F-Prime Capital prepared a market analysis for 2018's year-end discussion. We are sharing it with our broader community in the hope that someone will find in informative, interesting or at least entertaining.

1. F-Prime Capital
State of the Tech Venture Capital Market – December 2018
F-Prime Capital
December 2018

3. F I N T E C H P O RT F O L I O
Insurance
Wealth Management
Lending
Payments
E N T E R P R I S E P O RT F O L I O
3
H E A LT H C A R E P O RT F O L IO
Healthcare IT Medical devices/tools Therapeutics
Note: Not exhaustive
Real Estate
Capital Markets
DevOps
SaaS / Enterprise
Security
AV/Robotics
Data analytics

4. Significant spike in 2018 deployment across both Tech and
FinTech; trend of increasing average deal size continues
4 (1) Excludes Hardware and Biotech; Categories not mutually exclusive
Source: Pitchbook; Team analysis
§ Total capital deployed to Tech saw a substantial spike in 2018. The trend of decreasing deal volume continues as late stage rounds
absorb a significant portion of overall tech investment.
§ FinTech saw its own spike in 2018, both in capital invested and total deal count. Average deal size has risen along with overall tech
trends, but unlike Tech, deal count increased over 2017.
U.S. Venture Investments in Technology1 U.S. Venture Investments in Financial Technology
CONFIDENTIAL

5. 5 (1) Latest data available. Note: Fundraising totals do not capture all corporate venture capital
Source: NVCA, Pitchbook; CB Insights; Team analysis
U.S. Venture Capital Raised ($B)
VC fundraising is producing decade-high overhang
Global Venture Capital Overhang ($B)
• Venture fundraising in the U.S. remains at sustained high levels of $35-40B /year.
• Global AUM overhang climbs higher still.
2017
2016
2015
2014
2013
2012
2011
2010
Vintage
1

6. Non-VC pools of capital pushing into venture rounds
6
Tech-Focused Private Equity AUM, 2000-2018
§ Tech-focused PE has become a major industry player, with funds now holding over half a trillion dollars in AUM, 2x from five
years ago.
§ PE buyout firms are on course to make more investments in the technology sector than any year prior, with 1,079 tech-
focused PE-baked buyout deals globally in 2018. Ex: Apptio, Prometric, Integral Ad Science.
§ While PE will compete with VC in later rounds, they also offer a new exit opportunity for VCs at all stages of company growth.
Positive fundraising environment
for tech-focused PE
Source: Preqin; Pitchbook
Fund
Fund
Size
Close date
Thoma Bravo (III)
Target
$10.0B
Active
raise
Insight Venture
Partners (X)
$6.3B Sep-18
Providence Equity
Growth (III)
$1.3B Jun-18
Francisco Partners (V) $4.0B Nov-17
Vista Equity Partners
(VI)
$11.0B May-17
Silver Lake Partners (V) $15.0B Apr-17

7. Deal sizes and multiples expanding as more money pushes in
7
US VC Deal Size by Stage
Note: SW = Software
Source: Pitchbook; Capital IQ; Team analysis
EV / Sales multiple

8. Fortunately, exit market has also improved over the same
time frame and shows a sustained increase in exit valuations
8
US VC exits skewing larger
Source: Pitchbook; Team analysis
§ Exits have grown along with deal sizes, with now over 60% of exits coming in above $100M.
§ Even in a heavy deployment environment, the exit environment has kept steady pace and median deal size spiked this year.
Recent spike in median VC exit valuation

9. 2018 has been a strong year for tech exits, with an estimated
~80% increase in deal value over 2017
9
Facebook: $81B
market cap at IPO
Software Exits by Type, 2010-2018E
(1) Note: As always, exit deal value may be significantly under-reported due to companies not disclosing exit value. Analysis excludes Concur, Netsuite, Pivotal and
Solarwinds. IPO gross proceeds represent Market Cap at IPO; Acquisition proceeds represent price .
Source: Pitchbook; Team analysis
Software IPOs
Software M&A
Selected High-Profile Exits, 2018
Acquirer Value
SAP $8.0B
Microsoft $7.5B
Salesforce $6.5B
SAP $2.4B
AT&T $2.0B
Roche $1.9B
Company Date Amt raised Mkt cap @ IPO
5-Oct $252M $4.9B
26-Jul $251M $2.8B
19-Jun $1,111M $3.7B
27-Apr $629M $4.4B
20-Apr $555M $3.9B
12-Apr $154M $2.0B
3-Apr $154M $26.5B
23-Mar $756M $11.2B
16-Mar $192M $3.9B

