Software 2018: Where Are We Now and Where Are We Going?

Battery Ventures | 1
QUIET EXPERTISE THAT SPEAKS VOLUMES.
VENTURE + GROWTH | PRIVATE EQUITY
2018
Software 2018
Neeraj Agrawal
Logan Bartlett

2018
Disclaimers
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WHY WE’RE LONG SOFTWARE

2018
0%
5%
10%
15%
20%
25%
30%
2016 2017 2018 2019 2020 2021
IT Growth Rate (Worldwide)
Software Growth Rate (Worldwide)
SaaS Growth Rate (Worldwide)
US GDP
Overall software spend continues to grow
SaaS CAGR: 19.6%
Software CAGR: 8.5%
US GDP CAGR: 2.3%
IT CAGR: 3.3%
8.5%
3.3%
2.3%
2016-2021 CAGR
SaaS spend
2016-2021 CAGR
Software spend
2016-2021 CAGR
Total IT spend
2016-2021 CAGR
Total US GDP
vs.
vs.
vs.
19.6%
Source: Gartner Market Databook, 4Q17 Update; Forrester; PwC; IMF

2018
Software has consistently grown through different eras & delivery
models
$0B
$100B
$200B
$300B
$400B
$500B
$600B
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018
Homegrown/Internal Software On-Prem + Mainframe SaaS
Global software industry revenue
Source: Battery Ventures; Forrester; Gartner; the Yankee Group; BEA.gov; Input Research
Note: Homegrown/Internal Software is estimate based on hours worked

2018
Software and IT have had a strong impact on productivity
$0
$10
$20
$30
$40
$50
$60
$70
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
USDollars
Productivity - GDP
Per Hour Worked in the US
52% 49% 46%
17%
7%
24%
31%
44%
30%
1974-1995 1995-2004 2004-2012
IT Increased Workforce Skills Other
IT's Contribution to Productivity Growth
Source: OECD.org; “The U.S. Software Industry: An Engine for Economic Growth and Employment”, SIIA, 2014
Note: Constant currency for 2010 USD

2018
Software has had a demonstrable impact on employment
The US software industry supports nearly 10 million jobs
2.5M directly employed in the software industry
7.2M software-supported indirect and induced jobs
$$The average annual wage
for software developers is
> 2x the average annual
wage for all US jobs
Source: “The $1 Trillion Economic Impact of Software”, BSA | The Software Alliance, June 2016

2018
The five forces of software’s accelerating growth
Software is infiltrating what were once niche markets
Every company is becoming a software company
Software is displacing hardware
Software is displacing services & labor
Existing software markets are growing over time1
2
3
4
5

2018
Existing software markets are growing over time
* Denotes a current or former Battery portfolio company
$17.7B
$19.2B
$20.7B
$22.5B
$24.3B
2016 2017 2018 2019 2020
$31.6B
$33.9B
$36.3B
$39.0B
$41.8B
2016 2017 2018 2019 2020
$31.0B
$36.5B
$40.0B
$50.7B
$59.6B
2016 2017 2018 2019 2020
Global CRM Market Global ERP Market Global BI Market
Financials
Expense
Management
Procurement
Application
Monitoring
IT Service
Management
Platform-as-
a-Service
*
*
Left Chart Source: Zion Market Research
Middle and Right Chart Source: Dart Consulting
* Denotes a current or former Battery Portfolio Company. Past performance does not guarantee future results
1

2018
Software is infiltrating what were once niche markets
*
* Denotes a current or former Battery portfoliocompany
Patient CollectionsPharma/Biotech
Illustrative Vertical Market Examples
Cap Table Mgmt
*
Illustrative Hyper-Focused Business Processes Examples
Email Marketing
Illustrative SMB Market Examples
PizzaMortgage LendingTours/Activities
Disaster Awareness
Credit Checks SaaS Optimization
Scheduling Meetings Site Reliability EngSales Process Mgmt
Application Integration
Payroll/Benefits
Software Project Mgmt
Expense MgmtSales Automation
*
2

2018
Software is displacing hardware
(1) International Data Corporation (IDC) Worldwide Quarterly Cloud IT Infrastructure Tracker
(2) Bureau of Labor Statistics. Number of jobs in 2016. Job outlook calculated as the projected percent change in employment from 2016 to 2026. The average growth rate for all occupations is 7%
Number of jobs: 1,256,200
Job outlook, 2016-2026: 24%
Number of jobs: 73,600
Job outlook, 2016-2026: 5%
Software Engineers Hardware Engineers
Software engineers are in high demand(2)
$47
$52
$58
$65
$72
$81
$62 $61
$60
$58 $57 $56
$40B
$50B
$60B
$70B
$80B
$90B
$100B
2017 2018 2019 2020 2021 2022
Worldwide spending: cloud vs non-cloud IT infrastructure(1)
Cloud IT Infrastructure Non-Cloud IT Infrastructure
By 2020, spending on cloud IT infrastructure will surpass spending on non-cloud IT infrastructure
2017-2022 CAGR
Cloud IT Infrastructure:
Non-Cloud IT Infrastructure:
2017-2022 CAGR
11.7%
(2.7%)
3

2018
Software is displacing services & labor4

2018
Date Acquirer Target
Total Deal
Amount
8/8 $1.6B
12/26 $1.1B
10/9 $820M
9/5 $712M
10/16 $510M
Every company is becoming a software company
Total Deal
Amount
12/9 $710M
Total Deal
Amount
6/15 $4.0B
8/3 $2.7B
4/20 $1.3B
5/19 $687M
10/8 $675M
4/27 $600M
8/3 $500M
Total Deal
Amount
12/6 $2.8B
8/1 $2.4B
7/1 $1.5B
1/25 $970M
11/14 $915M
6/21 $900M
2/22 $800M
10/31 $632M
3/11 $581M
2014 2015 2016 2017
Source: 451 Research. Includes all announced software acquisitions by historically non-technology buyers with transaction value over $500M from 11/2014 through 12/2017
* Denotes a current or former Battery Portfolio Company. Past performance is not indicative of future returns
*
5

2018
$0B
$100B
$200B
$300B
$400B
$500B
$600B
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
~5
We’re still in the early innings of the software revolution

2018
$0
$1T
$2T
$3T
$4T
$5T
$6T
$7T
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
~5
TODAY

2018
$0
$1T
$2T
$3T
$4T
$5T
$6T
$7T
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
~5
Assumed 2017-2050 CAGR
Global Software Revenue
~5%
$1 TRILLION
TODAY

SOFTWARE IN 2018

The Public Market

2018
0%
100%
200%
300%
400%
500%
600%
700%
800%
900%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
SaaS Index S&P 500 Nasdaq Dow Jones
SaaS companies are well outpacing broad-based indices
746%
266%
182%
180%
• While the typical market indices are significantly up since 2008, an index of SaaS companies has outperformed all of them by more than 2.5x
in the same time (up 746% since 2008)
Source: Capital IQ
Data as of 3/31/2018
Indexed stock price since 2008

2018
SaaS multiples recently traded up to an all-time high
3.4x 3.3x
3.2x
1.6x
1.9x
2.4x
3.1x3.1x3.2x
2.9x
3.3x
3.8x
4.5x 4.4x
3.0x
4.1x
4.6x
4.8x
4.9x
4.4x
4.9x
5.3x
6.2x
6.5x
5.6x
5.4x
4.1x
4.4x 4.4x
4.7x
4.2x
4.5x
3.5x
4.4x
4.9x
4.3x
4.8x
5.8x
5.6x
5.7x
6.6x
0x
1x
2x
3x
4x
5x
6x
7x
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
• SaaS multiples have traded up since a recent low-point in the beginning of 2016, recently crossing the previous all-time record for NTM
revenue multiple of 6.5x, which was set in the middle of 2013
Source: Capital IQ
Median NTM Revenue Multiple

