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2012 Pacific Crest Private SaaS Company Survey Results
See final page for important disclosures
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2012 Pacific Crest Private SaaS Company Survey Results
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Pacific Crests Private SaaS Company Survey Results
Results analyzed in this report reflect data gathered from 83 private SaaScompany respondents (CEOs and CFOs) in June/July 2012
Purpose provide useful operational and financial benchmarking data tomanagers and investors in SaaS companies
Broad diversity of companies:
$0-$60M+ in revenues (~$18M median)
25-250+ employees (~136 median)
10-2,000+ customers (~600 median)
$100s to $MMs median annual contract value (~$24K median)
Primarily U.S. headquartered
Only partial overlap in names from our 2011 survey, which asked many of thesame questions
28% of this years group participated in 2011; the other 72% were new respondents.This years group included more larger companies (median revenue was $13M lastyear), but selling smaller sized contracts ($24K median annual contract value vs. $38Klast year)
In our commentary, we analyze results from this survey standalone, whileintermittently comparing results from our 2011 survey
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Growth Rates
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How Fast Did / Will You Grow GAAP Revenues?
Median 2011 GAAP Rev Growth 40%
Median 2012E GAAP Rev Growth 38%
Median 2011 GAAP Rev Growth 40%
Median 2012E GAAP Rev Growth 38%
68 respondents
While 40%growth is themedian, growthrates andexpectationsclearly do not fitthe standard bellcurve.
1
7
18
11 11
7
12
0
8
17
16
7 7
13
0
5
10
15
20
100%
NumberofCompanies
2011 Revenue Growth 2012E Revenue Growth
Comparison with 2011Survey
Identical median historicalgrowth vs. last year(40%). More conservativeoutlook (38% vs. 44% lastyear). Median 2011 Revenue $18M
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Median Growth Rate as a Function of Contract Size
Number of respondents: $1M = 2Median ACV is the median annual contract value of a customer, excluding professional services
Companies withlowest ASPs aregrowing the fastest(though the data issparse). In oursample group, thoseselling in the $25k-$250k range aregrowing 15 pointsbelow the median.
38%34%
25% 26%
45% 45%
>100%
0%
25%
50%
75%
100%
$1M
Median Contract Size (ACV)
2011G
rowthRate
Median 40%
Comparison with 2011Survey
Markedly lower growth forthe middle tiers ($25k-$100k and $100k-$250k)in this years results,which were 41% and 38%respectively, last year.
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38%39%
38%
29%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Field Inside Internet Channel
Primary Mode of Distribution
20
11GrowthRate
6
Median Growth Rate as a Function of Sales Strategy
Companies usingfield sales astheir primarymode ofdistribution aregrowing slower.(1)
(1): Note that certain respondents who filled in growth rates did not answer the distribution mod question, skewing the medians of those categories belowthe 40% overall medianNumber of respondents: Field = 33, Inside = 13, Internet = 8, Channel = 4
Comparison with 2011Survey
Very similar results to lastyear.
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Comparison of Fast Growers vs. Slower Growers
(1) Slower growers include companies with 2011 growth 30%; 37 respondentsMedian contract size looks at average contracts across all customers
The fastestgrowers tend tobe: (1) skewedmore to SMB;(2) have lowerASPs; (3) spendmore on CAC;and (4) losemoney, incomparison withthe slowergrowers.
Slower Growers(1)
Faster Growers(2)
Median Values for Both Groups
Growth
2011 GAAP Revenue Growth 24% 80%
Target Customer
Enterprise 71% 52%
SMB 29% 39%
Contracts
Average Contract Length 1.7 years 1.5 years
Median Contract Size (ACV) $50K $20K
Sales & Marketing
Median S&M Spending 24% 42%
Median CAC $0.70 $0.93
Profitability
2012E EBITDA Median 11% (22%)
2012E FCF Median 9% (15%)
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Go-to-Market
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Primary Mode of Distribution
(1): Denotes respondents who stated a majority of new ACV bookings to be sold through that mode of distribution66 respondents
Field sales is themost popularmode ofdistribution forthe surveyedgroup, with 53%of respondentsusing it as theirprimary mode ofselling; 20% usedinside sales astheir primarymode; 14%Internet.
0
5
10
15
20
25
30
35
40
Field Sales Inside Sales Internet Sales Channel Sales Mixed
Primary Mode of Distribution
Numb
erofCompanies
75%-100% 50%-75%
(1)
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Primary Mode of Distribution as a Function of Median Contract Size
Median contract size looks at initial contract sizeNumber of respondents: $1M = 2
As expected,companies withlarger ASPs tendto rely moreheavily on fieldsales.Nonetheless,field sales is stillactively usedeven bycompanies in the$5K-$25K ACVgroup.
