NATIONAL VENTURE CAPITAL ASSOCIATION

YEARBOOK 2009

PREPARED BY

INCLUDING STATISTICS FROM THE
PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Reuters

March 2009 Dear Reader: On behalf of the National Venture Capital Association board of directors and staff, we are pleased to present you with the latest statistics that describe the activity of the venture capital industry in the United States. These statistics reflect yet another all-time high level of survey participation by venture capital practitioners. While accurately tracking the inputs into this economic growth engine is important, these dollars represent a small portion of what many of these companies have and will contribute to the United States economy in terms of revenue, employment, and quality of medical care and living. The statistics gathered and tracked by Thomson Reuters for ThomsonONE.com (VentureXpert) and this Yearbook are essential to enabling analysis of venture capital by policy think tanks and economists for use by government officials and foreign governments. For example, recent analysis of Thomson Reuters data by Global Insight shows that while venture capital investment represents 0.2% of US GDP the revenue of compa, nies created by the industry represented 17 .6% of GDP in 2006. For every venture capital dollar invested in 1970-2001, there was $7 in US revenue during 2006 in those compa.90 nies. In these companies, for every $28,463 of venture capital invested in 1970-2001, there was one ongoing job in the year 2006. Venture capital is unique. NVCA believes that it is more important than ever to effectively tell the story of venture capital, differentiate it from other forms of alternative assets, and explain what’s needed to continue creating great, leading-edge companies. We believe that a strong venture capital industry is essential to America’s future and improving our quality of life. Your comments are always welcome at research@nvca.org. Very truly yours, Dan Broderick Mark G. Heesen Prolog Ventures NVCA President NVCA Director & Chairman of the NVCA Research Committee John S. Taylor NVCA VP Research

NVCA BOARD OF DIRECTORS 2008-09
Executive Committee
Dixon Doll Chairman DCM E. Rogers Novak Treasurer Novak Biddle Venture Partners Paul Maeder At-Large Highland Capital Partners Terry McGuire Chairman-elect Polaris Venture Partners Kate Mitchell At-Large Scale Venture Partners

Research Committee
Dan Broderick Chairman Prolog Ventures Stephen Holmes InterWest Partners Diana Frazier FLAG Capital Management, LLC

John Jaggers Sevin Rosen Funds

Board Members At-Large
Keith Crandell ARCH Venture Partners Barbara Dalton Pfizer, Inc. James Fleming Columbia Capital Deepak Kamra Canaan Partners Jack Lasersohn The Vertical Group Trevor Loy Flywheel Ventures Jonathan Root U.S. Venture Partners Rob Soni Matrix Partners Bess Weatherman Warburg Pincus Thomas Crotty Battery Ventures Ira Ehrenpreis Technology Partners Jim Hale, III FTV Capital Robert Kibble Mission Ventures Pascal Levensohn Levensohn Venture Partners David Prend RockPort Capital Partners Ray Rothrock Venrock Associates R. David Spreng Crescendo Ventures

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Thomson Reuters

2009
National Venture Capital Association Yearbook

For the National Venture Capital Association Prepared by Thomson Reuters

Copyright © 2009 Thomson Reuters

The information presented in this report has been gathered with the utmost care from sources believed to be reliable, but is not guaranteed. Thomson Reuters disclaims any liability including incidental or consequential damages ariising from errors or omissions in this report.

Thomson Reuters

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National Venture Capital Association 2009 Yearbook
National Venture Capital Association
1655 Fort Myer Drive, Suite 850 Arlington, Virginia 22209-3114 Telephone: 703-524-2549 Telephone: 703-524-3940 www.nvca.org

Thomson Reuters
3 Times Square, 18th Floor New York, NY 10036 Telephone: 646-223-4431 Fax: 646-223-4470 www.thomsonreuters.com
Vice President, Private Equity Products Elizabeth Benson Vice President, Deals and Private Equity Operations Shariq Kajiji Deals Publisher Jim Beecher Editor-in-Charge, Deals Group David Toll Global Private Equity Operations Manager Alex Tan Operations Manager Private Equity—North America James Thisdelle Contributor & Press Management Matthew Toole Product Manager Lori Ann Silva Team Manager Paul Pantalla Research Editor Eamon Beltran Senior Art Director David Cooke Sales Manager – Publications (VCJ, PE Week) Greg Winterton (646-223-6787) ThomsonONE.com Sales: Bill Moore (646-223-7285)

President Mark G. Heesen Vice President of Research John S. Taylor Senior Vice President Molly M. Myers Vice President of Federal Policy & Political Advocacy Jennifer Connell Dowling Vice President of Strategic Affairs & Public Outreach Emily Mendell Vice President of Membership & Member Firm Liaison Janice Mawson Director of Federal Policy & Political Advocacy Emily A. Baker Director of Marketing Jeanne Lazarus Metzger Director of Federal Life Science Policy Kelly Slone Public Policy Manager Sumi Singh Membership Coordinator & Database Administrator Terry Samm Accounting Manager Beverley Badley Manager of Administration and Meetings Allyson Chappell Administrative Assistant Gwendolyn Taylor

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Table of Contents
What is Venture Capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 10 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Portfolio Company Post-Money Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 11 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 15 Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Portfolio Company Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 51 Appendix A: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Appendix B: MoneyTree Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Appendix C: MoneyTree Geographical Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Appendix D: Industry Codes (VEICs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Appendix G: Data Sources and Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Appendix H: Portfolio Company Valuation Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Appendix I: International Convergence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Appendix J: Non-US Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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What is Venture Capital?
Venture capital has enabled the United States to support its entrepreneurial talent and appetite by turning ideas and basic science into products and services that are the envy of the world. Venture capital funds and builds companies from the simplest form – perhaps just the entrepreneur and an idea expressed as a business plan – to freestanding, mature organizations.
Venture Capital Backed Companies Known for Innovative Business Models Employment at IPO and Now
Company As The Home Depot Starbucks Corporation Staples Whole Foods Market, Inc. eBay of IPO 650 2,521 1,693 2,350 138 Current 331,000 176,000 75,588 52,900 15,500 # Change 330,350 173,479 73,895 50,550 15,362

Risk Capital for Business
Venture capital firms are professional, institutional managers of risk capital that enables and supports the most innovative and promising companies. This money funds new ideas that could not be financed with traditional bank financing, that threaten established products and services in a corporation, and that typically require five to eight years to be launched. Venture capital is quite unique as an institutional investor asset class. When an investment is made in a company, it is an equity investment in a company whose stock is essentially illiquid and worthless until a company matures five to eight years down the road. Follow-on investment provides additional funding as the company grows. These “rounds,” typically occurring every year or two, are also equity investment, with the shares allocated among the investors and management team based on an agreed “valuation.” But, unless a company is acquired or goes public, there is little actual value. Venture capital is a long-term investment.

Venture Capital Backed Companies Known for Innovative Technology and Products Employment at IPO and Now
Company Microsoft Intel Corporation Medtronic, Inc. Apple Inc. Google JetBlue As of IPO 1,153 460 1,287 1,015 3,021 4,011 Current 91,000 86,300 40,000 35,100 16,805 11,632 # Change 89,847 85,840 38,713 34,085 13,784 7 ,621

Source: IHS Global Insight. Current data is FY 2007 Year End Data

companies have received funding but no one- or twoperson company has ever gone public! Along the way, talent must be recruited and the company scaled up. Ask any venture capitalist who has had an ultra-successful investment and he or she will tell you that the company that broke through the gravity evolved from the original business plan concept with the careful input of an experienced hand.

Deal Flows — Where The Buys Are More Than Money
The U.S. venture industry provides the capital to create some of the most innovative and successful companies. But venture capital is more than money. Venture capital partners become actively engaged with a company, typically taking a board seat. With a startup, daily interaction with the management team is common. This limits the number of startups in which any one fund can invest. Few entrepreneurs approaching venture capital firms for money are aware that they essentially are asking for 1/6 of a person! Yet that active engagement is critical to the success of the fledgling company. Many one- and two-person For every 100 business plans that come to a venture capital firm for funding, usually only 10 or so get a serious look, and only one ends up being funded. The venture capital firm looks at the management team, the concept, the marketplace, fit to the fund’s objectives, the value-added potential for the firm, and the capital needed to build a successful business. A busy venture capital professional’s most precious asset is time. These days, a business concept needs to address world markets, have superb scalability, be made successful in a reasonable timeframe, and be truly innovative. A concept that promises a 10 or 20 percent improvement on something that already exists is not likely to get a close look.

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Many technologies currently under development by venture capital firms are truly disruptive technologies that do not lend themselves to being embraced by larger companies whose current products could be cannibalized by this. Also, with the increased emphasis on public company quarterly results, many larger organizations tend to reduce spending on research and development and product development when things get tight. Many talented teams have come to the venture capital process when their projects were turned down by their companies.

The Exit Funnel Outcomes of the 11,686 Companies First Funded 1991 to 2000

Went/Going Public 14% Still Private or Unknown* 35% Acquired 33% Known Failed 18%

Common Structure — Unique Results
*Of these, most have quietly failed

While the legal and economic structures used to create a venture capital fund are similar to those used by other alternative investment asset classes, venture capital itself is unique. Typically, a venture capital firm will create a Limited Partnership with the investors as LPs and the firm itself as the General Partner. Each “fund,” or portfolio, is a separate partnership. A new fund is established when the venture capital firm obtains necessary commitments from its investors, say $100 million. The money is taken from investors as the investments are made. Typically, an initial funding of a company will cause the venture fund to reserve three or four times that first investment for follow-on financing. Over the next three to eight or so years, the venture firm works with the founding entrepreneur to grow the company. The payoff comes after the company is acquired or goes public. Although the investor has high hopes for any company getting funded, only one in six ever goes public and one in three is acquired.

sion funds, charities, individuals, and corporations have benefited far beyond the risk-adjusted returns of the public markets.

Beyond the IPO
Many of the most exciting venture capital backed companies left the venture portfolios after they went public. Far from being a destination, the IPO process provides needed growth capital for a growing company. A 2009 analysis by IHS Global Insight shows that more than 90% of the jobs at today’s venture backed public companies were created after it went public. That is, these companies on average are 10% of their mature size at the time they go public.

What’s Ahead
Much of venture capital’s success has come from the entrepreneurial spirit pervasive in the American culture, financial recognition of success, access to good science, and fair and open capital markets. It is dependent upon a good flow of science, motivated entrepreneurs, protection of intellectual property, and a skilled workforce. The nascent deployment of venture capital in other countries is gated by a country’s or region’s cultural fit, tolerance for failure, services infrastructure that supports developing companies, intellectual property protection, efficient capital markets, and the willingness of big business to purchase from small companies.

Economic Alignment of all Stakeholders — An American Success Story
Venture capital is rare among asset classes in that success is truly shared. It is not driven by quick returns or transaction fees. Economic success occurs when the stock price increases above the purchase price. When a company is successful and has a strong public stock offering, or is acquired, the stock price of the company reflects its success. The entrepreneur benefits from appreciated stock and stock options. The rank and file employees throughout the organization historically also do well with their stock options. The venture capital fund and its investors split the capital gains per a pre-agreed formula. Many college endowments, pen-

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Executive Summary
The year 2008 was a difficult year for the US venture capital industry in many ways. While overall fundraising and company investment each retreated from post-bubble highs in 2007, very bad exit opportunities stifled the forward progress of the large number of companies just reaching the maturity level at which they would typically go public or be acquired. In the second quarter of 2008, no venture backed companies went public – a situation which had not occurred for over 30 years! In fact, only six venture-backed companies went public in 2008. Instead, these later stage companies needed large, later rounds of financing as well as the continued attention and support by the investing venture capitalists. The required time and capital made it difficult for the industry to turn its attention to launching the next generation of great companies. Nonetheless, over 1,100 new companies were added to venture fund portfolios during 2008. The lack of distributions to the institutional investors who provide the capital to the industry have left these professional money managers with little capital to recycle back to the industry. The year started with a difficult fundraising environment for all but the most demonstrably promising funds and ended with tough conditions for all. Even when this overview is being written several weeks into 2009, little has improved. Exits and fundraising remain challenging. But the industry is very much open for business. Reports from across the industry are that excellent teams are coming to venture firms with very strong business plans. That part of the venture capital ecosystem is working well. The most recent industry performance index continues to show that over the long haul the industry pays 1520% IRR to its investors. All indications are that this will continue. However, a continued poor exit market will stress returns both because of lower exit valuations and delayed realizations.

Introduction
The 2009 National Venture Capital Association Yearbook provides a summary of all of venture capital activity in the United States. This includes investments into portfolio companies to capital managed by general partners to fund raising from limited partners to valuations of companies receiving venture capital
Figure 1.0 Venture Capital Under Management Summary Statistics

investments to exits of the investments by either IPOs or mergers and acquisitions to performance of private equity funds with data from the Thomson Reuters Performance Database. The statistics for this publication were assembled primarily from the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters and analyzed through the ThomsonONE.com (VentureXpert) database of Thomson Reuters, which has been endorsed by the NVCA as the official industry database.

No. of VC Firms in Existence No. of VC Funds in Existence No. of Professionals No. of First Time VC Funds Raised No. of VC Funds Raising Money This Year VC Capital Raised This Year ($B) VC Capital Under Management ($B) Avg VC Capital Under Mgt per Firm ($M) Avg VC Fund Size to Date ($M) Avg VC Fund Size Raised This Year ($M) Largest VC Fund Raised to Date ($M)

1988 1998 2008 377 624 882 715 1,085 1,366 3,468 5,616 7,497 15 58 44 104 288 210 4.4 29.7 27.9 25.5 92.0 197.3 67.6 147.4 223.7 34.7 60.6 104.4 42.3 103.1 132.9 1,175.0 5,000.0 5,000.0

Industry Resources
Venture capital under management in the United States by the end of 2008 decreased 24% from 2007 year-end levels because large funds, raised during 2000 ($105 billion total raised) at the height of the bubble, rolled out of the industry’s managed capital and were replaced with smaller and more targeted funds ($28 billion raised in 2008). The overall contraction in capital under management is reflected in the anticipated decrease in active firms and funds. We

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National Venture Capital Association
expect further declines in the number of firms and funds from this current level as firms which most recently raised money and invested at the height of the bubble, wrap up their portfolios and exit the industry. At year end 2008, 882 venture firms managed 1,366 funds which had committed capital of $197.3 billion. capital. This “denominator” effect made it difficult for institutional investors to make any new commitments near year end 2008.

Investment
Venture capital investment in United States portfolio companies decreased 8% from the post-bubble high in 2007, but the total was still above 2006 levels. In 2008, venture capitalists invested $28.4 billion dollars in 3,832 deals. This modest decline folFigure 3.0 Capital Commitments to U.S. Venture Funds ($ Billions) 1980 to 2008
120 100 80
($ Billions)

Commitments
New commitments to venture capital funds in the United States decreased in 2008 to $27.9 billion from their post-bubble record levels in 2007. In 2008, 210 funds got investor commitments — a decrease of 15%. The dollar amount of those commitments fell 21%. Most of the successful fundraising during 2008 occurred in the first nine months. That said, overall fundraising (new capital committed by investors) remained in line with the amount of previously-raised capital being deployed or invested by venture capitalists in companies. That is, new commitments of capital and capital deployed remained pretty much in balance. As the economy worsened toward the end of 2008, many institutional investors (e.g., pension plans, endowments, money managers) saw the public portion of their portfolios fall and found themselves overallocated to alternative asset classes including venture
Figure 2.0 Capital Under Management U.S. Venture Funds ($ Billions) 1980 to 2008
300

60 40 20 0
198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8

Year

Figure 4.0 Investments to Portfolio Companies ($ Billions) 1980 to 2008
120

250

100

200
($ Billions)

80
($ Billions)

150

60

100

40

50

20

0
198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8

0
198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8

Year

Year

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2009 NVCA Yearbook
lows 4 consecutive years of modest increases. Despite these global economic concerns, the United States venture capital industry invested in 1,179 first time companies in 2008. While this is below the level of the prior two years, new portfolio companies are being sought out and funded. During 2008, a near-record number of later stage deals were done. This is not surprising because of a large number of portfolio companies reaching maturity with no or lousy exit opportunities open to them. Despite the time and capital commitments to these mature portfolio holdings, venture capitalists also invested in companies in the seed state and early stage at near post-bubble levels. MoneyTree™ sectors, 12 saw no IPOs. The number of venture-backed companies acquired during 2008 (335) declined from 2007 (378) to a level consistent with other post-bubble years. While 2007 was the post-bubble high water mark for strong acquisition exits, in 2008 the total disclosed proceeds dropped 59% to $13.3 billion. While M&A exits were at best a mixed picture, 18% of those companies sold for more than ten times the total venture investment (TVI) in those companies.

Performance
Over the long-term, venture capital funds have paid out a net 15-20% IRR to their investors. The most recent performance statistics confirm this. For the 20 year period ended on September 30, 2008, venture funds overall returned 17.0% annualized IRR. Among the fund segments, those designating themselves as early stage led the way with 21.6% annualized IRR. Shorter horizon returns are less significant. For examFigure 5.0 2008 Investments By Industry Class

Portfolio Company Post-Money Valuations
Round valuations overall appeared to be significantly lower in 2008 than they were overall in the period 1995-2008. In 2008, the median financing round was at a reported $13.3 million, compared with the recent history of $30.0 million. The calculated average (or mean) round valuation, which of course can be affected by particularly large rounds, was $46.7 million in 2008 versus $72.9 million over the 14-year comparison period. Of those sectors with sufficient reported results, only two reported an increase in median round valuations: the media and entertainment sector and the medical devices and equipment sector.

Industry Group Information Technology Medical/Health/Life Science Non-High Technology Total

All Investments No. of Investment Companies Amt ($Bil) 1,905 14.0 734 8.2 553 6.2 3,192 28.4
Figure 6.0 2008 Investments By Company Stage
Startup-Seed 5%

Initial Investments No. of Investment Companies Amt ($Bil) 659 2.9 234 1.5 286 1.8 1,179 6.2

Exits
The year 2008 was an awful year for venture-backed companies exiting through initial public offerings or acquisitions. Only six venture-backed companies went public and the proceeds from acquisitions dropped by more than 50%. This comes at a time when a record number of companies founded during or just after the tech bubble entered the “later stage” of maturity and, in more typical times, would have exited. One has to go back to the 1970s to find years with fewer IPOs. The six companies which did go public brought in less than one-half billion dollars in proceeds. Of the six IPOs, two were Healthcare Services companies and two were in Medical Devices and Equipment. Of the 16

Later 38%

Early 19%

Expansion 38%

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Figure 7.0 Venture Capital Investments in 2008 By Industry Sector
Telecommunications 6% Software 17% Biotechnology 16%

Figure 8.0 2008 Investments By State
State CA MA NY TX WA VA IL MD NJ PA All Others Total Number of Companies 695 138 125 56 69 37 23 32 33 51 223 1,482 Pct of Total 47% 9% 8% 4% 5% 3% 2% 2% 2% 3% 15% Investment ($ Millions) 5,917.3 898.2 768.0 510.2 405.2 291.3 229.5 220.6 182.0 168.0 1,123.7 10,713.8 Pct of Total 55.2% 8.4% 7.2% 4.8% 3.8% 2.7% 2.1% 2.0% 1.7% 1.6% 10.5%

Business Products and Services 2% Computers and Peripherals 1% Consumer Products and Services 2% Electronics/Instrumentation 2% Financial Services 2%

Semiconductors 6% Retailing/Distribution 1% Networking and Equipment 2%

Healthcare Services 1%

Industrial/Energy 16%

Medical Devices and Equipment 12% Media and Entertainment 7% IT Services 7%

ple, the one year returns reflect falling valuations for public companies which then affect the valuations of private companies. Amplifying this effect in 2008, likely continuing into 2009 is the large number of later stage companies still in portfolios. These companies typically have positive EBITDA. Their portfolio valuations would be influenced by public markets through the use of ratios and comparables for pricing. Much of this IRR “exists” in the net asset values of portfolios. A continued awful exit market will delay exits (timing) and could reduce the values of the companies now awaiting an IPO or acquisition (amount realized). Both suggest lower short-term returns going forward.
Figure 9.0 Valuations Per Company Industry 2008 Financings ($ Millions)
Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total Avg Val 44.2 17.0 NA 24.8 NA NA NA 33.7 36.5 161.6 44.5 NA NA NA 38.9 25.9 40.3 46.7 Max 158.2 42.2 NA 77.0 NA NA NA 200.0 188.0 1,000.0 140.0 NA NA NA 70.0 113.0 141.3 1,000.0 Upper Lower Quartile Median Quartile Min 94.0 14.6 3.1 0.1 23.8 12.0 5.2 2.0 NA NA NA NA 27.0 10.2 8.0 2.0 NA NA NA NA NA NA NA NA NA NA NA NA 33.8 5.9 2.2 0.1 33.0 10.1 4.5 0.3 68.7 28.1 17.6 3.0 63.1 34.1 13.6 1.2 NA NA NA NA NA NA NA NA NA NA NA NA 42.3 37.8 30.0 14.2 36.9 22.4 7.5 0.5 30.0 12.0 9.0 6.0 57.9 13.3 4.7 0.1

When analyzing the performance results from Thomson Reuters, several points need to be emphasized. For example, a large portion of the investment performance of the funds in any analysis of venture capital performance is dependent on unrealized returns that are subject to the various valuation methods used by firms for valuing year-end portfolio investments. By definition, these investments are usually illiquid and the valuations applied to them could have a liquidity premium applied to them. Later stage funds may be a bit more efficient in pricing since they tend to have valuations that are more closely correlated with public stocks.
Figure 10.0 Venture-Backed IPOs

300
No. of IPOs

30
Offer ($ Billions)

250 200
No. of IPOs

25 20 15
Offer ($ Billions)

150 100 50 0 '80'81'82'83'84'85'86'87'88'89'90'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08 Year

10 5 0

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2009 NVCA Yearbook
Although these measures seem to make venture capital returns and public market returns directly comparable, the returns to public markets are almost always stated as time-weighted returns while it is recommended that venture capital returns be calculated as money-weighted returns, or internal rates of return. By definition, neither method is “right” or “wrong”, but just different calculations of performance. Therefore, readers should bear in mind that additional care must be taken when directly comparing public and private market performance. Venture capital funds by their nature are long-term investments and should be measured with this in mind. Short-term performance can be misleading because the underlying investments are highly illiquid. Also, since performance is in large part affected by capital gains that have not been distributed yet, short-term performance is more of an indicator of performance as opposed to a truer representation. Readers should bear this in mind when comparing short-term versus long-term asset class performance.

