Monetization of Tech Start-ups in EMEA & CIS

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1 Monetization of Tech Start-ups in EMEA & CIS Sergei Arsenyev Co-head of GS Russia & CIS May 2017

2 Global vs. Local Historically, tech companies focused to distinct development strategies: developing unique tech and taking it global, or using and adjusting existing tech to become local leaders Global Leaders Local Leaders Global Business Model Original Technologies/Content 2

3 Different Growth Stages Offer Different Funding / Monetization Opportunities Seed Financing Early Funding Rounds (A,B) Debt Financing >$300m >$200m >$20m >$50m IPO <$10m >$10m Sale to Strategic Investor M&A 3

4 The Development of Tinkoff Bank Company Overview Eurobond Issue Date: Apr-2011 Institutional investors Size: $175m GS role: Joint Lead Manager and Bookrunner Eurobond Issue Date: Dec-2008 Institutional Investors Size: $70m 49k Series A Date: Oct-2007 Size: 10% stake with an option to increase its stake by 5% GS role: Investor Total Credit Cards Issued, # Subordinated Eurobond Date: Nov-2012 Institutional Investors Size: $125m followed by a tap of $75m in Feb-2013 GS role: Joint Lead Manager Series C Date: May-2012 Size: $50m / 8% stake $100m Syndicated Loan (incl. warrants to lenders of 6% share capital) Date: Dec-2007 Institutional investors, Size: RUB 1.5bn (USD61m) $187m 180k 2.0m $625m Series B Date: Sep-2008 Size: $40m / 4% stake $1.0bn 2.2m $3.2bn 3.5m IPO Date: Oct % Long Only investors / 37% Hedge Funds Size: $1,087m GS Role: Joint Global Coordinator and Bookrunner Series D Date: Oct-2012 Size: $28m / 15% stake Eurobond Issue Date: Sep-2012 Institutional Investors Size: $250m 4

5 The Development of Uber Company Overview Series B Date: Dec-2011 Jeff Bezos Size: $37m GS role: Investor Angel Date: Oct-2010 Size: $1.25m Seed Date: Aug-2009 Size: $0.2m $60m Series A Date: Feb-2011 Benchmark, Alfred Lin, Scott Banister Size: $11m Series D Date: Jun-2014 Wellington Size: $1.4bn $3.5bn Series C Date: Aug-2013 Benchmark Size: $363m Series E Date: Feb-2015 Jack Abraham 4 Size: $2.2bn 45 $18bn Debt Financing Date: Jan-2015 Size: $1.6bn GS role: Investor Private Equity Date: Aug-2015, Feb-2016 Size: $300m 50 $41bn $51bn 64 Series F Date: Jul-2015 Size: $1.0bn $62.5bn 72 Series G Date: Jun-2016 Size: $3.5bn Debt Financing Date: Jul-2016 Size: $1.15bn GS role: Investor Countries of operations, # 5

6 The Development of Spotify Company Overview Series B Date: Aug-2009 Li Kashing, Series D Date: Jun-2011 Size: $100.0m Series F Date: Nov-2013 Size: $250m 1m Convertible Notes Date: Jan-2016 Size: $500m GS role: Bookrunner 6m $4.0bn $8.5bn $8.5bn $8.5bn 30m Size: $50.0m $3.0bn 15m Series A Date: Oct-2008 Li Kashing, Northzone Size: $21.6m $250m Series C Date: Feb-2010 Sean Parker Size: $16.1m $300m 250k $1.0bn 4m Series E Date: Nov-2012 AF Square, ($50m) ($10m) ($15m) Size: $100.0m GS role: Investor Series G Date: Jun-2015 etc. Size: $526m GS role: Investor and Bookrunner Debt Financing Date: Mar-2016 Size: $1.0bn GS role: Investor Paying Subscribers, # 6

7 Comparison of Monetization Strategies Sale or IPO? Maximize Valuation / Proceeds Key Considerations Certainty of Transaction (Level of Investor Interest) Level of Control / Ownership Timing Engender Further Growth / Business Development Limit Disclosure Overview of Private Placement Market 7

