cloud insights 102010

CLOUD INSIGHTSM&A and Capital Markets Perspectiveon the Cloud Computing Industries:

- Software-as-a-Service- Platform-as-a-Service- Infrastructure-as-a-Service

September 2010 – Quarterly Update

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Table of Contents

Summary 1

M&A Overview 3 Transaction Detail 3 M&A Valuations 4 Transaction Analysis 5

Capital Markets Overview 6

Public Company Analysis 8

Venture Capital Activity 11 Transaction Analysis 11

William Blair & Compnay Selected SaaS Transactions 13

SaaS Professional Biographies 14

William Blair & Company SaaS Equity Research Coverage 15

Disclosures 16

Summary

1

Summary

SAAS MERGERS & ACQUISITIONS During Q3 2010, 29 SaaS M&A transactions were announced compared to 14 transactions announced in Q3 2009. Dollar volume for Q3 2010 was down year over year with $788 million in total disclosed transaction value versus $2.1 billion during Q3 2009 (largely driven by Adobe’s $1.7 billion acquisition of Omniture). Notable M&A transactions in Q3 2010 included:

Salary.com, a compensation and talent management solutions provider, was acquired by Kenexa for $83 million.

Learn.com, a learning management software provider, announced that it will be acquired by Taleo for $125 million.

iTradeNetwork, a provider of supply chain management and intelligence solutions to the food industry, announced that it will be acquired by Roper Industries for $525 million.

SAAS EQUITY PERFORMANCE SaaS stocks have significantly outperformed the broader market during 2010. The SaaS index outperformed the NASDAQ and the S&P 500 with Large and Small Cap SaaS companies gaining 33% and 27%, respectively, while the Mid Cap SaaS group gained 25% since the beginning of 2010.

SAAS CAPITAL MARKETS Q3 2010 witnessed three SaaS IPO pricings:

SciQuest, a strategic procurement and supplier enablement provider, completed its initial public offering of $66 million (including the over allotment). SciQuest traded up 29% on its first day of trading and is currently up 27% since pricing. William Blair acted as an underwriter in SciQuest’s initial public offering.

RealPage, a property management software provider, completed its initial public offering of $156 million (including the over allotment). RealPage traded up 32% on its first day of trading and is currently up 74% since pricing. William Blair acted as an underwriter in RealPage’s initial public offering.

IntraLinks, a provider of online information exchanges for collaboration, completed its initial public offering of $156 million (including the over allotment). IntraLinks traded down 1% on its first day of trading and is currently up 30% since pricing.

Cornerstone OnDemand, Ellie Mae and Tangoe are the three SaaS initial public offerings currently on file with the SEC. William Blair is pleased to be an underwriter on Cornerstone’s and Ellie Mae’s initial public offerings.

SAAS VENTURE CAPITAL Q3 2010 witnessed 50 SaaS venture investments with a total disclosed transaction value of $288 million. Year over year, Q3 2010 experienced similar levels of activity compared to Q3 2009, in which 46 transactions were announced. Total dollar volume in Q3 2010 was up versus $220 million in Q3 2009. Comparing Q3 2010 to the prior quarter, total number of transactions and total dollar volume were up; Q2 2010 witnessed 38 transactions with a total disclosed transaction value of $288 million. Notable venture investments in Q3 2010 included:

Retail Solutions, a provider of software for the retail and consumer packaged goods industries, announced a $15 million Series C round led by Investor Growth Capital.

SpringCM, a cloud enterprise content management provider, announced a $15 million financing with new investor Silicon Valley Bank and existing investors Foundation Capital and North Bridge Venture Partners.

iContact, an email marketing software provider, announced a $40 million Series B round led by JMI Equity.

Xactly, a sales performance management company, announced a $12 million round led by Bridgescale Partners with participation from existing investors Alloy Ventures, Bay Partners, Cheyenne Partners, Glynn Capital Management, Outlook Ventures and Rembrandt Ventures. The round also included a strategic investment from salesforce.com.

