Hughes Media Law Presents: Cascadia Capital - Venture Funding In Today's Market
1. Venture Capital Funding in Today’s Marketplace
April 26, 2010
Expertise. Discipline. Results.
Columbia Center
701 5th Ave, Ste 2600
Seattle, WA 98104
www.cascadiacapital.com
3. Investment Bank Serving Emerging Growth & Middle Market Companies
Cornerstones of Cascadia Capital
Deep Domain Expertise Investment Banking Expertise Strong Relationships
Industry group heads have Seasoned team from top-tier Dedicated coverage effort of
unique insight from actually investment banks private equity firms, hedge funds
working in their industries: Nationally ranked investment and VCs
- Managing companies banking practice – consistently Active dialogs with leading
- Acquiring/selling among the top 10 investment banks companies and consolidators
businesses in the country for completed within the relevant industries
- Raising capital
transactions Unique relationships with top
- Selling to accounts
Over a $1 billion of capital raised executives across all industries
- Venture startups
Over a $1 billion of M&A deals
completed
Services Offered
Mergers & Acquisitions Corporate Finance Strategic Advisory
Industry Focuses
Emerging Growth Communications IT Internet New Media Sustainable Industries
Middle Market Business Services Consumer Distribution Industrial
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4. Full Service Firm
Representative Services Select Recent Transactions
Sell-side representation
Mergers & Buy-side representation
Acquisitions Minority & majority recapitalizations
Management buyouts Over $660m of recent transactions
Private equity placements
Corporate Debt financings
Finance
Public company capital raises
Strategic financings
Over $500m of recent transactions
Restructurings
Strategic
Shareholder value analysis
Advisory
Services Corporate valuations & fairness opinions
Public company takeover defense services
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5. Information Technology Practice Overview
Cascadia’s Information Technology Practice operates a Thematic Business Model that allows the firm to
uniquely deliver technology domain expertise making up the Information Technology landscape
Cloud Storage
Data Center Automation
IT Performance Management
IT Security
Governance, Risk and Compliance (GRC)
Virtualization
E-Commerce Infrastructure
Enterprise and Web Content Management
Internet and New Media
Broadcast Technology
Legal Technology
The Thematic Business Model drives the four fundamental aspects that are all critical to the successful
operation of Cascadia’s Information Technology Practice:
Strong Domain Expertise
Comprehensive Understanding of Technology Market Dynamics
Deep and Broad Relationships with Technology Strategic Buyers and Financial Sponsors
Extensive Technology Deal-making Experience
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7. The Markets Are Recovering
The financial and economic downturn of 2008 caused a hiatus in both
M&A and Financing markets throughout most of 2009
Large acquirers focused on controlling internal costs
Venture Capitalists focused on making sure that current portfolio companies remain
afloat and were hesitant to put money to work in new ventures until the economic
situation stabilized
The markets have been improving since Q4 of 2009
Market reached it’s bottom in Q3 of 2009 and a rebound is underway
Pickup in both M&A and Capital Raising activity
However, activity is still below 2006 and 2007 highs
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8. Technology M&A
4,500 $500
4,000 $450
$457
3,500 $432 $400
Dollar Volume (Billions)
$350
3,000
$373
Deal Volume
$300
2,500
$301
$250
2,000 $254
$200
1,500
$150
$173
1,000 $152
$100
500 $50
3,040 4,029 3,640 3,014 3,024 2,838 3,205
0 $0
2005 2006 2007 2008 2009 LTM LTM
3/31/2009 3/31/2010
