Falvey Partners latest technology private capital market update covers the environment for both tech private equity and venture capital investing and fundraising. The update also covers trends in tech portfolio exits via the IPO and strategic M&A markets.

1. Technology Private Capital Market Update
Q3 2013
Peter Falvey
Managing Director
peter.falvey@falveypartners.com
P. 1.617.598.0437
TECHNOLOGY
PRIVATE AND CONFIDENTIAL
Jeffrey Cook
Vice President
jeffrey.cook@falveypartners.com
P. 1.617.598.0439
Jeffrey Monk
Analyst
jeffrey.monk@falveypartners.com
P. 1.617.598.0445
FOCUS. BROAD REACH. OPTIMAL RESULTS.

2. I.
Technology Private Equity Market Update
2

3. Technology Private Equity Investing Posts Record Quarter...
Following a weak first half of 2013, large deals helped drive a rebound in Q3, with total
capital invested reaching $11.7B, the highest level in the post-recession era
TECHNOLOGY PRIVATE EQUITY INVESTING ACTIVITY
($B)
$14.0
160
139
133
$12.0
139
135
141
140
123
112
115
113
117
114
109
120
109
100
91
$8.0
76
100
79
80
68
$6.0
$11.3
$10.3
$9.4
$8.1
$4.0
$9.4
$5.1
60
$8.9
$8.9
$7.3
$6.7
$5.5
40
$6.1
$4.4
$2.0
$11.7
$11.0 $11.1
$4.0
20
$2.7
$0.6
$0.0
Q1
Q2
0
Q3
2009
Q4
Q1
Q2
Q3
Q4
Q1
2010
Q2
Q3
Q1
Q2
2011
Total Capital Invested ($B)
3
Q4
Source: PitchBook. Data Includes closed transactions only.
* Capital invested data excludes transactions with undisclosed transaction amounts.
Q3
2012
Deal Count
Q4
Q1
Q2
2013
Q3
Deal Count
Amount Invested
$10.0
117

4. ...as Middle Market Leveraged Lending Trends Improve
The leveraged loan market continues to improve, fueled by low rates and availability of debt
KEY BASELINE INTEREST RATES
Rate
October 2013
October 2012
Fed Funds Target Rate
0.25%
0.25%
US Prime Rate
3.25%
3.25%
3-Month LIBOR
0.24%
0.31%
MIDDLE MARKET LEVERAGED CASH FLOW TRENDS
Metric
October 2013
October 2012
CF Senior Debt (x EBITDA):
1.50 - 2.50x
1.50 - 2.25x
Total Debt Limit (x EBITDA):
3.00 - 4.25x
3.00 - 4.00x
L+ 3.5% - 4.5% (bank)
L+ 4.5% - 6.5% (non-bank)
L+ 3.0% - 4.5% (bank)
L+ 4.5% - 6.0% (non-bank)
14.0% - 17.0%
14.0% - 17.0%
9.0% - 11.5% Fixed
L+ 7.5% - 9.0% Floating
10.0% - 11.5% Fixed
L+ 9.0% - 10.0% Floating
25% - 35%
25% - 35%
Senior Cash Flow Pricing
Subordinated Debt Pricing
"One Stop" Pricing:
Minimum Equity Contribution
4
Source: Market Intelligence

5. Private Equity Fundraising Remains at Record Levels...
The success of smaller funds and an absence of new mega-funds has resulted in a
median fund size of $255M in Q3 2013, $100M lower than the year-ago period
PRIVATE EQUITY FUNDRAISING ACTIVITY
BY
QUARTER
($B)
$70
$60
60
49
46
45
40
$50
38
40
$40
31
30
$66
27
$35
31
27
26
28
27
29
30
30
26
$30
20
$48
$44
$20
11
$29
$10
$26
$17
$16
$12
$10
$6
20
$40
$16
$16
Q2
Q3
Q4
$25
$25
Q4
Q1
$24
$20
10
$9
$0
0
Q1
Q2
Q3
2009
Q4
Q1
Q2
Q3
Q4
Q1
2010
Q1
2011
Total Capital Raised ($B)
Source: PitchBook. Data Includes closed transactions only.
* Capital invested data excludes transactions with undisclosed transaction amounts.
Q2
Q3
2012
Number of Funds
Q2
2013
Q3
# of Funds
Capital Raised
36
5
50

