KPMG Venture Pulse 2018 Q3

Oct 22, 2018 | Publisher: Techcelerate Ventures | Category: Finance |  | Collection: Investments | Views: 12 | Likes: 1

1 #Q3VC © 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 Q3 2018 Global analysis of venture funding 10 October 2018 2 #Q3VC © 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 Q3’18 edition of KPMG Enterprise’s Venture Pulse — a quarterly report highlighting the key trends, opportunities, and challenges facing the venture capital market globally and in key jurisdictions around the world, including the Americas, Asia and Europe. Global VC investment reached a new annual investment high this quarter — confirming 2018 as a massive year for the VC market globally with 3 months of investment still to go. While total VC investment dropped quarter over quarter, the decline was not surprising given Q2’18 results were buoyed by the massive $14 billion deal by Ant Financial. Despite the decline, results remained strong compared to other quarters, led by a $2 billion raise by Grab in Singapore and $1 billion raises by Bitmain in China and Oyo Rooms in India. The IPO market globally now appears wide-open, helping to spur ongoing interest in the VC market. More than 20 unicorn companies globally have issued IPOs already in 2018 — far exceeding totals over the past 2 years. Post-IPO results have been relatively strong for most companies — a trend spurring excitement for potential high-profile exits expected heading into 2019. Urban mobility continued to gain momentum in Q3’18, with many of the big car-sharing companies continuing to expand into other forms of transportation. Uber’s recent investment in Lime — an electronic scooter and bike share company is a prime example of this. This trend follows one that began in China — where unicorn company Ofo’s bikes are now available through the Didi Chuxing app. In the mobility space, autonomous driving also continued to gain investor interest — a trend not expected to fade anytime soon. Looking ahead, while developing trade wars between the US and China and other countries are causing some investor concern, there continues to be strong optimism in the market for the remainder of 2018 and heading into 2019. In this edition of Venture Pulse, we look at these and a number of other global and regional trends, including: ― The massive strength of the VC markets in the US and Asia ― The resurgence in the number of new unicorn companies ― Growing VC investor interest in the co-working space ― The ongoing attraction of food-delivery options to VC investors ― The focus on investments and partnering in autotech and urban mobility. 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 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 28 41 US 59 Europe 82 Asia ― VC investment hits $52 billion invested worldwide ― Median deal size for series D rounds almost doubles since 2016 ― Corporate VC participation for 2018 surpasses 20% ― First time VC financings (YTD) fall to all time low ― Global exit activity surges on strength of IPO market ― Americas sees $28.9 billion invested across 2,056 deals in Q3 ― Latin America and Canadian venture investment surpasses 2017 annual total ― Series D+ medians more than double since 2016– reaching $290 million in 2018 ― Brazilian companies raise close to $300 million in Q3 ― US venture capital boom continues, reaching $27.9 billion in Q3 ― Total venture capital investment reaches $84 billion (YTD) — exceeding 2017 annual totals ― Quarter over quarter investment volume drops by 17.5%, initially ― IPO activity surpasses 2017 volume — with a quarter to go ― US sees 12 deals of $300 million or more ― Deal value hits $5.2 billion across 571 deals ― European deal volume falls by 36.6% quarter over quarter, initially ― Corporate VC participation rate approaches 24% ― Annual first-time venture financing volume and value reach record lows ― Largest 10 deals spread among 6 different countries ― Asia captures 9 of largest 13 deals globally this quarter ― Seed and angel stage deal volume plummets by 51% quarter over quarter ― Corporate participation rate surpasses 35% in Q3 ― Massive quarter for IPOs in Hong Kong ― India surges to over $2.5 billion invested in Q3 4 #Q3VC © 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. Is there a new normal? For some time now, against the backdrop of massive capital flows, a primary theme for the global venture community has been whether or not the cycle would eventually revert to more reasonable historical means or whether it has truly entered a new normal. At the earliest stage, volume did indeed revert, but thus far, early-stage and especially late-stage activity has stubbornly failed to follow suit. Instead, enormous sums of capital are still invested each quarter, while the volume of deals looks set to persist at a historically healthy pace, unceasing. The reason why a new normal cannot yet be determined, however, is for a true seismic shift in how the VC landscapes to have occurred, such a trend would have to persist in the face of truly transformed market conditions. That has yet to occur. Nearly every region looks set for a decade high Three quarters in, the