September 2013 Technology / Media / Telecoms / Internet / Healthcare / Cleantech / Materials Go4Venture Advisers’ European Venture & Growth Equity Market Monthly Bulletin September 2013 Published by Go4Venture Advisers Research, the Equity Research unit of Go4Venture Advisers LLP. About Go4Venture Advisers Providing innovative, fast-growing companies and their investors with independent corporate finance advice to help them evaluate, develop and execute growth strategies Equity Capital Markets (ECM)  Equity private placements  Growth equity financings and secondaries  Pre-IPO advisory Mergers & Acquisitions (M&A)  Sellside  Buyside / Buy and build  Valuation services Go4Venture Advisers LLP is authorised and regulated by the Financial Conduct Authority (FCA). © Go4Venture Advisers 2013 September 2013 Contents This Month in Brief 2 Investments 1.1 - Headline Transactions Index (HTI) 6 1.2 - Large Transactions Summary 7 1.3 - Large Transactions Profiles 9 M&A Transactions 2.1 - M&A Activity Index 24 2.2 - Top 5 Global TMT M&A Transactions Summary 25 Headline European VC & PE-Backed M&A Transactions: 2.3 - Summary 28 2.4 - Profiles 29 List of Acronyms 34 About this Bulletin The Go4Venture Advisers’ European Venture & Growth Equity Market Monthly Bulletin provides a summary of corporate finance activity among emerging European TMT companies:  Investments, i.e. Venture Capital (VC) and Private Equity (PE) financings, including growth equity, financing rounds with single secondaries components (recapitalisations); and  M&A Transactions where the sellers are VC and PE-backed European companies, including all majority transactions with no new investment going into the business (e.g. acquisitions, Management Buyouts (MBOs) and other buyouts). Investment activity is measured using Go4Venture’s European Tech Headline Transactions Index (HTI), which is based on the number and value of transactions reported in professional publications. M&A activity is measured using data from a combination of external sources, primarily Capital IQ, with complementary reporting from 451 Group and VentureSource. Europe is defined as Western, Central and Eastern Europe, excluding Israel. For more details, please refer to the Methodology Note available on our website. Please note that no part of the Bulletin can be reproduced unless content is duly attributed to Go4Venture and the details of republishing are notified to [email protected]. © Go4Venture Advisers 2013 Page 1  ` September 2013 This Month in Brief Dear Clients and Friends, Welcome to the latest edition of Go4Venture Advisers’ European Venture & Growth Equity Market Monthly Bulletin, featuring our proprietary Headline Transaction Index (HTI) of investment activity, as well as a summary of VC & PE-backed TMT M&A exits of $50 million or more. European Market Ploughing Ahead September was another solid month, but with fewer landmark transactions (deals of more than €20 million), resulting in a slightly lower overall investment value. We are still up by close to 40% this year though. M&A exits were also very active, particularly at the global level (fed by three large transactions involving BlackBerry, Nokia and Tokyo Electron) with European VC & Growth Equity exits showing also a good month with 5 transactions above $50 million reported. Investment Activity remains centred around internet investments (1/3 of the number of transactions, and 60% including SaaS related businesses) and growth equity-like transactions (2/3 of investments). In internet, we see the beginning of a move towards a more conservative stance, with fewer e-commerce plays making room for:  More information platform plays minimising offline transaction friction (this month, by order of appearance in the Bulletin: Groupe Santiane, Vestiaire Collective, Calastone, Eruditor and Restalos).  A continuing SaaS trend, which is disrupting one software segment after another (e.g. NewVoiceMedia, TalentSoft).  