8% 6% 9%
50%
8%
44%
64%
100% 100%
50%
33%
33%
27%
50%
17%
0%
10%
20%
30%40%
50%
60%
70%
80%
90%
100%
< $5k $5K-$25K $25K-$100K $100K-$250K $250K-$1M > $1M
Median Contract Size (ACV)
Channel Field Inside Internet
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CAC: How Much Do You Spend for $1 of New ACV from a New Customer?
Median $0.90
(1): Customer Acquisition Cost is the estimated, fully-loaded sales and marketing expense required over multiple periods to acquire $1 of new ACV from a newcustomer.Number of respondents : $2.00 = 5
Respondentsspent a medianof $0.90 for eachdollar of newACV from a newcustomer.(1)
15
9
9
10
2
5
1
4
0 2 4 6 8 10 12 14 16
Less than$0.50
$0.50-$0.75
$0.75-$1.00
$1.00-$1.25
$1.25-$1.50
$1.50-$2.00
$2.00-$3.00
Over $3.00
Comparison with 2011Survey
Inline with last year'smedian of $0.93.
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CAC on New Customers vs. Upsells vs. Renewals
60 respondents
In our sampleset, the mediancost to upsell anexisting customeris just 20% of thecost of new
sales. Renewalsare 10%.
$0.90
$0.18
$0.09
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
New ACV from NewCustomer
Upsell to Existing Customer Renewals
Comparison with 2011Survey
These upsell and renewalcosts are markedly downfrom last year's $0.28 forupsells and $0.16 forrenewals.
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Field Sales Inside Sales Internet Sales
Less than $0.50 $0.50-$0.75 $0.75-$1.00 $1.00-$1.25 $1.25-$1.50
$1.50-$2.00 $2.00-$3.00 Over $3.00
13
CAC Spend by Primary Mode of Distribution(1)
Median $0.83
(1): CAC for $1 new ACV from a new customerNumber of respondents : Field Sales = 28, Inside = 13, Internet = 7
Median $0.88
Median $1.06
Surprisingly,amongrespondents, themedian CAC forfield sales isslightly below the
CAC for insidesales. Internetsales is thehighest.
Comparison with 2011Survey
Last year's results betterreflected conventionalwisdom, with field, insideand internet at $1.00,$0.90 and $0.45,respectively
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4%
8%
25%
16%14%
18%15%
40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Less than
$2MM
$2MM-$5MM $5MM-
$10MM
$10MM-
$15MM
$15MM-
$25MM
$25MM-
$40MM
$40MM-
$60MM
Greater than
$60MM
14
What Percentage of New ACV is from Upsells to Existing Customers?
Overall Median
14%
Number of respondents: $40M-60M = 5, >$60M = 6
Median 14%
Size of Company (ACV)
The medianrespondent gets14% of new salesfrom upsells; thelargest companiesin the group rely
more heavily onupsells.
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1
1
3
2
6
9
8
15
9
0 5 10 15 20
50%
27
11
8
5
3
4
1
0 10 20 30
0-10%
10-25%
25-50%
50-75%
75-100%
100-150%
150-200%
15
Professional Services Impact on Go-To-Market
Professional Services as a % of 1st Year ACV Professional Services Gross Margin
Median 14%
Median 22%
59 respondents
Professionalservices play aminor role formost of thegroup,accounting for
14% of first yearcontract value forthe medianrespondent.
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Freemium / Try Before You Buy
Try Before You Buy StrategiesFreemium Strategies
Expected New ACV in 2012 from TryBefore You Buy Leads
Expected New ACV in 2012 fromFreemium Leads
62 respondents
Althoughfreemium andTBYB are still notused at all bymanyrespondents, fully
one-third ofcompanies are atleast exploringfreemium, andover half areexploring "trybefore you buy".
None
45%
0-10%28%
10-50%10%
>50%18%
None68%
0-10%21%
10-25%5%
>25%5%
Comparison with 2011Survey
These numbers aregenerally up from lastyear. For example, twiceas many companies aslast year said TBYBgenerated over 50% oftheir leads.
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Sales Commissions
Sales Commission (As % of ACV)
1757 respondents
We looked atsalescommissions forthe first time thisyear, and found avirtual step
function at the 7%commission leveland a long righttail on the highend of thedistribution, with a9.5% median.