2018
Public markets have shifted to reward growth and profitability
LTM Revenue Growth
LTM Growth + EBITDA Margin
R² = 0.3042
0x
5x
10x
15x
20x
25x
0% 50% 100% 150%
TEV/LTMRev
LTM Growth Rate
12/31/2007
R² = 0.4604
0x
5x
10x
15x
20x
25x
30x
0% 50% 100% 150%
TEV/LTMRev
LTM Growth Rate
12/31/2012
R² = 0.0117
0x
5x
10x
15x
20x
25x
0% 50% 100%
TEV/LTMRev
LTM Growth Rate + EBITDA Margin
12/31/2007
R² = 0.2191
0x
10x
20x
30x
40x
0% 50% 100% 150%
TEV/LTMRev
12/31/2012
R² = 0.6443
0x
5x
10x
15x
20x
0% 20% 40% 60% 80%
TEV/LTMRev
12/31/2017
• Over the course of the last decade, we have seen the public markets shift from using growth as the primary metric for evaluating companies to
a combination of growth and profitability
• This shift is reflected in the correlations (R2) shown above – growth and EBITDA margin combined have gone from a near zero correlation with
a company’s revenue multiple to being even more correlated than growth alone
R² = 0.5524
0x
5x
10x
15x
20x
25x
30x
0% 20% 40% 60% 80%
TEV/LTMRev
LTM Growth Rate
12/31/2017
Source: Data from Capital IQ. Date in all charts is December 31st of prior year. Includes SaaS companies with LTM Growth >0%
Does not include Castlight Health in 2015 and LogMeIn in 2018 due to material inorganic growth

2018
(20%)
(10%)
0%
10%
20%
30%
40%
(10%) 0% 10% 20% 30% 40% 50% 60% 70% 80%
UnleveredFCF%ofRevenue
LTM Revenue Growth Rate
The Rule of 40 has become a standard in the market with an
understanding of the trade-off between growth and profit
Companies
with <40%:
4.7x 2018
EV/Revenue
Multiple
Companies
with >40%:
9.3x 2018
EV/Revenue
Multiple
• This shift from a focus on growth to a focus on growth and profitability has been standardized around the concept of “The Rule of 40” – a
company’s growth plus profit should be greater than or equal to 40%
• This metric has clearly been priced into companies’ valuations, with businesses that exceed 40% trading at a revenue multiple of 9.3x EV/CY
2018 Revenue while companies with less than 40% trading at 4.7x EV/CY 2018 revenue
Source: Capital IQ

2018
Public SaaS companies by Rule of 40 (as of 3/31/2018)
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60%+
2.4x 3.8x 5.1x 6.8x 8.0x 8.6x 10.8x
2.7x 3.1x 5.4x 6.6x 8.2x 8.6x 10.8x
• Even with funding becoming a commodity for high burn startups, a healthy mix of growth and profitability clearly yields the highest multiples
This holds true across all groupings of growth + profit
*
*
*
Median
Average
Source: Capital IQ
Data as of 3/31/2018. Rule of 40 is calculated as LTM Growth Rate + Unlevered FCF Margin
CY 2018
Rev Mult
*

2018
$0M
$406M
$771M
$1.2B
$2.5B
$1.6B
$2.8B
$1.3B
$948M
$1.7B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2017 was a solid year for IPOs and the highest of the last three years
TotalAmountRaisedinIPO
*
*
*
*
*
*
*
*
NM 6.6x 4.3x 6.2x 4.8x 7.1x 6.9x 5.7x 7.5x 6.9x
NM 13% 15% 42% 19% 25% 24% 28% 29% 25%
NM $97M $90M $161M $103M $105M $100M $94M $133M $131M
NM $97M $145M $131M $123M $110M $113M $114M $150M $191M
Median
Statistics(1)
NTM Rev Mult.
NTM Rev Growth
IPO Size ($M)
NTM Rev ($M)
• Software IPOs hit a three year high (both # and $) in 2017 after a particularly weak 2016 – and as we discuss in the update for Q1 2018,
software IPOs have continued this trend in 2018
• As a cohort, the companies that went public in 2017 were larger (in terms of NTM revenue) than any group since 2008, indicative of the
increased opportunity to delay IPOs
(1) Revenue shown at the time of the IPO. Trading information as of first day close
Source: Capital IQ. Inclusive of deals on major US stock exchanges

2018
IPO
Date
$
Raised
Current ∆ from
IPO
IPO
Date
$
Raised
Current ∆ from
IPO
IPO
Date
$
Raised
Current ∆ from
IPOEV Price EV Price EV Price
5/20 $131M $13.1B $124.59 633% 9/29 $238M $8.1B $49.11 207% 3/16 $221M $5.9B $43.98 159%
12/9 $462M $12.5B $53.92 157% 6/22 $150M $3.6B $38.18 155% 4/6 $187M $4.2B $39.85 134%
1/22 $175M $2.8B $20.55 47% 10/5 $133M $2.5B $45.62 153% 4/27 $225M $4.1B $21.58 44%
11/18 $78M $2.0B $35.43 254% 10/27 $146M $2.1B $39.21 131% 10/18 $192M $3.0B $43.40 81%
6/18 $100M $1.8B $38.90 178% 7/28 $95M $1.4B $48.12 167% 3/23 $126M $2.2B $34.14 144%
11/12 $70M $1.4B $42.15 163% 9/22 $96M $1.2B $28.34 77% 11/16 $240M $2.1B $20.69 72%
6/25 $74M $1.4B $40.85 240% 9/15 $90M $1.0B $36.60 205% 5/24 $75M $1.8B $25.18 110%
7/16 $103M $1.2B $25.57 60% 10/26 $116M $1.5B $32.44 47%
4/23 $87M $537M $17.38 2% 11/14 $131M $1.3B $28.14 76%
6/25 $56M $504M $15.65 96% 4/12 $116M $1.2B $12.65 15%
11/9 $80M $1.2B $32.66 63%
Avg. $134M $3.7B 183% Avg. $135M $2.9B 156% Avg. $148M $2.2B 78%
Median $94M $1.6B 160% Median $133M $2.1B 166% Median $131M $1.8B 67%
Software companies continue to perform well in the public markets
with all companies up from IPO prices
2015 2016 2017
• On average, the market capitalization of public software companies have increased between 70-75% every year since going public, with
companies going public in 2015 having grown their market cap’s by 217% on average since the IPO
• The largest positive delta goes to Shopify, which has increased 633% since it’s IPO in 2015, led by continued 75%+ growth at $1B+ in ARR
Source: Capital IQ. Prices and Market Cap as of 3/31/2018. Prices and Market Cap for Apigee and Xactly as of date of acquisition. MuleSoft acquisition not closed as of 3/31/2018
*
*

The M&A Market

2018
$28.9B
$16.7B
$45.4B
$54.9B
$44.5B
$51.1B
$63.5B $63.8B
$79.5B
$56.3B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Software M&A since 2008
• After a record year in 2016, software M&A was down from $79.5B to $56.3B in 2017, returning back to the level seen from 2010-2013
Source: 451 Group
Software acquisitions over time

2018
$17B
$7B
$3B
$2B $2B
$7B
$5B
$3B
$8B
$18B
$11B
$8B
$7B
$11B
$23B
$12B
$9B
$13B
$14B
$8B
$2B
$19B
$13B
$15B
$11B
$14B
$28B
$10B$9B
$17B
$22B
$14B
$10B
$22B
$33B
$11B
$12B
$11B
$20B
$14B
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2011
The quarterly numbers for 2017 show a lighter beginning of the
year followed by a strong Q3 and Q4
2008 2009 2010 2012 2013 2014 2015 2016 2017
• Following two straight nearly record breaking quarters in Q2 and Q3 2016, we saw three consecutive lackluster quarters in software M&A to
end 2016 and begin 2017 before it ultimately ticked up at the end of the 2017
Source: 451 Group
Quarterly M&A amounts