Tools to support the internet data flow, in particular security (AlienVault, WISeKey) and mobile internet (SwiftKey). From a geographic standpoint, the UK is growing its share of Large HTI Transactions (to 40%) with the rest quite widespread, including France (about 30%). Sector-wise, medtech and cleantech are still under- represented (1 and 2 transactions, respectively), with IT services making a surprising showing (Inoapps), reflecting the growing influence of private equity style investing in the venture world based on recurring revenues (in this case via managed services) and accelerated growth via acquisitions and superior management execution. Fund-raising for funds is continuing its upward trend, with most GPs reporting more optimism (providing their exit track record stands up to scrutiny). New funds which were announced included:  Mainstream funds like Paris-based Idinvest and Partech International: o Idinvest continues to line up thematic funds in partnership with established corporates, this time the Idinvest Digital Fund II together with French media group Lagardere, majoring on Idinvest’s success with Criteo (which has just announced the pricing of its IPO, valuing the company at just short of $2 billion), Dailymotion (despite the exit to Yahoo! being thwarted by French government meddling), Deezer and Meetic. © Go4Venture Advisers 2013 Page 2  ` September 2013 o Partech International (now with an office in Berlin as well as Paris and San Francisco) has extended its December 2011 vintage fund to €160 million (from €130 million), and has taken advantage of a new €600 million French State-backed early-stage fund of funds called FNA to launch a €30 million seed fund together with various business angels (the FNA scheme is similar to the UK’s Enterprise Capital Funds).  More specialised funds covering geographies, sectors or products: o 3TS Capital, covering Central and Eastern European countries, reached a €103 million first close for its third fund. o HI Inov, a venture-dedicated vehicle seeded by the Dentressangle family with the support of high profile business angels, reached a €27 million first close on its way to a €50 million fund. As commented before, renewed interest in European venture is partly driven by the search for growth in the context of a moribund macro environment, low interest rates and the lack of exciting newly publicly-quoted tech companies (with only a few exceptions). There is also a growing realisation that, with this new investment cycle, Europe might finally produce substantial exits with more predictability. What is for sure is that the European venture mindset has changed, with everybody’s sights set on larger exits. Interestingly, at a recent Tech Tour Growth Equity conference we spoke at, one of the panels was specifically on: “Reset Ambition: From 100M to 1B”. Of course, we all have to be careful not to get too carried away. If we believe (like we do) that last year’s Facebook IPO was this investment cycle’s “Netscape moment”, we are already starting to see clear signs of froth – as one recent Wall Street Journal article pointed out. Insiders themselves are starting to notice, with people like Elon Musk (founder and CEO of both Tesla and SpaceX; not a shy man!) pointing out that “the stock price that [Tesla has] is more than we deserve”, and Reed Hastings (CEO of Netflix) warning of “momentum-investor-fuelled euphoria”. This public market froth in turn fuels stupendous fund-raisings such as Pinterest (no revenues) raising a $225 million Series E at a $3.8 billion valuation, 50% higher than eight months ago; Snapchat (no revenues) “discussing” a Series C funding which would value the company at $3.5 billion, i.e. more than 4 times what it was worth only 4 months ago (one wonders who leaked the “information” to the market); or two-year old Nextdoor (no revenues) raising a $60 million Series C at a $500 million valuation. The real danger, though, is this sense of excitement filtering down to Series A and seed investments – and setting unrealistic expectations among early-stage entrepreneurs (already fuelled by the widespread availability of tax-incentivised – and therefore risk-anesthetised – seed funding). One of the illusions is the speed at which one can build substantial, lasting innovation in the context of an immature, border-ridden and culturally diverse European market. Of course, one answer might be to take the company somewhere else. Another is to keep the balance right between the level of ambition and the true level of execution capabilities, while improving the team over time to raise the