This session was presented at the LSA’s Tech Adoption Summit in San Francisco on November 6-7, 2018.

1. THE STATE OF SMB SOFTWARE
A l ook at f u n drais in g an d e xi t t ren ds i n t h e
N ort h A m e ri can SMB s of t ware m ark et
Q3 2018

2. surepathcapital.com
C o n t e n t s
01 Introduction
02 Venture Capital (VC) deals
03 Private Equity (PE) deals
04 Mergers & Acquisitions (M&A)
05 Initial Public Offerings (IPOs)
surepathcapital.com

3. Introduction

4. surepathcapital.com
J O S H S C H E R M A N
V I C E P R E S I D E N T
S U R E P A T H C A P I T A L P A R T N E R S
surepathcapital.com
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5. surepathcapital.com
M A R K
M A C L E O D
F O U N D E R
J O S H
S C H E R M A N
V I C E - P R E SI D E N T
T h e S u r e P a t h T e a m
The SurePath team has over 30 years of experience in operating, growing, investing, buying, and selling SMB software companies.
D A N I A L
S H A I K H
A S S O C I A T E
E R I K
M O S N E Y
A N A L Y S T
S A R A
D E F I N A
A N A L Y S T
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6. surepathcapital.com
To help fund, grow, and exit SMB software companies
SurePath maximizes your optionality:
We ensure our clients are always in a position to raise more capital or exit profitably
Preparing you to raise the right amount of capital from the right
investors on the right terms
Growth
Funding
Leveraging our deep operating expertise to ensure your business is on
the right plan to create the most value
Strategic
Guidance
Our unparalleled access to SMB buyers helps us position you for an
intentional, profitable exit
Exits
S u r e P a t h : O u r P u r p o s e
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7. surepathcapital.com
S u r e P a t h a n d S M B
Business Management E-Commerce
CRMMarketing Tech
Payments
We have been part of some the most successful SMB SaaS companies
We have deep relationships with SMB investors and buyers
SurePath is committed to becoming the leading strategic financial advisor to the global SMB software market
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8. surepathcapital.com
R e c e n t S u r e P a t h D e a l s
served as the exclusive strategic
and financial advisor to
on its growth financing from
served as the exclusive strategic
and financial advisor to
on its Series A
financing led by
served as the exclusive strategic
and financial advisor to
on its sale to
an operating group of
Undisclosed
Client
Undisclosed
Investor
8

9. surepathcapital.com
The Leading Financial Advisor in SMB Software
EXPERIENCE
Funding, growing & exiting tech companies
PEDIGREE
Alumni of Constant Contact, FreshBooks, Shopify…
ACCESS
To Tier 1 investors & strategic partners
FOCUS
The only advisor with a dedicated focus on SMB Software
COMMITMENT
Helping our clients and their investors succeed
T h e S u r e P a t h D i f f e r e n c e
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10. Q3 2018 SMB Software Deals

11. surepathcapital.com
Every year we publish our annual State of SMB Software Report, looking at fundraising and exit activity in
the Small and Mid-Sized Business (SMB) software space in North America. This report has been well
received by CEOs, CFOs, investors and buyers. So we now update it quarterly.
We track SMB software companies across three broad categories: Grow my Business (front office), Run
my Business (middle office) and Track my Business (back office). For VCs, most activity was in front
office. For PE firms, the middle office was most popular.
While there are some pure-play companies that just serve small business, most companies serve small
and mid-market customers. This mirrors our deal practice at SurePath where we work with software
companies serving freelancers all the way up to mid-market enterprise.
Q3 saw lots of activity with $3.1B in venture funding, $4.2B in Private Equity/LBO’s activity, $437M in IPOs
and $10.4B in acquisitions. This included some mega-deals like Marketo’s sale to Adobe. Normally, we
see a slow down in the Summer. But not this year!
We hope you find this report useful and invite you to get in touch to discuss it with us.
The SurePath team
October, 2018
T h e S t a t e o f S M B S o f t w a r e
surepathcapital.com11

12. surepathcapital.com
H o w S C P t h i n k s a b o u t t h e S M B S o f t w a r e
M a r k e t
12 surepathcapital.com
Grow My
Business
Sales Tech
Marketing Tech
Ad Tech
E-Commerce
Run My
Business
HR-Tech (payroll,
employee
management,
etc.)
Security/IT
Business
Management/
ERP
Keep Track of
My Business
Accounting and
Invoicing
Payments
The SMB Software Market