2018
Source: Qatalyst Partners
Thoma&VistaOtherPEOtherStrategic
Oracle,SAP,Microsoft,
Salesforce,IBM,Cisco
The 2017 M&A slowdown can be seen across both strategic and
PE activity
Selected M&A Greater Than $500MM Since January 1, 2015
January ‘15
/
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Legend
On-Premise Cloud
June ‘17June ‘16June ‘15 January ‘16 January ‘17 January ‘18
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Education
Business
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Communi
ties
& Sports
/
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% Cloud (1)
88%
51%
37%
<1%
/
/
/
/
• Software M&A has lagged on all fronts since its high in 2016, with the biggest delta coming from an absence of acquisitions by Private Equity
firms not named Thomas Bravo or Vista Equity
*
*
*

2018
0x
1x
2x
3x
4x
5x
6x
7x
8x
9x
10x
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
LTMRevenueMultiple
Private Equity Strategic
23%
The gap between strategics and private equity in both amount and
valuation is closing
Software acquisitions by acquirer type Revenue multiples of acquisitions
266%
• PE firms are raising larger funds in order to continue to acquire high quality software companies at the high multiples that the market expects
Source: 451 Research Group. Includes deals with announced values in the Application Software and Information/IT Management industries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Percentageofaqusitions($)
Private Equity Strategic

2018
Part of the reason for a closing gap between strategics and private equity
is that the cloud can make strategic acquisitions more difficult…
Source: Spurrier Capital Partners

2018
…But the cloud is perfect for private equity
What makes software companies attractive
targets for PE firms?
Strong future
revenue visibility
Deals with customers are structured to be contractually
recurring, giving visibility into future revenue
High gross
margin
Software gross margins at scale are typically north of
80%
Cash-flow /
Working capital
dynamics
Enterprise software will typically have long-term
agreements with the cash paid up-front
Ability to handle
debt
Due to the cash-flow dynamics + visibility into revenue,
lenders are usually willing to provide large amounts of
debt
Low requirements
for capital
investment
Little on-going investment is required once the product
is built
Scalability
Products are extremely scalable, with low deployment
and upgrade costs
Stickiness
The high-switching costs inherent to enterprise software
typically mean you have to do a lot to lose customers
Number of PE software buyouts in the US
• The number of software buyouts in the US has continued to grow at a steady pace since 2009, almost ticking over 150 for 2017
Chart Source: 451 Research Group
7 5
20
23
41
44
37
28
52
56
67
75
102
86
134
150
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

2018
Not all signs point away from strategic cloud M&A – there is a race
for cloud revenue and a shortage of enterprise targets of scale
• The large strategic acquirers have used M&A to bolster cloud revenue through M&A varying degrees, but there are now a shortage of
acquisition targets of scale and a need by strategics to continue to grow recurring revenue  this could prove a formula for more cloud M&A
*

2018
Additionally, the old guard of strategics are under threat in their core
business from a number of vectors and may use M&A for both offense and
defense
• The cloud enabled SaaS companies to go around the traditional IT buying process, which has led to a proliferation of solutions that are
attacking legacy vendors from all angles  this could lead to strategic M&A to both defend ground and attack white spaces
*
*
*
*
*
*

2018
1. Tax repatriation holiday
• Companies will pay 8.0 – 15.5% instead of 35% to repatriate foreign cash holdings
to the US
✓ Key software acquirers have ~$400Bn in foreign cash that
could be repatriated
2. Corporate tax rate reduction
• Corporate tax rate reduced from 35% to 21%
✓ Incremental cash flow available to large serial acquirers from
reduced tax bill
― Disincentivizes multi-national corporations from re-
domiciling or housing revenue generating operations offshore
 Potential multiple re-rating for tax-paying public and private
companies
 Net operating losses held by potential targets become less
valuable
3. Limitations on Business Interest Expense Deductibility
• Deductions for net business interest expense limited to 30% of an amount that
approximates EBITDA
 Debt-financed acquisitions become less attractive
 Sponsor-backed leveraged buyouts require greater equity
check
Source: Capital IQ, PitchBook and company filings
(1) Market data current as of March 2018.
(2) Assumes a 30% M&A premium on public SaaS companies and 50% premium on private SaaS assets.
(3) Assumes 10% repatriation tax on foreign cash reserves.
And the new tax laws could serve as a potential catalyst for M&A in
2018
Implications of New Tax Laws for M&A
2
3
1
Post-tax Cash Firepower
of Key Software
Acquirors(3)
$1BN+ Public and Private High
Growth Software
with M&A Premium(1)(2)
~$400Bn ~$400Bn
• Between potential repatriation and a reduction in the corporate tax rate, the large strategic software acquirers could see a collective ~$400B of
new cash on their balance sheets
• To put that into perspective, ~$400B is enough to acquire 50 leading software companies
*
* *

The Venture Market

2018
Software investing has more than doubled as a percentage of the
venture industry since 2008
18%
32% 35% 34%
41% 40%
47% 43%
49%
42%
82%
68% 65% 66%
59% 60%
53% 57%
51%
58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Software Other
• Software investing rose from 18% of total Venture dollars in 2008 to a high of 49% of Venture dollars in 2016 before falling back down to 42%
in 2017
• The industry seems to have reached a new normal that began in 2012 with between 40-50% of total Venture dollars being deployed into
software companies
Source: Data from Pitchbook. Includes businesses with a headquarters in the United States, Canada, Europe, Australia and New Zealand
Dollars by sector

2018
Software companies being financed for the first time are
meaningfully changing
Source: Pitchbook
Software Companies headquartered in the US. Company descriptors are all as of 5/2/2018 (not the date of first funding). Analysis is conducted on meaningful terms determined
by Battery research. Singular and plural forms were combined for this analysis
Decreasing Usage
Term
% of descriptions with term
∆ '08-17
2008 2017
1 solutions 4.1% 0.4% (91%)
2 networking 5.7% 1.1% (81%)
3 advertising 4.2% 1.2% (72%)
4 web 13.3% 4.4% (67%)
5 engine 4.1% 1.5% (63%)
6 social 18.1% 7.4% (59%)
7 content 11.8% 5.1% (56%)
8 analysis 4.1% 2.0% (51%)
9 collaboration 4.1% 2.0% (51%)
10 video 8.3% 4.1% (51%)
11 media 5.9% 3.0% (48%)
12 search 5.1% 2.7% (48%)
13 sharing 4.7% 2.5% (48%)
14 services 36.2% 19.3% (47%)
15 games 9.4% 5.1% (45%)
16 interactive 3.3% 2.0% (40%)
17 online 25.9% 16.1% (38%)
18 marketing 7.4% 4.8% (35%)
19 platforms 3.3% 2.2% (33%)
20 sales 4.8% 3.6% (25%)
21 tools 12.1% 9.2% (24%)
22 community 6.3% 4.9% (24%)
23 enterprise 10.0% 7.9% (20%)
24 developers 3.3% 2.7% (19%)
25 management 17.2% 16.5% (4%)
Total # of companies 663 856
Increasing Usage
Term
% of descriptions with term
∆ '08-17
2008 2017
1 ai 0.2% 2.7% 1,681%
2 machine 0.8% 9.1% 1,108%
3 artificial 0.9% 8.4% 829%
4 simplify 0.8% 4.8% 535%
5 algorithms 0.6% 3.5% 481%
6 learning 2.0% 10.7% 448%
7 insurance 0.8% 3.3% 334%
8 messaging 0.8% 3.0% 303%
9 3d 0.5% 1.6% 261%
10 threats 0.5% 1.6% 261%
11 intelligent 0.9% 3.2% 249%
12 saas 1.4% 4.2% 210%
13 risk 0.6% 1.8% 190%
14 smart 0.9% 2.6% 184%
15 global 0.9% 2.5% 171%
16 automate 2.7% 7.0% 158%
17 monitor 3.0% 7.4% 144%
18 insights 2.9% 5.8% 104%
19 payments 3.3% 6.5% 97%
20 security 4.4% 8.5% 95%
21 workflows 1.7% 3.2% 90%
22 analytics 5.1% 9.6% 87%
23 data 13.0% 23.9% 85%
24 cloud 5.0% 8.1% 62%
25 real-time 5.0% 7.2% 46%
Total # of companies 663 856