8 Recent Success Stories in EMEA Current valuation: $8,530m Latest Funding (Mar-16): $1,000m Current valuation: $3,110m Latest Funding (May-17): $421m Current valuation: $2,090m Latest Funding (Dec-16): $89m Current valuation: $3,000m Latest Funding (May-07): Current valuation: $2,300m Latest Funding (Sep-15): Current valuation: $2,250m Latest Funding (Mar-17): $5m Sale to Ctrip (Nov-16): $1,740m Current valuation: $1,600m Latest Funding (Sep-16): $24m Current valuation: $1,500m Latest Funding (May-16): $110m Sale to Amazon (Mar-17): $650m Current valuation: $2,800 m Latest Funding (May-17): $403m Current valuation: $1,100m Latest Funding (May-16): $26m Current valuation: $1,050m Latest Funding (Jan-17): $100m Current valuation: $1,030m Latest Funding (Feb-15): $30m Current valuation: $1,000m Latest Funding (Jul-16): $56m Source: Based on publicly disclosed / publicly reported news sources Insight into the Internet Unicorn Landscape 8

9 Recent Success Stories in EMEA Current valuation : $2,700m Sale to Naspers (Oct-15): $1,200m Current valuation : $2,000m Latest Funding (Nov-16): $100m Current valuation: $1,500m Latest Funding: Current valuation: $700m Latest Funding (Apr-14): $150m Current valuation: $210m Latest Funding: Current valuation: $101m Latest Funding: Current valuation: $97m Latest Funding (Oct-12): $16m Source: Based on publicly disclosed / publicly reported news sources ¹ Forbes estimation ² It was rumored that total funding would be up to $200m ³ Financials converted at 57 RUB/USD exchange rate Insight into the Internet Unicorn Landscape 9

10 Private Market Update Private market sentiment has improved dramatically since the volatility seen throughout late 2015 and ,000 5,500 5,000 4, , ,500 1H'14 2H'14 1H'15 2H'15 1H'16 2H' YTD # of Technology Private Placements >$100mm Nasdaq Composite Index Note: Includes US and European technology and technology-related private placements >$100mm except where otherwise noted. Data as of 12-May Private Market Update 10

11 Current Fundraising Trends for Private Technology Companies While private market volumes slowed in 2016, we have seen activity in recent months fall into the following categories: Market Leaders Still Attracting Capital High Quality Transactions for Next Wave of Emerging Companies Down Rounds / Increased Investor- Friendly Structure 11

12 The Value of Success is Tremendous Despite increasing period between funding rounds, investors demonstrate solid demand and ability to pay premium for high growing tech companies $3,400 $8,526 $11,367 $5,000 $2,220 $4,250 $5,200 $2,000 Prior Round (Jan-15) Last Round (Mar-17) Prior Round (Nov-13) Last Round (Jun-15) Prior Round (Jan-14) Last Round (Mar-15) Prior Round (Dec-14) Last Round (Jul-15) Source: Venture Source ¹ Excludes Rocket Internet follow-on investment at undisclosed valuation. Overview of Private Placement Market 12

13 However Sustaining Growth Is Becoming Increasingly Difficult Latest High Profile Down Rounds, Sales and Bankruptcies Sale Down Round Bankruptcies Previous valuation (May-11): $1.15bn Latest valuation (Jan-16): $250m Previous valuation (Dec-11): $5.37bn Latest valuation (Feb-13): $1.51bn Previous valuation (Nov-11): $2.25bn Latest valuation (Jun-13): $12m Previous valuation (Feb-14): $650m Latest valuation (Feb-16): $325m Previous valuation (May-12): $189m Latest valuation (May-16): $0m Previous valuation (Feb-13): $431m Latest valuation (Feb-16): $342m Previous valuation (Sep-14): $3.20bn Latest valuation (Jan-16): $1.67bn Previous valuation (Nov-13): $452m Latest valuation (Sep-15): $15m Previous valuation (Aug-13): $1,150m Latest valuation (Mar-15): $15m Previous valuation (Sep-14): $3.20bn Latest valuation (Jan-16): $1.67bn Previous valuation (Dec-13): $150m Latest valuation (Dec-15): $0m Previous valuation (Jul-15): $3.43bn Latest valuation (Apr-16): $1.13bn Previous valuation (Nov-14): $2.78bn Latest valuation (Feb-16): $0m Source: CrunchBase, Tech Crunch, CBInsights, Pitch Book and Wall Street Journal estimates; based on publicly disclosed information only Note: Only includes Internet companies with a previous private valuation of $100mm or greater. Valuations are listed as post-money. Insight into the Internet Unicorn Landscape 13

