This document summarizes trends in venture capital financings based on data from various sources. It provides an overview of VC activity levels and deal terms across different funding rounds from 2012 to Q1 2013. Key findings include increasing median pre-money valuations, a decline in down rounds, and growth in seed investments concentrated in internet/software. Seed deals predominantly use preferred stock and average $1-1.3M in size. Convertible notes have median 5.5% interest rates and 18 month maturity.

1. Trends in Venture Capital
FinancingsFinancings
Leonard Grayver, Esq.
June 11, 2013

2. About Leonard Grayver
 Partner at Greenberg, Whitcombe & Takeuchi Partner at Greenberg, Whitcombe & Takeuchi
 Represents
 VC Funds
 Founders
 Startups
 Offices in California and Moscow Offices in California and Moscow
 For a copy of Russian-language Guide
to VC Term Sheets
 email LGrayver@gwtllp.com

3. Agenda
 Overview of Venture Capital Activity Overview of Venture Capital Activity
 Overview of Deal Terms
 Overview of Seed Round Activity
 Overview of Seed Investment Deal Terms

4. Data Used
 Wilson Sonsini Financing Trends Wilson Sonsini Financing Trends
 Fenwick and West VC Survey
 PricewaterhouseCoopers MoneyTree report
 Dow Jones VentureSource
 Personal Experience Personal Experience

5. BAROMETER OF 2012-13BAROMETER OF 2012-13
VC ACTIVITY

6. VC Financings Across Rounds
Series Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
Series A 24% 24% 24% 12% 25%Series A 24% 24% 24% 12% 25%
Series B 18% 17% 24% 31% 20%
Series C 17% 21% 22% 22% 19%
Series D 17% 14% 15% 16% 18%
Series E+ 24% 24% 15% 19% 18%
 Distribution across rounds is pretty stable
 Many seed investments don’t get further funding
 Expect to see fewer D & E rounds in the future

7. Median Pre-Money Valuations
Series 2007 2008 2009 2010 2011 2012 Q1'2013
Series A $ 9.60 $ 6.60 $ 4.80 $ 4.60 $ 6.00 $ 7.50 7.60$
Series B $ 28.20 $ 21.50 $ 15.30 $ 17.80 $ 19.20 $ 23.50 27.50$
 The ‘Instagram Effect’
 Improving economySeries B $ 28.20 $ 21.50 $ 15.30 $ 17.80 $ 19.20 $ 23.50 27.50$
Series C+ $ 60.30 $ 52.50 $ 47.50 $ 55.00 $ 69.20 $ 96.20 120.00$
$80
$100
$120
$140
$160
Series C+
 Companies raise rounds later in life
$-
$20
$40
$60
$80
2007 2008 2009 2010 2011 2012 Q1'2013
Series B
Series A

8. Median Amount Raised
Series 2007 2008 2009 2010 2011 2012 Q1'2013
Series A $ 6.00 $ 3.45 $ 2.60 $ 2.00 $ 1.80 $ 2.10 2.40$
Series B $ 11.80 $ 9.90 $ 8.00 $ 5.50 $ 4.10 $ 5.00 5.00$
Series C+ $ 13.10 $ 11.20 $ 9.30 $ 9.10 $ 8.10 $ 10.40 10.50$Series C+ $ 13.10 $ 11.20 $ 9.30 $ 9.10 $ 8.10 $ 10.40 10.50$
$15
$20
$25
$30
Series C+
Series B
$-
$5
$10
2007 2008 2009 2010 2011 2012 Q1'2013
Series A

9. Founders’ Share of Company
After Series A Round
75%
80%
50%
55%
60%
65%
70%
2007 2008 2009 2010 2011 2012 Q1'2013
 Increased valuation = increased founders’ share
 Does not account for Stock Option Plan