Asia Pacific region has already hit a new, gargantuan high in aggregate venture capital (VC) invested. The US has as well, thereby bolstering the Americas to a record high too. Last but not least, Europe is on pace to eclipse $23 billion invested this year alone, despite diminishing volume. In short, the profundity of VC inflows seems hardly set to diminish anytime soon. Paired with steadying tallies of activity, the venture industry looks more robust than ever. Median financing size trends remain robust testament to evolving landscape Hand in hand with the apparently new normal of diverging VC invested and plateauing volume, median deal sizes have steadily crept up across all stages and look set on staying at record levels. More importantly, such inflation has occurred across all regions. The critical question remains whether or not this trend is primarily driven by financial market conditions i.e. the sheer abundance of dry powder within VC plus entrance of non-traditional investors led to demand outstripping supply or whether larger sums are merited simply due to the confluence of additional factors, such as much greater markets enabled by the smartphone phenomenon. Thus far, the sustainability of the trend would suggest more the latter than the former. Completing the reversion at the earliest stages At the global level, the quarterly tallies of angel and seed financing volume have finally appeared to even out, almost in tandem with early-stage counts. Although driven in large part by angel and seed investors in the US having long since evened out their activity after a period of exuberance, it is worth noting that nearly every region now appears to see their earliest-stage tallies enter a plateau. This, more than anything else, suggests mean reversion to more sustainable investing patterns at the riskiest of stages may be nearing its completion. The ongoing impact of mega-funds The key trend to note with regard to recent strong fundraising is that such abundance of capital will likely support dealmaking, particularly in larger size ranges given that funds of certain magnitude must write checks of a certain size to remain economically meaningful. Accordingly, there is a very important capital base to underpin even very large late-stage financings going forward; the challenge for investors will likely be adhering to strategies with sufficient discipline. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. Q3'18 summary 5 #Q3VC © 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. A revamp in IPO methodology better demonstrates true extent of value, especially in Asia An encouraging sign for overall liquidity for the backers of startups is the gradual recovery of initial public offerings (IPOs), as volume has definitely picked up since the lows of 2016. Huge debuts on exchanges from the New York Stock Exchange (NYSE) to Hong Kong, such as Meituan Dianping’s $4.2 billion raise, yielding a market cap of almost $53 billion most recently, are illustrating how even very high-valued companies that have yet to turn a profit can still demonstrate their worth in public markets. However, it is worth noting that such debuts are mainly restricted to such large companies that have hit the necessary scale to justify going public in the first place. Also, in this edition of the Venture Pulse, the methodology of depicting exit values has been changed to better accommodate such huge raises as have been seen in Hong Kong as of late. Rather than utilizing the offering size, the pre-valuation has been included, thus depicting the extent of, say, Xiaomi’s debut on public markets earlier this year. See the methodology for the report on page 101. Healthcare sectors still seeing active interest In Q2 the pharma and biotech sector was on a tear already in 2018. Now, with one quarter to go, startups within the space have raised well over $19 billion, larger than any prior year by a considerable sum. Although other healthcare sectors are still on pace for record or near-record levels of VC invested this year as well, the largesse shown across such a relative volume is rather remarkable, if explicable by that sector’s typical economics. However, the spate of enormous exits within the space have demonstrated the financial potential of nascent technologies such as immunotherapies. The ongoing potential for liquidity As noted in the prior edition of the Venture Pulse, exit values remain historically healthy, even as the tally of completed exits subsided on a quarterly basis. In fact, the most recent quarters have seen a marked increase in aggregate exit values, especially in light of the change in IPO value depiction explicated above. Such elevated sums will need to persist, however, to match the largesse shown on the dealmaking side, so investors would do well to keep a keen eye on any potential faltering in the liquidity landscape. M&A remain the bulk of all exits, by and large, and will need to remain strong as alternative paths to liquidity that were spotlighted in the prior edition of the Venture Pulse are growing, yet not sufficient in and of themselves to bolster exits alone. Moreover, although IPO exit values will show