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CLOUD INSIGHTSM&A and Capital Markets Perspective

on the Cloud Computing Industries:- Software-as-a-Service

- Platform-as-a-Service

- Infrastructure-as-a-Service

October 2011 Update and Q3 Review

Mark McNay

Partner & Managing [email protected]+1.415.248.5902

Patrick Vihtelic

[email protected]+1.415.248.5911

Andrew Arno

[email protected]+1.415.248.5905

Paul Huber

Senior [email protected]+1.415.248.5901


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3/21

T

Summary

M&A Overview

Transaction Detail

M&A Valuations

Transaction Analysis

Capital Markets Overview

Public Company Analysis

Venture Capital Activity

Transaction Analysis

William Blair & Company Selected Cloud Transactions

SaaS Professi onal Biographies

William Blair & Company SaaS Equity Research Coverage

Notes

Disclosures


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Summary

SAAS MERGERS & ACQUISITIONSWhile the public equity markets have been volatile over the past quarter, the SaaS M&A ento be robust. During third quarter 2011, 53 SaaS M&A transactions were announcedannounced in third quarter 2010. Dollar volume for third quarter 2011 was up year-over-yeatotal disclosed transaction value, versus $788 million during third quarter 2010. Both transactions and dollar volume for year-to-date 2011 are up nearly double over the prior 2011 has witnessed 123 transactions totaling $4.8 billion in disclosed transaction valuecorresponding period in 2010, which witnessed 76 transactions totaling $2.1 billion in dvalue. Notable M&A transactions in third quarter 2011 included:

Fizzback, a provider of customer feedback management solutions, announced that it NICE Systems for $80 million (or roughly 7.3x LTM revenue).

Ning, a provider of social website and online community creation and management sthat it is being acquired by Glam Media.

Assistly, a provider of customer service management software, announced that it isalesforce.com for $50 million.

Plimus, a provider of e-commerce solutions for the SMB marketplace, announced that itGreat Hill Partners for $115 million.

Blackboard, a publicly listed provider of software solutions for the education industry, being acquired by Providence Equity Partners for $1.8 billion (or roughly 3.8x LTM reve

SAAS EQUITY PERFORMANCE

SaaS stocks have underperformed the broader marketduring 2011. The SaaS index underperformed the NASDAQand the S&P 500 with Large and Small Cap SaaS groupslosing 11.8% and 12.1%, respectively, while the Mid CapSaaS group lost 18.5% since the beginning of 2011. ForSeptember, the SaaS index underperformed the NASDAQand the S&P 500, losing 9.3%, compared with losses of6.2% and 5.7%, respectively.

SAAS CAPITAL MARKETS

Third quarter 2011 witnessed two SaaS public equity offerings, which included one initial pufollow-on offering, as well as four SaaS initial public offering filings:

ServiceSource International, which provides solutions that drive increased renewals of mand subscription agreements for technology companies, completed its follow-on offe(including the overallotment). ServiceSource priced its follow-on offering at a 5.5% discand a 0.7% discount to the closing price of its stock on the day of pricing. However, thsince its initial public offering in March of this year. William Blair acted as an underwrite

IPO and follow-on offering. Tangoe, which provides communications lifecycle management solutions, completed its

of $101 million (including the over allotment). Tangoe traded up 17% on its first dcurrently up 16% since pricing.

Demandware, which provides e-commerce solutions, filed for a $100 million IPO. Willian underwriter for Demandwares initial public offering.

Eloqua Jive Software and BazaarVoice have also filed for their respective IPOs

Index 2011 Y

Large-cap SaaS -11.8%

Midcap SaaS -18.5

Small-cap SaaS -12.1

All SaaS -13.6

NASDAQ -8.3%

S&P 500 -3.1%


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Summary (cont'd)

Summary (cont'd)

SAAS VENTURE CAPITALDespite the slowdown in the public equity markets, the SaaS venture funding environmhealthy. During third quarter 2011, 54 SaaS venture transactions were announced, comparein third quarter 2010. Dollar volume for third quarter 2011 was up year-over-year, with $603 value, versus $302 million during third quarter 2010. Venture investments for the year-to-datsignificantly year-over-year compared with the prior period. Year-to-date 2011 has witnestotaling $976 million in transaction value, whereas the same period in 2010 witnessed 117 $615 million in transaction value. Notable venture investments in third quarter 2011 included

Rearden Commerce, an e-commerce platform company, raised $133 million in funAmerican Express and JP Morgan Chase. Rearden Commerce has raised $328 milli

date.

Steelwedge Software, which provides sales planning and performance management million from Mainsail Partners.