10. Stock Option Pool Size
After Series A Round
30.0%
35.0%
40.0%
Percentageofcompanies Percentage of companies Option Pool Size
2.8% <5% 4 0.112
16.6% 5-10% 7.5 1.245
37.1% 10-15% 12.5 4.6375
22.2% 15-20% 17.5 3.885
8.4% 20-25% 22.5 1.89
13.9% >25% 27.5 3.8225
Average 2.598667
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
<5% 5-10% 10-15% 15-20% 20-25% >25%
Percentageofcompanies
Size ofemployee stock option pool
 Average option pool size is 15.9 %
 Stock Option Pool comes out of Founders’ shares
 Strategy: Negotiate by building a hiring model
Size ofemployee stock option pool

11. Series A Valuations by
Industry (under $2M raised)
Industry Valuation
Clean Tech 2.20$
Internet 3.00$
Software 3.50$
$4.00
$5.00
moneyvaluation
Software 3.50$
Life Sciences 3.50$
Non-technology 4.50$
$-
$1.00
$2.00
$3.00
$4.00Pre-moneyvaluation
 Non-technology products had the highest
valuations

12. Industry Valuation
Life Sciences 5.10$
Clean Tech 6.00$
Non-technology 10.00$$10.00
$15.00
moneyvaluation
Series A Valuations by
Industry (over $2M raised)
Non-technology 10.00$
Electronics/Hardware 12.00$
Semiconductor 12.30$
Software 13.00$
Internet 13.50$
$-
$5.00
$10.00
Pre-moneyvaluation
 New categories require more money to start
 Life Sciences is lowest valuation (was tied
for highest in the under $2M bracket)
 Likely due to higher risk and longer road to liquidity
 Founders’ share in Life Science/CleanTech is under 40%

13. Up Rounds and Down Rounds
2009 2010 2011 2012 Q1'2013
Down rounds 39% 28% 15% 15% 11%
Flat rounds 24% 16% 18% 18% 21%
Up rounds 36% 56% 67% 68% 68%60%
70%
80%
0%
10%
20%
30%
40%
50%
2009 2010 2011 2012 Q1'2013
Down rounds
Flat rounds
Up rounds
 Marked improvement since start of recession
 Plateaued over the last two years

14. But a lot depends on the round
Series 2012 Q1'2013
Series B 6% 4%
Series C 16% 5%
Series D 15% 19%
Series E+ 22% 18%
20%
25%
Series E+ 22% 18%
0%
5%
10%
15%
Series B Series C Series D Series E+
DownRounds
2012
Q1'2013
 Later rounds = more chance of a down round
 Probably due to exit difficulties
 Founders suffer more than investors
Series B Series C Series D Series E+

15. … and the industryIndustry 2012 Q1'2013
Software 9% 10%
Hardware 24% 0%
Life Science 15% 33%
Internet 12% 6%
CleanTech 23% 0%
25%
30%
35%
CleanTech 23% 0%
0%
5%
10%
15%
20%
Software Hardware LifeScience Internet CleanTech
2012
Q1'2013
 Software consistently up rounds
 CleanTech had one really bad quarter

16. Change in Valuation Across
RoundsSeries 2012 Q1'2013
Series B 125% 96%
Series C 75% 93%
Series D 33% 17%
120%
140%
Series D 33% 17%
Series E+ 35% 18%
0%
20%
40%
60%
80%
100%
Series B Series C Series D Series E+
IncreaseinValuation
2012
Q1'2013
 120% increase is 2.2× increase
 Lower increase in later rounds is likely due
to more down rounds
Series B Series C Series D Series E+

17. … and Across Industries
Industry 2012 Q1'2013
Software 97% 67%
Hardware 43% 38%
Life Sciences 16% 6%
Internet 122% 103%
100%
120%
140%
IncreaseinValuation
Internet 122% 103%
CleanTech 46% 51%
0%
20%
40%
60%
80%
100%
Software Hardware Life
Sciences
Internet CleanTech
IncreaseinValuation
2012
Q1'2013
 Includes data from all rounds
 CleanTech is very volatile

18. SEED ROUND INVESTMENTSSEED ROUND INVESTMENTS

19. Growth and Recognition
of Seed Investments
 Three of the six largest VC investors Three of the six largest VC investors
(by number of deals) were seed focused funds
 500 Startups, Y Combinator, First Round Capital
 Between 2009 and 2012
 Number of seed financings almost quadrupled
to 1800to 1800
 Number of seed investments doubled to
31% of the total number of VC deals
 Number of companies funded by accelerators
increased five-fold to 1200

