Venture Capital 2016 Data & Views from VCs and LPs 1

With more money (and new non VC entrants) venture financings have obviously increased was an enormous year (2x pre recession) US VC financing activity 0 2,500 5,000 7,500 10,000 $0 $25 $50 $75 $ Capital invested ($B) # of rounds closed 2Source: PitchBook 2015 Annual U.S. Venture Industry Report; Upfront analysis. $77 $68 5,193 $44 $40 $42 $30 $26 $36 $35 $28 $23 2,574 3,145 4,119 4,533 4,316 6,428 8,097 7,572 8,563 9,381

Angel & Seed deals have grown fastest but dollars have scaled massively into a smaller number of later-stage deals (doubling in just 2 years) US VC # of rounds closed by stageUS VC capital invested ($B) by stage ,000 2,000 3,000 4,000 5, Early Stage 3Source: PitchBook 2015 Annual U.S. Venture Industry Report; Upfront analysis. CAGR 21% 36% 16% CAGR 1%1% 22% 3% Angel/ Seed Late Stage Early Stage Late Stage Angel/ Seed

And the dollars into late-stage deals has largely been driven by non- traditional VCs entering the market (up 50% in the last 3 years) Non-VC participation in US $20 million-plus rounds 60% 0% 37% 15% 30% % CAGR ’12-’15 55% 47% 15% 4Source: CBInsights, VC-backed $20M+ rounds; non-VC defined as Asset Mgmt, Corporate/Corporate VC, Family Office, Hedge & Mutual Funds; Upfront analysis.

M&A pace hasn’t matched the increases in funding pace so VC mark-ups have been good but cash distributions less so US VC-backed M&A activity $0 $38 $75 $113 $ Amount Paid ($B) Number of M&As 5Source: Dow Jones VentureSource Venture Capital Report 4Q’15; Upfront analysis. $54 $81 $42 $43 $

IPO exits are down 32% in volume and 38% in value $0 $4 $8 $ US VC-backed IPO activity Raised ($B) through IPO 120$15 Number of IPOs $6 $5 $9 $8 $ Source: Dow Jones VentureSource Venture Capital Report 4Q’15; Upfront analysis.

With fewer VC exits many partners are more overloaded with boards and financings. 77% of surveyed VCs sit on or observe 4+ boards 3% 2% 7Source: Upfront Survey Jan 2016, 158 VCs. 23% 39% 24% 9% How many boards do you sit on or observe?

About 2/3rd of respondents and their partners write 1-4 first checks each year How many first check investments do you and a typical partner at your firm make each year? 0% 25% 50% 75% 100% RespondentTypical partner at respondent's firm 6% 32% 27% 34% 28% 24% 25% 5% 13% Source: Upfront Survey Jan 2016, 159 VCs for Respondent and 158 VCs for Typical partner at respondent’s firm.

88% of Surveyed VCs are conservative on valuations 6% 1% 11% 9Source: Upfront Survey Jan 2016, 156 VCs. 42% 41% How would you describe your outlook on valuations right now? Not much should change in 2016 over 2015 I expect valuations to continue to rise and you have to pay if you want to be in the best deals My best years are years where valuations are soft. If I get a great deal, I’m in. Otherwise I’ll wait until later in the year. Prices can only continue to drop I’ve already reset valuations expectations in my mind. If I don’t get what I consider a fair valuation I’ll just move on. There are plenty of deals out there and I’m not in a rush I find myself getting a little bit more conse rvative on valuations and am even willing t o miss a deal if I feel it’s overpriced

Specifically more than 90% of respondents expected valuations to go down in 2016 with a full 1/3rd of investors expecting significant price corrections Do you expect valuations to go up, down or remain about the same as previous quarters? 0% 25% 61% 75% 61% 50% 100% Q4'151H'16 Proj 30% 5% 8% 28% 6% Increase Significantly down Marginally down About the same 10Source: Upfront Survey Jan 2016, 156 VCs for Q4’15, 158 VCs for 1H’16.

There is a clear feeling that fund raising cycles are taking longer and 77% of respondents felt this pace is likely to slow down even further in 2016 Do you expect deals to take longer in the process than previous funding quarters, the same or shorter? 0% 25% 50% 75% 100% Q4'151H'16 Proj 77% 45% 22% 51% 1%4% Shorter than normal Getting longer About the same as normal 11Source: Upfront Survey Jan 2016, 159 VCs for Q4’15 and 158 VCs for 1H’16.

This has swung sentiment for many experienced VCs, with 62% of respondents advising companies to cut costs / burn as markets tighten 4% 35% 62% Which statement best describes the spending behavior at most of the companies in which you are on the board or observe? Generally not too worried about burn rates Generally cutting costs expecting markets to tighten Don’t see much change from a year ago 12Source: Upfront Survey Jan 2016, 156 VCs.

65% of respondents think their firms will make about the same first check investments in 2016 as they had in 2015 More New Investments Fewer New Investments 11% 23% 13Source: Upfront Survey Jan 2016, 159 VCs. 65% Do you think your firm will make more new first check investments or fewer in 2016 vs. 2015? About the Same Pace

50% of respondents indicate they may slow down their pace, 35% thought it would be the same pace as 2015 and only 16% expect 2016 to be robust 4% 1% 14Source: Upfront Survey Jan 2016, 158 VCs. 43% 35% 16% How would you generally describe your investment mindset heading into 2016? “I’d rather fund when the dust settles “Unless a deal is amazing I’m likely to slow my pace a bit” “Seeing tons of great deal flow and expect this to be a solid year” “I don’t feel compelled to do deals” “2016 about the same pace as my last several years”

With the sentiment of the markets it’s no surprise that a full 82% of VCs expressed caution or concern going into % 9% 30% 50% Generally cautious 9% Which of the following statements best describes your mood heading into 2016 Things are bad & getting worse Hugely bullish I’m very concerned Generally optimistic 15Source: Upfront Survey Jan 2016, 155 VCs.

159 VCs surveyed Fund type AngelSeedVC (Early)VC (Mid)VC (Late)PECorp(blank) Fund size ($ million) $1-20$20-100$ $ $1000+EvergreenPersonal Survey respondent geography NorcalSoCalNE USOther USROW(blank) Position Partner / MDAnalyst to PrincipalSole proprietor/personal investor How long has your firm existed (years) Personal investment experience (years) Source: Upfront Survey Jan