Sustainable Growth Takes Hold in U.S. Angel Investor Market

The U.S. angel investor market in the first two quarters of 2013 showed signs that sustainable growth has taken hold since the correction in the second half of 2008 and the first half of 2009, with total investments at $9.7 billion, an increase of 5.2 percent over the same period in 2012, according to the Center for Venture Research at the University of New Hampshire.

The UNH Center for Venture Research released new data about the state of the U.S. angel investor market today, Wednesday, Oct. 16, 2013.

A total of 28,590 entrepreneurial ventures received angel funding during the first half of 2013, a 4.8 percent increase from the same period in 2012, and the number of active investors in Q1 and Q2 2013 was 134,895 individuals, a 2.9 percent increase from Q1 and Q2 2012. The increase in total dollars and the matching increase in total investments resulted in an average deal size of $337,850 in the first half of 2013, comparable to the deal size in the same period in 2012 of $336,390.

“These data indicate that angels remain major players in this investment class and at valuations similar to the first half of 2012. While the market exhibited a pattern similar to the first half of 2012, when compared to the market correction that occurred in 2008, these data indicate that the angel market has demonstrated a steady recovery since 2008,” said Jeffrey Sohl, director of the UNH Center for Venture Research at the Peter T. Paul College of Business and Economics.

Angels continued their appetite for seed and start-up stage investing, with 38 percent of Q1 and Q2 2013 angel investments in the seed and start-up stage, which is virtually unchanged from 40 percent in the like period last year. There was, however, a shift in early stage financing (post-seed and start-up) to 51 percent in the first half of 2013, an increase from 38 percent from the previous period. New, first-sequence investments represented 49 percent of Q1 and Q2 2013 angel activity, unchanged from the same period last year.

“Historically angels have been the major source of seed and start-up capital for entrepreneurs, and while this stabilization in seed and start-up investing is an encouraging sign, it has remained consistently below the pre-2008 peak of 55 percent, signifying that there continues to be a need for seed and start-up capital for both new venture formation and job creation,” Sohl said.

Software accounted for the largest share of investments, with 24 percent of total angel investments in Q1 and Q2 2013, followed by health care services/medical devices (21 percent), industrial/energy (10 percent), retail (8 percent), biotech (8 percent) and IT services (6 percent).
“Industrial and energy investing has been a consistent performer since 2009, which reflects an interest in clean tech investing. Retail and biotech have solidified their presence in the top six sectors,” Sohl said.

Angel investments continue to be a significant contributor to job growth, with the creation of 111,500 new jobs in the United States in the first half of 2013, or 3.9 jobs per angel investment.

Private equity market will experience massive fundraising growth in 2014

Private Equity Headhunters, an executive recruiting firm that specializes in the private equity space, announces a new article making the bold prediction that the private equity market will experience massive fundraising growth in 2014. On the heels of Private Equity Headhunters' recent executive compensation survey, the firm feels that this industry marker points to investors' increasing confidence in an improving economy that will lead to phenomenal fundraising growth in the next year. Private Equity Headhunters has specialized in placing top executives in private equity and venture capital firms for over 15 years.

According to the details of the Private Equity Headhunters survey released this week, senior executives' total cash compensation, including salaries, bonuses and incentives, continued to rise in 2013, with an average increase between 3 and 7 percent.

"Based on the results from our survey, we see that compensation in the private equity and venture capital space has experienced significant growth," explained Frank Weston, Private Equity Headhunters' Chief Operating Officer. "We believe the reason can be traced to an overall rebound in the private equity market. Although we are a seeing a slow economic recovery from the 2007 recession, private equity markets are coming back, with fundraising, deals and M and A exits beginning to rise again."

Fundraising has traditionally determined how companies and firms elect to compensate their executives, which slumped considerably for both buyout and venture capital firms in 2010. The company's survey results and a steady increase in executive compensation indicates that investors are gaining confidence again in a recovering economy. Private Equity Headhunters sees the compensation increase trend as a precursor to a natural increase in fundraising in the private equity and venture capital space for 2014, and therefore predicts that a massive upswing will take place.

Many of the largest buyouts from 2005 to 2008 in the private equity sector were due to overly optimistic revenue and profit expectations that could not hold firm when the recession hit. Private Equity Headhunters cites companies such as Caesars Entertainment Corp and Energy Future Holdings as two such organizations left with great amounts of debt when business declined.

Often, an IPO is the only way for a private equity firm to exit gracefully, although this takes a significant amount of time and the outcome is not always certain. Because of the duration of this process, it takes a long time for this process to show and indicate growth, giving the increase in executive compensation even more weight as an indicator of overall market growth.

Though private equity firms have not completely bounced back since the crisis, these firms are raising multi-billion dollar funds again, which raises the need to find good investments. Large deals are in the works, and Private Equity Headhunters makes note of two deals worth more than 20 billion dollars including the proposed buyout of Dell, Inc. by Michael Dell and Silver Lake as well as the takeover of H.J. Heinz Co. by Berkshire Hathaway Inc and 3G Capital. In addition, according to Blackstone Group LP's figures, the firm's investment in hotel chain Hilton Worldwide Inc. was worth 50 percent more in 2013 than when the company invested in 2007.

"We see several indications that lead us to believe that 2014 will be the year of phenomenal fundraising for private equity firms," explains C. Nicholas, CEO of Private Equity Headhunters. "We're seeing multi-year highs in the volume of large exits for venture-backed companies. Couple this with an improving economy and a steady increase in executive compensation, and we see all the signs of improving market conditions and overall growth that make private equity and venture capital fundraising very successful."

About Private Equity Headhunters:

Founded in 1998, Private Equity Headhunters specializes in locating jobs for executives and matches investment seekers with private equity and strategic buyers. The company utilizes its network of 2,400 recruiters and relationships with more than 1,600 PE/VC firms to achieve a job placement rate of 86 percent for national and international executives, even in a weak economy. With a 100 percent interview rate and impressive placement rate, Private Equity Headhunters has consistently ranked first in PE/VC space as a senior executive recruiting firm. For more information, visit http://www.PrivateEquityHeadhunters.com.

Risk-Adjusting the Returns to Venture Capital

Performance evaluation of venture-capital (VC) payoffs is challenging because payoffs are infrequent, skewed, realized over endogenously varying time horizons, and cross- sectionally dependent. The authors of this study show that standard stochastic discount factor (SDF) methods can be adapted to handle these issues. The authors’ approach generalizes the Public Market Equivalent (PME) measure commonly used in the private-equity literature.

The authors find that the abnormal returns from both VC funds and VC start-up investments are robust to relaxing the strong distributional assumptions and implicit SDF restrictions from the prior literature: VC start-up investments earn substantial positive abnormal returns, and VC fund abnormal returns are close to zero.

The authors further show that the systematic component of start-up company and VC fund payoffs resembles the negatively skewed payoffs from selling index put options, which contrasts with the call option-like positive skewness of the idiosyncratic payoffs. Motivated by this finding, The authors explore an SDF that includes index put option returns.

This results in negative abnormal returns to VC funds, while the abnormal returns to start-up investments remain large and positive.

A solid start for Australian private equity in 2013

The first quarter of 2013 saw the Cambridge Associates LLC Australia Private Equity and Venture Capital Index (C|A Australia Index) post gains of 2.36%, according to the latest quarterly report released by The Australian Private Equity and Venture Capital Association Ltd (AVCAL) today. Over the same period, the S&P/ASX 300 Index continued to rise on the back of growing confidence in the US economy and domestic interest rate cuts, increasing by 8.04%.

The C|A Australia Index over the medium to long term outperformed listed equities, posting annualised net-of-fees returns of 7.18%, 3.71% and 8.99% over the three, five and fifteen-year horizons respectively. However, ten-year returns showed listed market returns of 10.21% outpacing an 8.37% return by private equity.

One-year returns for the C|A Australia Index were steady at 6.72% on an AUD basis and 7.42% in USD terms. For ten of the last eleven years, annual rolling returns for the Index have been positive.

Australian Private Equity & Venture Capital Association (AVCAL) CEO Dr Katherine Woodthorpe said, “It is interesting to note that the first quarter of 2013 saw the highest level of distributions to limited partners in the last five quarters, and the second highest level since records began. Despite the challenging environment for exits, it is encouraging to note that private equity is generally delivering good returns to investors, particularly with realisations being top of mind for many limited partners at the moment."

Dow Jones VentureSource U.S. Quarterly Report - 2Q 2013

Dow Jones VentureSource’s quarterly findings for U.S. venture capital fundraising, investment, valuation, and liquidity.

Highlights for 2Q 2013 include:

*U.S. venture capital raised 4% more funds in the first half 2013 than in the first half of the previous year

*Venture capital investment saw its worst quarter since 1Q 2010

*Median pre-money valuation increased 27% from 1Q 2013 Initial public offerings (IPOs) doubled from the previous



Venture Fundraising Increases in U.S. during 2Q 2013

50 funds garnered $6.8 billion in 2Q 2013, a 4% decrease in number of funds, but a 48% increase in the amount raised from the prior quarter.

Insight Venture Partners VIII LP, the largest U.S. venture capital fund of the year, raised $2.6 billion, accounting for 38% of the total amount raised in 2Q 2013.

Median U.S. fund size was $150 million in the first half of 2013.



U.S. Venture Investment Fall Slows in 2Q 2013

U.S.-based companies raised $7.2 billion from 801 venture capital deals in 2Q 2013, a 2% decrease in capital and a 0.5% decrease in number of deals from the previous quarter.

Compared to the same period in 2012, a 16% decrease was registered in number of deals, while amount raised went down 19%.

With the exception of Healthcare and Consumer Goods that experienced a drop of 8% and 80% respectively, all others sectors saw an increase in amount raised.


