Cloud insights m&a and capital markets report

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Cloud insights m&a and capital markets report

  1. 1. CLOUD INSIGHTSM&A and Capital Markets Perspectiveon the Cloud Computing Industries: - Software-as-a-Service - Platform-as-a-Service - Infrastructure-as-a-ServiceOctober 2011 Update and Q3 ReviewMark McNay Andrew Arno Patrick Vihtelic Paul HuberPartner & Managing Director Director Associate Senior Analystmmcnay@williamblair.com aarno@williamblair.com pvihtelic@williamblair.com phuber@williamblair.com+1.415.248.5902 +1.415.248.5905 +1.415.248.5911 +1.415.248.5901
  2. 2. Table of ContentsSummary 1 M&A Overview 3  Transaction Detail 3  M&A Valuations 4  Transaction Analysis 5 Capital Markets Overview 6 Public Company Analysis 8 Venture Capital Activity 11  Transaction Analysis 11 William Blair & Company Selected Cloud Transactions 13 SaaS Professional Biographies 14 William Blair & Company SaaS Equity Research Coverage 15 Notes 16 Disclosures 17 
  3. 3. SummarySummary SAAS MERGERS & ACQUISITIONS While the public equity markets have been volatile over the past quarter, the SaaS M&A environment continues to be robust. During third quarter 2011, 53 SaaS M&A transactions were announced, compared with 29 announced in third quarter 2010. Dollar volume for third quarter 2011 was up year-over-year, with $2.4 billion in total disclosed transaction value, versus $788 million during third quarter 2010. Both the total number of transactions and dollar volume for year-to-date 2011 are up nearly double over the prior period. Year-to-date 2011 has witnessed 123 transactions totaling $4.8 billion in disclosed transaction value compared with the corresponding period in 2010, which witnessed 76 transactions totaling $2.1 billion in disclosed transaction value. Notable M&A transactions in third quarter 2011 included: Fizzback, a provider of customer feedback management solutions, announced that it is being acquired by NICE Systems for $80 million (or roughly 7.3x LTM revenue). Ning, a provider of social website and online community creation and management solutions, announced that it is being acquired by Glam Media. Assistly, a provider of customer service management software, announced that it is being acquired by salesforce.com for $50 million. Plimus, a provider of e-commerce solutions for the SMB marketplace, announced that it is being acquired by Great Hill Partners for $115 million. Blackboard, a publicly listed provider of software solutions for the education industry, announced that it is being acquired by Providence Equity Partners for $1.8 billion (or roughly 3.8x LTM revenue). SAAS EQUITY PERFORMANCE SaaS stocks have underperformed the broader market Index 2011 YTD September during 2011. The SaaS index underperformed the NASDAQ Large-cap SaaS -11.8% -7.9% and the S&P 500 with Large and Small Cap SaaS groups Midcap SaaS -18.5% -14.9% losing 11.8% and 12.1%, respectively, while the Mid Cap Small-cap SaaS -12.1% -8.9% SaaS group lost 18.5% since the beginning of 2011. For All SaaS -13.6% -9.3% September, the SaaS index underperformed the NASDAQ NASDAQ -8.3% -6.2% and the S&P 500, losing 9.3%, compared with losses of S&P 500 -3.1% -5.7% 6.2% and 5.7%, respectively. SAAS CAPITAL MARKETS Third quarter 2011 witnessed two SaaS public equity offerings, which included one initial public offering and one follow-on offering, as well as four SaaS initial public offering filings: ServiceSource International, which provides solutions that drive increased renewals of maintenance, support and subscription agreements for technology companies, completed its follow-on offering of $181 million (including the overallotment). ServiceSource priced its follow-on offering at a 5.5% discount to its filing price and a 0.7% discount to the closing price of its stock on the day of pricing. However, the stock