Figure 11.0 Performance of Private Equity funds
Net IRR to Investors For Investment Horizon Ending 09/30/2008 for Private Equity Funds 1YR 3YR 5YR 10YR -1.5 3.7 5.0 37.1 -5.6 7.3 11.4 14.9 9.1 11.1 10.1 8.7 -1.5 6.4 8.5 17.1 -8.3 7.1 12.2 7.3 10.8 4.4 4.8 5.4 -7.1 7.6 11.0 9.3

Fund Type Seed/Early Focused Balanced Focused Later Stage Focused All Venture Buyout Funds Mezzanine Debt All Private Equity

20YR 21.6 14.7 14.5 17.0 11.1 7.8 12.9

Figure 12.0 Five Year Rolling Averages: Venture Capital vs. Public Market Indexes
Five-Year Period Ending 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Venture Capital S&P 500 NASDAQ 6.5 9.4 2.8 8.6 11.5 10.9 8.7 12.0 15.4 11.7 10.9 15.3 13.1 5.4 10.6 20.1 13.8 24.0 22.4 12.2 17.1 26.1 17.4 18.3 26.6 21.4 23.1 48.2 26.2 40.2 48.2 16.5 18.6 36.8 9.2 8.6 26.9 -1.9 -3.2 25.0 -2.0 -1.8 -2.1 -3.8 -11.8 -6.5 -1.1 -2.2 1.3 4.5 4.6 8.6 10.8 14.7 8.5 -4.1 -4.7

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Industry Resources
Venture capital under management in the United States by the end of 2008 decreased 24% from 2007 year-end levels because large funds raised in during 2000 ($105 billion total raised) at the height of the bubble rolled out of the industry’s managed capital and were replaced with smaller and more targeted funds ($28 billion raised in 2008). The overall contraction in capital under management is reflected in the anticipated decrease in active firms and funds. The industry’s current investment and fundraising levels are approximately 1/3 of the bubble peak. We would expect further declines in the number of firms and funds from this current level as firms which raised money and invested at the height of the bubble wrap up their portfolios and exit the industry. Industry headcount fell as well. The number of estimated industry principals fell 16% in 2008 also as part of the ongoing post-bubble contraction to approximately 7,500. At year end 2008, 882 venture firms managed 1,366 funds which had committed capital of $197.3 billion.

METHODOLOGY
The number of firms in existence will vary on a rolling eight-year basis as firms raise new funds or do not raise funds for more than eight years. Under this methodology, we estimate that there are currently 882 firms with limited partnerships “in existence”. To clarify, this is actually stating that there are 882 firms that have raised a venture capital partnership in the last eight years. In reality, there may well be fewer firms actually making new investments. For this publication, we are primarily counting the number of firms with limited partnerships and are excluding other types of investment vehicles. From that description, it may appear that the statistics for total industry resources may be underestimated. However, this must be balanced with the fact capital under management by captive and evergreen funds is difficult to compare equitably to typical limited partnerships with fixed lives. For this analysis only, the firms counted for capital under management include firms with fixed life partnerships and venture capital funds raised. If a firm

raised both buyout and venture capital funds, only the venture funds would be counted in the calculation of venture capital under management.
Figure 1.01 Capital Under Management U.S. Venture Funds ($ Billions) 1980 to 2008
300 250 200
($ Billions)

150 100 50 0
198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8

Year

Figure 1.02 Total Capital Under Management By Firm Type 1980 to 2008 ($ Millions)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Private Independent 2,062 2,909 4,314 6,824 9,194 11,175 14,549 16,745 17,898 21,667 22,144 21,403 22,245 24,399 28,502 33,519 40,096 51,566 75,265 118,970 184,432 209,055 209,655 211,470 220,242 229,247 236,708 223,869 176,672 Financial Institutions 1,218 1,993 2,234 3,099 3,539 4,124 4,296 4,408 4,466 4,060 4,014 3,515 3,344 3,419 4,038 4,924 5,705 8,521 12,220 17,853 25,504 27,405 26,710 26,382 26,273 25,244 24,473 20,928 13,182 Corporations 516 759 744 1,018 1,179 1,773 1,772 2,172 2,296 2,137 2,370 2,281 2,454 1,753 1,805 1,698 2,555 2,715 3,421 6,973 13,135 14,304 14,444 14,103 14,073 14,898 14,913 11,938 6,440 Other 304 439 509 459 689 828 883 875 840 735 671 601 357 229 356 459 544 899 1,094 1,503 2,129 2,336 2,290 2,244 2,311 2,012 2,006 1,565 1,006 Total 4,100 6,100 7,800 11,400 14,600 17,900 21,500 24,200 25,500 28,600 29,200 27,800 28,400 29,800 34,700 40,600 48,900 63,700 92,000 145,300 225,200 253,100 253,100 254,200 262,900 271,400 278,100 258,300 197,300

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Figure 1.03 Distribution of Firms By Capital Managed 2008
160 140 120 100 80 60 40 20 0
0 100 -25 0 -50 0 0-1 -10 0 102550100 250 100 0+ 50 25 0

143 135 119 135

150

89

58

53

Venture capital under management can be a complex statistic to estimate. Indeed, capital under management reported by firms can differ from firm to firm as there’s not one singular definition. For example, some firms include only cumulative committed capital, others may include committed capital plus capital gains, and still other firms define it as committed capital after subtracting liquidations. To complicate matters, it is difficult to compare these totals to European private equity firms which include capital gains as part of their capital under management measurements. For purposes of the analysis in this publication, we have tried to clarify the industry definition of capital under management as the cumulative total of committed capital less liquidated funds or those funds that have completed their life cycle. Typically, venture capital firms have a stated 10-year fixed life span, except for life science funds which are often established as 12-year funds. Figure 1.07 shows the reality of fund life. Thomson Reuters calculates capital under management as the cumulative amount committed to

Capital Under Management ($ Millions) This chart shows capital committed to US venture firms in active funds. While much of the capital is managed by larger firms, of the 882 firms in existence at the end of 2008, roughly 60% of them (532) managed $100 million or less. By comparison, 53 firms managed active funds totaling more than $1 billion.

500

Figure 1.04 Fund and Firm Analysis
Total Cumulative Funds 186 250 321 434 550 639 718 820 901 996 1055 1094 1170 1264 1369 1527 1674 1899 2140 2488 2907 3147 3221 3327 3497 3677 3862 4081 4273 Total Cumulative Firms 117 154 192 236 288 320 354 390 411 440 457 465 486 518 549 615 675 774 859 994 1138 1222 1238 1293 1358 1428 1502 1592 1648 Total Cumulative Capital ($B) 5.8 7.9 9.8 13.4 16.8 20.2 24.1 27.7 31.3 36.5 39 41.2 45.2 50 58.7 68.3 80.2 100.2 131 186.5 270.3 303.1 311.8 322.5 343.1 371.6 409.1 444.7 467.6 Firms That Raised Funds in the Last 8 Vintage Years 92 127 162 208 260 297 332 362 377 392 393 373 365 376 389 429 469 548 624 752 881 943 938 968 1003 1024 1027 1019 882 Capital Managed ($B) 4.1 6.1 7.8 11.4 14.6 17.9 21.5 24.2 25.5 28.6 29.2 27.8 28.4 29.8 34.7 40.6 48.9 63.7 92 145.3 225.2 253.1 253.1 254.2 262.9 271.4 278.1 258.3 197.3 Avg Fund Size ($M) 31.8 32.4 31.5 32.1 31.8 33.1 35.7 35.5 35.7 38.3 39.8 42.1 45.8 47.7 53.3 57.4 63.3 70.5 84.8 104.2 129.6 134.4 136.7 141.2 144.2 152.6 161.5 162.1 144.4 Avg Firm Size ($M) 44.6 48 48.1 54.8 56.2 60.3 64.8 66.9 67.6 73 74.3 74.5 77.8 79.3 89.2 94.6 104.3 116.2 147.4 193.2 255.6 268.4 269.8 262.6 262.1 265 270.8 253.5 223.7

Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Existing Funds 129 188 248 355 459 541 603 681 715 746 734 660 620 625 651 707 773 903 1085 1394 1737 1883 1852 1800 1823 1778 1722 1593 1366

The correct interpretation of this chart is that since the beginning of the industry to the end of 2008, 1,648 firms had been founded and 4,273 funds had been raised. Those funds totaled $467.6 billion. At the end of 2008, 882 firms as calculated using our eight-year methodology managed 1,366 individual funds, each fund typically a separate limited partnership. Capital under management by those funds at the end of 2008 is $197.3 billion. The average firm size is $223.7 million.

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2009 NVCA Yearbook
Figure 1.05 Principals Information Figure 1.06 Top 5 States By Capital Under Management 2008

Year 2007 2008

No. Principals Per Firm 8.7 8.5

Estimated Industry Principals 8892 7497

Avg Mgt Per Principal ($M) 28.9 26.3

The correct interpretation of this chart is that at year end 2008, there were 7,497 principals (people who go to board meetings) in the industry. A principal on average manages $26.3 million and the average firm is made up of 8.5 principals.

State CA MA NY CT MD Total*

($ Millions) 84,479.5 36,148.6 17,950.0 11,780.9 7,316.1 157,675.0

*Total includes above 5 states only

Figure 1.07 Capital Under Management By State 1980 to 2008 ($ Millions)

State CA MA NY CT MD WA TX DC NJ IL PA VA MN CO NC UT OH GA TN FL MI MO LA KY WI ME AL AZ IN RI NM ID IA OK VT PR DE NH MS OR SC SD HI ND KS NE MT WV WY AR NV AK Total

1980 1,099 530 1,247 255 42 27 89 1 109 84 18 3 59 138 13 4 214 0 2 8 0 3 4 0 93 1 0 15 13 1 0 0 0 23 0 0 1 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 4,100

1981 1,349 761 1,659 528 84 61 96 1 86 133 30 1 51 147 14 4 835 0 2 8 0 3 1 16 131 1 0 16 14 1 0 0 38 25 0 0 1 0 3 0 1 0 0 0 0 0 0 0 0 0 0 0 6,100

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2,288 3,051 4,090 4,880 5,871 6,458 6,720 7,849 7,428 7,524 7,678 8,282 9,087 11,421 14,192 19,455 26,254 48,317 990 1,509 1,830 2,200 2,769 3,419 3,793 4,263 4,364 4,003 4,967 4,990 5,285 6,762 7,409 10,297 14,779 22,006 1,811 2,765 3,245 3,598 4,672 4,840 4,664 6,347 6,531 6,208 6,092 6,845 8,168 9,307 10,893 11,714 21,639 30,728 607 753 879 1,287 1,440 1,678 1,757 1,614 1,762 1,638 1,741 1,583 1,743 1,827 1,902 3,396 4,578 6,975 55 120 258 252 403 431 417 451 634 565 476 1,011 1,249 1,260 2,144 2,243 3,090 4,878 76 264 267 316 411 388 428 406 391 201 247 231 182 302 464 677 1,083 1,796 111 331 409 500 539 792 791 874 917 852 889 976 1,186 1,097 1,249 1,716 3,019 4,667 1 1 3 36 38 49 56 58 59 59 57 23 1,039 1,307 2,850 3,496 3,579 3,716 85 216 547 617 718 757 747 752 970 896 558 543 757 1,017 1,487 1,550 2,175 2,699 167 337 405 444 465 688 876 841 849 811 1,047 1,316 1,388 1,484 1,306 1,769 2,221 3,539 38 101 140 435 510 540 557 649 685 712 691 488 655 727 987 1,493 1,662 2,598 17 51 67 73 79 79 85 107 93 57 43 38 35 86 111 194 583 1,312 55 137 192 200 299 343 683 765 914 839 795 872 926 899 529 629 717 1,093 190 213 342 365 434 330 457 565 517 498 378 462 408 370 440 753 1,015 3,186 26 29 30 34 55 88 90 127 116 111 112 110 149 129 264 580 769 971 4 4 9 9 19 20 15 16 16 16 11 10 26 31 31 94 96 130 833 877 924 860 901 981 845 261 262 279 310 436 478 451 378 689 768 1,243 3 47 51 53 59 140 226 231 243 196 195 249 246 240 166 253 558 687 2 4 30 103 129 193 186 221 264 281 276 203 297 305 459 522 750 1,062 70 111 126 126 132 174 194 199 134 111 99 153 227 324 305 448 763 1,142 83 109 141 142 152 238 231 237 150 125 94 95 92 27 27 253 259 620 17 17 34 577 604 637 615 631 669 665 656 109 139 120 125 147 112 122 3 6 6 7 7 7 7 7 5 2 11 23 32 49 90 275 368 444 15 16 16 16 16 16 16 0 0 0 0 0 7 7 7 7 7 7 127 181 184 180 97 96 93 104 104 79 80 82 166 169 168 137 140 110 1 1 1 1 1 21 26 26 26 26 28 29 100 89 87 87 89 207 0 0 0 127 132 133 129 138 139 139 140 6 6 6 6 5 24 33 15 16 57 41 44 44 74 76 77 76 35 45 44 45 10 9 38 38 23 32 60 45 56 57 78 99 89 82 99 101 111 112 194 176 192 207 1 2 2 15 16 16 36 37 38 36 37 23 23 23 0 0 0 0 15 27 42 72 101 137 135 173 261 247 235 209 182 155 152 120 12 12 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 37 41 42 50 52 106 102 65 66 63 63 55 56 5 5 16 17 16 24 1 1 1 29 29 28 38 38 37 38 39 10 10 32 23 67 66 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 40 40 7 7 35 39 41 40 39 48 42 42 14 9 52 101 122 114 117 115 0 1 1 24 25 25 50 51 52 51 51 28 28 47 19 66 67 66 3 0 0 0 0 0 0 0 0 0 0 0 0 25 25 25 26 26 1 18 130 170 178 206 243 249 251 232 118 75 75 78 30 30 40 40 1 2 2 2 2 2 2 16 16 15 15 16 16 29 29 13 13 13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 10 74 73 0 0 2 2 2 2 2 2 2 2 0 0 0 2 2 2 2 11 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13 13 13 14 14 38 47 66 53 52 0 0 0 0 0 0 1 1 1 1 1 12 12 106 137 138 141 140 0 0 0 0 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 72 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 24 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7,800 11,400 14,600 17,900 21,500 24,200 25,500 28,600 29,200 27,800 28,400 29,800 34,700 40,600 48,900 63,700 92,000 145,300

2000 78,830 35,805 44,727 9,021 8,709 2,814 7,211 4,478 3,635 4,172 4,892 2,554 2,202 4,751 1,314 272 1,856 1,286 1,197 1,765 709 215 478 7 184 203 108 37 479 0 12 14 16 140 15 39 140 66 25 100 79 168 11 0 52 176 0 21 118 71 23 0 225,200

2001 89,359 43,276 46,033 12,286 8,458 3,638 8,373 5,268 4,296 4,590 5,093 2,752 2,141 5,266 1,394 479 1,878 1,279 1,289 1,730 712 241 731 7 183 291 108 48 477 24 12 14 60 140 41 69 140 66 53 100 80 168 11 0 51 165 0 21 118 71 23 0 253,100

2002 90,067 45,776 43,733 12,112 8,430 3,640 8,207 4,223 4,181 5,294 4,911 2,763 2,317 5,408 1,542 452 1,878 1,274 1,169 1,661 711 209 727 0 90 218 107 89 466 24 12 14 60 140 41 68 116 84 53 113 93 167 11 0 51 165 0 21 117 71 23 0 253,100

2003 92,500 44,610 43,021 12,065 8,418 3,512 8,127 3,956 4,389 5,692 5,304 2,943 2,307 5,394 1,738 526 1,855 1,197 1,161 1,567 751 198 709 14 89 219 107 124 499 24 34 14 55 139 41 68 68 65 28 83 80 167 9 0 28 71 0 21 117 71 23 0 254,200

2004 2005 2006 2007 2008 97,866 104,497 110,241 103,763 84,479 45,415 47,665 50,391 48,159 36,149 43,217 42,890 35,581 30,874 17,950 13,924 13,874 15,057 13,083 11,781 8,906 9,417 11,396 10,868 7,316 4,493 4,469 4,467 5,508 4,954 8,446 8,122 7,794 6,165 4,591 2,733 3,046 4,153 4,346 4,410 4,092 4,091 5,177 5,073 4,174 5,789 5,536 5,430 4,575 3,851 5,182 5,104 5,680 5,370 3,803 3,141 3,720 3,613 3,494 2,310 2,315 2,403 2,550 2,441 1,644 5,218 4,897 4,686 3,033 1,571 1,619 1,449 1,658 1,540 1,204 540 499 603 1,130 1,159 2,053 1,878 1,790 1,652 1,008 1,229 1,267 1,268 1,443 853 1,048 1,040 844 675 569 1,556 1,718 1,436 1,166 530 944 780 796 510 503 296 276 335 547 460 745 585 512 437 421 14 18 218 220 225 100 85 255 258 185 215 217 278 162 165 125 178 177 169 161 125 143 116 117 139 409 417 429 415 119 24 24 97 98 100 35 70 75 77 78 14 14 85 86 73 65 54 60 68 69 117 118 111 117 42 41 41 41 55 40 68 69 29 31 31 56 56 57 57 31 66 19 30 30 31 28 28 29 30 30 85 86 76 79 23 80 86 86 87 21 162 163 101 102 19 16 16 16 8 14 0 0 0 0 13 19 0 0 0 0 38 38 38 39 0 0 0 0 0 0 21 21 21 21 0 118 119 119 120 0 71 72 72 0 0 23 24 24 0 0 0 0 0 0 0 262,900 271,400 278,100 258,300 197,300

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Figure 1.08 Life of IT Funds in Years

Life of IT Funds In Years <= 10 11-12 13-14 15-16 17-18 >=19

% of Funds 7% 20% 27% 22% 14% 10%

Source: Adams Street Partners, based on 2006 analysis of funds then dissolved. This chart tracks the year in which a 10-year fund is, in fact, dissolved. These later periods are referred to as "out years." By this point in time, most of the strong exits have occurred, the companies that are going to outright fail have done so, and the portfolio consists of a few portfolio company holdings which are difficult to sell at a favorable price.

funds on a rolling eight-year basis. Current capital under management is calculated by taking the capital under management calculation from the previous year, add in the current year’s funds’ commitments, and subtracting the capital raised eight years prior. For this analysis, Thomson Reuters classifies ven-

ture capital firms using four distinct types: private independent firms, financial institutions, corporations, and other entities. ‘Private independent’ firms are made up of independent private and public firms including both institutionally and non-institutionally funded firms and family groups. ‘Financial institutions’ refers to firms that are affiliates and/or subsidiaries of investment banks and non-investment bank financial entities including commercial banks and insurance companies. The ‘Corporations’ classification includes venture capital subsidiaries and affiliates of industrial corporations. The capital under management data referred to in this section consist primarily of venture capital firms investing through limited partnerships with fixed commitment levels and fixed lives and does not include infinite lived “evergreen funds” or true captive corporate industrial investment groups without fixed commitment levels. The term ‘evergreen funds’ refers to funds that have a continuous infusion of capital from a parent organization as opposed to the fixed life and commitment level of a closed-end venture capital fund.

