KPMG Venture Pulse 2018 Q2

Oct 22, 2018 | Publisher: Techcelerate Ventures | Category: Finance |  | Collection: Investments | Views: 10 | Likes: 1

1 #Q2VC 2018 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. Venture Pulse Q2 2018 Global analysis of venture funding 12 July 2018 2 #Q2VC 2018 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. Welcome Welcome to the Q2'18 edition of KPMG Enterprise's Venture Pulse a quarterly report highlighting key trends, opportunities and challenges facing the venture capital market globally and in key regions around the world. A record-shattering $14 billion raise by Ant Financial in China, in addition to $1 billion+ mega-rounds to Weltmeister, Pinduoduo, Faraday Future, and Manbang Group helped propel VC investment in Asia and the Americas. While VC investment in Europe remained far behind the other regions, a rebound in investment in the UK helped to keep European investment relatively strong quarter-over-quarter. Artificial intelligence continued to be a hot area of investment in all regions of the world in Q2'18, while autotech, cybersecurity, agtech and biotech were also seen as key priorities. The IPO market gained momentum in Q2'18 with the successful IPOs of Ayden in the Netherlands, DocuSign in the US and a number of other software-as-a-service companies. M&A activity was also robust, led by the $7.5 billion acquisition of GitHub by Microsoft. With post-IPO results showing positive returns, it is likely that other VC-backed companies in the US, Europe and Asia could move forward with IPOs over the next few quarters if only as a means to create exit opportunities for their early investors. Looking forward to Q3'18, AI and data analytics are expected to remain high on the radar of VC investors. It is also expected that companies in maturing sectors, such as e-commerce, will continue to broaden their offerings and investments in order to access new or adjacent verticals. In this edition of Venture Pulse, we look at these and other global and regional trends, including: The implications of the plateau in seed and angel stage deals in the US The major focus on artificial intelligence by both governments and investors The strengthening IPO market globally and the shifting rationale for holding IPO exits The evolution and rising prominence of agtech We hope you find this edition of Venture Pulse insightful. If you would like to discuss any of the results in more detail, please contact a KPMG Enterprise adviser in your area. message Jonathan Lavender Global Chairman, KPMG Enterprise, KPMG International Brian Hughes Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International and Partner, KPMG in the US Arik Speier Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International and Partner, KPMG in Israel You know KPMG, you might not know KPMG Enterprise. KPMG Enterprise advisers in member firms around the world are dedicated to working with businesses like yours. Whether you're an entrepreneur looking to get started, an innovative, fast growing company, or an established company looking to an exit, KPMG Enterprise advisers understand what is important to you and can help you navigate your challenges no matter the size or stage of your business. You gain access to KPMG's global resources through a single point of contact a trusted adviser to your company. It is a local touch with a global reach. Contents 2018 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. 6 Global Americas 29 42 U.S. 61 Europe 84 Asia New record for VC topping $70 billion invested worldwide Late-stage accounts for ever increasing percentage of total investment Global fundraising remains strong on pace with 2017 Median deal size for 2018 reaches $50 million for Series D+ Corporate VC participation surpasses 20% VC totals second highest quarter in the decade Median pre-money valuation for Series D+ jumps to $279 million Canadian VC remains robust at over $700 million VC investment in Mexico rebounds from Q1 lows Over $28 billion invested on 1859 deals in Q2'18 Another strong quarter for Corporate Venture Capital with $14+ billion invested Volume of first-time venture financings remain below historic averages Venture-backed exits robust powered by IPO resurgence and strong M&A Over $5.6 billion invested on 631 deals in Q2'18 Angel/seed deal volume continues downward trend in Europe Jump in median financing size persists in particular for early and late-stage VC Corporate VC participation rate spikes nearing 25% UK continues to dominate top deals, led by massive rounds in London and Cambridge Massive $35.9 billion invested on 466 deals in Q2'18 Corporate venture capital participates in whopping 30% of deals First-time financing remains robust Chinese companies represent 8 of top 10 deals globally 4 #Q2VC 2018 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. The unstoppable tide of capital The first quarter of 2018 recorded a truly massive tally of VC invested worldwide, with the final figure landing at well over $50 billion once all data was collected. But even that mammoth sum pales in comparison to what the second quarter of 2018 recorded: $69 billion+. It has to be noted that the outlier company of all outlier companies Chinese fintech giant Ant Financial once again skewed even annual figures significantly, raising $14 billion in a late-stage VC round that almost beggars typical venture methodologies. Without that single transaction, VC invested would still have been a remarkable $56 billion, give or take, which signals