Index YTD (12/31/09-9/30/10)Large Cap SaaS +33.0%Mid Cap SaaS +24.7%Small Cap SaaS +27.2%All SaaS +30.8%NASDAQ +4.4%S&P 500 -7.6%

Summary (cont'd)

www.williamblair.com 2

Summary (cont'd)

PAAS AND IAAS ACTIVITY Notable events in the PaaS and IaaS sectors in Q3 2010:

RightScale, a cloud computing management platform, announced a $25 million Series C round led by Tenaya Capital with participation from DAG Ventures, Benchmark Captital, Index Ventures and Presidio Ventures.

Oracle announced the Exalogic Elastic Cloud at Oracle Openworld in San Francisco. The integration middleware machine provides a complete cloud application infrastructure system.

3PAR, a utility storage company, was acquired by HP for approximately $2.4 billion.

SoftLayer Technologies, a provider on-demand data center and hosting services, announced it is being acquired by its management team and GI Partners for $475 million.

VMware acquired TriCipher, a provider of secure access management and enterprise identity federation for SaaS applications, for an undisclosed amount and Integrien, a real time application and infrastructure performance analytics software company, for an undisclosed amount.

CA Technologies acquired Arcot Systems, an identity and access management company, for $200 million and 4Base Technology, an IT infrastructure consulting firm focused on cloud computing and virtualization, for an undisclosed amount.

As always, we encourage you to contact us if we may be of assistance.

Best regards,

Mark McNay Andrew Arno Patrick Vihtelic Group Head Vice President Senior Analyst [email protected] [email protected] [email protected] 415.248.5902 415.248.5905 415.248.5911

M&A Overview

3

M&A Overview Transaction Detail

Number of SaaS M&A transactions announced increased by nearly three times when comparing LTM 09/10 to LTM 09/09.

LTM 09/10 – 87 transactions (19 with disclosed transaction values totaling $2.6 billion).

LTM 09/09 – 34 transactions (14 with disclosed transaction values totaling $3.1 billion).

29 M&A transactions were announced in Q3 2010, compared to 14 in Q3 2009.

M&A Activity Detail

Source: Capital IQ as of September 30, 2010.

Annual M&A Detail

2005 2006 2007 2008 2009 LTM

09/09 LTM 09/10

Transaction Value $694 $2,302 $6,005 $1,854 $2,826 $3,057 $2,595

Number of Transactions 15 32 46 31 39 34 87


($ in millions)

2007 2008 2009LTM09/09

LTM09/10 2007 2008 2009

LTM09/09

LTM09/10

AnnualDisclosed 22 13 14 14 19 $6,005 $1,854 $2,826 $3,057 $2,595Undisclosed 24 18 25 20 68 - - - - -TOTAL 46 31 39 34 87 $6,005 $1,854 $2,826 $3,057 $2,595

Number of Transactions Dollar Value

Transaction Value LTM Transaction Value # of Transactions

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

0102030405060708090100

Number of Transactions

Transaction Value($ in millions)

M&A Overview (cont'd)


M&A Valuations M&A Overview (cont'd)

Volume and number of announced M&A transactions are both up during the last twelve months when compared to the same period in 2009, surpassing highs seen in 2007 in terms of number of announced transactions.

Valuation multiples are also up during the LTM 09/10 period compared to LTM 09/09, but in line with the LTM 09/09 period when excluding the high multiple acquisition of Synaptic Mash during Q3 2010.

M&A Valuation Analysis


($ in millions)

2007 2008 2009LTM09/09

LTM09/10

VolumeNumber of Announced Transactions 46 31 39 34 87Number of Disclosed Transactions 22 13 14 14 19Total Dollar Volume $6,005 $1,854 $2,826 $3,057 $2,595Average Transaction Size $273 $143 $202 $218 $137

EV/LTM RevenuesNumber of Disclosed Transactions 14 7 3 4 6Mean 5.81x 2.88x 4.03x 3.40x 5.93xMedian 4.50x 2.80x 4.60x 3.40x 4.10x

EV/LTM EBITDANumber of Disclosed Transactions 5 3 2 1 2Mean 25.6x 15.9x 47.7x 45.4x 34.5xMedian 22.1x 18.5x 47.7x 45.4x 34.5x

Annual

M&A Overview (cont'd)

5

M&A Overview (cont'd) Transaction Analysis

Private venture backed companies continue to comprise nearly half of the acquisition targets, with an emergence of private independent targets over the last twelve months.