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Capital Commitments
New commitments to venture capital funds in the United States decreased in 2008 to $27.9 billion from their postbubble record levels in 2007. In 2008, 210 funds got investor commitments — a decrease of 15%. The dollar amount of those commitments fell 21%. Most of the successful fundraising during 2008 occurred in the first nine months. That said, overall fundraising (new capital committed by investors) remained in line with the amount of previouslyraised capital being deployed or invested by venture capitalists in companies. That is, new commitments of capital and capital deployed remained pretty much in balance. The fundraising environment remained difficult for all but the most proven and demonstrably promising firms throughout the year, and for virtually all funds as year end neared. Venture firms had raised considerable funds in 2007 and the first part of 2008. As the economy worsened toward the end of 2008, many institutional investors (e.g., pension plans, endowments, money managers) saw the public portion of their portfolios fall and found themselves over-allocated to alternative asset classes including venture capital. This “denominator” effect made it difficult for institutional investors to make any new commitments near year end 2008. Much of the fundraising was done by established, often larger, firms. Capital was also successfully raised by new funds in promising sectors, such as clean technology, and those with proprietary deal flow prospects. The top fundraising states remained California, Massachusetts, and New York. The list of top states shifted in 2008 with DC and Texas joining the top 5, replacing Washington state and Pennsylvania. Overall, funds domiciled in the top 5 states accounted for 82% of the capital raised and 63% of the funds raising money. Please note that fund domicile by state is less meaningful than it has been historically viewed. Much of the money is managed by large, national funds which tend to be domiciled in any of several states. Some of these firms, for example, may have their largest concentration of investing partners in California but the firm is actually headquartered and administered elsewhere.

Methodology
As defined by Thomson Reuters, capital commitments are funds raised by private equity limited partnerships from their limited partners. There are three sources of data for
Figure 2.01 Capital Commitments To U.S. Venture Funds ($ Billions) 1980 to 2008
120 100 80
($ Billions)

capital commitments: (1) SEC filings that are regularly monitored by our research staff, (2) surveys of the industry routinely conducted by Thomson Reuters, and (3) industry press and press releases from venture firms. Commitments are stated on either a calendar year basis
Figure 2.02 Capital Commitments To Private Equity Funds 1980-2008
Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Venture Buyouts and Mezzanine Capital $Mil No. Funds Capital $Mil No. Funds 2,025.6 52 183.5 4 1,486.5 75 126.8 4 1,705.4 87 611.3 13 3,949.2 143 1,351.3 15 2,964.3 116 3,482.5 22 3,988.5 121 3,024.5 22 3,788.4 103 5,001.9 31 4,376.7 116 15,565.7 41 4,435.0 104 11,326.4 50 4,902.6 105 11,966.2 78 3,229.0 87 7,861.1 62 2,002.8 42 5,886.6 27 5,215.3 80 11,031.3 58 3,943.6 88 16,128.9 79 8,928.0 140 20,415.3 98 9,859.6 172 26,293.3 102 11,845.2 162 29,655.2 99 19,772.5 244 41,055.4 129 29,692.0 288 61,568.7 160 55,808.9 451 53,556.5 153 105,004.6 653 75,254.7 154 39,056.4 321 49,904.1 120 9,329.8 206 24,118.2 88 11,607.8 163 31,040.1 101 19,845.2 219 50,908.7 137 28,727.5 235 97,403.2 179 31,827.6 241 147,989.7 179 35,398.0 247 205,260.1 208 27,947.8 210 177,980.1 179 Private Equity Capital $Mil No. Funds 2,209.1 56 1,613.3 79 2,316.7 100 5,300.5 158 6,446.8 138 7,013.0 143 8,790.3 134 19,942.4 157 15,761.4 154 16,868.8 183 11,090.1 149 7,889.4 69 16,246.6 138 20,072.5 167 29,343.3 238 36,152.9 274 41,500.4 261 60,827.9 373 91,260.7 448 109,365.4 604 180,259.3 807 88,960.5 441 33,448.0 294 42,647.9 264 70,753.9 356 126,130.7 414 179,817.3 420 240,658.1 455 205,927.9 389

60 40 20 0
198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 20 0 5 200 6 200 7 200 8

Year

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National Venture Capital Association
Figure 2.03 Venture Capital Fund Commitments 1980 to 2008 ($ Millions)
State CA MA NY DC TX PA CT UT WA MD MN IL OH CO TN MI VA AL NJ MO FL AZ GA SD ND KY HI OR VT NC LA OK IN KS IA RI MS NH ME ID WV SC PR NV NE DE UN WY AR WI NM Total 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 380 363 731 913 948 1044 770 1235 934 1501 736 546 1407 1169 223 115 438 494 357 559 557 935 788 335 557 242 1051 170 228 402 193 1043 424 302 1460 654 363 2242 490 509 470 695 0 0 0 0 0 39 0 12 5 0 0 0 0 0 12 57 0 240 118 87 61 256 41 162 143 58 382 137 0 9 0 57 69 54 73 55 12 118 45 167 30 110 70 309 44 333 130 316 156 236 288 66 310 150 300 272 0 0 0 0 6 0 11 1 0 0 0 0 0 0 9 37 17 113 0 25 126 37 60 0 0 5 48 40 0 45 0 0 219 4 182 24 2 74 213 50 0 415 2 0 3 168 0 266 110 51 418 20 162 16 946 66 1000 65 48 158 74 57 47 235 158 26 57 94 247 278 0 16 30 0 34 3 0 87 75 0 30 0 67 4 0 0 40 29 112 32 71 32 70 80 0 0 0 114 0 0 0 0 30 20 24 73 0 34 0 0 40 0 0 0 0 36 0 5 0 97 33 0 0 0 0 3 0 0 34 0 2 0 4 10 13 15 2 0 0 3 0 0 0 0 0 150 0 0 0 0 0 0 0 0 41 23 13 96 216 254 61 120 0 125 244 75 110 177 0 0 0 0 15 644 0 33 0 0 53 0 0 64 60 3 87 39 171 10 0 36 11 29 0 35 0 133 0 0 0 0 19 0 0 0 37 0 0 0 0 10 0 0 0 52 0 0 0 15 65 0 14 0 0 56 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 17 0 0 0 0 0 0 0 0 0 0 0 14 0 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 20 0 0 0 30 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 7 32 23 38 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 14 0 0 0 0 0 0 32 0 0 10 0 0 0 0 0 0 12 10 2 0 10 0 27 16 5 0 49 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 0 25 0 11 0 60 0 0 0 0 56 0 0 0 5 0 0 17 0 0 25 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 4 34 0 49 0 0 40 0 0 15 0 0 1 0 0 0 0 0 0 22 948 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 2 0 0 0 0 0 13 5 0 0 0 0 0 0 0 0 0 0 0 0 0 10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 58 0 0 0 0 0 0 0 0 0 0 0 0 2 31 17 36 28 0 2 0 155 40 0 0 2026 1487 1705 3949 2964 3989 3788 4377 4435 4903 3229 2003 5215 3944 1994 2031 1030 1895 1310 283 182 388 11 37 272 164 183 86 0 116 13 0 0 401 0 105 0 0 0 0 7 0 32 0 63 169 0 20 0 0 0 0 0 59 0 0 0 0 0 0 25 0 0 0 40 6 8928 1995 3330 2012 2154 280 194 114 260 0 179 21 19 230 10 19 84 0 53 0 363 11 106 0 74 0 0 15 3 32 0 10 18 0 0 25 5 0 12 20 0 0 0 14 0 50 111 31 0 0 0 0 2 9860 1996 3539 1998 1848 820 326 174 425 0 204 775 36 295 0 216 151 26 20 0 456 6 0 0 34 11 0 0 0 0 0 164 24 24 116 10 0 0 0 0 22 0 0 0 0 25 36 65 0 0 0 0 0 11845 1997 5555 2439 3966 2338 388 609 1324 33 180 172 527 360 366 253 109 226 65 5 118 45 78 0 41 0 0 42 0 0 0 349 88 0 0 20 12 0 0 50 0 0 0 0 0 0 0 0 0 0 0 16 0 19773 1998 7593 4994 8381 395 1411 157 1093 50 409 1272 585 466 58 433 266 5 322 30 1002 25 250 0 181 22 0 0 0 10 0 174 51 45 13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 29692 1999 2000 21854 41901 7984 16173 9601 16588 220 1423 1792 4160 1253 2290 3038 3050 40 129 640 1195 1681 4039 131 2473 1364 1007 659 662 1942 2414 267 262 329 286 996 2345 0 80 720 1206 80 65 326 936 29 0 30 861 14 131 0 0 0 0 10 0 0 65 0 20 209 601 375 70 0 110 20 103 0 0 5 21 0 0 0 30 0 0 127 0 0 15 0 6 0 70 0 0 25 0 0 41 28 0 0 0 0 26 7 69 17 82 0 0 55809 105005 2001 13328 9563 2504 1122 2739 334 3904 224 938 521 17 1073 330 513 82 8 201 16 652 286 26 21 19 1 0 135 0 0 25 120 112 0 40 0 26 25 0 0 77 27 4 0 31 0 0 0 0 0 0 14 0 39056 2002 2735 2577 1025 315 186 86 60 29 83 478 276 478 102 140 22 11 41 11 392 0 8 42 0 0 0 8 3 14 0 72 52 0 10 0 0 0 0 11 16 0 13 15 0 0 0 22 0 0 0 0 0 9330 2003 4652 1597 1245 0 76 488 165 34 1 1100 26 702 5 94 101 51 238 7 561 0 56 41 0 0 0 2 0 0 0 291 8 0 36 0 0 0 0 9 3 0 2 0 0 0 0 0 0 0 0 0 18 11608 2004 9203 1692 2183 392 794 463 2327 40 995 278 50 432 276 84 16 33 72 19 197 80 1 0 55 5 0 0 8 2 0 3 75 0 17 0 10 0 0 0 0 0 0 0 0 0 0 10 0 0 0 11 22 19845 2005 14930 5144 2096 566 652 349 1216 24 281 833 295 81 544 69 84 101 428 60 344 29 313 19 104 0 0 5 0 0 0 101 4 12 6 0 0 0 0 0 0 0 0 6 0 0 0 0 0 0 0 0 34 28728 2006 10902 4641 2583 1413 363 486 3186 130 590 2868 398 465 125 133 62 13 555 19 1962 40 11 0 103 0 0 65 0 0 0 398 13 38 24 0 43 64 1 5 46 0 0 0 0 0 0 0 0 0 0 78 5 31828 2007 14866 6257 5223 240 284 754 625 142 1882 1377 275 558 209 371 100 49 599 0 235 220 109 0 518 0 0 98 0 2 11 166 0 5 1 0 0 14 0 7 20 75 0 0 1 0 0 0 0 0 0 101 7 35398 2008 15096 3501 1973 1293 1172 1025 886 559 489 447 325 236 194 157 129 106 83 68 48 45 25 20 19 15 13 12 6 5 3 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 27948

20

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2009 NVCA Yearbook
or a vintage year basis depending on the analysis required. The data in this chapter is calendar year and incrementally measures how much capital a fund raised during the calendar year. For example, if a venture capital firm announces a $175 million fund in 2007, raises $75 million in 2007, and subsequently raises the remaining $100 million in 2008, the fund commitments would be counted in two calendar years at $75 million and $100 million, respectively. Assuming it started investing
Figure 2.04 Top 5 States By Venture Capital Committed 2008

and made its first capital call in 2008, the entire fund would then be considered to be a 2008 vintage year fund. An important note: the fund commitments presented in this publication do not include those corporate captive venture capital funds that are provided its financing by the corporate parent as well as evergreen funds since they do not raise capital from outside investors in the traditional sense.

State
California Massachusetts New York District of Columbia Texas Sub-Total Remaining States Total

No. of Funds
89 22 11 3 7 132 78 210

Committed ($Mil)
15095.7 3500.6 1972.8 1292.9 1172.2 23034.2 4913.6 27947.8

Figure 2.05 Private Equity Annual Commitment ($ Billions) 1980 to 2008
220 200 180 160 140
($ Billions)

Venture Capital Buyouts and Mezzanine Capital

120 100 80 60 40 20 0
1 98 0 198 1 1 98 2 1 98 3 198 4 198 5 198 6 198 7 1 98 8 1 98 9 1 99 0 1 99 1 1 99 2 1 99 3 1 99 4 1 99 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 2 00 5 200 6 2 00 7 2 00 8

Year

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Investments
Venture capital investment in United States portfolio companies decreased 8% from the post-bubble high in 2007, but the total was still above 2006 levels. In 2008, venture capitalists invested $28.4 billion dollars in 3,832 deals into 3,192 companies. This modest decline follows 4 consecutive years of modest increases. Much of the investment attention was focused on new companies, as well as later stage companies already in the portfolios which are unable to move onto an initial public offering or acquisition. As the year ended and concerns mounted over global economic problems, the investment pace fell in the fourth quarter. It is not clear whether that trend will continue into 2009. Despite these global economic concerns, the United States venture capital industry invested in 1,179 first time companies in 2008. While this is below the level of the prior two years, it shows that the industry is very much open for business. During 2008, a near-record number of later stage deals were done. This is not surprising because of a large number of portfolio companies reaching maturity with no or lousy exit opportunities open to them. Except for the fourth quarter of 2008 when activity overall fell, this ever-increasing accumulation of companies in need of later stage financing kept the number of such deals above 300 per quarter – a level unheard of until the second quarter of 2007. Despite the time and capital commitments to these mature portfolio holdings, venture capitalists did also invest in companies in the seed and early stage at near post-bubble levels. Life science investment remained around 30% of all invested capital and investment in California increased slightly to 50% of the capital deployed nationally. Clean technology investment increased to $4.1 billion, which is 7.5 times the amount three years earlier. Investment by corporate venture capital groups remained steady at 8% of total US investment. Approximately 19% of all rounds involve at least one corporate venture group. However, both of these statics trended down in the fourth quarter. Several factors were in play which will put upward pressure on the amount of venture capital invested in the coming quarters: (1) there are a record number of later stage companies which need continued funding but are unable to exit through IPO or acquisition at this time; (2) the emerging sectors such as biotechnology, medical devices, and clean technology tend to be more capital intensive than typical information technology companies;(3) many venture firms report an increasing number of high-quality opportunities and teams in the marketplace; and (4) increased government R&D funding will undoubtedly make certain sectors more investible. On the other hand, those factors suppressing investment levels in the near term are (1) the need for capital efficiency at the portfolio companies – lengthening the runway and reducing the burn rate; (2) possible difficulty in additional fundraising from institutional investors over the next several quarters because of stretched allocations to this asset class; and (3) a lack of exits means lack of distributions which means a lack of capital which can be recycled for future investment.

Methodology
As calculated by Thomson Reuters, venture capital investment data are derived from several sources. Primarily, survey information is obtained from the quarterly survey which drives the MoneyTree Report™ from PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. This is the official industry database of venture capital investment. Secondly, Thomson Reuters obtains data from SEC filings that are regularly monitored by our research staff.

Finally, publicly available sources such as press releases and trade publications are used. For detailed information on which transactions qualify as MoneyTree and are therefore counted in this chapter, please refer to Appendix B.

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Figure 3.01 Venture Capital Investments ($ Billions) 1980 to 2008
120

100

80

($ Billions)

60

40

20

0
198 0 198 1 198 2 198 3 198 4 198 5 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8

Year

Figure 3.02 Venture Capital Investments in 2008 By Industry Group

Industry Group Information Technology Medical/Health/Life Science Non-High Technology Total

All Investments No. of Investment Companies Amt ($Bil) 1,905 14.0 734 8.2 553 6.2 3,192 28.4

Initial Investments No. of Investment Companies Amt ($Bil) 659 2.9 234 1.5 286 1.8 1,179 6.2

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2009 NVCA Yearbook
Figure 3.03 Venture Capital Investments Top 5 States in 2008

State California Massachusetts New York Texas Washington Total*

Num of Cos 1,292 346 195 125 126 2,084

Amt Invested ($Bil) 14.3 3.0 1.3 1.3 1.0 20.8

*Total includes top 5 states only

Figure 3.04 Venture Capital Investments in 2008 By Industry Sector
Telecommunications 6% Software 17% Biotechnology 16%

Business Products and Services 2% Computers and Peripherals 1% Consumer Products and Services 2% Electronics/Instrumentation 2% Financial Services 2% Healthcare Services 1%

Semiconductors 6% Retailing/Distribution 1%

Networking and Equipment 2% Medical Devices and Equipment 12% Industrial/Energy 16%

Media and Entertainment 7%

IT Services 7%

Figure 3.05 Venture Capital Investments in 2008 By Stage
Startup-Seed 5% Early 19%

Later 38%

Expansion 38%

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Figure 3.06 Amount of Capital Invested By State in 2008 ($ Millions)
181 181 NH NH 16 MT 12 12 ID ID
16 MT

962 WA

92 WA 0 0 ND ND 1 SD SD
1

176 176 OR OR

487 487 MN MN
75 WI

43 43 VT VT 75 WI 1298 1298 NY NY

20 20 ME ME 2997 MA 2997
MA

2 2 WY WY 194 194 UT UT 817 817 CO CO

14278 14278 CA CA

13 NV

13 NV

16 16 NE NE 45 45 KS KS
17 OK

40 40 IA IA 86 86 MO MO 17 OK 00 AR AR 8 8 LA LA

208 208 AZ AZ

69 69 NM NM

1287 TX

1287 TX

701 701 PA PA 258 134 258 31 445 134 OH OH 31 IN 445 DC DC 24 IN IL IL 24 486 WV WV 486 VA 29 VA 29 KY KY 459 NC 459 65 65 TN NC TN 34 34 SC SC 423 423 0 24 24 GA 0 GA AL MS MS AL 238 238 FL FL