Equity Financings into U.S.-based, VC-backed Companies, by Industry Group (2Q 2013)

Information Technology (IT) saw the largest investment allocation, with 238 deals garnering $2.1 billion and accounting for 29% of total equity investment.

Healthcare followed with $1.9 billion in 168 closed deals, a decrease of 8% in amount invested and 3% drop in number of deals compared to the previous quarter.

Business and Financial Services increased quarter over quarter, with $1.3 billion invested in 169 deals – a 10% and 16% rise in dollars and deals, respectively, compared to 1Q 2013.

Investment in Consumer Services registered both the highest quarter over quarter increase in capital invested and number of deals: 40% and 20%, respectively.

Complete Report

Cambridge Associates U.S. Private Equity and Venture Capital Commentary Quarter and Year Ending December 31, 2012

Overview

On the heels of a strong finish in 2011, U.S. private equity and venture capital funds also performed well in 2012, due in large part to double-digit returns in most of the large sectors in both asset classes. In the four years between 2009 and 2012, private equity funds had positive returns in all but three quarters and venture capital funds rose in all but two quarters, as indicated by the Cambridge Associates LLC benchmark indices of the two alternative asset classes. During the fourth quarter of 2012, both private asset classes bested large cap public equities, but for the year, venture capital trailed public equity returns and private equity funds had mixed success against the public equity indices.

Over the past ten years, private equity significantly outperformed venture capital and the public markets, while over that same time period, venture slightly underperformed public indices. Returns for the Cambridge Associates LLC U.S. Private Equity Index® and Cambridge Associates LLC U.S. Venture Capital Index® were positive in the fourth quarter of 2012 while most public equity indices were negative. Macro factors impacting the public markets were largely political, such as the “fiscal cliff” negotiations, and overall market uncertainty had a dampening effect on initial public offerings (IPOs).

Highlights of the fourth quarter and year are:

_ With the exception of the one-year period, the private equity benchmark outperformed large and small public companies in all of the time periods ending December 31, 2012 listed in the table above. During various periods over the past ten years, the venture capital index’s record against the public markets has been mixed but over the long term, venture has significantly outperformed public equities.

_ The spread between the private equity and venture capital ten-year returns is down to 7.2% after hitting a peak of 12.7% at the end of the third quarter 2010. _ As of December 31, 2012, public companies accounted for about 18.6% of the private equity index, a decrease of approximately 2.0% from the third quarter. Public company representation in the venture capital index decreased to 11.8% from about 14.9% last quarter. Non-U.S. company exposures in both private asset class indices rose a bit in the fourth quarter. In the private equity index, it went up approximately 0.8% to 19.7% and in the venture capital benchmark, it increased 0.3% to 10.8%.

Private Equity Performance Insights:

During the fourth quarter of 2012, most U.S. public equity indices were down amid economic and political uncertainty regarding the “fiscal cliff.” The Cambridge Associates LLC U.S. Private Equity Index®, however, remained in positive territory for the second consecutive quarter and the third of four in the year. The index’s fourth quarter return was 3.5%, bringing its return for the year up to 13.8%, an increase of about 2.2% from the previous year. In the fourth quarter, portfolio company valuations increased across all vintage years from 2000 to 2012; funds launched in each of the five vintages that represented at least 5% of the index saw asset values improve by at least $1.3 billion. In dollar terms, valuations grew most for consumer, healthcare, energy, financial services, and manufacturing companies; all were among the index’s large sectors.

According to Dealogic, 12 private equity-backed companies went public in the fourth quarter at a value of $3.6 billion; the number of companies equaled the third quarter’s activity but the value represented an increase of $1.9 billion. During 2012, 61 private equity-backed companies went public, fetching $12.7 billion, and while there were 13 more IPOs than in 2011, the value of the deals was roughly half. Some of 2012’s better known IPOs included Bloomin’ Brands and Realogy (which includes real estate brands Coldwell Banker and Century 21 among others). The latter represented almost 10% of the value raised by IPOs during the year.

Both the fourth quarter and year were active periods for mergers and acquisitions (M&A) involving private equity-backed companies. There were 237 M&A transactions in the fourth quarter, up from 199 in the third. The values of 70 of those deals were disclosed to the public, which is in line with the previous quarter’s 71. Based on the publicly available values, the average transaction size rose from $224 million in the third quarter to $562 million in the fourth. In 2012, there were 806 M&A transactions, an increase of 115 over the prior year. The values of 279 deals were disclosed to the public in 2012 at an average size of $291 million. In 2011, there were 245 transactions with publicly-disclosed values worth an average of $362 million.

Five vintage years -2007, 2006, 2005, 2008, and 2004 - represented nearly 82% of the private equity index’s value by the end of 2012; the index has grown more concentrated since 2010 when there were seven vintage years of note in the index. Returns among the five vintages were slightly better in the fourth quarter than they were in the third, ranging from 2.2% for the 2004 funds to 5.4% for the 2008 funds. Throughout 2012, an active M&A environment and generally strong public markets helped drive realizations and bolster unrealized valuations.

During the fourth quarter and year, in funds raised in the 2007 vintage year, write ups in the consumer and energy sectors combined to account for roughly 40% of the vintage’s increased valuations. In the second largest vintage year, 2006, retail and healthcare led all other sectors with respect to valuation increases, representing more than 70% of the write-ups in the fourth quarter and more than 50% for the year. For the year’s best performing vintage, 2005, consumer sector portfolio companies jumped the most in value but healthcare and IT businesses also contributed. Energy sector write-ups were by far the largest in the fourth quarter’s highest returning vintage, 2008.

All Eight Key Sectors in the PE Index Earned Positive Returns for the Quarter, Consumer Led All

All of the eight sectors that represented at least 5% (“meaningfully sized”) of the index produced positive returns during the fourth quarter of 2012. The three largest sectors – consumer, energy, and healthcare – comprised more than 51% of the index’s total value and returned between 4.1% and 6.7%. On a dollar-weighted basis, the three earned a gross return of 5.5%, outperforming the total benchmark gross performance by 0.7%. Among the eight meaningfully-sized sectors, consumer posted the highest return for the quarter; the 2006 and 2007 vintage years contributed most to the performance and they accounted for more than 52% of the sector’s market value at the end of the year. Media produced the fourth quarter’s lowest return, 0.9%, which was driven mostly by modest valuation moves (both up and down) in all vintages except for 2004 and 2008. During the quarter, fund managers allocated more than half of the capital invested to energy, consumer, and healthcare companies – about 3% higher than the historical average.

For the year, manufacturing was the best performing sector and media was the worst. Write ups for manufacturing companies in vintage years 2007, 2004, and 2006 were the largest drivers of that sector’s return. The 2004 vintage was the largest positive contributor to the annual performance for media, the only large sector that did not produce a double-digit positive return for the year. The three largest sectors – consumer, energy, and healthcare - outperformed the benchmark’s total gross return by 0.2% and outperformed all other industries by 0.4%.

Distributions Hit a Record Level; Capital Contributions Also Rose

In the fourth quarter, managers in the U.S. private equity index called about $25.2 billion from limited partners and returned $48.6 billion; these represent a 46.3% increase in contributions and a 122.6% increase in distributions from last quarter. The increase of nearly $8.0 billion in capital calls from the prior quarter was the largest quarter-over-quarter rise since the second quarter of 2010. Distributions increased by nearly $26.8 billion from the third quarter, hitting the highest quarterly level seen in the 27 years that Cambridge Associates has tracked the industry.

Investors in funds launched in 2007, 2008, and 2011 contributed $17.9 billion, or 71% of the total capital called during the quarter, the 2007 funds alone represented $9.7 billion, or 39% of the capital called. Conversely, each of the vintage years between 2004 and 2008 distributed more than $4 billion in the quarter. Investors in funds launched in 2006 and 2007 received approximately $22.8 billion or 47% of the capital distributed. Distributions outnumbered contributions in all quarters in 2012. During 2012, managers in the U.S. private equity index called $71.3 billion from limited partners, more than $10.0 billion less than they called in either 2011 or 2010 but 43% more than in 2009. Total distributions during 2012 hit $118.0 billion – the largest annual amount since the index’s inception. Distributions increased by 23% over totals hit in 2011, 59% from 2010, and 327% from 2009. Exits and recapitalizations helped drive distributions to record highs. Friendly credit markets enabled recapitalizations and anticipated tax hikes made motivated sellers out of some private equity investors. Last year was the second in a row but only the fifth since the inception of the private equity index in which distributions outpaced contributions; the others were 1996, 2004, 2005, and 2011. From 2006 through 2010, when contributions outnumbered distributions, private equity fund managers in the index called 1.3 times as much capital as they distributed; in 2011 and 2012, the reverse was true, as distributions outweighed contributions by a similar margin.

Venture Capital Performance Insights

For the first time in three years, the venture capital index produced a single-digit annual return, coming off of two consecutive years of 13%+ performance. Dragging down the index’s performance for the year were returns of less than 1% in the middle two quarters and just over 1% in the last. Middling performance from the index’s largest sector, IT, contributed heavily to the benchmark’s result. The IPO market, active during the first half of the year, struggled in the second half following disappointing Facebook IPO results. Contributions were lower in 2012 than in 2011 while distributions increased, and distributions not only outpaced contributions for the year but they hit their highest annual level since 2000.

According to the National Venture Capital Association (NVCA) and Thomson Reuters, 49 venturebacked companies went public in 2012 for a total IPO offer value of nearly $21.5 billion. The number of venture-backed IPOs was in line with 2011, however the total offer value was up significantly, thanks entirely to the $16.0 billion Facebook IPO. There were 469 venture-backed M&A deals in 2012, down slightly from 2011 with 498. For deals with values disclosed to the public, the average size of a venture-backed M&A transaction was up 21.7% from 2011, to approximately $173.6 million.

