What does 2017 hold for the Innovation Economy? In the latest State of the Markets report, SVB Analytics took a rear-view approach, identifying the factors that mattered most in 2016 and examining which trends and themes will play out in 2017.

1. State of the
Markets 2017
Inside views on the health and productivity
of the innovation economy
Written by SVB Analytics:
Steve Allan, CFA
Head of Analytics
Sean Lawson
Manager
Steven Kakowski
Associate
Steven Pipp
Associate
Visit svb.com
Follow @SVB_Financial
Engage #SVBSOTM

2. State of the Markets: First Quarter 2017
State of the Markets 2
What does 2017 hold for the Innovation Economy? To find out, my team took a
rear-view approach, identifying the factors that mattered most in 2016 and
examining which trends and themes will impact 2017.
For starters, it’s clear that the equity rounds that defined 2015 — private
investments led by crossover mutual and hedge funds, often exceeding $100M —
turned out to be an anomaly. As a result, the 2016 pace of new venture-backed
companies reaching $1B+ valuations slowed to just one-third the velocity of 2015.
In contrast, the VC ecosystem showed resilience in 2016: venture funds raised
$42B, their highest total in over a decade.
Looking forward, the exuberance of 2015 may yet be realized in 2017. With a class of
internationally known unicorns (led by Snap, Airbnb and Uber) approaching IPO
readiness, the public market presents opportunities for intriguing and lucrative exits.
Steve Allan, CFA
Head of SVB Analytics

3. State of the Markets: First Quarter 2017
State of the Markets 3
1 Market Dynamics
2 Recalibrated Venture Landscape
3 Primed Exit Conditions
4 Closing Thoughts

4. State of the Markets 4
Market
Dynamics

5. Yields Rebound Sharply in Q4 2016
State of the Markets 5
WGBI Country Yields: 12/31/16 10-Year Bond Yields of G-7 Nations: 2015–2016
Country 1 2 5 7 10 15 30
Switzerland
Germany
Japan
Netherlands
Denmark
Sweden
France
Spain
Italy
United Kingdom
United States
Australia
Norway
Canada
+ Flipped Positive
Years to Maturity
Sovereign bonds rebounded sharply into positive-yielding territory following the U.S. presidential
election, elevating expectations of rising inflationary pressure and higher interest rates under the
new administration.
Negative
Sources: S&P Capital IQ and Citi Research.
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16
United States France
Italy Germany
Canada Japan
United Kingdom

6. Tech Equities Enter New Macro Environment
State of the Markets 6
Nasdaq Composite Index: 2009–2016
The bull market sprint for U.S. equities has withstood global macroeconomic headwinds and geopolitical
uncertainty since early 2014, reaching all-time highs in Q4 2016 following the U.S. election.
0
1000
2000
3000
4000
5000
6000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
• Quantitative Easing
• Recovery Post
Financial Crisis
• Low Volatility
• Strong U.S. Dollar
• Growth Concerns
• Chinese Market /
Currency Shocks
• U.S. Investment
Incentives
• Business-Friendly
Environment
• Geopolitical
Conflict
• Reduced Trade
and/or Immigration
• Rising Rates
Source: S&P Capital IQ.

7. Defining Q4: Post-Election Shakeout
7
-20% -10% 0% 10% 20% 30% 40%
Mexican Peso
Gold
Clean Energy
Emerging Markets
Information Technology
WTI Crude Oil
Iron & Steel
Banks
Bitcoin
Various market indicators reflect uncertainty surrounding the economic impact of an unexpected
administration. Early movements suggest a retreat from emerging markets and expectations of increased
infrastructure spending.
1. Based on indexes tracked by Dow Jones, S&P and MSCI.
2. In U.S. Dollars.
Sources: S&P Capital IQ and CoinDesk.
2050
2100
2150
2200
2250
2300
Sep 16 Oct 16 Nov 16 Dec 16
S&P 500 Index: Sep 2016–Dec 2016
U.S. Election:
2139
+5%
Market Movements: 11/7/16–12/31/16
State of the Markets
Information Tech.1 +2%
1
1
1
1
2
2
2
2