that the unstoppable tide of capital abundance within venture has yet to abate. Late-stage volume marches slowly but steadily forward Prior to Q1 2018, even the heady period from late 2015 to the end of 2017 never saw late-stage VC activity account for more than 20% of global venture volume, although eventually quarterly tallies crept close. However, the first two quarters of 2018 have each seen well over 20% of global venture volume classified as late stage. The primary implications of this trend are twofold: one, companies are staying private longer, and two, they are still able to raise plenty of capital. But given the gradual decline in aggregate deal count by quarter, the riskiest potential deals are less and less likely to be closed. Valuations persevere atop the flood of capital Venture valuations are difficult in practice, and even somewhat so in theory. Given their degree of uncertainty, it is still intriguing that they remain so consistently high across the board. Such persistence argues significant capital abundance and consequent competition as well as investors' belief that such valuations will eventually pay off. That belief should not necessarily be met with skepticism; software M&A multiples and the rip-roaring performance of technology stocks over the past several years should always be borne in mind when analyzing VCs' willingness to take huge, even if risky, bets. That said, there is still plenty of talk around increasing caution. European venture still characterized by late-stage-focused funds As this edition of the KPMG Venture Pulse was being finalized, news broke of Highland Europe, a growth-stage VC firm, closing its third fund at $540 million (based on exchange rates at that time). Such a sizable close for the European fundraising ecosystem exemplifies the European venture scene as it currently stands: A cadre of often late-stage-focused VC firms still successfully close the bulk of capital within the continent, and invest across key metros, bolstering aggregate VC invested even if the tally of early-stage activity continues to decline. Although early-stage fundraising will experience bouts of bullishness, that market within Europe continues to face systemic hurdles more owing to the very nature of early-stage VC than anything else, as well as interplay between EU agencies or national governments as to specific roles. Skewed by Ant Financial, capital flow surges to a new high As Ant Financial's mammoth and skewing financing were already remarked upon earlier, it's important to note for the Asia-Pacific venture ecosystem that quarterly VC invested came in quite below the staggering highs previously reached in just the prior year. That said, the steadiness in late-stage volume as well as historical robustness of capital represents another notch in the maturation of the regional venture and technology scene. Ongoing political and trade concerns that look set to intensify could result in some hiccups in the flow of capital to VC in particular, but thus far, things remain robust. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. Q2'18 summary 5 #Q2VC 2018 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. Corporate participation continues to be a highly important driver In this and the previous edition of the Venture Pulse, corporate financings of companies that otherwise meet all other criteria for venture-backed financings are included for the first time. Given the evolution of private markets and the venture industry in general, most notably, the significant increase in corporate VC participation rates, this change was necessary to truly reflect the importance of the role that strategic acquirers and related investment arms are playing in the current landscape. Especially as private companies continue to elect to grow while staying private, more and more companies are looking to gain or maintain exposure to innovation within the private sphere, whether it be financial or related to intellectual property. Participation rates are at all-time highs. Still highly cyclical on a quarterly basis, fundraising suggests ongoing alternatives commitment Midway through the year, fundraising volume is on pace to match the tally observed in 2017, roughly speaking, at 234 closed vehicles. Total capital committed, however, is quite healthy, having increased steadily on a quarter-over-quarter basis. What these data points suggest, in the context of the remarkably strong fundraising cycle over the prior several years, is that the shift toward alternatives' allocations on the part of institutional investors is as momentous as some in the industry have declared. Increased allocation to VC by family offices, mutual funds (those often taking direct stakes) and others as part of an overall augmentation of alternatives' portions of portfolios has directly underpinned the bullishness of the VC cycle this past half-decade. If this trend continues, it will likely only further encourage highs in VC invested on a historical basis, as well as late-stage exposure. As fundraising volume is still skewing toward the mid-sized and large segments of the market, pure fund should continue to exert upward pressure across the investing side of affairs. Liquidity is all about timing Private capital strategies are all about the premiums given to patient investors. With that in mind, the fact exit volume has steadily slid since peaks in 2014 and 2015 should not yet spark concern, especially as global exit value tallies have been fairly steady. What should spark concern