is up 86.7% since its initial public offering in March of this year. William Blair acted as an underwriter for ServiceSource’s IPO and follow-on offering. Tangoe, which provides communications lifecycle management solutions, completed its initial public offering of $101 million (including the over allotment). Tangoe traded up 17% on its first day of trading and is currently up 16% since pricing. Demandware, which provides e-commerce solutions, filed for a $100 million IPO. William Blair is acting as an underwriter for Demandware’s initial public offering. Eloqua, Jive Software and BazaarVoice have also filed for their respective IPOs. 1
  4. 4. Summary (contd) Summary (contd) SAAS VENTURE CAPITAL Despite the slowdown in the public equity markets, the SaaS venture funding environment continues to be healthy. During third quarter 2011, 54 SaaS venture transactions were announced, compared with 51 announced in third quarter 2010. Dollar volume for third quarter 2011 was up year-over-year, with $603 million in transaction value, versus $302 million during third quarter 2010. Venture investments for the year-to-date 2011 period are up significantly year-over-year compared with the prior period. Year-to-date 2011 has witnessed 144 transactions totaling $976 million in transaction value, whereas the same period in 2010 witnessed 117 transactions totaling $615 million in transaction value. Notable venture investments in third quarter 2011 included: Rearden Commerce, an e-commerce platform company, raised $133 million in funding from Citigroup, American Express and JP Morgan Chase. Rearden Commerce has raised $328 million in total funding to date. Steelwedge Software, which provides sales planning and performance management solutions, raised $16 million from Mainsail Partners. MINDBODY, which provides business management software for businesses in yoga, pilates, day spa, and fitness markets, raised $21 million from Bessemer Venture Partners and Catalyst Investors. Box.net, which provides online file storage, sharing and collaboration solutions, raised $50 million from Meritech Capital Partners, Andreessen Horowitz, Emergence Capital Partners, Draper Fisher Jurveston, Scale Venture Partners, U.S. Venture Partners, salesforce.com and others. Inkling, which provides a prediction market platform for corporations, start-ups, academic, non-profit and government institutions, raised $17 million in funding led by Tenaya Capital. Cvent, a provider of event management and Web survey solutions, raised $136 million in a minority transaction from New Enterprise Associates and Insight Venture Partners, with Greenspring Associates also participating. PAAS AND IAAS ACTIVITY Notable events in the PaaS and IaaS sectors in third quarter 2011: Carbonite, which provides online back-up solutions for consumers, completed its initial public offering of $72 million (including the over allotment). Carbonite traded up 23.5% on its first day of trading and is currently up 48.1% since pricing. William Blair acted as an underwriter for Carbonite’s initial public offering Cloud.com, a provider of software infrastructure platforms for cloud providers, has been acquired by Citrix Systems for about $190 million. 10gen, a provider of platform-as-a-service technology designed to help developers build Web sites and applications, raised $20 million from Sequoia Capital, Union Square Ventures and Flybridge Capital Partners. iGware, a provider of software and infrastructure tools that support consumer devices, was acquired by Acer for about $395 million in total consideration. GoodData Corporation, which provides a business intelligence platform-as-a-service that enables companies to collaborate around data, raised $15 million from Andreessen Horowitz as well as existing investors Windcrest Partners, General Catalyst Partners and Fidelity Growth Partners