aim. © Go4Venture Advisers 2013 Page 3  ` September 2013 Exits The global tech M&A market was rather lively in September, with four multi-billion (>€3 billion) transactions involving well-known names. In all cases, these were large transactions reflecting the never-ending consolidation in various tech segments, be it semiconductor manufacturing equipment (Applied Materials/Tokyo Electron), electronic components manufacturing (Koch Industries/Molex) or mobile handsets (Microsoft/Nokia Device and Services). Among European VC and PE-backed companies, this month saw five disposals above our self-imposed $50 million threshold, three of which have a long-standing VC heritage:  One was OB10, an early (2001) entrant in the e-invoicing market, which was acquired by Tungsten, an investment vehicle set up by well-connected City insiders, Edmund Truell (founder of private equity firm Duke Street, originally started as part of Hambros Bank) and his brother Danny (CIO of Wellcome Trust). Tungsten’s purpose is to do a roll-up in financial services – clearly new technologies are relevant to bust incumbent banks’ antiquated processes, but it will take the credibility of insiders to break the dam of resistance to change.  Tirendo couldn’t be more different: a relatively young start-up in the European online car tyre market being snapped up by its giant, well-established US competitor two years after creation.  Grapple Mobile was acquired by Monetise, an AIM-listed company which started in 2003 and floated in 2007 to become one of the world’s leading providers of mobile transaction processing services – with 3 billion annual mobile transactions worth a combined $50 billion. Grapple Mobile brings additional mobile app development skills to Monitise and was originally funded by Brightspark, a Canadian VC. What is not covered in our write-ups are the smaller transactions, because they don’t “move the needle” for investors and go against the higher level of ambition we support. However, there are scenarios where small exits are the way to go, for instance in order to:  Free up investors’ time, and management talent, when conditions for a great exit are not met. As advisers we cover this as part of our “Active Portfolio Development” service, which aims to accelerate portfolio rotation.  Encourage technology development outside the expensive company walls. This can lead to thriving independent companies in their own right or an early acquisition. In September, Intel acquired Spanish start-up Indisys, which specialises in natural language processing, for “north of €20 million”. Intel Capital had led the company’s $5 million Series A round less than a year before (November 2012). This follows a similar $40 million transaction in July 2013 when Intel acquired Israel-based Omek, a pioneer in gesture control software, and a company in which Intel had invested two years earlier (as a part of a $7 million Series C financing). © Go4Venture Advisers 2013 Page 4  ` September 2013 We expect more of these transactions, where a corporate acquires a company it has invested in. For us, this is part of the big pharma/biotech open innovation model spreading to the rest of the tech industry. While many will be concerned that start-up investors don’t see the optimal return in such transactions, our view is that this brings more predictability to the outcome, something European venture has sorely lacked to date. And the price paid will also depend on how well the investment transaction was structured in the first place. In fact, we see corporate investment as a durable trend in venture funding, and one which needs to be harnessed by entrepreneurs and their backers. Enjoy the reading. Please direct any questions or comments to [email protected]. If you do not wish to receive future HTI updates from us, please send an email with the title "unsubscribe" to [email protected]. The Go4Venture Advisers Team Where to Meet the Go4Venture Advisers Team in November – see http://www.go4venture.com/contact/  November 4-5 – Copenhagen, Denmark – Nordic Venture Forum 2013  November 7 – London, UK – Silicon Valley Comes to the UK  November 14 – Paris, France – Stanford Ignite – Paris in partnership with École Polytechnique  November 26 – London, UK – Digital Media Finland in London For