is that there have been few notable surges in exit value, driven by unicorns finally going public or being acquired. The steady trickle of such exits still could pay off for many backers, as exemplified by Microsoft's acquisition of Github and some recent notable IPO filings, such as that of Domo. The key therein is the steadiness of such payoffs and consequent payouts to venture backers. As long as the timeline does not become overly protracted, investors are expected to still take delayed exits of sufficient size over less-robust liquidity events at the preplanned time. And, as the unicorn boom kicked off in earnest in the early years of the 2010s, there is still runway for typical late-stage venture fund timelines it is probable that non-traditional VCs that looked for quicker exits amid exposure to fast-growing tech companies may be those left most disappointed, but all in all, from here on out it is the steadiness, not the surge, in late-stage companies' exits that matters the most. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. Q2'18 summary Globally, in Q2'18 VC-backed companies raised $69.8B across 3,108 deals 7 #Q2VC 2018 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. Despite growing uncertainty globally, including concerns regarding US trade tariffs and changes to tax regulations, Q2'18 saw companies around the world raise a massive amount of VC funding, propelling global totals to a record high despite the continued decline in the number of VC deals. Ant Financial sees largest VC funding round ever China-based deals dominated global investment activity in Q2'18, accounting for eight of the 10 largest deals this quarter, including four $1 billion+ deals to Ant Financial, Weltmeister, Pinduoduo and Manbang Group. The $14 billion raise by Ant Financial at the end of May represented the largest VC deal in history. Investors may have seen this opportunity as a mezzanine round: a chance to take hold of equity that could increase significantly upon an IPO that is rumored to be in the works for next year. US market activity also remained strong in Q2'18, led by Faraday Future's $2 billion round. While European VC deal volume decreased again this quarter, overall investment continued to build on an excellent start to the year. Artificial intelligence technologies experiencing rapid investment growth AI continued to see substantial VC investment globally during the second quarter of 2018. China- based facial-recognition company Sensetime raised $1.2 billion over two separate funding rounds this quarter, making it the world's most valuable AI company to-date. The substantial investor focus on AI technologies reflects the widespread applicability of AI to different industries and solutions. Many countries have also made AI innovation a priority. The Chinese government, for example, has identified AI as a strategic area for investment, with a goal to become a global leader in AI by 2020. Gap in funding sizes remains noticeable The $100 billion Softbank Vision Fund made waves in the global VC investment community when it was announced in 2017. Since that time, other VC investors have announced large funds to try and compete for late-stage deals, including Sequoia ($12 billion), Battery Ventures ($1.25 billion) and General Catalyst ($1billion). Even the EU is getting on board the megafund trend, introducing VentureEU in Q2'18, a $2.6 billion fund intended to drive investment in the region. During Q2'18, Softbank also suggested a second Vision Fund is coming, a sure sign that mega-funds will continue to be a significant contributor to the VC market in the quarters and years ahead. mega-funds, however, are primarily targeted toward late-stage deals. While the focus on investing in late-stage deals extends back to before the Vision Fund was announced, the increase in attention being given to mega-funds over the past few quarters may be contributing to the ongoing decline in deals activity at the angel and seed-stages. With a number of more mature investment sectors such as food delivery and ride hailing reaching a fever pitch globally, mega-funds will likely continue to invest in late-stage companies looking to fuel global expansion and take top market position either regionally or globally. Massive $14 billion raise by Ant Financial propels global VC funding in Q2'18 8 #Q2VC 2018 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. Excitement over automotive sector technologies continues to build In Q2'18, US-based electric car manufacturer Faraday Future reopened their last round and raised an additional $2 billion in funding following the $1.5 billion raise in Q1'18, highlighting the increasing attention VC investors are giving to automotive technologies, both in the electric car space and in the autonomous driving space. In the first half of 2018, the total amount invested in autonomous vehicles has almost eclipsed funds raised during all of 2017. Most, if not all, traditional automotive companies are interested in the autonomous driving space related to either technology development or to fleet management. Large investors such as Softbank are also highly involved in this area, with many hedging their bets by making investments in multiple market leaders. For example, Softbank has invested in Uber, Didi, Grab and Ola. By investing heavily in different companies, it is likely Softbank will be able to force some cooperation between competitors in key markets while furthering competition in others. Cybersecurity continues to be a hot-button