the true extent of potential liquidity for some firms, not all unicorns necessarily are still well- disposed to go public,. Even some that have recently debuted are not performing up to where they initially landed. All currency amounts are in USD, unless otherwise specified, data provided by PitchBook. Q3'18 summary Globally, in Q3'18 VC-backed companies raised $52B across 3,045 deals 7 #Q3VC © 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 VC investment surpassed the previous annual record set in 2017 during Q3’18, driven in part by strong investment activity in all regions of the world. Both Asia and the US achieved new annual VC investment highs this quarter, while VC investment in Europe remained relatively steady. Record year for VC investment — with 3 months to go With one quarter still remaining in 2018, VC investment globally surpassed the record $171 billion raised during all of 2017. While the number of VC deals remained just over half of the peak annual high of 19,890 achieved during 2015, deals have become much larger, thus accounting for the massive uptick in investment. Globally, VC investors continued to focus on late-stage deals, although there continued to be some stabilization of activity at the seed and angel deal stages — in Asia and the US. The VC funding base has continued to mature and strengthen compared to previous years — with the availability of funds and the size of funds both growing quite substantially. While SoftBank’s $100 billion Vision Fund continues to be an outlier fund, other mega-funds are expected to appear over the next few quarters as other VC funds look to compete for the biggest bets. With companies now looking more positively at exit opportunities, there could be a renewal in funding sources over the next few quarters. US and Asia continue to drive global results, while Europe remains steady China and the US accounted for many of the biggest deals this quarter, although Singapore-based ride hailing company Grab attracted the largest funding round: a $2 billion raise in August. In the US, a strong economy, numerous $100 million+ mega-rounds, and a more positive IPO market helped keep VC investment high, while a $1 billion series B deal by China-based bitcoin mining equipment manufacturing company Bitmain led activity in China. India also saw a $1 billion raise by hotel booking company Oyo Rooms this quarter. While the three $1 billion+ deals in Asia pale in comparison to Ant Financial’s $14 billion raise during Q2’18, the deals highlight the ongoing strength of the VC market in the region. In Europe, VC investment fell well short of the funds raised in Asia and the Americas, yet remained relatively steady compared to historical norms. IPO market becoming more attractive with positive exits on the rise Q3’18 saw an ongoing resurgence in IPO activity globally, with companies like event ticket provider Eventbrite joining the likes of DocuSign, Zscaler, and Ayden — all of which issued IPOs earlier this year. In its first day of trading, Eventbrite’s share price rose almost 60% above its listing price. While less spirited, the IPOs of a number of Chinese-based technology companies — including electric car manufacturer Nio on the NYSE, and smartphone company Xiaomi on the Hong Kong Stock Exchange (HKSE) — took place during Q3’18. While both companies had relatively uninspiring results in their first days of trading, the longer-term results will be critical to watch in order to identify long-term trends. Global VC investment reaches new annual high at the close of Q3’18 8 #Q3VC © 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. Over the next quarter, it is likely that both IPO interest and activity will continue to rise, even in Europe which, has been considered to have a relatively soft IPO market historically. In the UK, peer-to-peer lending unicorn company Funding Circle is poised for an IPO on the London Stock Exchange in the near future. It is likely other unicorns will aim at IPO exits in Q4’18 and into Q1’19. Unicorn births see a resurgence in Q3’18 The number of new unicorns (companies with a $1 billion+ valuation), globally continued to see a bounce-back in the third quarter following on a resurgence that began earlier in the year. After 17 unicorn births in Q1 and 20 in Q2’18, 18 unicorns were birthed during Q3’18. While many of the new unicorns came from the US, including Automation Anywhere, Starry, Lime and Toast — and from China, including Link Doo, Xpeng and Tiger Brokers, other new unicorns came from a wide mix of countries — including Singapore (Trax), Germany (Celonis), Hong Kong (Klook). The most surprising unicorn to be birthed in Q3 was delivery platform company Rappi, based in Colombia. Rappi is only the second unicorn to come from Latin America — following in the footsteps of Brazil- based Nubank. Cross-border investment remains healthy, despite US trade war concerns US investors continued to make significant investments abroad, even as the US government expanded its tariff wars with countries such as Canada and China. In September, the US expanded tariffs to an additional $200 billion worth of goods coming from China, following on