2018
$9.1B
$5.8B
$7.2B
$11.9B $12.2B
$15.2B
$30.0B
$32.5B
$35.1B
$32.0B
1,456
1,147
1,482
2,160
2,808
3,480
4,068
3,800 3,246
2,980
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
$0
$5
$10
$15
$20
$25
$30
$35
$40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Capital Invested Deal Count
In 2017, venture investing in software plateaued in terms of dollars
invested and continued to decline in number of deals
Number of dollars and deals into software businesses
• In 2013, the software industry saw nearly 100% growth in capital invested. Since that jump, we have seen the industry plateau from a dollars
invested standpoint – oscillating between (8%)-9% dollar growth
• From 2009 until 2014, deal count increased by a CAGR of 29%, but since 2014 the number of software deals has declined by 10% a year on
average

2018
$22.6B
$16.6B
$13.9B
$53.2B
To put venture software investing in perspective, Venture investment in
2017 was still well below the R&D of Microsoft, Alphabet and Amazon
R&D spend in 2017
• While $32B of venture spend seems high, it pales in comparison to the overall R&D spend within the industry, led by Alphabet, Amazon, and
Microsoft, which invested a $53.2B in R&D in 2017
Source: Capital IQ
Venture investments in software in 2017
$32.0B

2018
123
94 93
122 126 131
171 187
138 147
0
50
100
150
200
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
142
92
153
135
154 162
195
167 171
190
0
50
100
150
200
250
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
330
208 219
290 305 319
382 395 375
417
0
50
100
150
200
250
300
350
400
450
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
568
431
494
666 715
799
990 943 939 932
0
200
400
600
800
1,000
1,200
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
281 308
510
933
1,491
2,050
2,312
2,088
1,609
1,271
0
500
1,000
1,500
2,000
2,500
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• Unpacking the number of deals by stage shows growth across the board since 2008 with by far the largest growth in seed deals (352% growth
’08-17), but a steady decline since 2014 (82% decline ‘14-17)
• Other stages are up somewhere between 64% (Series A growth ‘08-17) at the highest and 26% (Series B growth ‘08-17) at the lowest
• Every stage peaked in either 2014 or 2015 with the exception of Series B, which continues to rise
Unpacking the data by stage shows that most rounds are flat in terms of
number of deals with the notable exception of seed rounds, which declined
significantly
Seed Series A Series B
Series D+Series C
’08–’17 growth: 4.5x ’08–’17 growth: 1.6x ’08–’17 growth: 1.3x
’08–’17 growth: 1.3x ’08–’17 growth: 1.2x
Deal count

2018
$2.0B$1.5B$1.5B
$3.3B$3.0B$3.3B
$11.7B
$13.6B
$15.5B
$9.7B
$0M
$3B
$6B
$9B
$12B
$15B
$18B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$1.7B
$1.0B
$1.5B
$2.3B
$2.0B
$2.9B
$5.6B
$4.5B
$5.4B $5.4B
$0M
$2B
$4B
$6B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$2.9B
$1.5B
$2.1B
$3.0B$2.9B
$3.6B
$5.3B
$6.3B
$5.8B
$7.7B
$0M
$2B
$4B
$6B
$8B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$2.2B
$1.6B$1.7B
$2.7B
$3.3B
$3.9B
$5.4B
$5.8B
$6.2B
$6.9B
$0.0M
$2B
$4B
$6B
$8B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$184M$185M$293M
$595M
$981M
$1.6B
$2.0B
$2.3B $2.3B $2.3B
$0M
$1B
$2B
$3B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
All stages are up significantly in terms of dollars deployed annually
since 2008, but recent trends show different stories for each stage
Dollars invested
’08–’17 growth: 3.1x ’08–’17 growth: 4.8x
• Dollars deployed into Series A and B rounds have fairly consistently risen in each year while Seed and Series C rounds have flatten out
• Series D+ deals have been the most manic – this stage largely drove the big jump in overall dollars deployed into software in 2014, the
subsequent rise in 2015 and 2016 and the slight pull back in 2017
Series D+Series C

2018
$16.7M
$15.7M
$16.2M
$27.0M
$23.6M
$25.3M
$68.3M
$72.8M
$112.6M
$66.3M
$0M
$20M
$40M
$60M
$80M
$100M
$120M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$8.6M
$7.0M
$9.8M$10.3M$9.6M
$11.2M
$13.8M
$15.8M
$15.5M
$18.4M
$0M
$5M
$10M
$15M
$20M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$3.9M$3.8M
$3.4M
$4.0M
$4.6M$4.8M
$5.4M
$6.2M
$6.6M
$7.5M
$0M
$2M
$4M
$6M
$8M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$12.3M$11.2M$10.1M
$17.2M
$13.3M
$17.9M
$28.9M
$27.2M
$31.4M
$28.5M
$0M
$5M
$10M
$15M
$20M
$25M
$30M
$35M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$0.7M
$0.6M$0.6M
$0.6M
$0.7M
$0.8M
$0.9M
$1.1M
$1.4M
$1.8M
$0M
$1M
$2M
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
• Rounds sizes have grown steadily across all stages of software investing since 2008 with Series As the lowest (89% growth ‘08-17) and
Series D+ the highest (298% growth ‘08-17)
• Since 2013, Series D+ rounds have followed the inconsistency of the late stage market with a big jump from ‘13-14 and ’15-16 followed by a
big fall from ‘16-17
Round sizes have proven out a “flight to quality” with the average
increasing fairly consistently across the board
’08–’17 growth: 2.3x ’08–’17 growth: 4.0x
Average round size
Series D+Series C

2018
168% Seed
281% Series A
261% Series B
314% Series C
378% Series D+
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Seed Series A Series B Series C Series D or later
As round and fund sizes have gone up so to have valuations
• Valuation increases have tracked fairly consistently with the growth in average deal sizes
• The later stages (Series C and D+) saw a dip in valuation in 2015 and 2016 that was then erased with the growth in valuations in 2017
Median pre-money valuation indexed since 2008
Series D+

2018
Interestingly, dilution in the seed stage is consistently up while dilution
in all other rounds is down from the highs of 2008 and 2009
• The data around dilution shows that in the Seed stage round size outpaced valuation (leading to more employee dilution), while in all other
stages valuation has outpaced round size – typically this will show the dynamics of supply vs. demand at each stage
• In general, more dilution means less demand at a particular stage while less dilution means more demand
12%
13%
12%12%12%
11%12%
16%
18%
19%
29%30%
28%
27%
24%
27%
24%24%
25%26%
28%
31%
29%
23%
24%
21%
24%
23%
24%24%
20%
23%
22%
17%
18%
17%
16%17%
21%
17%
16%
20%
18%
13%
15%
14%
12%
13%13%
11%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Seed Series A Series B Series C Series D+
Median dilution by round

2018
Software investments in the US fell off considerably when
unpacking that data vs. other core geographical markets
$8.5B
$5.5B $6.7B
$11.1B $11.3B
$13.7B
$27.3B
$29.0B
$31.9B
$26.7B
$608M
$306M
$503M
$812M
$901M
$1.5B
$2.6B
$3.5B
$3.2B
$5.4B
$9.1B
$5.8B
$7.2B
$11.9B $12.2B
$15.2B
$30.0B
$32.5B
$35.1B
$32.0B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
United States Europe, Canada and Oceania
• The overall software market fell 9.7% in 2017 from the all-time high in the 2016, but this was outpaced by the fall in the US, which dipped
19.6% from 2016
Number of dollars into software businesses