Europe. Salesforce.com announced the extension of its social enterprise platform, which offers a real-time multitenant application development environment that enables the creation of cloud, mobile and social apps. Database.com, Salesforce’s on-demand cloud database for developers, has become available to developers and ISVs. As always, we encourage you to contact us if we may be of assistance. Best regards, Mark McNay Andrew Arno Patrick Vihtelic Paul Huber Partner & Managing Director Director Associate Senior Analyst mmcnay@williamblair.com aarno@williamblair.com pvihtelic@williamblair.com phuber@williamblair.comwww.williamblair.com 2
  5. 5. M&A OverviewM&A Overview Transaction Detail The number of SaaS M&A transactions announced increased by over two times when comparing LTM 09/11 to LTM 09/10. LTM 09/11 – 177 transactions (58 with disclosed transaction values totaling $6.5 billion). LTM 09/10 – 88 transactions (20 with disclosed transaction values totaling $2.7 billion). 53 M&A transactions were announced in third quarter 2011, compared with 29 in third quarter 2010. M&A Activity Detail ($ in millions) Number of Transactions Dollar Value LTM LTM LTM LTM 2008 2009 2010 09/10 09/11 2008 2009 2010 09/10 09/11 Annual Disclosed 13 14 30 20 58 $1,854 $2,826 $3,432 $2,654 $6,457 Undisclosed 18 25 82 68 119 - - - - - TOTAL 31 39 112 88 177 $1,854 $2,826 $3,432 $2,654 $6,457 Source: Capital IQ as of September 30, 2011. Annual M&A Detail Transaction Value LTM Transaction Value # of Transactions Transaction Value Number of ($ in millions) Transactions $7,000 180 $6,000 160 140 $5,000 120 $4,000 100 $3,000 80 60 $2,000 40 $1,000 20 $0 0 2006 2007 2008 2009 2010 LTM LTM 09/10 09/11 Transaction $2,302 $6,005 $1,854 $2,826 $3,432 $2,654 $6,457 Value Number of 32 46 31 39 112 88 177 Transactions Source: Capital IQ as of September 30, 2011. 3
  6. 6. M&A Overview (contd)M&A Valuations M&A Overview (contd) The volume and number of announced M&A transactions are both up during the last 12 months when compared with the corresponding period in 2010. On a monthly basis, September 2011 witnessed 17 SaaS M&A transactions totaling $326.5 million in disclosed transaction value compared with 11 transactions totaling $167.5 million in September 2010. While revenue multiples are down slightly during LTM 09/11, M&A activity has increased significantly over the prior period. M&A Valuation Analysis ($ in millions) Annual LTM LTM 2008 2009 2010 09/10 09/11 Volume Number of Announced Transactions 31 39 112 88 177 Number of Disclosed Transactions 13 14 30 20 58 Total Dollar Volume $1,854 $2,826 $3,432 $2,654 $6,457 Average Transaction Size $143 $202 $114 $133 $111 EV/LTM Revenues Number of Disclosed Transactions 7 3 8 7 21 Mean 2.88x 4.03x 5.04x 5.64x 4.13x Median 2.80x 4.60x 2.83x 3.90x 3.31x EV/LTM EBITDA Number of Disclosed Transactions 3 2 1 2 2 Mean 15.9x 47.7x 19.0x 34.5x 15.9x Median 18.5x 47.7x 19.0x 34.5x 15.9x Source: Capital IQ as of September 30, 2011. www.williamblair.com 4
  7. 7. M&A Overview (contd)M&A Overview (contd) Transaction Analysis Private venture-backed companies account for nearly half of the acquisition targets, while private independent targets account for the majority of acquisition targets over the last 12 months. Cash continues to be the most common form of consideration disclosed during the last 12 months, making up 69% of transactions with a disclosed consideration. M&A Activity by Target Ownership Private – V.C. Backed Private – Independent Public Percent of Transactions 75% 50% 25% 0% 2006 2007 2008 2009 2010 LTM 09/10 LTM 09/11 Private – V.C. Backed 60% 57% 52% 62% 50% 45% 44% Private – Independent 34% 26% 35% 31% 48% 52% 56% Public 6% 17% 13% 7% 2% 2% 1% M&A Activity by Consideration Not Disclosed Cash Stock Percent of Transactions 100% 75% 50% 25% 0% 2006 2007 2008 2009 2010 LTM 09/10 LTM 09/11 Not Disclosed 47% 50% 42% 43% 73% 75% 69% Cash 34% 33% 39% 50% 21% 22% 22% Stock 19% 17% 16% 7% 5% 3% 10% Source: Capital IQ as of September 30, 2011. 5