Technology M&A activity has begun to rebound but still below 2006 levels
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Source: The 451 Group
9. Technology M&A by Industry, LTM 3/31/10
Internet content & commerce
IT services & distribution
Application software
IT outsourcing
2% Communications services
3%
3% 19%
Semiconductors
3%
4% Mobility
Infrastructure management
4%
Hosted services
4% Information management
Systems
17%
5% Carrier infrastructure
Security
5% Enterprise networking
Media technologies
6%
Storage
7% 16%
Energy & power
Environmental footprint
Internet, IT Services and Application Software Data centers & facilities
lead the way as the most active sectors within IT Non-tech sectors
Technology portfolio investors
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Source: The 451 Group
10. Venture Capital Fundraising
300 $40
$35
250
$36
$30
$32
Funds Raised (Billions)
200
Number of Funds
$29 $29 $25
$27
150 $20
$15
100 $16
$14
$10
50
$5
243 243 253 270 162 252 137
0 $0
2005 2006 2007 2008 2009 LTM LTM
3/31/2009 3/31/2010
Venture Capital fundraising has declined as Limited Partners reallocate their portfolios
However, plenty of dry-powder remains on the sidelines
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Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
11. Venture Capital Returns vs. Stock Market Indices
40%
30%
US Venture Capital Index,
9/30/2009
20%
DJIA
10%
NASDAQ
0%
S&P 500
-10%
-20%
Quarter 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years
Venture capital returns have outpaced stock market indices over the long term
Venture capital valuations move directionally with the public markets; fund managers
base their valuations on a wider range of factors than just the public markets, thereby
reducing the near-term volatility of VC returns relative to stock market indices
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Source: Cambridge Associates LLC
12. Venture Capital Activity
4,500 $35
4,000
$30
3,500 $30
Dollar Volume (Billions)
$28 $25
3,000 $26
Deal Volume
$24
2,500 $23 $20
$19
2,000 $18 $15
1,500
$10
1,000
$5
500
3,209 3,746 4,027 3,994 2,868 3,609 2,914
0 $0
2005 2006 2007 2008 2009 LTM LTM
3/31/2009 3/31/2010
Deal volume is increasing as the economy stabilizes and VCs regain comfort in the market
Levels still 25% below 2007 and 2008 highs
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Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
14. VC Activity by Industry, LTM 3/31/10
Software
Biotechnology
Medical Devices and Equipment
2%2%
2% Media and Entertainment
2% 22%
3% Industrial/Energy
3% IT Services
4% Telecommunications
Semiconductors
5% Consumer Products and Services
Networking and Equipment
15%
Electronics/Instrumentation
7%
Business Products and Services
Financial Services
9%
11% Computers and Peripherals
9% Healthcare Services
Retailing/Distribution
Software, Life Sciences and Media lead the way as Other
the most active sector within IT
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Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
15. Median Pre-Money Valuation by Series
Series A Financings Series B Financings
$8 $7.3 $7.0 $30
$6.7 $24.4
$7 $23.0
$25
$6 $5.2 $19.8 $20.0
$5.0
$20
($ millions)
($ millions)
$5 $15.3
$4 $15
$3
$10
$2
$5
$1
$0 $0
Q1 - Q3 Q4 Q1 - Q3 Q4
2006 2007 2008 2009 2009 2006 2007 2008 2009 2009
Series C Financings Series D of Higher Financings
$60 $90 $80.0
$51.9
$80 $71.0 $70.0
$50 $43.0
$40.0 $70
$40 $60
($ millions)
($ millions)
$28.0 $30.0 $45.0
$50
$30 $35.2
$40
$20 $30
$20
$10
$10
$0 $0
Q1 - Q3 Q4 Q1 - Q3 Q4
2006 2007 2008 2009 2009 2006 2007 2008 2009 2009
Pre-money valuations have bottomed out in 2009 and there are signs that valuations are improving
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Source: The Venture Financing Report, Cooley Godward Kronish LLP, February 18, 2010