2018
$747M
$424M $595M
$1.3B
$1.0B
$1.4B
$2.2B
$3.4B $3.5B $3.5B
$0M
$1B
$2B
$3B
$4B
$5B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$2.5B
$1.1B $1.5B
$2.2B $2.2B
$2.6B
$3.6B
$4.3B
$6.0B
$5.1B
$0M
$2B
$4B
$6B
$8B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$4.3B
$3.3B $4.0B
$6.8B $7.0B
$8.5B
$20.2B
$19.2B
$20.9B
$16.3B
$0M
$5B
$10B
$15B
$20B
$25B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Investments by US region show that most of the domestic pull-back was
in the Bay Area
New England Rest of US
Bay Area Tri-State area
• While other geos are still up since 2008, the growth in software investments since 2008 has been largely driven by Silicon Valley and the
greater New York City area
• More recently, the big jump in software investing from 2013 to 2014 and the slight pullback in 2017 was largely a result of the Bay Area
’08-’17 growth: 3.8x ’08-’17 growth: 4.7x
’08-’17 growth: 1.9x ’08-’17 growth: 2.0x
$914M
$685M$635M$742M
$1.0B
$1.2B $1.3B
$2.1B
$1.5B
$1.7B
$0M
$1B
$2B
$3B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Dollars invested into different US geographies
Source: Data from Pitchbook. Includes businesses with a headquarters in the United States

2018
$874M $1.1B $1.0B
$1.9B $2.2B $2.4B
$9.4B $9.9B
$11.3B
$6.7B
$0M
$2B
$4B
$6B
$8B
$10B
$12B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$1.2B
$356M $491M
$1.2B
$759M $764M
$2.1B
$2.6B
$4.0B
$1.9B
$0M
$1B
$2B
$3B
$4B
$5B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
$3.4B
$2.1B
$3.0B
$4.9B $4.9B
$6.1B
$10.8B
$9.3B $9.7B $9.7B
$0M
$5B
$10B
$15B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
’08-’17 growth: 2.8x
$3.0B
$1.9B $2.2B
$3.0B $3.5B
$4.4B $5.0B
$7.2B $7.0B
$8.5B
$0M
$5B
$10B
$15B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The Bay Area pull-back was specifically in late stage deals in 2017
Series D+
Bay Area Rest of US
Seed, Series A, B, C
Bay Area Rest of US
• While early stage investing both inside and outside the Bay Area is 2.8x higher since 2008, Bay Area early stage investing has been mostly
flat-to-down since 2014, while the Rest of the US has marched fairly consistently higher
• In Series D+ investments, the Bay Area has driven nearly all the growth since 2008 – while 2017 was down from a high of $11.3B in 2016, it
still represents 7.6x growth since 2008
’08-’17 growth: 2.8x
’08-’17 growth: 7.6x ’08-’17 growth: 1.6x

2018
Investment in software businesses in the core markets outside of the US
has continued to climb higher in recent years
• After a couple of years of relative stagnation, VC investment into European, Canadian and Oceanic software companies almost doubled in
2017 to $5.4B as investors look for opportunities outside of domestic geographies
$480M
$225M $368M
$574M $653M
$1.1B
$2.1B
$2.9B
$2.5B
$4.4B
$124M
$127M
$188M $221M
$292M
$477M
$508M
$447M
$765M
$89M
$104M
$163M
$223M
$201M
$608M
$306M
$503M
$812M $901M
$1.5B
$2.6B
$3.5B
$3.2B
$5.4B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Europe Canada Oceania
Source: Data from Pitchbook. Includes businesses with a headquarters in the Canada, Europe, Australia and New Zealand
Dollars into software businesses

2018
$8.5B
$5.5B
$6.7B
$11.1B$11.3B
$13.7B
$27.3B
$29.0B
$31.9B
$26.7B
$0M
$5B
$10B
$15B
$20B
$25B
$30B
$35B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
United States Europe
$480M
$225M
$368M
$574M $653M
$1.1B
$2.1B
$2.9B
$2.5B
$4.4B
$0M
$1B
$2B
$3B
$4B
$5B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
All major geographies have outpaced the US in terms of growth in
software investing since 2008
Dollars by geography
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Canada $120M $75M $127M $188M $221M $292M $475M $508M $446M $764M
‘08–’17 growth: 6.4x
Australia + New Zealand $4M $6M $8M $51M $27M $89M $104M $163M $223M $201M
‘08–’17 growth: 51.9x
• The slight pullback in software investing in 2017 was almost entirely a result of the US while most other areas climbed higher
• Notably, European and Canadian software investing had a banner year in 2017 with 72% and 71% growth respectively from 2016
• Australia + New Zealand have grown to ~$200M+ a year in the last two years
’08–’17 growth: 3.1x ’08–’17 growth: 9.1x

2018
1,020
291
203
30
1,105
398
298
50
$0 - $99M $100M - $249M $250M - $999M $1B+
2008-2012 2013-2017
Fund size and fund frequency have both noticeably increased
since 2008
37%
Growth
8%
Growth
47%
Growth
67%
Growth
Number of funds raised by fund size Median step-up between funds
• Round and fund sizes are inherently intertwined in a chicken-and-the-egg type of way – it’s unclear which came first but each is directly linked
to the other. Both fund size and fund frequency has grown considerably since 2008
Average time (years) between funds
Left Chart Source: Data from Pitchbook as of 3/31/2018. Includes funds with a headquarters in the United States, Canada, Europe, Australia and New Zealand
Right Charts Source: Pitchbook, NVCA Venture Monitor

2018
Software liquidity was down noticeably from a near-high in 2016
and has plateaued between ~$40-70B since 2011
• Both strategic and PE buyout dollars were less than what they had been at their all time high in 2016, which indicates less capital going back
to limited partners in the ecosystem
$11.3B
$5.6B
$9.1B
$21.5B $22.1B
$36.6B
$57.3B
$33.1B
$54.3B
$25.9B
$2.2B
$23.9B
$959M
$3.5B
$1.6B
$2.8B
$13.8B
$5.3B
$1.7B
$4.7B
$21.5B
$6.7B
$6.7B
$3.8B
$2.7B
$10.1B
$12.1B
$6.9B
$12.9B
$50.1B
$44.6B
$46.8B
$65.6B
$39.6B
$70.8B
$41.3B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Strategic Acquisitions Private Equity Buyouts IPO
Source: Pitchbook
Note: Private Equity Buyouts is inclusive of dollars from deals categorized as Buyout and Secondary Buyout. Strategic Acquisitions is inclusive of deals categorized as
Merger/Acquisition, Merger of Equals and Reverse Merger. IPO is inclusive of dollars from deals categorized as IPO and Follow-On Offerings (not enterprise value of IPOs)
Venture exits by type ($)

2018
$9.0B
$5.8B
$7.1B
$11.7B $12.0B
$14.8B
$29.5B
$32.1B
$34.8B
$31.9B
$12.0B
$6.3B
$12.3B
$49.1B
$42.9B
$45.4B
$65.0B
$39.4B
$64.4B
$40.0B
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Capital Invested Liquidity
1.33x 1.09x 1.73x 4.19x 3.59x 3.07x 2.20x 1.23x 1.85x 1.25x
When comparing liquidity to capital invested in the ecosystem,
2017 was the third lowest year since 2008
Source: Pitchbook
Liquidity is equal to IPO (IPO and Secondary Offering), Buyouts and Strategic Acquisitions
• 2017 trailed only 2009 and 2015 in terms of lowest ratio between liquidity and capital invested
• Two of the last three years are in the bottom three of liquidity to capital invested ratio since 2008  this is both a product of increased capital
invested and a decrease in liquidity compared to the prior few years
Ratio of
liquidity/capital
invested
Liquidity/capital invested