MINDBODY, which provides business management software for businesses in yoga, fitness markets, raised $21 million from Bessemer Venture Partners and Catalyst Invest

Box.net, which provides online file storage, sharing and collaboration solutions, raisMeritech Capital Partners, Andreessen Horowitz, Emergence Capital Partners, DrapScale Venture Partners, U.S. Venture Partners, salesforce.com and others.

Inkling, which provides a prediction market platform for corporations, start-ups, acadgovernment institutions, raised $17 million in funding led by Tenaya Capital.

Cvent, a provider of event management and Web survey solutions, raised $136 transaction from New Enterprise Associates and Insight Venture Partners, with Greensparticipating.

PAAS AND IAAS ACTIVITY

Notable events in the PaaS and IaaS sectors in third quarter 2011:

Carbonite, which provides online back-up solutions for consumers, completed its initial million (including the over allotment). Carbonite traded up 23.5% on its first day of tra

up 48.1% since pricing. William Blair acted as an underwriter for Carbonites initial publi

Cloud.com, a provider of software infrastructure platforms for cloud providers, has beSystems for about $190 million.

10gen, a provider of platform-as-a-service technology designed to help developers applications, raised $20 million from Sequoia Capital, Union Square Ventures anPartners.

iGware, a provider of software and infrastructure tools that support consumer devices, wfor about $395 million in total consideration.

GoodData Corporation, which provides a business intelligence platform-as-a-secompanies to collaborate around data, raised $15 million from Andreessen Horowitzinvestors Windcrest Partners, General Catalyst Partners and Fidelity Growth Partners E

Salesforce.com announced the extension of its social enterprise platform, whichmultitenant application development environment that enables the creation of cloud, moDatabase.com, Salesforces on-demand cloud database for developers, has become avand ISVs.


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M&A Overview

The number of SaaS M&A transactions announced increased by over two times w09/11 to LTM 09/10.

LTM 09/11 177 transactions (58 with disclosed transaction values totaling $6.5 billion).

LTM 09/10 88 transactions (20 with disclosed transaction values totaling $2.7 billion).

53 M&A transactions were announced in third quarter 2011, compared with 29 in th

M&A Activi ty Detail

Source: Capital IQ as of September 30, 2011.

Annual M&A Detail

2006 2007 2008 2009 2010 LTM

09/10TransactionValue

$2,302 $6,005 $1,854 $2,826 $3,432 $2,654

Number ofTransactions

32 46 31 39 112 88


($ in millions) Number of Transactions Dollar V

2008 2009 2010

LTM

09/10

LTM

09/11 2008 2009 2010

AnnualDisclosed 13 14 30 20 58 $1,854 $2,826 $3,43

Undisclosed 18 25 82 68 119 - - -

TOTAL 31 39 112 88 177 $1,854 $2,826 $3,43

Transac tion Value LTMTransac tion Value # of Transac tion

$0

$1,000

$2,000

$3,000

$4,000

$5,000$6,000

$7,000

Transaction Value($ in millions)


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M&A Overview (cont 'd)

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

The volume and number of announced M&A transactions are both up during the compared with the corresponding period in 2010.

On a monthly basis, September 2011 witnessed 17 SaaS M&A transactions totadisclosed transaction value compared with 11 transactions totaling $167.5 million in

While revenue multiples are down slightly during LTM 09/11, M&A activity has inover the prior period.

M&A Valuation Analysis


($ in millions)

2008 2009 2010

L

09

Volume

Number of Announced Transactions 31 39 112

Number of Disclosed Transactions 13 14 30

Total Dollar Volume $1,854 $2,826 $3,432

Average Transaction Size $143 $202 $114

EV/LTM Revenues


Mean 2.88x 4.03x 5.04x

Median 2.80x 4.60x 2.83x

EV/LTM EBITDA


Mean 15.9x 47.7x 19.0x

Median 18.5x 47.7x 19.0x

Annual


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M&A O

M&A Overview (cont'd)

Private venture-backed companies account for nearly half of the acquisition tindependent targets account for the majority of acquisition targets over the last 12 m

Cash continues to be the most common form of consideration disclosed during making up 69% of transactions with a disclosed consideration.

M&A Activi ty by Target Ownership

2006 2007 2008 2009 2010 LT

Private V.C. Backed 60% 57% 52% 62% 50%

Private Independent 34% 26% 35% 31% 48%

Public 6% 17% 13% 7% 2%

M&A Activity by Consideration

Private V.C. Backed Private Independent Public

0%

25%

50%

75%

Percent o fTransactions

Not Disclosed Cash Stock

0%

25%

50%

75%

100%

Percent o fTransactions


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Tangoe priced its IPO during third quarter 2011, raising $100.9 million in total.

ServiceSource International priced its follow-on offering during third quarter 2011, in total.

