Contents & Summary

Global analysis of venture funding 13 July 2017 © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q2VC 1

Welcome to the Q2’17 edition of the KPMG Enterprise Venture Pulse You know KPMG, you might not Report. In this quarter’s report, we highlight the key trends, know KPMG Enterprise. opportunities and challenges facing the venture capital (VC) market KPMG Enterprise advisers in globally and in key regions around the world. member firms around the world are dedicated to working with Despite an ongoing decline in the number of VC deals globally, there businesses like yours. Whether was a major uptick in VC investment during Q2’17. A significant you’re an entrepreneur looking to number of mega-deals in all regions helped drive this funding get started, an innovative, fast increase, including China-based Didi Chuxing’s record-shattering growing company, or an established $5.5 billion funding round. Given the return of global mega-deals, it company looking to an exit, KPMG comes as no surprise that this quarter saw the birth of 16 new unicorn Enterprise advisers understand what companies — the highest level experienced since Q2’15. is important to you and can help you navigate your challenges — no US Initial Public Offering (IPO) activity continued to make a matter the size or stage of your turnaround during the quarter, with a number of technology business. You gain access to companies achieving successful exits. In tandem with solid merger KPMG’s global resources through a and acquisition (M&A) activity, this renewal is a positive sign for the single point of contact — a trusted market. adviser to your company. It’s a local touch with a global reach. Q2 saw biotech and autotech attracting continued interest from investors, these are expected to be hot areas of VC investment in Q3, in addition to artificial intelligence (AI), analytics, and virtual reality technologies. Blockchain is also expected to remain on the radar of investors, with a growing focus on the technology’s applicability Jonathan Lavender across sectors and verticals. Global Chairman, KPMG Enterprise, In this edition of the Venture Pulse Report, we look at these and other KPMG International global and regional trends, including: Brian Hughes —The pickup in mega-deals activity across the globe Co-Leader, KPMG Enterprise —The ongoing decline in number of deals, specifically at the seed Innovative Startups and early-stage deal levels Network, KPMG —The drivers behind advancements in autotech International, and Partner, —The growing focus on business to business (B2B) opportunities. KPMG in the US We hope you find this edition of the Venture Pulse Report insightful. If Arik Speier you would like to discuss any of the results in more detail, please Co-Leader, contact a KPMG adviser in your area. KPMG Enterprise Innovative Startups Network, KPMG International, and Partner, KPMG in Israel © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q2VC

Global 6 —VC invested surges while deal volume continues decline —Median deal sizes grow especially Series D and beyond —Downward pressure on early rounds remains —Mega-deal rounds return particularly in Asia —Continued interest in biotech and autotech Americas 31 —VC investment value bounces back, volume remains steady —Series D+ median valuation hits $250 million —US investment strong but Canada and Latin America struggle US 44 nd —US VC invested reaches 2 highest total since 2010 —First time financings remain stable —M&A dominates exits but IPO’s perk up —Richly valued late-stagers go public Europe 65 —VC deal value stable, volume down —early-stage deals continue decline —Corporate VC participation above 20 percent —Improbable raise of $500 million one of largest in Europe — ever Asia 88 rd —Deal value spikes to 3 highest level of decade —Mid and late-stage deals gain traction —Corporate VC surges to new high of 22.5 percent —Mega-rounds return with a bang © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