Cash continues to be the most common form of consideration disclosed during the last twelve months, making up 84% of transactions with a disclosed consideration.

M&A Activity by Target Ownership

2005 2006 2007 2008 2009 LTM 09/09 LTM 09/10

Private – V.C. Backed 54% 60% 59% 59% 64% 65% 48%

Private – Independent 33% 34% 23% 23% 31% 24% 49%

Public 13% 6% 18% 18% 5% 12% 2%

M&A Activity by Consideration

2005 2006 2007 2008 2009 LTM 09/09 LTM 09/10

Not Disclosed 20% 47% 52% 52% 46% 37% 76%

Cash 53% 34% 32% 31% 46% 51% 20%

Stock 27% 19% 16% 16% 8% 11% 4%


Private – V.C. Backed Private – Independent Public

0%

25%

50%

75%

Percent of Transactions

Not Disclosed Cash Stock

0%

25%

50%

75%

100%

Percent of Transactions

Capital Markets Overview


Capital Markets Overview

SciQuest, RealPage and IntraLinks priced their IPOs during Q3 2010, raising $378 million in total.

Cornerstone OnDemand filed for an IPO during Q3 2010.

Annual SaaS Public Offering Activity ($ Volume by IPO, Follow-On and Convertible Debt)

2005 2006 2007 2008 2009 LTM 09/09 LTM 09/10

Initial Public Offerings $410.1 $145.0 $805.0 – $194.9 $194.9 $964.5

Follow-Ons Offerings – $439.3 $934.7 $177.0 $457.9 – $457.9

PIPEs – – – – $251.0 $251.0 –

Convertible Debt Offerings – – – – – – $913.8

Source: Capital IQ and Dealogic as of September 30, 2010.

Initial Public Offerings Follow-On Offerings PIPEs Convertible Debt Offerings)

$0

$500

$1,000

$1,500

$2,000

$2,500($ in millions)

Capital Market Overview (cont'd)

7

Capital Market Overview (cont'd)

LTM SaaS Public Equity Offering Detail

Note: William Blair clients highlighted. Source: FactSet and Dealogic as of September 30, 2010.

CompanyFilingDate

PricingDate Filing Range

OfferPrice

Offering Size

($ in MM)

Primary as % of Offering Dilution

FirstDay

First Week To Date

IPO

FiledCornerstone OnDemand 09/29/10 - - - $115.0 - - - - - -

Ellie Mae 04/30/10 - - - $86.3 - - - - - -

Tangoe 04/16/10 - - - $75.0 - - - - - -

PricedConvio, Inc. 01/22/10 04/29/10 $10.00 -$12.00 $9.00 $53.1 73.8% 23.0% $148.5 13.8% 8.3% 2.4%

SPS Commerce, Inc. 12/03/09 04/22/10 $11.00 -$13.00 $12.00 $56.5 66.1% 27.0% $138.4 13.3% 13.0% 6.8%

RealPage 04/29/10 08/11/10 $13.00 -$15.00 $11.00 $155.6 44.4% 9.6% $685.4 32.0% 52.3% 73.5%

IntraLinks Holdings 04/12/10 08/05/10 $14.00 -$16.00 $13.00 $155.7 100.0% 23.8% $640.7 -0.8% -4.6% 30.1%

SciQuest, Inc. 03/26/10 09/23/10 $9.50 - $11.50 $9.50 $65.6 87.0% 10.3% $200.3 29.2% 27.2% 27.2%

Follow-On

PricedMedidata Solutions Inc. 11/19/09 12/08/09 - $15.00 $82.5 0.0% 0.0% $341.3 3.3% 4.1% 28.0%

Taleo Corp. 10/28/09 11/19/09 - $20.25 $131.6 100.0% 16.9% $742.0 3.7% 8.5% 43.2%

LogMeIn Inc. 11/06/09 11/19/09 - $18.50 $57.8 3.2% 0.4% $412.6 5.4% 9.8% 94.5%

SuccessFactors, Inc. 10/15/09 10/20/09 - $15.50 $186.0 100.0% 19.3% $1,108.6 3.1% -0.1% 62.0%

Withdrawn WD DateGomez, Inc. 05/07/08 11/09/09 - - - - - - - - -

Market Cap Post Offering

($ in

% Change Pricing to

Public Company Analysis


Public Company Analysis

Since the beginning of 2010, the SaaS Index has outperformed the NASDAQ composite, gaining 31% while the NASDAQ gained 4% for the year.