Fourth-Quarter VC Performance Mediocre; Solid Overall in 2012

After beginning 2012 with a strong first quarter, the Cambridge Associates LLC U.S. Venture Capital Index® returned 0.6%, 0.6%, and 1.2%, respectively, in the second, third, and fourth quarters, ending the year with a 7.2% return. All but one of the meaningfully-sized vintage years had flat or positive returns in the fourth quarter with the exception being vintage year 2000; and all were up for the year (see table to the right). The fourth quarter performance was driven by the five vintages that each made up more than 10% of the index; vintage years 2000 and 2005 through 2008 vintage years together comprised over 64% of the index. Despite mediocre fourth-quarter performance, all seven of the meaningfully-sized vintage years earned positive returns for the year, led by the 2000 and 2010 vintages. Significant write-ups in software, IT, and healthcare companies were behind the positive performance for these two vintage years. Software was by far the largest contributor to the 2000 funds return while IT led in the more recent vintage, 2010. The once dominant vintage year 2000 represented only 11.2% of the index in 2012, down from roughly 13.0% the year before and a peak of over 40% in June 2005.

Software Posted the Highest Fourth Quarter and Annual Returns in 2012

The venture capital index remained concentrated by sector, with the three largest – IT, healthcare, and software – accounting for nearly 76% of the index’s value. With totals slightly higher than their long-term averages, over 81% of capital invested during the fourth quarter went into companies in these sectors. IT and healthcare companies garnered more than twice the dollars allocated to software. Among the large sectors, software was the best performing during the quarter, posting a 3.5% return, while media’s - 3.7% was the lowest. Write-downs in media investments in funds raised in 2000 and 2005 were not offset by smaller write-ups in other vintages.

For the year, the three largest sectors returned over 11.9%, outperforming the total 2012 return for all portfolio companies by over 2.2%. Software companies earned a gross return of 23.0%, by far the best among the top three sectors. Vintage years 2000 and 2008 contributed the most to the sector’s strong return. On a pooled, dollar-weighted basis, software companies produced double-digit returns in vintage years 2000 and 2005 through 2008.

VC Calls and Distributions Increased Slightly from Prior Quarter Levels

In the fourth quarter, managers in the U.S. venture capital index called just under $3.4 billion, an increase of $171 million, or 5.3% from the previous quarter. Distributions also rose from the third quarter to the fourth, albeit by only 2.9%, to $6.1 billion. This marked the fourth consecutive quarter that distributions outnumbered contributions. It has been more than 12 years since there was a similar trend in LP cash flows.

Managers of funds raised in 2008, 2010, and 2012 called approximately $1.7 billion or 50.0% of all capital called during the quarter. Each vintage called more than $500 million. Investors in the 2000 and 2004 vintage years each received over $1.0 billion in distributions or 44.2% of the total distributed. Vintage years 2005 and 2006 both distributed more than $600 million in the quarter. Managers in the U.S. venture capital index called less and distributed more capital in 2012 than they did in 2011. Contributions decreased 12.2% to $13.7 billion while distributions increased 50.5% to nearly $22.2 billion. Distributions in 2012 were the third highest annual total of all-time, behind only the bubble years of 1999 and 2000.

70 percent of Entrepreneurs say Boston's Startup Community Could be More Inclusive to Women

Seventy percent of Boston-area entrepreneurs say that the hub's startup community is either sometimes or not at all inclusive to female entrepreneurs, according to a recent survey commissioned by the New England Venture Capital Association. In addition, the survey of 100 Boston-area entrepreneurs found that more needs to be done in terms of providing access to funding and other resources to female entrepreneurs in Boston. It's no secret that women are in the minority in the venture capital and tech communities. Moving forward the NEVCA will tackle this issue proactively by tracking the number of women entrepreneurs receiving venture financing and continuing the conversation about creating a community that attracts and retains more women in tech.

(Logo: http://photos.prnewswire.com/prnh/20130724/NE51592LOGO )

According to the survey, fundraising in Boston, a critical activity for any entrepreneur looking to give life to their ideas is a challenge for female entrepreneurs. Only eight percent of female entrepreneurs said that being a woman had a positive impact on their fundraising, according to the report. Meanwhile, 64 percent of respondents said that Boston's startup community is only sometimes inclusive to female entrepreneurs and six percent said that Boston's startup community is not at all inclusive to female entrepreneurs. Thirty percent of respondents said that in general, Boston is inclusive to female entrepreneurs.

"Boston has a crop of tremendously talented female entrepreneurs, and is doing no better or worse than any other major startup market as far as the ratio of venture-backed women to men founders. Our 'Lean In' breakfast with Sheryl Sandberg in April ignited a number of interesting conversations among startup companies and the investor community, and we are interested in propelling that conversation further and making explicit that Boston wants to be home to the best women in technology," said C.A. Webb, executive director of the NEVCA in Cambridge. 

NEVCA president and partner at Bessemer Venture Partners, Steve Kraus added, "We want women who are coming up through the ranks of some of Boston's fastest growing venture-backed companies to, like many of the men they work with, leave those companies eventually and start their own. And we want women founders to move to Boston to start their companies because they know this is the best place in the world to be a woman running a startup." 

Despite the fact that female entrepreneurs are the minority in the startup community, the report found there is an extremely dynamic group of women running startups in Boston, including Helen Greiner of CyPhy Works; Meredith Flynn-Ripley of HeyWire; Michelle Dipp of OvaScience; Katrine Bosley of Avila Therapeutics; Bettina Hein of Pixability; Paula Long of DataGravity; Anna Palmer of Fashion Project; and Lissy Hu of Careport Health among others. Still, 33 percent of survey respondents reported that there were no women on their management teams; 37 percent had only one woman on their management teams; 17 percent had two women on their management team and only nine percent had three women on their management team. Here is a link to NEVCA's 2013 list of women-run startups in Boston.

"CRV has seen tremendous success backing women entrepreneurs: Paula Long at Equallogic and DataGravity, Tushara Canekeratne at Virtusa, and Maria Cirino at Guardent have collectively created over $2 billion in shareholders' value and more than 7,000 jobs.  We would love to see more of those startups led by women," said Izhar Armony of Charles River Ventures.

Methodology
The New England Venture Capital Association surveyed entrepreneurs in Boston from June 6^th –June 24^th about the inclusiveness of Boston's startup community towards women and how many women are in founder or leadership roles at the city's startups.

About the New England Venture Capital Association
The New England Venture Capital Association (http://www.newenglandvc.org) represents more than 700 venture capital professionals from 90 top firms, collectively managing more than $50 billion in investor capital. Its mission is to help ideas that matter become local businesses that benefit entrepreneurs, investors, and the world. To do so it advances the collective interests of member firms in keeping the region competitive, championing emerging and proven venture-backed companies, maintaining strong connections to local universities and talent, and supporting the region's thriving startup community.

More Merger & Acquisition Trends For 1st Half 2013 From Berkery Noyes

Media and Marketing Industry Merger & Acquisition Trends For 1st Half 2013

Consumer Publishing had the largest half-to-half year rise in volume, increasing 21 percent since second half 2012. At the same time, M&A volume in the Entertainment segment improved 11 percent. The amount of deals in the B2B Publishing and Information segment underwent a slight uptick, rising from 86 to 90 transactions in the prior half year period.

Complete Berkery Noyes Report


Online and Mobile Industry Merger & Acquisition Trends For 1st Half 2013

Volume in the E-Marketing & Search segment increased 17 percent on a half-to-half year basis. The largest transaction in first half 2013, both in the overall industry and the E-Marketing segment, was Salesforce.com’s acquisition of digital marketing provider ExactTarget for $2.25 billion.

Complete Berkery Noyes Report


Software Industry Merger & Acquisition Trends For 1st Half 2013

Four of the industry's top ten highest value transactions in first half 2013 were completed by private equity firms. In the cyber security subset, Vista Equity Partners' acquisition of Websense for $942 million was the largest deal backed by a financial sponsor since 2011, when Thoma Bravo acquired Blue Coat Systems for $1.15 billion.

Complete Berkery Noyes Report


Healthcare Industry Merger & Acquisition Trends For 1st Half 2013

Healthcare IT remained the most active market segment in first half 2013, representing 40 percent of the industry’s aggregate volume year-to-date. Meanwhile, the largest Pharma IT transaction backed by a financial sponsor in first half 2013 was JLL Partners’ acquisition of BioClinica, a provider of clinical trial management solutions, for $105 million.


Complete Berkery Noyes Report


Financial Technology and Information Industry Merger & Acquisition Trends For 1st Half 2013

The segment with the largest half-to-half year increase in volume was Insurance, which rose 42 percent in first half 2013. The industry’s highest value transaction in first half 2013, Fidelity National Financial’s announced acquisition of Lender Processing Services for $3.83 billion, occurred in the Banking segment.

Complete Berkery Noyes Report

EDUCATION INDUSTRY 1ST HALF 2013 -Mergers and Acquisitions

M&A MARKET OVERVIEW

Berkery Noyes tracked 678 transactions between 2011 and 1st Half 2013, of which 213 disclosed fi nancial terms, and calculated the aggregate transaction value to be $20.66 billion. Based on known transaction values, we project the values of 465 undisclosed transactions to be $2.70 billion, totaling $23.37 billion worth of transactions tracked over the past two and a half years. Disclosed median enterprise value multiples for all segments combined in this report during the last 30 months were 1.5x revenue and 12.0x EBITDA.

1ST HALF 2013 KEY HIGHLIGHTS

• Capita plc, a UK based provider of business process outsourcing (BPO) and professional support services, was the most active acquirer in 1st Half 2013 with four industry transactions: Creating Careers, KnowledgePool, Inc., Blue Sky Performance Improvement, and Micro Librarian Systems.

