The IPO Window Reopens: We finally saw the IPO window crack open in Q3 2016, as proceeds from technology M&A are leaving investors flush with cash to reinvest and driving demand for IPOs and follow-on offerings. In this third-quarter update on State of the Markets, my team analyzed investment and exit data to identify key trends impacting clients: 1. The number of IPOs exceeded private IPOs for the first time since Q2 2013, as crossover investors’ interest in large pre-IPO financings dropped off. 2. In the U.S., the pace of unicorn exits in Q3 exceeded new entrants. 3. After plummeting in the first half of 2016, values of publicly traded unicorns showed signs of recovery. Learn more by reading the new State of the Markets report. As with any review of the markets, conditions can turn quickly. We are, however, confident that the fundamentals driving innovation will be strong through the end of 2016.

1. State of the Markets
The IPO Window Reopens
Third Quarter 2016
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
⁻ M&A Restores Valuation Confidence
⁻ Public Unicorns Grow into Their Private Values

3. State of the Markets 3
Market
Dynamics

4. Equity Markets Weather Macro Storms
State of the Markets 4
Nasdaq Composite Index: Sep. 2008 – Sep. 2016
The U.S. equity markets have withstood several cycles of global macroeconomic and geopolitical
uncertainty since early 2014, but in Q3 2016 reached all-time highs.
0
1,000
2,000
3,000
4,000
5,000
6,000
Sep '08 Sep '09 Sep '10 Sep '11 Sep '12 Sep '13 Sep '14 Sep '15 Sep '16
Source: S&P Capital IQ, Bloomberg, FiveThirtyEight
Year 2000 Peak
Market Movers: Q3 2016
26% 26%
47% 48%
53%
Sep '16 Nov '16 Dec '16 Feb '17 Mar '17
Implied Probability: Fed Funds Futures
25
50
75
100%
Sep ‘16
67.5%
32.5%
Clinton
Trump
Presidential Election Forecasts

5. Negative Yields Become New Normal
State of the Markets 5
WGBI Country Yields: 9/30/2016
Source: S&P Capital IQ, Citi Research
10-Year Bond Yields: G-7 Nations:
Q1 2015 – Q3 2016
Country 1 2 5 7 10 15 30
Switzerland
Germany
Japan
Sweden
Denmark
Netherlands
France
Spain
Italy
United Kingdom
United States
Australia
Norway
Canada
Negative
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
Italy Japan
Germany France
United Kingdom Canada
United StatesPositive
Years to Maturity
Through Q3 2016, the yields for more than one third of debt outstanding – totaling over $10 trillion –
issued by countries in the World Government Bond Index (WGBI) traded below zero, while yields for
many G7 nations continued a descent towards zero.

6. Crossovers Curtail Private Funding
State of the Markets 6Source: CBInsights
Global Investments in Venture Rounds: Crossover Investors
TotalRounds
AverageRoundSize
$35M
$46M
$139M
$153M
$90M
$0M
$20M
$40M
$60M
$80M
$100M
$120M
$140M
$160M
$180M
0
10
20
30
40
50
60
2012 2013 2014 2015 Q1 - Q3 2016
Tiger Global Management Goldman Sachs Wellington Management
Fidelity Investments Coatue Management T. Rowe Price
Blackrock Average Round Size ($MM)
Some of the largest fund managers who took a primary role in funding large, late-stage private rounds
have become less active through Q3 2016.

7. 2016: Return of the Tech IPO
State of the Markets 7Source: CB Insights, S&P Capital IQ
IPO and PIPO Transactions for U.S. Technology Firms: Q1 2013 – Q3 2016
0
5
10
15
20
25
30
Q1 '13 Q3 '13 Q1 '14 Q3 '14 Q1 '15 Q3 '15 Q1 '16 Q3 '16
IPOs
Private IPOs
27
4
11
7
Tech IPO “Boom”
Tech PIPO Boom
Since 2013, late-stage companies have opted to raise private capital rather than enter the public
markets, as 2015 saw four times as many private IPOs (PIPOs: rounds >$100M) as IPOs. In Q3 2016,
however, that trend reversed as tech IPOs exceeded PIPOs as a result of crossover investors pulling
back from large, new investments and the IPO window opening.