The Large and Small Cap SaaS companies gained 33% and 27% year to date, respectively, while the Mid Cap SaaS group gained 25% during the period.

Valuation Overview

Source: FactSet as of September 30, 2010. Note: Market cap groupings based on September 30, 2010 stock price. Data points represent median multiples.

$1 B+ Market Cap $500 MM to $1 B Market Cap <$500 MM Market Cap

6.2x

32.5x

44.5x

3.4x

22.4x

39.4x

1.7x

13.8x

23.2x

EV / 2010E Sales EV / 2010E EBITDA EV / 2010E FCF

SaaS Indexed Stock Price Performance

Note: Market cap groupings based on December 31, 2009 stock price. Mkt. Cap > $1 B consists of: ATHN, BBBB, CNQR, CRM, RP, SFSF. Mkt. Cap $500 MM to $1B consists of: IL, N, PFWD, RNOW, TLEO, TRAK, ULTI. Mkt. Cap < $500 MM consists of: CNVO, CTCT, DMAN, KNXA, LOGM, LPSN, MDSO, SDBT, SLRY, SNCR, SPSC, SQI, VOCS. Source: FactSet as of September 30, 2010.

80

90

100

110

120

130

140

150

1/1/10 2/1/10 3/1/10 4/1/10 5/1/10 6/1/10 7/1/10 8/1/10 9/1/10

Mkt. Cap > $1B (+33.0%) Mkt. Cap $500 MM to $1B (+24.7%)

Mkt. Cap < $500 MM (+27.2%) NASDAQ (+4.4%)

Public Company Analysis (cont'd)

9


Stock Price and Revenue Multiple Over Time

Source: FactSet as of September 30, 2010. Note: Low point and high point reflect data since December 31, 2008.

StockPrice

EV/LTMRev

StockPrice

EV/LTMRev

StockPrice

EV/LTMRev

StockPrice

EV/LTMRev

12/31/08 to 9/30/10

Low Point to 9/30/10

High Point to 9/30/10

athenahealth Inc. $1,127.4 $ 37.62 9.33 x $22.05 3.04x $47.41 9.48x $33.02 4.88x -12.2% 49.8% -30.4%

Blackboard Inc. $1,235.6 $26.23 2.98 x $23.00 2.51x $46.30 4.23x $36.04 3.09x 37.4% 56.7% -22.2%

Concur Technologies Inc. $2,566.7 $ 32.82 6.21 x $18.20 3.00x $52.01 8.73x $49.44 7.98x 50.6% 171.6% -4.9%

Constant Contact Inc. $621.0 $13.25 3.44 x $12.60 2.46x $26.19 5.48x $21.43 3.39x 61.7% 70.1% -18.2%

Convio Inc. $160.8 NA NA $6.95 1.14x $10.24 2.11x $9.22 1.63x NA 32.7% -10.0%

DealerTrack Holdings Inc. $689.3 $11.89 1.13 x $9.28 0.71x $21.35 2.98x $17.08 2.27x 43.7% 84.1% -20.0%

DemandTec Inc. $282.8 $ 8.07 2.09 x $5.40 1.33x $9.76 2.94x $9.41 2.79x 16.6% 74.3% -3.6%

IntraLinks Holdings Inc. $647.3 NA NA $11.85 6.13x $16.91 7.84x $16.91 4.89x NA 42.7% 0.0%

Kenexa Corp. $396.5 $ 7.98 0.75 x $3.83 0.30x $18.42 2.16x $17.52 2.03x 119.5% 357.4% -4.9%

LivePerson Inc. $428.6 $1.82 0.87 x $1.68 0.73x $8.94 4.55x $8.40 3.81x 361.5% 400.0% -6.0%

