Release of NVCA Yearbook Reveals an Encouraging Year for Venture Industry

Comprehensive analysis of the U.S. venture capital industry shows a significant

increase in IPOs, early and seed stage financing and increased investment in
companies across the U.S.

ARLINGTON, VA Venture capitalists raised $16.8 billion in new commitments and invested
$29.6 billion in U.S. companies in 2013, according to the NVCA 2014 Yearbook, prepared by
Thomson Reuters. The National Venture Capital Associations (NVCA) Yearbook is a
comprehensive analysis of the U.S. venture capital industry for 2013, highlighting venture
capital investment in portfolio companies, capital managed by general partners, fundraising
from limited partners, valuation at exits by either initial public offerings (IPOs) or mergers and
acquisitions (M&As). In addition, for the first time, the NVCA 2014 Yearbook includes a section
on U.S. growth equity investment.

This years Yearbook reveals a dynamic investment environment with increased focus on new
players in the innovation economy, including the rise of growth equity and corporate venture
capital investment investment vehicles that did not exist when we launched the Yearbook 17
years ago, said Bobby Franklin, President and CEO of NVCA. Venture capitalists remain
committed to supporting Americas entrepreneurial community, bringing new and disruptive
products to market, and improving medical care and patient well-being while providing an
attractive return to investors. Whether by traditional venture capital, corporate venture capital,
growth equity, or any number of new and energized investment options, we are here to report
that the beat goes on.

Overview

The NVCA 2014 Yearbook shows that the activity level of the U.S. venture capital industry is
roughly half of what it was at the 2000-era peak. In 2000, 1,050 firms each invested $5 million
or more during the year. In 2013, the number of venture capital firms was roughly half that at
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548 active venture capital firms, which invested in 3,382 companies through 4,041 deals. The
number of deals is 4% higher than 2012 counts, but is essentially the same as 2011.

Since 2002, the total dollars invested in a given year shows that the industry has remained
generally in the $20 billion to $30 billion range. Following this trend, $29.6 billion was invested
by venture capital firms in 2013.

Software was the leading sector for venture capital investment, receiving 37.3 percent of total
funding in 2013. Biotechnology came in second with 15.4 percent of total investment, media
and entertainment in third with 9.9 percent, and medical devices and equipment was in fourth
with 7.2 percent. Among first fundings, software led the way with 591 companies getting their
initial venture capital rounds, more than 46 percent of the first fundings.

Flurry of Venture-Backed IPOs

There were 81 venture-backed IPOs in 2013 that raised $11.1 billion, a 69 percent increase in
the number of IPOs compared to the year earlier. Over half of the IPOs were biotechnology
companies, a five year high for the sector.

NVCA is encouraged by the increase in smaller IPOs and biotech IPOs in light of the legislative
success in 2012 with passage of the JOBS Act, which provided regulatory relief for small-cap
companies during the IPO process and instituted confidential filing to allow companies to test
the market without making a public announcement.

There has been a significant increase in time to exit, reflecting the fact that many of these IPOs
were mature companies, and many of them were in the life sciences space, which had been
awaiting an IPO opportunity for months, and in some cases, years.

Growth in Seed and Early Stage Financing

Following a dearth of healthy exits in 2012, the improved venture-backed IPO market in 2013
allowed capital to flow back to investors, resulting in increased seed and early stage
investment.

In 2013, 56 percent of the financing rounds went to seed and early stage companies, compared
with a more typical range of 33 percent, reflecting increased investor confidence in growth
trajectory of emerging companies.

Increased Venture Activity Across the U.S.

Not only did venture investment increase for early stage companies, venture activity continued
to grow in states across the U.S. California, Massachusetts, New York, Connecticut, Illinois and
Texas were the top five states for venture activity, receiving 78 percent of the investment
dollars. More broadly, companies in 48 states plus the District of Columbia received financing,
which ties the 2012 record high.

Increasingly, local investors are leading financing rounds and forming syndicates with out of
state firms, contributing to the growth in venture activity in more states. California-based
venture capital firms, which manage 60 percent of venture capital, invested in companies in 38
states in 2013, and firms in Massachusetts and New York each invested in 36 different states.

Focus on U.S. Growth Equity Investment

The NVCA Yearbook records 342 growth equity deals in the U.S. in 2013. This compares with
406 in 2012, but is very much in line with the past several years. A disclosed $12.3 billion in
equity investment was reported for 2013. This does not count the approximately 105 deals for
which no dollar equity amounts were disclosed.

As with traditional venture capital, the sector receiving the most dollars through the most deals
in 2013 was Software. By count, 148 of the 342 deals, or 43%, were with software companies.

Growth equity investing is a critical component of the emerging growth company financing
continuum and has become, in many respects, the private alternative to the public markets for
both emerging growth companies and their earlier stage venture capital backers.

Corporate Venture

Corporate venture investment continues to gain considerable strength and presence in the
overall industry. The number and reach of corporate venture capital groups increased in 2013,
along with the visibility of this group. These groups provided an estimated 10.5% of the
venture capital invested by all venture groups. They were involved in 16.9% of the deals, which
is the highest level of corporate venture activity in five years.

A copy of the NVCA 2014 Yearbook can be downloaded here.

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Venture capitalists are committed to funding Americas most innovative entrepreneurs,
working closely with them to transform breakthrough ideas into emerging growth companies
that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital
community, the National Venture Capital Association empowers its members and the
entrepreneurs they fund by advocating for policies that encourage innovation and reward long-
term investment. As the venture communitys preeminent trade association, the NVCA serves
as the definitive resource for venture capital data and unites its nearly 400 members through a
full range of professional services. For more information about the NVCA, please visit
www.nvca.org.