US-Russia Seminar on Venture Capital for Technology Business Growth US Department of Commerce March 15, 2002 Mark G. Heesen President
The Economic Impact of Venture Capital on the US Economy ...
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DRI-WEFA Study
Commissioned by NVCA Venture funded firms now account for: 7.6 million employees Annual revenues of $1.3 trillion, These figures represent: 5.9% of US payroll 13.1% of US GDP 7.9% of US company revenue
Source: DRI-WEFA (analysis as of 8/2001
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Fundraising
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Venture Capital Fundraising Was Strong Through 2000
$120 $100 $80 $60 $40 $20 $0
$B Raised 1994 8 1995 10 1996 12 1997 18 1998 30 1999 59 2000 105 2001 41
This does not include money available for investment by Corporate Venture groups.
Source: VentureXpert™ Database by VE & NVCA
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Investment Marches On Rumors that the Venture Industry has stopped investing are greatly exaggerated
The VC Industry has Grown Dramatically in the Past Few Years
$100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0
$ Million Invested
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™
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2000
Recent Quarters Portend a Return to Traditional Activity Levels
$30 $20 $10 $0
1Q9 2Q9 3Q9 4Q9 1Q0 2Q0 3Q0 4Q0 1Q0 2Q0 3Q0 4Q0 7.1
Total VC $B 6.3 10.5 13.0 22.7 26.3 26.3 26.1 20.9 12.4 10.0 7.0
Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™
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The Exit Scene - the strong emergence of acquisition successes in a volatile IPO market
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After setting records in 1999 and 2000, IPO Markets are Quiet Now
$30 $20 $10 $0
IPO $B
1994 4.7
1995 8.3
1996 11.6
1997 4.7
1998 3.6
1999 17.8
2000 21.1
2001 3.2
Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™
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Acquisitions are an increasingly important exit strategy
$80 $60 $40 $20 $0
Acq $B 1994 1995 1996 1997 1998 1999 2000 2001 3.2 3.7 8.5 7.4
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9.0
36.5
66.7
14.8
Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™
Private Equity Returns Over the Long Haul VC Returns 20-25%
Fund Type E a rly V C L a te r V C B u y o u ts M e zza n in e A ll P riv a te E q u ity 1yr -3 6 % -2 6 % -1 6 % 4% -2 1 % 5 yr 54% 22% 8% 10% 18% 20 yr 22% 17% 16% 11% 17%
As of 9/30/2001 - Source: VentureXpert™ Database by VE & NVCA
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Portfolio Companies Have Been Devalued -- More to Come?
100 80 60 40 20 0
Avg Val $M Median Val $M 2000 Q3 87 38 2000 Q4 93 44 2001 Q1 65 30 2001 Q2 60 31 2001 Q3 52 26
Source: VentureXpert™ Database by VE & NVCA
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No one has repealed the business cycle … Factors affecting the short term
Investment Food Chain
Not All Segments are Healthy
Markets $ Leadership (VC & Mgt)
Customers
Revenue
Profits Liquidity (IPOs, Acqs)
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Companies Receiving First Venture Round (Series A) During Last Downturn (1/1990-6/1992)
Artisoft Starbucks Intuit (FKA ChipSoft) McAfee Xpedite Palm Computing Cutter & Buck
RF Micro Devices eFax.com Shiva Corporation Wind River Systems FTP Software CheckFree SPSS
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Current Policy Agenda
Exemption of ISOs and ESPPs from Payroll Taxes Accounting Standards—new international effort (IASB) to force stock options expensing Broadband Deployment Trade Promotion Authority (TPA) Securities Litigation Reform
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Where do I go for more specific information?
Www.pwcmoneytree.com NVCA 2001 Yearbook VentureXpert www.nvca.org What’s happening in my state/city? State specific histories: www.ventureeconomics.com (click left tab “Statistics” and select most recent qtr)
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Www.nvca.org www.aeeg.org