A C H I E V I N G B I G E X I T S F O R S M B -F O C U S E D S T A R T U P S

M A R K M A C L E O D , F O U N D E R A N D P R E S I D E N T

S U R E PAT H C A P I TA L PA R T N E R S

@startupcfo |#SMBindex

Private & Confidential | 2

A g e n d a

Introduction

Our SMB Focus

2 Paths to Exit

Success in SMB

The SurePath SMB Index

01

02

03

04

05

Private & Confidential | 3

I n t r o d u c i n g S u r e P a t h

Funding, growing and exiting venture-backed startups since 1999

Raised over $100M in VC in the US,

Canada and Asia ◆

3 years as a VC (Real Ventures)

Worked corporate development and

exited many companies

◆ Airbnb

Blackberry Rackable Systems

Return Path & others

14 years as CFO for some of Canada’s leading technology

companies ◆

FreshBooks Shopify Tungle

& many others

Private & Confidential | 4

O u r P u r p o s eHelping you fund, grow and exit your startup

The process of raising growth capital is very different from raising early stage capital

It is cheaper than ever to start companies, but more expensive than ever to build market leaders. If that’s your aspiration, you need growth capital

We help startups prepare for growth stage and help them raise the capital needed to become market leaders

We have sat on both sides of the table. We have funded, grown and exited many companies

We offer up that experience through ongoing coaching and mentoring.

A low touch, high impact way to help you grow

There are few credible choices for advisors to facilitate sub $100M exits. We fill that gap

We work with you to facilitate the BD and Corp Dev intros that pave the way to an eventual exit

If you decide to exit, we manage the process for you from start to finish

SurePath maximizes your optionality: We make sure you know what it takes to build a market leader and capitalize you towards that goal.

We ensure you are always in the minds of strategic buyers so that if they decide to make a move in your space, you are in the conversation. You can then decide; Keep going or exit?

Growth Funding

Strategic Guidance

Exits

Why SMB?

Private & Confidential |

0-10 employees 27 million

91%

6

T h e S M B M a r k e t

Source: US Census, US Small Business Administration

400K new business establishments are opened every quarter in the United States. SMBs account for 99.9% of businesses, and 56% of the workforce.

11-100 employees 1.7 million

6%

100+ employees 1 million

3%

Private & Confidential | 7

T h e S M B M a r k e t

SMBs are the backbone of the economy

Businesses are moving

to apps

There is always room for new

players

Private & Confidential | 8

S M B F u n d i n g / E x i t R e a l i t y

Consumer SMB Enterprise

2 Paths to Exit

Private & Confidential | 10

T w o P a t h s t o E x i t

$21M$32M $18M

$45M $47M $50M

$21M $25M$35M $37M

$130M$119M

$253M

$103M $100M

$54M

$108M

$127M

$88M$98M $100M

$233M

105

122133

171 170

187195

185 182 180

157

8 10 12 113 8 4 8 4 8

2$0.00M

$50.0M

$100.0M

$150.0M

$200.0M

$250.0M

$300.0M

0

50

100

150

200

250

2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1

Med

ian

Dea

l Size

Num

ber

of D

eals

North American SaaS IPO vs M&A

M&A Median Valuation IPO Median Valuation M&A IPO

Private & Confidential | 11

I P O s s i n c e 2 0 1 3Company IPO Date

Atlassian (TEAM) Dec-15Square (SQ) Nov-15AppFolio (APPF) Jun-15MINDBODY (MB) Jun-15Shopify (SHOP) May-15GoDaddy (GDDY) Apr-15New Relic (NEWR) Dec-14Lending Club (LC) Dec-14HubSpot (HUBS) Oct-14Zendesk (ZEN) May-14Paycom Software (PAYC) Apr-14Wix.com (WIX) Nov-13Endurance International Group (EIGI)

Oct-13

RingCentral (RNG) Sep-13Cvent (CVT) Aug-13GrubHub (GRUB) May-13

• Of the 42 public companies that serve the SMB market, 16 companies have gone public since 2013

Private & Confidential |

13 274832 49

70

2450

105

149

215

320

203

552

850

49%54%

80%

44%

109%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1 2 3

Reve

nue

Gro

wth

YoY

Reve

nue

in U

SD M

illions

AppFolio (APPF) MINDBODY (MB) Shopify (SHOP) Atlassian (TEAM)

Square (SQ) Atlassian (TEAM) Growth Square (SQ) Growth AppFolio (APPF) Growth

MINDBODY (MB) Growth Shopify (SHOP) Growth

12

A c l o s e r l o o k a t t h e 5 m o s t r e c e n t I P O s• All companies had ~50M+

in annual revenues the most recent fiscal year prior to its IPO

• YoY Revenue growth rates were at least 44%+ with Shopify achieving 109% YoY Revenue Growth

• At the time of their IPO, only Atlasssian was profitable. All others were not.

Private & Confidential | 13

T h e P a t h t o I P O

• Of the 42 companies examined, the average time since founding to IPO is 11.6 years

• A handful of companies were able to IPO within the first 5 years of being founded

How long does it typically take after the company has been founded?

23

21

12

4

0

5

10

15

20

25

1-2 years 3-5 years 6-10 years 11-20 years 21+ years

Num

ber o

f Com

pani

es

Number of Years till IPO

Private & Confidential | 14

A c q u i s i t i o n s - W h a t ’ s b e e n g o i n g o n ?