6. ...as Firms Continue to Chip Away at the Near-Record Overhang
PE Firms continue to chip away at the significant amount of ‘dry-powder’ while the
fundraising environment continues to improve

Significant amount of ‘dry powder’ built-up from large fund raises prior to the financial crisis

Successful fundraising in recent quarters ensuring no shortcoming of dry powder in coming
years
PE FUNDRAISING
YEAR
CAPITAL OVERHANG
300
272
235
$250
$150
117
117
130
150
128
97
$100
100
$50
50
$239
$223
$140
$44
$91
$111
2008
2009
2010
2011
2012
$350
$66
$300
$57
$60
$250
$200
$40
$31
$30
$150
$18
$20
$100
$50
0
Capital Raised ($B)
Source: PitchBook
$500
$400
$80
2013*
$0
6
$100
$105
2007
$109
$0
$0
2007
# of Funds
2008
2009
Cumulative Overhang
Source: PitchBook
2010
2011
2012
Overhang by Vintage
Cumulative Overhang ($B)
200
VINTAGE
$450
250
$200
BY
Cumulative Overhang
$348B
$120
Oveerhang by Vintage ($B)
$300
BY

7. Technology Private Equity Portfolio Company Exits Rebound
After a weak H1 2013, tech PE portfolio company sales posted a record quarter, with
37 exits contributing to $32.8B in exit value
TECHNOLOGY PRIVATE EQUITY PORTFOLIO COMPANY EXIT ACTIVITY
($B)
$35.0
60
$30.0
48
41
38
$20.0
39
43
41
36
23
$10.0
40
31
25
$32.8
30
21
19
$25.0
20
14
8
$7.5
$6.4
$6.4
$0.6
$1.6
Q1
Q2
Q3
10
$7.5
$7.2
$5.1
$4.3
$14.1
$13.8
$12.4 $11.3
$10.2 $10.7
$10.9
$5.0
$7.0
Q1
Q2
0
2009
Q4
Q1
Q2
Q3
Q4
Q1
2010
Q2
Q3
Q4
Q1
2011
Total Exit Value ($B)
7
37
34
31
$15.0
$0.0
38
36
Source: PitchBook. Data Includes closed transactions only.
* Total exit value data excludes transactions with undisclosed transaction amounts.
Q2
Q3
2012
Exit Count
Q4
2013
Q3
Exit Count
Exit Value
$25.0
50

8. Larger Deals Fueling Strategic Technology M&A Activity
Technology M&A market marked by consolidation from major tech acquirers as they
snap up sector leaders leading to fewer, but larger deals
STRATEGIC M&A MEDIAN DEAL SIZE
NOTABLE CASH POSITIONS
($MM)
$140
$79.9B
36 $1B+ strategic
acquisitions since
beginning of 2011
$119
$120
$50.6B
$100
$39.1B
$85
$80
$80
$76
$13.3B
$70
$65
$60
$43
$40
$50
$47
$50
$51
$50
$35
$11.8B
$10.6B
$23
$20
$10.2B
$0
1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13
8
Source: PitchBook
YTD YTD YTD
2011 2012 2013
$5.8B

9. Technology IPO Market Rebounding
After a weak start to 2013, the inconsistent / sporadic tech IPO market is beginning to
stabilize, posting a solid Q2 – Q3 of 23 IPOs accumulating $3.6B in raised capital
TECHNOLOGY IPO MARKET
($B)
$6.0
Capital Raised
Excludes Facebook’s
$16B IPO
17
$5.0
14
18
16
14
14
12
12
12
11
9
9
9
10
$3.0
8
7
$4.8
$2.0
5
6
5
$1.7
$1.0
5
3
3
$0.6
Q1
Q2
$0.4
Q1
$0.9
$0.5
Q4
$1.6
$1.1
$1.0
0
$1.6
$1.6
4
$2.5
$2.3
2
6
5
$0.3
$0.7
$1.1
$1.0
$0.4
$0.0
0
Q3
2009
Q2
Q3
2010
Q4
Q1
Q2
Source: PitchBook, CapitalIQ
Q3
Q4
Q1
2011
Amount Raised ($B)
9
2
Q2
Q3
2012
IPO Count
Q4
Q1
Q2
2013
Q3
IPO Count
Amount Raised
$4.0