17. Selected Software M&A Activity
Date Deal Deal Value/LTM
Announced Acquiror Name Target Name Target Business Description Value($mm) Revenue EBITDA
04/16/10 Oracle Phase Forward Provides clinical trial electronic data capture and management software $755.4 3.3x 24.6x
03/29/10 HgCapital StepStone Solutions Provides employee recruitment management software 146.6 2.0 -
03/26/10 Thoma Bravo PLATO Learning Provides K-12 educational curriculum planning, management and assessment software 143.0 2.7 12.0
03/19/10 Morningstar Realpoint Provides online credit data rating, analysis and surveillance services 52.0 4.3 -
03/10/10 CA NimSoft Provides business service management , network performance and availability monitoring software 350.0 10.9 -
03/01/10 MSCI Barra RiskMetrics Group Provides risk management, governance, financial analytics and wealth management software 1,611.8 5.3 16.3x
02/22/10 Iron Mountain Mimosa Systems Provides content archiving solutions for information immediacy 112.0 - -
02/09/10 Bentley Systems Enterprise Informatics Provides enterprise content management GRC software - - -
01/04/10 EMC Archer Technologies Provides enterprise governance, risk and compliance (GRC) software 175.0 5.8 -
12/01/09 Vista Equity Partners Intuit (Real estate business) Provides rental property management software for the real estate sector 128.0 1.7 -
11/05/09 JDA Software Group i2 Technologies, Inc. Provide collaborative supply-chain management (SCM) software 561.4 2.4 11.2
09/16/09 IHS Inc. ESS Provides EH&S and crisis management sustainability software 59.0 3.0 -
09/14/09 CA Inc. NetQoS Provides application and network performance and optimization software 200.0 3.6 -
09/10/09 Trustwave Vericept Provides anti-data leakage software 20.0 2.0 -
08/31/09 Actimize, Inc. Fortent Provides anti-money laundering, compliance mgmt. and anti-fraud software 73.5 2.5 -
08/27/09 PSI AG Advanced Information Systems
Provides planning, procurement and supply chain management software 18.0 1.1 7.9
08/17/09 Jack Henry & Associates Goldleaf Financial Solutions Provides back office software for banks 61.1 0.8 -
07/30/09 McAfee MX Logic Provides email filtering, web filtering and email archiving software 140.0 4.0 -
07/27/09 IBM SPSS Provides predictive analytics software and solutions 1,120.1 3.8 14.3
07/17/09 Hewlett-Packard Ibrix Provides enterprise file systems and storage software - - -
07/13/09 Software AG IDS Scheer AG Provides business process management solutions 554.1 1.0 15.5
06/01/09 EMC Data Domain Provides de-duplication data backup and recovery hardware and software 2,345.0 7.4 79.4
05/27/09 EMC Configuresof Provides continuous compliance and configuration management SaaS 95.0 3.2 -
05/13/09 Oracle Virtual Iron Software Offers server virtualization software for small and medium-sized companies - - -
04/12/09 Thoma Bravo Entrust Develops solutions for securing digital identities and information 96.4 1.0 13.4
03/23/09 Oracle Sun Microsystems Provides network computing infrastructure solutions worldwide 7,400.5 0.6 10.8
02/13/08 HarbourVest & Thoma Cressey Flexera Software Provides software management solutions 200.0 1.8 -
02/04/09 Oracle mValent Provides application configuration management software solutions - - -
01/23/09 Verisign Certicom Corp Provides cryptography solutions for software vendors 74.6 2.0 NM
01/22/09 Autonomy Interwoven Develops content management software solutions 751.6 2.2 12.7
01/20/09 Riverbed Technology Mazu Networks Offers business optimization solutions to IT organizations 47.0 - -
01/07/09 Acresso Software Intraware Provides solutions for digital asset delivery and management 44.6 2.5 NM
01/07/09 Sun Microsystems Q-layer NV Provides datacenter and storage virtualization software - - -