• 146 SMB acquisitions since Q1 2013

• $450M average SMB acquisition activity per quarter

• Q1 2016 saw the $1.1B acquisition of Constant Contact by Endurance Group

$15 $11 $45 $71$117

$890

$459

$332$394

$309

$177

$454

$575

$1,100

6 6

11

8

16

1213

16

19

14

7

11

6

0

2

4

6

8

10

12

14

16

18

20

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Tota

l $ S

pen

t o

n M

&A

(in

USD

Milli

ons

)

Total Deal Volume ($) Constant Contact Total Number of Deals

Private & Confidential | 15

H o w m u c h a r e t h e s e c o m p a n i e s w o r t h ?

• Average valuations in SMB are rising

• 8 quarter average - $55M

• Excluding Constant Contact the average valuation was $115M

$15 $11 $9$24 $19

$111

$77

$41 $36 $34

$59 $65

$335

$-

$50

$100

$150

$200

$250

$300

$350

$400

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

Ave

rag

e V

alu

atio

n o

f Disc

lose

d D

eals

(in U

SD M

illio

ns)

Private & Confidential | 16

W h e r e a r e t h e b u l k o f d e a l s ?

73

51

7

14

1 0

10

20

30

40

50

60

70

80

Undisclosed $1-49M $50-99M $100-500M $500M +

Nu

mb

er o

f D

ea

ls

• 50% - no disclosed value

• The vast majority of deals that are disclosed (35% of all deals) fall between $1-49M

• Constant Contact is the only SMB deal in the last few years, over $500M

Private & Confidential | 17

C o n s t a n t C o n t a c t - A C a s e S t u d y

$15$28

$50

$87

$129

$174

$214

$252

$285

$332

-$1 -$6 -$3 $1 $7 $14

$24$35 $30

$44

73%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-$50

$0

$50

$100

$150

$200

$250

$300

$350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

wth

%

iin U

SD M

illio

ns

Total Revenue EBITDA Gross Margin Revenue Growth

IPO - October 2007

Private & Confidential | 18

H o w d i d C o n s t a n t C o n t a c t g e t t h e r e ?

Constant Contact Key Metrics

• 650,000 unique paying customers • ARPU: $47.12 • Revenue Growth from 87M (2008) to

332M (2014): CAGR — 25%

Private & Confidential |

Intuit, 17, 12%

Groupon, 14, 10%

Deluxe, 9, 6%

Endurance International Group, 9,

6%Square,

8, 6%

Cimpress, 8, 5%

Cvent, 6, 4%GoDaddy, 5, 3%AVG

Technologies, 5, 3%

Others, 65, 45%

19

W h o a r e t h e m o s t a c q u i s i t i v e b u y e r s ?How publicly traded companies that serve SMBs stack up amongst themselves in number of M&A deals since 2013

• 146 SMB acquisitions since 2013

• The top 9 buyers account for 55% of all deal volume

• The other 45% or 65 deals come from 29 different players

Private & Confidential | 20

T h e P a t h t o A c q u i s i t i o n

28

33

37

29

11

0

5

10

15

20

25

30

35

40

1 -2 years 3-5 years 6-10 years 11-20 years 21+ years

Num

be

r of C

om

pa

nie

s

Number of Years till Acquisition

• A great outcome takes time.

• Average of 9 years till acquisition (median, 6 years)

• Constant Contact was acquired 21 years after it was founded

How long does it typically take after the company has been founded?

Private & Confidential | 21

H o w d o c o m p a n i e s g e t t h e r e ?

•~ 1/2 of acquired companies were venture backed •For transactions with disclosed values , VC-backed companies sold for 2.8x

more •Removing Constant Contact, the average for VC funded exits was $70M

54%

46%Funded

No Capital Raised (Bootstrapped) $34.1

$97.2

$0

$20

$40

$60

$80

$100

$120

Bootstrapped VC Funded

Ave

rag

e D

isclo

sed

Va

lua

tion

(in

USD

Milli

ons

)

Success in SMB

Private & Confidential |

CAC

CrossSell

InternationalMarkets

BuildChannels

23

S c a l i n g S M B A c q u i s i t i o n 4

Path

s

1

2

3

4

Private & Confidential | 24

S c a l i n g y o u r S M B c o m p a n y

01

02

03

04

Build For The Long Term

Maintain Profitable Unit Economics

Build Channels

Own a segment

The SurePath SMB Index

Private & Confidential | 26

I n t r o d u c i n g t h e S u r e P a t h S M B I n d e x

SurePath SMB Index

Final Selection of 42 Companies

Selection of Companies for SMB Focus

Examined 280+ Annual Reports of Publicly Traded Companies

SCP loves SMBs

Our clients serve SMBs

So Many Other

Indices

The First To See The

Trends

Private & Confidential | 27

S C P S M B I n d e x - T h e P l a y e r s

Private & Confidential | 28

S u r e P a t h S M B I n d e x

SCP SMB Index Total Market Cap $164B

• All 42 companies are weighted based on Market Cap and indexed at January 4, 2016

• 28 of the 42 companies are part of the $1 billion market cap club (a club we expect will grow over time)

As of May 9, 2016

Shubham Datta Associate

shubham@surepathcapital.com 647.972.6834

Rena Wang Analyst

rena@surepathcapital.com 416.897.8922

Mark MacLeod Founder & President

mark@surepathcapital.com 416.843.6004