2018
This is due to the rise dollars deployed and the lengthening of time
to exit for venture-backed software companies
Source: Pitchbook
• The lack of liquidity in the market has been impacted by an increased time to exit for venture-backed companies with time to an IPO up to 7+
years
Time from first financing to liquidity
4.4 years
7.6 years
7.9 years
0
1
2
3
4
5
6
7
8
9
10
11
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Strategic Acquisitions Private Equity Buyouts IPO

2018
SoftBank’s fund size stands alone with powerful limited partners
$7.6B
$9.4B
$10.3B
$11.0B
$15.0B
$100.0B
Thoma Bravo Fund XII
Silver Lake Partners III
Silver Lake Partners IV
Vista Equity Partners Fund VI
Silver Lake Partners V
SoftBank Vision Fund
Largest tech funds ever raised globally
Pending
2017
2017
2013
2007
2016
Year of
final
close
Undisclosed/not
yet raised
Vision Fund investors
$45B
$28B
$15B
$7B
$4B $1B
• SoftBank’s Vision Fund is orders of magnitude larger than any prior technology-focused fund and has a number of powerful limited partners
Source: Wall Street Journal, CNN

2018
The Vision Fund has been deploying entire country GDPs into
businesses
$38.4B
deployed
$61.7B
remaining
$16.9B
$19.5B
$2.0B
B2B
B2C
Bio-tech
(1)
(1)
(1)
(2)
• Most of the noise in the market has been around SoftBank’s investment in consumer-focused companies like Uber and WeWork, but the
Vision Fund has made a number of B2B-focused investments as well
• With a little under 40% deployed, the SoftBank is rumored to be in discussions to raise another fund
(1) SoftBank investments expected to be offered to the Vision Fund
(2) Combined $4.4 billion from both SoftBank Group and SoftBank Vision Fund. Split not disclosed
Source: SoftBank announcements and disclosures, news reports. Based on Recode as of 3/12/2018
Note: Since final deal values are not disclosed, value of funding rounds led by SoftBank used.
(1)
(1)
*

2018
And the Vision Fund’s impact is likely only starting to be felt
Description Example
Delayed Initial Public
Offerings
• Many late-stage, private companies with large valuations think
about IPOs as a way to raise significant capital, but with the Vision
Fund’s $100B behind them, there is less incentive to go through the
time-intensive process
King Making
• SoftBank is able to bake off competitors against one another with
the risk that if a company doesn’t take SoftBank’s offer, their
competitor will get funded with near unlimited capital
Inflated Valuations
• Given SoftBank’s extended investment horizon (“300-year plan”
and “thinking in decades”), the Vision Fund has shown early
indications of less price sensitivity than more traditional institutional
investors
• In simple supply-demand terms – the demand to put money to work
has outpaced the supply of quality companies, which will continue
to cause more dollars into fewer deals
Additional Liquidity
• SoftBank will invest both primary and secondary capital in many of
their investments, and these secondary investments give early
investors and shareholders the opportunity to take early liquidity if
desired
Response from Other
Funds
• Given all these implications, other funds will be sure to respond to
help companies counteract the SoftBank effect, particularly the
“King Making” impact

The Themes in the Market

2018
IT budget growth is expected to be mostly in-line with prior years
3%
6%
15%
41%
34%
3%2%
8%
13%
43%
35%
2.7%3%
5%
17%
53%
21%
2.1%
4%
8%
15%
37% 37%
2.4%
0%
10%
20%
30%
40%
50%
60%
<(5%) (5%)-0% Flat 0-5% >5% Weighted Average
Growth Rate
2015 2016 2017 2018
• 74% of CIOs expect their budget to grow in 2018, which is the same percentage as the percentage that expected it to grow in 2017
• A recent high of 37% CIOs expect their budget to grow more than 5% in 2018
Source: Piper Jaffrey CIO Survey
How do you expect your IT budget to compare to the last year?

2018
• Security still remains a top initiative for IT buyers, largely a result of the decentralization of the cloud and the number of high-profile breaches
in the last few years
• As cloud software IT spend also gains momentum, we have seen spend on servers, switching/routing equipment, and storage decrease over
the last couple of years
Security continues to drive most of the growth in IT spend
(6%)
16%
23% 22% 21%
28%
35%
24%
30%
33%
26%
49%
45%
60%
82%
(13%) 1%
4%
21%
15%
23% 21%
12%
26%
34%
22%
40%
33%
66%
76%
(11%)
2%
13% 15%
18% 20% 20%
25%
28% 30% 31%
34%
37%
73%
88%
(20%)
0%
20%
40%
60%
80%
100%
2016 2017 2018
Source: Piper Jaffrey CIO Survey
Which technologies will you increase/decrease spending on in 2018

2018
4%
5%
6%
11%
18%
20%
19%
9%
14%
16%
19%
38%
33%
34%
December '14 August '15 December '15 June '16 December '16 June '17 December '17
Today In 3 Years
We are approach the tipping point where cloud passes traditional
data center spend
77%
72%
67%
63%
58%
14%
17%
20%
22%
25%
9% 11% 13% 15% 17%
2013 2014 2015 2016 2017
Traditional Data Center Public Cloud Private Cloud
Enterprise infrastructure spend
Percentage of workloads in public cloud today vs.
expected in three years
• The public + private cloud vendors continue to take share from the traditional data center with it likely that the combined clouds will surpass
traditional data center spend in the next few years
• This rate of adoption will likely continue, with enterprises stating that 34% of their workloads will be in the cloud in three years vs. 19% today
Left Chart Source: IDC Worldwide Quarterly Cloud IT Infrastructure Tracker
Right Chart Source: Goldman Sachs. Note percentage of survey respondents

2018
The cloud wars continue, with each carving off respective areas of
domain expertise
• AWS reigns supreme with $17.1B in revenue and 40% growth in their public cloud off the backs of aggressive product expansion into a best-
of-suite vendor
• Azure continues to leverage its reputation in the enterprise to pace as the clear number two in the market, with GCP trailing by a decent
margin
Source: Work-Bench Almanac 2017

2018
The adoption of both Microsoft Azure as well as multi clouds is
most pronounced in the enterprise
Enterprise adoption of cloud Enterprise cloud usage by type
Single
Public,
9%
No Plans,
5%
Single
Private,
4%
Hybrid Cloud, 51%
Multiple
Public
Clouds,
21%
Multiple Private
Clouds, 10%
82% of enterprises
using multi cloud
15%
19%
58%
68%
50%
26%
35%
15%
IBM Cloud Google Cloud Azure AWS
Adoption Year-over-Year Growth Rate
• Microsoft Azure and IBM have shown the strongest adoption in the enterprise, with it possible that Azure will pass Amazon for organizations
with over 1,000 employees
• Enterprises are intentionally architecting cloud strategy to prevent vendor lock-in, focusing on multi and hybrid clouds
Source: RightScale 2018 State of Cloud Report
Note: Includes only respondents over 1,000 employees

2018
What are your top issues in getting up and running with AI?
Major, 24%
Transformational,
13%
Moderate, 25%
Minor, 15%
None, 18%
Don't know,
5%
AI represents huge promise, but is early and difficult for companies
CEOs are aware of the AI implications… but are early in their deployment
4%
21%
25%
35%
14%
Have already
invested and
deployed
In short-term
planning/actively
experimenting
In medium- or
long-term
planning
On the radar,
but no action
planned
No interest
54%
37% 35% 35%
30% 27%
23%
Lack of necessary staff
skills
Defining our AI Strategy Identifying use case for
AI
Funding for AI initiatives Security or privacy
concerns
Complexity of integrating
AI with our existing
infrastructure
Determining how to
measure value from
using AI
What do you expect the impact from artificial intelligence to be? What do you expect the impact from artificial intelligence to be?
And face significant talent and hiring challenges to get up and running
37% of CEOs
expect significant
business impact
from AI
Source: Gartner
• CEOs recognize the need for AI to automate their businesses, but seem to be struggling to identify what their business use-case will be and to
find the right talent to deploy it properly