the initial tariffs to $50 billion of Chinese goods. In retaliation, China imposed its own set of tariffs on US products. While VC investors are somewhat leery of the potential long-term consequences of trade tensions between the US and other countries, VC investors have continued investing overseas, dialing up activities in Europe — particularly in the United Kingdom. Others VC investors have started to look at expanding to newer technology hubs in order to broaden their portfolios. VC investors focusing on confluence of technologies While a number of industries garnered a significant amount of attention from investors in Q3’18, including transportation sharing, food delivery and agtech, VC investors globally also increasingly focused their attention on companies with technologies that cross sectors and that blur the lines between sectors. For example, ride hailing company Uber recently invested in bike and scooter sharing company Lime in order to provide access to electric scooters via its app. This deal followed on Uber’s acquisition of bike sharing company Jump Bikes at the end of Q2’18. Healthtech and biotech remain big VC market winners globally Healthtech and biotech again attracted a significant amount of investment this quarter, with $100 million+ raises by One Medical, 23andMe, BioNTech and Orchard Therapeutics among others. While some companies have found it challenging to disrupt current processes and structures, companies that have focused on either patient needs or on infrastructure have had some success. Given the aging population and rising medical costs in most regions of the world, healthtech and biotech are expected to be long-term areas of focus for investors. Global VC investment reaches new annual high at the close of Q3’18. cont’d. 9 #Q3VC © 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 — Q3'18 For some time now, it has been clear that the unprecedented conditions financial markets experienced since 2010 have induced a dramatic shift in the venture industry in particular. First angel and seed investing soared in volume in the middle of the decade as high-net-worth individuals’ portfolios recovered from the financial crisis and more limited partners began to pledge capital to nascent seed-focused funds. Then, significant growth at the late stage and even an emergent ‘private IPO’ market occurred, culminating in the ongoing maturation of ecosystems beyond Silicon Valley. The question now is whether this new normal of heightened levels of VC invested, within the range observed since the end of 2014, will persist. Source: Venture Pulse, Q3'18. Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. Note: Refer to the Methodology section on page 101 to understand any possible data discrepancies between this edition and previous editions of Venture Pulse. The new normal? 0 1,000 2,000 3,000 4,000 5,000 6,000 $0 $10 $20 $30 $40 $50 $60 $70 $80 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) # of deals closed Angel/Seed Early VC Later VC “With 3 months left to go, global VC investment is already ahead of funds raised during all of 2017. This speaks to the incredible levels of innovation happening across the Americas, Asia and Europe. The opportunities companies are providing today are reshaping the world around us — and VC investors want to be a part of that.” Jonathan Lavender Global Chairman, KPMG Enterprise, KPMG International 10 #Q3VC © 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, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. Growth in medians seems more reasonable than the preponderance of positivity 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 2015 2016 2017 2018* Up Flat Down “Across the globe median venture capital deal sizes continue to steadily increase across all stages, reaching new heights in 2018. The abundance of dry powder, continued rise of corporate participation and ever increasing market sizes may continue to drive investment for some time to come.” Arik Speier Co-Leader, KPMG Enterprise Innovative Startups Network, KPMG International and Partner, Head of Technology, KPMG in Israel $0.5 $0.5 $0.5 $0.5 $0.5 $0.6 $0.7 $1.0 $1.1 $2.4 $2.4 $2.1 $2.2 $2.8 $3.1 $3.5 $4.1 $5.9 $5.5 $6.4 $6.0 $5.8 $7.5 $9.0 $8.4 $9.5 $12.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Angel/seed Early stage VC Later stage VC 11 #Q3VC © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global median deal size ($M) by series 2010 — 2018* Is a near-doubling in size, in the span of 2 years, sustainable? The median Series D and later round has jumped from $26.5 million to $50 million between 2016 and 2018 to date. Perhaps a better question is again whether the arena for private company growth has been irrevocably transformed by the overall shift in financial markets, as more investors look for alpha gain in riskier, illiquid, yet potentially more profitable venues. Despite the level of growth throughout this decade, it still is too soon to tell, as permanence will only be truly indicated by the transformation of a crisis. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. Unceasing growth at the late stage $0.5 $0.5 $0.4 $0.4 $0.5 $0.6 $0.7 $0.9 $1.0 $2.5 $2.8 $2.7 $3.0 $3.5 $4.1 $5.0 $6.0 $7.6 $7.0 $7.2 $7.0 $7.0 $10.0 $12.0 $12.0 $14.5 $16.5 2010 2011 2012 2013 2014 2015 2016 2017 2018* Seed Series A Series B $10.0 $12.0 $11.6 $12.0 $15.0 $19.1 $22.5 $25.0 $31.0 $12.0 $14.8 $16.0 $16.0 $27.2 $35.0 $26.5 $39.7 $50.0 2010 2011 2012 2013 2014 2015 2016 2017 2018* Series C Series D+ Global median pre-money valuation ($M) by series 2010 — 2018* Valuations march upward without pause Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. $3 $3 $3 $3 $3 $4 $4 $5 $7 $6 $7 $8 $8 $11 $13 $14 $15 $20 $19 $20 $21 $25 $31 $39 $37 $40 $58 2010 2011 2012 2013 2014 2015 2016 2017 2018* Seed Series A Series B $36 $46 $49 $53 $57 $73 $81 $90 $125 $65 $81 $92 $99 $150 $197 $150 $260 $350 2010 2011 2012 2013 2014 2015 2016 2017 2018* Series C Series D+ 13 #Q3VC © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global deal share by series 2012 — 2018*, number of closed deals Global deal share by series 2012 — 2018*, VC invested ($B) VC invested, in the current cycle, has clearly been massively skewed toward the later stages, specifically Series C and D or later financings. What is interesting is that the reset of the cycle and in some ways traditional nomenclature, wherein angel and seed financing volume first escalated and then reverted to longer-term means, seems to have essentially been completed. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. The cyclical reset may be nearly complete 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 $160 2012 2013 2014 2015 2016 2017 2018* Series D+ Series C Series B Series A Angel/seed 14 #Q3VC © 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. Global financing trends to VC-backed companies by sector 2013 — 2018*, number of closed deals Global financing trends to VC-backed companies by sector 2013 — 2018*, VC invested ($B) Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. Globally, software still predominates 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 201320142015201620172018*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 15 #Q3VC © 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. Financing of VC-backed companies by region 2013 — 2018*, number of closed deals Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. 2018 sees emerging markets’ volume tick up 64% 27% 9% 61% 27% 12% 58% 27% 15% 56% 28% 16% 60% 27% 13% 64% 22% 14% Americas Europe Asia Pacific 2013 2014 2015 2016 2017 2018* 16 #Q3VC © 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. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. A dramatic shift in VC invested to Asia 2013 Financing of VC-backed companies by region 2013 — 2018*, VC invested ($B) 69% 17% 14% 66% 14% 20% 58% 13% 29% 51% 12% 37% 50% 13% 37% 48% 10% 42% Americas Europe Asia Pacific 2013 2014 2015 2016 2017 2018* 17 #Q3VC © 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 — Q3'18 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. With one quarter to go, it is highly probable that corporates will reach an all-time high in the proportion of global venture deals in which they participated. What is telling about this figure is that it is one of the more clear indicators that the global venture industry has indeed evolved. The lines between outsourced Researxh and Development (R&D), traditional R&D, traditional venture, collaboration and other modes of innovation and research by companies are all blurring to greater degrees. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. Corporate VC participation now exceeds more than a fifth of all deals 0% 5% 10% 15% 20% 25% $0 $10 $20 $30 $40 $50 $60 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) % of total deal count 18 #Q3VC © 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* Intriguingly, first-time financings by value look set to return to aggregate annual tallies seen earlier in the decade, even as the total volume of first-time financings diminishes considerably. It is important to note that first-time financing data will likely be lagged somewhat. Yet any lag would not affect final totals to such an extent that 2018 to date has not set a potentially new low. This is likely more due to the business and investment cycles coinciding in a relatively high-priced, high-valued environment, which has led to available capital being pledged to somewhat less risky, even if still early-stage, investments, while semi-nimble incumbents detract from startup rates by inculcating innovation internally. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. Multiple factors combine for 2018 to see an all-time low in first-time VC financings $10 $12 $13 $13 $14 $20 $18 $15 $12 3,798 5,076 5,901 6,665 7,352 6,882 5,579 4,789 2,751 2010 2011 2012 2013 2014 2015 2016 2017 2018* Capital invested ($B) Deal count 19 #Q3VC © 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 volume of unicorn financings is resurging Global unicorn rounds 2010 — Q3'18 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. For six quarters straight, the quarterly tally of VC raised by unicorns, whether new or existing, has eclipsed or nearly hit $15 billion. During that timeframe, the clip of raising has proceeded at a steadier pace than nearly ever before, hovering between 30 to 40 transactions per quarter as well. The only disclaimer from this trend further supporting the evolution of the venture landscape is that existing unicorns still drive it substantially. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. 0 5 10 15 20 25 30 35 40 45 50 $0 $5 $10 $15 $20 $25 $30 $35 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital invested ($B) # of deals closed 20 #Q3VC © 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 — Q3'18 Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. A flurry of Hong Kong IPOs boosts Q3 total 0 100 200 300 400 500 600 $0 $20 $40 $60 $80 $100 $120 $140 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Exit value ($B) Exit count An important change in Venture Pulse methodology must be noted, given the significant trend differences. Although exit volume remains largely the same, the shift in exit values is due to the fact that PitchBook now utilizes IPO pre-valuations in the stead of IPO offering sizes. This better reflects the true extent of liquidity that investors are able to point to in their own portfolio valuations. 21 #Q3VC © 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* On a global basis, the tech IPO market has resurged primarily thanks to somewhat of a thawing in the US and a true surge in Hong Kong listings. Taking IPO pre-valuations into account rather than IPO sizes, now the true extent of potential liquidity considered by investors is visible and, moreover, signifies how just two companies have skewed aggregate exit values. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. Two companies alone skew IPO values 0 500 1,000 1,500 2,000 2,500 Strategic Acquisition Buyout IPO $0 $50 $100 $150 $200 $250 Strategic Acquisition Buyout IPO “The exit pipeline has continued to see a surge in activity. This quarter, we saw several unicorns exiting to strong results. While much of this activity is happening in the US, there are strong indicators that the other regions are following suit — with filings in Hong Kong and London. We are likely to see more unicorn investors gaining liquidity over the next quarter, which could lead to further injection into early stage companies.” David Pessah Senior Director, KPMG Innovation Labs KPMG in the US 22 #Q3VC © 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 — Q3'18 As noted in the prior edition of the Venture Pulse, 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. All in all, volume on a quarterly basis does indicate somewhat of a slowing of momentum, which is likely due to industry cyclical effects as the market sees newer fundraises and more established managers focus on working their current vehicles. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. Fundraising chugs along 0 50 100 150 200 250 $0 $5 $10 $15 $20 $25 $30 $35 1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q 2010 2011 2012 2013 2014 2015 2016 2017 2018 Capital raised ($B) # of funds raised 23 #Q3VC © 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, as laid out in the prior edition of the Venture Pulse. More importantly, it is worth noting that this is proportionate amid lowering volume, so the cycle of fundraising may be also in a re-establishing phase. Global first-time vs. follow-on venture funds (#) 2010 — 2018* Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. *As of 9/30/18. Data provided by PitchBook, October 10, 2018. First-time funds enjoy best two-year stretch in decade thus far 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 24 #Q3VC © 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. So far, 2018 has been a banner year for global VC investment in a wide variety of urban mobility solutions — from bike and electric scooter sharing companies to technology companies providing supports that make autonomous driving more viable. Global VC investment in the autonomous driving space has been particularly hot the past 2 years. Year-to-date investment is well on pace to exceed the previous record, set in 2016 , showing the extensive longevity of the investment trend – one not expected to slow down any time soon. Focusing on islands of autonomy VC investors globally are interested in urban mobility solutions aimed at helping people get from where they are to where they want to go. From bike-, scooter- and car-sharing to autonomous taxis, smart buses and real-time demand public transit — investors are interested in taking advantage in the shift in transportation patterns and habits. The challenge with mobility solutions is the fact that no two cities are the same. The characteristics of New York are different from Chicago, Beijing, Tokyo, or Hamburg. While there are mobility solutions that are applicable to widespread geographic regions — like car hailing, as evidenced by the ongoing VC interest in Uber, Lyft, Grab and others — many must be looked at on a regional level. Local regulatory regimes also play a factor in solution applicability. Autonomous driving is particularly local in execution. This is why many companies and investors looking to support autonomous driving have been focused on building islands of autonomy rather