13. surepathcapital.com
S M B S o f t w a r e D e a l L a n d s c a p e
1. Source: Pitchbook
2. Deal count excludes deals involving accelerators, incubators, crowdfunding and deals with undisclosed values
Over $18.1B of capital was deployed across 184 deals over the third quarter of 2018. The biggest deal was Adobe’s acquisition of Marketo. Both
M&A and funding deal volumes were high. August, typically a quiet time for deals, was very active
13
24
21
16
15
16
11
10
6
5
9
9
4
9
9
10
4
2
0
10
20
30
40
50
60
70
July August September
DealCount
Deal Count by Type
$2,084M
$2,372M
$5,930M
$3,400M
$602M
$1,131M $604M
$281M
$188M
$210M
$230M
$207M
$728M
-
$1,000M
$2,000M
$3,000M
$4,000M
$5,000M
$6,000M
$7,000M
$8,000M
July August September
TotalCapitalInvested(inmillions,$USD)
Capital Invested by Deal Type
PE Growth/Expansion
Angel
Seed Round
IPO
Early Stage VC
Later Stage VC
Buyout/LBO
Merger/Acquisition

14. surepathcapital.com
S M B V e n t u r e F u n d i n g
1. Source: Pitchbook
2. Deal count excludes deals involving accelerators, incubators, and crowdfunding and deals with undisclosed values
146 SMB software companies raised venture capital in Q3 of 2018. Most of the deal volume was in Series A and B.
$22M
$67M
$679M
$2,337M
21
22
61
42
0
10
20
30
40
50
60
70
-
$500M
$1,000M
$1,500M
$2,000M
$2,500M
Angel Seed Round Early Stage VC Later Stage VC
DealCount
CapitalRaised(inmillions,$USD)
Capital Raised by Venture Deal Type
Capital Raised Deal Count
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15. surepathcapital.com
$115M T. Rowe Price
$100M ICONIQ Capital
$100M Accel / Sequoia Capital
$90M T. Rowe Price / Wellington Management
$85M Temask Holdings
$427M Dragoneer Investment Group / General Atlantic
$300M Tiger Global Management
$250M Coatue Management / DST Global
$250M Fin Venture Capital
$140M MSD Capital / Dragoneer Investment Group
T o p S M B S o f t w a r e R a i s e s
Source: Pitchbook
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16. surepathcapital.com
65
14
67 $1,437M
$236M
$1,432M
Grow My Business
Keep Track of My Business
Run My Business
V e n t u r e D e a l s b y C a t e g o r y
SMB software companies raised ~ $3.1B across 146 deals in Q3 2018, a significant increase relative to the first half of 2018, which totalled ~3.0B.
Companies that helped SMBs grow and run their business attracted approximately 90% of VC $.
Outer ring represents total
capital invested by
category and inner ring
represents total deal count
by category
Source: Pitchbook
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17. surepathcapital.com
Combined, companies in the Business Management/ERP software, E-commerce and Marketing Tech categories attracted 2/3 of total venture
capital funding in Q3 2018. However, all front, middle, and back office sectors saw deal activity.
Source: Pitchbook
V e n t u r e D e a l s b y C a t e g o r y ( c o n t . )
17
24
25
11
45
15
7
7
7
5
$635M
$607M
$191M
$979M
$296M
$157M
$73M
$162M
E-Commerce
Marketing Tech
Sales Tech incl POS and CRM
Business Management/ERP
HR Tech incl Payroll and
Employee Mgmt
Security/IT
Accounting and Invoicing
Payments
Ad Tech

18. surepathcapital.com
V e n t u r e D e a l s b y T a r g e t C u s t o m e r
Nearly 75% of venture funding in Q3 2018 went to companies that target both the small and mid-market segments. Relatively few companies
serve only the small or medium segments explicitly. This makes sense as it enables software vendors to reach a larger market and continue to
serve customers as they grow.
Source: Pitchbook
18
98
20
28
$2,361M
$578M
$165M
Both
Medium
Small

19. surepathcapital.com
V e r t i c a l - S p e c i f i c V e n t u r e D e a l s
Q3 2018 saw nearly $1.2B in capital invested across 54 vertical-specific deals. Food Service and Restaurants and Logistics companies
attracted more than half of the total invested capital (~$747M across 14 deals). Vertical-specific companies tend to achieve higher valuation
multiples than horizontal peers.
Source: Pitchbook
19
13
1
6
11
9
3
1
3
2
3
1 1
$447M
$300M
$152M
$85M
$82M
$53M
$32M
Food Service & Restaurants
Logistics
Health & Beauty
Real Estate
Retail
Financial Services
Agriculture
Manufacturing
Home Services
Healthcare
Childcare
Automotive