Annual SaaS Public Offer ing Act ivity($ Volume by IPO, Follow-On and C

2006 2007 2008 2009 2010 LTM

Initial Public Offerings $145.0 $805.0 - $194.9 $486.5 $48

Follow-Ons Offerings $439.4 $934.8 $177.0 $457.9 $631.3 $52

PIPEs - - $251.0 - -

Convertible Debt Offerings - - - - $1,029.6 $85

Source: Capital IQ and Dealogic as of September 30, 2011.

In itial Publ ic Offerings Fol low-On Offerings PIPEs Convertible

$0

$500

$1,000

$1,500

$2,000

$2,500 Initial Publ ic Offerings Follow-On Offerings PIPEs Con

($ in millions)


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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, 2011.

Company

Filing

Date

Pricing

Date Filing Range

Offer

Price

Offering

Size

($ in MM)

Primary

as % of

Of fer ing Di l

09/30/2011

IPO

Filed

Bazaarvoice 08/26/11 - - - 86.3$ -

Jive Software 08/24/11 - - - 100.0$ -

Eloqua 08/24/11 - - - 100.0$ -Demandware 07/15/11 - - - 100.0$ -

WageWorks 04/25/11 - - - 49.0$ -

Trustwave 04/21/11 - - - 100.0$ -

Priced

Tangoe 04/16/10 07/26/11 $9.00 - $11.00 10.00$ 100.9$ 74.4%

Responsys 12/23/10 04/20/11 $8.50 - $10.00 12.00$ 91.4$ 85.3%

Ellie Mae 04/30/10 04/14/11 $9.00 - $11.00 6.00$ 50.7$ 59.2%

ServiceSource International 12/20/10 03/24/11 $7.50 - $ 9.00 10.00$ 137.3$ 71.3%

Cornerstone OnDemand 09/29/10 03/16/11 $9.00 - $11.00 13.00$ 157.0$ 62.1%

Follow-On

Priced

ServiceSource International 07/18/11 07/28/11 - 17.50$ 181.1$ 13.3%

SPS Commerce 06/08/11 06/09/11 - 16.50$ 19.9$ 100.0%

Kenexa 05/16/11 05/19/11 - 27.75$ 95.7$ 100.0%

IntraLinks Holdings 03/25/11 04/06/11 - 25.50$ 219.9$ 16.7%

SciQuest 03/09/11 03/30/11 - 14.25$ 77.3$ 21.2%

RealPage 11/17/10 12/06/10 - 25.75$ 266.5$ 38.6%

IntraLinks Holdings 11/19/10 12/06/10 - 20.00$ 200.0$ 20.0%

SPS Commerce 11/12/10 12/02/10 - 12.25$ 35.2$ 3.5%

Synchronoss Technologies 11/12/10 11/17/10 - 25.40$ 124.4$ 90.1%


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Since the beginning of 2011, the SaaS Index has underperformed against the losing 13.6%, while the NASDAQ has lost 8.3% for the year.

Since the beginning of 2011, the Large and Small Cap SaaS groups have losrespectively, while the Mid Cap SaaS group lost 18.5%.

Valuation Overview

$1 B+ Market Cap $500 MM to $1 B Market Cap $1 B consists of: ATHN, BBBB, CNQR, CRM, LOGM, N, RP, SFSF, TLEO, ULTI

Mkt. Cap $500 MM to $1B consists of: CTCT, CSOD, IL, LPSN, MDSO, MKTG, RNOW, SNCRMkt. Cap < $500 MM consists of: CNVO, DMAN, ELLI, KNXA, SDBT, SPSC, SQI, TNGOSource: FactSet as of September 30, 2011.

80

90

100

110

120

130

12/31/10 1/31/11 3/3/11 4/3/11 5/3/11 6/3/11 7/3/11 8/3/11

Mkt. Cap >$1B (-11.8%) Mkt. Cap $500 MM t

Mkt. Cap


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Venture

Venture Capital Activity

The total number of venture investments increased 28% when comparing LTM 09

while dollar volume also was up 53% for the same periods.

Year-over-year, third quarter 2011 was up in venture capital activity; third quarteventure investments totaling $622 million, while third quarter 2010 witnessed 51 totaling $302 million.

On a monthly basis, September 2011 witnessed 21 SaaS venture transactions totadisclosed transaction value compared with 21 transactions totaling $125.6 million in

Annual Venture Capital SaaS Act iv ity

2008 2009 2010 LTM 09/10 L

Transaction Value $1,296 $961 $901 $997

Number of Transactions 133 134 157 163

Quarterly Venture Capital SaaS Activity

Transaction Value LTMTransaction Value # of Transactions

$0

$400

$800

$1,200

$1,600

$2,000



Transaction Value Number of Transactions

$0

$100

$200

$300

$400$500

$600

$700



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Venture Capital Activity (cont'd)

Transaction Analysis (contd ) Venture Capital Activity (cont'd)

The number of early- and later-stage investments for LTM 09/11 increased signific

levels seen in LTM 09/10; however, the number of series B and series C transacrelatively flat.

