends
2
Key Themes:
Responses to Market Recalibration

3. State of the Markets 3
Market
Dynamics

4. Capital Still Cheap; Volatility Still Low
State of the Markets 4
With interest rates remaining near record lows, investors continue to scour the markets for returns.
Markets saw a sustained period of low volatility for nearly three years, from 2012 to Q3 2015
U.S. Treasury 5-Year Constant Maturity:
June 2008 – June 2016
Source: S&P Capital IQ
0
10
20
30
40
50
60
70
80
90
Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16
^VIX (Implied Volatility):
June 2008 – June 2016
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16

5. Macro Forces Weigh on U.S. Market
State of the Markets 5
Nasdaq Composite Index: June 2008 – June 2016
After years of impressive growth, the post-financial crisis bull market decelerates amid global
macroeconomic headwinds and geopolitical uncertainty
0
1000
2000
3000
4000
5000
6000
Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16
Since
January 2014
U.S. Dollar
Hits 10-Year Highs
Oil Price
Hits 10-Year Lows
China
Yuan & Market Shocks
Source: S&P Capital IQ
Year 2000 Peak
U.K. / E.U.
Brexit

6. 3
4
7
2
7
3 3
6
13
11
13
12
15
25
27
12
13
10
8
4
12
11
10
1
7
3
9
1
7 3
0
5
10
15
20
25
30
Private IPOs
IPOs
2015: Year of the Private IPO
State of the Markets 6
Late-stage companies have opted to raise private capital rather than IPO, as 2015 saw four times
as many private IPOs (rounds >$100M) as IPOs. Both Private IPOs and IPOs have notably
decreased in the first half of 2016.
Source: CB Insights, S&P Capital IQ
IPO and PIPO Transactions for U.S. Technology Firms: Q1 2012 – Q2 2016
0
January 2014 June 2016
45 Number of Unicorns 148
$4B Uber’s Valuation $68B
The difference it’s made…

7. Crossovers Curtail Private Funding
State of the Markets 7
Some of the largest fund managers who took a primary role in funding large, late-stage private
rounds have been less active in 1H 2016
Source: CBInsights
Global Investments in Venture Rounds – Crossover Investors
TotalRounds
AverageRoundSize
$35M
$46M
$139M
$153M
$117M
$0M
$20M
$40M
$60M
$80M
$100M
$120M
$140M
$160M
$180M
0
10
20
30
40
50
60
2012 2013 2014 2015 H1'16
Tiger Global Management Goldman Sachs Wellington Management
Fidelity Investments Coatue Management T. Rowe Price
Blackrock Average Round Size ($MM)Average Round Size ($M)

8. The Advent of the Unicorn
State of the Markets 8
The number of private companies with $1B+ valuations has tripled since 2014, with more than
half of all unicorn value concentrated in the top 12 “decacorns”. The pace of newly minted
unicorns, however, has declined
Source: Wall Street Journal
Private Companies with Reported $1B+ Valuations:
Q1’14 – Q2‘16
Unicorn Market Value Concentration:
June 2016
0
20
40
60
80
100
120
140
160
Less than $2B $2-5B $5-10B
$10-15B $15-20B Greater than $20B
Uber
$68B
Xiaomi
$46B
Airbnb
$26B
Didi Chuxing
$25B
Palantir
$20B
Meituan-Dianping
$18BSnapchat
$16B
WeWork
$16B
Flipkart
$15B
SpaceX
$12B
Pinterest
$11B
Dropbox
$10B
All Others
$277B

9. Tech Companies Stay Private Longer
State of the Markets 9
Years from Founding to IPO (Median): 1999 – 2015
With access to funding from traditional and non-traditional sources, tech companies are choosing to
delay the scrutiny and transparency of public markets, and the median age of current U.S. unicorns
suggests this trend will continue
0
2
4
6
8
10
12
14
16
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Median tech company age at IPO
Source: Dr. Jay Ritter, University of Florida
U.S. Unicorns
2000
Dotcom Crash
2008
Financial Crisis
90th
10th
Median
25th
75th

10. Unicorn Values Fall Precipitously after IPO
State of the Markets 10
More than two-thirds of unicorns have seen their values plummet after going public. Twilio, which
had its IPO in June 2016, is one of the few exceptions
Source: S&P Capital IQ
Publicly Traded Tech Unicorn Returns
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
71% of Unicorns
trade below their IPO closing price
Median Return: -28%
Last Private  IPO  June 2016
0%
-20%
-40%
-60%
-80%
IPO Date: 2014 2015 2016

11. Public Values Point to Unicorn Mispricing
State of the Markets 11Source: Wall Street Journal, S&P Capital IQ
Total Returns Compared to Tech Unicorns’ Last Private Round
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
600%
At the end of 1H 2016, the majority of publicly traded unicorns traded below their final private
valuation, reinforcing the ongoing shift in investor focus towards profitability
Last Private  IPO  June 2016
0%
-20%
-40%
-60%
-80%
IPO Date: 2014 2015 2016
GoPro
Pure
Storage
Hortonworks
Rocket
Internet
Box Lending
Club
Sunrun
Square
Hanhua
Financial