than on trying to find solutions that could work anywhere. For example, Waymo — a spin-off of Google’s self-driving car project — has been piloting autonomous vehicles in Phoenix, Arizona. During Q3’18, Waymo made a deal for 62,000 autonomous vehicles from Chrysler in a deal that could lead to a true commercialized model within the next couple of years. By focusing on specific jurisdictions, companies can create 3D models to ensure different applications work well in that location. While the same technologies might support each island of autonomy, the actual support structure or modelling might be different for each based on each area’s unique characteristics. Commercializing autonomous vehicles — focusing on shared service models To date, much of the investment in autonomous vehicles has been by transportation companies — such as the big automakers, by companies that support autonomous vehicles (e.g. sensor developers) and by platform providers like Uber. But looking forward, it appears that the main area of interest for investors is on the autonomous vehicle as a service model — where a vehicle can be on the road capturing revenue almost 24 hours a day. Given the cost of any autonomous vehicles is likely to be prohibitively expensive for most people in the near term, the real revenue will likely be on using vehicles for commercial purposes — from autonomous taxis to autonomous buses or commercial transportation vehicles. Urban mobility at center of VC investment storm globally 25 #Q3VC © 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. From cars to bikes to…scooters While autonomous driving is a major focus of investors looking for urban mobility solutions, VC investors have also continued to invest in ride hailing apps. In Q3’18, Uber raised another $500 million in funding, while Singapore based Grab raised a $2 billion round. Yet, ride hailing is seen by many as a saturated market — with the big companies having already placed themselves above the rest. Now, VC investors, including the ride hailing platforms themselves are looking into other mobility solutions. For example, in recent quarters, extensive bike share programs spanning the globe have been able to attract massive funding from VC investors. Corporates like Uber and Didi Chuxing have been a big part of this funding, recognizing their ability to use their ride hailing apps to also manage bicycle options. Following on cars and bicycles, scooters appear to be the next hot topic for urban mobility investors. This quarter, Lime raised $335 million, while Bird Rides raised $300 million in Q2’18. Paris appears to be a major hotbed for competition in the scooter space, with ride hailing company Taxify announcing plans to launch dockless scooters during Q3’18. Both Bird Rides and Lime already offer electric scooters in the city. Meanwhile, in Brazil, bike and scooter sharing company Yellow raised $63 million this quarter in what is believed to be Latin America’s largest Series A funding round ever. Trends to watch for in the urban mobility space Looking forward, urban mobility is expected to continue to attract significant VC investment — across everything from autonomous vehicles to scooters. While ride hailing companies will also likely continue to attract interest, it is expected mostly to be targeted at existing leaders in the space. In the autonomous vehicle space, there will likely be continued investment in the infrastructure required to support autonomous driving (e.g. sensors, security), in addition to additional investment by the traditional corporates. Over the next few quarters, most investments in the urban mobility space will likely focus on commercial and shared-use business models. Urban mobility at center of VC investment storm globally, cont’d. “Urban mobility is a global issue, but in many ways it’s also local. Every major city is an island of autonomy, with its own characteristics and needs. It is impossible to fit every island in the same box — meaning that solutions need to be tailored for individual circumstances. Autonomous cars, scooters, bicycles — while global companies will provide many of these solutions, they will likely only be successful if they account for local needs.” Gary Silberg Partner, National Sector Lead, Automotive Industry KPMG in the US 26 #Q3VC © 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 urban mobility companies 2010 — Q3'18 At $22.1 billion, the aggregate total of VC invested in urban mobility companies may not quite eclipse the massive record set in 2016, but it handily eclipses every other year. More importantly, volume looks as healthy as ever, which signifies active interest on the part of many. As urbanization proceeds apace and indeed densification in major areas of the world as well, startups and investors alike are grappling with the ensuing problems, many of which are what seem like the simplest of problems: How does one get around most efficiently in a congested cityscape? How to better arrange for the flow of goods and services? There are plenty of available market niches, as the recent surge in electric scooters signals. Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. Urban mobility is booming $0.1 $0.2 $0.3 $0.7 $4.2 $8.6 $27.1 $14.0 $22.1 15 28 42 60 96 109 143 213 159 2010 2011 2012 2013 2014 2015 2016 2017 2018* Deal value ($B) # of deals closed 27 #Q3VC © 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 Q3'18 Grab — $2,000M, Singapore Ridesharing Late-stage VC Bitmain — $1,000M, Beijing Computer hardware Late-stage VC OYO Rooms — $1,000M, Gurgaon Hotel marketplace Late-stage VC Xpeng — $596.2M, Guangzhou Transportation Series B Ximalaya — $596.2M, Shanghai Entertainment software Late-stage VC Souche.com — $578M, Hangzhou Platform software Late-stage VC 7 8 6 4 2 1 Peloton — $550M, New York Recreation Series F Didi Chuxing — $500M, Beijing Transportation Late-stage VC Letgo — $500M, New York Platform software Late-stage VC New Dada — $500M, Shanghai Logistics Corporate Zoox — $500M, Foster City Transportation Series B WeWork China — $500M, Shanghai Real estate Series B Uber — $500M, San Francisco Transportation Late-stage VC China dominates the Q3 2018 rankings Source: Venture Pulse, Q3'18, Global Analysis of Venture Funding, KPMG Enterprise. Data provided by PitchBook, October 10, 2018. 6 4 7 8 2 1 8 8 8 8 8 8 8 8 8 8 2 2 4 4 In Q3'18 VC-backed companies in the Americas raised $28.9B across 2,056 deals 29 #Q3VC © 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 reached a new annual record high in 2018, propelled primarily by the record-setting pace of investment in the US. Latin America also had a stellar quarter of VC investment in Q3, with two $100 million+ funding rounds and the birth of the region’s second unicorn company. Canada’s VC market also continued to perform well, driven by a resilient economy, highly-skilled technology workforce and strong government supports for innovation. VC investors remain focused on late-stage deals in North America In the US and Canada, late-stage deals took the bulk of investment in the VC market, with numerous $100 million+ deals in the US and a number of $50 million+ deals in Canada this quarter1. Among the largest deals in Canada, only League was able to secure early-stage funding, with a CAD$62 million series B raise in July. League’s ability to gain funding for its digital health- focused platform was likely a result of its strong executive team — well known to many in Canada’s VC community. Funding for League came primarily from Canadian sources, including telecommunications firm Telus Corp2. Latin America sees second Unicorn birth ever — the first in Colombia Despite investor concerns, there has been a dramatic increase in VC funding in Latin America over the past 2 years — in part driven by the presence of bigger deals. Latin America had a particularly strong quarter of VC investment in Q3’18, showcasing its ongoing potential as a high-growth and underdeveloped region in the eyes of VC investors. Latin America saw the creation of its second unicorn company ever this quarter, following a massive-for-the-region $217.5 million funding round by on-demand delivery platform Rappi based in Colombia. The innovative app provides customers with both delivery services and the ability to withdrawal cash from Rappi delivery agents3. Brazil played host to the region’s second $100 million+ funding round this quarter with a $162 million raise by Movile. Brazil VC market sees big investment in Q3’18 Despite an uncertain macroeconomic environment, VC investors continued to show a belief that Brazil can grow as a hotbed for innovation in Latin America4. In Q3’18, for example, e-commerce platform Movile raised a significant $124 million funding round, suggesting that while deals might be slow to materialize, they will continue to occur in the region. Given the region’s high population of underbanked and unbanked people, it is not surprising to see that fintechs have been best able to navigate Brazil’s current turbulence and win investment5. Brazil-based trucking platform CargoX also raised $60 million during Q3’18. Following on a global trend, urban mobility is also starting to gain traction in Brazil. During Q3’18, Sao Paulo-based bike and scooter sharing company Yellow raised $63 million in what is believed to be the largest series A funding round ever in Latin America. Americas sees strong quarter, as Latin America VC investment soars 1 https://www.theglobeandmail.com/business/article-buoyed-by-surge-in-megadeals-canadian-venture-capital-activity-up/ 2 https://www.cvca.ca/wp-content/uploads/2018/08/H1-2018_CanadaReport_ENG_FINAL1.pdf 3 https://techcrunch.com/2018/08/31/rappi-raises-200m-as-latin-american-tech-investment-reaches-new-highs/ 4 https://techcrunch.com/2018/07/12/a-new-124-million-for-brazils-movile-proves-that-investors-still-see-promise-in-latin-american-tech/ 5 https:

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Global VC investment reached a new annual investment high this quarter — confirming 2018 as a massive year for the VC market globally with 3 months of investment still to go. While total VC investment dropped quarter over quarter, the decline was not surprising given Q2’18 results were buoyed by the massive $14 billion deal by Ant Financial.

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