10. FinTech exits also picked up in 2018, with several notable
public exits and multiple acquisitions over $100M
10(1) VC-backed exits only; (2) IPO on the Euronext Amsterdam Stock Exchange; Note: As always, exit deal value may be significantly under-reported due to companies not
disclosing exit value. IPO gross proceeds represent Market Cap at IPO
Source: Pitchbook; Team analysis
U.S. FinTech Exits1 by Type, 2010-2018E Selected High-Profile Exits, 2018
FinTech Exits
Target Acquirer Value
Public Markets (IPO)2
$8,300M
Public Markets (IPO) $4,400M
Public Markets (IPO) $2,930M
Public Markets (IPO) $2,960M
Workday $1,600M
S&P Global $550M
GrubHub $390M
Mirae Asset $220M
RealPage $219M
United Community Banks $130M
Coinbase $120M
SS&C Technologies $5,400M
CME Group $5,500M
Silver Lake / P2 Capital $3,500M
Public Markets (IPO) $1,540M
VCBackedNon-VCbacked
LendingClub
($5.4B) and
OnDeck ($1.3B)
Square
($2.9B)
Expands significantly
if non VC-backed
exits included

11. Financial Services giants have been slow to acquire, but are
participating more meaningfully in investments
11
Key Incumbents have made few acquisitions However, investment has picked up in recent years
Source: CBInsights; Pitchbook; Team Analysis
§ FinTech investment by banks picked up again in 2018,
with banks leading rounds in Tradeshift ($250M), Poynt
($100M), Flexiti ($50M), CommonBond ($50M), Axoni
($32M), Veem ($25M), Even Financial ($19M)
§ Key areas of investment this year included process
automation (BillTrust, ScaleFactor, C2FO, Bill.com, Canopy
Tax), and real estate tech (Unison)
BBVA Compass
Goldman Sachs
BNP Paribas
Capital One
JPMorgan
Ally
Credit Suisse
First Data
Vantiv
TD Bank
Only 20% of the
top 50 banks
operating in the
US have acquired
a fintech startup
(2013-2018)

12. While valuations demand caution, we see a long-term shift
unfolding as software-driven VC investments penetrate new industries
12
The pool of companies fit for VC funding grows as software expands to new verticals
Surface area for tech VC grows
as “software eats the world”
(1) Verticals as classified by Pitchbook; (2) Industries as defined by BEA / FRED; Note: Categories aligned as closely as possible, should be considered illustrative vs. precise.
Source: Pitchbook; Bureau of Economic Analysis; FRED; Team analysis
And there is much room to grow
Industry2
Contribution
to GDP
2018 VC
investment
VC investment
as % of GDP
Information $1.2T $14.5B 1.21%
Finance and
Insurance
$1.1T $21.6B 1.92%
Transportation
/ Mobility
$542B $11.7B 2.15%
Manufacturing $2.1T $3.1B 0.15%
Agriculture $217B $130M 0.06%
Real Estate and
Rentals
$2.3T $1.4B 0.06%
1

13. Network economics, cloud infrastructure and mobile
app distribution are helping companies scale faster than ever
13
…And applicationsRapid scaling of technology infrastructure…
1st iPhone
Netflix moves to
cloud with AWS
1st Android
phone
Facebook
mobile
launch
AWS
launched
AWS revenue
Active smartphones
FB Mobile monthly
active users
(1) Active users not necessarily paying customers
Source: Statista; GigeOm Research; Company websites; Broker Research Reports; Oliver Wyman
~$10 - $20 CAC ~$500 - $1,000 CAC
Months after launch
1

14. Global geographic expansion is happening earlier
and tapping into larger addressable markets
14
Top companies going fully global
• Capital-light software companies are
well-positioned for rapid geographic
expansion
• Bigger ambitions, better capital access
and reduced global scaling friction is
leading to bigger TAMs
• Rapid global expansion by leaders
reinforces competitive advantage, and
contributes further to a winner-take-all
dynamics in specific verticals
Source: Public announcements and press

15. These market dynamics have resulted exceptional growth
for businesses with attractive business models
15
Liquidity window remains openSignificant value has been created this cycle
(1) Estimates based on company presentations, public announcements and team analysis; Note: US only
Source: Pitchbook
Up next
Sum of last-round valuations: ~$150BYears after launch
1
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PORTCO (C)

16. 1) Rise of the API economy
2) Devops and security are the
new engines of IT spend
3) Data is the new fuel
4) Financial services will
unbundle, creating new
front doors and new models
5) Invisible and embedded
payments
6) Software transforms
industries previously
untouched by VC
Our core beliefs about these market forces frame attractive
investment themes in which we have high conviction
16
Our beliefs Selected themes and investments
No joy left in core IT infrastructure.
AWS, MSFT and Google have all the
fun.
Software keeps eating the world
On verge of a shift to a new 10-15
year era of machine-to-machine
computing defined by API-execution
and AI-model development
Horizontal platforms give rise to new
front doors and foundational data
businesses
Startups have an unprecedented
ability to sell direct-to-customer at
attractive unit economics
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