8. State of the Markets 8
Recalibrated
Venture Landscape

9. 0
5
10
15
20
25
30
IPOs
Private IPOs
Large Private Rounds Fall Out of Favor in 2016
State of the Markets 9Sources: CB Insights and S&P Capital IQ.
IPO and PIPO Transactions for U.S. Technology Firms: 2013–2016
From 2013–2015, many late-stage companies opted to raise private capital rather than enter the
public markets. There were four times as many Private IPOs (rounds of $100M+) as IPOs in 2015.
However, that trend reversed in 2H 2016. As crossovers pulled back and IPO conditions improved,
tech IPOs exceeded the number of PIPOs.
Tech IPO Boom
Tech PIPO Boom
4
11
5
27
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013 2014 2015 2016

10. Crossovers Curtail Private Funding
State of the Markets 10Source: CB Insights.
Global Investments in Venture Rounds by Notable Crossover Investors: 2012–2016
Totalrounds
Averageroundsize
$35M
$46M
$139M
$153M
$109M
$0M
$20M
$40M
$60M
$80M
$100M
$120M
$140M
$160M
$180M
0
10
20
30
40
50
60
2012 2013 2014 2015 2016
Tiger Global Management Goldman Sachs Wellington Management
Fidelity Investments Coatue Management T. Rowe Price
BlackRock Average round size
Some of the largest fund managers who took a primary role in financing large, late-stage private rounds
were less active in 2016. The average round size remained above $100M, more than double that of 2013.

11. Traditional Investors Replenish Capital
State of the Markets 11
While crossovers have drastically cut back on venture investments, the ecosystem as a whole has shown
resilience. In 2016, venture capital commitments hit their highest level in more than a decade.
1. Corporate venture capital.
2. Crossovers include hedge funds, mutual funds, and wealth management firms.
Sources: Pitchbook, National Venture Capital Association, and SVBA estimates.
$0B
$10B
$20B
$30B
$40B
$50B
$60B
$70B
$80B
$90B
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
VC Fundraising VC Investments CVC Investments Crossover Investments
U.S. Venture Capital Investments and Fundraising: 2007–2016
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Crossover
Investment
- 50% YoY
Venture Capital
Fundraising
+ 18% YoY
1 2

12. Time to Exit — Before and After IPO
State of the Markets 12Sources: Dr. Jay Ritter, University of Florida; Wall Street Journal; Crunchbase and S&P Capital IQ.
Access to funding from traditional and nontraditional sources allowed tech companies to delay the
scrutiny and transparency of public markets. Even after an IPO, it may take years to unwind positions.
0
2
4
6
8
10
12
14
16
1999 2003 2007 2011 2015
Years from Founding to IPO for U.S. Tech:
1999–2016 (Median)
U.S.
Unicorns
Post-2000
Dotcom Crash
Post-2008
Financial Crisis
90
10
Median
25
75
Deciles
Share Float Trajectory for U.S. Tech:
Float % by IPO Year (Median)
0%
25%
50%
75%
100%
2012 2013
2014 2015
2016
Closely Held
IPOs
IPOs
IPOs
IPOs
IPOs
At IPO +6
mos.
+12
mos.
+18
mos.
+24
mos.
+36
mos.
+48
mos.

13. Net Change in Global Unicorns by Year: 2014–2016
Unicorn Exits Stabilize with New Entrants
State of the Markets 13
Total
Market Values2
All Unicorns
$599B
1. Exits include IPOs, M&A and revaluations below $1B.
2. As of 12/31/16.
3. Sum of market caps for unicorns at the close of their respective first day of trading.
Sources: Wall Street Journal and S&P Capital IQ.
Apple
$618B
Google
$539B
Facebook
$332B
Unicorns at IPO3
$96B
The number of new companies reaching $1B+ valuations still exceeded the number of exits,1 but the
ratio steadied in 2016. However, the current backlog of unicorns — with a combined market value of
nearly $600B — could take years to be absorbed by the public market.
0
20
40
60
80
100
120
140
160
-11
+76
-15
+49
154
144
79
45
-14 +24
Year-end
Unicorns
2013
Exits Entrants Year-end
Unicorns
2015
Year-end
Unicorns
2014
Exits Entrants Exits Entrants Year-end
Unicorns
2016
Ratio: 3.3x Ratio: 6.9x Ratio: 1.7x