246 246 MI MI

695 NJ

39 RI 39 RI 130 CT 130
CT 63 63 DE DE

695 NJ

461 461 MD MD

0 0 GU GU

77 HI HI

14 PR

14 PR

0 0 VI VI

Figure 3.07 Number of Companies Invested in By State in 2008

126 126 WA WA 29 29 OR OR

23 23 NH NH

2 MT 66 ID ID
1 1 WY WY

2 MT

1 ND
1 SD

1 ND

43 43 MN MN
18 WI

88 VT VT 18 WI 195 195 NY NY 44 44 OH OH 10 10 KY KY 152 152 PA PA 1 1 WV WV
NC

44 ME ME
346 346 MA MA 9 9 RI 76 76 NJ NJ 5 DE 87 87 MD MD 30 30 CT CT RI

1 SD
2 NE

1292 1292 CA CA

3 3 NV NV

29 UT

29 UT

2 NE 20 20 KS KS 44 OK OK

4 4 IA IA 19 19 MO MO 00 AR AR
9 LA 57 IL

33 33 MI MI 13 13 IN IN
20 20TN TN

78 78 CO CO

57 IL

65 65 VA VA 45 NC 45

8 8 DC DC

5 DE

19 19 AZ AZ

16 16 NM NM 125 125 TX TX

6 LA

0 0 MS MS

8 8 AL AL

59 59 GA GA

10 SC

10 SC 0 0 GU GU

29 FL 6 6 HI HI

29 FL 22 PR PR 0 0 VI VI

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Figure 3.08 Venture Capital Investments in 1980 to 2008 By Region ($ Millions)
Region Silicon Valley New England LA/Orange County NY Metro Midwest Texas Southeast San Diego Northwest DC/Metroplex Colorado Philadelphia Metro North Central SouthWest Upstate NY Sacramento/N.Cal South Central AK/HI/PR Unknown Total 1980 1981 1982 131.3 325.8 532.3 71.2 170.2 242.0 38.5 112.3 189.4 54.7 67.5 95.4 29.7 68.2 98.0 76.3 128.4 119.2 23.5 49.8 73.2 20.3 32.4 14.3 6.0 21.5 44.0 24.3 26.5 25.9 30.3 32.1 39.7 21.3 27.7 18.9 18.2 22.2 30.2 9.0 18.7 41.8 7.2 13.1 3.0 2.4 7.9 19.4 12.8 24.0 7.2 0.0 0.1 4.5 0.0 0.0 19.1 576.9 1,148.4 1,617.3 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1066.6 1044.4 741.6 941.8 825.0 949.1 874.6 863.2 742.8 1073.6 875.2 1080.3 1808.3 428.3 451.5 434.4 405.5 500.5 488.7 409.3 407.6 277.0 443.1 347.0 460.3 759.8 343.3 261.3 203.3 191.7 273.3 200.2 241.7 182.7 143.6 170.5 186.9 201.0 1021.5 143.0 160.4 210.7 210.0 259.7 306.3 361.5 196.1 177.5 223.1 196.7 281.6 480.9 164.3 209.0 153.0 134.7 201.7 158.9 194.4 163.7 158.0 168.3 310.6 386.4 450.0 144.1 200.4 241.6 228.3 206.3 237.1 237.6 143.5 161.1 148.4 220.2 284.3 464.4 134.5 122.8 165.6 229.2 252.0 238.8 200.3 142.4 98.5 319.3 415.0 350.6 820.8 65.8 60.9 95.8 74.8 101.7 149.5 142.1 106.4 105.8 107.1 124.3 222.1 271.2 129.3 89.2 142.1 128.9 140.5 115.1 115.3 88.6 62.0 219.9 135.9 157.5 380.6 80.8 53.6 103.5 58.5 99.8 128.6 140.7 83.9 37.6 50.0 67.2 131.1 415.8 82.2 82.6 77.4 112.7 106.8 100.8 159.3 92.3 50.6 128.2 133.9 189.5 327.7 38.8 72.4 52.3 54.7 78.9 71.5 56.3 104.8 41.6 178.0 425.1 124.0 232.3 55.1 70.1 32.8 43.0 77.4 41.5 49.4 60.4 46.4 87.6 113.5 89.9 203.4 31.7 41.8 40.6 79.8 53.9 55.3 49.3 30.1 30.9 90.9 46.6 31.8 111.4 10.4 17.7 14.2 10.7 9.7 6.2 7.3 11.1 3.4 9.1 5.1 0.7 35.5 9.2 19.1 16.0 41.3 23.0 34.1 4.2 19.3 15.7 17.7 7.4 16.6 31.4 31.6 8.2 13.7 11.7 19.8 12.6 24.2 11.6 3.9 15.2 13.3 46.6 48.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 1.0 22.0 7.8 1.1 0.8 4.5 0.5 0.6 0.8 0.3 0.0 0.0 30.0 0.8 0.2 0.3 2,960.3 2,966.1 2,742.9 2,958.0 3,230.6 3,295.0 3,267.9 2,707.7 2,156.6 3,480.1 3,625.8 4,076.3 7,871.3 1996 3421.9 1155.2 687.3 726.1 737.0 532.1 1124.7 444.7 494.4 510.1 306.5 352.1 225.9 172.0 22.4 28.9 71.6 24.2 2.2 11,039.2 1997 4703.5 1569.3 803.6 1268.3 869.1 830.8 1385.9 496.0 538.3 551.6 379.8 492.7 350.7 288.8 84.5 21.4 67.4 14.0 4.4 14,720.2 1998 5967.2 2356.9 1253.4 1684.6 1624.5 1158.9 1634.4 591.5 813.4 1139.4 725.8 625.5 477.0 356.8 179.7 85.8 186.7 5.5 42.1 20,909.3 1999 18106.0 5506.4 3587.9 4534.4 2739.7 3135.6 4388.3 1208.6 2508.2 2104.0 1738.4 1593.7 796.3 745.9 214.5 104.1 418.1 17.4 2.4 53,449.8 2000 33335.4 11736.8 6681.3 10437.5 5606.2 6003.0 8007.4 2201.7 3598.4 5607.3 4103.7 2566.0 1387.0 1348.1 289.7 350.1 464.3 237.6 58.8 104,020.5 2001 12703.6 5206.8 2087.1 3528.6 1966.5 2943.0 2742.5 1523.5 1382.3 2097.0 1222.4 1111.7 645.1 446.6 159.1 227.0 160.9 69.8 26.3 40,250.0 2002 7119.0 2867.6 1296.2 1492.3 956.7 1296.0 1793.7 964.3 741.6 1096.3 536.5 584.0 486.2 406.1 104.5 65.4 69.4 4.9 0.0 21,880.3 2003 6568.5 2986.6 1111.9 1421.6 863.7 1246.9 1114.3 823.7 623.2 823.0 621.4 535.6 493.0 223.7 128.2 32.2 58.5 12.9 0.0 19,688.8 2004 8003.1 3356.3 951.7 1603.9 655.2 1154.5 1301.1 1215.7 1011.3 937.7 408.0 736.3 453.4 370.1 105.2 37.9 119.5 15.1 0.9 22,436.9 2005 8221.3 2814.3 1602.7 1983.5 773.5 1174.9 1096.0 1092.3 1012.1 1049.3 643.7 559.1 353.3 550.3 54.1 45.7 18.3 13.6 57.1 23,115.1 2006 9636.3 3189.8 1970.7 2038.1 990.1 1389.4 1247.1 1203.1 1267.1 1150.1 645.1 756.5 407.6 495.2 149.9 34.2 87.1 46.4 0.0 26,703.7 2007 11009.4 3900.5 1619.4 1692.7 1215.8 1468.5 2038.4 1991.6 1709.6 1268.1 609.7 822.6 588.7 549.1 136.5 99.9 106.3 20.9 0.0 30,847.6 2008 10997.4 3283.1 1994.7 1867.2 1368.6 1287.3 1244.1 1213.0 1167.3 1002.1 817.4 758.1 619.4 483.5 87.4 72.8 70.9 21.0 0.0 28,355.2

Figure 3.08b Venture Capital Investments in 1980 to 2008 By Region (Number of Deals)

Region Silicon Valley New England NY Metro Midwest LA/Orange County Northwest Southeast DC/Metroplex Texas Philadelphia Metro San Diego Colorado SouthWest North Central South Central Upstate NY Sacramento/N.Cal AK/HI/PR Unknown Total

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 100 158 270 347 395 324 327 335 338 378 385 329 412 308 334 498 763 870 1,041 1,699 2,158 1,101 806 857 943 985 1,196 1,240 1,179 62 132 158 219 251 237 211 249 228 217 212 168 160 145 142 233 331 380 461 652 873 573 440 440 424 417 440 497 465 32 69 88 114 86 91 102 118 105 120 88 80 69 69 78 127 152 226 264 474 808 429 221 193 213 183 274 258 309 30 51 79 95 109 98 111 130 104 128 101 92 86 87 84 130 181 224 239 314 497 269 233 163 155 166 198 248 267 45 82 91 132 115 99 105 118 106 111 99 93 97 61 55 88 132 159 215 345 513 246 153 144 146 184 219 207 238 11 26 38 60 45 49 47 56 64 63 48 41 47 41 47 80 104 129 130 259 329 189 136 109 147 161 176 223 208 28 40 80 69 82 95 117 132 109 108 121 104 104 107 106 163 217 293 299 444 650 393 267 237 231 196 221 246 206 13 17 40 57 44 46 42 61 57 50 59 53 45 35 44 72 113 134 160 262 496 253 190 180 178 204 211 211 194 39 53 71 82 90 109 90 103 102 86 82 70 65 65 63 95 133 168 188 301 465 332 172 168 164 168 188 173 147 14 20 20 28 29 38 35 50 43 35 42 41 63 49 43 78 89 134 130 135 222 125 92 83 99 88 108 128 143 6 15 15 33 37 42 31 49 54 56 47 41 46 47 60 71 106 97 115 146 232 153 110 123 126 131 127 163 126 15 40 36 41 57 44 57 59 59 51 47 34 50 48 51 57 77 93 122 157 218 106 88 70 71 76 98 97 101 18 21 23 19 25 18 28 40 22 27 21 25 34 29 26 37 50 67 83 110 143 84 65 49 56 77 84 94 78 21 21 37 55 66 36 47 52 52 38 43 39 40 40 38 71 71 117 108 115 146 121 73 72 68 66 65 84 77 8 16 9 12 8 11 11 12 7 8 5 3 7 7 10 15 20 25 27 30 51 31 24 17 29 10 22 30 38 5 9 8 13 18 17 10 9 10 12 6 4 9 10 5 8 9 20 31 32 34 29 24 22 28 27 37 32 29 2 3 7 11 14 11 17 11 11 6 10 9 13 7 9 10 11 7 16 17 35 25 6 11 7 10 7 16 19 0 1 2 1 0 1 0 0 0 0 0 3 3 1 2 4 7 6 5 5 14 10 3 6 5 5 13 8 8 0 0 25 4 1 14 1 1 2 2 0 0 1 4 2 2 7 7 15 3 17 14 0 0 3 2 0 0 0 449 774 1,097 1,392 1,472 1,380 1,389 1,585 1,473 1,496 1,416 1,229 1,351 1,160 1,199 1,839 2,573 3,156 3,649 5,500 7,901 4,483 3,103 2,944 3,093 3,156 3,684 3,955 3,832

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Figure 3.09 Venture Capital Investments 1980 to 2008 By Stage ($ Millions)
Stage Startup-Seed Early Expansion Later Total 1980 161.4 153.5 189.2 72.7 576.9 1981 353.8 302.8 392.1 99.6 1148.4 1982 347.2 408.6 627.4 234.1 1617.3 1983 560.1 757.8 1266.1 376.3 2960.3 1984 658.1 710.3 1196.4 401.4 2966.1 1985 527.6 516.5 1238.1 460.7 2742.9 1986 742.1 600.5 1154.4 461.0 2958.0 1987 625.2 721.5 1425.5 458.3 3230.6 1988 663.3 721.0 1521.8 388.9 3295.0 1989 563.9 715.8 1585.7 402.5 3267.9 1990 398.2 692.8 1269.9 346.8 2707.7 1991 232.5 548.8 1040.0 335.4 2156.6 1992 552.0 572.6 1772.4 583.2 3480.1 1993 637.4 620.8 1862.5 505.1 3625.8 1994 791.5 825.9 1535.1 923.8 4076.3 1995 1261.6 1724.2 3660.5 1224.9 7871.3 1996 1997 1998 1999 1292.1 1332.1 1737.1 3656.9 2687.3 3526.9 5552.1 11464.3 5418.9 7608.6 10430.1 29549.2 1640.9 2252.5 3190.0 8779.5 11039.2 14720.2 20909.3 53449.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 3197.8 766.7 333.8 357.5 465.5 897.7 1176.8 1279.7 1500.3 25176.2 8545.5 3834.5 3548.0 4004.0 3806.9 4172.9 5476.4 5363.4 59334.5 22801.5 12341.3 10028.6 9148.4 8649.3 11533.2 11688.1 10637.1 16312.0 8136.3 5370.7 5754.8 8818.9 9761.2 9820.8 12403.4 10854.3 104020.5 40250.0 21880.3 19688.8 22436.9 23115.1 26703.7 30847.6 28355.2

Figure 3.09b Venture Capital Investments 1980 to 2008 By Stage (Number of Deals)
Stage 1980 1981 1982 Startup-Seed 113 225 270 Early 180 241 397 Expansion 130 255 320 Later 26 53 110 Total 449 774 1097 1983 361 454 475 102 1392 1984 388 422 528 134 1472 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 361 382 386 364 354 259 185 249 285 329 430 505 531 661 315 327 392 351 328 370 270 282 180 250 507 759 884 1007 537 502 595 595 648 586 527 600 505 426 695 1018 1407 1569 167 178 212 163 166 201 247 220 190 194 207 291 334 412 1380 1389 1585 1473 1496 1416 1229 1351 1160 1199 1839 2573 3156 3649 1999 808 1710 2454 528 5500 2000 696 2843 3691 671 7901 2001 274 1280 2385 544 4483 2002 178 851 1586 488 3103 2003 205 783 1362 594 2944 2004 209 865 1211 808 3093 2005 239 822 1095 1000 3156 2006 360 943 1367 1014 3684 2007 450 1038 1261 1206 3955 2008 444 1018 1187 1183 3832

Figure 3.10 Venture Capital Investments 1980 to 2008 By Industry ($ Millions)
Industry Software Telecommunications Media and Entertainment Biotechnology Medical Devices and Equipment Industrial/Energy Consumer Products and Services Healthcare Services Networking and Equipment Computers and Peripherals Retailing/Distribution Semiconductors Financial Services IT Services Business Products and Services Electronics/Instrumentation Other Total 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 39.9 132.5 244.7 588.3 700.5 602.3 563.5 497.6 474.9 454.3 514.6 449.4 605.6 466.9 667.2 1,144.0 2,295.6 3,348.0 4,475.7 10,515.0 8.7 45.2 96.6 137.3 164.6 175.7 173.1 143.0 155.9 114.5 113.3 106.6 152.7 235.1 454.6 951.9 1,197.8 1,594.4 2,860.1 7,935.1 19.0 51.3 66.9 100.1 61.8 88.0 110.1 153.2 138.4 163.7 93.4 65.6 150.4 333.0 277.7 914.8 1,077.8 953.0 1,823.7 6,639.0 46.0 105.2 78.8 128.7 94.9 131.9 220.4 260.1 354.0 326.6 291.3 271.1 563.9 453.5 569.9 800.4 1,161.5 1,413.2 1,555.9 2,088.1 32.8 48.4 74.3 146.0 204.8 185.8 173.9 257.4 343.5 344.0 326.8 226.0 490.9 423.5 433.7 641.7 658.2 1,022.6 1,169.1 1,529.8 156.5 250.8 221.0 229.3 233.0 207.8 199.2 311.1 210.2 330.5 199.2 170.0 302.2 295.2 276.2 542.8 506.5 707.8 1,441.0 1,688.0 21.8 12.3 46.6 47.3 43.8 70.6 129.8 159.1 149.9 104.0 169.0 130.2 114.1 133.5 186.8 521.5 508.4 748.2 647.1 2,566.5 18.1 12.0 34.7 81.4 90.2 79.3 121.1 130.5 89.8 151.1 84.1 63.4 171.8 154.5 184.2 455.7 682.4 892.3 932.0 1,435.8 27.7 66.4 65.7 204.0 210.6 218.9 158.7 131.3 140.1 200.4 168.7 138.7 273.3 508.5 243.3 352.5 621.9 946.9 1,451.5 4,375.5 93.7 227.5 430.2 833.0 662.7 446.2 428.5 386.9 356.5 283.8 233.1 166.6 188.1 158.6 180.0 326.3 395.2 391.6 377.0 909.9 27.1 6.8 14.5 82.2 67.6 32.0 82.2 267.3 226.3 218.6 88.7 48.5 96.9 89.4 96.6 317.6 258.1 316.1 628.1 2,841.7 25.8 90.4 117.2 232.3 255.0 245.2 278.0 250.0 288.7 159.9 183.6 76.1 148.7 94.5 152.4 202.3 302.4 572.9 625.6 1,307.8 13.8 15.5 12.4 26.8 13.7 86.0 102.6 63.2 209.4 221.4 60.2 21.5 107.1 123.0 124.8 193.5 329.4 371.3 820.9 2,232.7 3.3 4.9 16.6 28.1 21.2 21.4 31.9 42.8 28.7 36.2 37.8 41.4 28.4 31.3 112.8 184.9 445.6 659.1 1,085.5 4,204.5 8.4 17.1 22.3 31.4 34.6 29.4 60.2 52.3 44.9 43.9 76.9 70.6 34.2 62.7 45.4 176.8 383.3 439.5 693.9 2,809.4 33.4 53.8 68.9 56.5 100.0 119.9 121.8 124.4 78.0 115.0 66.9 78.3 52.0 56.9 64.8 134.6 194.4 286.8 227.0 287.6 1.1 8.4 5.9 7.7 7.2 2.5 3.0 0.3 6.0 0.0 0.0 32.7 0.0 5.8 5.8 10.0 20.7 56.3 95.3 83.5 576.9 1,148.4 1,617.3 2,960.3 2,966.1 2,742.9 2,958.0 3,230.6 3,295.0 3,267.9 2,707.7 2,156.6 3,480.1 3,625.8 4,076.3 7,871.3 11,039.2 14,720.2 20,909.3 53,449.8 2000 24,391.4 16,635.6 10,491.3 4,171.2 2,435.6 2,534.2 3,398.7 1,371.2 11,513.0 1,655.7 3,143.4 3,626.2 4,229.9 8,632.3 4,975.9 770.1 44.7 104,020.5 2001 10,341.9 5,303.3 2,333.4 3,439.5 2,022.2 1,157.0 692.7 501.9 5,595.5 662.7 329.7 2,450.9 1,446.3 2,462.0 1,065.5 371.4 74.2 40,250.0 2002 5,282.7 2,346.4 734.1 3,236.2 1,839.7 748.9 244.0 371.2 2,665.4 453.7 157.2 1,546.5 347.8 1,091.0 482.0 315.0 18.4 21,880.3 2003 4,534.7 1,803.9 890.1 3,669.3 1,649.4 758.8 174.7 224.8 1,754.3 369.6 68.3 1,794.7 411.4 772.3 591.9 220.5 0.0 19,688.8 2004 5,422.6 1,911.4 976.0 4,267.5 1,928.1 777.0 317.2 358.2 1,519.0 618.4 184.4 2,174.3 523.8 697.5 398.2 362.3 1.1 22,436.9 2005 4,824.3 2,362.4 1,151.3 3,916.3 2,213.3 850.9 372.0 398.4 1,457.1 555.4 231.3 1,915.7 915.5 1,067.6 395.4 431.0 57.1 23,115.1 2006 4,974.5 2,657.0 1,641.0 4,575.5 2,921.1 1,955.9 501.3 395.4 1,059.3 548.6 214.1 2,158.5 468.0 1,353.2 590.9 681.9 7.5 26,703.7 2007 5,457.3 2,283.1 1,948.9 5,216.7 4,063.6 3,273.1 494.0 268.4 1,294.7 611.7 386.4 2,070.4 567.4 1,560.9 758.6 588.8 3.6 30,847.6 2008 4,921.8 1,675.7 2,002.5 4,527.6 3,481.1 4,674.8 434.5 195.1 657.1 409.4 267.5 1,650.1 534.5 1,844.0 483.9 572.8 22.7 28,355.2

Figure 3.10b Venture Capital Investments 1980 to 2008 By Industry (Number of Deals)
Industry Telecommunications Networking and Equipment Computers and Peripherals IT Services Software Semiconductors Electronics/Instrumentation Biotechnology Medical Devices and Equipment Healthcare Services Industrial/Energy Media and Entertainment Retailing/Distribution Consumer Products and Services Financial Services Business Products and Services Other Total 1980 11 12 69 3 40 20 38 19 39 4 102 28 6 23 16 15 4 449 1981 37 37 124 8 95 42 49 46 51 2 164 45 6 25 18 20 5 774 1982 56 30 186 22 168 49 49 59 70 18 181 70 14 50 27 34 14 1,097 1983 69 68 239 27 304 76 47 68 104 36 157 64 25 42 25 32 9 1,392 1984 98 67 244 31 336 96 82 48 118 48 161 41 18 37 12 29 6 1,472 1985 88 80 161 24 326 86 77 71 135 33 131 53 19 48 25 21 2 1,380 1986 77 73 143 24 318 72 69 97 113 55 131 62 32 51 30 39 3 1,389 1987 91 74 124 31 298 87 70 130 165 57 158 83 66 68 36 45 2 1,585 1988 76 70 133 22 273 89 58 145 149 45 134 68 80 55 42 33 1 1,473 1989 75 73 124 27 292 78 62 128 184 54 140 68 72 48 41 30 0 1,496 1990 55 76 101 30 301 75 54 139 189 41 143 57 44 61 23 26 1 1,416 1991 62 65 78 30 282 49 47 135 154 35 121 48 38 43 22 18 2 1,229 1992 59 86 81 19 298 56 42 157 188 42 124 74 34 49 22 20 0 1,351 1993 67 63 67 17 240 41 29 132 147 45 93 76 34 48 31 27 3 1,160 1994 69 76 68 31 247 37 35 137 128 40 94 91 26 66 31 21 2 1,199 1995 140 79 91 60 415 60 49 170 179 69 129 139 49 115 43 47 5 1,839 1996 212 122 97 121 670 68 43 231 217 128 152 174 69 129 65 67 8 2,573 1997 271 142 111 158 798 110 53 247 264 147 208 208 90 160 83 98 8 3,156 1998 331 214 86 206 952 112 57 276 280 149 186 261 117 161 113 139 9 3,649 1999 521 283 101 450 1,387 138 53 266 283 159 188 690 226 272 189 280 14 5,500 2000 860 478 135 680 2,100 252 72 348 286 163 239 934 271 277 340 456 10 7,901 2001 493 327 74 322 1,235 209 57 332 248 101 190 360 83 117 147 175 13 4,483 2002 277 221 54 167 971 168 58 309 231 67 125 157 50 67 76 102 3 3,103 2003 223 183 58 145 918 209 51 340 243 67 133 140 34 46 62 92 0 2,944 2004 227 180 62 137 926 258 63 377 268 59 146 139 37 65 71 75 3 3,093 2005 254 170 63 156 885 226 82 382 279 66 137 195 37 73 64 84 3 3,156 2006 317 129 76 198 927 251 93 450 352 54 205 316 43 84 80 107 2 3,684 2007 299 132 67 226 944 215 94 486 398 52 301 371 54 101 85 124 6 3,955 2008 234 97 66 267 887 180 87 486 374 52 346 406 41 104 74 121 10 3,832

