This report summarizes all the venture, private equity + merger & acquisition transactions in the SMB software space in Q1 2018.

1. THE STATE OF SMB SOFTWARE
A look at Q1 2018 fundraising and exit trends among North
American software companies that serve the SMB market
Q1 2018

2. Private & Confidential |
A g e n d a
01 Introduction
02 Methodology and Scope
03 Venture Capital (VC) deals
04 Private Equity (PE) deals
05 Mergers & Acquisitions (M & A)
06 Initial Public Offerings (IPOs)
surepathcapital.com

3. Private & Confidential |
Every year we publish our annual State of SMB Software Report, looking at fundraising and exit activity in the
Small and Mid-Sized Business (SMB) software space in North America. This report has been well received by
CEOs, CFOs, investors and buyers. So we thought we would keep the party going with quarterly updates.
We track SMB software companies across three broad categories: Grow my Business (front office), Run my
Business (middle office) and Track my Business (back office). For VCs, most activity was in front office. For PE
firms, the middle office was most popular.
While there are some pure-play companies that just serve small business, most companies serve small and mid-
market customers. This mirrors our deal practice at SurePath where we work with software companies serving
freelancers all the way up to mid-market enterprise.
Similarly, despite the intense fragmentation in marketing technology, new fundings and exits remain strong.
Marketing is an increasingly complex and technical challenge. Small business owners are getting more
sophisticated in their online marketing needs.
Q1 saw many deals and several bigger deals that what we saw in 2017. Hopefully, this is a sign of things to
come.
We hope you find this report useful and invite you to get in touch to discuss it with us.
The SurePath team
April, 2018
T h e S t a t e o f S M B S o f t w a r e
surepathcapital.com

4. S H U B H A M
D A T T A
D A N I A L
S H A I K H
M A R K
M A C L E O D
F O U N D E R D I R E C T O R S E N I O R A N A L Y S T
J O S H
S C H E R M A N
V I C E - P R E S I D E N T
T h e S u r e P a t h T e a m
The SurePath team has over 30 years of experience in operating, growing, investing,
buying, and selling SMB software companies.
surepathcapital.com

5. Q1 2018 SMB Software Deals

6. Q 1 ‘ 1 8 S M B S o f t w a r e D e a l L a n d s c a p e
1. Source: Pitchbook
2. Deal count excludes deals involving accelerators, incubators, crowdfunding and deals with undisclosed values
Over $3.8B of capital was invested across 122 deals over the first quarter of 2018. The biggest deal was the acquisition of
payment technology provider Cayan by TSYS. Both M & A and funding deal volumes were high.
surepathcapital.com
$17M $25M $27M$96M
$151M
$198M
$240M $13M
$367M$70M
$62M
$65M
$1,225M
$117M
$300M
$756M
-
$200M
$400M
$600M
$800M
$1,000M
$1,200M
$1,400M
$1,600M
$1,800M
$2,000M
January February March
TotalCapitalInvested(inmillions,$USD)
Capital Invested by Deal Type
IPO
Merger/Acquisition
Corporate
PE Growth/Expansion
Later Stage VC
Early Stage VC
Angel/Seed
11
13 13
13
16
13
12 2
12
3
3
1
3
3
3
1
-
5
10
15
20
25
30
35
40
45
50
January February March
DealCount
Deal Count by Type

7. Q 1 ‘ 1 8 S M B V e n t u r e F u n d i n g
1. Source: Pitchbook
2. Deal count excludes deals involving accelerators, incubators, and crowdfunding and deals with undisclosed values
106 SMB software companies raised venture capital in Q1 of 2018. The bulk of the VC dollars invested in the
sector went into accelerating 42 early stage and 26 growth stage companies.
surepathcapital.com
$23M
$46M
$445M
$621M
$65M
18
19
42
26
1
-
5
10
15
20
25
30
35
40
45
-
$100M
$200M
$300M
$400M
$500M
$600M
$700M
Angel Seed Round Early Stage VC Later Stage VC Corporate
DealCount
CapitalRaised(inmillions,$USD)
Capital Raised by Venture Deal Type
Capital Raised Deal Count