Completed transaction volume continues a gentle slide as VC invested comes roaring back Worldwide VC deal count slid again by just over 7% between Q1 and Q2'17. However, thanks to a surge of mega-rounds, the quarter-over-quarter increase in total venture capital invested was a staggering 55.3%. This included the largest venture round ever, raised by Beijing-based ridesharing platform Didi Chuxing, at $5.5 billion. Analyzing year-over-year figures, even the massive $40 billion invested in Q2'17 was down by 14.2% relative to the $46.7 billion invested in Q2 2016, while deal volume fell by 24% across the same timeframe. Activity across the Americas varies Buoyed by the US, the Americas have seen deal volume hold relatively steady over the past three quarters now, as additional datasets have been tabulated. There was a bare increase of 0.1% in activity between Q1 2017 and Q2'17, even as total VC invested surged by close to 38%. Year over year, however, both VC invested and volume were down, the former by 4.2% and the latter by 10.5%. Even in nations experiencing consistent declines in venture volume, certain companies can rake in heftily sized rounds, such as Brazil-based 99Taxis, which closed out a $200 million funding with SoftBank’s participation. Valuations remain steadfast as volume continues at subdued plateau Nearly every financing series still records an increase in median size relative to 2016 in the US. This continued robustness speaks to how the VC slowdown in the most developed venture market was once again confined largely to the angel and/or seed stages in the US, which are now holding steady in terms of finalized transactional volume. Likely driven by industry cyclicality, there could be a temporary plateau of sorts emerging when it comes to overall US investment volume, with hefty levels of dry powder continuing to exert upward pressure on financing metrics. The European angel & seed stage is still subsiding, however Quarter over quarter, aggregate VC invested actually rose slightly in Europe, moving from $4 billion to $4.1 billion, even as quarterly volume diminished by just over 44% year over year. Unlike the US, subsiding angel and seed rounds are the primary cause for the continued slackening in the pace of investors. But as the historically robust tallies of quarterly VC invested testify, plenty of firms are still willing to back multiple European companies, particularly when it comes to the late-stage. A handful of notable financings, such as London-based Improbable’s $502 million raise or Auto1 Group’s near-$400 million round, continue to help boost overall industry tallies in the continent. After slower start, Asia sees massive boom in VC invested It is hard to overstate just how swiftly the tide turned when it comes to aggregate VC invested in Asia. Boosted in large part by several Beijing-based businesses’ considerable fundraises, overall capital deployed by investors in the region soared from $5.4 billion in Q1 2017 to $12.7 billion in Q2'17, an increase of over 130%. That said, it is important to note just how much outliers still contribute to such figures — the year-over-year change in VC invested for the quarter was actually down by 33.7%, given that Ant Financial among other companies raised massive rounds around this time last year. Within certain markets, a distinct sense of winner-take-all is emerging, as Didi Chuxing or others either double down on funds to continue rapid, massive expansion or to quickly claim the lead in select market segments. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q2VC

Corporate participation continues rise to record proportions One of the ongoing trends that signifies how the venture industry has slowly been maturing and changing is the slow but steady rise in the proportion of VC rounds in which corporations or corporate venture arms participate. Standing at 17.6% for Q2'17, this percentage speaks to the maturation of the key drivers behind corporate investing strategies when it comes to exposure to innovation or rapid growth. Whether pure-play financial or strategic or a blend of both, such motivators continue to impel growing corporate involvement, particularly as certain key technical areas such as artificial intelligence continue to showcase more and more useful business applications. Glut of dry powder to continue transforming industry Although not the highest figure recorded for a given quarter in the past seven and a half years, and certainly skewed by mega-funds such as New Enterprise Associates’ $3.3 billion vehicle, the $17.15 billion in capital commitments collected in Q2'17 is highly significant. For one, it exemplifies how the venture industry still has more than enough funds to support a healthy rate of investing for some time, even in a relatively pricey climate, and two, it illustrates not only limited partners’ desire for exposure to the VC asset class but also the perception of considerable opportunities remaining in key, emergent technologies and geographic areas. Exits continue down what is likely more of a cyclical, temporal decline Quarterly exit volume exhibits a distinct lessening of momentum since a peak in the first quarter of 2015, even though exit values have remained either within pre-2014 norms or somewhat elevated. Similarly to the investment side, such coincident trends are cyclical, tied to the recent investing boom and in particular corporate acquirers’ appetites. Strategic M&A will likely continue at a decent clip, but especially given the boom in such activity for the past few years, there is likely to be a period of internal regrouping and digestion of recent buys, while the pipeline of venture-backed exit-ready companies refills. Will first-time funds make somewhat of a comeback? Over the past few years, the proportion of first-time funds to the whole has either held steady or, on a regional basis, diminished somewhat. However, so far in 2017, 26 such vehicles have closed worldwide, relative to 35 in 2015 and 39 in 2016. Thereby on pace for a potential increase in volume, first-time fundraising can serve as a barometer of sorts of LP willingness and sentiment regarding the asset class on the whole. At $2.55 billion in capital commitments to first-time pools of capital, already exceeding any year from 2012 to 2014, it is clear certain first-time fund managers can still rake in more- than-healthy sums from investors, which underlines the perception of opportunities still available within the venture realm. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. © 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. #Q2VC