10. Recent High-Profile Technology Transactions

Robust demand and activity in SaaS, e-learning and social media sectors

Interest from PE and strategic buyers driving valuations higher
─
─
Dell bidding war between Silver Lake and Icahn Enterprises
Quest bidding war between Dell and Insight Venture Partners
PRIVATE EQUITY
STRATEGIC
Devices & Services
Business
Has been
acquired by
Has been
acquired by
Has been
acquired by
Has been
acquired by
October 2013
May 2013
May 2013
December 2012
Has been
acquired by
Has received an
investment from
August 2012
Has been
acquired by
September 2012
Has been
acquired by
May 2012
10
Has been
acquired by
Has been
acquired by
Has been
acquired by
September 2013
June 2013
June 2013
June 2013
Has been formed by
portfolio companies of
Has been
acquired by
Has been
acquired by
Has been
acquired by
Has been
acquired by
August 2012
August 2012
June 2013
May 2013
January 2013
November 2012
Has been
acquired by
Has been
acquired by
Has been
acquired by
Has been
acquired by
Has been
acquired by
April 2012
January 2012
December 2011
July 2012
June 2012
Has been
acquired by
Has been
acquired by
August 2012
Has been
acquired by
May 2012

11. II. Venture Capital Market Update
11

12. Overall Venture Capital Investing Continues to Rise…
Venture capital investing has continued at its steady incline through 2013. The $7.8B
invested in Q3 represents the largest quarterly outflow of VC since Q2 2011
QUARTERLY VENTURE CAPITAL INVESTING ACTIVITY
($B)
$9.0
1,200
1,081
1,023
$8.0
1,015
941
886
$7.0
910
1,034
991
956
937
904
1,005
979
1,000
906
876
821
762
765
800
681
$5.0
600
$8.2
$4.0
$7.5
$7.1
$6.5
$3.0
$5.1
$2.0
$7.4
$5.4
$5.9
$5.4
$5.1
$7.8
$7.4
$6.6
$6.3
$7.0
$6.8
400
$6.0
$5.7
$3.8
200
$1.0
$0.0
Q1
Q2
Q3
Q4
2009
Q1
Q2
Q3
2010
Q4
Q1
Q2
Source: NVCA, PWC MoneyTree
Q4
Q1
2011
Amount Invested ($B)
12
Q3
Q2
Q3
2012
Deal Count
Q4
Q1
Q2
2013
Q3
Deal Count
Amount Invested
$6.0

13. …as Early-Stage Deals Continue to Gain Momentum
Early-stage deals continue to gain momentum, rising sharply after a weak Q1 and
outpacing both expansion and later-stage deals in the previous two quarters
QUARTERLY VENTURE CAPITAL INVESTING ACTIVITY
($B)
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
3Q'11
4Q'11
1Q'12
2Q'12
Seed
13
Source: NVCA, PWC MoneyTree
Early Stage
3Q'12
Expansion
4Q'12
Later Stage
1Q'13
2Q'13
3Q'13

14. VC Fundraising Still Lagging
$11.6B has been raised by VCs YTD in 2013, significantly below levels seen for the
same period in recent years
QUARTERLY VC FUNDRAISING
NOTABLE RECENT FUNDS
($B)
$18.0
$3,500M
$16.4
$16.0
$2,700M
$14.0
$12.9
$11.6
$12.0
$2,600M
$10.0
$8.1
$2,000M
$8.0
$6.3
$6.1
$6.0
$4.8
$4.0
$5.2
$4.3
$3.4
$2.7
$1,250M
$4.1
$3.2
$2.1
$900M
$2.0
$0.0
1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13
14
Source: NVCA, PWC MoneyTree
YTD YTD YTD
2011 2012 2013
$750M

15. VC Overhang Continues to Dwindle Amid Smaller Funds
At the current investing rate it will take ~8 quarters for VC firms to wipe out the
current amount of VC ‘dry powder’

Average VC fund size has been cut in half since peaking in 2011

Stable investing during slower recent fundraising quarters contributing to decrease in dry
powder
AVERAGE VC FUND SIZE
VC CAPITAL OVERHANG
($MM)
$350
($B)
$90
$301
$300
$250
Cumulative Overhang
$53B
$80
$270
$70
$215
$200
$60
$201
$191
$178
$50
$149
$150
$40
$30
$100
$20
$50
$10
$0
$0
2007
2008
2009
2010
2011
2012
2013*
2007
Average Fund Size ($M)
Source: PitchBook
15
2008
2009
2010
Cumulative Overhang
* As of 6/30/13
Source: PitchBook
2011
2012