20. Where are Seed
Investments Going?2010 2011 2012
Internet/Di
gital Media
71% 75% 66%
Software 29% 25% 34%
70%
80%
Software 29% 25% 34%
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012
Internet/Digital Media
Software
 Capital-heavy industries are not suitable
2010 2011 2012

21. Who is Investing in Seed?
2010 2011 2012
Seed
funds
43% 46% 46%
Profession
al angels
31% 28% 20%
VC funds 26% 27% 34%
35%
40%
45%
50%
VC funds 26% 27% 34%
0%
5%
10%
15%
20%
25%
30%
35%
2010 2011 2012
Seed funds
Professional angels
VC funds
 Professional angels are being squeezed
out by VC funds

22. What is the Seed
Investment Vehicle?
2010 2011 2012
Preferred
Stock
69% 59% 67%
Convertible
Debt
31% 41% 33%
70%
80%
Debt
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012
Preferred Stock
Convertible Debt
 Preferred stock deals predominate
 Counter to what most people think
 Shows the institutionalization of seed deals
2010 2011 2012

23. How Much is Invested?
2010 2011 2012
Preferred Stock Deals$1,056,000 $1,000,000 $1,360,000
Convertible Note Deals$662,500 $1,000,000 $918,000
$1,200,000
$1,400,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
2010 2011 2012
Preferred Stock Deals
ConvertibleNoteDeals
 Preferred stock deals are somewhat
higher than convertible note deals

24. The Hard Part is Getting
to the Next Round …
 From 2009 to 2012 From 2009 to 2012
 Number of seed financings increased from
472 to 1749
 Number of Series A rounds only increased
from 418 to 692

25. Seed Bubble?
 45% of companies that raised their seed
round in 2010 raised a Series A Round byround in 2010 raised a Series A Round by
the end of 2011
 27% of companies that raised their seed
round in 2011 raised a Series A Round by
the end of 2012
 The rest? Many, if not most, have shut down. The rest? Many, if not most, have shut down.

26. SEED INVESTMENT DEAL TERMSSEED INVESTMENT DEAL TERMS

27. Preferred Stock Financings
 Usually use simplified financing documents
 No anti-dilution rights
No ROFR or Co-sale rights No ROFR or Co-sale rights
 No Registration Rights
 No Dividend Preference Rights
 Limited Veto Rights
 Limited Drag Along
 Information Rights - Yes
Pre-emptive rights – Yes Pre-emptive rights – Yes
 Legal Fees <$10,000
 Investor gets a board seat in ≈ 70% of deals

28. Liquidation Preference
2010 2011 2012
Non-
participatin
g preferred
liquidation
90% 91% 85%
75%
100%
preference
Participati
ng
preferred
liquidation
preference
10% 9% 15%
0%
25%
50%
75%
2010 2011 2012
Participating preferred
liquidation preference
Non-participating
preferred liquidation
preference
 Almost always non-participating liquidation
preference

29. Convertible Note Financings
 Used in ≈35% of all seed financings Used in ≈35% of all seed financings
 Probably in most seed financings < $250k

30. Interest RatePercentag
e in which
investors
received a
board
seat:
72.50% 70% 73
70%
80%
90%
100%
2012 Q1'2013
< 8% 64% 82%
= 8% 30% 18%
> 8% 5% 0%
0%
10%
20%
30%
40%
50%
60%
2012 Q1'2013
> 8%
= 8%
< 8%
 Median interest rate is 5.5%

31. Maturity
2012 Q1'2013
< 12
months 8% 0%
= 12
months 30% 45%
> 12
70%
80%
90%
100%
 Median maturity is 18 months
> 12
months 62% 55%
0%
10%
20%
30%
40%
50%
60%
2012 Q1'2013
> 12 months
= 12 months
< 12 months
 Median maturity is 18 months

32. Conversion into Shares
 Conversion to shares at discounted price
in about 85% of the dealsin about 85% of the deals
 Discount ranges:
2012 Q1'2013
< 20 % 17% 30%
= 20% 54% 40%
> 20 % 29% 30%
30%
40%
50%
60%
70%
80%
90%
100%
> 20 %
= 20%
< 20 %
 Median discount is 20%
0%
10%
20%
30%
2012 Q1'2013
< 20 %