2018
Plans for Container Orchestration
8% 9%
12% 13%
10%
12%
29%
3%
3%
3% 3% 4%
2%
10%
3% 2%
2% 1% 4% 4%
6%
14% 14%
17% 17%
18% 18%
45%
Production Dev/QA PoC
9%
36%
40%
15%
Currently in use Considering in
next 2 years
Not familiar Have no plans to
use in next 2
years
2016 was the year that Kubernetes established itself as the mainstream container
orchestration tool, while 2017 saw it pace further ahead of the pack
Container tool usage by stage
• Container orchestration is still early in mainstream adoption, but Kubernetes has established itself as the solution of choice – well ahead of a
pack of other solutions vying for second place
Left Chart Source: 451 Research, Voice of Enterprise: Cloud
Right Chart Source: OpenStack Developer Survey

2018
Serverless breaks out as the new compute platform
VM
VMVM
Virtual Machines
Containers
Bare Metal
Serverless
Growth of serverless market
$1.9B
$7.7B
2016 2021
Cloud Hosting
Azure Functions
AWS Functions
IBM Functions
Google Functions
Abstraction
Time
• While new in name only, 2017 was the year that serverless broke out as a platform and the term became nearly ubiquitous even though
adoption is still early
• In order to further abstract infrastructure management, AWS, Azure, GCP, and IBM have all created serverless functions
Left Graph Source: Adapted from CNCF Blog
Right Chart Source: Research and Markets Function-as-a-Service Report

2018
Select Private Vendor
Cloud Computing Azure VM
Cloud Data
Warehouse
Azure Data Warehouse
Application
Monitoring
Azure Monitor Google App Engine
Data Processing Azure HDInsight Google Dataproc
Machine Learning
Platform
Azure Machine Learning
Cloud Security Azure Security Center NA
Data Streaming Azure Event Hub Google Dataflow
Security and
Access Control
Amazon Cognito Azure Active Directory Google Identity Management
CDN Amazon Cloudfront Azure CDN Google CDN
Cost Management Amazon Trusted Advisor Azure Cost Management NA
Provisioning NA NA
Key Management Amazon KMS/ Azure KeyVault Google Key Management
It might not be crazy to compete with cloud giants after all…
• With Okta’s IPO, the acquisition of Evident.io, and large rounds by CloudHealth, Confluent, Dataiku*, HashiCorp and Snowflake, the last 18
months have proven that that private vendors can beat cloud giants either head-to-head or in a slight adjacencies
*

2018
New web standards are beginning to emerge
Client Client Client
Server Web Server
CDN
App Server
Database
~1970-1997 ~1997-2017 ~2017–Present
DNS
API
Centric
Third
Party
Services
And many more…
• The web has moved from a monolithic, inflexible architecture to one that is more distributed and API-centric, where enterprises no longer need
to build all functionality into their app, but instead connect through API or SDK to other independent vendors for additional functionality
Microservice
Microservice
Your
Services
Microservice
Unix Model Web 1.0 Modern Web

2018
Transformational
7%
Major
18%
Moderate
20%
Minor
17%
None
22%
Don't Know
16%
$4M $5M $9M $21M $37M $50M $64M $96M
$176M
$360M
$720M
$1.3B
$2.2B
$3.2B
25%
80%
133%
76%
35%
28%
50%
83%
105%
100%
84%
64%
46%
0%
20%
40%
60%
80%
100%
120%
140%
$0M
$1B
$2B
$3B
$4B
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Business Value ($Bs) Growth
Blockchain was everywhere in 2017, but it is still extremely
nascent in the B2B world
Blockchain market for businesses over-timeCEO’s perspective of Blockchain’s impact
Sample Impact – Settling Financial Transactions
25% of CEOs
expect
significant
business
impact from
Blockchain
• Few dispute that there is opportunity for Blockchain in the
enterprise (with Gartner estimating the market to be $3.2B by
2030), but the actual impact is much more hypothetical (like
Settling Financial Transactions) than it is in use
Top Left and Right Chart Source: Gartner
Bottom Left Image Source: Accenture

2018
• May 2018 is the official go-live date of GDPR in
Europe, but Enterprises and SMBs alike spent 2017
and the beginning of 2018 accounting for data and
data processes
• This has become an even more relevant as the
public outrage over Facebook’s handling of data
makes headlines around the world
Data governance and data sovereignty is now a need-to-have
GDPR impacts are broad reaching Facebook isn’t helping public perception
Select vendors that can help you CYA
*
Top Left Image Source: Europa.eu
Top Right Image Source: Denver Post
Bottom Right Select Vendors Source: GDPR Index

2018
Digital transformation reaches peak hype but adoption has lagged
0
20
40
60
80
100
120
140
2016 2017
IT spending or digital transformation
mentions on earnings calls
0
10
20
30
40
50
60
70
80
90
100
2013 2014 2015 2016 2017 2018
Google Trends analysis for “digital transformation”
9%
20%
28% 26%
14%
3%
Nodigital
Desire
Designing
Delivering
Scaling
Harvesting
CIO survey: What best classifies your digital transformation
efforts?
Inactive
Building
foundation
Breaking the
barrier
CEO survey: CEOs feeling the pressure
47%
35%
Experiencing pressure from the
board of directors to make
progress in digital business
Have specific job title
"chief digital officer"
• 2017 was the year that we saw enterprises double down on their “enterprise transformation” focus but few have turned the words into practice
yet
Top Left Chart Source: Goldman Sachs
Top Right Chart Source: Google
Bottom Left Chart Source: Gartner 2018
Bottom Right Chart Source: Gartner 2017

2018
ASC 606 is impacting public companies and software accounting
GAAP ASC 606
Perpetual Upfront Upfront
Term Ratable Upfront
Cloud Ratable Ratable
Accounting Treatment of Revenue and Licenses
• ASC 606 does not have a fundamental impact on the operations of software businesses but does impact the timing of revenue recognition and
the expensing of software commissions
• Public companies were forced to deal with this in the back-half of 2017 and throughout 2018, and it is something that should be top-of-mind for
all companies that are thinking about an IPO
• Businesses with term licenses will have the largest impact with revenue recognition more closely tracking the bookings/billings seasonality.
Sales commissions will also be required to be capitalized and amortized over the expected life-time of the contract
Image Sources: Goldman Sachs Equity Research

2018
Glassdoor / Culture Matters
 Battery is thrilled to partner with Glassdoor* for the second annual
Battery Ventures/Glassdoor Highest Rated Cloud Computing
Companies to Work For project.
 Two lists: Top 25 Public List & Top 50 Private List
 This project highlights private and public B2B-focused cloud
companies with stellar records of employee satisfaction as measured
by employee feedback shared on Glassdoor.
 Such ratings are increasingly important as cloud and other
technology firms fight harder than ever to attract and retain new
talent.
* Denotes a current or former Battery portfolio company. For a full list of all Battery investments and exits, please click here.

2018
Methodology
To be considered, a cloud company must have received at least 30
company reviews on Glassdoor as of 3/18/18.
The private-company report tracks independent, non-public cloud
companies that, according to Battery research and data from research
service Crunchbase,
–are based in the U.S.;
–have a B2B business model; are categorized as Saas, cloud-
computing and/or enterprise software, according to Crunchbase;
–have more than 200 employees (as of 4/13/2018, according to
company data provided to LinkedIn and Battery research); and
–have raised funding over the past three years (on or after 7/1/14).
The public-company report tracks public cloud companies globally with a
B2B business model that have at least $500 million in total enterprise
value as of April 15, 2018, according to CapIQ.
A company’s CEO approval rating and positive business outlook rating
was not taken into account to determine rank on either list.
Views contained herein are for informational purposes only and should neither be considered investment advice nor construed or used as an offer and/or recommendation to
buy or sell a security.