14. Introducing SVB’s Interactive Unicorn Navigator
State of the Markets 14
Use our Unicorn Navigator to explore the connections between the preceding concepts and follow the
journeys of the billion-dollar club as they traverse the venture landscape toward an eventual exit.
Sources: Wall Street Journal, Pitchbook and S&P Capital IQ.
• Three-quarters of unicorns that have
gone public since 2014 raised from a
crossover investor, compared to one
third of those that have been acquired.
• Only 73% of the 2016 unicorn class
raised a PIPO, compared to 84% of
2014 and 2015 classes.
• Just 36% of the 2016 unicorn class
raised from a crossover.
• Nearly 90% of unicorns with a
crossover raised a $100M+ round.
• 81% of unicorns remain privately held,
including all 22 unicorns in the 2016
class.https://www.svb.com/state-of-the-markets-report/

15. State of the Markets 15
Primed
Exit Conditions

16. Public M&As Restore Valuation Confidence
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
State of the Markets 16
Notes:
NTM Revenue Multiples for IPOs based on earliest estimates, adjusted to IPO date.
Multiples above 10x at IPO are represented with an arrow.
Sources: S&P Capital IQ and Bessemer Venture Partners.
TEAM: 12x
Restored
Confidence
“Good Times”
6-Month Gap
Between IPOs
When valuations for cloud software companies plummeted in early 2016, acquirers jumped at the
opportunity to buy at discounted valuations. This activity allowed for a second wave of IPOs in late
2016 by restoring investor confidence in high-growth software valuations.
NTM Revenue Multiples: 2015–2016
TWLO: 14xSHOP: 14x
Q2/Q3 Cloud M&A
BOX
APPT
INST
XTLY
Cloud IPOs
BVP Cloud Index
Constituent Median
DWRE
LNKD
N
OPWR
Jan ’15 April ’15 July ’15 Oct ’15 Jan ’16 April ’16 July ’16 Oct ’16

17. As Exit Conditions Improve, IPO Window Opens
State of the Markets 17Sources: S&P Capital IQ and Yahoo! Finance.
Companies look for a sustained period of low volatility before going public. Twelve tech IPO candidates
took advantage of a calm period between late summer 2016 and the November election.
0
10
20
30
40
50
Jan '12 Jul '12 Jan '13 Jul '13 Jan '14 Jul '14 Jan '15 Jul '15 Jan '16 Jul '16
0
5
10
15
20
25
1H '12 2H '12 1H '13 2H '13 1H '14 2H '14 1H '15 2H '15 1H '16 2H '16
U.S. Tech IPO Count: 2012–2016
^VIX: 2012–2016
2016 Election
VIX of 20+: 4 Days VIX of 20+: 75 Days

18. Public Unicorns Grow into Their Private Values
State of the Markets 18
-400%
-300%
-200%
-100%
0%
100%
200%
300%
400%
500%
600%
1. As of 12/31/16. Of the three U.S.-listed companies, only Twilio has passed its six-month lock-up period.
2. Ucar listed on NEEQ; valuation as of IPO in July 2016.
Sources: Wall Street Journal and S&P Capital IQ.
Total Returns as of Year-End 2016 Compared to Tech Unicorns’ Last Private Round
0%
-20%
-40%
-60%
-80%
IPO Date: 2014
2015
2016
Companies look to the performance of their peers as an indication of market reception. The unicorns are
evenly divided between those trading above and those trading below their last private valuations.
Half Above Half Below
2016 Unicorn IPOs
All Trade Above
Last Private Valuation1

19. Wave of M&A Leaves Cash-Flush Investors
State of the Markets 19
1. Based on U.S. software M&A proceeds to public investment managers.
2. Based on first-day closing price.
Sources: S&P Capital IQ and Renaissance Capital.
Cash Returned to Public Investment Managers1
vs. Gross Public Offerings (Cumulative)
8.6%
11.8%
37.0%
0%
10%
20%
30%
40%
Total Returns: 2016
From Q2 2015 to Q4 2016, capital returned to public investment managers (i.e., capital that must be
reinvested) from software M&A in the U.S. reached $63 billion while IPOs and follow-on offerings only
hit $5 billion. This dynamic has left investors flush with cash and seeking reinvestment opportunities.
$10B
$15B
$23B $24B
$32B
$59B
$63B
$1.3B $2.0B $2.7B $2.8B $3.5B $4.4B $5.0B
$0
$10
$20
$30
$40
$50
$60
$70
Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16
Closed M&A Announced M&A IPO and Follow On Offerings
$58BGap
S&P 500
Software & Services
S&P 500 Median
U.S. Tech
IPO Pop2