20. surepathcapital.com
$3.4B Francisco Partners / British Columbia Management
$550M Warburg Pincus
$68M Guidepost Growth Equity
$60M Primus Capital
$50M Susquehanna Growth Equity
$12M Level Equity
$10M Boathouse Capital
$5M Undisclosed Investor
T o p P E G r o w t h / B u y o u t S M B D e a l s
Source: Pitchbook
+ Growth Round; * Buyout
+
+
+
+
+
+
+
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21. surepathcapital.com
P E G r o w t h / B u y o u t D e a l s b y C a t e g o r y
Source: Pitchbook
Private and Growth Equity firms deployed over $4.2B in capital into software companies serving the SMB space in Q3 2018. Deals in the Grow
My Business category attracted the majority of the capital, specifically the VeriFone LBO which accounted for $3.4B of this capital.
21
1
1
6
$3,400M
$745M
Grow My Business
Keep Track of My Business
Run My Business

22. surepathcapital.com
P E G r o w t h / B u y o u t D e a l s b y C a t e g o r y ( c o n t . )
SMB Software companies with Sales Tech incl. POS and CRM offerings attracted the most capital from PE and Growth Equity firms during the
quarter, with Business Management/ERP companies in a distant second place.
Source: Pitchbook
1
2
4
1
$3,400M
$555M
$190M
Sales Tech incl POS and CRM
Business Management/ERP
HR Tech incl Payroll and
Employee Mgmt
Accounting and Invoicing

23. surepathcapital.com
P E G r o w t h / B u y o u t D e a l s b y T a r g e t C u s t o m e r
Approximately 75% of all the PE and Growth Equity capital in Q3 2018 went to companies that target both the small and mid-market
segments. One company, VeriFone, contributed a majority of the capital to the medium segment (~3.4B).
Source: Pitchbook
23
6
2
$695M
$3,460M
Both
Medium

24. surepathcapital.com
$426M Morneau Shepell
$390M GrubHub
$220M DocuSign
$150M GrubHub
$150M Gannett Company
$4.8B Adobe Systems
$1.6M Workday
$775M Fortive
$700M Global Payments
$600M SoftBank Group
Source: Pitchbook
T o p M & A S M B D e a l s
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25. surepathcapital.com
M & A D e a l s b y C a t e g o r y
The cumulative deal size for all mergers and acquisitions in the SMB software space in in Q3 2018 was approximately $10.4B.
Source: Pitchbook
25
13
5
10
$5,736M
$628M
$4,021M
Grow My Business
Keep Track of My Business
Run My Business

26. surepathcapital.com
M & A D e a l s b y C a t e g o r y ( c o n t . )
Nearly 80% of M&A deal value during Q3 2018 related to companies within the E-commerce and Business Management/ERP categories.
Source: Pitchbook
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2
9
1
6
2
1
3
3
1
$5,545M
-
$3,185M
$526M
$290M
$558M
E-Commerce
Marketing Tech
Sales Tech incl POS and
CRM
Business Management/ERP
HR Tech incl Payroll and
Employee Mgmt
Security/IT
Accounting and Invoicing
Payments
Ad Tech

27. surepathcapital.com
M & A D e a l s b y T a r g e t C u s t o m e r
The majority of M&A deals in the SMB Software space were related to those companies that target both small and medium businesses.
27
16
6
6
$4,095M
$6,234M
Both
Medium
Small

28. surepathcapital.com
S M B S o f t w a r e I P O s
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Source: Pitchbook
NYSE: EB
IPO Date August 23, 2018
Amount Raised $230M
Age at IPO 12 years
Headcount at
IPO
900+
Pre-IPO
Investors
Tiger Global Management, SoftTech VC,
T. Rowe Price
NAS: SVMK
IPO Date September 26, 2018
Amount Raised $207M
Age at IPO 19 years
Headcount at
IPO
700+
Pre-IPO
Investors
T. Rowe Price, Morgan Stanley Expansion
Capital, Google Capital

29. Danial Shaikh
Associate
danial@surepathcapital.com
647.876.5453
Mark MacLeod
Founder & President
mark@surepathcapital.com
416.843.6004
Josh Scherman
Vice-President
josh@surepathcapital.com
646.420.0074
Toronto • San Francisco
Erik Mosney
Analyst
erik@surepathcapital.com
519.239.5759
29
Sara Defina
Analyst
sara@surepathcapital.com
416.689.2474