  8. 8. Capital Markets OverviewCapital Markets Overview Tangoe priced its IPO during third quarter 2011, raising $100.9 million in total. ServiceSource International priced its follow-on offering during third quarter 2011, raising $181.1 million in total. Annual SaaS Public Offering Activity ($ Volume by IPO, Follow-On and Convertible Debt) Initial Public Offerings Follow-On Offerings PIPEs Convertible Debt Offerings ($ in millions) $2,500 Initial Public Offerings Follow-On Offerings PIPEs Convertible Debt Offerings $2,000 $1,500 $1,000 $500 $0 2006 2007 2008 2009 2010 LTM 09/10 LTM 09/11 Initial Public Offerings $145.0 $805.0 - $194.9 $486.5 $486.5 $537.2 Follow-Ons Offerings $439.4 $934.8 $177.0 $457.9 $631.3 $521.7 $1,220.0 PIPEs - - $251.0 - - - - Convertible Debt Offerings - - - - $1,029.6 $854.6 $175.0 Source: Capital IQ and Dealogic as of September 30, 2011.www.williamblair.com 6
  9. 9. Capital Market Overview (contd) Capital Market Overview (contd)LTM SaaS Public Equity Offering Detail Market Cap % Change Pricing to Offer Price Discount to Offering Primary Post Filing Pricing Offer Size as % of Offering First First Company Date Date Filing Range Price ($ in MM) Offering Dilution ($ in MM) Day Week To Date Filing Price Last Sale09/30/2011IPOFiledBazaarvoice 08/26/11 - - - $ 86.3 - - - - - - - -Jive Software 08/24/11 - - - $ 100.0 - - - - - - - -Eloqua 08/24/11 - - - $ 100.0 - - - - - - - -Demandware 07/15/11 - - - $ 100.0 - - - - - - - -WageWorks 04/25/11 - - - $ 49.0 - - - - - - - -Trustwave 04/21/11 - - - $ 100.0 - - - - - - - -PricedTangoe 04/16/10 07/26/11 $9.00 - $11.00 $ 10.00 $ 100.9 74.4% 23.9% $ 314.0 16.5% 19.2% 13.1% - -Responsys 12/23/10 04/20/11 $8.50 - $10.00 $ 12.00 $ 91.4 85.3% 14.4% $ 529.3 28.3% 33.0% (10.2%) - -Ellie Mae 04/30/10 04/14/11 $9.00 - $11.00 $ 6.00 $ 50.7 59.2% 24.5% $ 122.4 12.8% 19.0% (7.3%) - -ServiceSource International 12/20/10 03/24/11 $7.50 - $ 9.00 $ 10.00 $ 137.3 71.3% 14.6% $ 655.1 21.8% 21.8% 32.1% - -Cornerstone OnDemand 09/29/10 03/16/11 $9.00 - $11.00 $ 13.00 $ 157.0 62.1% 16.1% $ 606.3 46.7% 38.0% (3.5%) - -Follow-OnPricedServiceSource International 07/18/11 07/28/11 - $ 17.50 $ 181.1 13.3% 2.0% $ 1,202.2 (8.0%) 2.0% (24.5%) -8.6% -0.7%SPS Commerce 06/08/11 06/09/11 - $ 16.50 $ 19.9 100.0% 0.0% $ 211.8 (9.7%) (0.1%) (1.3%) -6.9% -6.9%Kenexa 05/16/11 05/19/11 - $ 27.75 $ 95.7 100.0% 12.9% $ 739.1 16.6% 11.4% (43.6%) -1.6% -0.9%IntraLinks Holdings 03/25/11 04/06/11 - $ 25.50 $ 219.9 16.7% 2.7% $ 1,372.0 (0.8%) 10.8% (70.5%) -11.1% -0.3%SciQuest 03/09/11 03/30/11 - $ 14.25 $ 77.3 21.2% 5.2% $ 319.7 (2.9%) 0.2% 4.8% -5.3% -2.4%RealPage 11/17/10 12/06/10 - $ 25.75 $ 266.5 38.6% 6.0% $ 1,736.0 9.4% 8.7% (20.6%) -1.2% -0.4%IntraLinks Holdings 11/19/10 12/06/10 - $ 20.00 $ 200.0 20.0% 3.8% $ 1,067.6 (4.8%) (4.1%) (62.5%) -2.9% -2.1%SPS Commerce 11/12/10 12/02/10 - $ 12.25 $ 35.2 3.5% 0.9% $ 151.9 0.7% 15.3% 33.0% -8.3% -5.4%Synchronoss Technologies 11/12/10 11/17/10 - $ 25.40 $ 124.4 90.1% 12.1% $ 930.1 (1.0%) 3.5% (1.9%) -3.1% -2.3%Note: William Blair clients highlighted.Source: FactSet and Dealogic as of September 30, 2011. 7
  10. 10. Public Company Analysis Public Company Analysis Since the beginning of 2011, the SaaS Index has underperformed against the NASDAQ composite, losing 13.6%, while the NASDAQ has lost 8.3% for the year. Since the beginning of 2011, the Large and Small Cap SaaS groups have lost 11.8% and 12.1%, respectively, while the Mid Cap SaaS group lost 18.5%. SaaS Indexed Stock Price Performance Mkt. Cap >$1B (-11.8%) Mkt. Cap $500 MM to $1B (-18.5%) Mkt. Cap <$500M (-12.1%) NASDAQ (-8.3%) 130 120 110 100 90 80 12/31/10 1/31/11 3/3/11 4/3/11 5/3/11 6/3/11 7/3/11 8/3/11 9/3/11 Note: Market cap groupings based on December 31, 2010, stock