• Pearson plc was also an active acquirer in 1st Half 2013 with three transactions: Learning Catalytics LLC, IndiaCan Education Pvt Ltd and Exam Design, Inc.

• There were 33 fi nancially sponsored transactions in 1st Half 2013, with an aggregate value of $836 million, representing 24 percent of the total volume and 20 percent of the total value, respectively.

1ST HALF 2013 KEY TRENDS

• Total transaction volume in 1st Half 2013 increased by fi ve percent over 2nd Half 2012, from 128 to 135.

• Total transaction value in 1st Half 2013 decreased by 16 percent over 2nd Half 2012, from $4.57 billion to $3.84 billion.

• The median revenue multiple declined from 1.4x in 2nd Half 2012 to 1.0x in 1st Half 2013. Median value remained nearly constant during this timeframe.

• Deal volume in the K-12 Media and Tech segment increased 38 percent over the last six months, from 21 to 29 transactions, giving it a slight edge over Professional Training Institutions as the industry’s largest market segment year-to-date.

Complete Berkery Noyes Report

PRIVATE EQUITY INFORMATION INDUSTRY 1ST HALF 2013-Mergers and Acquisitions

M&A MARKET OVERVIEW

Berkery Noyes tracked 1,093 transactions between 2011 and 1st Half 2013, of which 290 disclosed fi nancial terms, and calculated the aggregate transaction value to be $84.88 billion. Based on known transaction values, we project values of 803 undisclosed transactions to be $13.64 billion, totaling $98.51 billion worth of transactions tracked over the past two and a half years. Disclosed median revenue multiple for all segments combined in this report in the last 30 months were 1.8x revenue and 9.8x EBITDA. The peak for deal volume over the past two and a half years occurred in 1st Half 2012, whereas value reached its zenith in 2nd Half 2012. 1ST HALF 2013 KEY HIGHLIGHTS

• The largest transaction in 1st Half 2013 was the announced acquisition of BMC Software by a private investor group, led by Bain Capital and Golden Gate Capital, for $6.81 billion.

• The most active acquirer year-to-date was Vista Equity Partners with seven transactions: SuccessEHS, ISS Group Limited, Websense, Inc., Care2Learn.com, Lanyon, Inc., Expesite, Inc. and MED-PASS, Inc. The largest of these seven deals was the acquisition of Websense, Inc. for $942 million.

1ST HALF 2013 KEY TRENDS

• Total transaction volume in 1st Half 2013 decreased by 15 percent over 2nd Half 2012, from 234 to 198.

• Total transaction value in 1st Half 2013 fell by 22 percent over 2nd Half 2012, from $24.45 billion to $18.99 billion. Although aggregate value declined, the two largest fi nancially sponsored transactions in the Information Industry during the past two and a half years occurred in 1st Half 2013.

• The median revenue multiple moved slightly from 1.9x in 2nd Half 2012 to 2.0x in 1st Half 2013. The median EBITDA multiple increased from 9.9x in 2nd Half 2012 to 11.2x in 1st Half 2013.

• The number of secondary buyouts in 1st Half 2013 decreased by 55 percent over 2nd Half 2012. This came in the aftermath of a 26 percent increase between 2011 and 2012.

Complete Berkery Noyes Report

THE MATURING OF THE PRIVATE EQUITY INDUSTRY

During the 1990s, returns among endowments investing in private equity funds
soared and endowments outperformed other private equity investors. This was not
the case between 1999 and 2006. In Limited Partner Performance and the Maturing
of the Private Equity Industry (NBER Working Paper No. 18793), Berk Sensoy,
Yingdi Wang, and Michael Weisbach conclude that: "The disappearance of abnormal
performance by endowments is consistent with changes in the economics underlying
the private equity industry." In fact, the private equity industry had matured.

In 1990, private equity was a little-known niche, with $6.7 billion in
investments. By 2008, just prior to the financial crisis, the industry had
ballooned into a $261.9 billion mainstay of institutional portfolios.
Based on a sample of 14,380 investments by 1,852 limited partners in 1,250
buyout and venture funds between 1991 and 2006, the authors confirm that
endowments outperformed other investors early on because they had access to the
most successful funds while other investors did not. Rather than expand or
charge higher fees, the best private equity partnerships rationed access to
their funds, accepting investments from favored investors, such as prestigious
educational and other nonprofit endowments, to the exclusion of others. Also,
endowments were better able to evaluate alternative investments, such as private
equity, that were unfamiliar at the time.

Between 1991 and 1998, endowments enjoyed an average 13.38 percent internal rate
of return on private equity investments, the highest of any limited partnership
groups. "The performance gap is driven entirely by endowments' investments in
the venture industry, which benefited most from the 1990s technology boom," the
authors write. "Compared with other types of institutions, endowments were more
likely to invest in older partnerships, which not only were more likely to
restrict access but also earned higher returns."

In the aftermath of the technology bust of the 2000s, which put an end to
booming returns from venture capital, that outperformance had evaporated. The
authors find that endowment investors' skill in picking venture funds declined
significantly after the tech bust. The marginal outperformance that could be
attributed to the funds they invested in, relative to those that they did not
invest in, fell to levels similar of other institutional investors during
1999-2006. And, endowment investors didn't show particular skill in picking
first-time funds, which were unlikely to restrict access, either before the tech
crash or afterward.

The authors explain this pattern as the result of maturation of the private
equity industry. In the early years, high returns were earned in part by
purchasing mismanaged companies and improving their operations. Investments in
high-tech companies were also an important driver of venture capital returns in
the 1990s. Over time, though, the "low-hanging fruit" was picked, and the
dispersion of returns across different private equity groups shrunk
dramatically.

Cambridge Associates U.S. Private Equity and Venture Capital Benchmark Commentary Quarter and Year Ending December 31, 2012

On the heels of a strong finish in 2011, U.S. private equity and venture capital funds also performed well in 2012, due in large part to double-digit returns in most of the large sectors in both asset classes.

In the four years between 2009 and 2012, private equity funds had positive returns in all but three quarters and venture capital funds rose in all but two quarters, as indicated by the Cambridge Associates LLC benchmark indices of the two alternative asset classes. During the fourth quarter of 2012, both private asset classes bested large cap public equities, but for the year, venture capital trailed public equity returns and private equity funds had mixed success against the public equity indices.

Over the past ten years, private equity significantly outperformed venture capital and the public markets, while over that same time period, venture slightly underperformed public indices. Returns for the Cambridge Associates LLC U.S. Private Equity Index® and Cambridge Associates LLC U.S. Venture Capital Index® were positive in the fourth quarter of 2012 while most public equity indices were negative. Macro factors impacting the public markets were largely political, such as the “fiscal cliff” negotiations, and overall market uncertainty had a dampening effect on initial public offerings (IPOs).

The Cambridge Associates indices are derived from performance data compiled for funds that represent the majority of the institutional capital raised by private equity and venture capital partnerships. The Cambridge Associates LLC U.S. Private Equity Index® includes funds raised between 1986 and 2012 and the Cambridge Associates LLC U.S. Venture Capital Index® represents funds raised between 1981 and 2012

Highlights of the fourth quarter and year are:

_ With the exception of the one-year period, the private equity benchmark outperformed large and small public companies in all of the time periods ending December 31, 2012 listed in the table above. During various periods over the past ten years, the venture capital index’s record against the public markets has been mixed but over the long term, venture has significantly outperformed public equities.

_ The spread between the private equity and venture capital ten-year returns is down to 7.2% after hitting a peak of 12.7% at the end of the third quarter 2010.

_ As of December 31, 2012, public companies accounted for about 18.6% of the private equity index, a decrease of approximately 2.0% from the third quarter. Public company representation in the venture capital index decreased to 11.8% from about 14.9% last quarter. Non-U.S. company exposures in both private asset class indices rose a bit in the fourth quarter. In the private equity index, it went up approximately 0.8% to 19.7% and in the venture capital benchmark, it increased 0.3% to 10.8%.

Private Equity Performance Insights:

During the fourth quarter of 2012, most U.S. public equity indices were down amid economic and political uncertainty regarding the “fiscal cliff.” The Cambridge Associates LLC U.S. Private Equity Index®, however, remained in positive territory for the second consecutive quarter and the third of four in the year. The index’s fourth quarter return was 3.5%, bringing its return for the year up to 13.8%, an increase of about 2.2% from the previous year. In the fourth quarter, portfolio company valuations increased across all vintage years from 2000 to 2012; funds launched in each of the five vintages that represented at least 5% of the index saw asset values improve by at least $1.3 billion. In dollar terms, valuations grew most for consumer, healthcare, energy, financial services, and manufacturing companies; all were among the index’s large sectors.

According to Dealogic, 12 private equity-backed companies went public in the fourth quarter at a value of $3.6 billion; the number of companies equaled the third quarter’s activity but the value represented an increase of $1.9 billion. During 2012, 61 private equity-backed companies went public, fetching $12.7 billion, and while there were 13 more IPOs than in 2011, the value of the deals was roughly half. Some of 2012’s better known IPOs included Bloomin’ Brands and Realogy (which includes real estate brands Coldwell Banker and Century 21 among others). The latter represented almost 10% of the value raised by IPOs during the year.

Both the fourth quarter and year were active periods for mergers and acquisitions (M&A) involving private equity-backed companies. There were 237 M&A transactions in the fourth quarter, up from 199 in the third. The values of 70 of those deals were disclosed to the public, which is in line with the previous quarter’s 71. Based on the publicly available values, the average transaction size rose from $224 million in the third quarter to $562 million in the fourth. In 2012, there were 806 M&A transactions, an increase of 115 over the prior year. The values of 279 deals were disclosed to the public in 2012 at an average size of $291 million. In 2011, there were 245 transactions with publicly-disclosed values worth an average of $362 million.

