Vaquero Capital Keynotes Techstars FounderCon 2013, September 16, 2013

1. Confidential
The State of M&A
David Grove
Managing Partner
Vaquero Capital

2. 2
0
100
200
300
400
500
600
SaaS and Internet Outpacing the Market
S&P 500 NASDAQ SaaS Peer Group Internet Peer Group
The Market Conditions are Robust…
93%YoY increase in 1H13
Technology M&A deal value
61IPOs raising $13Bnof
proceeds in 2Q13
74%and 43%YTD
increase in SaaS Software and
Internet indices respectivelyJan 09 July 13

3. 3
…Driven by Growing Confidence
62%of S&P 500 beat Q2 earnings estimates –
highest since 3Q11
$1.5Tof Cash in corporate coffers
14.2VIX Average (1H13) -- lowest since 2007
High Business Confidence
Strong Balance Sheets
Lower Volatility

4. 4
Significant IPOs have added to Buyers
Internet / Digital Media SaaS
Historical
Buyers

5. 5
Premium Sales and Bright Shiny Objects

6. 6
How Do You Achieve Premium Valuation?
Massive, often untapped markets
Ability to achieve sustainable, long-term growth
Engagement
Talent
Build v. Buy
Defensive &
Strategic
Technology
Exponential growth in traffic and deep engagement
New paradigms leveraging mobile devices
Visionary teams creating new markets
Ability to understand generational shifts
Rapid market share gain
Time to market critical
Existing business model in massive emerging market
Threat to market share if competitors own
Next generation technologies
Re-inventing consumer engagement modality
Size of Market
What Is It Worth to You? Sell v. Build

7. 7
Internet Leaders
SaaS Leaders
Hot M&A
Growth + Profitability – Risk = Valuation
Traditional Valuation Metrics
“Bright Shiny Objects”
40%
Growth
40%
Growth
9x
Revenue
Egregious Revenue Multiples = Infinite FCF Multiples
20%
FCF
50x
FCF
10%
FCF
8.5x
Rev
40x
FCF
12x
Rev
70x
FCF

8. 8
Deal Considerations
Structure
Stock v. Cash
Earnouts
Management &
Employees
Interests &
Perspectives
Board
Founder
Investors
“Tech” Companies
Are Bought Not Sold
Marketing
Using financing as
a trigger

9. 9
Preparing for Exit
Start Early Hygiene Matters
Consider Exit When Financing Lawyer Up

10. 10
Driving Competition
Negotiated Sale Auction
Targeted Auction Hybrid

11. 11
Recent High Profile Deals
 Talent
 Strategic
 Unique
 Engagement
 Location, Location, Lo
cation
 Build v. Buy
 Unique
 Competition
 Synergies
 Mobile
 Talent
 Installed Base
 Transformative

12. 12
Establish Relationships in Advance of Exit
Build an
Ecosystem of
Partners
Get to know future buyers – Don’t worry, they cant do what you do..

13. 13
Questions?

14. 14
Year Target Buyer Sector
Transaction
Value LTM Revenue
TV / LTM
Revenue
9/9/2013 MoPub Twitter Internet - Commerce $350 NA 3.5 x
6/11/2013 Waze Google Internet - Mobile $966 NA NM
6/3/2013 ExactTarget Salesforce.com SaaS - Marketing $2,351 $317 7.4 x
5/20/2013 Tumblr Yahoo! Internet - Social $1,100 NA 13.0 x
11/23/2012 Eloqua Oracle SaaS - Marketing $958 $90 10.6 x
10/21/2012 Ancestry.com Private Investors Internet - Social $1,609 $460 3.5 x
8/25/2012 Kenexa Corp. IBM SaaS - HR $1,397 $318 4.4 x
5/31/2012 Buddy Media Salesforce.com SaaS - Marketing $745 $29 26.0 x
5/22/2012 Ariba SAP America SaaS - Commerce $4,608 $502 9.2 x
4/9/2012 Instagram Facebook Internet - Social $1,000 NA NA
2/8/2012 Taleo Oracle SaaS - HR $1,921 $315 6.1 x
12/2/2011 SuccessFactors SAP America SaaS - HR $3,764 $292 12.9 x
10/23/2011 Rightnow Technologies Oracle SaaS - CRM $1,763 $216 8.2 x
7/11/2011 PopCap Games Electronic Arts SaaS - CRM $1,301 NA NA
6/15/2012 Yammer Microsoft Internet - Social $1,200 NA NA
5/10/2011 Skype Microsoft Internet - Communications $9,325 $860 10.8 x
12/31/2012 SurveyMonkey.com Google SaaS - Marketing $794 NA NA
5/24/2012 PowerReviews Bazaarvoice SaaS - Commerce $128 $12 10.7 x
8/15/2012 Getty Images The Carlyle Group Internet - Media $3,300 NA NA
3/5/2012 Amobee Singapore Telecommunications SaaS - CRM $321 NA NA
Mean $1,945 $310 9.7 x
Median $1,251 $315 9.2 x
Valuation of Hot M&A Comps

15. 15
Valuation of Hot Public Companies
EV EV / Rev EV / FCF Revenue Growth FCF Margin
Internet 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E
Angie’s List $1,180 3.0x 3.0x 23.0x 14.0x 38% 27% 15% 20%
Retail me Not $1,995 8.2x 6.8x 42.1x 33.4x 25% 21% 19% 20%
Facebook $104,617 10.8x 8.4x 48.8x 35.5x 32% 28% 22% 24%
Trulia $1,338 7.0x 5.0x 38.0x 26.0x 55% 39% 18% 19%
LinkedIn $28,587 13.4x 9.9x 90.7x 61.0x 41% 35% 15% 16%
Shutter stock $1,802 6.2x 5.0x 28.0x 20.3x 26% 26% 22% 24%
Zillow $3,217 12.0x 8.9x 76.2x 48.1x 41% 34% 16% 19%
Pandora $1,735 6.4x 4.7x NM 35.4x 37% 34% 6% 9%
Yelp $1,228 18.1x 12.3x 32.6x 18.4x 47% 38% 11% 15%
HomeAway $2,454 6.0x 5.0x 19.2x 17.0x 20% 16% 31% 30%
Mean 9.1x 6.9x 44.3x 30.9x 36% 30% 18% 20%
Median 7.6x 5.9x 38.0x 29.7x 38% 31% 17% 19%
EV EV / Rev EV / FCF Revenue Growth FCF Margin
Software 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E
Salesforce $21,928 7.9x 6.1x 41.3x 29.1x 29% 22% 15% 15%
Workday $12,521 18.6x 12.8x NM NM 51% 46% NM NM
NetSuite $7,735 14.8x 11.3x 109.3x 62.4x 28% 30% 14% 18%
Splunk $5,999 16.0x 12.1x 86.5x 53.8x 33% 32% 19% 23%
ServiceNow $4,465 11.0x 8.0x 79.8x 44.1x 45% 36% 9% 13%
Tableau $3,201 11.3x 8.9x NM 203.5x 40% 26% NM 4%
Cornerstone $2,726 10.5x 7.6x 146.6x 43.3x 41% 38% 7% 18%
Demandware $1,215 8.9x 6.6x NM NM 36% 35% NM NM
Concur $6,099 8.4x 6.8x 113.0x 79.2x 26% 23% 8% 9%
Marketo $981 10.8x 8.5x NM NM 28% 27% NM NM
Mean 11.8x 8.9x 92.7x 73.6x 36% 31% 12% 14%
Median 10.9x 8.2x 86.5x 53.8x 35% 31% 11% 15%