topic for investors With the growing focus on the Internet of Things and on autonomous driving, it is no surprise that VC investors have focused heavily on cybersecurity around enabling technologies. While few actual breaches have been publicized, there is recognition that any potential threat needs to be strongly mitigated right from the get-go in order to ensure confidence in the space. With the growing number of connected components of vehicles (e.g. guidance systems, etc.), there is growing pressure to ensure protections are in place. Macroeconomic issues creating uncertainty globally US trade tension with China, Canada and the EU is creating some uncertainty in the business world globally, although the actual impact has not been significantly noticeable in the VC space to date. The reality is that companies in China and the US have been competitors for many years in different industries, with competition heating up recently in the race to become world leaders in innovative technologies such as artificial intelligence. There has also been increasing industry- based competition between the two countries, particularly in the telecom space where well capitalized Chinese companies such as Tencent, Baidu and Alibaba have made inroads in markets once dominated by US-based telecoms. Exit market strengthens in the US bodes well for the future The IPO market heated up in the US during the first half of the year, with a number of successful exits, including Spotify, Dropbox and DocuSign. To date, both the number of IPO exits and their combined IPO value are on track to exceed 2017 numbers. Median IPO deal size is up substantially at $119 million, the highest the metric has been since 2018. The strength of this number likely reflects the pent-up demand for exits in the market following 2 years of lackadaisical activity. Post-IPO performance has also been very encouraging, with the vast majority trading above their initial IPO price. Massive $14 billion raise by Ant Financial propels global VC funding in Q2'18, cont'd. 9 #Q2VC 2018 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. IPOS have also been rebounding in Asia, with new listing rules related to the Hong Kong Stock Exchange spurring renewed interest among unicorns. It would not be surprising to see a number of Asia-based fintech companies looking to the IPO market to exit over the next few quarters. Some of the IPO activity this quarter appeared to be less about fundraising and more about providing liquidity for founders and employees. This will be a trend to keep an eye on to see if it becomes more prevalent over the remainder of the year. The desire to provide liquidity has also continued to fuel growth in secondary market transactions, particularly in the US. M&A was also strong in Q2'18, with activity such as Microsoft's $7.5 billion purchase of development platform company GitHub. Trends to watch for in Q3'18 Looking forward, tax reforms in the US, a significant amount of dry powder and the continued flow of funding into the VC world are expected to keep the VC market strong over the next quarter. Autonomous driving, healthtech and biotech are expected to be big winners over the next few quarters, in addition to blockchain. One area that may be one to watch over the next quarter will be valuations particularly for companies with no tangible assets, where investors are focused on what the company might do in the future. The level of assumption and risk involved in these types of valuations is quite high and it is still to be seen if these valuations will be substantiated. Massive $14 billion raise by Ant Financial propels global VC funding in Q2'18, cont'd. 10 #Q2VC 2018 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. Global venture financing by stage 2010 Q2'18 Once again, the venture industry has seen another high exceeded by leaps and bounds. The second quarter of 2018 recorded over $70 billion invested, dwarfing the prior high seen in the first quarter of the year and, for comparison's sake, nearly seven times the tally of Q2 2010. There appears to be virtually no limit to how much capital is pouring into late-stage financings of truly mammoth private companies. The poster child of the global late-stage largesse is Ant Financial, which raised billions in 2016 and closed on no less than $14 billion in fresh funding in this most recent quarter. Still, even without that gargantuan sum, Q2 2018 would have seen $56 billion, outstripping all but the prior quarter. Source: Venture Pulse, Q2'18. Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 12, 2018. Note: Refer to the Methodology section on page 103 to understand any possible data discrepancies between this edition and previous editions of Venture Pulse. The late-stage tide rolls onward "Globally, we continue to see an upward trend in the amount of venture capital investment, even as deal volumes decline. Asia had a particularly strong quarter accounting for 8 of the top 10 deals globally much of which was once again driven by record levels of corporate investment." Jonathan Lavender Global Chairman, KPMG Enterprise, KPMG International 0 1,000 2,000 3,000 4,000 5,000 6,000 $0 $10 $20 $30 $40 $50 $60 $70 $80 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) # of deals closed Angel/Seed Early VC Later VC 11 #Q2VC 2018 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. Global median deal size ($M) by stage 2010 2018* Global up, flat or down rounds 2010 2018* Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. Medians stay