8. Unicorn Births Decelerate
State of the Markets 8Source: The Wall Street Journal
Private Companies with Reported $1B+ Valuations:
Q1 2014 – Q3 2016
Unicorn Market Value Concentration:
September 2016
Uber $68B
Xiaomi
$46B
Didi Chuxing
$33B
Airbnb $26B
Palantir $20B
Lufax $19B
Meituan-Dianping
$18B
Snapchat $18B
WeWork
$16B
Flipkart $15B
SpaceX $12B
Pinterest $11B
Dropbox $10B
All Others
$280B
0
20
40
60
80
100
120
140
160
180
Less than $2B $2-5B $5-10B
$10-15B $15-20B Greater than $20B
The number of private companies with $1B+ valuations has tripled since 2014, with more than half
of all unicorn value concentrated in the top 13 “decacorns.” The pace of newly minted unicorns,
however, began declining in Q4 2015.

9. Tech Companies Stay Private Longer
State of the Markets 9
Years from Founding to IPO (Median): 1999 – Q3 2016
0
2
4
6
8
10
12
14
16
1999 2001 2003 2005 2007 2009 2011 2013 2015 Q3 2016
Source: Dr. Jay Ritter, University of Florida
U.S. Unicorns
2000
Dotcom Crash
2008
Financial Crisis
90th
10th
Median
25th
75th
With access to funding from traditional and nontraditional 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.

10. Net Change in Unicorns by Year: 2014 – September 2016
Unicorn Exits Converge with New Entrants
State of the Markets 10
Total
Market Values
All Unicorns
$591B
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: The Wall Street Journal, S&P Capital IQ
Year End
Unicorns
2013
Exits Entrants Year End
Unicorns
2015
Year End
Unicorns
2014
Exits Entrants Exits Entrants Sep. End
Unicorns
2016
45 -15
+49 79 -11
+76 144
149
0
20
40
60
80
100
120
140
160
Apple
$609B
Google
$543B
Facebook
$368B
Unicorns at IPO2
$92B
The number of new companies reaching $1B+ valuations still exceeds the number of exits.1 While
this has created a backlog of private companies with a combined market value of more than $550B,
the pace of unicorn exits is converging with the pace of entrants.
-10
+15

11. As Exit Conditions Improve, IPO Window Opens
State of the Markets 11Source: S&P Capital IQ; Yahoo! Finance
U.S. Tech IPO Count: H1 2012 – Q3 2016
20
15
10
5
0
^VIX: Jan 2012 – June 2016
0
10
20
30
40
50
Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16
H1 2012 H2 2012 H1 2013 H1 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 Q3 2016
Companies look for a sustained period of low volatility before going public. Decreased volatility in Q3
2016 signals improving market conditions and a reopening of the IPO window.

12. State of the Markets 12
Q3 2016
Key Themes

13. Market Downswing and Idle Cash Spur SaaS M&A
State of the Markets 13
Cloud Software M&A Deals Announced: Q2 – Q3 2016
Source: S&P Capital IQ
$26.0B
ImpliedEnterpriseValue($B)
NTMRevenueMultiple
Financial Buyers
Median Rev Multiple: 3.5x
Strategic Buyers
Median Rev Multiple: 5.6x
3.4x
6.1x
5.1x
3.4x
3.6x
2.1x
3.0x
5.6x
5.0x
3.2x 3.1x
8.3x
7.7x
8.5x
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
SciQuest Cvent Marketo Infoblox Qlik Rackspace Opower Textura Apigee inContact ININ Demandware Blue Coat NetSuite LinkedIn
Accel-KKR Vista Equity Vista Equity Vista Equity Thoma Bravo Apollo Group Oracle Oracle Google Nice Genesys Salesforce Symantec Oracle Microsoft
On the heels of the Q1 market downswing, Q2 and Q3 saw a wave of M&A interest from both strategic and
financial buyers for publicly-traded1 high-growth cloud software companies.
1Including Blue Coat

