#1Why Are More Companies Staying Private? Meeting of SEC Advisory Committee on Small and Emerging Companies Jamie Hutchinson February 15, 2017 G GOODWIN#2#3#4Large Amounts of Private Capital ● ● ● Markets are global and awash in private capital The types of investors in private companies have expanded VC Funds investing across the growth spectrum from early stage to late stage Traditional Private Equity no longer focused on just buyouts but increasingly on "growth equity" Corporate Venture Capital Hedge Funds have large "private" mandates Sovereign Wealth Funds Mutual Fund Complexes Family Offices "Rifle Shot Funds" are commonplace 3 GOODWIN#5Large Amounts of Private Capital Global Annual VC Investment Totals: (number of deals) Totals: (US$b) 5,225 49.9 5.2 8.7 36 2013 US 6,801 86.8 17.3 11.3 58.2 2014 Europe 1 Back to Reality: EY Global Venture Capital Trends 2015, ERNST & YOUNG (2016). 4 ■China 7,125 135.6 48.9 14.4 72.3 2015 GOODWIN#6#7Employees Don't Demand It ● Private Liquidity Programs increasingly commonplace Liquidity as a key to winning the "Talent Wars" "Yelp announced that private equity firm Elevation Partners has agreed to make a $25 million investment in Yelp through the purchase of Series E preferred stock [and a] $100 million [investment] through a planned purchase of shares from vested employees and other eligible shareholders." "This liquidity program will allow our people to focus on growing our business and continuing to create value," Jack Ma, Alibaba's chief executive, said in a statement. "We believe the high-quality investors making commitments to this important program share our mission and philosophy, and we welcome them as shareholders of the company." 6 "Facebook announced that Digital Sky Technologies (DST) has made a $200 million investment in exchange for a preferred stock, representing a 1.96 percent equity stake at a $10 billion valuation. DST...is planning to offer to purchase at least $100 million of Facebook common stock from existing common stockholders..." GOODWIN#8#9#10#11#12#13#14#15#16#17