12. Size Limits Exit Options
State of the Markets 12Source: CBInsights, Wall Street Journal
With a limited number of buyers for $1B+ companies, an IPO may be the only choice for those
seeking an exit
Tech Unicorn ExitsAll Tech Exits
59%
IPO
3%
IPO 817
4
2014 – 2015 2014 – 1H 2016
IPO
M&A
2014 – 1H 2016

13. New Unicorn Entrants Eclipse Exits
State of the Markets 13
Net Change in Unicorns by Year: 2014 – June 2016
The pace of new companies reaching $1B+ valuations still exceeds the pace of exits,1 creating a backlog of
private companies with a combined market value of more than $550B
Total
Market Values
All Unicorns
$560B
1Exits include IPOs, M&A and revaluations below $1B.
2Sum of market caps for unicorns at the close of their respective first day of trading
Source: Wall Street Journal; S&P Capital IQ
Year End
Unicorns
2013
Exits New Year End
Unicorns
2015
Year End
Unicorns
2014
Exits New Exits New June End
Unicorns
2016
45 -15
+49 79 -11
+76 144 -5
+8
148
0
20
40
60
80
100
120
140
160
Apple
$523B
Google
$479B
Facebook
$326B
Unicorns at IPO2
$87B

14. Exit Conditions Remain Uncertain
State of the Markets 14Source: S&P Capital IQ; Yahoo! Finance
Tech IPO Count: H1 2012 – H1 2016
Companies look for a sustained period of low volatility before going public. The elevated volatility
over the last year helps to explain the paucity of tech IPOs
H1 2012 H2 2012 H1 2013 H1 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016
20
15
10
5
0
0
10
20
30
40
50
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16
^VIX: Jan 2012 – June 2016

15. But Recent IPOs Provide a Glimmer of Hope
$0
$10
$20
$30
$40
6/306/23IPOPrice Range
State of the Markets 15Source: Yahoo! Finance, Wall Street Journal
Twilio exceeded expectations at its June 23 IPO, and a week later it traded at 3x its last private
valuation from a year prior. Acacia has also performed strongly since its May 13 IPO
Twilio, Inc. Stock Price per Share (Daily)
First Day of Trading:
+92%
IPO Close to 6/30:
+27%
Acacia Communications Stock Price per Share (Daily)
IPO
$0
$10
$20
$30
$40
$50
6/276/206/136/65/275/205/13Price
Range
First Day of Trading:
+35%
IPO Close to 6/30:
+29%

16. State of the Markets 16
1H 2016
Key Themes

17. Investor Sentiment Shapes IPO Market
State of the Markets 17
During bull markets, tech companies focus on growth at the expense of profitability at IPO.
However, investor sentiment has shifted away from growth, which is requiring IPO candidates to
show strong unit economics and a clear path to profitability
Source: Dr. Jay Ritter, University of Florida
Percentage of Companies Profitable at IPO: 1995 – 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Tech IPOs Non-Tech IPOs
?

18. Companies Seek Employee Liquidity Workarounds
State of the Markets 18
Even with access to additional capital, mature companies may need to seek non-traditional
sources of liquidity to satisfy near-term employee needs and retain talent
Source: Wall Street Journal, BuzzFeed News, MIT Technology Review, Bloomberg Technology

19. Alternative Investment Structures Emerge
State of the Markets 19Source: Wall Street Journal, Sovereign Wealth Fund Institute, SEC Filings, Company Websites
Early Stage
Growth Stage
Late Stage
Spotify
Convertible Debt
Nutanix
Pre-IPO Debt
$250MM
Menlo Ventures
Special Opportunities Fund LP
$350MM
Flagship Ventures
Opportunities Fund I LP
DCVC
Opportunity Fund II LP
$125MM
Industry Ventures
Special Opportunities Fund II-B LP
$200MM
CircleUp
Marketplace Index
$250MM
Zeel
$4.5MM
8tracks
$33MM
Reg A+
Rule 506(b)
Keen
$15.7MM
Bitpay
$30.5MM
Investor Marketplaces
Structured Deals
Debt Markets
New Investors
While the IPO window remains uncertain, companies at all stages are finding innovative solutions to
raise capital in order to finance the next stage of their growth. Those private companies large enough to
access debt markets are continuing to do so.
Tech Deals Percent of Sovereign-
Wealth Fund Investments
0%
5%
10%
15%
2006 2011 2016
Opportunity Funds
Airbnb
$1B Debt
Uber
$1.15B Debt
Morgan Stanley,
Barclays PLC, et al.
J.P. Morgan Chase & Co.,
Citigroup, Inc. et al.

