Upfront Ventures surveyed Limited Partners (LPs) on their outlook on the venture capital markets and the underlying technology startups we back. This presentation created in Q1 2017 shares this outlook.

1. LP Survey Results
January 2017
1
Mark Suster, @msuster
Chang Xu, @_changxu

2. LPs continue to be optimistic about the venture capital
asset class
2

3. 3
The mood of LPs over the past 5 years has gotten consistently more
optimistic about venture capital off of a low period from 2009-2012.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
4%4%
28%22%
58%67%
11%7%
Right allocation
Too much
Aggressively grow
Trying to grow
Q. How would you describe your fund’s current allocation to VC?

4. 4
We have seen a steady recognition over the past 5 years by LPs that there is a
need to find new managers to drive alpha in addition to established firms.
2016 2017
3%2%
43%39%
36%40%
16%19%
3% Too many
Looking to add
Aggressively add
Cutting back, may add 1-2
Happy with roster
Q. How would you describe your fund’s current outlook on VC managers?
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016

5. 5
Perhaps the biggest shift we’ve seen is the increasing focus on LPs in co-
investments and in fact some LPs now specialize in this.
2016 2017
1%1%
29%
17%
18%
20%
38%
45%
13%16%
Q. How would you describe your fund’s position on direct investments?
Only reason we fund VCs
Some, opportunistic
Starting to do more
Never
Very important
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016

6. 6
LPs believe that a large correlating factor driving our industry is large pools of
capital chasing higher yields due to low interest rates affecting other asset classes.
Low interest rate environment
Late-stage VC funds raising larger funds
Many new VC funds
Increases in corporate VC arms
Mutual funds and hedge funds
Increases in Sovereign Wealth Funds
Increases in Chinese money
Increases in LPs making direct investments 21%
23%
28%
41%
41%
59%
66%
77%
Note: Survey asked respondents to rate each item on a scale of 1-5. Above chart indicates percent of respondents that rated 4 (relevant) or 5 (most relevant).
Source: Upfront Ventures survey of LPs (N=82), Jan 2017
Q. In 2016 many investors warned “Winter is Coming” referring to a slowdown in venture markets. That slowdown
happened but was very short lived. Which of the following are relevant in influencing why “Winter was Mild”?

7. 7
LPs expect to continue to fund the venture industry at a relatively stable pace over
the next 3 years, which should mean consistent capital available for entrepreneurs.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
12%8%
79%82%
9%10%
Q. How would you describe your likely investment pace in venture over the next 3 years?
Increase pace
Keep pace
Slow down pace

8. LPs do believe VCs need to slow down our pace
8

9. 9
LPs have noticed the “valuation creep” in venture-backed companies and
have some concerns about burn rates and financial discipline.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
26%26%
71%68%
3%6%
Q. How would you describe your fund’s outlook on your existing (VC) managers activities?
Very happy
Deeply concerned
A bit concerned by pace,
valuation creep and burn rates

10. 10
VCs have been shortening the cycles in which they raising money from LPs,
which also has LPs a bit concerned.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
24%24%
11%15%
66%61%
Q. How would you describe your fund’s outlook on your existing (VC) managers funding (and fundraising) pace?
More quickly; it concerns us
Normal cadence
More quickly; we’re fine with it

11. LPs expressed that they are discerning
about which VC managers they fund
11

12. 12
Compared with a year ago there are far fewer bears amongst LPs - likely driven
by a sense that the industry has gotten through its short-lived tough patch.
2016 2017
6%
1%
76%
70%
17%
29%
1%
Q. How would you describe your current views on venture capital overall?
Bearish
Haven’t changed
Too much capital
More bullish
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016

13. 13
And most LPs we’ve spoken with over the past 5 years have now
acknowledge that the seed stage of the venture market is here to stay.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
7%
11%
75%66%
18%23%
Q. How would you describe your fund’s outlook on the seed market?
Fund, but discerning
Invest heavily
Over-done

14. 14
Traditional A/B round venture capital is still the most favored part of the venture
industry but LPs acknowledge they need a healthy mix of seed, A/B & growth.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
30%32%
57%51%
14%16%
Q. How would you describe your fund’s outlook on traditional Series A/B venture capital?
Best fit
Being squeezed
Want a healthy mix

15. 15
LP dollars still go disproportionally to large funds that end up doing later stage
investing but this is also the stage of the market they are most concerned about.
Source: Upfront Ventures survey of LPs (N=82 and N=73, respectively), Jan 2017, Jan 2016
2016 2017
1%
38%
32%
60%
68%
Q. How would you describe your fund’s outlook on later stage venture capital / growth equity?
Want a healthy mix
Over-valued
Bullish

