US-Russia Seminar on Venture Capital for Technology Business Growth -US Department of CommerceMarch 15, 2002Mark G. HeesenPresident-2-The Economic Impact of Venture Capital on the US Economy ...-3-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 revenueSource: DRI-WEFA (analysis as of 8/2001-4-Fundraising-5-Venture Capital Fundraising Was Strong Through 2000$0$20$40$60$80$100$120$B Raised810121830591054119941995199619971998199920002001Source: VentureXpert™ Database by VE & NVCAThis does not include money available for investment by Corporate Venture groups.Investment Marches On -Rumors that the Venture Industry has stopped investing are greatly exaggerated-7-The VC Industry has Grown Dramatically in the Past Few Years$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000$90,000$100,000$ Million Invested19801982198419861988199019921994199619982000Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™-8-$0$10$20$30Total VC $B6.310.513.022.726.326.326.120.912.410.07.07.11Q92Q93Q94Q91Q02Q03Q04Q01Q02Q03Q04Q0Recent Quarters Portend a Return to Traditional Activity LevelsSource: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™-9-The Exit Scene -the strong emergence of acquisition successes in a volatile IPO market-10-After setting records in 1999 and 2000, IPO Markets are Quiet Now$0$10$20$30IPO $B4.78.311.64.73.617.821.13.219941995199619971998199920002001Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™-11-Acquisitions are an increasingly important exit strategy$0$20$40$60$80Acq $B3.23.78.57.49.036.566.714.819941995199619971998199920002001Source: PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree™-12-Private Equity Returns -Over the Long Haul VC Returns 20-25%Fund Type1yr5 yr20 yrEarly VC-36%54%22%Later VC-26%22%17%Buyouts-16%8%16%Mezzanine4%10%11%All PrivateEquity-21%18%17%As of 9/30/2001-Source: VentureXpert™ Database by VE & NVCA-13-Portfolio Companies Have Been Devalued --More to Come?020406080100Avg Val $M8793656052Median Val $M38443031262000 Q32000 Q42001 Q12001 Q22001 Q3Source: VentureXpert™ Database by VE & NVCANo one has repealed the business cycle …Factors affecting the short term-15-Investment Food ChainNot All Segments are Healthy$MarketsLeadership (VC & Mgt)CustomersRevenueProfitsLiquidity (IPOs, Acqs)-16-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-17-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-18-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)Www.nvca.orgwww.aeeg.org