Five vintage years -2007, 2006, 2005, 2008, and 2004 - represented nearly 82% of the private equity index’s value by the end of 2012; the index has grown more concentrated since 2010 when there were seven vintage years of note in the index. Returns among the five vintages were slightly better in the fourth quarter than they were in the third, ranging from 2.2% for the 2004 funds to 5.4% for the 2008 funds. Throughout 2012, an active M&A environment and generally strong public markets helped drive realizations and bolster unrealized valuations.

During the fourth quarter and year, in funds raised in the 2007 vintage year, write ups in the consumer and energy sectors combined to account for roughly 40% of the vintage’s increased valuations. In the second largest vintage year, 2006, retail and healthcare led all other sectors with respect to valuation increases, representing more than 70% of the write-ups in the fourth quarter and more than 50% for the year. For the year’s best performing vintage, 2005, consumer sector portfolio companies jumped the most in value but healthcare and IT businesses also contributed. Energy sector write-ups were by far the largest in the fourth quarter’s highest returning vintage, 2008.

All Eight Key Sectors in the PE Index Earned Positive Returns for the Quarter, Consumer Led All

All of the eight sectors that represented at least 5% (“meaningfully sized”) of the index produced positive returns during the fourth quarter of 2012. The three largest sectors – consumer, energy, and healthcare – comprised more than 51% of the index’s total value and returned between 4.1% and 6.7%. On a dollar-weighted basis, the three earned a gross return of 5.5%, outperforming the total benchmark gross performance by 0.7%. Among the eight meaningfully-sized sectors, consumer posted the highest return for the quarter; the 2006 and 2007 vintage years contributed most to the performance and they accounted for more than 52% of the sector’s market value at the end of the year. Media produced the fourth quarter’s lowest return, 0.9%, which was driven mostly by modest valuation moves (both up and down) in all vintages except for 2004 and 2008. During the quarter, fund managers allocated more than half of the capital invested to energy, consumer, and healthcare companies – about 3% higher than the historical average.

For the year, manufacturing was the best performing sector and media was the worst. Write ups for manufacturing companies in vintage years 2007, 2004, and 2006 were the largest drivers of that sector’s return. The 2004 vintage was the largest positive contributor to the annual performance for media, the only large sector that did not produce a double-digit positive return for the year. The three largest sectors – consumer, energy, and healthcare - outperformed the benchmark’s total gross return by 0.2% and outperformed all other industries by 0.4%.

Distributions Hit a Record Level; Capital Contributions Also Rose

In the fourth quarter, managers in the U.S. private equity index called about $25.2 billion from limited partners and returned $48.6 billion; these represent a 46.3% increase in contributions and a 122.6% increase in distributions from last quarter. The increase of nearly $8.0 billion in capital calls from the prior quarter was the largest quarter-over-quarter rise since the second quarter of 2010. Distributions increased by nearly $26.8 billion from the third quarter, hitting the highest quarterly level seen in the 27 years that Cambridge Associates has tracked the industry.

Investors in funds launched in 2007, 2008, and 2011 contributed $17.9 billion, or 71% of the total capital called during the quarter, the 2007 funds alone represented $9.7 billion, or 39% of the capital called. Conversely, each of the vintage years between 2004 and 2008 distributed more than $4 billion in the quarter. Investors in funds launched in 2006 and 2007 received approximately $22.8 billion or 47% of the capital distributed. Distributions outnumbered contributions in all quarters in 2012.

During 2012, managers in the U.S. private equity index called $71.3 billion from limited partners, more than $10.0 billion less than they called in either 2011 or 2010 but 43% more than in 2009. Total distributions during 2012 hit $118.0 billion – the largest annual amount since the index’s inception. Distributions increased by 23% over totals hit in 2011, 59% from 2010, and 327% from 2009. Exits and recapitalizations helped drive distributions to record highs. Friendly credit markets enabled recapitalizations and anticipated tax hikes made motivated sellers out of some private equity investors.

Last year was the second in a row but only the fifth since the inception of the private equity index in which distributions outpaced contributions; the others were 1996, 2004, 2005, and 2011. From 2006 through 2010, when contributions outnumbered distributions, private equity fund managers in the index called 1.3 times as much capital as they distributed; in 2011 and 2012, the reverse was true, as distributions outweighed contributions by a similar margin.

Venture Capital Performance Insights

For the first time in three years, the venture capital index produced a single-digit annual return, coming off of two consecutive years of 13%+ performance. Dragging down the index’s performance for the year were returns of less than 1% in the middle two quarters and just over 1% in the last. Middling performance from the index’s largest sector, IT, contributed heavily to the benchmark’s result. The IPO market, active during the first half of the year, struggled in the second half following disappointing Facebook IPO results. Contributions were lower in 2012 than in 2011 while distributions increased, and distributions not only outpaced contributions for the year but they hit their highest annual level since 2000.

According to the National Venture Capital Association (NVCA) and Thomson Reuters, 49 venturebacked companies went public in 2012 for a total IPO offer value of nearly $21.5 billion. The number of venture-backed IPOs was in line with 2011, however the total offer value was up significantly, thanks entirely to the $16.0 billion Facebook IPO. There were 469 venture-backed M&A deals in 2012, down slightly from 2011 with 498. For deals with values disclosed to the public, the average size of a venture-backed M&A transaction was up 21.7% from 2011, to approximately $173.6 million.

Fourth-Quarter VC Performance Mediocre; Solid Overall in 2012

After beginning 2012 with a strong first quarter, the Cambridge Associates LLC U.S. Venture Capital Index® returned 0.6%, 0.6%, and 1.2%, respectively, in the second, third, and fourth quarters, ending the year with a 7.2% return. All but one of the meaningfully-sized vintage years had flat or positive returns in the fourth quarter with the exception being vintage year 2000; and all were up for the year (see table to the right). The fourth quarter performance was driven by the five vintages that each made up more than 10% of the index; vintage years 2000 and 2005 through 2008 vintage years together comprised over 64% of the index. Despite mediocre fourth-quarter performance, all seven of the meaningfully-sized vintage years earned positive returns for the year, led by the 2000 and 2010 vintages. Significant write-ups in software, IT, and healthcare companies were behind the positive performance for these two vintage years. Software was by far the largest contributor to the 2000 funds return while IT led in the more recent vintage, 2010. The once dominant vintage year 2000 represented only 11.2% of the index in 2012, down from roughly 13.0% the year before and a peak of over 40% in June 2005.

Software Posted the Highest Fourth Quarter and Annual Returns in 2012

The venture capital index remained concentrated by sector, with the three largest – IT, healthcare, and software – accounting for nearly 76% of the index’s value. With totals slightly higher than their long-term averages, over 81% of capital invested during the fourth quarter went into companies in these sectors. IT and healthcare companies garnered more than twice the dollars allocated to software. Among the large sectors, software was the best performing during the quarter, posting a 3.5% return, while media’s - 3.7% was the lowest. Write-downs in media investments in funds raised in 2000 and 2005 were not offset by smaller write-ups in other vintages. For the year, the three largest sectors returned over 11.9%, outperforming the total 2012 return for all portfolio companies by over 2.2%. Software companies earned a gross return of 23.0%, by far the best among the top three sectors. Vintage years 2000 and 2008 contributed the most to the sector’s strong return. On a pooled, dollar-weighted basis, software companies produced double-digit returns in vintage years 2000 and 2005 through 2008.

VC Calls and Distributions Increased Slightly from Prior Quarter Levels

In the fourth quarter, managers in the U.S. venture capital index called just under $3.4 billion, an increase of $171 million, or 5.3% from the previous quarter. Distributions also rose from the third quarter to the fourth, albeit by only 2.9%, to $6.1 billion. This marked the fourth consecutive quarter that distributions outnumbered contributions. It has been more than 12 years since there was a similar trend in LP cash flows. Managers of funds raised in 2008, 2010, and 2012 called approximately $1.7 billion or 50.0% of all capital called during the quarter. Each vintage called more than $500 million. Investors in the 2000 and 2004 vintage years each received over $1.0 billion in distributions or 44.2% of the total distributed. Vintage years 2005 and 2006 both distributed more than $600 million in the quarter. Managers in the U.S. venture capital index called less and distributed more capital in 2012 than they did in 2011. Contributions decreased 12.2% to $13.7 billion while distributions increased 50.5% to nearly $22.2 billion. Distributions in 2012 were the third highest annual total of all-time, behind only the bubble years of 1999 and 2000.

About the Indices Cambridge Associates derives its U.S. private equity benchmark from the financial information contained in its proprietary database of private equity funds. As of December 31, 2012, the database comprised 1,045 U.S. buyouts, private equity energy, growth equity, and mezzanine funds formed from 1986 to 2012, with a value of $584.8 billion. Ten years ago, as of December 31, 2002, the index included 490 funds whose value was slightly more than $122.5 billion. Cambridge Associates derives its U.S. venture capital benchmark from the financial information contained in its proprietary database of venture capital funds. As of December 31, 2012, the database comprised 1,420 U.S. venture capital funds formed from 1981 to 2012, with a value of roughly $129.2 billion. Ten years ago, as of December 31, 2002, the index included 937 funds whose value was about $38.7 billion.

The pooled returns represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds’ general partners in their quarterly and annual audited financial reports. These returns are net of management fees, expenses, and performance fees that take the form of a carried interest.

Both the Cambridge Associates LLC U.S. Venture Capital Index® and the Cambridge Associates LLC U.S. Private Equity Index® are reported each week in Barron’s Market Laboratory section. In addition, complete historical data can be found on Standard & Poor’s Micropal products and on our website, www.cambridgeassociates.com.