8. $125M KPCB
$75M Generation Investment Management
$65M CIBC Innovation Banking
$62M Battery Ventures
$53M Stripes Group
$50M Accel
$45M Undisclosed
$40M FirstMark Capital
$33M Menlo Venures
$31M Top Tier Capital Partners
Q 1 ‘ 1 8 ’ s T o p S M B S o f t w a r e R a i s e s
Source: Pitchbook
surepathcapital.com

9. V e n t u r e D e a l s b y C a t e g o r y
SMB software companies raised ~ $1.2B across 106 deals in Q1 2018. Of those, companies that helped SMBs run
their business attracted nearly 50% of the venture capital
Outer ring represents
total capital invested
by category and inner
ring represents total
deal count by
category
Source: Pitchbook
We track SMB software
companies across three
broad categories:
• Grow my Business:
marketing / front office
• Run my Business:
typically vertical apps
to help operate
(business management,
ERP, etc).
• Track my Business:
Billing, accounting, etc.
surepathcapital.com
53
32
21
$559M
$406M
$234M
Run My Business
Grow My Business
Keep Track of My Business

10. Combined, companies in the Business management/ERP software and Marketing Tech categories attracted
56% of total venture capital funding in Q1 2018. However, all front, middle, and back office sectors
saw deal activity.
Source: Pitchbook
V e n t u r e D e a l s b y C a t e g o r y ( c o n t . )
surepathcapital.com
38
25
12
12
9
2
3
4 1
$378M
$298M
$150M
$123M
$84M
$67M
$59M
$40M
$1M
Business Management/ERP
Marketing Tech
Accounting & Invoicing
HR Tech
Payments
Ad Tech
Security/IT
CRM
E-Commerce

11. V e n t u r e D e a l s b y T a r g e t C u s t o m e r
Over 85% of venture funding in Q1 2018 went to companies with a broad offering for both the small and
medium segments of the SMB software space. Relatively few companies served either only the small or
medium segments explicitly. This makes sense as it enables software vendors to reach a larger market.
Source: Pitchbook
surepathcapital.com
81
20
5
$1,034M
$133M
$33M
Both
Small
Medium

12. V e r t i c a l - S p e c i f i c V e n t u r e D e a l s
Q1 2018 saw nearly $256M in capital invested across 34 vertical-specific deals. Home services software
companies attracted $66M (26% of total capital) across 3 deals. Vertical-specific companies tend to achieve
higher valuation multiples than horizontal peers.
Source: Pitchbook
surepathcapital.com
3
6
3
4
1
4
2
1
1
2
3
1
1
1 1 $66M
$61M
$38M
$28M
$13M
$12M
$12M
$7M
$6M
$4M$4M
$2M $2M $2M $0.3M
Home Services
Real Estate
Legal
Restaurants
Interior Design
Construction
Financial Services
Media
Insurance
Logistics
Health
Breweries
Manufacturing
Fashion
Cannabis

13. $2.5M Undiscosed
$2M Visionary Private Equity Group
? GI Partners
$65M Great Hill Partners
$30M LLR Partners
$26M Aldrich Capital Partners
$6M Lyrical Partners
Q 1 ‘ 1 8 ’ s T o p P r i v a t e E q u i t y S M B D e a l s
Source: Pitchbook
Togetherwork/GI Partners deal size was not disclosed
+ Growth Round; * Buyout
+
+
+
+
+
+
surepathcapital.com
*

14. P E D e a l s b y C a t e g o r y
Source: Pitchbook
Private equity investors deployed nearly $132M in capital into software companies serving the SMB space in
Q1 2018. Deals in the Grow My Business and Track My Business categories attracted similar amounts of capital.
surepathcapital.com
2
3
1
$67M$62M
$3M
Grow My Business
Keep Track of My Business
Run My Business

15. P E D e a l s b y C a t e g o r y ( c o n t . )
Marketing tech companies attracted the most private equity funding during the quarter, followed closely by
payments companies.
Source: Pitchbook
surepathcapital.com
2
3
1
$67M$62M
$3M
Marketing Tech
Payments
Business Management/ERP