LogMeIn Inc. $838.6 NA NA $15.43 3.57x $38.39 8.90x $35.98 8.24x NA 133.2% -6.3%

Medidata Solutions Inc. $456.5 NA NA $13.64 1.65x $19.30 3.69x $19.20 2.48x NA 40.8% -0.5%

NetSuite Inc. $1,501.7 $ 8.44 2.67 x $6.74 1.94x $24.10 8.17x $23.57 7.97x 179.3% 249.7% -2.2%

RealPage Inc. $1,188.9 NA NA $14.52 5.66x $19.72 7.69x $19.08 7.44x NA 31.4% -3.2%

RightNow Technologies Inc. $631.1 $ 7.73 1.20 x $5.84 0.73x $19.92 3.53x $19.70 3.21x 154.9% 237.3% -1.1%

salesforce.com Inc. $14,522.8 $32.01 3.31 x $25.77 2.46x $123.14 10.82x $111.80 9.79x 249.3% 333.8% -9.2%

SciQuest Inc. $255.2 NA NA $11.06 4.68x $12.35 5.32x $12.08 5.22x NA 9.2% -2.2%

SoundBite Communications Inc. $44.5 $14.60 NMF $1.30 0.02x $3.41 0.46x $2.72 NMF -81.4% 109.2% -20.2%

SPS Commerce Inc. $148.8 NA NA $8.60 1.54x $13.91 3.14x $12.82 2.76x NA 49.1% -7.8%

SuccessFactors Inc. $1,851.5 $5.74 2.25 x $4.98 1.61x $25.95 9.15x $25.11 8.79x 337.5% 404.2% -3.2%

Synchronoss Technologies Inc. $558.7 $ 10.66 2.23 x $8.23 1.59x $21.75 4.51x $17.81 3.36x 67.1% 116.4% -18.1%

Taleo Corp. $1,160.0 $7.83 1.20 x $7.09 1.06x $30.35 4.56x $28.99 4.31x 270.2% 308.9% -4.5%

Ultimate Software Group Inc. $969.7 $ 14.60 1.97 x $12.95 1.67x $38.65 4.48x $38.64 4.47x 164.7% 198.4% 0.0%

Vocus Inc. $359.0 $18.21 3.51 x $11.66 1.74x $21.65 3.99x $18.48 2.96x 1.5% 58.5% -14.6%

MarketCap

($ MM)

12/31/08 Low Point High Point 9/30/10 % Change in Stock Price




Comparable Company Analysis

*Indicates excluded from mean and median calculation due to low enterprise value. Source: FactSet as of September 30, 2010.

Market Enterprise LG Term LTMClose Cap Value Enterprise Value / Sales Enterprise Value / EBITDA Enterprise Value / FCF Growth EBITDA

Name 09/30/10 ($ MM) ($ MM) LTM 2010E 2011E LTM 2010E 2011E LTM 2010E 2011E Rate Margin

athenahealth Inc. $33.02 $1,127.4 $1,049.0 4.88x 4.31x 3.39x 36.9x 29.1x 17.8x 51.2x NMF 38.5x 35.4% 13.2%

Blackboard Inc. $36.04 $1,235.6 $1,257.6 3.09x 2.82x 2.46x 12.8x 11.7x 8.9x 17.1x 14.7x 12.1x 19.4% 24.1%

Concur Technologies Inc. $49.44 $2,566.7 $2,237.1 7.98x 7.32x 6.00x 34.2x 25.2x 20.2x 36.1x 39.9x 31.9x 25.9% 23.3%

Constant Contact Inc. $21.43 $621.0 $515.0 3.39x 2.97x 2.36x 59.1x 23.4x 14.9x 59.6x 46.1x 23.5x 30.0% 5.7%

Convio Inc. $9.22 $160.8 $108.8 1.63x 1.59x 1.44x 19.7x 13.9x 10.4x 22.3x 19.5x 14.3x 12.5% 8.3%

DealerTrack Holdings Inc. $17.08 $689.3 $523.0 2.27x 2.15x 1.95x 14.3x 11.8x 8.8x NMF 46.2x 15.0x 16.7% 15.8%