About Cambridge Associates Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 950 global investors and delivers a range of services, including investment consulting, outsourced portfolio solutions, research services and tools (Research Navigatorsm and Benchmark Calculator), and performance monitoring, across all asset classes. The firm compiles the performance results for over 5,000 private partnerships and their more than 65,000 portfolio company investments to publish its proprietary private investments benchmarks, of which the Cambridge Associates LLC U.S. Venture Capital Index® and Cambridge Associates LLC U.S. Private Equity Index® are widely considered to be among the standard benchmark statistics for these asset classes. Cambridge Associates has more than 1,100 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and Beijing.

Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. Cambridge Associates has been selected to provide data and to develop and maintain customized industry benchmarks for a number of prominent industry associations, including the Institutional Limited Partners Association (ILPA), Australian Private Equity & Venture Capital Association Limited (AVCAL); the African Venture Capital Association (AVCA); the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA); the Asia Pacific Real Estate Association (APREA); and the National Venture Capital Association (NVCA). Cambridge also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA).

Venture Capital Funds Raised $2.9 Billion During Second Quarter 2013

U.S. venture capital firms raised $2.9 billion from 44 funds during the second quarter of 2013, a decrease of 33 percent compared to the level of dollar commitments raised during the first quarter of 2013, but equal to the number of funds, according to Thomson Reuters and the National Venture Capital Association (NVCA). The dollar commitments raised during the second quarter of 2013 is a 54 percent decline from the levels raised during the comparable period in 2012 and marks the lowest quarter for venture capital fundraising, by dollars, since the third quarter of 2011. The top five venture capital funds accounted for 55 percent of total fundraising during the second quarter of 2013.

Number of Venture Capital
Year/Quarter Funds ($M)
---------------------------------------------
2009 161 16,175.6
---------------------------------------------
2010 173 13,423.0
---------------------------------------------
2011 186 18,982.9
---------------------------------------------
2012 213 19,699.1
---------------------------------------------
2013 88 7,200.1
---------------------------------------------
2Q'11 47 2,650.4
---------------------------------------------
3Q'11 66 2,116.0
---------------------------------------------
4Q'11 53 6,105.0
---------------------------------------------
1Q'12 57 4,801.3
---------------------------------------------
2Q'12 51 6,319.3
---------------------------------------------
3Q'12 59 5,223.9
---------------------------------------------
4Q'12 46 3,354.6
---------------------------------------------
1Q'13 44 4,317.4
---------------------------------------------
2Q'13 44 2,882.7
---------------------------------------------

Source: Thomson Reuters and National Venture Capital Association

"The second quarter reflects not just the consolidation of the venture capital industry but also the overall contraction of fund size," said Mark Heesen, president of the NVCA. "Many long-standing, pedigree venture firms are heeding the guidance from limited partners and raising smaller, more agile funds. Consequently, dollar values of capital under management are declining from historical levels. Counterbalancing this trend is the recent uptick in the venture-backed IPO market which, if sustainable, may very well draw more dollars into the asset class in the coming year."

Second quarter 2013 venture capital fundraising was led by Massachusetts-based Matrix Partners X, L.P. which raised $450.0 million, California-based Scale Venture Partners IV, L.P. which raised $300.0 million and Foundation Capital VII, L.P. which raised $282.0 million.

There were 29 follow-on funds and 15 new funds raised during the second quarter of 2013, almost a 2-to-1 ratio of follow-on to new funds. The number of new funds raised during the second quarter is more than double the number of first-time funds raised during the first quarter of this year, which was atypically low. By dollars raised, follow-on funds accounted for 89 percent of total dollar commitments during the second quarter of 2013. Over the past five years, follow-on fund dollars have accounted for 91 percent of total venture capital fundraising.

The largest new fund reporting commitments during the second quarter of 2013 was Massachusetts.-based Sigma Prime Partners IX, L.P. which raised $115.6 million for the firm's inaugural fund. A "new" fund is defined as the first fund at a newly established firm, although the general partners of that firm may have previous experience investing in venture capital.

----------------------------------
No. of No. of
New Follow-on Total
----------------------------------
2009 40 121 161
----------------------------------
2010 57 116 173
----------------------------------
2011 57 129 186
----------------------------------
2012 71 142 213
----------------------------------
2013 22 64 86
----------------------------------
2Q'11 16 31 47
----------------------------------
3Q'11 21 45 66
----------------------------------
4Q'11 15 38 53
----------------------------------
1Q'12 16 41 57
----------------------------------
2Q'12 16 35 51
----------------------------------
3Q'12 19 40 59
----------------------------------
4Q'12 20 26 46
----------------------------------
1Q'13 7 37 44
----------------------------------
2Q'13 15 29 44
----------------------------------

Is a VC Partnership Greater than the Sum of its Partners?

This paper investigates whether individual venture capitalists have
repeatable investment skill and to what extent their skill is
impacted by the VC firm where they work. The authors examines a unique
dataset that tracks the performance of individual venture capitalists'
investments across time and as they move between firms. The authors find
evidence of skill and exit style differences even among venture
partners investing at the same VC firm at the same time.

The study estimates suggest the partner's human capital is two
to five times more important than the VC firm's organizational
capital in explaining performance.

VENTURE CAPITAL INVESTMENTS DECLINE IN DOLLARS AND DEAL VOLUME IN Q1 2013

Increases in Software and Media Investing Temper Declines in Clean Technology and Life Sciences

Venture capitalists invested $5.9 billion in 863 deals in the first quarter of 2013, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly venture capital (VC) investment activity fell 12 percent in terms of dollars and 15 percent in the number of deals compared to the fourth quarter of 2012 when $6.7 billion was invested in 1,013 deals.

The Life Sciences (biotechnology and medical device industries combined) and Clean Technology sectors both saw marked decreases in both dollars and number of deals in the first quarter. However, there was a notable percentage increases in dollars invested in the Media & Entertainment industry while the Software industry accounted for 40 percent of the dollars invested in the quarter.

“The bright spot in the first quarter was Software,” remarked Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US. "These capital-efficient companies that have shorter time frames to a liquidity event – whether that is M&A or IPO – continue to be attractive to an ever-shrinking pool of VC funds. Activity in both the IPO and M&A markets for Software companies is likely an encouraging factor for VCs and this dynamic could be spurring the greater focus, accordingly. The exact opposite is true for the Clean Technology sector. This capital-intensive sector is showing signs of reaching its limit in how much VCs can continue to support these companies without additional equity coming from outside sources.”

“Lower investment levels in the first quarter were driven by a number of factors, none of which were unexpected," said John Taylor, head of research for NVCA. "The venture industry has been raising less capital than it has been investing now for several years, and ultimately this dynamic flows through and manifests itself in lower investment levels overall. Additionally, we are seeing less money going into traditionally capital-intensive sectors such as clean tech and life sciences, especially in first-time deals. Lastly, the majority of deals are being done in the capital-efficient IT sector where rounds’ amounts are lower. We expect these overall trends to continue until exits and subsequent fundraising activities pick up, and dollars start to flow back into more venture funds.”

Industry Analysis

The Software industry received the highest level of funding for all industries, rising 8 percent from the prior quarter to $2.3 billion invested during the first quarter of 2013, marking the fourth consecutive quarter of more than $2 billion invested in the sector. The Software industry also counted the most deals in Q1 at 329; however, this represented an 18 percent decrease from the 399 rounds completed in the fourth quarter of 2012.

The Biotechnology industry was the second largest sector for dollars invested with $875 million going into 96 deals, falling 33 percent in dollars and 30 percent in deals from the prior quarter.

The Medical Devices and Equipment industry also experienced a decline, dropping 20 percent in Q1 to $509 million, while the number of deals dropped 10 percent to 71 deals.

Overall, investments in the Life Sciences sector (Biotechnology and Medical Devices) fell 28 percent in dollars and 23 percent in deals, which was the fewest number of deals since the first quarter of 2009.

Venture capitalists invested $1.4 billion into 231 Internet-specific companies during the first quarter of 2013. This investment level is 11 percent lower in dollars and 5 percent lower in deals than the fourth quarter of 2012 when $1.5 billion went into 243 deals. Two of the top ten deals for the quarter were in the Internet-specific category. ‘Internet-Specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category.

The Clean Technology sector, which crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation, declined 35 percent in dollars and 13 percent in deals from the prior quarter to $368 million going into 61 deals. The investment total is the lowest since the first quarter of 2006 when Clean Technology companies received $355 million. The relative decrease in Clean Technology investments was driven by the lack of any large deals in the sector during Q1.

Eleven of the 17 MoneyTree sectors experienced decreases in dollars invested in the first quarter, including Industrial/Energy (63 percent decrease), IT Services (41 percent decrease), and Semiconductors (39 percent decrease). The Media & Entertainment sector experienced a 37 percent increase during the quarter, which was primarily due to a single large deal, the third largest in Q1.

Stage of Development

Seed stage investments rose 11 percent in dollars but fell 22 percent in deals with $178 million invested into 52 deals in the first quarter. Early stage investments fell 28 percent in dollars and 17 percent in deals with $1.5 billion going into 393 deals. Seed/Early stage deals accounted for 52 percent of total deal volume in Q1, compared to 54 percent in the fourth quarter of 2012.

The average Seed deal in the first quarter was $3.4 million, up from $2.4 million in the fourth quarter.

The average Early stage deal was $3.7 million in Q1, down from $4.2 million in the prior quarter.

Expansion stage dollars decreased 13 percent in the first quarter, with $2.0 billion going into 217 deals. Overall, Expansion stage deals accounted for 25 percent of venture deals in the first quarter, approximately the same as was seen in the fourth quarter of 2012. The average Expansion stage deal was $9.2 million, nearly identical to the prior quarter.

Investments in Later stage deals increased 2 percent in dollars but declined 9 percent in deals to $2.2 billion going into 201 rounds in the first quarter. Later stage deals accounted for 23 percent of total deal volume in Q1, compared to 22 percent in Q4 when $2.2 billion went into 220 deals.