20. Q3
Crowded Field of $1B+ IPO Candidates
State of the Markets 20
U.S. Tech IPOs with Market Caps >$1B, Sized by First Day Market Cap or Last Private Valuation: 2012–2016
Sources: S&P Capital IQ and Wall Street Journal.
In the last five years, only three U.S. tech companies went public at valuations greater than $10 billion;
now seven more have attained that valuation through private financing, with another 77 above $1 billion.
2017 and Beyond2012 2013 2014 2015 2016
Q1
Q4 x10
x31
x33

21. State of the Markets 21
Closing Thoughts

22. Tech Drives Overall Economic Growth
State of the Markets 22
Since the hype and collapse the dot-com era, technology has steadily increased in importance (and
value) for the U.S. economy. Technology companies in the S&P 500 index now make up nearly one-
quarter of the entire index value, the largest of any sector.
Source: Siblis Research.
S&P 500 Technology Sector1 Weighting: 1995 - 2016
2016
2011
2006
2001
Tech Other
1. Amazon.com has been included in Technology.
0%
5%
10%
15%
20%
25%
30%
35%
1995 1998 2001 2004 2007 2010 2013 2016
Technology
Trigger
Peak of
Inflated
Expectations
Trough of
Disillusionment
Slope of
Enlightenment
23%
Largest S&P 500 Companies by Market Cap: 2001–2016

23. The Year Ahead — Predicting 2017
State of the Markets 23
Many of the themes from 2016 provide insight into what 2017 holds for the venture ecosystem. But the
risk remains: Unexpected world, political or economic events could shock the innovation ecosystem.
Themes Predictions
Valuations in 2016 saw a healthy recalibration
after the high-flying years of 2014 and 2015. Valuations
With plenty of capital in VC war chests, valuations
remain stable across early stages but fall in later
stages without crossover participation.
2016 was the slowest year for tech IPOs since the
financial crisis as a result of valuation declines
and an increase in volatility early in the year.
IPOs
With public company valuation confidence
restored and a stable of maturing unicorns, 2017
sees 2–3 times the number of IPOs as 2016.
Many of the mega-deals of 2016 were of public
companies hit by valuation drops. This was also a
banner year for tech M&A by non-tech acquirers.
M&A
Tech giants’ spending spree reaches the
VC-backed ecosystem but with mixed success
compared to the most recent private valuation.
Venture firms raised their highest total
commitments in over a decade — $41.6B. Fundraising
With full coffers, fundraising in 2017 falls from
the 2016 high, but interest from LPs stays high.
The sharp pullback in 2016 (down 50% from
2015 levels) was a return to normal. Crossovers
With rates rising, asset managers look for growth
elsewhere. This helps deflate the overheated
market for late-stage capital.

24. Report Authors
State of the Markets 24
Steven Pipp
Associate, SVB Analytics
spipp@svb.com
Steve Allan, CFA
Head of SVB Analytics
sallan@svb.com
Sean Lawson
Manager, SVB Analytics
selawson@svb.com
Steven Kakowski
Associate, SVB Analytics
skakowski@svb.com
Steve Allan, CFA is the Head of SVB
Analytics and SVB Securities Strategic
Advisory, responsible for the three areas of
information services provided to the
innovation economy, Strategic Advisory
Services, Compliance Valuations, and
Insights. Strategic Advisory Services
provides consultative guidance around
valuations, benchmarking and inorganic
growth strategies.
Sean Lawson is a Manager with SVB
Analytics and SVB Securities, responsible
for leading research and insights
spanning early and growth stage venture-
backed technology companies.
Steven Kakowski is an Associate with
SVB Analytics, responsible for valuation
engagements for venture-backed
technology companies.
Steven Pipp is an Associate with SVB
Analytics and SVB Securities, responsible
for valuation and strategic advisory
engagements for venture-backed
technology companies.

25. About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank has helped
innovative companies and their investors move bold ideas
forward, fast. SVB provides targeted financial services and
expertise through its offices in innovation centers around the
world. With commercial, international and private banking
services, SVB helps address the unique needs of innovators.
State of the Markets 25
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About SVB Analytics
SVB Analytics, a non-bank affiliate of Silicon Valley Bank, serves
the strategic business needs of entrepreneurs, corporates and
investors in the global innovation economy. For more than a
decade, SVB Analytics has helped global business leaders make
informed decisions by providing market intelligence, research, and
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has a unique view into the technology and life science sectors.