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					U.S. Venture Capital Investment Overview
Boulder Software Club
December 5, 2005
                                       U.S. VC Investment

                                                  6,310
$100
                                                           $94.6                                                  6,000

                                       4,591                                                                      5,000
 $75
                                                                                                                  4,000
                                                                   3,257
                                          $49.5
 $50                                                                                                              3,000
                              2,547                                           2,375
                    2,211                                     $36.2                      2,144    2,226
          1,912
                                                                                                          1,605   2,000
 $25                                                                       $22.0              $21.5
                               $17.9                                                  $19.2               $16.2
                    $13.1                                                                                         1,000
          $9.2

  $0                                                                                                              0
          1996       1997       1998       1999     2000      2001         2002       2003       2004     Q1-Q3
                                                                                                          2005
                            Amount Invested ($B)                               Number of Deals


Source: Ernst & Young / Dow Jones VentureOne
                          U.S. VC Investment
                     Q1-Q3 2005 Industry Breakdown
          499
$10                                                                                                    500


                                                                                                       400


                                                                                                       300
 $5
                           192
          $3.8                         175                                                             200
                                                  165
                                                            128
                                      $2.4       $2.5                 103
                        $1.9                                                    78           76        100
                                                           $1.4      $1.2
                                                                                $0.8       $0.8
 $0                                                                                                    0
       Software       Services       Comm.     Biopharma Med. Dev.   Semis   Info. Serv. Electronics
                           Amount Invested ($B)                       Number of Deals Other Industries:
                                                                                      $1.4B, 189 Deals

Source: Ernst & Young / Dow Jones VentureOne
                  Q1-Q3 2005 U.S. VC Financing Map
                    Eight Hotbeds Account for 77% of Deals and 83% of Dollars

                                                      Colorado
                                                     Deals: 2%
    Washington                                       Dollars: 3%
     Deals: 4%                  WA
    Dollars: 4%                                      MT                 ND
                                                                                                                                                                      ME           New England
                           OR                                                      MN
                                                                                                                                                           VT                       Deals: 13%
                                           ID                                                      WI                                                 NY
                                                                                                                                                                 NH
                                                                                                                                                                           MA      Dollars: 12%
                                                                       SD
                                                          WY                                                      MI                                                      RI
Northern CA                                                                                                                                      PA
                                                                                                                                                                     CT
                                                                                                                                                                               New York Metro
                                                                                        IA                                                                      NJ
Deals: 32%                       NV                                     NE
                                                                                                                            OH                                                   Deals: 7%
                                                                                                                                                            DE
Dollars: 34%                                    UT
                                                                                                        IL   IN
                                                                                                                                                           MD                   Dollars: 11%
                                                               CO                                                                     WV
                                                                                                                                                VA
                      CA                                                     KS          MO                            KY

                                                                                                                                                NC                              Potomac
                                                                                                             TN

 Southern CA
                                      AZ
                                                                              OK
                                                                                             AR                                            SC
                                                                                                                                                                               Deals: 4%
  Deals: 10%
                                                     NM
                                                                                                                                                                               Dollars: 4%
                                                                                                        MS   AL                  GA
 Dollars: 10%                                                          TX
                                                                                              LA

                                                                                                                                           FL


                                                                                                                                                                     Other Areas
                                                                      Texas                                                                                          Deals: 23%
                                                                    Deals: 5%                                                                                        Dollars: 17%
                                                                    Dollars: 5%

 Source: Ernst & Young / Dow Jones VentureOne
                                       2004 Highest Growth Areas
                                        Top 8 Areas, 2004 versus 2003 Growth ($ M)


                                                                                Minnesota               Illinois
      Washington                                                                  $138                    $154
         $312                     WA

                                                       MT                                                                                                              ME
                                                                      ND
                                                                                                                                                            VT
                             OR                                                    MN
                                                                                                                                                                  NH
                                                                                                                                                                            MA
                                             ID                       SD                           WI                                                  NY

                                                            WY                                                     MI                                                      RI
   Bay Area                                                                                                                                       PA
                                                                                                                                                                      CT
                                                                                        IA                                                                       NJ
     $483                          NV                                 NE
                                                                                                                             OH
                                                                                                                                                             DE
                                                                                                        IL    IN
                                                  UT
                                                                                                                                                            MD

                        CA
                                                                 CO
                                                                           KS            MO                             KY
                                                                                                                                       WV
                                                                                                                                                 VA               Maryland
                                                                                                                                                 NC
                                                                                                                                                                   $189
                                                                                                              TN
                                        AZ
Southern California                                    NM
                                                                            OK
                                                                                             AR                                             SC

      $132                                                                                                                        GA
                                                                                                        MS    AL
                                                                                                                                                       Georgia
                                                                      TX
                                        Utah                                                  LA
                                                                                                                                                        $367
                                        $85                                                                                                 FL




   Source: Ernst & Young / Dow Jones VentureOne
                                   Highest Growth Areas
                                   2004 $ Invested versus 2003 $ Invested
                              Health Sciences            Information Technology                 Other

                                                         Growth ($ Million)
         -$200        -$100           $0           $100                  $200      $300           $400          $500   $600

    Bay Area               -$124                              $300                                       $307                 $483

      Georgia                              $68            $137                     $162             $367

Washington                                  $97                          $207               $312
                                                                                          $8
                                                                                           $8
    Maryland                                 $133                  $56          $189

        Illinois                       $48        $51     $55              $154
                               -$21
                              -$21
  Minnesota                                 $99           $60            $138
   Southern
                                           $76          $47        $132
   California
                                                              $9
                                                              $9
        Utah                                $45                    $85
                                                        $16
                                                        $16
                                            $24
Source: Ernst & Young / Dow Jones VentureOne
                   U.S. Seed/First Round Investment

                                                 2,950
                                                                                                             3,000

$30                                                       $28.8
                                       2,085
                                                                                                             2,000
$20
                                         $15.8
                           1,081                                  1,085
                  941
         841                                                                                                 1,000
$10                                                          $7.8           666        619     720
                               $6.3                                                                    521
                    $4.2                                                  $4.1               $4.5
        $3.2                                                                         $3.6            $3.5

 $0                                                                                                          0
        1996       1997        1998       1999     2000      2001         2002      2003     2004    Q1-Q3
                                                                                                     2005
                           Amount Invested ($B)                                  Number of Deals


Source: Ernst & Young / Dow Jones VentureOne
                               U.S. VC Median Deal Size

  $10
                                                      $9.0

   $8
                                                             $6.9                 $7.0   $7.0
                                               $6.0                 $6.2   $6.0
   $6
                                    $4.6
   $4                   $3.6
            $3.1

   $2


   $0
            1996        1997        1998       1999   2000   2001   2002   2003   2004   Q1-Q3
                                                                                          2005


Source: Ernst & Young / Dow Jones VentureOne
               U.S. VC Median Pre-Money Valuation



     $30
                                                       $25.5
     $24
                                               $21.1
     $18                                                       $16.0                           $16.7
                                     $15.5
                          $12.9                                                        $13.0
     $12      $11.1                                                    $10.8   $10.0

       $6

       $0
               1996       1997        1998     1999    2000    2001    2002    2003     2004   Q1-Q3
                                                                                                2005



Source: Ernst & Young / Dow Jones VentureOne
          Round Allocation Mirrors Mid-’90s Levels
                                        Deal Flow Allocation by Round Class

  100%
              9%      11%                                                      8%

                                                                                     Restart
   80%
             39%      39%                                                     39%
                                                                                     Later
   60%
                                                             33%
                                                                                     Second
            20%                                                               20%
   40%
                                                                                     First
                                                      *54%

   20%                                                                        *34%   Seed
            *32%


     0%
            1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 YTD05
YTD05: Q1-Q3 2005
*Seed and First Rounds Combined

   Source: Ernst & Young / Dow Jones VentureOne
  More than ½ of Dollars Go To Later Rounds in ’05
                                         Investment Allocation by Round Class

  100%
                                                                                9%      9%


             31%
                                                                                               Restart
    80%

                                                                                45%            Later
                                                                                        50%
    60%
             25%                                                                               Second

    40%                                                         36%                            First

                                                                                        20%
             *43%     *42%                                                                     Seed
    20%
                                                                                       *22%

     0%
             1995                1997              1999        2001             2003   YTD05
YTD05: Q1-Q3 2005
*Seed and First Rounds Combined


    Source: Ernst & Young / Dow Jones VentureOne
                             U.S. Venture Backed IPOs

                                           250
$25                                                                                                     250
         216
                                                    202
$20                                        $19.5          $19.2                                         200


$15                                                                                                     150
                      120

$10     $8.7                                                                                            100
                                68
                                                                                           67
 $5                $4.6                                                                                 50
                               $3.7                                                               29
                                                                  22    20     22      $5.0
                                                              $1.8     $1.6   $1.4              $1.5
 $0                                                                                                     0
        1996        1997       1998        1999    2000      2001      2002   2003     2004     Q1-Q3
                                                                                                2005
                           Amount Invested ($B)                          Number of Deals


Source: Ernst & Young / Dow Jones VentureOne
                                    U.S. VC M&A Activity


$120                                                                                             500
                                                      458
                   $ (B ) Paid                                                                   450
                   # M&As                             $98    402                  403
$100                                                                380                          400
                                                                           337                   350
  $80                                      304
                                                                                                 300
                                 253                                                     255
  $60                  232                                                                       250
            199
                                               $43                                               200
  $40
                                                                                                 150
            $26                                                                   $23
                                                             $22                         $21     100
  $20
                      $13         $15                                      $13
                                                                    $11                          50

   $0                                                                                            0
           1996       1997       1998          1999   2000   2001   2002   2003   2004   Q1-Q3
                                                                                          2005


Source: Ernst & Young / Dow Jones VentureOne
       M&A: Median Value vs. Median VC Invested

 ($ M)
                                                                            M&A Median Valuation
                                                           $100
$100                                                                        Median VC Invested To Exit
 $90

 $80

 $70

 $60
                                                                                                                  $60
                                               $55
 $50
         $40                                                                                          $39
 $40
                    $33         $31
 $30                                                                $26
                                                                                          $23               $21         $24
 $20                                                                            $18 $17         $19
                                                                          $15
                                                     $11      $10
 $10           $6         $6          $7
  $0
          1996        1997        1998          1999        2000     2001        2002      2003        2004        Q1-Q3
                                                                                                                   2005


Source: Ernst & Young / Dow Jones VentureOne
                                     U.S. VC Fundraising

  $100

                                                      $83

   $75

                                               $58
                                                             $50
   $50


                                     $27
   $25                                                                            $18
                          $17                                                            $16
              $13                                                   $13
                                                                           $9

     $0
             1996        1997        1998      1999   2000   2001   2002   2003   2004   Q1-Q3
                                                                                          2005


Source: Ernst & Young / Dow Jones VentureOne
                              Q1-Q3 2005 Colorado Financings

           $469 Million Invested                                                  39 Deals

                                       Biopharmaceutica                                Biopharmaceutica
                                              ls                                              ls
                                             24%                                             10%
   Software                                                  Software                              Communications
     36%                                                       36%                                      10%
                                                                                                        Cons/Bus
                                                                                                        Services
                                                                                                           8%
                                                   Communications
                                                         9%
Semis                                                                                                 Electronics
  1%                                             Cons/Bus                                                 12%
                                                 Services
Med                                                            Semis
                                                    5%                  Med                  Energy
IS    Med                                                        3%
               Energy Electronics                                       IS                     3%
2% Device                                                                       Med
                 1%       18%                                           5%
      s 3%                                                                    Device   Information
 Information Services                                                          s 10%    Services
           1%                                                                              3%

  Source: Ernst & Young / Dow Jones VentureOne
                               Colorado VC Investment

                                                 169                                                      175
                                                          $3.41
$3                                                                                                        150
                                      133
                                  $2.54                                                                   125

$2                           86                                                                           100
                                                                  74
                                                                         75
                 65                                                                                       75
       54                                                                         52
                                                             $0.99                           50
$1                                                                                                  39    50
                             $0.65                                     $0.66
                  $0.36                                                        $0.36   $0.39      $0.47   25
      $0.31

$0                                                                                                        0
       1996       1997        1998        1999     2000      2001      2002    2003     2004      Q1-Q3
                                                                                                  2005
                           Amount Invested ($B)                            Number of Deals


Source: Ernst & Young / Dow Jones VentureOne
              Software Leads the Way for Colorado
                                     Software Portion of Colorado VC Deals




            175

            150

            125

            100                                                            Overall Investment


              75

              50           All Colorado VC Deals


              25
                           Colorado Software VC Deals
            0
            1996          1997      1998       1999   2000   2001   2002   2003   2004   Q1-Q3
Software %: 28%           25%       24%        18%    30%    28%    26%    44%    53%    2005
                                                                                          36%

Source: Ernst & Young / Dow Jones VentureOne
                   2005 Colorado VC Software Deals
                                   Publicly Disclosed Deals Listed Below

•    CenterStone Technologies, Denver
•    ExtraQuest, Greenwood Village
•    NetRegulus, Centennial
•    NewsGator Technologies, Denver
•    OpenLogic, Broomfield
•    Ping Identity, Denver
•    Privacy Networks, Fort Collins
•    Silver Creek Systems, Louisville
•    Tendril, Lafayette
•    Transform Software, Littleton
•    Umbria Communications, Boulder
•    Valen Technologies, Denver
•    Vericept, Denver
•    Webroot Software, Denver
Source: Ernst & Young / Dow Jones VentureOne
Thank you.
Now, Craig Hanson from Vista Ventures will
share his insight.

				
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