Median Commission Paid: 9.5%
3 3
17
16
10
8
0
5
10
15
20
0% 1-2% 3-4% 5-6% 7-8% 9-10% 11-14% 15+%
#ofRespondents
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16%
8%
11%
10% 9%8%
4%
0%
4%
8%
12%
16%
20%
$1M
Sales Commission as a Function of Median Contract Size
Median Contract Size (ACV)
18
Median contract value looks at initial contract sizeNumber of respondents: $1M = 2
Sorted by mediancontract value,there appears tobe a large stepfunction at ASPsbelow $1K. At the
high ASP end(over $1M),commission ratesdrop considerably,not surprisingly.
MedianSale
sCommission
Median 9.5%
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Margin and Cost Structure by Sales Commission
19
(1): Bottom Third Commission Payers defined as respondents who paid 0-8% commissions for new sales of new ACV (24 total)(2): Top Third Commission Payers defined as respondents who paid 11%+ commissions for new sales of new ACV (18 total)Median contract size examines average contracts across all customers
Median Values for Each Group
Commission % 7% 14%
Size of Company (ACV) $21M $9M
Median Contract Size (ACV) $72K $18K
Sales & Marketing Cost (% of Revenues) 27% 33%
CAC $0.88 $1.00
% Sold through Field Sales 83% 21%
% Sold through Inside Sales 10% 54%
Revenue Growth 28% 45%
Bottom Third
Commission Payers(1)
Top Third Commission
Payers(2)
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Commission For Renewals, Upsells and Multi-Year Deals
20
(1): Same rate (or higher) than new sales54 respondents
Not surprisingly,commissions onrenewals aretypically deeplydiscounted, withone-third of
respondentspaying nocommission onrenewals at all.Upsells, on theother hand, moreoften than notgenerate fullcommissions.
Upsells
Median Commission
Rate 8%
% of RespondentsPaying Full
Commission(1)
56%
Renewals
Median Commission
Rate 2%
% of RespondentsPaying 0%
35%
% of RespondentsPaying 1-2%
25%
No AdditionalCommission
47%
Nominal Kicker 20%
Full Commission 16%
% of Respondents Paying:
Additional Commission
for Extra Years on Initial Contract
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Cost Structure
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Anticipated Cost Structure at Scale(1)
(1) Note: Survey describes scale as "e.g.", $50 million in revenues or higher.68 respondents
Gross Margin
Operating Expense Margins:
Sales & Marketing
R&D
G&A
EBITDA
FCF
Growth Rate 28%
3%
40%
3% 19%
19%
29%
24%
14%
24%
18%
12%
2012E Median Target Model
71% 78%
The mediannumbers reflectthe most operatingleverage fromimprovements incost of sales
(gross margin)and R&D(surprisingly, moreso than reductionsin the sales &marketingexpense rates).
Comparison with 2011Survey
These numbers aresimilar to last year's,although last year S&Mstarted off a higher base.
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Median Cost Structure by Size
52 respondents; $40M = 12
Other than for thesmallest group(
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Comparison: Historical Results of Selected Public SaaS Companies
(1): YoY Revenue Growth compares against previous years revenue of the companies at the timeMedian includes ATHN, BCOV, BV, CNVO, CSOD, CTCT, DMAN, DWRE, ET, LOGM, MKTG, N, NOW, PFPT RP, RNOW, SQI, SPSC, CRM, SFSF, TLEO and VOCS~$25M median excludes RP~$50M median excludes RP~$100M median excludes BCOV, DMAN, DWRE, PFPT, SPSC and SQI
Median Total Revenue Run-Rate
~$25M ~$50M ~$100M
Gross Margin 63% 66% 66%
Sales & Marketing 48% 46% 45%
Research & Development 23% 18% 16%
G & A 15% 14% 14%
EBIT Margin (25%) (11%) (1%)
FCF Margin (7%) (1%) 3%
YoY Revenue Growth Rate(1) 104% 59% 39%
Historical Results of Public SaaS Companies
Compared with areference group ofhistorical results ofnow public SaaScompanies,survey
respondents arespending less onsales & marketingbut also growingmore slowly.
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25%23%
38%
43% 43%
48%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0% to 15% 15% to
30%
30% to
45%
45% to
60%
60% to
100%
> 100%
2012E Growth Rate
MedianSales&MarketingS
pend
25
Sales & Marketing Spend vs. Projected Growth Rate
Median(2) 29%
(1) As a percentage of GAAP revenues projected for 2012E(2) Bar reflects median sales & marketing spend across all companies50 respondents; 0-15% = 6, 15-30% = 14, 30-45% = 10, 45-60% = 6, 60-100% = 5, >100% = 9
(1)
Not surprisingly,respondentsprojecting thehighest rates ofgrowth arespending the most
on sales &marketing.