price Mkt. Cap > $1 B consists of: ATHN, BBBB, CNQR, CRM, LOGM, N, RP, SFSF, TLEO, ULTI Mkt. Cap $500 MM to $1B consists of: CTCT, CSOD, IL, LPSN, MDSO, MKTG, RNOW, SNCR, SREV, TRAK, VOCS Mkt. Cap < $500 MM consists of: CNVO, DMAN, ELLI, KNXA, SDBT, SPSC, SQI, TNGO Source: FactSet as of September 30, 2011. Valuation Overview $1 B+ Market Cap $500 MM to $1 B Market Cap <$500 MM Market Cap 49.7x 41.3x 32.3x 25.9x 23.0x 6.2x 15.1x 3.8x 2.0x EV / 2011E Revenue EV / 2011E EBITDA EV / 2011E FCFSource: FactSet as of September 30, 2011.Note: Market cap groupings based on September 30, 2011 stock price. Data points represent median multiples. www.williamblair.com 8
  11. 11. Public Company Analysis (contd) Public Company Analysis (contd)Stock Price and Revenue Multiple Over Time Market 12/31/08 Low Point High Point 9/30/11 % Change in Stock Price Cap Stock EV/LTM Stock EV/LTM Stock EV/LTM Stock EV/LTM 12/31/08 to Low Point High Point ($ MM) Price Rev Price Rev Price Rev Price Rev 9/30/11 to 9/30/11 to 9/30/11 athenahealth Inc. $2,207.3 $ 37.62 9.33 x $22.05 3.04x $69.25 9.48x $59.55 7.50x 58.3% 170.1% -14.0% Blackboard Inc. $1,573.8 $26.23 2.98 x $23.00 2.51x $48.80 4.23x $44.66 3.53x 70.3% 94.2% -8.5% Concur Technologies Inc. $2,092.3 $ 32.82 6.21 x $18.20 3.00x $57.87 8.93x $37.23 5.34x 13.4% 104.6% -35.7% Constant Contact Inc. $519.9 $13.25 3.44 x $12.60 1.69x $35.60 5.48x $17.29 2.12x 30.5% 37.2% -51.4% Convio Inc. $153.6 NA NA $6.95 1.09x $12.91 2.51x $8.41 1.39x NA 21.0% -34.9% Cornerstone OnDemand Inc. $642.6 NA NA $12.13 9.32x $22.74 26.23x $12.54 9.84x NA 3.4% -44.9% DealerTrack Holdings Inc. $677.1 $ 11.89 1.13 x $9.28 0.71x $25.49 3.75x $15.67 2.08x 31.8% 68.9% -38.5% DemandTec Inc. $196.9 $8.07 2.09 x $5.40 1.33x $14.07 4.62x $6.54 1.50x -19.0% 21.1% -53.5% Ellie Mae Inc. $116.1 NA NA $3.80 0.88x $7.30 4.73x $5.56 1.68x NA 46.3% -23.8% IntraLinks Holdings Inc. $430.6 NA NA $6.64 1.83x $31.76 9.76x $7.51 2.69x NA 13.1% -76.4% Kenexa Corp. $444.1 $ 7.98 0.75 x $3.83 0.30x $32.87 4.11x $15.64 1.66x 96.0% 308.4% -52.4% LivePerson Inc. $556.4 $1.82 0.87 x $1.68 0.73x $14.71 6.16x $9.95 4.00x 446.7% 492.3% -32.4% LogMeIn Inc. $803.4 NA NA $15.43 3.57x $47.22 10.56x $33.21 5.64x NA 115.2% -29.7% Medidata Solutions Inc. $415.1 NA NA $13.64 1.48x $27.11 3.69x $16.44 1.85x NA 20.5% -39.4% NetSuite Inc. $1,908.3 $ 8.44 2.67 x $6.74 1.94x $42.64 13.39x $27.01 8.40x 220.0% 300.7% -36.7% RealPage Inc. $1,470.2 NA NA $14.52 5.71x $32.80 12.79x $20.45 6.34x NA 40.8% -37.7% Responsys Inc. $534.1 NA NA $10.44 3.87x $17.80 7.67x $10.78 3.87x NA 3.3% -39.4% RightNow Technologies Inc. $1,117.9 $7.73 1.20 x $5.84 0.73x $36.18 5.64x $33.05 5.01x 327.6% 465.9% -8.7% salesforce.com Inc. $16,199.0 $ 32.01 3.31 x $25.77 2.46x $159.32 12.55x $114.28 8.36x 257.0% 343.5% -28.3% SciQuest Inc. $300.5 NA NA $10.65 4.74x $17.90 8.04x $14.94 5.31x NA 40.3% -16.5% ServiceSource $923.8 NA NA $11.75 4.53x $22.29 9.05x $13.21 4.85x NA 12.4% -40.7% SoundBite Communications Inc. $38.7 $14.60 NMF $1.30 0.02x $3.41 0.47x $2.50 0.27x -82.9% 92.3% -26.7% SPS Commerce Inc. $203.7 NA NA $8.60 1.52x $18.71 3.90x $16.29 3.48x NA 89.4% -12.9% SuccessFactors Inc. $1,974.0 $5.74 2.25 x $4.98 1.61x $40.27 13.55x $22.99 6.84x 300.5% 361.6% -42.9% Synchronoss Technologies Inc. $977.4 $ 10.66 2.23 x $8.23 1.59x $35.20 7.03x $24.91 4.05x 133.7% 202.7% -29.2% Taleo Corp. $1,106.9 $7.83 1.20 x $7.09 1.06x $37.94 5.66x $25.72 3.50x 228.5% 262.8% -32.2% Tangoe Inc $371.2 NA NA $8.75 2.59x $13.98 4.78x $11.31 3.90x NA 29.3% -19.1% Ultimate Softw are Group Inc. $1,263.3 $14.60 1.97 x $12.95 1.67x $60.37 6.60x $46.72 4.94x 220.0% 260.8% -22.6% Vocus Inc. $356.1 $ 18.21 3.51 x $11.66 1.74x $32.67 5.36x $16.76 2.26x -8.0% 43.7% -48.7%Source: FactSet as of September 30, 2011.Note: Low point and high point reflect data since December 31, 2008. 9