as high as ever amid influx of positive sentiment 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 2015 2016 2017 2018* Up Flat Down $0.5 $0.5 $0.5 $0.5 $0.5 $0.6 $0.7 $1.0 $1.4 $2.5 $2.4 $2.1 $2.3 $2.8 $3.2 $3.5 $4.5 $7.0 $5.5 $6.3 $6.0 $5.8 $7.7 $9.0 $9.0 $10.0 $13.5 2010 2011 2012 2013 2014 2015 2016 2017 2018* Angel/seed Early stage VC Later stage VC 12 #Q2VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global median deal size ($M) by series 2010 2018* The hurdles that fledgling companies must face in the current, capital-rich landscape, are clear when examining the divergence between seed, Series A and Series B financing sizes. For the companies that can clear those hurdles, the rewards are rich, but to jump from a median of $1.2 million at the seed-stage, then nearly eight times higher at Series A, is increasingly difficult. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. New highs across the board $0.5 $0.5 $0.4 $0.4 $0.5 $0.6 $0.7 $1.0 $1.2 $2.5 $2.8 $2.7 $3.0 $3.5 $4.1 $5.0 $6.0 $8.0 $7.0 $7.2 $7.0 $7.0 $10.0 $12.0 $12.0 $14.0 $17.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Seed Series A Series B $10.0 $12.0 $11.6 $12.0 $15.0 $19.0 $22.4 $25.0 $30.0 $12.2 $14.8 $16.0 $15.9 $27.0 $35.0 $28.2 $40.0 $50.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Series C Series D+ 13 #Q2VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global median pre-money valuation ($M) by series 2010 2018* Series B valuations see the relatively greatest leap upward between 2017 and 2018 to date $2.8 $3.3 $3.0 $3.2 $3.4 $4.0 $4.4 $5.2 $6.6 $6.0 $6.9 $7.8 $8.4 $10.7 $12.6 $14.0 $15.6 $20.0 $19.3 $20.4 $20.9 $24.8 $30.9 $38.6 $37.0 $40.0 $60.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Seed Series A Series B $36.3 $46.0 $49.0 $52.8 $56.9 $73.8 $80.0 $87.8 $120.0 $66 $82 $91 $98 $150 $184 $150 $262 $311 2010 2011 2012 2013 2014 2015 2016 2017 2018* Series C Series D+ "Global VC activity has been very strong so far in 2018, but there is still one big question out there and that is valuations. It is very difficult to substantiate some of the valuations we are seeing in the market based on current results. There's a lot of focus on what companies might provide in the future. The level of assumptions and risk associated with these valuations are very high and we have yet to see if they will be substantiated." Arik Speier Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International and Partner, Head of Technology, KPMG in Israel Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. 14 #Q2VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global deal share by series 2012 2018*, number of closed deals Global deal share by series 2012 2018*, VC invested ($B) The aggregate decline in the volume of angel and seed activity recorded since 2015 has very roughly approximated the robust rise in venture financing sizes and valuations recorded between the depths of the financial crisis and that same peak. Consequently, it seems safest to conclude that the decline is cyclical, a rational response to rising prices at such a risky stage. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. The early stage sees further cyclical pullback 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2012 2013 2014 2015 2016 2017 2018* Series D+ Series C Series B Series A Angel/seed $0 $20 $40 $60 $80 $100 $120 $140 2012 2013 2014 2015 2016 2017 2018* Series D+ Series C Series B Series A Angel/seed 15 #Q2VC 2018 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global financing trends to VC-backed companies by sector 2013 2018*, number of closed deals Global financing trends to VC-backed companies by sector 2013 2018*, VC invested ($B) Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. Sector lines continue to blur, pharma stays strong 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201320142015201620172018*Commercial Services Consumer Goods & Recreation Energy HC Devices & Supplies HC Services & Systems IT Hardware Media Other Pharma & Biotech Software 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201320142015201620172018* 16 #Q2VC 2018 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. 64% 27% 9% 61% 28% 11% 59% 26% 15% 57% 28% 15% 61% 26% 13% 65% 21% 14% Americas Europe Asia Pacific Financing of VC-backed companies by region 2013 2018*, number of closed deals Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. Volume stays robust in developed markets 2013 2014 2015 2016 2017 2018* 17 #Q2VC 2018 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. 69% 17% 14% 67% 14% 19% 58% 13% 29% 52% 11% 37% 52% 13% 35% 47% 9% 44% Americas Europe Asia Pacific Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. Asia-Pacific sees 44% of VC invested in 2018 YTD 2013 Financing of VC-backed companies by region 2013 2018*, VC invested ($B) 2013 2014 2015 2016 2017 2018* 18 #Q2VC 2018 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. Corporate VC participation in global venture deals 2010 Q2'18 Note: The capital invested is the sum of all the round values in which corporate venture capital investors participated, not the amount that corporate venture capital arms invested themselves. Likewise, the percentage of deals is calculated by taking the number of rounds in which corporate venture firms participated over total deals. In a cautious, high-priced environment, corporates can justify joining in higher-priced rounds and enjoy access to relatively much richer balance sheets, but their evolution into an important supporting player in the global venture landscape is a testament to the slow-moving evolution of the venture industry on the whole. It is important to note that direct investing is especially skewing figures, as evidenced by the sheer mass of capital tallied in Q2 2018, in which corporates participated or dispensed solo. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 12, 2018. Corporate VC activity now exceeds more than a fifth of all deals 0% 5% 10% 15% 20% 25% $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) % of total deal count 19 #Q2VC 2018 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. Global first-time venture financings of companies 2010 2018* Midway through the year, 2018 looks on pace to record the lowest total of first-time financings in close to a decade, due to a combination of factors. First, in a time marked by expensive financings and despite having plenty of capital on hand, investors are reluctant to pay up for the riskiest investments brand-new enterprises. Second, the massive gains observed in public markets has likely disincentivized angel financiers from the high-stakes arena of funding fledgling opportunities. Last but not least, innovation cycles come and go, and although there could be a new wave of realized innovations stirring within the crypto sector, much of the lowest-hanging fruit in app-based, mobile-first enterprises has already been snatched. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 11, 2018. Multiple factors combine for 2018 to perhaps hit an all-time low in first-time VC financings $9 $12 $13 $13 $14 $20 $17 $14 $8 3,793 5,066 5,922 6,663 7,324 6,786 5,424 4,415 1,570 2010 2011 2012 2013 2014 2015 2016 2017 2018* Capital invested ($B) Deal count 20 #Q2VC 2018 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. Another remarkable quarter for unicorns' never- ending ability to raise capital Global unicorn rounds 2010 Q2'18 Note: PitchBook defines a unicorn venture financing as a VC round that generates a post-money valuation of $1 billion or more. These are not necessarily first-time unicorn financing rounds, but also include further rounds raised by existing unicorns that maintain at least that valuation of $1 billion or more. Especially with Lyft recording a Series I financing this past quarter, in its steady progression through the English alphabet, it is clear that thus far, investors are still more than willing to ply existing unicorns with massive sums. New unicorns are still being birthed as well, but the true outliers that resulted in Q2 2018 seeing the largest amount ever raised by new and old unicorns still skew toward the latter. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 12, 2018. 0 5 10 15 20 25 30 35 40 45 50 $0 $5 $10 $15 $20 $25 $30 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) # of deals closed 21 #Q2VC 2018 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. Global venture-backed exit activity 2010 Q2'18 Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 12, 2018. 2018 is proving significant for the exit cycle 0 100 200 300 400 500 600 $0 $10 $20 $30 $40 $50 $60 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Exit value ($B) Exit count 22 #Q2VC 2018 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. Global venture-backed exit activity (#) by type 2010 2018* Global venture-backed exit activity ($B) by type 2010 2018* Liquidity options continue to proliferate for venture-backed companies. The tech IPO market has revived somewhat, with notable names such as Dropbox, Spotify, DocuSign, Smartsheet and Pivotal Software finally debuting on public exchanges. However, buyouts by PE firms and M&A also remain key for both backers and founders, gracing them with multiple options to find liquidity. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. 2018 sees life in tech IPO market 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Strategic Acquisition Buyout IPO $0 $20 $40 $60 $80 $100 $120 Strategic Acquisition Buyout IPO 23 #Q2VC 2018 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. Global venture fundraising 2010 Q2'18 The fundraising market is highly cyclical and skewed significantly by the popularity of alternative investments overall among capital markets. Hence, the waxing and waning of fundraising volume over the past decade. In the last edition of the Venture Pulse, we observed that although there could be recurrent upticks, by and large, on a historical basis, the fundraising cycle is slowing marginally, suggesting limited partners' appetite for exposure to VC may well have been mostly met. That could have been premature, as 234 closed funds in 2018 to date may put the market on pace to match the 460 pools closed in 2017 but, at the very least, the cycle is holding steady, not growing. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 12, 2018. One of the stronger quarters for VC raised 0 50 100 150 200 250 $0 $5 $10 $15 $20 $25 $30 $35 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital raised ($B) # of funds raised 24 #Q2VC 2018 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. Global venture fundraising (#) by size 2010 2018* After trending down as a proportion of overall fundraising volume from 2014 to 2016, first-time funds worldwide are still enjoying a comeback first kicked off in 2017. This trend is at least somewhat cyclical. The successes of the most prominent venture funds in the early part of this decade were bound to culminate in venture partners leaving more-established firms to strike out on their own. It is also a testament to bandwagoning, as the ongoing success of aforementioned prominent firms inspires other entities, such as governments to foster fledgling funds. Global first-time vs. follow-on venture funds (#) 2010 2018* Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 6/30/18. Data provided by PitchBook, July 12, 2018. First-time funds enjoy a continued renaissance in 2018 to date 0 50 100 150 200 250 300 350 400 450 500 2010 2011 2012 2013 2014 2015 2016 2017 2018* Under $50M $50M-$100M $100M-$250M $250M-$500M $500M-$1B $1B+ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201020112012201320142015201620172018*First-time Follow-on 25 #Q2VC 2018 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. The agtech sector continues to draw record investment as VCs and other investors seek to finance solutions to the growing issue of food security amid a rapidly growing global population. VCs are particularly attracted to technology and innovation that helps provide more scale, sustainability and predictability in agriculture, a sector known for its unpredictable weather and market volatility. VC investment in agtech continues to break records 2017 was a blockbuster year for VC investment in Agtech, with over $1.7 billion total invested on the power of a series of mega-deals late in the year, including Ginkgo Bioworks, Indigo Agri and Farmers Business Network. In 2018, we've seen this momentum continue with more than $600 million invested across 105 deals in the first 5 months of the year, including AgriProtein ($107 million), Edico Genome, ConCentric ($54 million) and PrecisionHawk ($75 million). New technology gives investors comfort in agtech investing Agriculture has become a destination for VC investing due largely to the advancements in technology that help farmers better predict, manage and boost crop production. Traditionally, agriculture has been seen as a volatile industry, given the unpredictability factors such as, of the weather, pest and disease outbreaks and regularly fluctuating commodity markets. Companies that offer technology that helps to smooth out the food production process from field and soil to the supermarket are considered attractive. Technologies that also help to boost production and increase crop yields, while reducing financial and environmental costs, are also in favor in today's agtech market. VCs are excited by Agriculture 4.0 and a range of technologies being developed and refined including crop sensors, satellite imagery, the IoT, blockchain, swarm robotics, automation and data analytics, to name a few examples. For instance, distributed ledger technology is helping to trace the physical product through the supply chain. This is important for efficiencies, but also meets a growing demand among consumers to source where their food comes from. Another example is AI, which is helping farmers better analyze animal behavior, as well as identify and track potential ailments. Meantime, predictive analytics is being used to assess moisture levels in a field, which helps growers ensure their crops received the appropriate amount of water and better predict growth curves, yields and harvest dates. Agtech attracting a hybrid of corporates The agtech sector is maturing, as evidenced by a first wave of agtech unicorns, expansion of VC activity and interest from big players in both the ag and technology sectors. There are more than 30 active funds joining the agtech-focused funds such as Khosla, Fall Line, Finistere, Innovation Endeavors and S2G, among others1. There were also some meaningful VC-backed exits in 2017. M&A activity is expected to remain robust in the sector and a focus on the agtech startup scene where early-stage companies are developing various digital solutions to help improve crop production. Large ag players are expected to be active in M&A in the near term, as well as tech and retail giants such as Google and Amazon, alongside more state-owned corporations. For instance, we could see more financings like the $110-million Series D announced by Farmers Business Network late last year, which included a mix of investors from Singapore's state investment firm Temasek to Kleiner Perkins Caufield & Byers and GV (formerly Google Ventures)2. VC investment in agtech continues to soar 1 https://techcrunch.com/2018/03/08/major-trends-in-agtech-for-2018/ 2 https://venturebeat.com/2017/11/30/farmers-business-network-raises-110-million-to-bring-price-transparency-to-agriculture/ 26 #Q2VC 2018 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. Agtech investment has few geographical boundaries While the US, China, India and Brazil have a strong interest and investment in ag and agtech given their growing populations (and mouths to feed), there are also innovative solutions coming out of Israel, Australia, New Zealand and the Netherlands. For example, regions with multiple climatic conditions, such as Australia, are most likely to have a wider range of agtech solutions. Meantime, Israel has developed a strong reputation for its agtech innovation pivoting from defence technologies, while the Netherlands has a strong reputation in the horticulture and floriculture space. There's also a trend towards clustering, in particular bringing together ecosystems that include industry bodies and research and knowledge players. The triple helix of industry, research and government then start to attract the fourth key ingredient: capital which is where VCs are starting to play a larger role. Trends to watch in agtech Agtech companies are trying to disrupt