28

Thomson Reuters

2009 NVCA Yearbook
Figure 3.11 Venture Capital Investments By State 1980 to 2008 ($ Millions)

State CA MA NY TX WA CO PA NJ MN VA MD NC IL GA OH MI FL AZ UT NH OR IN CT MO WI NM TN DE KS VT IA RI SC DC KY AL WV ME OK NE MT PR NV ID LA HI WY SD ND MS UN AR AK Total

1980 192.5 66.3 53.8 76.3 3.7 30.3 25.4 9.8 11.5 1.9 19.7 2.1 10.1 9.1 8.3 3.6 7.9 5.6 1.4 1.3 2.3 0.0 1.5 1.0 0.1 2.0 3.8 0.0 0.0 1.8 6.5 0.0 0.0 2.7 0.2 0.7 0.0 1.1 5.8 0.0 0.0 0.0 0.0 0.0 6.6 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0 576.9

1981 478.4 163.4 46.3 128.4 13.4 32.1 29.8 26.1 19.6 9.9 13.4 4.7 14.9 26.3 35.4 7.1 7.7 16.4 2.1 3.7 8.1 0.0 15.4 0.0 1.7 0.2 7.2 0.0 0.8 0.2 0.2 1.9 0.0 3.3 2.5 1.5 0.0 0.0 5.6 0.7 0.0 0.0 0.0 0.0 17.6 0.1 0.0 0.0 0.0 2.4 0.0 0.0 0.0 1,148.4

1982 755.3 225.3 57.5 119.2 17.1 39.7 26.0 33.4 28.3 7.8 10.8 25.0 21.1 11.2 21.7 33.4 20.1 33.2 7.2 3.8 24.2 0.6 23.9 4.1 0.4 0.2 8.5 0.6 0.4 0.0 1.4 4.6 0.0 4.2 1.1 8.2 3.1 0.3 5.5 0.0 0.0 0.0 1.3 0.7 1.3 0.0 2.0 0.0 0.0 0.2 19.1 0.0 4.5 1,617.3

1983 1,484.9 399.2 68.4 144.1 58.2 82.2 40.0 70.3 44.0 48.9 26.9 26.7 54.3 35.3 24.0 46.6 58.8 25.4 5.0 11.7 56.6 9.0 47.2 4.6 7.8 1.1 13.5 0.0 0.7 0.5 2.8 4.8 0.0 1.2 1.5 0.3 3.8 2.8 13.7 0.5 0.0 0.2 0.2 14.5 17.2 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 2,960.3

1984 1,385.7 416.5 78.4 200.4 27.4 82.6 75.2 85.8 57.4 23.6 24.4 14.6 67.9 31.0 36.2 43.0 33.9 32.7 6.6 13.6 61.8 17.2 54.9 8.5 8.3 1.6 31.2 0.0 0.9 1.0 3.1 6.9 0.1 2.8 0.0 9.6 2.9 6.0 5.9 0.8 0.0 0.0 1.0 0.0 1.4 0.0 0.0 0.0 0.5 2.5 0.8 0.0 0.0 2,966.1

1985 1,056.7 395.3 114.4 241.6 55.5 77.4 48.1 74.6 24.4 31.7 51.8 17.8 45.2 54.5 30.3 33.3 31.6 14.6 4.0 5.3 84.8 13.3 61.6 8.8 7.2 22.0 46.3 0.3 2.3 0.0 0.7 12.6 0.9 18.9 2.4 12.3 1.1 19.0 1.5 0.5 1.5 0.0 0.0 0.3 9.9 0.0 0.0 0.0 0.0 2.2 4.5 0.0 0.0 2,742.9

1986 1,249.6 359.4 72.1 228.3 52.1 112.7 34.6 116.9 28.5 21.0 20.8 18.4 30.7 108.1 51.0 21.2 34.5 37.9 29.5 14.8 76.1 16.7 64.0 3.8 13.6 10.0 53.9 0.0 2.2 6.6 0.9 9.9 0.0 14.8 2.3 14.2 2.0 11.6 4.7 0.0 0.7 0.0 2.4 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.5 1.5 0.0 2,958.0

1987 1,223.1 424.3 88.7 206.3 86.1 106.8 83.5 135.8 35.0 64.2 32.5 21.2 38.5 62.1 46.0 56.2 68.4 35.1 5.7 12.9 51.7 17.7 94.0 10.6 16.4 9.0 66.6 4.5 3.9 8.0 11.9 6.6 12.8 2.9 7.7 20.9 0.1 15.3 14.1 0.0 2.7 0.0 4.1 0.0 1.9 0.0 0.0 0.0 14.0 0.0 0.6 0.0 0.0 3,230.6

1988 1,332.9 389.1 113.3 237.1 45.0 100.8 74.5 103.1 25.9 65.0 46.4 15.7 42.7 91.8 71.7 17.7 60.2 39.7 11.7 18.8 67.5 6.4 160.9 1.6 12.8 3.9 42.8 1.4 5.4 4.5 1.3 14.2 18.1 17.2 2.8 9.6 0.0 8.7 5.3 1.5 0.4 0.0 0.0 0.0 1.9 0.0 2.2 0.0 0.0 0.6 0.8 0.0 0.0 3,295.0

1989 1,262.6 318.6 158.9 237.6 74.4 159.3 48.7 156.7 35.7 49.7 88.0 14.5 93.4 53.1 44.4 21.8 31.7 36.4 4.4 13.8 40.9 9.7 87.4 9.5 11.7 3.0 74.1 4.8 14.9 7.4 2.0 30.9 23.6 0.0 5.8 2.3 3.0 17.2 9.3 0.0 0.0 0.0 5.5 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.3 0.0 0.0 3,267.9

1990 1,171.6 337.3 48.8 143.5 56.3 92.3 117.1 71.1 45.5 46.6 34.8 33.9 72.0 19.1 27.0 26.4 32.5 27.5 0.8 16.2 32.3 10.9 133.3 7.5 12.4 1.8 42.2 1.4 8.9 7.2 2.5 2.7 7.6 2.5 0.0 2.3 0.0 4.5 2.6 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 4.9 0.0 0.0 0.0 2,707.7

1991 1,007.9 231.0 44.5 161.1 31.3 50.6 38.2 66.9 39.8 9.1 27.6 9.0 82.6 36.0 15.5 4.2 26.2 20.6 3.3 30.1 29.7 8.3 86.1 34.9 5.5 4.4 20.8 3.8 0.4 1.5 1.1 0.4 4.0 0.8 8.5 0.1 0.0 0.8 1.5 0.0 1.0 0.3 2.7 0.0 2.0 0.0 0.0 0.0 0.0 2.4 0.0 0.0 0.0 2,156.6

1992 1,368.9 362.2 133.6 148.4 159.3 128.2 163.7 101.2 63.8 26.4 18.8 44.3 75.7 158.7 26.3 14.7 79.8 57.4 24.4 6.8 55.6 0.0 71.9 27.4 22.2 0.0 8.1 9.7 1.9 19.0 1.6 5.1 1.2 4.8 3.9 10.6 0.0 0.2 0.0 0.0 0.0 0.0 9.1 5.0 3.8 0.0 0.0 0.0 0.0 16.7 30.0 9.5 0.0 3,480.1

1993 1,193.8 310.6 104.9 220.2 116.9 133.9 421.5 68.6 45.3 41.0 25.2 20.1 93.3 150.9 49.1 58.7 126.8 35.6 10.5 23.0 18.8 27.0 37.9 50.4 27.5 0.5 46.7 3.0 4.8 0.0 2.8 8.7 11.4 1.1 24.8 57.3 0.0 3.0 0.0 38.0 0.0 1.0 0.0 0.2 3.8 0.0 0.0 0.0 0.0 1.7 0.8 4.7 0.0 3,625.8

1994 1,520.0 409.6 68.1 284.3 134.9 189.5 130.5 201.9 53.8 77.4 49.3 60.7 157.9 97.1 62.4 8.6 94.5 30.6 0.0 7.9 22.5 56.1 74.8 39.1 8.5 0.0 36.6 12.4 1.5 5.3 23.9 0.0 21.8 4.3 18.2 25.0 0.0 0.0 11.0 3.5 0.0 22.0 1.2 0.1 2.7 0.0 0.0 0.0 0.2 15.0 0.2 31.4 0.0 4,076.3

1995 3,132.4 672.1 253.6 464.4 327.1 327.7 140.4 260.8 170.0 291.7 123.4 211.8 199.6 150.4 69.7 65.8 221.2 96.1 11.2 28.8 38.3 8.3 134.1 83.3 8.9 3.6 155.2 4.4 6.6 12.0 14.2 3.4 53.1 0.7 20.7 29.2 0.0 1.5 6.1 0.5 0.0 7.8 0.6 15.2 30.5 0.0 0.0 0.0 9.8 0.0 0.3 5.0 0.0 7,871.3

1996 4,582.7 1,070.1 299.8 532.1 399.7 306.5 304.0 412.8 168.3 366.2 137.2 181.8 355.1 244.4 162.7 85.7 402.5 95.3 52.3 42.4 94.6 22.8 147.3 50.4 25.1 22.4 146.8 4.7 26.2 2.0 22.1 0.3 91.9 6.7 31.1 46.7 0.0 1.5 31.8 10.4 0.0 4.1 2.0 0.1 13.7 20.2 0.0 0.0 0.0 10.6 2.2 0.0 0.0 11,039.2

1997 6,024.5 1,396.5 804.8 830.8 408.2 379.8 473.8 446.2 260.9 339.8 182.8 269.3 361.3 393.2 213.3 112.0 450.3 158.1 94.0 53.3 126.9 25.2 269.3 67.9 68.0 27.0 108.0 1.1 9.2 3.2 17.1 11.5 47.7 5.2 35.0 109.4 23.8 9.7 27.8 3.7 0.0 12.5 9.7 1.2 26.5 1.5 2.0 0.0 1.1 8.0 4.4 4.0 0.0 14,720.2

1998 7,898.0 1,989.7 1,271.6 1,158.9 729.6 725.8 557.1 473.6 359.7 762.2 328.3 324.0 418.1 428.6 309.2 124.0 551.5 208.1 116.7 184.8 53.5 39.0 366.8 611.0 90.2 7.7 107.5 0.0 10.4 1.4 8.8 26.0 137.0 46.9 37.5 82.3 2.0 61.5 101.4 17.9 0.0 1.3 24.2 30.3 68.0 4.2 0.0 0.0 0.5 3.5 42.1 6.9 0.0 20,909.3

1999 2000 23,006.7 42,568.6 4,942.1 10,337.8 3,390.6 6,795.6 3,135.6 6,003.0 1,929.7 2,773.8 1,738.4 4,103.7 1,619.2 2,853.2 921.3 3,271.6 634.9 1,023.3 1,169.5 3,307.0 648.2 1,817.7 789.2 1,823.7 1,412.0 2,350.5 1,130.0 2,314.5 490.7 973.6 250.4 337.2 1,685.8 2,682.5 302.2 622.6 408.2 673.6 235.5 750.6 545.7 789.5 46.7 269.0 924.5 1,509.4 168.2 590.3 86.4 191.8 12.1 21.1 493.2 453.3 16.8 134.7 30.2 264.8 0.0 46.4 13.9 30.8 31.4 74.6 135.1 447.6 286.3 478.1 81.9 201.8 64.6 266.3 0.0 4.5 57.4 140.2 68.0 52.5 57.3 134.8 16.3 16.7 4.6 31.1 23.4 30.8 16.5 18.5 294.0 112.7 12.8 203.0 0.0 0.0 0.7 0.3 3.0 6.1 90.4 19.5 2.4 58.8 25.9 34.3 0.0 3.5 53,449.8 104,020.5

2001 16,541.3 4,775.8 2,015.9 2,943.0 1,124.7 1,222.4 927.1 1,528.4 455.9 936.1 997.4 584.5 964.2 890.3 233.6 153.6 846.5 196.0 208.1 224.6 230.1 39.7 549.8 237.4 93.1 14.2 212.8 164.6 40.3 11.6 6.0 118.7 98.1 162.2 23.9 80.3 1.4 3.9 29.8 88.6 24.8 32.0 28.2 2.7 80.5 37.8 0.0 0.5 1.0 30.0 26.3 10.4 0.0 40,250.0

2002 9,444.8 2,532.7 779.7 1,296.0 579.8 536.5 451.8 904.7 402.7 423.9 636.1 562.2 308.9 564.7 264.8 107.8 410.2 191.1 129.5 207.8 151.1 40.0 182.7 76.0 50.8 53.7 115.8 19.4 7.4 3.7 2.0 95.9 79.5 20.3 13.8 56.3 15.9 15.4 33.0 12.6 0.0 0.5 31.8 10.6 19.3 4.4 0.0 18.1 0.0 5.0 0.0 9.7 0.0 21,880.3

2003 8,536.2 2,733.3 658.8 1,246.9 463.5 621.4 498.0 870.1 233.0 408.2 346.0 380.7 374.1 295.3 179.0 80.2 308.7 73.3 106.5 154.3 107.5 24.5 212.3 78.4 37.5 3.6 84.4 0.4 24.9 5.2 0.0 61.3 14.3 56.1 4.8 29.9 12.6 0.9 31.1 204.6 0.0 0.1 40.2 52.2 1.3 12.8 0.0 3.5 14.5 0.9 0.0 1.2 0.0 19,688.8

2004 10,208.4 3,114.4 761.6 1,154.5 863.6 408.0 602.3 1,004.5 386.9 301.9 549.8 306.7 208.9 501.2 76.6 129.6 363.7 70.7 227.8 135.6 143.7 67.8 205.1 26.0 57.1 24.0 85.0 2.1 48.7 5.1 5.3 58.0 13.6 80.2 47.2 26.0 5.8 12.0 63.9 0.2 0.0 1.5 47.6 2.5 3.2 13.7 1.5 1.9 2.0 4.9 0.9 3.7 0.0 22,436.9

2005 10,962.0 2,582.5 1,127.4 1,174.9 838.3 643.7 481.9 886.4 239.6 525.8 486.6 392.5 276.7 253.1 139.9 80.8 329.0 123.4 192.0 92.4 134.4 103.6 201.6 56.0 68.5 76.4 88.6 7.2 1.7 35.2 32.1 76.3 2.7 26.4 32.0 20.2 10.5 4.5 0.0 13.1 27.4 1.7 158.5 8.0 4.1 11.9 4.1 0.0 0.0 10.0 57.1 12.6 0.0 23,115.1

2006 12,844.3 2,995.0 1,273.2 1,389.4 1,106.3 645.1 854.0 807.3 327.3 439.6 661.9 418.8 403.4 369.5 78.5 116.9 387.2 262.6 180.9 78.7 152.8 70.3 269.7 43.7 72.3 32.1 41.5 5.3 21.5 10.1 1.5 82.7 10.3 43.9 27.7 18.9 4.7 7.6 14.9 6.5 0.0 14.3 19.6 1.5 11.5 32.1 6.5 0.0 0.0 1.0 0.0 39.2 0.0 26,703.7

2007 2008 14,720.2 14,277.8 3,721.4 2,996.7 1,129.7 1,297.8 1,468.5 1,287.3 1,377.2 962.3 609.7 817.4 820.2 700.9 607.6 694.8 488.1 487.0 556.7 486.4 610.7 460.7 546.7 459.1 505.4 444.9 474.9 423.4 192.8 258.1 104.7 245.7 767.5 238.4 202.9 208.0 188.3 193.6 135.2 181.1 312.1 176.0 82.8 133.6 295.9 129.7 91.7 86.5 90.1 75.2 128.5 69.4 124.7 65.1 6.5 62.7 82.1 45.5 8.7 42.9 6.3 40.2 7.0 39.2 87.2 34.0 90.5 31.0 53.4 29.5 31.5 24.1 10.2 24.0 5.0 20.2 8.1 17.3 0.0 16.0 4.0 15.6 16.0 13.8 29.4 12.6 16.2 11.9 15.9 8.2 4.9 7.2 0.2 1.5 4.0 0.5 0.2 0.4 5.9 0.0 0.0 0.0 0.2 0.0 0.0 0.0 30,847.6 28,355.2

Thomson Reuters

29

National Venture Capital Association
Figure 3.11b Number of Venture Capital Deals by State 1980 to 2008

State CA MA NY PA WA TX CO MD NJ VA GA IL OH NC MN MI CT FL OR UT NH MO KS TN AZ WI NM IN SC DC KY LA RI VT AL DE HI NV ID OK IA ME NE PR ND MT WY WV SD UN MS AR AK Total

1980 1981 1982 153 258 383 53 114 142 23 44 54 11 17 20 8 14 20 39 53 71 15 40 36 6 8 16 18 28 31 5 7 16 9 15 14 13 16 21 8 17 15 6 4 16 18 16 34 2 10 22 7 19 26 10 13 36 3 10 15 5 4 6 3 7 5 1 0 5 0 2 1 1 3 5 8 15 15 1 3 1 5 2 1 0 0 3 0 0 0 2 2 6 1 1 3 4 9 5 0 4 4 1 3 0 2 2 8 0 0 1 0 1 0 0 0 1 0 0 2 3 5 3 2 1 2 2 1 1 0 1 0 0 0 0 0 0 0 0 1 0 0 1 1 0 0 2 0 0 0 0 0 25 0 3 1 1 0 0 0 0 2 449 774 1,097

1983 523 192 71 23 34 82 41 23 42 26 17 33 9 17 44 29 36 21 23 1 7 5 2 13 15 7 1 8 0 6 2 4 7 1 1 0 0 2 3 6 3 4 1 1 0 0 0 2 0 4 0 0 0 1,392

1984 561 222 50 30 17 90 57 17 40 21 26 35 21 13 51 27 35 21 27 5 6 4 2 10 15 11 4 7 2 5 1 2 10 1 8 0 0 1 1 4 2 4 1 0 1 0 0 1 0 1 2 0 0 1,472

1985 476 216 48 35 23 109 44 20 45 21 31 27 25 15 23 19 32 22 24 1 3 5 1 17 14 11 3 8 1 4 2 6 6 0 8 1 1 0 1 4 1 9 1 0 0 1 0 1 0 14 1 0 0 1,380

1986 480 185 47 44 21 90 57 17 45 19 43 27 20 21 29 22 32 20 24 12 9 5 2 23 10 15 4 15 0 5 4 2 4 3 9 1 0 2 0 5 3 6 0 0 0 2 0 1 0 1 1 2 0 1,389

1987 513 217 52 56 25 103 59 24 52 28 44 31 27 16 33 22 39 28 29 13 10 12 6 29 19 16 6 15 4 7 7 2 7 3 11 1 0 2 1 4 2 5 0 0 1 1 0 2 0 1 0 0 0 1,585

1988 1989 1990 1991 1992 509 551 541 472 568 195 180 168 134 135 46 49 29 22 32 55 38 42 36 61 23 35 27 26 33 102 86 82 70 65 59 51 47 34 50 28 19 27 27 23 44 55 47 47 41 24 29 27 23 19 38 29 29 34 34 31 62 34 36 33 22 18 22 22 21 11 16 24 17 18 29 29 30 30 27 12 16 13 8 5 43 43 37 30 30 23 20 31 20 27 35 28 21 12 12 6 5 3 6 10 7 11 18 17 11 8 11 10 9 9 4 4 3 1 5 29 28 22 22 10 10 20 14 13 20 15 6 11 6 9 6 1 3 2 0 6 6 12 8 1 3 7 5 9 7 4 1 5 3 3 4 5 0 2 2 2 0 0 1 1 6 7 7 4 2 3 2 3 3 1 4 7 7 1 4 4 3 1 3 2 0 0 0 0 0 0 1 1 4 4 0 0 0 0 1 1 4 2 1 0 3 2 2 3 4 4 6 6 4 1 5 1 0 0 0 0 0 0 3 2 0 0 0 0 0 5 0 0 3 0 1 0 0 0 1 1 1 0 0 0 0 0 0 0 0 2 2 0 0 1 1 1 3 1 4 0 0 0 0 1 0 0 0 0 1 1,473 1,496 1,416 1,229 1,351