The average Later stage deal in the first quarter was $11.1 million, which decreased slightly from $10.0 million in the prior quarter.

First-Time Financings

First-time financing (companies receiving venture capital for the first time) dollars decreased 20 percent to $903 million in Q1, the lowest level since the third quarter of 2009, while the number of companies fell 21 percent from the prior quarter to 263. First-time financings accounted for 15 percent of all dollars and 30 percent of all deals in the first quarter, compared to 17 percent of all dollars and 33 percent of all deals in the fourth quarter of 2012.

Companies in the Software industry received a major portion of first-time rounds in the first quarter, accounting for 63 percent of the dollars and 45 percent of the companies receiving funding in Q1.

The Life Sciences sector experienced a dramatic drop, falling 52 percent in dollars to $98 million from the prior quarter, which is the lowest quarterly amount since the third quarter of 1996 and only the fourth time in survey history that the total has fallen below $100 million in a single quarter. Only 20 Life Sciences companies received venture capital funding for the first time in Q1 of 2013, which is the fewest seen since Q2 of 1995.

The average first-time deal in the first quarter was $3.4 million, approximately the same as the prior quarter.

Seed/Early stage companies received the bulk of first-time investments, garnering 51 percent of the dollars and 79 percent of the deals in the first quarter of 2013.

Middle-Market Mergers & Acquisitions Holding Steady In 2013

The middle-market for Mergers & Acquisitions has significantly improved in the past two years according to The Babson College Middle-Market/Small Business Mergers & Acquisitions Survey conducted by the business school’s MBA students in the first quarter of 2013.
Yet according to the report, growth in 2013 will be flat versus 2012 because of a stalled economy, challenges in Washington around tax and estate issues, hesitation by business owners to relinquish, and the gradual recovery in the debt market.

The Babson Survey directed by Babson College Professor Kevin J. Mulvaney in collaboration with members of the Association for Corporate Growth (ACG) and Exit Planning Exchange (XPX), assesses and defines current trends that impact buyers and sellers of businesses. The survey population included leading national middle-market investment banks, large business brokerage firms, advisory professionals, and commercial bankers.

“The M&A environment for both small and mid-sized business exits or recapitalizations is stable and may improve in the coming years,” commented Mulvaney, “ It is a very good time for entrepreneur owners to begin planning for their capital event.”

Among the survey’s key findings:

Middle-market volume is strong; but small business M&A activity grows more slowly.

• The volume of middle-market deals is steady and a majority of respondents project a continuation of the current level through the rest of the year. Only 20% of respondents foresee volume increases as the year unfolds.
• Services industry sector remains the strongest with increased activity reported in e-commerce, health and medical services, and aerospace and related industries.
• The small business arena is growing more slowly (an average of 0.5 times increase in EBITDA valuation over 2012) with no expected rise this year in valuations.
• The environment for M&A activity is about the same as a year ago. Babson authors project an increase in the number of private equity buyers in the next eighteen months because of increased debt availability on more acceptable terms.
• Underperforming or weak companies are not viable deals and receive lowball offers and very little interest from financial buyers. The market is willing to pay a premium for revenue growth potential and predictable EBITDA performance.

Buyers demand high ‘seller assistance’ for smaller companies

• The percentage of seller assistance (earn outs, deferred money, etc.) continues to be high. The smaller the company (on a $1-100MM survey scale) the higher the demands for seller assistance from the buyer.
• Good news for sellers – the deferred component of the purchase price has dropped from an average of 30% to 20%. The survey also found that sellers are beginning to dig in their heals demanding a larger component of cash up front.
Timeframe to complete deals lengthens
• Due diligence by buyers who have concerns about a sluggish economy and perceived challenges to building revenue will increase deal-making timeframes by a month (formerly 6-9 months). Strategic buyers are also organizing more outside expertise than ever before to prepare their due diligence reports.
• Sellers need patience and must be prepared with information and the ability to respond quickly to buyer requests to increase chances of closing deals within six months. Like buyers, seller success is dependent on acquiring the right legal and deal-making expertise.
• It is still a seller’s market for quality companies. Whether selling or restructuring capital, sellers must develop a knowledgeable game plan to evaluate options and potential deal partners.

Financing for Buyers continues to grow and terms are more acceptable

• More financial lenders are making loans with terms that represent a fair balance between what the lender and borrower feel is acceptable.
• The Babson survey projects an increase in the number of opportunities for every type of middle-market financing. This is good news for private equity buyers when balancing leverage versus equity contributions for new M&A deals.
• For smaller deals, there has been a strong rebound in SBA loans especially from community banks, that will help contribute to the growth of small business deals moving forward.
• Surprisingly, the survey found an increase in the percentage of equity needed by qualified buyers of small businesses. This had been a minimum of 20% but some experts see an increase to a minimum of 25%. The increased equity demands from lenders may have contributed to the slow growth of small business sales.
• Middle-market stability is reflected in increased pressure on pricing for financial institutions involved in M&A deals. Yields on mezzanine debt dropped to 12-14% from historical averages of 15-20% and financing costs declined as the volume of financial buyer deals increased.

Moderate Recovery Continues in 2012 for U.S. Angel Investor Market

The angel investor market in 2012 continued the upward trend started in 2010 in investment dollars and in the number of investments, albeit at a moderate pace, according to the 2012 Angel Market Analysis released by the Center for Venture Research at the University of New Hampshire.

Total investments in 2012 were $22.9 billion, an increase of 1.8 percent over 2011 when investments totaled $22.5 billion. A total of 67,030 entrepreneurial ventures received angel funding in 2012, an increase of 1.2 percent over 2011 investments, and the number of active investors in 2012 was 268,160 individuals, a decline of 15.8 percent from 2011.

“The small increase in both total dollars and the number of investments resulted in a deal size for 2012 that was virtually unchanged from 2011. These data indicate that while fewer angels were active investors in 2012, those who did invest have increased their individual investments substantially, from $70,690 in 2011 to $85,435 in 2012, an increase of 20.9 percent,” according to Jeffrey Sohl, director of the UNH Center for Venture Research at the Peter T. Paul College of Business and Economics.
“It is possible that given the robust returns in the public equity markets, some angels may have reallocated their portfolios and reduced their angel investing activity but those angels that continued to invest remained quite active,” Sohl said.

Software remained the top sector position with 23 percent of total angel investments in 2012, followed by healthcare services/medical devices and equipment (14 percent), retail (12 percent), biotech (11 percent), industrial/energy (7 percent), and media (7 percent).

Angels decreased their investments of seed and start-up capital, with 35 percent of 2012 angel investments in the seed and start-up stage, down from 42 percent in 2011 and matching seed and start-up investing in 2010 (31 percent). Angels also exhibited a decreased interest in early stage investing with 33 percent of investments in the early stage, down from 40 percent in 2011. Expansion financing exhibited a significant increase to 29 percent of deals, up from 15 percent in 2011.
“Investment activity was evenly divided between new, first sequence, investments and follow-on investments, the same as in 2011. This decrease in seed/start-up stage is of concern since that is the stage of need for our nation’s entrepreneurs,” Sohl said.

Angel investments continue to be a significant contributor to job growth with the creation of 274,800 new jobs in the United States in 2012, or 4.1 jobs per angel investment. The average angel deal size in 2012 was $341,800 and the average equity received was 12.7 percent with a deal valuation of $2.7 million.

Silicon Valley Venture Capitalists’ Confidence Up for Third Consecutive Quarter

The Silicon Valley Venture Capitalist Confidence Index® for the first quarter of 2013, based on a March 2013 survey of 30 San Francisco Bay Area venture capitalists, registered 3.73 on a 5 point scale (with 5 indicating high confidence and 1 indicating low confidence). This quarter’s index is up from the previous quarter’s confidence reading of 3.63, and marks the third consecutive upward move in VC confidence.

This is the 37th consecutive quarterly survey and research report, providing unique quantitative and qualitative trend data and analysis on the confidence of Silicon Valley venture capitalists in the future high-growth entrepreneurial environment. Mark Cannice, department chair and professor of entrepreneurship and innovation with the University of San Francisco (USF) School of Management, authors the research study each quarter.

In this latest report, Cannice finds a depressed exit market for venture-backed firms in the first quarter of 2013 was not enough to reverse the positive overall trend in confidence of Silicon Valley venture capitalists. For example, Bill Reichert of Garage Technology Ventures shared, “We’ve waited through the chilling effect of the troubled IPOs of Zynga and Groupon. There is less frothiness in social, local, mobile, and gaming. Calmer heads seem to be prevailing, and the overall market is up.” Mark Platshon of Birchmere Ventures struck an optimistic chord saying, “The Valley will always reinvent itself or change to build new approaches.”

However, not all venture capitalists who responded to the Q1 survey agreed with the view of a more munificent environment. For example, Igor Sill of Geneva Venture Management argued, “Despite signs of an improving economy and new found stock market optimism, I sense considerable concern over the impact of governmental policy on the venture capital industry.” Bob Ackerman of Allegis Capital added, “While innovation is alive and well, costs are up, staffing is a major challenge, and early-stage capital formation is clearly under pressure in some sectors of the market.”

Professor Cannice concluded the report with, “While the forces of creative destruction (Schumpeter) apply to the industries that finance innovation and new venture creation as well as to the enterprises that are financed, the impact of these structural shifts on the overall productivity and competitiveness of wide swaths of American business is difficult to predict.”

Complete Silicon Valley Venture Capitalist Confidence Index® for the first quarter of 2013.

