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2014 VentureCapital Review

Venture capitalactivity reaches13-year highThe venture capital (VC) industry hadan exceptional year in 2014. Fundingwas back to levels not seen since 2000,median deal sizes were higher acrossall development stages and we sawmore “mega-investments” of more thanUS$50m than at any point since 2000.With the macroeconomic situationimproving and an active exit environment,in which VC-backed IPOs both increasedin number and outperformed otherIPOs (including those backed by PE),the prospects for 2015 look strong.

VC investors putmore capital to workGlobal VC funding levels in 2014 were at their highest level for 13years, with average deal size continuing to increase, making 2014the best year for VC investment activity since 2000. In 2014,US$86.7b was raised globally, surpassing every year since 2000,when US$116.3b was raised. The strong growth in funding wasevident in all three key VC markets — the US, Europe and China.Global venture capital investment51.1 35.6 46.6 56.0 49.8 53.586.71006,551 6,5077,000Amount invested (US$b)806040205,50010.113.813.74,81311.48.78.55,45815.29.711.86,040 6,08513.013.115.511.314.513.914.614.513.526.119.923.16,0005,0004,0003,0002,0001,000Number of rounds013.66.89.912.911.210.917.62008 2009 2010 2011 2012 2013 20140Amount invested during Q1 (US$b)Amount invested during Q3 (US$b)Number of rounds during the year/quarterAmount invested during Q2 (US$b)Amount invested during Q4 (US$b)Note: Global total includes the US, Europe, Canada, China, Israel (all site) and India only.1

Compared with 2013, median deal sizes increased significantlyacross all stages of development in 2014, particularly in the US,Europe and China. The rate of growth was highest in China, whichrecorded the highest median value across all markets in 2014.While the revenue generation stage continued to attract the largestshare of investment, VC activity also increased in theVenture capital investment by industryearly-stage rounds. From a sector perspective, consumer servicesand business and financial services were the preferred areas forglobal VC investors, both in volume and value terms. Consumerservices activity was particularly strong in Europe and China.32mmx55mm32mmx55mmNumber of rounds2011 2012 2013 2014Business and financial services2011 1,170 2012 1,163 2013 1,535 20141,682Consumer goodsBusiness and financial services1861,1701911,1632181,5352261,682Consumer servicesConsumer goods1861,3321911,4752181,5442261,690Energy and utilitiesConsumer services2401,3321811,4751631,5441211,690Health careEnergy and utilities2401,1791811,0951631,1301211,064Industrial goods and materialsHealth care2531,1792141,0952131,1301451,064Information technologyIndustrial goods and materials2531,6702141,7452131,7381451,554Information technologyAmount invested (US$b)Business and financial servicesConsumer goodsBusiness and financial servicesConsumer servicesConsumer goodsEnergy and utilitiesConsumer servicesHealth careEnergy and utilitiesIndustrial goods and materialsHealth careInformation technologyIndustrial goods and materials1,6701,7451,7382011 2012 2013 20149.99.412.12011 2012 2013 20142.,55420. technology10.411.311.514.72 | 2014 Venture Capital Review

Mega-investments onthe rise in 20142014 was notable for the increase in mega-investments of morethan US$50m. More than 300 companies received this level ofinvestment in 2014 (US$39.4), double the number ofmega-investments in 2013.Mega-investments by region 2014 (US$b) — number of roundsMega-investments by by region (US$b)2525202015151010500.30.34CanadaCanada9.19.161 3861 384.14.1China EuropeChina Europe3.43.41414IndiaIndia0.23 0.2IsraelIsrael19719722.322.3United StatesUnited States20020015015010010050500Number of of roundsAmount invested during 2014 (US$b) Number of rounds during 2014Amount invested during 2014 (US$b) Number of rounds during 2014Mega-investments by sector 2014 (US$b) — number of roundsMega-investments by by sector (US$b)2020151510105081817.97.9Business andBusiness andfinancial servicesfinancial services0.3 30.3ConsumerConsumergoodsgoods18.218.2107107ConsumerConsumerservicesservices0.8 70.8Energy andEnergy andutilitiesutilities57574.64.6Health careHealth care62627.77.7InformationInformationtechnologytechnology12012010010080806060404020200Number of of roundsAmount invested during 2014 (US$b) Number of rounds during 2014Amount invested during 2014 (US$b) Number of rounds during 2014Amount invested during Q3 (US$b)Amount invested during Q3 (US$b)Number of rounds during the year/quarterNumber of rounds during the year/quarter3

Positive exit and fundraisingenvironments drive activityImproving macroeconomic conditions underpinned investorconfidence and fueled an active exit and positive fundraisingenvironment, which supported the increase in global VC activity in2014. The IPO window remained open throughout the year and M&Aactivity was up on 2013 levels in all VC markets.In the US, the increase in IPO volumes was solid, but paled bycomparison with China, which saw a three-fold increase in activityas capital markets reopened, and with Europe, where activity levelsmore than doubled. IPO activity in smaller VC markets, such as Israeland Canada, also reached its highest levels in the last six years.Mega-investments Mega-investments by byregion (US$b) region (US$b)10106846240209.2Amount raised through 8 IPO 105 exits by region 2014 (US$b) — number of exits7.19.2105United StatesUnited States55554.84.8617.161Amount raised through IPO exits (US$b) 0.2VC-backed IPOs delivered particularly well for investors,outperforming all other IPOs in 2014, including those that werebacked by PE. Although VC is traditionally attracted to the highestgrowth sectors and its investments are considered higher growththan PE portfolio companies, the degree of difference in performancewas significant.Globally, more than 70% (77% in the US) of VC-backed IPOs werein the tech and health care sectors. In 2014, both of these sectorsdominated the IPO rankings with health care accounting for thegreatest number of deals (193) and tech accounting for the greatestamount of capital raised (US$50.2b).1200.24 0.9 2Europe China Canada India Israel4 0.9Number 2 of IPO exits70.570.5Europe China Canada India Israel100120 80100 6080 4060 2040 0200Number of Number IPO exits of IPO exitsAmount raised through IPO exits (US$b)Number of IPO exitsAmount raised through IPO exits by sector 2014 (US$b) — number of exitsMega-investments Mega-investments by bysector (US$b) sector (US$b)8768574635241302VC contacts102.5182.5Business 18and financialservicesBusinessand financialservices1.87.17.18 251.8Consumer Consumergoods 8 services250.9Amount raised through IPO exits (US$b)Consumer Consumergoods services7Energy andutilities1141145.05.0Energy and Health careutilities 0.97Global Strategic Growth Markets26Industrialgoods 0.5andmaterials4.2 36Information 36technologyNumber of IPO exitsHealth care Industrial Informationgoods and technologymaterialsAmount invested during Q3 (US$b)Amount raised through IPO exits (US$b)Number of IPO exitsNumber of rounds during the year/quarterMaria PinelliMarkets and Operations+44 20 7980 0960Sandra Feldner VandergriffAmount invested during Q3 (US$b)maria.pinelli@ey.com+1 213 977 3253Number of rounds during the year/quartersandra.feldnervandergriff@ey.comGlobal VC LeaderBryan Pearce+1 617 585 0499bryan.pearce@ey.com260.54.2Regional VC leadersUnited StatesJeff Grabow+1 408 947 5607jeffrey.grabow@ey.com120100120 80100 6080 4060 2040 0200Number of Number IPO exits of IPO exits4 | 2014 Venture Capital Review

The US and Europe continued to dominate the global M&A exitlandscape in 2014, with the US accounting for 66% of global deals.VC-backed M&A activity remained particularly strong in the US onthe back of big-ticket deals, with the amount raised through M&Aexits at its highest level since 2008.48380Amount raised through M&A exits by region 2014 (US$b) — number of exits7079.848380 60Mega-investments by byregion (US$b) region (US$b)70 5060 4050 3040 2030 102010079.8United States18118110.66.5 0.6 1.0 1.019 22 17 1110.66.5 0.6 1.0 1.0Europe China 19 Canada22India Israel17 11Amount raised through M&A exits (US$b)Number of M&A exitsUnited States Europe China Canada India Israel50040050030040020030010020001000Number Number of M&A of exits M&A exitsAmount raised through M&A exits (US$b)Number of M&A exitsAmount raised through M&A exits by sector 2014 (US$b) — number of exitsMega-investments bysector (US$b)Mega-investments bysector (US$b)2020 1515 1010550037737714.914.91.21518.818.81451451.0231.2Business Consumer 15 Consumer Energy1.023 andand financial goods services utilitiesservicesBusiness Consumer Consumer Energy andand financial Amount goods raised through services M&A exits utilities (US$b)services10.4 10.415314310.4 10.4153Health careHealth care2.011143Industrial 2.0 Informationgoods 11 and technologymaterialsIndustrial Informationgoods Number and of technology M&A exitsmaterials400350400 300350 250300 200250 150200 100150100 0500Number Number of M&A of exits M&A exitsAmount raised through M&A exits (US$b)The fundraising environment in 2014 was most positive in the US,with early- and late-stage financing running at multi-year highs.In the Asia-Pacific region, VC funds continued to target early stageNumber of M&A exitsinvesting reflected by an increasing proportion of early stagefunds closed. The Asia-Pacific region recorded the biggest gainsin average fund values compared with 2013.IsraelOren Bar-On+97 2 3568 7102oren.bar-on@il.ey.comFrance and LuxembourgFranck Sebag+33 1 46 93 73 76franck.sebag@fr.ey.comAsia-PacificRingo Choi+86 755 2502 8298ringo.choi@cn.ey.comEMEIADemet Ozdemir+90 212 408 5405demet.ozdemir@tr.ey.comsector US$b) (US$b)IndiaMayank Rastogi+91 22 6192 0850mayank.rastogi@in.ey.comGreater ChinaLawrence Lau+862 1222 82816lawrence.lau@cn.ey.com5

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