2018
Glassdoor stats that you should know
 50 Million monthly unique visitors; 72% of Glassdoor users have
a 4-year or higher college degree
 Of all company reviews on Glassdoor, 53% are from current
employees and 47% are from former employees (at time of review).
 Among those surveyed, nearly half (48%) of Glassdoor users read
at least 7 reviews before forming an opinion of a company
 Among those surveyed, 3 in 4 (76%) Glassdoor users are more
likely to apply to an open job if the employer is active on
Glassdoor (e.g. responds to reviews, updates their profile, shares
updates on the culture and work environment). (It’s free to respond!)
Source: Glassdoor Research

2018
Private company list
Rank Company Score
1 Algolia 4.9
2 Asana 4.9
3 Canopy 4.9
4 SalesLoft 4.8
5 Sprout Social 4.8
6 Procore 4.8
7 Outreach 4.8
8 Datorama 4.8
9 Greenhouse 4.7
10 Health Catalyst 4.7
11 Lucid Software 4.7
12 Podium 4.7
13 Segment 4.7
14 Justworks 4.7
15 PagerDuty 4.7
16 Slack 4.7
17 nCino 4.7
Rank Company Score
18 Looker 4.7
19 ForgeRock 4.7
20 BounceX* 4.7
21 InVision* 4.6
22 ThousandEyes 4.6
23 ServiceTitan* 4.6
24 Elementum 4.6
25 HireVue 4.6
26 Intercom 4.5
27 OutSystems 4.5
28 Duo Security 4.5
29 C3 IoT 4.5
30 ThoughtSpot 4.5
31 Dynamic Signal 4.5
32 Salsify 4.5
33
Collective
Health 4.5
Rank Company Score
34 WalkMe 4.5
35 Pipedrive 4.5
36 Chef* 4.5
37 Mavenlink 4.5
38 Smartsheet 4.5
39 Tanium 4.5
40 Gainsight* 4.5
41 Addepar 4.5
42 Demandbase 4.5
43 Qubole 4.5
44 Dataminr 4.5
45 Pluralsight 4.4
46 Carbon Black 4.4
47 Cohesity* 4.4
48 M-Files 4.4
49 TrendKite* 4.4
50 Tradeshift 4.4
Smartsheet is now a public company (NYSE: SMAR). They were not yet public at the cutoff date for the public list (4/15/2018).

2018
Bar is getting higher for private companies
*

2018
Our private list
Source: LinkedIn, Pitchbook

2018
Public company list
Rank Company Score
1 HubSpot 4.6
2
Ultimate
Software
4.5
3
Guidewire
Software*
4.5
4 SendGrid 4.5
5 Paylocity 4.4
6 Instructure 4.4
7 Nutanix* 4.3
8 Zendesk 4.3
9 AppFolio 4.3
10 Shopify 4.3
11 Okta 4.3
12 Wix 4.3
Rank Company Score
13 Dropbox 4.3
14
Cornerstone
OnDemand
4.2
15 Box 4.2
16 Five9 4.2
17 Coupa* 4.2
18 Zuora 4.2
19 Twilio 4.1
20 Talend 4.1
21 Salesforce 4.1
22 Xero 4.0
23 Paycom 4.0
24 Adobe 4.0
25 Mimecast 4.0

2018
Our public List
1 1 1 1
2 2
1
3
6
3
2 2
Founding Year for Public List
Source: CapIQ, Pitchbook
$300B Cumulative Market Cap
(as of 4/27/2018)

2018
Cloud companies compare favorably to Glassdoor overall
Average Overall Company Rating
Source: Glassdoor

2018
Average CEO Approval Rating
Source: Glassdoor

2018
Average Positive Business Outlook Rating
Source: Glassdoor

2018
Source: LinkedIn
Geographic diversity

2018
Industry diversity
Source: Battery Research

2018
Liquidity for our 2016 private list
*
*
*
*

CONCLUSION

2018
$28.9B
$16.7B
$45.4B
$54.9B
$44.5B
$51.1B
$63.5B$63.8B
$79.5B
$56.3B
$0B
$15B
$30B
$45B
$60B
$75B
$90B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
$9.1B
$5.8B
$7.2B
$11.9B$12.2B
$15.2B
$30.0B
$32.5B
$35.1B
$32.0B
$0M
$15B
$30B
$45B
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Q1 Update: 2018 is currently on pace to be a record setting year
for software
Venture funding market
2018 run-rate:
$41.9B
Q1: $10.5B
$0M
$406M
$771M
$1.2B
$2.4B
$1.6B
$2.8B
$1.3B
$948M
$1.7B
Q1: $948M
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Software IPO market
M&A market
Q1: $19.1B
2018 run-rate:
$76.2B
(1)
• Extrapolating the run-rate activity in Q1 for the rest of the year shows that 2018 could be a record breaking year for the software market across
the Venture funding, M&A and IPO markets
(1) Reported by Recode
Top Left Chart Source: Pitchbook
Top Right Chart Source: 451 Group
Bottom Chart Source: Capital IQ

2018
• The road to 1K employees is a long one for many start-ups, with over 100K software companies in the US and only 600 over 1,000
employees
50+
employees
200+
employees
500+
employees
1,000+
employees
5,000+
employees
7,300
companies
2,300
companies
970
companies 600
companies
200
companies
It’s not easy to get there…
Source: LinkedIn employee data on software companies

2018
But disruptive software companies will be started in all markets
Nasdaq composite index
0
1,000
2,000
3,000
4,000
5,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*
**
*
*
*
*
*
*
*
* Denotes a current or former Battery portfolio company. Past performance is not indicative of future returns
Note: Includes public cloud companies with TEV >$500M as of 4/15/18 according to Capital IQ, cloud companies acquired for over $500M since 2009 according to Pitchbook,
and private cloud companies valued at over $1.5B as of 4/15 according to Crunchbase. Excludes companies based in Asia
*

2018
$0B
$1000B
$2000B
$3000B
$4000B
$5000B
$6000B
$7000B
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
*
~5
We’re just getting started
Your Logo Here?
*
*
*
*
*
*
*
*
*
* Denotes a current or former Battery portfolio company. Past performance is not indicative of future returns
Note: Includes public cloud companies with TEV >$500M as of 4/15/18 according to Capital IQ, cloud companies acquired for over $500M since 2009 according to Pitchbook,
and private cloud companies valued at over $1.5B as of 4/15 according to Crunchbase. Excludes companies based in Asia
*
*

2018
Logan is a vice president in Battery’s Boston office, focused on growth investments for
business-to-business software companies. He is currently involved in Battery’s
investments in Amplitude, Braze, Clubhouse, Dataiku, Narvar, Pendo, and TrendKite. In
2017, Logan was named to Forbes’ “30 Under 30” list of leading young entrepreneurs,
innovators and game changers. Logan graduated with a BS from Washington and Lee
University, where he played men’s lacrosse.
Neeraj joined Battery in 2000 and invests in SaaS and internet companies across all stages. He was a
founding investor in BladeLogic and has invested in several other companies that have gone on to
stage IPOs, including Bazaarvoice, Coupa, Guidewire Software, Marketo, Nutanix, Omniture,
RealPage and Wayfair. He also invested in several Battery portfolio companies that have experienced
M&A events. Neeraj’s current private investments include Amplitude, Braze, BloomReach, Catchpoint,
Chef, Clubhouse, Cohesity, Dataiku, Glassdoor.com, InVision, OpsGenie, Optimizely, Outlyer, Pendo,
SmarterHQ, Sprinklr, StellaService, Tealium, TrendKite and Yesware. He has been recognized as a
top-100 global venture capitalist on the Forbes Midas List for the past eight consecutive years.
Twitter: @neerajvc
Email: neeraj@battery.com
Twitter: @jloganbartlett
Email: logan@battery.com
Neeraj Agrawal
Logan Bartlett
Special thanks to Brandon Gleklen, Mike Hoeksema and Galit Krifcher for their work on this with us
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