20. Premium Between Generations Disappears
State of the Markets 20
Source: SVB Analytics, S&P Capital IQ
Enterprise Software split by IPO Date at Salesforce IPO (6/22/2004): Before = “Legacy”; After = “Cloud”
Other Internet split by IPO Date at Mobile Era (1/1/2007): Before = “Legacy”; After = “Mobile”
The public markets are no longer placing a premium on growth at all costs and instead favor
proven business models, leading to recent multiple compression
NTM Revenue Multiples – Enterprise Software:
Q2’09 – Q2’16
NTM Revenue Multiples – Other Internet:
Q2’09 – Q2’16
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
Q2'09 Q2'10 Q2'11 Q2'12 Q2'13 Q2'14 Q2'15 Q2'16
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
Q2'09 Q2'10 Q2'11 Q2'12 Q2'13 Q2'14 Q2'15 Q2'16
Cloud Legacy Mobile Legacy

21. Compressed Multiples Spur SaaS Acquisitions
State of the Markets 21
Cloud Software M&A Deals Announced: Q2’16
On the heels of the recent market downswing, Q2 2016 saw a wave of M&A interest from both strategic
and financial buyers for high-growth cloud software companies
Source: S&P Capital IQ
3.4x
6.1x
5.1x
3.6x
3.0x
5.6x
3.2x
8.3x
7.7x
6.7x
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
$10.0
$26.0B
ImpliedEnterpriseValue($BUSD)
NTMRevenueMultiple
Financial Buyers
Median Rev Multiple: 4.4x
Strategic Buyers
Median Rev Multiple: 6.2x
SciQuest Cvent Marketo Qlik Opower Textura inContact Demandware Blue Coat LinkedIn
Accel-KKR Vista Equity Vista Equity Thoma Bravo Oracle Oracle Nice Salesforce Symantec Microsoft

22. Private Valuations Reveal Divergence
State of the Markets 22
Investors are focusing on the most promising companies, curtailing early-stage bets while doubling
down on later rounds. In Q2 2016, the number of rounds continued to decline, yet total capital invested
grew by $10B vs. Q1 2016.
Source: Pitchbook
Median Pre-Money Valuations
Series Seed through Series B: 2012 – Q2’16
Median Pre-Money Valuations
Series C through Series D+: 2012 – Q2’16
$4 $5 $5 $6 $5 $6
$8 $9
$12
$14 $14
$16
$21
$26
$33
$41
$36
$46
$0M
$5M
$10M
$15M
$20M
$25M
$30M
$35M
$40M
$45M
$50M
2012 2013 2014 2015 Q1'16 Q2'16
Seed Series A Series B
$50 $56 $60
$74
$100
$114
$92 $99
$135
$180
$205
$248
$0M
$50M
$100M
$150M
$200M
$250M
$300M
2012 2013 2014 2015 Q1'16 Q2'16
Series C Series D+

23. 0
2,000
4,000
6,000
8,000
10,000
12,000
2013 2014 2015 H1 2016 2016 Run-
Rate
Seed Series A + B Series C+
VC Deals Decline While Capital Deployed Is Flat
State of the Markets 23
Venture deal activity has receded in 2016, particularly for seed and early-stage deals. However, capital
deployed has remained constant through 1H 2016, as fewer companies raise larger deals and investors
grow more selective.
Source: Pitchbook
U.S. VC Deal Activity by Series: 2013 – H1’16 U.S. VC Capital Deployed by Series: 2013 – H1’ 16
-27%
-20%
-9%
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
$90.0
2013 2014 2015 H1 2016 2016 Run-
Rate
Seed Series A + B Series C+
-14%
+3%
+3%
Early Stage Late StageSeed Early Stage Late StageSeed

24. State of the Markets 24
Appendix

25. Report Authors
25
Steven Pipp
Associate, SVB Analytics
spipp@svb.com
Steve Allan, CFA
Head of SVB Analytics
sallan@svb.com
Sean Lawson
Manager, SVB Analytics
selawson@svb.com
John Ortelle
Manager, SVB Analytics
jortelle@svb.com
Steven Kakowski
Associate, SVB Analytics
skakowski@svb.com
State of the Markets
Special Thanks
Vincent Timoney
Director
Silicon Valley Bank
Rob Tompkins
Managing Director
Silicon Valley Bank
Dan Zaelit
Director
Silicon Valley Bank
Natalie Dillon
Associate
Silicon Valley Bank
Daren Motsuoka
Associate
Silicon Valley Bank

26. About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank has helped
innovative companies and their investors move bold ideas
forward, fast. SVB provides targeted financial services and
expertise through its offices in innovation centers around the
world. With commercial, international and private banking
services, SVB helps address the unique needs of innovators.
State of the Markets 26
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About SVB Analytics
SVB Analytics, a non-bank affiliate of Silicon Valley Bank, serves the
strategic business needs of entrepreneurs, corporates and investors
in the global innovation economy. For more than a decade, SVB
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