DemandTec Inc. $9.41 $282.8 $217.7 2.79x 2.72x 2.41x NMF NMF NMF NMF 56.0x 22.2x 20.0% -8.8%

IntraLinks Holdings Inc. $16.91 $647.3 $770.4 4.89x 4.33x 3.70x NMF 13.5x 10.7x 33.5x 46.6x 17.9x NA 2.2%

Kenexa Corp. $17.52 $396.5 $332.9 2.03x 1.85x 1.65x 16.0x 12.8x 10.1x 17.4x 18.2x 14.9x 15.8% 12.7%

LivePerson Inc. $8.40 $428.6 $375.8 3.81x 3.44x 2.90x 18.7x 14.9x 11.2x 32.7x 31.3x 18.8x 24.2% 20.3%

LogMeIn Inc. $35.98 $838.6 $692.0 8.24x 7.31x 5.99x 47.0x 31.2x 23.8x 54.1x 24.7x 22.8x 21.0% 18.0%

Medidata Solutions Inc. $19.20 $456.5 $374.1 2.48x 2.29x 1.96x 15.1x 11.0x 7.7x 31.3x NA NA NA 16.5%

NetSuite Inc. $23.57 $1,501.7 $1,403.5 7.97x 7.40x 6.34x NMF NMF NMF NMF NMF NMF 27.0% 2.6%

RealPage Inc. $19.08 $1,188.9 $1,190.1 7.44x 6.55x 5.41x 51.9x 36.3x 23.9x 27.3x NMF 32.0x 22.5% 14.3%

RightNow Technologies Inc. $19.70 $631.1 $531.7 3.21x 2.99x 2.58x 35.7x 22.2x 13.9x 54.5x 59.4x 24.9x 26.7% 9.0%

Salesforce.com Inc. $111.80 $14,522.8 $14,256.7 9.79x 9.01x 7.61x 50.9x 47.1x 41.2x 49.9x 52.4x 41.2x 29.8% 19.2%

SciQuest Inc. $12.08 $255.2 $206.3 5.22x NA NA 21.5x NA NA 23.2x NA NA NA 18.9%

SoundBite Communications Inc.* $2.72 $44.5 $9.3 NMF NMF NMF NMF NMF 29.1x NMF NMF NMF NA -3.2%

SPS Commerce Inc. $12.82 $148.8 $112.6 2.76x 2.56x 2.21x 28.9x 24.2x 19.5x 31.7x NMF 28.5x 25.0% 9.6%

SuccessFactors Inc. $25.11 $1,851.5 $1,508.2 8.79x 7.57x 6.05x NMF NMF NMF 55.0x 49.2x 31.1x 28.0% -0.2%

Synchronoss Technologies Inc. $17.81 $558.7 $473.5 3.36x 2.88x 2.32x 15.8x 10.6x 7.8x 23.8x 25.1x 16.3x NA 21.2%

Taleo Corp. $28.99 $1,160.0 $915.1 4.31x 3.96x 3.42x 31.7x 18.4x 15.4x 22.4x 26.8x 18.7x 23.0% 13.6%

Ultimate Software Group Inc. $38.64 $969.7 $942.6 4.47x 4.09x 3.43x NMF 27.1x 19.0x 50.6x 39.7x 27.2x 28.8% 6.3%

Vocus Inc. $18.48 $359.0 $263.8 2.96x 2.72x 2.41x NMF 21.5x 13.4x 19.9x 19.6x 15.5x 24.0% 3.4%

Mean 4.68x 4.22x 3.54x 30.0x 21.4x 15.7x 35.7x 36.2x 23.4x 24.0% 11.7%

Median 3.81x 3.21x 2.74x 28.9x 21.5x 13.9x 32.2x 39.7x 22.5x 24.2% 13.2%

Venture Capital Activity

11

Venture Capital Activity Transaction Analysis

Total number of venture investments increased 56% when comparing LTM 09/10 to LTM 09/09, while dollar volume increased 40%.

Year-over-year, Q3 2010 was up slightly in venture capital activity – Q3 2010 witnessed 50 venture investments totaling $288 million, while Q3 2009 witnessed 41 venture investments totaling $220 million.