Venture capital firms that invest in women-led businesses see positive returns

Venture capital firms that invest in women-led businesses see positive returns, says a new report issued today by the U.S. Small Business Administration (SBA) Office of Advocacy. The report, called Venture Capital, Social Capital, and the Funding of Women-led Businesses, focuses on women entrepreneurs' access to equity funding and how social networks influence venture capital firms' decisions to invest. In the report, the authors, Joy Godesiabois and Lawrence Plummer, find that social capital ("who you know and how you know them") affects funding of women-led firms in different, sometimes conflicting ways.

Venture capital firms tend to invest with familiar social networks that may not include women entrepreneurs. Yet this study shows that when venture capital firms do invest in women-led businesses, they generally improve their bottom line. And venture capital firms that regularly invest as a group in the same businesses tend to invest more often in businesses led by women entrepreneurs, according to the report.

"As investors look for new opportunities, and as we focus on ways to grow our economy, we should look to women entrepreneurs for a good share of new growth," said Dr. Winslow Sargeant, Chief Counsel for Advocacy. "Policies that encourage venture capital networks to be more inclusive will create the environment for new high-growth innovative businesses."

Private Equity and Venture Capital Investments in ex U.S. Developed and Emerging Markets Posted Positive Returns in Q3 2012, Bouncing Back From a Negative Second Quarter,

Private equity and venture capital funds that invest primarily in companies located outside the U.S., in both developed and emerging markets, generated positive returns during the quarter ending September 30, 2012. While trailing the performance of international public equity indices during the period, both alternative asset groups improved significantly from negative results in the second quarter, according to global institutional investment advisor Cambridge Associates LLC (C|A).

The Cambridge Associates LLC Global ex U.S. Developed Markets Private Equity and Venture Capital Index earned 3.1% in the third quarter, up 4.6% over the prior quarter. For the first three quarters of 2012, the index was up 9.1%. The Cambridge Associates LLC Emerging Markets Private Equity and Venture Capital Index rose 2.6% in the third period, a 5.3% quarter-over-quarter improvement; year to date, the index earned 6.2%. Returns for both the developed and emerging markets indices are calculated in U.S. dollars.

The following table shows the performance of both C|A benchmarks versus comparable public market indices over a variety of time horizons ending on September 30, 2012.

Global ex U.S. Developed and Emerging Markets Private Equity and Venture Capital Indices
Returns (%) in U.S. Dollars
Periods ending September 30, 2012
For the periods ending September 30, 2012		Qtr.		Year to Date		1 Year		3 Years		5 Years		10 Years		15 Years		20 Years
Ex U.S. Developed Markets PE and VC		3.1		9.1		9.0		12.1		1.5		14.6		13.7		13.4
Emerging Markets PE and VC		2.6		6.2		7.1		12.7		6.9		11.8		7.9		7.7
Other Indices
MSCI EAFE		6.9		10.1		13.8		2.1		-5.2		8.2		3.4		5.5
MSCI Emerging Markets		7.9		12.3		17.3		6.0		-1.0		17.4		7.5		8.9

Sources: Cambridge Associates LLC, MSCI Inc., and Thomson Reuters Datastream. MSCI data provided "as is" without any express or implied warranties. Returns for time periods shorter than a year are not annualized.

Both the developed and the emerging markets indices outperformed their public equity counterparts, the MSCI EAFE and the MSCI Emerging Markets indices, over the longest investment periods in the table, the 15- and 20-year marks. 

The Five Largest Vintages in the Developed Markets Index, and the Four Largest in the Emerging Markets Index, all had Positive Returns for the Quarter

Funds launched in 2008 were the best performers of the five significantly-sized vintages (i.e. those accounting for at least 5% of the index's value) in the developed markets index, earning 6.4% for the third quarter. All five (vintage years 2004 - 2008) rose during the quarter. The largest vintage in the index, the group of funds launched in 2006 and representing 29.4% of the index's value, returned 2.3%, the lowest of the top five.

In the emerging markets index, only four vintages were significantly sized, but all four earned positive returns for the period -- a complete reversal from the previous quarter, when all posted negative returns. Of the four, the 2006 and 2007 vintages each gained 3.5%, while the 2005 and 2008 vintages each earned 2.3%. The 2007 vintage remained the largest in the index and represented 36.7% of its total value.

Capital Calls and Distributions Rose in the Developed Markets Index; in the Emerging Markets Index, Distributions also Increased, but Contributions Fell

Fund managers in the developed markets index summoned more cash from their investors during the third quarter than in the second -- about $7.9 billion, a 29.4% increase. Nearly 67% of the total capital called during the quarter came from investors in three vintage years: 2007, 2008, and 2011. Fund managers also increased distributions, to $14.7 billion. This was a 65.0% jump over the prior period and marked the sixth time in the last seven quarters in which distributions outpaced contributions. About 75% of the distributions during the quarter went to the limited partners of funds raised in 2005, 2006, and 2007.

Contributions in the emerging markets index during the third quarter fell 5.7%, to $3.8 billion. Almost 83% of this amount came from four vintages: 2007, 2011, 2010, and 2006. Investors in funds in the emerging markets index saw a 91.7% increase in distributions in the third quarter, to $2.1 billion, though this followed a second period in which distributions were at their lowest quarterly level in three years. Vintage years 2005 and 2007 together accounted for 60% of all distributions during the quarter. 

"Fund managers in both indices gave us the biggest jump in distributions that we've seen in some time," said Miriam Schmitter, Managing Director. "In each case, the bulk of the distributions were driven by a small number of vintages -- the 2005 through 2007 vintage year funds in the developed markets index and the 2005 and 2007 vintages in the emerging markets index. The exit environment in Europe has been healthy, supported by recovering debt markets." 

Healthcare was the Top Earning Large Sector in the Developed Markets Index, while Financial Services Led the Way among the Largest Sectors in the Emerging Markets Index

Healthcare companies in the developed markets index generated a 5.1% return for the third quarter, which was the best of the seven significantly-sized sectors. Of the seven, only one sector, media, had a negative result for the quarter, and it fell only 0.1%. During the quarter, consumer and healthcare companies attracted the first and second largest amounts of investment capital, a combined 43% of the total.

All five of the significantly-sized sectors in the emerging markets index had positive returns for the quarter. Financial services topped the list with a 6.2% return, followed by a 4.2% return for healthcare. Manufacturing was the poorest performing large sector, rising 1.6%. Companies in the consumer sector, which represented almost a quarter (23.9%) of the index's value, received 37% of the total invested capital during the quarter, the largest of any individual sector in the index and the fourth consecutive quarter in which consumer companies were the leading recipients of investment dollars.

Companies in the U.S. were the Best Performers among the Largest Regions in the Developed Markets Index, though Companies in Japan Led overall

The U.K. remained the largest regional component of the developed markets index during the third quarter, representing 13.9% of the index's value; companies in the U.K. returned 3.6% for the period. The U.S. was the performance leader among the five largest regions by investment value in the index, returning 4.5%. The other three top regions were Sweden and Germany, each of which returned 3.5%, and France, which rose 1.7%. Companies in Japan, however, were the top performers in the index overall, earning 15.9%.

In the emerging markets index, only three regions represented more than 5.0% of the index: Mainland China, India, and South Korea. China was the single largest region in the index, accounting for 35.6% of its value, and it turned in a negative performance for the quarter, falling 1.4%. India represented 10.7% of the index and had by far the best quarter of the top three regions, earning 9.0% for the quarter. South Korean companies generated a 2.0% return and represented 5.6% of the index.

Western Europe and Emerging Asia Continued to Attract the Bulk of Investment Capital

Fund managers in the developed markets index ploughed more than 63% of their investment dollars into companies located in Western Europe, which, while following a long-established trend, was 15% less than the historical average. Companies in the U.S. and Australia attracted the second and third largest amounts of investment capital, respectively, in the index.

Companies located in emerging Asia were the biggest beneficiaries of investment capital in the emerging markets index, collecting 76% of the total for the quarter.

For further details on the performance of the C|A developed and emerging markets indices for Q3 2012, please click here.

About the Indices

Cambridge Associates derives its Global ex U.S. Developed Markets Private Equity and Venture Capital benchmark from the financial information contained in its proprietary database of global ex U.S. and emerging markets private equity and venture capital funds. As of September 30, 2012, the database comprised 694 funds formed from 1986 to 2012 with a value of about $251 billion. By way of comparison, ten years ago at September 30, 2002, the benchmark index included 318 funds whose value was roughly $39 billion.

Cambridge Associates derives its Emerging Markets Private Equity and Venture Capital benchmark from the financial information contained in its proprietary database of emerging markets venture capital and private equity funds. As of September 30, 2012, the database comprised 417 funds formed from 1986 to 2012 with a value of roughly $98 billion. By way of comparison, as of September 30, 2002, the benchmark index included 150 funds whose value was about $13 billion.

The pooled returns represent the net end-to-end rates of return calculated on the aggregate of all cash flows and market values as reported to Cambridge Associates by the funds' general partners in their quarterly and annual audited financial reports. These returns are net of management fees, expenses, and performance fees that take the form of a carried interest.

About Cambridge Associates

Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 900 global investors and delivers a range of services, including investment consulting, outsourced investment solutions, research and tools (Research Navigator(SM) and Benchmark Calculator), and performance monitoring, across asset classes. The firm compiles the performance results for more than 5,000 private partnerships and their more than 65,000 portfolio company investments to publish proprietary private investments. Cambridge Associates has more than 1,000 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information about Cambridge Associates, please visit www.cambridgeassociates.com.

Cambridge Associates has been selected to provide data and to develop and maintain customized industry benchmarks for a number of prominent industry associations, including the Institutional Limited Partners Association (ILPA), Australian Private Equity & Venture Capital Association Limited (AVCAL); the African Venture Capital Association (AVCA); the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA); the Asia Pacific Real Estate Association (APREA); and the National Venture Capital Association (NVCA). Cambridge also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA).