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The first quarter was robust for Digital New York VC financing, in terms of both total capital raised and deal volume, second only to the fourth quarter of 2013. 32 Private digital companies raised a combined $497 million. 12 companies we had already been tracking completed follow-on financings, raising $284 million in total. 22 companies completed Series A or Series B rounds that got them over the $5 million mark in terms of total capital raised, and these new additions raised $213 million in total. The fourth quarter was quieter on the M&A front, where five venture-backed companies sold. We saw exits from eCommerce SEO company Altruik, digital search content site Gojee, shopping marketplace Portero, and online tutoring company Tutorspree. The largest sale by a digital New York company in the first quarter was shopping site Ideeli’s sale to Groupon for $154 million.

The largest private funding of the quarter was On Deck’s $77 million Series D, which brings the online small business lending startup’s total capital raised to $179 million. We have seen a growing number of investors participate in funding rounds, especially from West Coast and other non-New York based VC’s. New York has also become an important point of entry for international investors who are interested in American start-ups, and for overseas companies looking to establish themselves and partner with companies in the U.S. All these factors contribute to the growth of New York as an important long term player in startup tech.

$127

$589

$343 $352

$446

$621

$317

$662

$497

Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014

Digital New York VC Funding Q1 2014 ($mm)1

Source: Capital IQ.

1 Includes digital companies based in the New York Metropolitan area that either have raised at least $5 million of outside capital or are

prominent enough in the Digital NY scene to merit inclusion.

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($ in millions)

Date Company (Subsector)

Jan 07 Aereo

(Content Enabling)

$34.0 • IAC

• Highland

• Himalaya

• FirstMark

$97.0 • Lauder Partners

• Highline Ventures

Jan 14 NewsCred, Inc.

(Content Enabling)

25.0 • InterWest Partners

• FirstMark Capital

• Mayfield Fund

• IA Ventures

46.5 • NA

Jan 14 Oyster

(Content)

14.0 • Highland Capital Partners • The Founders Fund 20.0 • Advancit Capital

• BoxGroup

• Highland Capital Partners

• SV AngelFeb 05 Tapingo Ltd.

(eCommerce)

10.5 • Carmel Ventures • Khosla Ventures 14.0 • NA

Feb 10 PlaceIQ, Inc.

(Local Advertising)

15.0 • Iris Capital

• Valhalla Partners

• IA Ventures

• U.S. Venture Partners

• Harmony Partners

27.8 • Neu Venture Capital

• Social Leverage

Feb 11 Kaltura

(Content Enabling)

47.0 • SAP Ventures

• Intel Capital

• Mitsui & Co.

• Commonfund Capital

• Nokia Growth Partners

• Nexus Venture Partners

• .406 Ventures

• SVB Silicon Valley Bank

• Gera Venture Capital

125.0 • NA

Feb 19 Kapitall, Inc.

(Finance &

Professional)

13.0 • Bendigo Partners , LLC • Linden Venture Fund LLC 20.9 • NA

Feb 27 L2, Inc.

(Tech)

16.5 • General Catalyst Partners 16.5 • NA

Feb 27 OnDeck

(eCommerce)

77.0 • IVP

• RRE

• SAP

• Google Ventures

• Industry Ventures, LLC

• First Round Capital

• Tiger Global Management

179.0 • NA

Feb 28 Business Insider, Inc.

(Finance &

Professional)

11.9 • Institutional Venture Partners

• Bezos Expeditions

• RRE Ventures LLC 34.6 • Pilot Group

• Allen & Company

Mar 10 Cortica Inc.

(Video & Images)

20.0 • Horizons Ventures Limited • Mail.ru Group 34.9 • NA

Mar 18 Percolate

(Social Marketing

Management)

24.0 • First Round Capital

• GGV Capital

• Lerer Ventures

• Sequoia Capital

• WPP Digital

34.8 • NA

Mar 19 Art.sy

(Marketplace)

18.5 • IDG Capital

• Thrive Capital

• Zhen Fund 26.0 • NA

Mar 26 CPX Interactive

(Digital Agency)

30.0 • AR Capital 30.0 • NA

Source: CapIQ.

Notable Digital New York Fundraisings

Q1 2014

$ Raised

Investor(s) in

Latest Round

Total $

Raised

Other

Investor(s)

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Content was king in the first quarter, as fourteen companies raised a total of $219 million. The largest round was by open source video management platform Kaltura, which raised $47 million from new investors SAP Ventures, Nokia Growth Partners, Commonfund Capital, and Gera Venture Capital with participation from existing investors. Kaltura provides media companies with advanced video management, publishing and monetization tools that increase their reach and monetization. Kaltura will use the additional capital to further accelerate product development and extend operations into Brazil, Mexico, China, Japan, Australia, Singapore, and Korea. The company has raised $126 million to date. The headline grabber this quarter was streaming TV provider Aereo, which closed a $34 million Series C, despite several ongoing legal battles between the New York-based startup and traditional TV networks, one of which is headed to the Supreme Court. The new round, in which the company’s lead investor, IAC, was joined by media investor honchos like Gordon Crawford and Himalaya Capital Management, will support Aereo’s “rapid nationwide expansion” and allow it to ramp up hiring, the company said. Previous investors Highland Capital Partners and FirstMark Capital also joined in the round. Another large financing this quarter was the $25 million Series C by content marketing management and publishing startup NewsCred, led by InterWest Partners. The company’s content licensing business, where publishers like The New York Times, Reuters, and Getty Images make their content available to brands, will “continue to be the foundation” of the NewsCred’s services, though it launched a program called The NewsRoom last year—Instead of licensing existing content, The NewsRoom is a network of freelancers who can create new content tailored to a brand’s specific needs. After the quarter ended, in April, personal finance startup LearnVest raised $28 million and website building platform Squarespace raised $40 million. eCommerce was the second most active sector in the first quarter, with seven companies raising a total of $138 million. Small business lending startup OnDeck raised the largest round of the quarter, in its $77 million Series E led by new investor Tiger Global Management with participation from existing investors First Round Capital, Google Ventures, Industry Ventures, Institutional Venture Partners, RRE Ventures and SAP Ventures. OnDeck uses data aggregation and electronic payment technology to evaluate the financial health of small and medium sized businesses and to efficiently make loans ranging in size from $5,000 to $250,000. To date, OnDeck has deployed nearly $1.0 billion in loans. OnDeck will use the funds to accelerate new product development, geographic expansion and robust marketing and hiring. The company has raised $193 million in capital to date. In other follow-on financings this quarter, online art marketplace Art.sy raised $19 million, and chef-for-hire site Kitchensurfing raised $15 million. Just after the quarter ended, beauty sample box provider Birchbox raised $60 million in Series B funding that valued the company at $485 million. Birchbox helped to pioneer the concept of monthly boxes shipped to your home, paid for on a subscription basis, with its shipments of beauty samples for just $10/month. New eCommerce additions to our database included sales order automation startup Handshake, online grocery delivery business Fresh Direct, athlete endorsement marketplace Thuzio, and fitness class booking site Fitmoo. Six digital marketing companies completed rounds this quarter, raising $76 million in total funds. The largest digital marketing deal was CPX Interactive’s $30 million fundraise from AR Capital, in the ad tech company’s first outside financing since inception in 2000. CPXi has four main divisions: bRealTime (programmatic ad tech), Simplixity (media execution), Affiture (affiliate network), and AdReady, a programmatic ad startup that CPXi acquired last fall. For now, programmatic ad buying seems to be the main focus and an area where CPXi plans to continue investing. Percolate, a startup that helps marketers create content and share it on social networks, raised $24 million in a Series B led by Sequoia Capital. Percolate product features include the ability to create a calendar with potential topics for sharing on a given day, browse content that’s related to the company or theme (whether it’s owned by the brand, has been published elsewhere, or is user-generated), then tweak and share on social networks, as well as collaborate on content as a team and see analytics around what’s performing well. Other follow-on digital marketing rounds this quarter included $5 million by social media marketing startup Crowdtap and $11 million by advertising revenue analytics company Operative Media. We added location-based targeting startup PlaceIQ to our database after the startup raised $15 million this quarter, and direct marketing management startup Ceros after the company raised $6 million. Shortly after the quarter ended social marketing management platform Kinetic Social raised $18 million. Four mobile startups raised a total of $41 million in the first quarter. Studio SVB, known as Oyster, completed a $14 million round led by Highland Capital, being lauded as the Netflix of books, offering unlimited access to ebooks via online mobile subscription. Mobile shopping application owner Tapingo raised $11 million. Ride sharing transportation app Via Transportation raised $10 million as we continue to see startup activity in that space despite Uber and Lyft’s continued adoption. Finally, GameChanger Media raised $7 million this quarter to continue to build mobile apps that allow users to analyze professional sports statistics. ChatID was the one social venture round that got done in the first quarter. The text and chat communications provider raised $6 million to help put brands and customers in direct touch. After the quarter ended, online invitation and social

event management site Paperless, known as Paperless Post, raised $25 million.

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M&A: Five Digital New York Exits

On January 13

th, Groupon announced it would buy flash fashion retailer ideeli for $43 million in cash at an implied value

of $150 million or 1.5x LTM revenue. The deal represents a strategic gain for Groupon but a loss for ideeli investors, including StarVest, Kodiak, and Credit Suisse, which had collectively invested $107 in the company. The acquisition underscores Groupon’s current acquisition mode and push to expand into new product categories. In the case of ideeli, it is the company’s first major move into the fashion category by acquisition, the company notes. It is both a product/customer and technology play, with Groupon continuing to run ideeli’s business and also using its mobile expertise, possibly to expand into other flash sales categories. On January 24

th, online tutor marketplace WyzAnt bought former competitor Tutorspree in a deal that was rumored to

be extremely cheap, as Tutorspree had recently shut down operations and returned capital to investors after stagnant growth. On February 11

th, search marketing firm SearchDex announced it would buy SEO provider Altruik. Altruik's patent-

pending technology platform automates the more tedious and arduous on-page component of the SEO process. For over a decade, SearchDex has focused on category-level optimization and long-tail category expansion through their SEO proxy and hypercategorization technologies. The merging of both companies' technologies will position SearchDex to be the most robust SEO platform available on the market. On March 10

th, CIRCA, the leading international buyer of pre-owned jewelry, announced its acquisition of Portero, an

online shopping destination for pre-owned, authenticated luxury accessories. This acquisition adds a strategic selling platform to complement CIRCA’s existing buying services and addresses an overwhelming demand from CIRCA’s loyal clients to purchase pre-owned jewelry, watches and handbags in a trusted environment. On March 21

st, Gojee, a recipe aggregation site, announced it would be acquired by XO Group, the umbrella group for

women-focused sites like The Knot, The Bump, The Nest and Wedding Channel. The move comes after Gojee explored sales to several other companies, including Yahoo.

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Additions to Our Digital New York Guide

Private Companies: This quarter we added four eCommerce, ten content, one social, two marketing and three

mobile companies to our database. We add a company to our Digital NY database when it has raised at least $5 million in outside capital to date, or when it has generated significant “buzz” in the New York tech community.

eCommerce: Fitmoo,Thuzio, Fresh Direct, Handshake Content: Financial Insight Technology, Cortica, Business Insider, L2, Knowledge Delivery Systems, Kapitall,

Peloton Interactive, The Levo League, Above Average Productions, Newscred Social: ChatID Marketing: PlaceIQ, Ceros Mobile: Oyster, Tapingo, Via Transportation

VC/PE Firms: We added one seed /

early stage firm and one early stage / growth firm. We add new VC/PE firms to our Digital NY database when we see that they have made investments in Digital NY companies. The firms added this quarter have each made several investments in Digital NY. Tiger Global Trilogy Partners

Tiger Global is a fundamentally-oriented, global investment firm. The firm is best known as a hedge fund founded by Julian Robertson, but now invests in both public and private markets under the leadership of Chase Coleman. Tiger Global’s private equity partnerships have ten-year horizons and invest in growth companies in the global internet and technology sectors. Tiger Global was founded in 2001 and is based in New York. Its most recent Digital New York investments include Kitchensurfing and On Deck, which both completed rounds in the first quarter of 2014.