14 2016 Internet Unicorn Themes More Unicorns Fewer Exits 1 Funding Environment Robust despite lack of mega deals 2 Declining pace of Unicorn Additions 3 The Pace of Unicorn Exits Remains Slow 4 Interesting Capital Raising Opportunities Insight into the Internet Unicorn Landscape 14

15 Goldman Sachs Experience in the Sector YTD GS acts as an active counterparty for Technology Companies at different levels of development and at different valuations Valuation¹ <$100m $ m $500 1,000m $ bn $ bn $5+bn GS Acted as an Investor ¹ YTD deals (Private Placement, Convertible Debt Offering, IPO, FO, ABO, Block Trade, Common Stock Sale, Sale of Controlling Stake). Valuation as at the date of the deal announcement. 15

16 Select Long-Term Relationships With Technology Majors GS maintains long-term relationship with its clients in the tech space through their growth and development stages GS Involvement: Jul-16: Leveraged loan financing from GS Jan-15: Convertible Notes financing from GS clients Dec-11: Investor for Series B funding GS Involvement: Mar-16: Investor and Placement Agent for Convertible Notes issue Jun-15: Investor and Placement Agent for Series G funding Nov-12: Investor for Series E funding GS Involvement: Feb-17: Convertible Debt Bookrunner Nov-15: IPO Bookrunner Oct-14: Placement Agent and Investor for Series E funding Apr-14: Debt financing from GS GS Involvement: Aug-15: SPO Bookrunner May-15: SPO Bookrunner Feb-15: SPO Bookrunner Apr-14: IPO Bookrunner GS Involvement: Apr-16: Advised on sale of controlling stake to Alibaba Dec-14: Placement Agent for series F funding GS Involvement: Aug-15: Placement Agent for Series D funding Aug-14: Placement Agent for Series C funding ¹ Latest valuation for public companies Market Cap, for non-public companies latest rumored valuation. ² Rounds where GS participated as an investor or bookrunner, financial advisor, placement agent.³ Accumulated amount of funds being raised through the rounds GS participated. Overview of Private Placement Market 16

17 Strategies for Digital Transformation Unlocking Value for Traditional Print Media 1 2 Current Market Cap $5,977m $6,430m Market Cap 2014 $7,165m $6,365m Total Revenue 2016 $1,888m $3,640m Total Revenue 2014 $2,383m $4,036m 11% 14% 2008 Revenue Mix 32% 89% 86% 33% 2016 Revenue Mix 68% Online Offline Source: Company Filings, GS IBD Estimates Note: GMG assumes that digital revenue in 2008 grows at the same rate as Trader Digital revenue in Trader Media Group 67% 17

18 MCap, $m The Transformation of Schibsted Revenue Split 08A Revenue Split 12A Revenue Split 16A 12,000 10,000 Offline 89% Online 11% Online 40 % Offline 32% Offline 60 % Online 68% 8,000 6,000 $ 5,968 4,000 2,

19 MCap, $m The Transformation of Axel Springer Revenue Split 08A Revenue Split 12A Revenue Split 16A 12,000 Online 14% Online 37% Offline 33% 10,000 Offline 86% Offline 63% Online 67% 8,000 6,000 $ 6,430 4,000 2,

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