01/05/09 Mastercard Incorporated Orbiscom Limited Provides payment solutions for the consumer marketplace 100.0 - -
12/30/08 Eclipsys Premise Corporation Provides clinically-focused software solutions 38.5 - -
10/08/08 Symantec MessageLabs Enterprise managed technology SaaS solution 695.0 4.8 -
05/01/08 Autodesk MoldFlow Computer aided engineering software solutions 184.7 3.1 16.9
Range:
High $7,400.5 10.9x 79.4x
Median $141.5 2.6x 13.8x
Mean $573.6 3.2x 19.6x
Low $18.0 0.6x 7.9x
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Source: CapitalIQ; The 451 Group
18. Selected Software Equity Private Placement Activity
Date Amount
Announced Lead Investor(s) Target Target Business Description Raised ($ mm)
3/31/2010 NGEN Partners, LLC moka5, Inc. Desktop virtualization $ 21
3/26/2010 The Four Rivers Group Vidyo, Inc. Internet based video conference solutions $ 25
3/22/2010 The9 Limited Red 5 Studios, Inc. Multiplayer online games developer $ 20
2/24/2010 Mayfield Fund Pano Logic, Inc. Desktop virtualization $ 20
2/22/2010 Institutional Venture Partners ngmoco, Inc. Mobile game developer $ 25
12/31/2009 Investcorp Technology Partners CSIdentity Corporation Identity fraud solutions $ 35
12/15/2009 Existing investors Silver Spring Networks, Inc. IP-based networking products $ 105
11/17/2009 Founders Fund, In-Q-Tel, and Reed Elsevier Ventures Palantir Technologies, Inc. Platforms for integrating, visualizing, and analyzing information $ 35
11/11/2009 New Enterprise Associates Playdom, Inc. Social game developer $ 43
10/8/2009 SAIC, Inc. BPL Global, Ltd. Smart grid technology $ 22
10/6/2009 TA Associates, Inc. TEOCO Corporation Network cost optimization solutions $ 60
8/31/2009 Six unnamed investors Prodea Systems, Inc. Digital home and multimedia management technologies $ 32
7/31/2009 Doll Capital Management Smith & Tinker, Inc. Online and offline game developer $ 29
7/22/2009 Sequoia Capital eMeter Corporation Energy information management solutions $ 32
7/22/2009 New and existing investors iControl Networks, Inc. Home monitoring solutions $ 23
6/29/2009 Menlo Ventures ParAccel, Inc. Database Management System (DBMS) $ 22
5/6/2009 VantagePoint Venture Partners Tendril Networks, Inc. Residential energy management systems (REMS) $ 30
12/11/2008 Intel Capital and Presidio Venture Partners Carrier IQ, Inc. Mobile services intelligence solutions $ 20
11/21/2008 Bessemer Venture Partners Goodmail Systems, Inc. Email solutions $ 25
10/7/2008 Goldman Sachs Group, Merchant Banking Division Nimsoft, Inc. Performance and availability monitoring solutions $ 26
10/2/2008 New Enterprise Associates Dexterra, Inc. Mobile workforce solutions $ 22
9/30/2008 Monitor Clipper Partners, Inc. Accellos, Inc. Supply chain solutions $ 29
9/23/2008 Act II Capital Trion World Network, Inc. Games developer $ 70
9/23/2008 Index Ventures OpTier, Inc. Business transaction management solutions $ 48
9/22/2008 LSI Corporation 3Leaf Systems Server virtualization solutions $ 35
8/26/2008 Norwest Venture Partners Vanu, Inc. Radio access network solutions $ 32
8/6/2008 Court Square Ventures LLC Echo360, Inc. Platform that captures and converts class lectures $ 22
7/30/2008 Pinnacle Ventures Kickfire, Inc. Database appliances $ 20
7/21/2008 Goldman, Sachs & Co. CambridgeSoft Corporation Life science enterprise software $ 21
7/18/2008 Garnett & Helfrich Capital Azingo, Inc. Mobile software $ 50
6/17/2008 Foundation Capital Control4 Corporation Wired and wireless home automation products $ 20
6/16/2008 Montagu Newhall Associates Roundbox, Inc. Mobile broadcast solutions $ 20
6/11/2008 Highland Capital Partners and General Catalyst Partners Bullhorn, Inc. Staffing and recruiting software $ 26
4/25/2008 Insight Venture Partners and Updata Partners DataCore Software Corporation Storage virtualization $ 30
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Source: CapitalIQ