Comparison with 2011Survey
The dispersion betweenfaster and slower growerswas more significant andclear this year, versus2011s results.
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Contracting & Pricing
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Median $24K
27
Median Annual Contract Size (ACV) per Customer
60 respondents; average contract size across all customers
Comparison with 2011Survey
This years groupincluded more companieswith lower pricedsolutions, bringing theASP down to $24k,versus $38k in the 2011survey.
4
8
15
17
7
9
0 5 10 15 20
< $1K
$1K-$5K
$5K-$25K
$25K-$100K
$100K-$250K
$250K-$1M
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Median/Typical Contracts for the Group
63 respondents
Billing TermsAverage Contract Length
Month to month11%
Less than 1 year9%
1 to 2 years48%
2 to 3 years11%
3 years or more21%
Median 1.7 Years Median 11 Months
Monthly, 32%
Qtrly, 10%
Qtrly to
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$1M
Median Contract Size (ACV)
Avera
geContractLen
gth
Month to month Less than 1 year 1 to 2 years 2 to 3 years 3 years or more
29
Contract Length as a Function of Contract Size
Median contract size looks at initial contractNumber of respondents: $1M = 2
The phenomenonof longer contractterms for largercontracts is clear.In fact, virtually allrespondents with
an ASP over $5khad 1+ yearcontracts.
Comparison with 2011Survey
Median contract lengthswere longer across theboard versus 2011sresults.
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What is Your Primary Pricing Metric?
Other pricing metrics include: revenue under management and modules / features used62 respondents
Seats, 38.7%
Sites, 1.6%
Total employees,9.7%Database size, 1.6%
Usage ortransactions, 30.6%
Other, 17.7%
Comparison with 2011Survey
These results werevirtually identical to lastyears.
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Annual Renewal Rates
Median 93%
60 respondents
What percentage of your contracts up for renewal in a given year renew ($ basis)?
1
0
1
3
5
6
20
24
0 5 10 15 20 25 30
< 50%
50-60%
60-70%
70-80%
80-85%
85-90%
90-95%
95-100%
93% annualrenewal rates ondeals up forrenewal shouldnot be mistakenfor 7% churn,
since manycompanies havelonger termcontracts.
Comparison with 2011Survey
The 93% median annualrenewal rate amongexpiring contracts was 6points higher than lastyears survey results.
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Gross Churn
Median 5%
(1): Excluding the benefit of upsells (which we define as gross churn)Gross churn is the percentage of ACV from existing customers that is expected to be lost on a one year period due to non-renewals, not taking into account thebenefit of upsells or increased usage58 respondents
What percentage of total ACV on a dollar basis churns in a given year?(1)
Median grosschurn rates (seedefinition below)amongrespondentsappear to be very
low (again). Only8 of the 60respondents hadannual grosschurn rates over10% and only 5indicated grosschurn rates over15%.
Comparison with 2011Survey
The median gross churnof 5% is the same as lastyears result, despitedifferences on theprevious page
30
20
3
3
2
0 5 10 15 20 25 30 35
20%
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8%
13%
6%
3%
1%
0%
2%
4%
6%
8%
10%
12%
14%
Mo.-to-Mo. < 1 yr 1-2 yrs 2-3 yrs 3+ yrs
33
Gross Churn as a Function of Contract Length
58 respondents. Number of respondents in each group: Month to Month = 7; 3 yrs = 11
Median 5%
With theexception of therespondents withmonth-to-monthcontracts, thelonger the
contracts thelower the churn.The month-to-month results aresurprising.
Contract Length
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15%
8%
6%
6%
2%
1%
0%
4%
8%
12%
16%
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3%
6%
8%
2%
8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Field Sales Inside Sales Internet Sales Channel Sales Mixed
35
Gross Churn as a Function of Primary Distribution Mode
Median 5%
57 respondents. Number of respondents in each group: Field = 27, Inside = 11, Channel = 4, Internet = 7, Mixed = 8
Respondentsdeployingprimarily fieldsales sign largerdeals with longerterms, and thus
have lower grosschurn.