16. Stable VC Investing Overshadowing Decreased Fundraising
While VCs continue to put capital to work from prior funds, capital inflows are well
below 2011 highs and are still tracking lower
QUARTERLY VC INFLOWS / OUTFLOWS
($B)
$9.0
Capital
Outflows
$8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
Capital
Inflows
$1.0
$0.0
1Q'09 2Q'09 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10 4Q'10 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 2Q'13 3Q'13
16
Source: NVCA, PWC MoneyTree

17. Software Companies Continue to be Most Attractive Targets for VCs
VC ALLOCATED
TO
SOFTWARE
$3.6B invested in software companies in Q3 represents 46 percent of all VC invested
dollars. Later-stage raisings continue to attract majority of software VC
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
46% of all VC dollars
invested in Q3 went to
software companies
Qtr 1
Qtr 2
Qtr 3
Qtr 4
Qtr 1
Qtr 2
2010
Qtr 3
Qtr 4
Qtr 1
Qtr 2
2011
Qtr 3
Qtr 4
Qtr 1
2012
Qtr 2
Qtr 3
2013
SOFTWARE VC INVESTING
($MM)
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
$2,939
$851
$195
Qtr 1
$1,270
$966
$184
Qtr 2
$336
Qtr 3
2010
$1,350
$1,208
$1,186
$287
$338
$464
Qtr 4
Qtr 1
Qtr 2
$1,735
$502
Qtr 3
$1,827
$359
Qtr 4
2011
First Sequence Financing ($MM)
17
Source: NVCA, PWC MoneyTree
$2,124
$1,399
$347
Qtr 1
$445
Qtr 2
$1,509
$510
Qtr 3
2012
All Other Stages ($MM)
$1,684
$1,786
$1,819
$563
$524
$468
$627
Qtr 4
Qtr 1
Qtr 2
Qtr 3
2013

18. Corporate VCs Post Record Quarter of Investing
Corporate VCs invested $909M in Q2 2013, the highest level in over 4 years and a 23%
increase over the high seen in Q2 2011
QUARTERLY CORPORATE VC INVESTING ACTIVITY
($MM)
$1,000
$909
$900
$800
$742
$700
$686
$665
$600
$554
$500
$463
$400
$441
$437
Q3
Q4
$572
$533
$514
$494
$461
$473
$371
$359
$296
$300
$223
$200
$100
$0
Q1
Q2
Q3
Q4
2009
18
Source: NVCA, PWC MoneyTree
Q1
Q2
2010
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
2013

19. Falvey Partners Snapshot
We are an entrepreneurial investment banking firm focused exclusively on capital
raising and M&A for leading software companies


Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team
Falvey Partners professionals have closed dozens of software transactions representing billions of
dollars in transaction value
FOCUS
SERVICES

Sell-side or buy-side M&A

Growth capital raising

Board and corporate advisory
SELECT, RELEVANT TRANSACTION EXPERIENCE
Project
Leaf
Project
Bay
Project
Port
Project
Swift
Project
Anthem
Retail
Marketing
Software
Cloud Accounting
Software Provider
Ecommerce
Software Provider
Content
Management
Software Provider
Enterprise
Mobility Software
Provider
Web Infrastructure
Software Provider
Strategic Minority
Investment
Placement Agent
Sell-Side Advisor
Sell-Side Advisor
Sell-Side Advisor
Placement Agent
December 2012
Has been
acquired by
Has acquired
Series D
Convertible
Preferred Stock
led by
Has been acquired
by a portfolio
company of
Has been
acquired by
July 2012
December 2011
September 2011
July 2011
July 2011
Series C
Convertible
Preferred Stock
Led by
Has been
recapitalized by
August 2010
August 2004
SECTOR

Software / SaaS

Has been
acquired by
Tech-enabled business services
A portfolio company of

IT services

Internet / digital media
September 2012
COMPANY TYPE

$50M - $250M in enterprise value

Profitable or near-term path to profitability
A portfolio company of
Growth equity
investment from
PGI Notify and Send
platforms acquired by
Growing, with established scale

Has been
acquired by
19
April 2011
February 2011
Has received an
investment from
November 2010
October 2010