how, what and where we grow. Their goal is not only to help feed more people more efficiently, but also to get aligned with the growing trends of transparency, traceability and sustainability in food production. Different technologies are helping to marry these various interests. For example, robotics will become more important as producers are under greater pressure to get the crops off the field, into the packaging and then through the supply chain as efficiently as possible and with the ability to track the journey from farm to plate. We also expect to see more consolidation not just of companies, but applications for farmers. This will likely include putting multiple sensor-driven data inputs together and giving farmers fewer platforms to work with either in the cab of their tractor, on their smartphone or a desktop. The financial services sector is also expected to get more involved in ag and agtech, as it starts to think differently about its role in the production of food and insurance. For example, insurers have an increasingly important role to play around crop risk given the more severe weather patterns, from flooding to drought, that are affecting global food production. Lastly, there will be more emphasis on sustainability in farming to help protect the planet. One example is a system where farmers are financially rewarded for their role in helping support sustainability, which can then lead to lower financial and credit costs across the supply chain. That, in turn, will lead to the adoption of technology to support the system. Regardless of the technology and its intended solution, the future of agtech is about delivering certainty for all stakeholders including farmers, bankers, investors and consumers. VC investment in agtech continues soar, cont'd. "As governments and NGOs strive to ensure they have sufficient food and water for their people, and meet their environmental stewardship obligations, we expect to see interest in agtech grow significantly and more VC activity." Ben van Delden Partner, Head of AgTech & Markets Markets and Growth 27 #Q2VC 2018 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. Global venture financing of agtech companies 2010 Q2'18 The sum of VC invested in agtech between 2015 and 2017 rose exponentially, culminating in no fewer than 218 completed financings within the sector for a combined total of $1.8 billion last year. The 2018 figures are no less robust. This trend is explained by several factors: the demonstrated potential for agtech innovation to result in significant exits, such as those of Granular or Blue River Technology, the growing awareness of the need for more productive and hardy crops, as well as more efficient supply chains in general and last, but not least technical innovations such as, the plummeting cost of sensors that have made even agtech solutions more feasible. Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 12, 2018. Agtech is on the upswing $0.1 $0.4 $0.3 $0.3 $0.7 $0.6 $1.1 $1.8 $0.6 44 57 80 78 149 163 192 218 105 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) Deal count "There are a number of clear geographic leaders when it comes to agtech innovation and venture capital investment. The US remains the clear leader in this space however Israel, Australia and India have made inroads. We are also seeing a burgeoning agtech ecosystem in parts of Europe such as the Netherlands, UK and France. Here in Israel, we already have between 400-500 agtech startups driving innovation in a wide range of areas." Idit Blank-Varol Head of Food & Retail, KPMG in Israel 28 #Q2VC 2018 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. Top 10 global financings in Q2'18 Ant Financial $14,000M, Hangzhou Financial software Series C Weltmeister $3,176M, Shanghai Transportation Late-stage VC Pinduoduo $3,000M, Shanghai Internet retail Series C Faraday Future $2,000M, Los Angeles Transportation Late-stage VC Manbang Group $1,900M, Beijing Transportation Late-stage VC 7 8 6 9 10 5 4 3 2 1 Ubtech $820M, Shenzhen Robotics Series C Hellobike $700M, Shanghai Transportation Series E1 SenseTime $620M, Beijing Artificial Intelligence Series C SenseTime $600M, Beijing Artificial Intelligence Series C Lyft $600M, San Francisco Transportation Series I China dominates the Q2 2018 rankings Source: Venture Pulse, Q2'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, July 11, 2018. 10 3 6 4 9 7 8 5 2 1 In Q2'18 VC-backed companies in the Americas raised $28.2B across 1,986 deals 30 #Q2VC 2018 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. VC investment in the Americas remained high in Q2'18, primarily driven by strong VC market activity and investment in the United States. US continues to account for biggest deals in the Americas The US accounted for the lion's share of VC investment in Q2'18, attracting all ten of the biggest deals in the Americas this quarter, including a $1B+ funding rounds to Faraday Future. While a minor amount

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A record-shattering $14 billion raise by Ant Financial in China, in addition to $1 billion+ mega-rounds to Weltmeister, Pinduoduo, Faraday Future, and Manbang Group helped propel VC investment in Asia and the Americas. While VC investment in Europe remained far behind the other regions, a rebound in investment in the UK helped to keep European investment relatively strong quarter-over-quarter.

About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.

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