Annual Venture Capital SaaS Activity

2007 2008 2009 LTM 09/09 LTM 09/10

Transaction Value $1,226 $1,345 $969 $701 $983

Number of Transactions 124 137 126 104 162

Quarterly Venture Capital SaaS Activity

Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4’09 Q1’10 Q2’10 Q3’10

Transaction Value $340 $418 $273 $430 $529 $257 $129 $132 $231 $220 $386 $176 $133 $288

Number of Transactions 39 33 29 41 50 31 15 17 21 41 47 27 38 50

Source: Capital IQ and VentureSource as of September 30, 2010.

Transaction Value LTM Transaction Value # of Transactions

020406080100120140160180

$0

$400

$800

$1,200

$1,600

Number ofTransactions


Transaction Value Number of Transactions

$0

$100

$200

$300

$400

$500

$600

$0

$10

$20

$30

$40

$50

$60

Number ofTransactions


Venture Capital Activity (cont'd)


Transaction Analysis Venture Capital Activity (cont'd)

Series A and B financings continue to comprise a majority of SaaS venture investments.

Series A financings have increased by over 50% when comparing the LTM 09/10 period to LTM 09/09.

Number of SaaS Transactions by Round

Series A Series B Series C Series D Series E Series F Later Stage

Median SaaS Transaction Size by Round

($ in millions)

Series A Series B Series C Series D Series E Series F Later Stage

Source: Capital IQ and VentureSource as of September 30, 2010.

3126

22

72 1

4

2025

15

74

06

0

10

20

30

40

$3 $6

$10 $16

$2

$20

$29

$3 $8 $7

$10

$24

na

$23

0

10

20

30

40

LTM09/10 LTM09/09

LTM09/10 LTM09/09

William Blair & Compnay Selected SaaS Transactions

13

William Blair & Compnay Selected SaaS Transactions

\

Selected M&A Transactions

Selected Private Placement Transactions

$50,000,000

Convertible Preferred Stock

$54,000,000

Convertible Preferred Stock

Selected Public Equity Transactions

$66,000,000

Initial Public Offering

$206,816,000

Initial Public Offering& Follow-on

$51,750,000


$68,331,000

Follow-On

$237,600,000

Follow-On

$137,396,000

Follow-On

$166,118,000

Follow-On

$42,500,000


$126,500,000


$195,500,000


$239,603,000

Follow-On

$10,000,000

Series E Preferred Stock

from existing investors and

Not Disclosed

has been acquired by

Not Disclosed


Not Disclosed


Not Disclosed


Not Disclosed


Not Disclosed


Not Disclosed

has acquired

Not Disclosed


$56,534,000


$53,124,000


$155,595,000


Not Disclosed


$65,550,000


SaaS Professional Biographies




Mark McNay Group Head, San Francisco Mark McNay joined William Blair & Company in 2000 as Group Head of the West Coast Investment Banking Team based in San Francisco. Prior to joining William Blair & Company, he was a Managing Director and Head of the Internet Banking Group at Volpe Brown Whelan & Company and a Managing Director at Smith Barney, where at various times he headed the Consumer/Retailing Group and the Los Angeles Corporate Finance Office. He is a graduate of Georgetown University (B.S.) and Columbia University (M.B.A.).

Andrew Arno Vice President, San Francisco Andrew Arno is a Vice President in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. He joined William Blair & Company in 2004. From 2000 to 2002, he was an Investment Banking Associate at WR Hambrecht+Co. in the technology group. From 1997 to 2000, he worked at The Shattan Group LLC, a boutique investment bank focused on private equity placements. He is a graduate of Columbia University (B.A.) and the Haas School of Business at UC Berkeley (M.B.A.).