The median transaction size has remained relatively flat for series A, series transactions, while Series B transactions have seen a slight increase in median trans

Number of SaaS Transactions by Round

Series A Series B Series C

Median SaaS Transaction Size by Round

($ in millions)

Series A Series B Series C

Source: Capital IQ, VentureSource and William Blair estimates as of September 30, 2011.

4034

27

54

3328

0

10

20

30

40

50

60

$2

$6

$9

$2

$9 $9

0

5

10

15

LTM 09/10 LTM 09/11

LTM 09/10 LTM 09/11


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William Blair & Company Selected Clo

William Blair & Company Selected Cloud Transactions

has been acq uired by

Selected M&A Transactions

Selected Private Placement Transactions

$50 000 000$54 000 000

Selected Public Equity Transactions

$120,081,000

Initial Public Offering& Follow-on

$303,514,000

Follow-on Offerings

$708,860,000

Initial Public Offering& Follow-ons

$10 000 000

has been acquired by has been acquired byhas been acq uired by has acquired

$66,000,000

Initial Public Offering

$91,673,000


$53,124,000


has been acquired by has been acquired byreceived a significant

investment from

$422,108,000


$132,781,530


$318,436,530


$51,750,000


$91,351,224


$71,875,000



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SaaS Professional Biographies



Mark McNayPartner and Group Head, San Francisco

Mark McNay joined William Blair & Company in 2000 as Group Head of the WeBanking Team based in San Francisco. Prior to joining William Blair & Company, Director and Head of the Internet Banking Group at Volpe Brown Whelan & Compa

Director at Smith Barney, where at various times he headed the Consumer/RetailingAngeles Corporate Finance Office. He is a graduate of Georgetown University (University (M.B.A.).

Andrew ArnoDirector, San Francisco

Andrew Arno is a Director in William Blair & Companys West Coast Investment BanSan Francisco. He joined William Blair & Company in 2004. From 2000 to 2002, h

Banking Associate at WR Hambrecht+Co. in the technology group. From 1997 to 200Shattan Group LLC, a boutique investment bank focused on private equity placemenof Columbia University (B.A.) and the Haas School of Business at UC Berkeley (M.B.A

Patrick VihtelicAssociate, San Francisco

Patrick Vihtelic is an Associate in William Blair & Companys West Coast Investmbased in San Francisco. While at William Blair & Company, Patrick has been fomergers & acquisitions, public equity offerings and private equity placements for tecHe joined William Blair & Company in 2008 after spending time at a boutique inveFrancisco. Before investment banking, Patrick spent a summer working at MotoAnalyst in the mobile division. He is a graduate of Indiana University (B.S.).

Paul HuberSenior Analyst, San Francisco

Paul Huber is a Senior Analyst in William Blair & Companys West Coast Investmbased in San Francisco. He joined William Blair & Company in 2010 and is fo

supporting transaction execution. Before joining William Blair & Company, he was anAnalyst at Financial Technology Partners LP, a boutique investment bank in Sangraduate of Brown University (A.B.).


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William Blair & Company SaaS Equity Res

William Blair & Company SaaS Equity Research Coverage

SaaS Equity Research

Company Ticker Analyst

athenahealth, Inc. ATHN Daniels, Ryan

Blackboard Inc. BBBB Dobell, Brando

Concur Technologies, Inc. CNQR Lederman, Lau

Constant Contact, Inc. CTCT Lederman, Lau

Convio, Inc. CNVO Lederman, Lau

Cornerstone OnDemand, Inc. CSOD Lederman, Lau

DemandTec, Inc. DMAN Lederman, Lau

Ellie Mae, Inc. ELLI Dobell, Brando

Kenexa Corporation KNXA Lederman, Lau

NetSuite Inc. N Lederman, Lau

RealPage, Inc. RP Lederman, Lau

Responsys, Inc. MKTG Lederman, Lau

RightNow Technologies, Inc. RNOW Lederman, Lau

salesforce.com, inc. CRM Lederman, Lau

SciQuest, Inc. SQI Lederman, Lau

ServiceSource International, Inc. SREV Lederman, Lau

SPS Commerce, Inc. SPSC Lederman, Lau

Ultimate Software Group, Inc. ULTI Lederman, Lau

Vocus, Inc. VOCS Lederman, Lau


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Notes

Notes

William Blair & Company, L.L.C. is a global investment firm offering investment banking, asset


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OFFICELOCATIONS

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