16. How did LPs feel about
Trump — before the
inauguration?
(of course we had to ask)
16

17. 17
Prior to the inauguration LPs didn’t seem overly concerned about the
economic & political environment.
LPs 10%32%32%24%1%
Very bullish Optimistic Neutral Somewhat concerned Very concerned
Q. Overall, looking at the current economic & political environment globally I would say I am
Source: Upfront Ventures survey of LPs (N=82), Jan 2017

18. 18
But on point issues LPs did express concern about areas that may affect
underlying investment opportunities.
China relations Surveillance / Immigration Offshore development
1%
6%7%
25%
9%
31%
48%16%
15%
60%
30%
43%
68%
3%14%16%8%
Very concerned
Worried
No impact
Good
Very positive
Q. Do you believe a Trump Presidency could have an impact on the following areas?
/ manufacturing cyber security
Source: Upfront Ventures survey of LPs (N=82), Jan 2017

19. 19
LPs seem concerned about Trump’s impact on social issues with 1/3rd
“concerned or deeply worried”
LPs 15%19%35%30%1%
Right direction No impact Discourage from entering tech Concerned Deeply worried
Q. How will a Trump presidency impact startup companies and tech company employment & social policies
including ethnic diversity, immigration, religious tolerance, gender equality and transgender rights?
Source: Upfront Ventures survey of LPs (N=82), Jan 2017

20. 20
The majority of LPs we surveyed were clearly anti-Trump.
Q. How do you personally feel about a Trump presidency?
Source: Upfront Ventures survey of LPs (N=82), Jan 2017
LPs 11%40%20%29%
Right leader Fine, too much drama Dislike, but irrelevant Anti-Trump Deeply offended

21. 21
However, most LPs didn’t think the Trump presidency will have a major
impact venture capital.
LPs 15%69%12%4%
Very beneficial No impact Uncertainty but limited impact Concerned
Q. Considering all these issues (offshore development, H1-B, M&A, surveillance, China
relations / manufacturing, etc.), how will a Trump presidency impact venture capital?
Source: Upfront Ventures survey of LPs (N=82), Jan 2017

22. Appendix
Annual Upfront LP Survey Participants
82 respondents in January 2017
73 respondents in January 2016
22

23. 2017 LP respondent demographics (I)
23
Fund type
0
10
20
30
9
2
5
12
34
20
Fund size
0
10
20
$0-250M $250-750M $750M-1.5B $1.5-5B $5-10B $10B+ N/A
5
18
7
13
7
15
16
Which of the following best describes your focus on VC?
0
20
40
Only VC Mostly VC Very diverse Not much VC
3
30
2524
Foundation or
Endowment
Fund of
Funds
Family
Office
Discretionary
Advisor
Insurance
Company
Other
Survey respondent geography
0
15
30
SF/Bay Area Greater LA NY Boston Other US ROW
7
28
2
13
4
25
Source: Upfront Ventures survey of LPs (N=82), Jan 2017

24. 2017 LP respondent demographics (II)
24
Position
0
20
40
60
Partner / MD Analyst to Principal
21
60
How long has your firm been investing in VC (years)
0
20
40
0-3 3-10 10-20 20+
2
33
26
15
4
How long has your firm existed (years)
0
20
40
0-3 3-10 10-20 20+
44
27
8
1
Personal investment experience (years)
0
20
40
0-3 3-6 6-10 10-15 15+
3028
14
7
2
Haven’t invested
much in VC
Source: Upfront Ventures survey of LPs (N=82), Jan 2017

25. 2016 LP respondent demographics (I)
25
Fund type
0
10
20
30
9
445
23
28
Fund size
0
10
20
$0-250M $250-750M $750M-1.5B $1.5-5B $5-10B $10B+ Blank
4
16
7
18
3
11
14
Which of the following best describes your focus on VC?
0
25
50
Only VC Mostly VC Very diverse Not much VC
2
42
10
19
Foundation or
Endowment
Fund of
Funds
Family
Office
Discretionary
Advisor
Insurance
Company
Other
Survey respondent geography
0
15
30
NorCal SoCal NE US Other US ROW Blank
2
4
28
11
6
22
Source: Upfront Ventures survey of LPs (N=73), Jan 2016

26. 2016 LP respondent demographics (II)
26
Position
0
20
40
60
Partner / MD Analyst to Principal Blank
1
18
54
How long has your firm been investing in VC (years)
0
20
40
0-3 3-10 10-20 20+
1
23
30
16
3
How long has your firm existed (years)
0
20
40
0-3 3-10 10-20 20+
38
1614
5
Personal investment experience (years)
0
20
40
0-3 3-6 6-10 10-15 15+
27
23
15
44
Haven’t invested
much in VC
Source: Upfront Ventures survey of LPs (N=73), Jan 2016