  12. 12. Public Company Analysis (contd) Public Company Analysis (contd) Comparable Company Analysis Market Enterprise 10 - 11 2011 Close Cap Value Enterprise Value / Revenue Enterprise Value / EBITDA Enterprise Value / FCF Revenue EBITDA Name 09/30/11 ($ MM) ($ MM) LTM 2011E 2012E LTM 2011E 2012E LTM 2011E 2012E Growth Margin athenahealth Inc. $59.55 $2,207.3 $2,102.9 7.50x 6.55x 5.08x 41.3x 33.2x 24.4x 57.2x nmf 46.7x 30.8% 19.7% Blackboard Inc. $44.66 $1,573.8 $1,700.2 3.53x 3.15x 2.83x 20.8x 13.6x 10.9x 23.8x 17.5x 15.2x 20.7% 23.2% Concur Technologies Inc. $37.23 $2,092.3 $1,771.3 5.34x 4.83x 3.97x 30.7x 18.3x 13.7x 44.7x 36.5x 27.4x 20.0% 26.4% Constant Contact Inc. $17.29 $519.9 $413.8 2.12x 1.93x 1.60x 23.8x 11.8x 8.4x 32.3x 20.7x 14.3x 23.1% 16.4% Convio Inc. $8.41 $153.6 $102.7 1.39x 1.29x 1.12x 14.5x 9.7x 7.3x 44.1x 14.2x 9.2x 14.5% 13.2% Cornerstone OnDemand Inc. $12.54 $642.6 $556.7 9.84x 7.65x 5.16x nmf nmf nmf nmf nmf 37.6x 66.5% nmf DealerTrack Holdings Inc. $15.67 $677.1 $606.9 2.08x 1.79x 1.61x 10.3x 8.6x 7.0x 15.8x 51.7x 21.0x 38.7% 20.8% DemandTec Inc. $6.54 $196.9 $132.7 1.50x 1.46x 1.30x nmf 45.3x 21.9x 24.5x 21.3x 14.7x 12.9% 3.2% Ellie Mae Inc. $5.56 $116.1 $78.5 1.68x 1.56x 1.27x 16.0x 10.6x 6.4x nmf 19.1x 12.9x 16.4% 14.7% IntraLinks Holdings Inc. $7.51 $430.6 $553.7 2.69x 2.55x 2.28x 7.7x 7.8x 6.8x 11.4x 12.9x 9.4x 17.9% 32.9% Kenexa Corp. $15.64 $444.1 $399.8 1.66x 1.42x 1.26x 15.7x 8.9x 7.3x 41.3x 16.3x 11.9x 41.3% 16.0% LivePerson Inc. $9.95 $556.4 $482.0 4.00x 3.60x 2.98x 19.2x 14.0x 11.5x 34.8x 28.4x 19.3x 21.8% 25.7% LogMeIn Inc. $33.21 $803.4 $619.3 5.64x 5.18x 4.25x 33.8x 19.7x 15.8x 20.6x 19.9x 15.6x 18.4% 26.2% Medidata Solutions Inc. $16.44 $415.1 $321.3 1.85x 1.73x 1.56x 9.4x 7.2x 5.9x 32.3x 10.0x 8.9x 11.4% 24.2% NetSuite Inc. $27.01 $1,908.3 $1,790.0 8.40x 7.64x 6.42x nmf nmf 57.0x nmf nmf 45.1x 21.2% 9.6% RealPage Inc. $20.45 $1,470.2 $1,403.0 6.34x 5.35x 4.22x 46.2x 24.5x 18.0x 56.2x 39.2x 27.2x 39.4% 21.8% Responsys Inc. $10.78 $534.1 $452.2 3.87x 3.40x 2.79x 20.9x 19.6x 15.2x nmf 32.1x 24.3x 41.4% 17.4% RightNow Technologies Inc. $33.05 $1,117.9 $1,036.9 5.01x 4.57x 3.87x 43.8x 32.9x 20.8x nmf nmf 27.8x 22.2% 13.9% Salesforce.com Inc. $114.28 $16,199.0 $16,196.5 8.36x 7.43x 5.92x 57.8x 42.4x 30.9x nmf 41.6x 30.1x 34.3% 17.5% SciQuest Inc. $14.94 $300.5 $250.5 5.31x 4.62x 3.95x 34.2x 23.3x 16.9x 32.2x 19.1x 14.9x 27.8% 19.8% ServiceSource $13.21 $923.8 $852.0 4.85x 4.44x 3.62x nmf nmf 38.0x nmf nmf nmf 25.6% 5.8% SoundBite Communications Inc.* $2.50 $38.7 $10.3 0.27x 0.26x 0.24x nmf nmf 17.9x nmf nmf nmf 2.3% nmf SPS Commerce Inc. $16.29 $203.7 $173.9 3.48x 3.08x 2.56x 45.1x 34.5x 20.9x nmf 52.8x 22.8x 26.6% 8.9% SuccessFactors Inc. $22.99 $1,974.0 $1,724.1 6.84x 5.49x 4.36x nmf nmf nmf 49.7x 37.1x 25.5x 49.9% 2.2% Synchronoss Technologies Inc. $24.91 $977.4 $820.9 4.05x 3.60x 3.01x 26.1x 13.5x 10.9x nmf 28.3x 18.7x 34.0% 26.8% Taleo Corp. $25.72 $1,106.9 $958.5 3.50x 2.97x 2.54x 28.3x 13.3x 11.8x 38.5x 34.7x 18.3x 33.5% 22.3% Tangoe Inc $11.31 $371.2 $328.2 3.90x na na nmf 27.5x 18.1x nmf 41.2x 21.9x na na Ultimate Software Group Inc. $46.72 $1,263.3 $1,215.8 4.94x 4.50x 3.76x 54.8x 26.4x 17.9x 59.6x 48.6x 28.6x 18.6% 17.1% Vocus Inc. $16.76 $356.1 $239.6 2.26x 2.09x 1.80x nmf 13.7x 9.6x 14.9x 13.9x 9.1x 17.3% 15.3% *Indicates excluded from mean and median calculation due to low enterprise value. Source: FactSet as of September 30, 2011.www.williamblair.com 10