16. P E D e a l s b y T a r g e t C u s t o m e r
Over 95% of private equity capital in Q1 2018 went to companies with a broad offering for both the small and
medium segments of the SMB software space. Only one company served only the small segment explicitly and
none served only the medium segment. This is similar to what we saw with VC funding.
Source: Pitchbook
surepathcapital.com
5
1
$126M
$6M
Small
Both

17. $1.05B TSYS
$175M GoDaddy
$150M MINDBODY Online
$146M Carbonite
$49M Bynder
$35M Houzz
$32M Descartes Software
$4M New Media Investments
$0.2M Grom Social
Q 1 ‘ 1 8 ’ s T o p S M B S o f t w a r e M & A D e a l s
Source: Pitchbook
surepathcapital.com

18. M & A D e a l s b y C a t e g o r y
The cumulative deal size for all mergers and acquisitions in the SMB software space in in Q1 2018 was north of
$1.6B.
Source: Pitchbook
surepathcapital.com
1
5
3
$1,050M
$378M
$213M
Keep Track of My Business
Grow My Business
Run My Business

19. M & A D e a l s b y C a t e g o r y ( c o n t . )
64% of M&A deal value was attributable to Total System Services’ $1.05B acquisition of payment technology
and merchant services company, Cayan. 23% of M&A deals during the quarter were related to martech.
Source: Pitchbook
surepathcapital.com
1
5
1
2
$1,050M
$378M
$146M
$67M
Payments
Marketing Tech
Security/IT
Business Management/ERP

20. M & A D e a l s b y T a r g e t C u s t o m e r
Similar to the trend seen in the venture capital and private equity deal landscape, the vast majority of capital
deployed in M&A deals went to companies with a broad offering for both the small and medium segments of
the SMB software space.
Source: Pitchbook
surepathcapital.com
7
2
$1,603M
$39M
Both
Small

21. NYSE: DBX
IPO Date March 23, 2018
Amount Raised $756M at $8.23B valuation
Age at IPO 11 years
Revenue at IPO ~$1.1B (December 31, 2017)
Headcount at IPO 1,800+
Pre-IPO Investors Sequoia Capital, Accel Partners, T. Row Price
Q 1 ‘ 1 8 ’ s S M B S o f t w a r e I P O s
Source: Pitchbook
Dropbox is not a pure play SMB company, however, it does have a meaningful number of SMB customers.
surepathcapital.com

22. Our Purpose

23. To help fund, grow, and exit SMB software companies
SurePath maximizes your optionality:
We ensure our clients are always in a position to raise more capital or exit profitably
Preparing you to raise the right amount of capital from the right
investors on the right terms
Growth
Funding
Leveraging our deep operating expertise to ensure your business is on
the right plan to create the most value
Strategic
Guidance
Our unparalleled access to SMB buyers helps us position you for an
intentional, profitable exit
Exits
S u r e P a t h : O u r P u r p o s e
surepathcapital.com

24. We have been part of some the most successful SMB software companies
We have deep relationships with SMB investors and buyers
SurePath is committed to becoming the leading strategic financial advisor to the global SMB software market
S u r e P a t h a n d S M B
surepathcapital.com

25. served as advisor to
R e c e n t S u r e P a t h D e a l s
served as the exclusive strategic
and financial advisor to
on its sale to
an operating group of
surepathcapital.com

26. The Leading Financial Advisor in SMB Software
EXPERIENCE
Funding, growing & exiting tech companies
PEDIGREE
Alumni of Constant Contact, FreshBooks, Shopify…
ACCESS
To Tier 1 investors & strategic partners
FOCUS
The only advisor with a dedicated focus on SMB Software
COMMITMENT
Helping our clients and their investors succeed
T h e S u r e P a t h D i f f e r e n c e
surepathcapital.com

27. Shubham Datta
Director
shubham@surepathcapital.com
647.972.6834
Danial Shaikh
Senior Analyst
danial@surepathcapital.com
647.876.5453
Mark MacLeod
Founder & President
mark@surepathcapital.com
416.843.6004
Josh Scherman
Vice-President
josh@surepathcapital.com
646.420.0074
Toronto • San Francisco