Trilogy Partners invests operates wireless carriers in the Caribbean and Latin America and makes investments in early stage application and infrastructure companies. The firm’s partners have long been at the center of the global wireless revolution as founders of Voicestream (T-Mobile) and Western Wireless (Alltel) in addition to previously holding pivotal roles at McCaw Cellular (AT&T). Trilogy is based in Washington, but has made recent investments in Digital New York companies including GameChanger Media and PrePlay.

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Gridley’s Guide to Digital NY is a unique and comprehensive report (first published in September 2011) for investors,

About Gridley & Company LLC Gridley & Company is a New York based boutique investment bank that provides financial advisory services to companies in the Internet and Information Services industry with a specific focus on the following sectors: AdTech, Data Services, Digital Marketing & Media, eCommerce, Mobile, Payments & Financial Technology, Social, Advertising & Traditional Marketing, and Saas & Outsourcing Services. Industry professionals rely on and look to Gridley for insights on M&A and private company fundraising through proprietary annual events and through the firm’s quarterly newsletter, The Compass, which is received by over 2,200 industry professionals. Gridley & Co. regularly meets with senior industry leaders to share perspectives and exchange ideas. For more information or to arrange a meeting with the Gridley team to discuss opportunities, please call the Gridley team members below or visit www.gridleyco.com.

Linda Gridley, President & CEO: 212-400-9710, lgridley@gridleyco.com

Digital NY Background

We came up with the idea for Gridley’s Guide to Digital New York in the summer of 2011 as we heard an increasing amount of chatter about digital activity in NY from people both in and out of the city. Since our official launch in September 2011, that chatter has only gotten louder and more widespread. We now see stories about “Digital NY” in publications like Crain’s New York, The New York Times, and The Wall Street Journal on a regular basis. In 2012, AT&T commissioned a report by the Center for an Urban Future entitled “New Tech City” with the byline,

“Riding a wave of start-ups, New York has emerged a national leader in fields that leverage the Internet and mobile technologies—a development that has provided a key economic boost and left the city well positioned for future tech growth.”

It’s no wonder that this is a topic everyone is focused on as there has been approximately $8.4 billion invested in “Digital NY” since January 2006. New York-based incubators and collaborative office spaces have popped up to centralize innovative, entrepreneurial minds while combating high real estate prices that have traditionally been a limiting factor for the New York startup scene. Additionally, former Mayor Bloomberg has clearly made a “Digital NY” one of his target legacies. Last year, Bloomberg launched “We Are Made in NY,” an initiative that aims to support the local tech scene by providing “resources and programs” that help startups grow, highlighting job openings at tech startups, and helping to introduce “novices” to the growing industry. The former Mayor also helped create a plan to open a science and engineering campus on Roosevelt Island in 2017. We are excited about the prospects for “Digital NY” and look forward to sharing our quarterly updates and perspectives with you.

Gridley’s Guide to Digital New York includes:

386 private emerging digital companies broken down into 5 major sectors and 36 subsectors – including company descriptions, funding history, and URL

210 venture capital & private equity firms investing in the digital NY sector, categorized by investment profile and by physical presence in NY

5 public company sectors including 28 companies involved in the NY region’s growth Access to the complete 45-page guide

The guide is intended for parties interested in knowing who’s who in the New York digital scene. Venture capital and private equity firms, entrepreneurs, and public companies looking for acquisitions are just a few of the possible users who could benefit from the Guide’s centralized information. In addition to the report, we have designed an “easy to use” website that lays out the information in the report in a fun, creative way. You can access this website at:

www.gridleydigitalny.com