  13. 13. Venture Capital ActivityVenture Capital Activity Transaction Analysis The total number of venture investments increased 28% when comparing LTM 09/11 with LTM 09/10, while dollar volume also was up 53% for the same periods. Year-over-year, third quarter 2011 was up in venture capital activity; third quarter 2011 witnessed 55 venture investments totaling $622 million, while third quarter 2010 witnessed 51 venture investments totaling $302 million. On a monthly basis, September 2011 witnessed 21 SaaS venture transactions totaling $235.5 million in disclosed transaction value compared with 21 transactions totaling $125.6 million in September 2010. Annual Venture Capital SaaS Activity Transaction Value LTM Transaction Value # of Transactions Transaction Value Number of ($ in millions) Transactions $2,000 250 $1,600 200 $1,200 150 $800 100 $400 50 $0 0 2008 2009 2010 LTM 09/10 LTM 09/11 Transaction Value $1,296 $961 $901 $997 $1,530 Number of Transactions 133 134 157 163 208 Quarterly Venture Capital SaaS Activity Transaction Value Number of Transactions Transaction Value Number of ($ in millions) Transactions $700 70 $600 60 $500 50 $400 40 $300 30 $200 20 $100 10 $0 0 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Transaction Value $257 $129 $132 $228 $219 $382 $176 $133 $302 $290 $312 $290 $622 Number of Transactions 31 15 22 21 45 46 27 38 51 41 51 58 55 Source: Capital IQ and VentureSource as of September 30, 2011. 11
  14. 14. Venture Capital Activity (contd)Transaction Analysis (cont’d) Venture Capital Activity (contd) The number of early- and later-stage investments for LTM 09/11 increased significantly compared with levels seen in LTM 09/10; however, the number of series B and series C transactions have remained relatively flat. The median transaction size has remained relatively flat for series A, series C, and Later Stage transactions, while Series B transactions have seen a slight increase in median transaction size. Number of SaaS Transactions by Round LTM 09/10 LTM 09/11 60 54 50 40 40 34 33 35 27 28 30 21 20 10 0 Series A Series B Series C Later Stage Median SaaS Transaction Size by Round ($ in millions) LTM 09/10 LTM 09/11 15 $12 $12 10 $9 $9 $9 $6 5 $2 $2 0 Series A Series B Series C Later Stage Source: Capital IQ, VentureSource and William Blair estimates as of September 30, 2011. www.williamblair.com 12
  15. 15. William Blair & Company Selected Cloud TransactionsWilliam Blair & Company Selected Cloud Transactions Selected M&A Transactions received a significant has been acquired by investment from has been acquired by has been acquired by has been acquired by has been acquired by has acquired has been acquired by has been acquired by has been acquired by Selected Public Equity Transactions $71,875,000 $51,750,000 $91,351,224 $318,436,530 $156,975,000 Initial Public Offering Initial Public Offering Initial Public Offering Initial Public Offering Initial Public Offering & Follow-on $132,781,530 $422,108,000 $53,124,000 $91,673,000 $206,816,000 Initial Public Offering Initial Public Offering Initial Public Offering Initial Public Offering Initial Public Offering & Follow-on & Follow-on & Follow-on & Follow-on $66,000,000 $303,514,000 $120,081,000 $708,860,000 $126,500,000 Initial Public Offering Follow-on Offerings Initial Public Offering Initial Public Offering Initial Public Offering & Follow-on & Follow-ons Selected Private Placement Transactions $10,000,000 $54,000,000 $50,000,000 Series E Preferred Stock from existing investors and Convertible Convertible Preferred Stock Preferred Stock 13
  16. 16. SaaS Professional BiographiesSaaS Professional Biographies SaaS Professional Biographies Mark McNay Partner and Group Head, San Francisco Mark McNay joined William Blair & Company in 2000 as Group Head of the West Coast Investment Banking Team based in San Francisco. Prior to joining William Blair & Company, he was a Managing Director and Head of the Internet Banking Group at Volpe Brown Whelan & Company and a Managing Director at Smith Barney, where at various times he headed the Consumer/Retailing Group and the Los Angeles Corporate Finance Office. He is a graduate of Georgetown University (B.S.) and Columbia University (M.B.A.). Andrew Arno Director, San Francisco Andrew Arno is a Director in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. He