1993 423 128 33 46 27 65 48 15 33 18 37 26 21 20 26 12 23 24 12 6 10 12 2 8 21 7 2 8 7 2 2 4 3 0 9 1 0 0 2 0 2 2 5 1 0 0 0 0 0 4 2 1 0 1,160

1994 458 123 35 37 34 63 51 20 39 21 41 35 22 22 21 3 31 18 12 0 4 7 2 10 23 8 1 7 6 3 3 2 0 3 4 3 0 2 1 5 5 0 3 2 1 0 0 0 0 2 5 1 0 1,199

1995 667 198 65 65 62 95 57 31 56 40 46 43 37 35 51 13 44 48 17 6 10 15 3 19 28 7 2 7 5 1 10 8 3 4 10 4 0 1 1 2 10 2 1 4 2 0 0 0 0 2 0 2 0 1,839

1996 1,012 291 86 82 74 133 77 45 63 64 53 56 53 61 51 21 46 55 29 15 16 22 9 24 28 9 5 8 13 4 7 4 1 1 8 4 2 2 1 7 6 5 5 5 0 0 0 0 0 7 3 0 0 2,573

1997 1,133 332 152 127 84 168 93 48 75 82 84 79 52 82 90 29 65 70 41 30 17 17 6 25 27 19 3 12 14 2 15 12 4 1 16 4 4 7 2 5 4 3 3 2 1 0 2 2 0 7 2 2 0 3,156

1998 1,387 393 192 138 109 188 122 54 76 102 98 70 63 82 79 32 74 62 18 33 26 19 3 24 36 16 4 8 16 3 16 11 5 2 15 0 3 10 3 11 7 11 5 2 1 0 0 1 0 15 2 2 0 3,649

1999 2,207 581 348 146 205 301 157 98 113 148 161 129 51 104 85 43 89 118 50 42 31 23 8 40 54 18 6 11 9 16 16 10 10 1 10 2 3 8 2 7 3 13 7 2 1 2 0 0 1 3 2 5 0 5,500

2000 2,938 768 605 254 254 465 218 175 185 275 223 199 77 153 109 53 116 185 68 61 56 49 22 45 64 21 8 26 13 44 14 15 9 4 28 4 3 10 4 9 4 15 10 10 1 3 0 2 1 17 3 5 1 7,901

2001 1,525 512 281 142 142 332 106 91 152 136 138 126 43 89 84 21 70 113 43 43 30 17 10 29 33 21 4 6 6 24 4 11 11 3 15 2 5 4 2 7 4 5 10 5 1 2 0 2 1 14 3 3 0 4,483

2002 1,075 374 153 96 108 172 88 91 91 85 79 77 49 85 56 26 38 58 26 28 38 28 7 22 24 11 7 11 7 6 3 8 14 6 13 2 2 6 2 4 1 4 3 1 0 0 0 8 2 0 3 5 0 3,103

2003 1,135 381 118 97 83 168 70 87 90 82 58 56 28 77 58 16 34 62 21 22 32 19 11 23 16 8 5 8 4 6 3 1 10 6 9 1 5 6 5 2 0 2 3 1 2 0 0 5 1 0 4 3 0 2,944

2004 1,222 380 150 103 115 164 71 88 90 79 77 50 35 53 50 17 33 61 29 30 23 8 14 25 12 10 8 10 5 8 4 3 8 4 5 1 4 6 2 11 3 3 1 1 1 0 1 3 3 3 5 1 0 3,093

2005 1,310 365 129 100 127 168 76 101 74 87 63 54 38 51 43 19 32 55 26 28 24 10 4 21 25 16 15 10 1 11 3 4 13 5 3 3 4 9 2 0 4 2 3 1 0 2 4 5 0 2 2 2 0 3,156

2006 1,549 395 209 136 143 188 98 111 94 89 81 55 41 62 39 18 30 56 31 39 21 13 7 11 29 20 9 15 3 8 7 3 7 9 7 3 10 7 1 6 2 4 3 3 0 0 1 3 1 0 1 6 0 3,684

2007 1,626 447 193 159 175 173 97 96 92 94 76 69 56 69 57 22 37 65 42 33 23 17 16 20 28 21 25 17 10 17 8 7 4 8 4 4 4 8 4 6 3 7 0 4 1 1 1 4 2 0 2 1 0 3,955

2008 1,562 410 235 174 164 147 101 100 88 81 79 66 52 51 47 43 37 35 35 33 28 24 23 21 20 19 19 17 12 12 10 10 10 9 8 6 6 6 6 5 5 4 3 2 2 2 1 1 1 0 0 0 0 3,832

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Figure 3.12 Venture Capital Investments First vs. Follows-on Rounds Total Dollars Invested ($ Millions)
120,000

Figure 3.14 Venture Capital Investments Number of Companies Receiving

100,000

Follow-on First
(Number of Companies)

7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

Follow-on First

80,000

($ Millions)

60,000

40,000

20,000

0
'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Year

Figure 3.13 Venture Capital Investments First vs. Follows-on Rounds Total Dollars Invested ($ Millions)
Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 First 337.3 629.1 614.4 946.4 863.5 738.1 863.4 996.2 1,076.5 945.4 845.9 555.9 1,307.1 1,392.0 1,705.5 4,003.2 4,298.3 4,843.5 7,125.8 15,904.0 28,756.7 7,391.2 4,335.4 3,980.3 4,869.8 5,791.1 6,156.8 7,492.0 6,173.2 Follow-on 239.6 519.2 1,003.0 2,013.9 2,102.6 2,004.8 2,094.6 2,234.4 2,218.5 2,322.5 1,861.8 1,600.7 2,173.1 2,233.7 2,370.8 3,868.1 6,740.9 9,876.6 13,783.5 37,545.8 75,263.8 32,858.8 17,545.0 15,708.5 17,567.0 17,324.0 20,546.9 23,355.6 22,182.0 Total 576.9 1,148.4 1,617.3 2,960.3 2,966.1 2,742.9 2,958.0 3,230.6 3,295.0 3,267.9 2,707.7 2,156.6 3,480.1 3,625.8 4,076.3 7,871.3 11,039.2 14,720.2 20,909.3 53,449.8 104,020.5 40,250.0 21,880.3 19,688.8 22,436.9 23,115.1 26,703.7 30,847.6 28,355.2

Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

* # of Cos receiving financing can be less than the sum of the prior two columns because a given company can receive initial and follow-on financing in the same year

Thomson Reuters

'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Year

Figure 3.15 Venture Capital Investments First vs. Follows-on Rounds Total Number of Companies
# of Cos Receiving Initial Round Financing 293 501 578 672 586 453 493 563 503 440 340 258 387 343 417 886 1,144 1,288 1,412 2,441 3,370 1,216 832 763 922 1,022 1,205 1,301 1,179 # of Cos Receiving Follow-On Financing 139 235 436 611 739 769 741 831 766 813 764 691 691 625 608 751 1,130 1,445 1,794 2,393 3,626 2,730 1,910 1,791 1,798 1,793 2,037 2,128 2,179 # of Cos Receiving Financing* 413 695 971 1,217 1,257 1,186 1,195 1,338 1,222 1,203 1,037 908 1,016 913 960 1,539 2,077 2,538 2,976 4,408 6,342 3,786 2,633 2,456 2,617 2,698 3,069 3,274 3,192

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National Venture Capital Association
Figure 3.16 First Sequence by Stage of Development ($ Millions)

Stage Startup-Seed Early Expansion Later Total

1980 141.1 74.6 61.9 59.7 337.3

1981 305.7 137.4 132.4 53.6 629.1

1982 274.4 169.4 131.3 39.4 614.4

1983 410.5 307.0 180.6 48.3 946.4

1984 437.7 198.7 204.2 22.9 863.5

1985 306.8 128.9 258.5 44.0 738.1

1986 421.6 176.7 214.2 50.8 863.4

1987 1988 346.5 367.5 318.2 300.6 276.4 324.5 55.2 83.9 996.2 1,076.5

1989 263.9 215.6 354.4 111.4 945.4

1990 181.1 300.7 320.3 43.8 845.9

1991 1992 1993 1994 1995 1996 1997 1998 97.2 212.8 367.0 536.9 732.2 681.3 790.2 987.8 214.7 275.3 333.0 410.1 913.8 1,418.2 1,823.8 2,879.0 165.2 648.4 559.6 529.9 1,765.4 1,772.2 1,903.5 2,908.3 78.9 170.5 132.4 228.6 591.7 426.6 326.0 350.8 555.9 1,307.1 1,392.0 1,705.5 4,003.2 4,298.3 4,843.5 7,125.8

1999 2,742.1 6,360.6 6,300.4 500.8 15,904.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2,503.8 608.3 260.9 302.8 363.2 784.8 1,018.1 1,023.6 1,089.2 16,567.5 4,578.1 2,414.0 2,224.3 2,628.9 2,504.8 2,416.0 3,038.8 2,421.9 9,090.8 1,944.3 1,430.3 1,009.4 1,295.6 1,579.8 2,050.6 2,574.6 1,673.2 594.6 260.5 230.2 443.8 582.1 921.7 672.1 855.1 988.9 28,756.7 7,391.2 4,335.4 3,980.3 4,869.8 5,791.1 6,156.8 7,492.0 6,173.2

Figure 3.17 First Sequence by Stage of Development (No. of Deals)

Stage Startup-Seed Early Expansion Later Total

1980 101 117 59 16 293

1981 201 160 109 31 501

1982 211 245 96 26 578

1983 291 247 106 28 672

1984 280 179 112 15 586

1985 221 102 107 23 453

1986 242 116 107 28 493

1987 227 192 118 26 563

1988 207 169 106 21 503

1989 204 100 111 25 440

1990 119 118 89 14 340

1991 85 74 81 18 258

1992 117 127 120 23 387

1993 144 69 104 26 343

1994 186 108 105 18 417

1995 254 283 290 59 886

1996 314 414 358 58 1,144

1997 341 474 423 50 1,288

1998 450 496 417 49 1,412

1999 650 1112 640 39 2,441

2000 575 1928 810 57 3,370

2001 215 691 280 30 1,216

2002 130 468 203 31 832

2003 157 429 144 33 763

2004 160 531 179 52 922

2005 194 525 243 60 1,022

2006 302 558 256 89 1,205

2007 375 565 274 87 1,301

2008 330 506 211 132 1,179

Figure 3.18 First Sequence by Industry ($ Millions)

Industry Industrial/Energy Software Biotechnology IT Services Medical Devices and Equipment Media and Entertainment Financial Services Telecommunications Consumer Products and Services Computers and Peripherals Business Products and Services Semiconductors Electronics/Instrumentation Networking and Equipment Healthcare Services Retailing/Distribution Other Total

1980 115.6 26.8 13.8 3.1 19.6 8.7 7.3 3.3 9.9 39.9 4.5 24.2 22.0 4.5 6.1 27.1 1.1 337.3

1981 162.5 68.4 57.2 4.9 22.2 41.4 13.0 26.2 6.5 86.0 7.1 55.2 24.8 28.5 12.0 4.8 8.4 629.1

1982 88.4 108.8 31.9 13.8 28.8 36.3 9.9 37.0 36.7 110.1 18.7 12.9 15.1 22.0 26.0 13.8 4.2 614.4

1983 101.2 233.5 22.5 9.0 45.9 42.3 9.8 41.7 22.1 160.0 15.9 54.5 32.4 66.6 54.9 33.0 1.0 946.4

1984 82.1 203.4 22.1 14.2 72.2 41.9 7.1 52.9 29.1 115.0 9.8 79.3 29.2 33.7 43.8 26.9 0.8 863.5

1985 98.1 98.5 34.5 16.1 42.6 62.8 70.2 65.3 48.1 38.7 12.6 46.4 43.3 24.0 16.5 19.7 0.5 738.1

1986 81.1 114.0 54.3 9.6 71.8 43.2 81.3 45.0 60.4 57.5 35.4 22.4 28.6 33.9 62.7 60.3 2.0 863.4

1987 1988 130.9 124.1 90.2 126.2 62.4 65.7 4.5 9.4 83.5 80.0 99.5 100.9 43.9 160.6 37.9 39.0 52.7 77.2 84.1 67.4 25.2 11.3 38.1 56.7 32.4 25.6 24.9 45.7 59.9 17.1 126.2 63.5 0.0 6.0 996.2 1,076.5

1989 222.5 96.7 51.1 20.6 74.0 94.1 71.4 43.6 50.3 43.8 13.3 14.5 19.5 56.4 48.8 24.7 0.0 945.4

1990 100.3 164.0 27.2 18.3 60.5 65.1 34.0 52.8 88.4 52.5 40.6 32.5 21.4 43.5 31.5 13.3 0.0 845.9

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 66.4 174.6 169.5 163.1 453.6 289.8 363.5 984.6 1,033.9 1,122.0 471.2 426.1 313.6 277.0 361.1 765.2 1,349.2 1,242.4 108.9 152.3 130.9 303.1 547.6 902.2 1,023.6 1,205.1 2,820.5 6,105.3 1,568.6 1,180.9 955.3 1,262.1 1,156.3 1,184.9 1,172.2 904.7 17.4 165.1 131.3 150.6 148.4 206.8 354.8 359.2 404.7 824.7 785.4 694.8 424.4 698.3 587.7 903.8 937.6 838.9 10.3 8.8 13.1 92.9 56.2 229.5 245.4 360.4 1,539.3 2,501.4 373.6 185.9 145.9 195.6 360.7 358.4 507.4 616.7 45.3 105.2 153.4 133.1 193.3 237.0 277.7 259.5 310.4 361.8 246.8 270.6 325.9 325.4 396.9 621.0 807.5 593.4 17.7 101.5 257.7 121.3 735.7 368.5 411.1 773.7 2,229.2 2,970.6 363.6 196.1 427.7 253.8 534.5 581.3 655.9 572.1 8.7 100.2 110.2 66.9 123.8 259.5 234.7 443.4 872.4 1,584.3 353.6 81.6 84.7 247.6 613.0 152.7 225.0 288.3 10.8 92.3 61.2 188.5 407.2 418.0 387.2 997.9 2,003.5 4,819.0 850.2 213.2 218.4 284.8 420.4 499.9 415.4 264.9 57.5 79.3 56.5 132.1 317.7 227.6 205.2 241.9 772.8 925.3 127.1 36.6 80.6 128.0 241.9 146.5 215.2 198.2 19.2 61.2 43.2 39.3 160.7 143.0 117.2 121.3 250.6 373.3 260.1 25.0 89.8 112.1 119.4 59.4 145.7 143.0 62.4 25.4 54.7 39.5 133.4 258.1 259.7 344.4 976.2 2,026.0 245.1 148.9 254.2 198.0 151.6 207.6 352.6 127.3 12.8 51.7 3.1 36.4 64.0 123.8 184.2 163.7 277.6 1,073.3 557.4 336.9 396.7 420.7 257.6 210.7 217.0 127.0 16.1 14.2 16.0 8.6 55.5 83.6 119.1 43.0 97.2 151.1 94.9 80.8 58.7 89.1 127.7 134.3 160.0 84.3 19.9 58.8 81.0 37.7 82.1 131.8 222.1 319.2 1,238.1 2,558.9 903.9 232.7 101.8 181.1 104.3 93.6 162.2 69.6 24.4 63.9 81.7 130.7 298.9 253.5 312.7 266.0 333.8 431.9 82.1 162.1 88.6 91.3 164.9 159.2 52.4 47.3 25.4 52.7 28.4 61.6 215.1 165.1 110.2 210.5 670.4 884.5 54.0 44.7 13.9 103.8 136.0 70.9 113.0 37.7 32.7 0.0 0.0 0.2 10.0 0.5 15.3 32.1 73.5 43.5 53.6 18.4 0.0 1.1 57.1 7.5 3.6 17.3 555.9 1,307.1 1,392.0 1,705.5 4,003.2 4,298.3 4,843.5 7,125.8 15,904.0 28,756.7 7,391.2 4,335.4 3,980.3 4,869.8 5,791.1 6,156.8 7,492.0 6,173.2

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Figure 3.19 First Sequence by Industry (No. of Deals)

Industry Software Media and Entertainment Industrial/Energy Biotechnology IT Services Medical Devices and Equipment Consumer Products and Services Business Products and Services Telecommunications Financial Services Electronics/Instrumentation Semiconductors Computers and Peripherals Healthcare Services Retailing/Distribution Networking and Equipment Other Total

1980 24 20 76 13 2 19 16 10 6 11 22 18 38 3 6 5 4 293

1981 61 37 115 31 8 31 16 13 23 13 30 25 69 2 5 17 5 501

1982 82 49 92 33 17 30 35 27 29 24 22 11 75 14 11 14 13 578

1983 164 33 72 24 12 49 23 18 27 18 25 35 85 25 18 38 6 672

1984 132 19 76 17 13 53 20 12 42 6 32 39 68 26 7 21 3 586

1985 73 28 62 28 11 41 29 13 28 18 27 25 28 9 13 19 1 453

1986 72 32 58 32 8 51 29 23 24 22 18 13 32 31 25 21 2 493

1987 79 45 73 54 5 60 31 20 23 24 24 15 31 20 38 21 0 563

1988 85 31 71 46 8 54 18 12 22 21 17 21 34 11 26 25 1 503

1989 67 33 73 32 11 60 22 9 22 12 17 12 27 8 13 22 0 440

1990 81 22 48 26 6 37 24 10 7 7 10 12 18 7 8 16 1 340

1991 58 10 28 21 5 30 16 9 11 10 8 8 11 10 7 14 2 258

1992 68 28 31 52 4 43 22 10 18 12 10 11 28 16 12 22 0 387

1993 52 25 32 46 6 41 17 13 26 19 5 4 18 11 13 14 1 343

1994 97 28 39 40 19 37 31 10 22 13 9 10 17 18 9 17 1 417

1995 1996 1997 1998 1999 2000 2001 214 319 317 321 584 861 295 71 73 103 117 376 386 75 81 78 98 90 96 122 78 54 69 87 101 80 123 107 27 66 64 90 226 323 77 55 87 105 93 85 71 55 60 51 72 69 136 99 30 30 42 47 74 148 221 53 71 91 96 134 233 391 131 29 40 40 62 101 183 46 23 19 18 17 17 26 25 23 29 54 44 48 116 79 42 37 44 30 33 54 23 41 57 52 39 56 58 18 31 36 33 43 113 118 18 29 49 53 83 100 210 97 5 1 5 5 9 8 9 886 1,144 1,288 1,412 2,441 3,370 1,216

2002 262 40 61 108 26 65 22 29 48 26 16 50 10 21 10 35 3 832

2003 228 39 47 90 32 74 18 26 44 17 19 62 23 20 6 18 0 763

2004 2005 2006 2007 2008 245 257 262 258 242 53 92 149 176 163 58 63 97 143 149 106 112 138 135 128 47 58 79 89 110 73 85 126 118 94 30 42 43 50 55 33 38 46 63 47 53 78 102 80 45 33 29 29 41 30 21 31 26 32 27 83 43 43 30 26 19 22 13 21 21 15 23 20 15 13 17 22 14 21 12 33 24 16 23 9 3 3 2 6 8 922 1,022 1,205 1,301 1,179

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Figure 3.20 Internet-Related Investments By Year 1994-2008 Figure 3.21 Top Five States by Internet-Related Investments in 2008

Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TOTAL

No. of Cos 164 393 738 990 1,451 3,018 4,538 2,317 1,377 1,149 1,143 1,193 1,441 1,497 1,482 22,891

($ Millions) 720.9 1,822.4 3,958.8 5,961.6 11,394.0 41,438.2 79,140.4 25,347.6 10,941.6 8,744.3 9,627.6 9,705.0 11,332.8 12,339.6 10,713.8 243,188.8

State California Massachusetts New York Texas Washington TOTAL*

($ Millions) 5,917.3 898.2 768.0 510.2 405.2 8,498.8

* Total includes above 5 states only

Figure 3.22 2008 Internet-Related Investments By Regions in 2008

Stage Region Silicon Valley NY Metro New England LA/Orange County DC/Metroplex Texas Northwest Midwest Southeast San Diego Philadelphia Metro SouthWest Colorado North Central Sacramento/N.Cal Upstate NY South Central AK/HI/PR TOTAL

($ Millions) 4,906.3 972.5 950.1 740.9 516.9 510.2 435.1 374.8 361.1 240.3 189.7 158.7 151.8 146.0 29.9 15.1 7.6 6.9 10,713.8