more details, please always refer here. © Go4Venture Advisers 2013 Page 5  ` September 2013 1.1 - Headline Transactions Index (HTI) Go4Venture HTI Index by Deal Value 800 2010 2011 )n700 m 2012 2013 € ( h600 tn o M r500 e p s n400 o itc a s300 n a rT fo200 e u laV100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Go4Venture Advisers HTI Database Go4Venture HTI Index by Cumulative Deal Value 3,500 2010 2011 3,000 )n m 2012 2013 € ( s2,500 n o itca2,000 s n a rT fo1,500 e u la1,000 V la to T 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Go4Venture Advisers HTI Database September 2012 2013 Year-to-Date 2012 2013 Large Transactions # 1 4 1 5 Large Transactions # 8 7 1 03 €mn 3 66.1 2 82.1 €mn 1 ,620.8 2 ,314.3 Other Transactions # 2 6 3 5 Other Transactions # 2 04 2 76 €mn 8 0.1 8 7.8 €mn 5 87.6 7 32.6 All Headline Transactions # 4 0 5 0 All Headline Transactions # 2 91 3 79 €mn 4 46.2 3 69.9 €mn 2 ,208.5 3 ,046.9 Of Which: Of Which: Landmark Transactions # 7 4 Landmark Transactions # 2 5 2 7 €mn 2 80.5 1 43.4 €mn 8 89.0 1 ,443.3 Definitions Large Transactions: > £5mn / €7.5mn / $10mn Other Transactions: < £5mn / €7.5mn / $10mn Landmark Transactions: subset of Large Transactions > €20mn / £13mn / $27mn © Go4Venture Advisers 2013 Page 6  ` September 2013 1.2 - Large Transactions Summary (>£5mn / €7.5mn / $10mn) # Company Sector Round €mn Description Investors 1 Infinity SDC (UK) Telecom B 57.0 Provider of data center Caxton Alternative www.infinitysdc.net Services and colocation solutions. Management, Lansdowne Partners, Wood Creek Capital Management. 2 Groupe Santiane (France) Internet B 40.0 Operator of a price Sagard, Individual Investors. www.santiane.fr Services comparison site for healthcare insurance. 3 NewVoiceMedia (UK) Telecom C 26.2 Provider of a cloud-based Bessemer Venture Partners, www.newvoicemedia.com Software call centre telephony Eden Ventures, Highland solution. Capital Partners, Notion Capital. 4 CeQur (Switzerland) Medical B 20.2 Provider of an insulin BMC Ventures, Endeavour www.cequrcorp.com Technology infuser device for people Vision, JLP Consulting, Orion with type 2 diabetes. Healthcare Equity Partners, Schroders, VI Partners. 5 AlienVault (Spain) Software Late 19.8 Developer of an open Adara Venture Partners, www.alienvault.com Stage source security and Correlation Ventures, GGV information platform. Capital, Kleiner Perkins Caufield & Byers, Sigma West, Top Tier Capital, Trident Capital. 6 TalentSoft (France) Software Late 19.8 Provider of cloud-based Bpifrance, Highland Capital www.talentsoft.com Stage HR software. Partners. 7 VestiaireCollective (France) Internet C 15.0 Online marketplace for Balderton Capital, Condé www.vestiairecollective.com Services second hand luxury Nast, Idinvest, Ventech. fashion. 8 Calastone (UK) Internet B 13.5 Provider of independent Accel Partners, Octopus www.calastone.com Services transaction services for Ventures. the fund management industry. 9 SwiftKey (UK) Software B 13.1 Alternative keyboard app Cambridge Capital, Index www.swiftkey.net for Android. Ventures, Octopus Ventures. 10 Fermentalg (France) Cleantech C 12.0 Developer of a process ACE Management, Bpifrance, www.fermentalg.com which transforms Demeter Partners, Emertec microalgae into Gestion, IRDI, Picoty, compounds useful in the Sofiproteol, Viveris. agrifood, healthcare and energy markets. 11 Inoapps (UK) IT Services A 11.9 Provider of support, Business Growth Fund. www.inoapps.co.uk consulting, hosting, and managed services for Oracle's range of products. 12 Plaxica (UK) Cleantech C* 9.6 Developer of polylactic Imperial Innovations, www.plaxica.com acid (PLA) polymers and Invesco Perpetual, NESTA platform chemicals from Investments. renewable sources. Source: Go4Venture Advisers HTI Database Key Bold indicates lead investor(s) * Internal round ** Led by existing investors © Go4Venture Advisers 2013 Page 7  ` September 2013 # Company Sector Round €mn Description Investors 13 Eruditor Group (Russia) Internet B 9.0 A provider of online Frontier Ventures, Intel www.eruditor-group.com Services platforms for service Capital, Runa Ventures providers such as hairdressers, fitness instructors, plumbers and doctors to sell their services. 14 WISeKey (Switzerland) Software Late 7.5 Cyber-security provider Grupo Jaime Câmara, Saudi www.wisekey.com Stage specialising in mobile Crown Investment, telephony and social networks. 15 Reservas de Restaurantes Internet B 7.5 Provider of a free online Active Venture Partners, (Spain) Services platform for restaurant Seaya Ventures www.restalo.es bookings and discounts. Source: Go4Venture Advisers HTI Database Key Bold indicates lead investor(s) * Internal round ** Led by existing investors © Go4Venture Advisers 2013 Page 8  ` September 2013 # Company Sector Round €mn Description Investors 1 Infinity SDC (UK) Telecom B 57.0 Provider of data centre Caxton Alternative Management, www.infinitysdc.net Services and colocation solutions. Lansdowne Partners, Wood Creek Capital Management. Infinity SDC (UK), a provider of data centre and colocation solutions, raised £48.0mn (€57.0mn) in a Series B round from new investors Caxton Alternative Management and Wood Creek Capital Management, with support from existing investor Lansdowne Partners. Founded in 2005, Infinity operates data centres in Romford to the northeast of London, in Stratford (the Queen Elizabeth Olympic Park’s iCITY), in Stockley Park (West London) and in Slough. Together these total some 430,000ft2 of technical space supplied with 120mVA of electricity. From these facilities the firm is able to provide anything from 3kW collocation racks to data centre facilities for major telecoms carriers, such as Cable & Wireless, which has signed a 15-year deal. Infinity provides connectivity options to multiple Internet Service Providers (ISPs) and a large choice of telecommunications carriers including BT, Colt, Easynet, Geo Networks, Level 3, Virgin Media and Zayo. Their geographical location puts these centres in the prime position to cater for the City and the many IT and high technology businesses which have traditionally been located within England’s Thames Valley and M4 corridor. The data centre industry as a whole is currently focused on efficiency and reducing energy costs. Hardware in legacy centres can have much higher costs simply due to the cooling requirements which modern, purpose built centres can avoid. Infinity prides itself on the robustness of its centres: of the ANSI’s four tiers of accreditation for data centres, all of Infinity’s facilities meet or exceed the requirements for Tier III and in November 2009, the firm opened Europe’s first Tier IV centre for IT infrastructure services company Computacenter. The money from this round will be used to complete the fit-out of the firm’s data centres at Stockley Park, Romford and Slough. The fit out of its data centre at iCITY on the Queen Elizabeth Olympic Park will be funded in 2015. £26m (€31mn) of this round came from US investors Caxton Alternative Management (AUM €5.6bn) and Wood Creek Capital Management. Founded in 1983, Caxton is the family office of self-made hedge fund industry veteran Bruce Kovner. With offices in New York, London and Sydney, Caxton has c.200 staff and operates as a global macro hedge fund betting on worldwide economic trends. Founded much more recently, in 2005, Wood Creek is much smaller, employing only 18 staff with 13 sector- focused investment professionals. The firm caters for institutional investors and is affiliated with the MassMutual Life Insurance Company and its asset management subsidiary Babson Capital Management. The firm invests in both intangible assets – for example music, film and television rights, technology patents and biopharmaceutical IP – as well as tangible assets such as telecoms infrastructure, farmland, water and capital assets for the mining industry. The remaining £22mn (€26mn) came from existing investor Lansdowne Partners (€800mn (2010); AUM €11bn). Founded in 1998, we have not seen Lansdowne since April 2011 when it backed molecular detection platform company Oxford Nanopore. Lansdowne, a large holding company, has a very similar investment philisophy to Caxton. From an investment point of view, one of the attractions of Infinity is its diversified portfolio of clients renting rackspace and generating relatively predictable recurring revenue. This enabled the firm to received debt funding this year in the form of £56mn (€66mn) of structured finance from Deutsche Bank. © Go4Venture Advisers 2013 Page 9  `