joined William Blair & Company in 2004. From 2000 to 2002, he was an Investment Banking Associate at WR Hambrecht+Co. in the technology group. From 1997 to 2000, he worked at The Shattan Group LLC, a boutique investment bank focused on private equity placements. He is a graduate of Columbia University (B.A.) and the Haas School of Business at UC Berkeley (M.B.A.). Patrick Vihtelic Associate, San Francisco Patrick Vihtelic is an Associate in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. While at William Blair & Company, Patrick has been focused on executing mergers & acquisitions, public equity offerings and private equity placements for technology companies. He joined William Blair & Company in 2008 after spending time at a boutique investment bank in San Francisco. Before investment banking, Patrick spent a summer working at Motorola as a Financial Analyst in the mobile division. He is a graduate of Indiana University (B.S.). Paul Huber Senior Analyst, San Francisco Paul Huber is a Senior Analyst in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. He joined William Blair & Company in 2010 and is focused primarily on supporting transaction execution. Before joining William Blair & Company, he was an Investment Banking Analyst at Financial Technology Partners LP, a boutique investment bank in San Francisco. He is a graduate of Brown University (A.B.).www.williamblair.com 14
  17. 17. William Blair & Company SaaS Equity Research CoverageWilliam Blair & Company SaaS Equity Research Coverage SaaS Equity ResearchCompany Ticker Analystathenahealth, Inc. ATHN Daniels, RyanBlackboard Inc. BBBB Dobell, BrandonConcur Technologies, Inc. CNQR Lederman, LauraConstant Contact, Inc. CTCT Lederman, LauraConvio, Inc. CNVO Lederman, LauraCornerstone OnDemand, Inc. CSOD Lederman, LauraDemandTec, Inc. DMAN Lederman, LauraEllie Mae, Inc. ELLI Dobell, BrandonKenexa Corporation KNXA Lederman, LauraNetSuite Inc. N Lederman, LauraRealPage, Inc. RP Lederman, LauraResponsys, Inc. MKTG Lederman, LauraRightNow Technologies, Inc. RNOW Lederman, Laurasalesforce.com, inc. CRM Lederman, LauraSciQuest, Inc. SQI Lederman, LauraServiceSource International, Inc. SREV Lederman, LauraSPS Commerce, Inc. SPSC Lederman, LauraUltimate Software Group, Inc. ULTI Lederman, LauraVocus, Inc. VOCS Lederman, Laura 15
  18. 18. NotesNoteswww.williamblair.com 16
  19. 19. William Blair & Company, L.L.C. is a global investment firm offering investment banking, assetmanagement, equity research, institutional and private brokerage, and private capital to individual,institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve theirfinancial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients’interests first and foremost. We place a high value on the enduring nature of our client relationships,the quality of our products and services, and the continuity and integrity of our people. For moreinformation, please visit www.williamblair.com.OFFICE LOCATIONSHeadquarters222 West Adams StreetChicago, IL 60606+1.312.236.1600www.williamblair.com125 High Street Putnam Place 3 St. Helen’s PlaceOliver Street Tower 100 Great Meadow Road London EC3A 6ABSuite 1901 Suite 606 EnglandBoston, MA 02110 Wethersfield, CT 06109 +44 20 7868 4400+1.617.235.7500 +1.800.596.2028666 Fifth Avenue 500 Delaware Avenue Stockerstrasse 4614th Floor Suite 720 8002 ZurichNew York, NY 10103 Wilmington, DE 19801 Switzerland+1.212.237.2700 +1.302.573.5000 +41 44 287 9020343 Sansome Street Av. Brigadeiro Faria Lima Unit 16-18, 11th Floor12th Floor 3729, room 511 Building One,San Francisco, CA 94104 São Paulo, SP Corporate Avenue+1.415.986.5596 Brazil No.222 Hubin Road 04538-905 Shanghai 200021, P.R.C. +55 11 3443 6472 +86 21 2327 2222CHICAGO | BOSTON | LONDON | NEW YORK | SAN FRANCISCO | SÃO PAOLO | SHANGHAI | WILMINGTON | ZURICH

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