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Figure 3.23 Sources and Targets of Invested Capital Investments 2008 ($ Millions)
SOURCE STATE AB AC AL AZ BC CA CO CT DC DE FF FL GA HI IA ID IL IN KS KY LA MA MB MD ME MI MN MO NC NE NH NJ NM NW NY OH OK ON OR PA QL QU RI TN TX UN UT VA VC VT WA WI WY Total AK AL 0.0 0.0 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 10.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 24.1 AR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 AZ 0.0 0.0 0.0 1.8 0.0 32.8 0.0 2.2 0.0 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.4 0.0 74.2 0.0 0.0 3.0 0.0 0.0 0.0 0.0 8.3 0.0 0.0 19.6 5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.0 0.0 33.5 6.0 0.0 0.0 0.0 7.5 0.0 0.0 208.1 CA 15.5 0.8 0.0 3.7 11.7 6,223.5 57.1 452.6 57.4 1.9 799.1 11.5 10.6 0.0 0.0 0.0 330.1 5.1 0.0 0.0 0.9 1,001.5 66.0 392.2 0.0 20.0 58.7 20.9 16.5 0.0 2.7 340.3 0.0 14.1 862.3 20.1 0.0 25.9 5.1 135.5 6.1 16.1 0.0 0.0 198.0 2,805.7 37.0 78.7 25.3 0.0 142.8 3.4 1.7 14,278.1 CO 0.0 0.0 0.0 1.3 2.4 172.3 59.1 26.3 1.7 0.0 16.7 1.8 7.1 0.0 0.0 2.6 9.9 0.0 0.0 0.0 0.9 32.4 0.0 6.8 0.0 0.0 6.6 12.5 0.0 0.0 1.0 20.1 0.2 0.0 81.3 0.4 0.0 0.0 0.0 4.2 0.0 0.0 0.0 0.0 2.6 310.4 4.3 5.9 0.0 0.0 24.6 2.1 0.0 817.5 CT DC DE FL 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 24.6 0.0 7.7 19.4 0.0 0.0 0.0 3.5 16.2 0.0 15.3 0.0 0.0 0.0 0.0 0.0 0.6 0.0 1.5 0.0 4.0 0.0 1.0 21.7 0.0 0.0 0.0 17.4 0.0 4.4 0.0 7.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 16.7 0.0 7.7 70.8 0.0 0.0 0.0 0.0 0.0 3.4 0.0 7.3 0.0 0.0 0.0 0.0 0.0 11.0 0.0 0.0 7.0 0.0 0.0 1.0 1.6 0.0 0.0 0.0 0.0 5.0 0.0 6.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 1.2 9.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.1 0.0 0.0 16.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.7 0.0 1.8 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.5 27.2 7.2 24.5 44.4 0.0 0.0 0.0 0.0 1.7 0.0 0.0 3.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 129.7 31.0 62.7 238.5 GA 0.0 0.0 0.6 0.0 0.0 52.2 0.0 9.7 4.1 0.0 42.3 8.0 38.3 0.0 0.0 0.0 8.6 0.0 0.0 0.0 0.0 52.0 0.0 20.5 2.5 0.0 0.0 0.0 9.7 0.0 0.0 15.8 0.0 0.0 20.1 4.3 0.0 0.0 0.0 2.2 0.5 0.0 0.0 1.3 1.2 116.1 0.0 2.1 0.0 0.0 11.4 0.0 0.0 423.5 Target State HI IA ID 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 6.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 4.5 33.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.3 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 2.5 5.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.3 40.3 12.0 IL 0.0 0.0 0.0 0.0 0.0 63.0 3.0 1.1 3.7 0.0 9.1 11.0 0.2 0.0 0.0 0.0 53.7 2.5 0.0 0.0 0.0 94.3 0.0 37.3 0.0 5.3 2.3 0.0 0.0 0.0 0.0 0.9 0.0 0.0 13.6 7.2 0.0 1.5 0.0 0.2 0.0 0.0 2.5 0.0 8.2 113.8 0.0 8.7 0.0 0.0 0.0 2.0 0.0 445.1 IND KS KY 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.2 2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 6.7 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.9 1.0 4.4 3.2 0.0 0.0 0.0 14.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 3.1 0.0 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.1 0.0 0.0 1.7 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 18.0 2.5 2.6 0.0 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 22.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 71.7 9.2 4.7 0.0 0.0 0.0 3.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 133.6 45.5 29.6 LA 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 2.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.3 MA 0.0 0.0 0.0 0.0 5.4 440.3 37.1 87.4 11.0 7.1 191.1 4.6 9.3 0.0 0.0 0.0 31.6 11.5 0.0 6.8 1.0 1,027.5 0.0 61.7 6.3 0.6 5.1 4.0 14.2 0.0 4.6 53.0 0.0 0.0 261.7 2.0 0.0 11.7 2.1 31.1 3.2 0.1 6.3 0.5 16.3 567.2 2.0 46.0 7.3 0.8 17.0 0.2 0.0 2,996.7 MD ME MI MN MO MS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 67.6 2.0 14.7 81.9 4.0 0.0 0.0 0.0 0.0 5.4 0.0 0.0 10.3 0.0 0.0 15.0 0.0 0.0 1.9 0.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 24.2 0.0 20.0 8.9 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.2 0.0 0.0 5.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.7 4.3 1.0 0.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.5 0.0 0.6 0.0 2.0 0.0 0.0 0.0 0.0 0.0 17.7 0.0 31.8 0.0 16.8 102.5 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60.0 0.0 0.0 23.2 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 42.0 0.9 2.0 0.0 0.0 0.0 0.0 54.6 0.0 0.0 0.0 0.0 0.0 4.5 6.0 0.0 4.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.9 0.0 2.6 19.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 67.0 0.0 13.7 23.7 3.3 0.0 0.8 0.0 2.8 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.7 4.4 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.2 0.0 4.7 0.0 0.0 0.0 128.3 8.9 55.9 114.8 44.8 0.0 3.6 0.0 0.0 0.7 0.0 0.0 21.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.0 0.0 2.8 7.2 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 460.6 20.1 245.7 486.8 86.4 0.0

Source State includes U.S. states, Australian states and Canadian provinces. FF = other foreign UN = undisclosed or unknown.

Thomson Reuters

35

National Venture Capital Association
Figure 3.23 (continued) Sources and Targets of Invested Capital Investments 2008 ($ Millions)
SOURCE STATE AB AC AL AZ BC CA CO CT DC DE FF FL GA HI IA ID IL IN KS KY LA MA MB MD ME MI MN MO NC NE NH NJ NM NW NY OH OK ON OR PA QL QU RI TN TX UN UT VA VC VT WA WI WY Total
MT 0.0 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.9 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.2 1.2 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.5 NC ND NE NH NJ NM NV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 36.2 0.0 16.0 34.9 97.3 19.1 6.1 0.0 0.0 0.0 0.0 0.0 2.1 0.0 5.8 0.0 0.0 0.0 14.9 13.5 0.0 5.0 0.0 0.0 0.0 10.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.2 0.0 0.0 0.0 60.8 2.5 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.3 0.0 0.0 1.5 6.1 0.2 0.0 4.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40.5 0.0 0.0 33.1 127.2 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.8 0.0 0.0 3.6 19.4 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 6.7 0.0 0.0 0.3 0.0 1.8 0.0 7.8 0.1 0.0 7.1 1.5 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 68.2 0.0 0.0 0.1 8.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 35.8 0.0 0.0 10.3 56.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.9 0.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 37.3 0.0 0.0 18.7 62.9 1.1 6.0 5.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 6.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.8 0.0 0.0 7.0 34.5 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 2.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 5.7 0.0 0.0 0.0 11.1 0.0 0.0 124.4 0.3 0.0 52.1 167.8 17.1 0.5 0.0 0.0 0.0 0.0 2.0 2.4 0.0 15.9 0.0 0.0 4.1 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 459.3 0.4 16.0 181.2 694.8 69.3 12.6 NY 0.0 0.0 0.0 1.5 0.0 192.2 13.8 22.2 4.3 1.3 52.8 0.0 0.1 0.0 0.0 0.0 13.6 0.0 0.0 0.0 8.7 195.4 0.0 41.0 2.9 3.0 13.1 1.5 3.2 0.0 2.0 31.5 0.0 0.0 364.3 12.6 0.0 10.1 0.0 36.7 0.0 0.0 0.0 0.0 1.2 251.8 2.9 8.8 0.0 0.0 0.3 5.0 0.0 1,297.8

Target State OH OK ORE PA PR RI SC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 50.4 0.0 52.0 164.0 0.0 0.7 7.8 0.0 0.0 0.0 4.9 0.0 0.0 0.0 0.0 0.0 7.0 4.1 0.0 1.4 0.0 0.0 0.0 4.5 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.9 0.0 4.3 17.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.7 0.0 1.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 11.7 0.0 4.6 5.8 0.0 0.0 0.0 1.1 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 10.0 0.0 0.0 1.5 0.0 0.0 0.0 8.2 0.0 7.6 53.9 10.8 4.1 9.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 7.0 7.5 0.0 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 0.0 1.5 0.0 0.0 0.5 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 5.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 28.2 0.0 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 47.7 0.0 5.7 58.1 0.0 5.3 2.0 46.6 0.0 0.0 0.3 0.0 0.0 0.5 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.4 0.0 0.0 0.0 0.0 3.4 0.0 5.6 191.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 0.0 1.1 0.0 0.0 9.0 0.0 0.0 0.0 3.2 0.0 1.2 9.4 0.0 0.0 0.0 50.7 14.9 36.4 131.8 3.0 8.1 4.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.2 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 21.1 0.0 0.0 16.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 258.0 17.2 176.0 701.0 13.8 39.2 34.0

SD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6

TN 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 3.0 0.0 0.0 1.0 4.7 0.0 0.0 0.0 2.5 1.0 0.0 1.3 0.0 3.1 0.0 1.0 0.0 0.0 0.3 0.0 1.0 0.0 0.0 1.5 0.0 0.0 1.0 6.4 0.0 1.0 0.0 0.6 0.0 0.0 0.0 10.5 6.7 14.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 64.9

TX UN UT VA VI VT WA WI WV 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.2 0.0 0.0 0.0 0.0 0.0 11.0 0.0 0.0 267.8 0.0 30.4 95.6 0.0 0.0 249.7 2.2 0.0 12.9 0.0 0.0 5.6 0.0 0.0 10.3 0.0 0.0 20.8 0.0 0.0 0.0 0.0 0.3 24.1 4.9 0.0 5.5 0.0 0.0 25.9 0.0 0.0 5.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.3 0.0 1.0 2.7 0.0 0.0 56.4 0.0 0.0 7.4 0.0 0.0 0.0 0.0 0.0 6.7 0.0 0.0 2.1 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 0.0 0.0 0.0 35.4 0.0 0.0 5.8 0.0 0.0 27.3 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.5 0.0 0.0 0.0 0.0 0.0 0.0 8.3 0.0 148.2 0.0 16.2 45.6 0.0 12.8 36.7 8.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 19.9 0.0 11.9 84.2 0.0 0.0 18.2 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.9 0.0 0.0 0.0 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 3.5 0.0 0.0 0.0 0.0 0.0 0.7 0.5 0.0 0.0 0.0 0.0 6.1 0.0 0.0 1.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.0 0.0 6.5 14.1 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 252.4 0.0 5.4 13.2 0.0 12.8 35.0 1.3 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 29.9 0.0 0.3 9.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 175.9 0.0 0.9 3.2 0.0 0.0 27.2 0.0 0.0 234.7 0.0 74.8 110.5 0.0 15.0 241.1 30.3 24.0 0.0 0.0 36.4 0.5 0.0 0.0 1.2 0.0 0.0 3.8 0.0 0.3 61.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 197.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 14.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1,287.4 0.0 193.5 486.5 0.0 42.8 962.2 75.3 24.0

WY 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5

TOT 15.5 0.8 3.5 10.4 39.6 8,559.3 214.8 755.0 203.8 12.3 1,418.2 75.3 93.3 5.1 4.0 9.0 589.1 34.7 14.0 24.9 61.9 3,273.7 66.0 914.5 17.3 101.8 173.0 63.0 162.0 0.8 12.4 679.2 9.8 17.4 2,349.7 123.8 0.6 61.2 18.5 551.3 16.1 22.7 10.8 37.0 496.1 6,122.0 98.9 274.2 32.7 1.8 459.3 39.4 3.7 28,355.2

Source State includes U.S. states, Australian states and Canadian provinces. FF = other foreign UN = undisclosed or unknown.

36

Thomson Reuters

2009 NVCA Yearbook
Figure 3.24 2008 Internet-Related Investments By Stage Figure 3.25 2008 Internet-Related Investments By Industry Sector

Company Stage Startup/Seed Early Stage Expansion Later Stage TOTAL

($ Millions) 407.7 1,950.1 3,838.5 4,517.6 10,713.8

Figure 3.26 2008 Internet-Related vs Non Internet-Related Investments By Industry Sector ($ Millions)
Industry Software Media and Entertainment IT Services Telecommunications Networking and Equipment Semiconductors Business Products and Services Financial Services Retailing/Distribution Computers and Peripherals Medical Devices and Equipment Consumer Products and Services Industrial/Energy Healthcare Services Electronics/Instrumentation Biotechnology Other Total Internet Related 3,601.5 1,863.1 1,598.4 1,426.3 493.9 390.2 273.5 230.2 213.6 170.3 166.3 155.4 81.7 22.7 19.8 7.0 NA 10,713.8 Non-Internet Related 1,320.3 139.4 245.6 249.5 163.2 1,259.9 210.4 304.3 54.0 239.1 3,314.8 279.1 4,593.1 172.5 553.0 4,520.6 22.7 17,641.4 Total 4,921.8 2,002.5 1,844.0 1,675.7 657.1 1,650.1 483.9 534.5 267.6 409.4 3,481.1 434.5 4,674.8 195.1 572.8 4,527.6 22.7 28,355.2

Industry Group Software Media and Entertainment IT Services Telecommunications Networking and Equipment Semiconductors Business Products and Services Financial Services Retailing/Distribution Computers and Peripherals Medical Devices and Equipment Consumer Products and Services Industrial/Energy Healthcare Services Electronics/Instrumentation Biotechnology TOTAL

($ Millions) 3,601.5 1,863.1 1,598.4 1,426.3 493.9 390.2 273.5 230.2 213.6 170.3 166.3 155.4 81.7 22.7 19.8 7.0 10,713.8

Figure 3.28 Top Five States By Percentage Invested Within State in 2008

Figure 3.27 2008 Internet-Related vs Non Internet-Related Investments By Industry Sector (Number of Companies)
Industry Internet Related Software 526 Media and Entertainment 305 IT Services 207 Telecommunications 168 Networking and Equipment 61 Business Products and Services 43 Consumer Products and Services 40 Retailing/Distribution 27 Financial Services 25 Computers and Peripherals 23 Semiconductors 19 Medical Devices and Equipment 12 Healthcare Services 11 Industrial/Energy 10 Electronics/Instrumentation 3 Biotechnology 2 Other 0 Total 1,482 Non-Internet Related 221 25 25 33 17 60 55 8 38 31 123 301 29 277 71 387 9 1,710 Total 747 330 232 201 78 103 95 35 63 54 142 313 40 287 74 389 9 3,192

Fund Domicile California Washington North Carolina Michigan Georgia

Pct. Invested Within State 73% 43% 42% 41% 41%

*Minimum $20 million invested

Figure 3.29 Top Five States By Portion Received From In-State Firms 2008

Company Location California Massachusetts New York Pennsylvania Washington

Pct. Invested From State 44% 34% 28% 27% 20%

*Minimum $20 million invested

Thomson Reuters

37

National Venture Capital Association
Figure 3.30 Number of States Invested Into in 2008 By State of Venture Firm Figure 3.31 Number of States California Venture Firms Invested Into By Year

Location of Venture Firm California Massachusetts New York Illinois Pennsylvania New Jersey Maryland Connecticut Minnesota Ohio Texas

No. of States Invested In 38 36 34 26 25 24 23 21 21 21 21

Year 1988 1998 2008

No. of States Invested In 29 34 38

Figure 3.32 Corporate Investments By Year
Corpp Backed N u m o f Co r p Investments % of Overall Backed ($ Millions) Investments Deals 434.9 6% 136 734.9 7% 237 971.3 7% 338 1,717.6 8% 517 7,986.0 15% 1,288 16,166.8 16% 2,101 4,863.3 12% 995 1,914.0 9% 570 1,282.5 7% 448 1,534.9 7% 554 1,568.0 7% 554 2,034.6 8% 660 2,594.3 8% 800 2,233.0 8% 742
% o f Ov e r a l l D e a l s W i t h at L east O ne C o rp V C 7% 9% 11% 14% 23% 27% 22% 18% 15% 18% 18% 18% 20% 19%

Figure 3.33 Clean technology Investments By Year
Clean Nu m of Technology Clean Investments Technology ( $ Mi l l i o n s) Deals 76.7 36 156.9 46 143.6 46 107.3 36 202.9 37 577.8 46 398.9 61 388.4 65 266.2 59 444.1 79 550.1 90 1,439.0 139 2,666.3 238 4,118.9 277

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Average I n ve st me n t P e r D e a l ( $ Mi l l i o n s) 2.1 3.4 3.1 3.0 5.5 12.6 6.5 6.0 4.5 5.6 6.1 10.4 11.2 14.9

Figure 3.34 California Investments as a Percentage of Overall Investments
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

29% 9%

32% 9%

39% 11% NoCal SoCal Other

62%

59%

50%

1998

2000

2008

38

Thomson Reuters

Portfolio Company Valuations
Round valuations overall appeared to be significantly lower in 2008 (Figure 4.04) than they were overall in the period 1995-2008 (Figure 4.01). As round valuations fell, fewer were reported and this pushed some sectors below the analysis threshold. In 2008, the median financing round was at a reported $13.3 million, compared with the recent history of $30.0 million. The calculated average (or mean) round valuation, which of course can be affected by particularly large rounds, was $46.7 million in 2008 versus $72.9 million over the 14-year comparison period. Of those industries which sufficient reported results, only two reported an increase in median round valuations: the media and entertainment sector and the medical devices and equipment sector. Venture investment in 2008 was a competing mix of (A) later stage companies receiving large rounds anticipating an acquisition (M&A) or initial public offering (IPO), and (B) early investment in companies just getting going. With the activity focused on the two ends of the spectrum, it is worth looking at a company’s first financings (Figures 4.02 and 4.05) and subsequent financings separately (Figures 4.03 and 4.06). The overall drop in the public markets for technology company stocks of more than 30% affected valuations of companies at both ends of the maturity spectrum. Early stage fundings had to be structured to provide for additional rounds and investors later on. Later stage companies needed cash infusions at a time when they would have otherwise gone public or been acquired. Depressed public markets did not allow for a step up in valuation. With the door essentially slammed shut in 2008 for initial public offerings, only six companies went public. In contrast to 2007 which saw record median valuations, those companies which did go public in 2008 saw IPO valuations consistent with the 2002-2006 period.