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4
6
5
26
11
5
6
0 5 10 15 20 25 30
< 90%
90-95%
95-100%
~100%
100% - 105%
105% - 110%
> 110%
No. of Companies
36
Net Renewal From Existing Customers
Median 106%
(1): We define this as the net renewal rate63 respondents
How much do you expect your ACV from existing customers to change, includingthe effect of both churn and upsells?(1)
100%+NetRenewal
(Upsellsgr
eaterthan
chu
rn)
NetChurn
(Churngreat
er
thanupsells
)
Accounting forthe benefit ofupsells,respondentsexpect theexisting base to
grow at medianrate of 6%annually.
Comparison with 2011Survey
Very similar results to lastyear.
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Capital Efficiency
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Capital Raised So Far
Median $23M
62 respondents
17
7
8
18
12
0 5 10 15 20
< $5MM
$5MM to$15MM
$15MM to$25MM
$25MM to$50MM
> $50MM
Mostrespondentshave hadreasonablystrong fundinghistories.
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Analysis of Companies by Capital Raised
60 respondents
Median
Amount
Raised to
Date
No. of
Respondents
2011 GAAP
Revenue 2012E Growth
< $5M 17 $4M 34%
$5M-$15M 7 $8M 80%
$15M-$25M 8 $15M 36%
$25M-$50M 16 $35M 38%
> $50M 12 $33M 50%
Comparison with 2011Survey
This year we had morecompanies who haveraised less money (28%raised
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p y y
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Years Investment
$1M ACV 2 $4M
$5M ACV 3 $7.7M
$15M ACV 5 $15M
$40M ACV 7 $23M
Actual/expected time and investment reqd to reach:
ACV at which you expect to be FCF+: ~$23M
40
Capital Efficiency Expectations Median Levels for the Group
(1) (1)
(1): Median59 respondents
Comparison with 2011Survey
Very similar results to lastyear.
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Exits
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2-Year Horizon on Exit Scenarios
63 respondents
2012 Survey2011 Survey
58 respondents
M&A Likely
26%
Exit Not
Likely
41%
Either is
Likely
5%
IPO Likely
28%
M&A Likely
33%
Exit Not
Likely
46%
Either is
Likely
5%
IPO Likely
16%
2012 Pacific Crest Private SaaS Company Survey Results
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See final page for important disclosures43
Expectations Regarding M&A Purchases Within the Next Year
62 respondents
2012 Survey2011 Survey
Larger
Acquisition5%
Neither is
Likely
76%
Small Tuck-In19%
Small Tuck-In
32%
Larger
Acquisition
4%
Neither is Likely
64%
57 respondents
2012 Pacific Crest Private SaaS Company Survey Results
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See final page for important disclosures
CORPORATE FINANCE M&A AND PRIVATE PLACEMENTS
$155,595,000
RealPage(RP)
Initial Public Off ering
$53,123,733
Convio
(CNVO)
Initial Public Off ering
$124,085,000
SuccessFactors
(SFSF)Initial Public Off ering
$66,000,000
DemandTec
(DMAN)Initial Public Off ering
$105,800,000
Eloqua(ELOQ)
Initial Public Offering
$70,312,500
E2open(EOPN)
Initial Public Off ering
$130,900,000
Bazaarvoice(BV)
Follow- on Offering
$381,535,262
SplunkL
Follow -on Offering
$241,155,000
ServiceNow(NOW)
Initial Public Off ering
$93,982,473
Proofpoint(PFPT)
Initial Public Off ering
$138,000,000
In o ox(BLOX)
Initial Public Offering
$263,925,000
Splunk(SPLK)
Initial Public Offe ring
$185,725,000
ExactTarget(ET)
Initial Public Off ering
$130,883,292
Bazaarvoice(BV)
Initial Public Off ering
$63,250,000
Brightcove(BCOV)
Initial Public Off ering
$132,307,500
Guidew ire
Initial Public Offe ring
$91,351,224
Responsys(MKTG)
Initial Public Off ering
$156,975,000
Cornerstone OnDemand(CSOD)
Initial Public Offering
$65,550,000
SciQuest(SQI)
Initial Public Off ering
$103,500,000
Imperva(IMPV)
Initial Public Offering
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has been ac quir ed by has been r ec apitaliz ed by
has been acquired by has been acquired by has been acquired by
has been acquired by
has acquired has been acquired by has been acquired by has been acquired by
Private Placement
has been acquired by has been acquired by
has been acquired by
has acquired has been acquired by Leveraged recapitalization by
has been acquired by
has been acquired by
44
Pacific Crest Leadership in Software - Selected Transaction Experience
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