33. Valuation Caps
 Over 2010 – 2012, valuation caps were Over 2010 – 2012, valuation caps were
used in 85% of deals
 The median valuation cap was $6M

34. Infrequently Used Terms
 Investors get a board seat in ≈2% of deals Investors get a board seat in ≈2% of deals
 Notes are secured in ≈2% of deals
 Notes include warrants in ≈6% of deals
 Notes are senior to other debt in ≈10% of deals

35. VENTURE ROUND DEAL TERMSVENTURE ROUND DEAL TERMS

36. Liquidation Preference
2012 2011 2010 2009 2008
37% 48,5% 50% 57% 45%
2008 2009 2010 2011 2012 Q1'2013
55%
60%
PercentageSeniorLiquidation2008 2009 2010 2011 2012 Q1'2013
45% 57% 50% 48% 37% 34%
30%
35%
40%
45%
50%
2008 2009 2010 2011 2012 Q1'2013
PercentageSeniorLiquidation
Preference
 As economy improves, senior liquidation
preferences are becoming less common

37. Senior Liquidation Preference
Across Rounds
2008 2009 2010 2011 2012 Q1'2013
Series B 31% 28.50% 22% 26% 22.20% 29%
Series C 40% 45% 32.50% 44% 28.70% 41%
Series D 54.50% 57% 47.50% 37.50% 34.50% 33.00%
55%
60%
PercentageSeniorLiquidation
Series D 54.50% 57% 47.50% 37.50% 34.50% 33.00%
Series E+ 52% 53% 52.50% 42% 44.50% 32%
20%
25%
30%
35%
40%
45%
50%
2008 2009 2010 2011 2012 Q1'2013
PercentageSeniorLiquidation
Preference
Series B
Series C
Series D
Series E+
 Least common in series B
 Steady decline in later rounds
2008 2009 2010 2011 2012 Q1'2013

38. Multiple Liquidation Preferences
2008 2009 2010 2011 2012 Q1'2013
>1x-2x 74% 75% 86% 61% 96.50% 57%
>2x-3x 23% 25% 9% 25% 3.50% 29%
>3x 3% 0% 5% 14% 0% 14%
80%
90%
100%
>3x 3% 0% 5% 14% 0% 14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2008 2009 2010 2011 2012 Q1'2013
>1x-2x
>2x-3x
>3x
 Very surprising jump in multiple liquidation
preference in Q1’2013
2008 2009 2010 2011 2012 Q1'2013

39. Participating v. Non-participating
2008 2009 2010 2011 2012 Q1'2013
58% 51% 50% 42% 33% 32%
55%
60%
30%
35%
40%
45%
50%
2008 2009 2010 2011 2012 Q1'2013
 Steady decline in participating liquidation
preference
2008 2009 2010 2011 2012 Q1'2013

40. Cumulative Dividends
2008 2009 2010 2011 2012 Q1'2013
6.00% 5.70% 6.50% 6.00% 6.25% 3%
5.00%
6.00%
7.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2008 2009 2010 2011 2012 Q1'2013
 More common in East Coast VC financings

41. Anti-Dilution
2008 2009 2010 2011 2012 Q1'2
Full Ratchet 4% 3.70% 4% 4% 3% 1%
Weighted Average 94% 96% 94% 94% 95% 96%
None 2% 0.30% 2% 2% 2% 3%80%
100%
4%
0%
20%
40%
60%
Full Ratchet
Weighted Average
None
0%
2%
4%
 Full Ratchet is almost never used

42. Redemption
2008 2009 2010 2011 2012 Q1'2013
23% 19.50% 22% 17.50% 16.70% 0.14
20%
22%
24%
10%
12%
14%
16%
18%
20%
2008 2009 2010 2011 2012 Q1'2013

43. ANY QUESTIONS OR IF YOU
NEED A LAWYER, EMAIL MENEED A LAWYER, EMAIL ME
LGrayver@GWTLLP.com