14. 0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16
M&A Flurry Restores Valuation Confidence
State of the Markets 14
Cloud Software includes enterprise software companies with IPOs since 2004 on major markets.
NTM Revenue Multiples for IPOs based on earliest estimates adjusted to IPO closing price.
Source: S&P Capital IQ
Third
Quartile
Median
StrategicAcquisitions
Median:5.3x
TEAM: 12xRPD: 11x
FinancialAcquisitions
Median:3.5x
LNKD: 6.7x
N: 8.5x
TWLO: 9x
APIC: 6x
APIC: 5.0x
INST: 6x
4.5 Month Gap
Between IPOs
14 Public SaaS
Acquisitions
RAX: 2.1x
CVT: 6.1x
NTNX: ~8x
EVBG: ~6x
SCWX: 3x
“Good Times”
Valuations for cloud software companies plummeted in early 2016, and financial and strategic
buyers took the opportunity to purchase 14 public SaaS companies. This activity has helped to
restore confidence in high-growth software valuations.
Cloud Software NTM Revenue Multiples: Q2 2015 – Q3 2016

15. Flurry of M&A Leaves Cash-Flush Investors
State of the Markets 15Source: S&P Capital IQ
$12B
$16B
$25B $25B
$62B
$72B
$1.5B $2.2B $2.8B $2.9B $3.7B $4.6B
$0
$10
$20
$30
$40
$50
$60
$70
$80
Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16
$BUSD
Announced M&A – Proceedsto Floating Shares
Closed M&A – Proceedsto Floating Shares
IPO and Follow-On Offerings
Cumulative U.S. Software M&A and Public Offerings
Q2 2015 – Q3 2016
5.0%
17.1%
34.6%
S&P 500 S&P 500 Software &
Services
Median U.S. Technology
IPO "Pop"
Total Returns: Q1 – Q3 2016
From Q2 2015 to Q3 2016, capital returned to investors and money managers (e.g. capital that must be
reinvested) as software M&A in the U.S. reached $72 billion while IPOs and follow-on offerings only hit
$4.6 billion. This dynamic has left investors flush with cash and seeking reinvestment opportunities.

16. Public Unicorns Grow into Their Private Values
State of the Markets 16Source: Wall Street Journal, S&P Capital IQ
Total Returns Compared to Tech Unicorns’ Last Private Round Last Private  June 2016  Sep 2016
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
600%
0%
-20%
-40%
-60%
-80%
IPO Date: 2014
2015
2016
6/30 Median Return: -29%
9/30 Median Return: +6%
Publicly traded unicorns had seen their valuations plummet in 1H 2016. In Q3, however, investors sought
to reinvest capital gained through successful software M&A in the public unicorns.

17. Private Valuations Reveal Divergence
State of the Markets 17Source: Pitchbook
Median Pre-Money Valuations
Series Seed through Series B: 2012 – Q3 2016
Median Pre-Money Valuations
Series C through Series D+: 2012 – Q3 2016
$4 $5 $5 $6 $6
$8 $9
$12
$14 $14
$21
$26
$33
$41
$38
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
2012 2013 2014 2015 Q3 '16*
Seed Series A Series B
$50
$56
$60
$74
$90
$92
$99
$135
$180
$200
$0
$50
$100
$150
$200
$250
2012 2013 2014 2015 Q3 '16*
Series C Series D+
*As of 8/1/2016 *As of 8/1/2016
Investors are focusing on the most promising companies, curtailing early-stage bets while doubling down
on later rounds. As of Q3 2016, capital deployed to venture rounds is on track to exceed 2015 levels. The
volume of closed deals, however, is expected to decline as capital is concentrated in fewer companies.

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

19. Report Authors
State of the Markets 19
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

20. About Silicon Valley Bank
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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 20
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About SVB Analytics
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