William Blair & Company SaaS Equity Research Coverage

15

William Blair & Company SaaS Equity Research Coverage

SaaS Equity Research

Company Ticker Analyst

athenahealth, Inc. ATHN Tobin, Corey

Blackboard Inc. BBBB Dobell, Brandon

Concur Technologies, Inc. CNQR Lederman, Laura

Constant Contact, Inc. CTCT Lederman, Laura

Convio, Inc. CNVO Lederman, Laura

DealerTrack Holdings, Inc. TRAK Coverage in transition

DemandTec, Inc. DMAN Lederman, Laura

Kenexa Corporation KNXA Lederman, Laura

NetSuite Inc. N Lederman, Laura

Phase Forward Incorporated PFWD Kreger, John

RealPage, Inc. RP Lederman, Laura

RightNow Technologies, Inc. RNOW Lederman, Laura

salesforce.com, inc. CRM Lederman, Laura

SPS Commerce, Inc. SPSC Lederman, Laura

Ultimate Software Group, Inc. ULTI Lederman, Laura

Disclosures

THIS IS NOT IN ANY SENSE A SOLICITATION OR OFFER OF THE PURCHASE OR SALE OF SECURITIES. THE FACTUAL STATEMENTS HEREIN HAVE BEEN TAKEN FROM SOURCES WE BELIEVE TO BE RELIABLE, BUT SUCH STATEMENTS ARE MADE WITHOUT ANY REPRESENTATION AS TO ACCURACY OR COMPLETENESS OR OTHERWISE. OPINIONS EXPRESSED ARE OUR OWN UNLESS OTHERWISE STATED. FROM TIME TO TIME, WILLIAM BLAIR & COMPANY, L.L.C. OR ITS AFFILIATES MAY BUY AND SELL THE SECURITIES REFERRED TO HEREIN, MAY MAKE A MARKET THEREIN AND MAY HAVE A LONG OR SHORT POSITION THEREIN. PRICES SHOWN ARE APPROXIMATE. THIS MATERIAL HAS BEEN APPROVED FOR DISTRIBUTION IN THE UNITED KINGDOM AND APPROPRIATELY PASSPORTED COUNTRIES BY WILLIAM BLAIR INTERNATIONAL, LIMITED (“WBIL”), REGULATED BY THE FINANCIAL SERVICES AUTHORITY (FSA), AND IS DIRECTED AT, AND IS ONLY MADE AVAILABLE TO, AUTHORIZED PERSONS AND OTHER PERSONS FALLING WITHIN COB 3.2.5(1)(b) OF THE FSA HANDBOOK, AND MAY NOT BE PASSED ON TO PRIVATE CUSTOMERS IN THE UNITED KINGDOM. ANY UNAUTHORIZED USE IS PROHIBITED. “WBIL” IS REGISTERED IN ENGLAND UNDER COMPANY NUMBER 3619027 AND ITS REGISTERED OFFICE IS LOCATED AT 3 ST HELENS PLACE, LONDON, ENGLAND ECA6AB. “WILLIAM BLAIR & COMPANY” AND

ARE REGISTERED TRADEMARKS OF WILLIAM BLAIR & COMPANY, L.L.C. Copyright 2009, William Blair & Company, L.L.C.

September 30, 2010

16

Disclosures

CLOUD INSIGHTSM&A and Capital Markets Perspectiveon the Cloud Computing Industries:

- Software-as-a-Service- Platform-as-a-Service- Infrastructure-as-a-Service

September 2010 – Quarterly Update

OFFICE LOCATIONS

Mark [email protected]+1.415.248.5902

Patrick Vihtelic [email protected]+1.415.248.5911

Andrew [email protected]+1.415.248.5905

Unit 16-18, 11th FloorBuilding One, Corporate AvenueNo.222 Hubin RoadShanghai 200021, P.R.C.+86 21 2327 2222

Kamiyacho MT Building13th Floor4-3-20 ToranomonMinato-ku, Tokyo 105-0001Japan+81 3 5470 0720

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Headquarters222 West Adams StreetChicago, IL 60606+1.312.236.1600www.williamblair.com

8888 Keystone CrossingSuite 1300Indianapolis, IN 46240+1.317.575.4051

666 Fifth Avenue14th FloorNew York, NY 10103+1.212.237.2700

Two International PlaceSuite 1700Boston, MA 02110+1.617.235.7500

William Blair & Company, L.L.C. is a global investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients’ interests first and foremost. We place a high value on the enduring nature of our client relationships, the quality of our products and services, and the continuity and integrity of our people. For more information, please visit www.williamblair.com

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cloud insights 102010

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