Figure 4.01 Valuations By Company Industry 1995-2008 ($ Millions)

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 64.4 51.6 58.1 63.3 44.8 78.7 49.2 44.1 64.8 74.4 47.1 136.6 137.7 84.1 83.8 57.5 99.2 72.9

Max 864.0 600.0 525.0 986.1 559.5 904.8 658.5 700.0 1,400.0 2,777.8 484.3 1,537.2 495.6 3,650.5 922.0 1,353.5 2,200.0 3,650.5

Upper Quartile 91.8 52.7 70.0 63.0 42.9 90.0 51.0 40.8 80.1 74.4 61.9 149.8 150.0 76.3 89.5 67.9 112.0 90.0

Lower Median Quartile 42.1 16.0 23.5 12.0 31.4 14.3 26.0 10.0 16.5 8.5 32.0 10.0 27.6 12.5 18.0 6.0 32.0 13.0 28.0 13.0 30.0 13.2 56.2 22.2 30.0 8.3 30.4 11.5 45.5 20.0 28.5 12.6 42.0 18.9 30.0 10.0

Min 0.1 0.3 1.8 0.7 1.2 0.2 0.7 0.1 0.3 0.1 0.1 0.3 4.8 0.3 1.6 0.0 0.1 0.0

Thomson Reuters

39

National Venture Capital Association
Figure 4.02 Valuations By Company Industry 1995-2008 Financings ($ Millions) First Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 18.9 22.4 24.2 25.0 10.2 35.3 20.4 26.0 21.4 30.2 14.6 25.9 NA 25.8 25.0 18.7 32.1 23.5

Upper Lower Max Quartile Median Quartile Min 266.0 20.8 10.0 4.9 0.0 345.0 23.0 13.1 6.3 0.3 297.5 24.8 11.8 7.3 1.3 500.0 21.3 10.0 5.0 0.1 50.0 14.7 7.8 3.9 1.1 460.0 35.8 13.0 6.0 0.4 320.1 23.9 12.3 6.4 0.4 492.6 25.0 8.4 3.5 0.1 276.0 25.0 11.9 6.4 0.2 2,777.8 22.8 11.0 6.0 0.3 484.3 14.9 8.5 4.5 0.1 454.0 27.0 15.3 8.0 0.3 NA NA NA NA NA 310.0 28.0 11.0 6.5 0.3 285.0 25.0 15.0 10.0 0.6 373.3 20.0 10.1 6.0 0.3 876.0 29.5 14.0 6.4 0.1 2,777.8 25.5 11.4 5.0 0.0

Figure 4.03 Valuations By Company Industry 1995-2008 Financings ($ Millions) Additional Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 75.4 72.4 68.6 79.8 60.3 101.0 56.1 58.0 86.9 88.8 54.0 167.9 NA 114.2 100.9 70.4 122.9 86.1

Max 864.0 600.0 525.0 986.1 559.5 904.8 658.5 700.0 1,400.0 1,000.0 350.4 1,537.2 NA 3,650.5 922.0 1,353.5 2,200.0 3,650.5

Upper Quartile 101.0 90.0 80.0 82.3 67.4 124.0 56.0 59.1 112.0 105.3 70.9 201.4 NA 93.6 105.0 85.5 140.9 107.0

Lower Median Quartile 56.0 23.2 40.3 19.5 43.7 20.0 40.0 17.6 21.8 15.0 49.9 18.4 31.0 13.2 25.0 12.6 50.0 22.0 44.1 18.6 38.4 19.4 78.8 35.0 NA NA 46.5 20.9 60.8 31.6 37.9 18.5 63.2 27.3 43.9 18.2

Min 0.5 3.1 3.0 0.7 2.0 0.2 0.7 0.4 0.7 0.1 0.5 1.7 NA 0.8 1.0 0.0 1.8 0.0

40

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2009 NVCA Yearbook
Figure 4.04 Valuations By Company Industry 2008 Financings ($ Millions)

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 44.2 17.0 NA 24.8 NA NA NA 33.7 36.5 161.6 44.5 NA NA NA 38.9 25.9 40.3 46.7

Max 158.2 42.2 NA 77.0 NA NA NA 200.0 188.0 1,000.0 140.0 NA NA NA 70.0 113.0 141.3 1,000.0

Upper Quartile 94.0 23.8 NA 27.0 NA NA NA 33.8 33.0 68.7 63.1 NA NA NA 42.3 36.9 30.0 57.9

Lower Median Quartile 14.6 3.1 12.0 5.2 NA NA 10.2 8.0 NA NA NA NA NA NA 5.9 2.2 10.1 4.5 28.1 17.6 34.1 13.6 NA NA NA NA NA NA 37.8 30.0 22.4 7.5 12.0 9.0 13.3 4.7

Min 0.1 2.0 NA 2.0 NA NA NA 0.1 0.3 3.0 1.2 NA NA NA 14.2 0.5 6.0 0.1

Figure 4.05 Valuations By Company Industry 2008 Financings ($ Millions) First Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 7.8 NA NA NA NA NA NA 18.9 NA NA 13.7 NA NA NA NA 16.2 NA 14.1

Max 27.4 NA NA NA NA NA NA 156.0 NA NA 52.1 NA NA NA NA 40.0 NA 156.0

Upper Quartile 11.4 NA NA NA NA NA NA 5.9 NA NA 13.3 NA NA NA NA 23.6 NA 15.9

Lower Median Quartile 2.9 1.3 NA NA NA NA NA NA NA NA NA NA NA NA 4.0 1.1 NA NA NA NA 5.0 3.6 NA NA NA NA NA NA NA NA 13.2 3.3 NA NA 4.5 1.2

Min 0.1 NA NA NA NA NA NA 0.1 NA NA 1.2 NA NA NA NA 2.5 NA 0.1

Thomson Reuters

41

National Venture Capital Association
Figure 4.06 Valuations By Company Industry 2008 Financings ($ Millions) Additional Round Financings

Company Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications Total

Avg Val 54.4 NA NA NA NA NA NA 58.4 50.7 211.4 57.6 NA NA NA 38.9 30.3 46.2 68.5

Max 158.2 NA NA NA NA NA NA 200.0 188.0 1,000.0 140.0 NA NA NA 70.0 113.0 141.3 1,000.0

Upper Quartile 103.5 NA NA NA NA NA NA 56.6 47.8 136.2 93.1 NA NA NA 42.3 39.1 75.0 95.7

Lower Median Quartile 27.2 7.4 NA NA NA NA NA NA NA NA NA NA NA NA 40.5 15.2 10.0 5.0 33.8 25.8 38.6 24.9 NA NA NA NA NA NA 37.8 30.0 30.2 14.0 9.0 8.5 32.0 8.2

Min 0.5 NA NA NA NA NA NA 0.8 2.9 7.5 8.0 NA NA NA 14.2 0.5 6.0 0.5

Figure 4.07 Venture-Backed IPOs Valuations as of IPO ($ Millions) By Year of IPO

Year of IPO 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Avg Val 154.6 208.1 160.3 221.2 499.0 504.3 439.1 361.4 284.7 656.2 290.5 394.4 622.7 441.1

Upper Lower Max Quartile Median Quartile 1,026.5 170.9 109.7 71.3 9,911.4 182.8 110.3 66.8 2,139.2 161.0 108.1 63.9 1,220.6 269.6 182.2 106.6 4,827.7 538.8 343.8 222.4 11,965.5 521.1 248.8 134.9 1,719.2 527.3 322.2 205.7 1,083.3 570.7 223.3 141.7 821.9 359.2 227.7 156.2 23,053.7 389.6 255.9 152.8 1,442.1 387.5 201.9 140.1 2,647.5 409.3 256.7 177.6 7,963.7 573.0 346.0 271.5 1,443.1 380.7 257.8 197.6

Min 12.2 9.5 11.4 12.5 47.0 18.0 57.3 36.8 41.9 21.6 23.1 70.9 50.0 88.8

42

Thomson Reuters

Exits: IPOs and Acquisitions
The year 2008 was an awful year for venture-backed companies exiting through initial public offerings or acquisitions. Only six venture-backed companies went public and the proceeds from acquisitions dropped by more than 50%. This comes at a time when a record number of companies founded during or just after the tech bubble entered the “later stage” of maturity and, in more typical times, would have exited. One has to go back to the 1970s to find years with fewer IPOs. The six companies which did go public brought in less than one-half billion dollars in proceeds. The second and fourth quarters had no venture-backed IPOs at all. Of the six IPOs, two were Healthcare Services companies and two were in Medical Devices and Equipment. Of the 16 MoneyTree™ sectors, 12 had none. At the end of 2007, interestingly, there were 31 venture-backed companies in registration. Five of the six venture-backed IPOs took place in the first quarter. To put this in context, approximately 14% of the venture-backed companies first funded in the 1990s eventually went public. In recent years, more than 1,000 companies annually are funded for the first time. This suggests an IPO count well above 100 each year for that ratio to continue. While we have provided the traditional analytical charts and summaries in this chapter, the reader is reminded that 2008 results are based on this very small sample of six IPOs. The number of venture-backed companies acquired during 2008 (335) declined from 2007 (378) to a level consistent with other post-bubble years. While 2007 was the post-bubble high water mark for strong acquisition exits, in 2008 the total disclosed proceeds dropped 59% to $13.3 billion. While M&A exits were at best a mixed picture, 18% of those companies sold for more than ten times the total venture investment (TVI) in those companies.

Methodology
Initial and secondary public offerings of companies that are venture-backed are followed and analyzed by Thomson Reuters. This research is compiled three ways: first, through cross-referencing venturebacked companies with IPOs in registration or that have begun trading, which is tracked through the new issues online database of Thomson Reuters; second, through daily prospectus research; third, through industry surveys. By using this research process, we have been successful in identifying virtually all companies that have gone public that have had venture backing.
Figure 5.01 Venture-Backed IPOs

However, the term “venture-backed” has different meanings depending on context. There are three decreasingly stringent classifications that Thomson Reuters uses in classifying public companies as venture-backed. The most rigorous is that a venture capitalist must be a shareholder at the time of the public offering and the investment must be made by a nonbuyout venture capital fund. Thus, an investment that was exited prior to going public or a company financed by a buyout firm would not be counted as venture-backed in this sense. This is the criterion used in publishing venture-backed IPOs in the
Figure 5.02 Number of Venture-Backed IPOs vs. All IPOs

Year
300 250 200 No. of IPOs Offer ($ Billions) 30.00 25.00 20.00 15.00 10.00 5.00 0.00 '80'81'82'83'84'85'86'87'88'89'90'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08 Year

# of All IPOs 477 352 83 77 67 187 166 167 156 23

# of Venture-Backed IPOs 269 265 41 22 29 94 57 56 86 6

150 100 50 0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Offer ($ Billions)

Thomson Reuters

No. of IPOs

43

National Venture Capital Association
Venture Capital Journal. The second most strict category still provides that the investment be made in a venture round of financing, but allows that the investment could have been exited at some point prior to the IPO. The third and most comprehensive definition of venture-backed includes companies invested in by either venture capital or buyout funds and the investor may or may not have exited prior to the IPO. When the term venture-backed is used in this particular chapter, it usually refers to companies covered by the second category. The term ‘private equitybacked’ will refer to the third category of company.

Figure 5.03 Venture-Backed IPOs 1980 to 2008 Value and Age Characteristics
Num of Offer Amount IPOs ($Mil) 59 664 97 1,068 39 577 196 3,770 83 1,005 76 1,293 153 3,423 126 2,318 54 846 65 1,223 70 1,396 157 4,923 195 7,204 219 6,683 167 4,671 205 8,147 272 11,482 138 4,826 78 3,782 269 20,823 265 25,618 41 3,490 22 2,109 29 2,023 94 11,378 57 4,485 56 5,075 86 10,326 6 470 Med Offer Amt ($Mil) 9 8 8 12 9 13 14 15 14 15 20 25 24 22 23 33 32 30 41 63 73 71 71 66 69 65 76 84 71 Mean Offer Amt ($Mil) 12 11 16 20 12 17 23 21 17 21 23 32 39 32 28 41 42 35 48 77 97 85 96 70 121 79 91 120 78 Post Offer Value ($Mil) 3,517 4,886 2,663 18,787 4,672 6,480 23,902 9,789 3,391 5,577 5,274 20,836 31,404 23,194 18,321 31,073 56,399 22,126 17,253 133,727 133,639 18,004 7,950 8,257 61,678 16,558 22,086 53,556 2,646 Med Post Value ($Mil) 28 26 35 44 31 38 55 56 57 55 67 87 77 68 70 110 110 108 182 343 249 322 223 228 256 202 257 346 258 Median Mean Post Age @ IPO Mean Age @ Value ($Mil) (yrs) IPO (yrs) 62 9 11 51 7 10 76 4 7 98 5 8 57 5 8 86 4 9 160 6 11 91 5 9 68 5 6 96 7 8 85 6 9 136 7 9 169 6 8 110 7 9 111 8 10 155 7 9 207 5 8 160 6 8 221 5 7 497 4 5 504 5 7 439 6 11 361 7 11 285 8 9 656 7 8 290 6 8 394 8 10 623 9 9 441 10 10

Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

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2009 NVCA Yearbook
Figure 5.04 Venture-Backed IPOs by MoneyTree™ Industry Total Offering Size ($ Millions)

Industry 1980 1981 1982 Computers and Peripherals 209 208 234 Healthcare Services 26 24 0 Software 68 164 43 Medical Devices and Equipment 45 51 40 Biotechnology 35 143 44 Business Products and Services 10 2 0 Consumer Products and Services 3 62 26 Electronics/Instrumentation 31 54 45 Financial Services 25 0 0 Industrial/Energy 90 148 8 IT Services 0 21 43 Media and Entertainment 0 49 7 Networking and Equipment 24 76 61 Other 0 0 0 Retailing/Distribution 0 7 0 Semiconductors 87 34 0 Telecommunications 11 28 27 Total 664 1,068 577

1983 820 160 487 274 397 191 198 165 39 324 66 41 108 0 120 278 104 3,770

1984 179 67 137 37 45 10 93 14 0 199 25 12 34 0 41 79 34 1,005

1985 177 83 47 74 17 8 12 6 208 264 13 78 30 0 223 14 39 1,293

1986 361 30 399 80 318 51 102 33 271 340 21 778 135 54 336 41 73 3,423

1987 237 13 222 152 173 17 119 16 56 418 32 196 113 0 94 98 361 2,318

1988 108 0 130 20 24 2 8 0 9 242 12 61 37 0 106 74 15 846

1989 165 59 128 108 65 0 174 64 85 155 0 15 52 0 34 79 41 1,223

1990 125 61 135 124 63 62 5 45 0 399 0 40 71 0 33 25 207 1,396

1991 76 390 394 498 928 103 453 74 174 358 177 251 312 0 379 186 170 4,923

1992 277 730 517 817 769 61 401 78 281 1,293 848 258 241 10 257 132 234 7,204

1993 298 124 800 333 485 116 376 272 197 787 66 666 356 0 729 340 737 6,682

1994 199 245 360 476 166 67 338 206 328 768 64 466 405 0 101 214 269 4,672

1995 1996 398 371 297 276 1,933 1,837 878 1,492 527 856 78 429 285 191 216 140 442 1,272 1,022 1,337 284 457 160 485 285 567 7 0 67 551 669 6 599 1,215 8,147 11,482

1997 200 185 834 450 536 109 155 77 245 333 85 457 316 141 175 204 325 4,827

1998 1999 2000 53 237 606 247 504 192 731 4,337 4,019 91 48 759 147 328 4,085 90 1,152 683 515 453 414 72 36 274 7 505 104 130 78 1,317 262 1,643 1,711 116 2,888 1,499 319 2,704 3,361 0 0 0 309 1,521 275 0 269 1,591 694 4,123 4,730 3,782 20,823 25,618

2001 0 535 365 610 335 0 185 41 490 522 0 0 135 0 0 122 150 3,490

2002 55 72 155 300 331 0 39 500 201 158 90 207 0 0 0 0 0 2,109

2003 2004 0 84 52 108 289 2,050 53 844 440 1,436 97 324 157 250 0 0 322 699 0 367 0 90 65 1,669 0 138 0 0 65 62 332 2,218 152 1,040 2,023 11,378

2005 7 67 505 327 782 464 103 0 755 21 122 352 0 0 28 594 358 4,485

2006 2007 0 108 0 113 576 1,242 714 1,241 855 1,315 0 828 77 202 0 0 197 0 257 580 191 344 798 184 427 453 0 0 139 496 125 636 719 2,583 5,075 10,326

2008 188 164 62 57 0 0 0 0 0 0 0 0 0 0 0 0 0 470

Figure 5.05 Venture-Backed IPOs by MoneyTree™ Industry Total Number of Companies
Industry Healthcare Services Medical Devices and Equipment Computers and Peripherals Software Biotechnology Business Products and Services Consumer Products and Services Electronics/Instrumentation Financial Services Industrial/Energy IT Services Media and Entertainment Networking and Equipment Other Retailing/Distribution Semiconductors Telecommunications Totals 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2 2 0 10 6 4 3 1 0 2 4 13 8 4 7 6 6 6 5 7 3 6 1 1 1 1 0 1 2 6 6 6 21 5 5 11 10 4 8 11 22 35 20 21 23 44 14 3 1 15 8 3 1 15 8 9 11 2 12 15 6 30 10 12 16 10 6 4 7 3 14 12 8 8 11 7 3 5 7 0 1 0 1 1 0 1 1 4 10 6 25 9 3 23 12 7 9 9 15 18 27 19 55 59 27 19 69 55 5 4 4 8 6 6 12 1 1 5 4 24 4 5 16 13 2 8 4 33 29 24 13 17 31 22 6 6 49 4 4 7 25 14 17 21 0 2 1 0 9 2 1 6 5 1 0 2 5 3 5 3 3 8 2 2 16 8 0 0 2 3 4 0 3 0 1 7 3 11 6 2 7 5 1 5 1 12 11 12 5 9 7 6 7 7 4 4 1 3 3 1 1 2 0 5 8 3 10 4 1 7 4 0 1 2 3 6 12 8 8 8 2 1 1 4 1 1 0 0 0 0 0 0 3 0 1 4 0 2 7 7 1 4 0 3 8 5 10 8 14 4 1 8 2 3 2 4 7 3 2 0 0 11 21 3 16 12 15 13 29 15 10 15 15 21 25 23 15 22 10 3 1 10 6 1 0 2 1 3 4 0 0 2 1 5 3 1 2 3 1 1 0 6 3 3 3 7 12 3 5 27 16 0 1 0 2 1 2 4 0 0 6 2 4 1 6 15 4 2 1 3 4 8 15 10 5 10 8 3 35 16 0 3 1 10 4 6 2 0 2 4 2 6 4 2 4 6 3 3 2 8 12 10 14 10 10 6 7 26 16 1 0 0 2 0 4 5 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 7 6 7 10 5 4 2 3 4 7 14 3 2 11 5 6 16 5 0 0 1 1 1 1 3 0 8 5 0 8 5 2 4 4 5 5 1 8 3 16 9 18 1 6 0 5 14 2 0 3 6 8 2 8 0 2 4 2 6 6 8 8 8 2 2 6 3 8 15 11 10 18 9 7 39 41 1 0 2 8 4 3 9 0 59 97 39 196 83 76 153 126 54 65 70 157 195 219 167 205 272 138 78 269 265 41 22 29 94 57 56 86 6

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Figure 5.06 Average and Median Age in Months of Companies at IPO 2000 to 2008

2000 Industry Telecommunications Computer Hardware and Services Computer Software Business/Financial Semiconductors and Electronics Biotechnology Healthcare Related Retailing and Media Industrial/Energy

2001

2002

2003

2004

2005

2006

2007

2008

Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median 55.3 40.0 18.0 NA NA NA 102.5 102.5 85.6 81.0 68.5 68.5 100.1 53.5 87.0 87.0 243.0 243.0 91.0 NA 77.0 83.0 119.4 77.0 90.2 67.0 60.0 56.0 120.4 71.0 95.0 89.0 82.1 90.0 73.9 67.0 55.5 47.0 106.0 47.0 111.0 111.0 105.9 108.0 122.2 83.0 94.0 66.0 135.3 70.0 108.7 118.0 9.0 NA 143.0 141.0 96.2 78.0 106.9 96.0 102.0 67.0 67.0 67.0 145.0 145.0 77.5 72.5 83.8 75.0 76.8 72.5 152.1 67.0 125.8 83.5 111.5 95.0 80.0 80.0 119.5 98.0 106.0 93.0 45.6 40.0 176.0 176.0 204.0 64.5 79.7 64.5 107.9 75.5 136.1 74.0 100.3 82.0 223.0 67.0 40.0 NA NA NA 57.0 55.0 124.0 129.0

Mean Median Mean Median Mean Median 91.7 57.0 89.4 88.0 127.0 NA 131.0 131.0 106.6 103.0 127.0 NA 125.1 109.5 126.6 112.5 110.0 110.0 131.2 136.0 147.6 135.0 NA NA 111.5 111.5 111.1 95.0 NA NA 96.1 94.0 89.6 100.0 103.0 NA 116.2 99.0 109.6 106.0 121.7 157.0 134.2 122.0 113.3 112.0 NA NA 109.0 98.0 105.7 113.0 NA NA

Figure 5.07 Venture-Backed Merger & Acquisitions by Year

Figure 5.08 Private Equity-Backed Merger & Acquisitions by Year
Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Number Number Total Known 1 0 1 1 1 0 3 0 5 2 9 4 17 4 21 8 32 16 35 20 27 12 33 13 91 60 121 76 136 89 162 109 193 146 270 202 324 233 353 259 376 249 406 203 359 187 326 146 383 210 448 223 502 221 549 238 473 155 ($ Millions) Price Average 0.0 0.0 217.5 217.5 0.0 0.0 0.0 0.0 643.5 321.8 282.2 70.6 214.7 53.7 854.4 106.8 1579.5 98.7 2071.3 103.6 595.6 49.6 1038.7 79.9 4293.4 71.6 6141.4 80.8 9972.2 112.0 16348.4 150.0 37023.7 253.6 65422.5 323.9 91566.8 393.0 223150.6 861.6 125326.7 503.3 39596.8 195.1 24018.8 128.4 14561.0 99.7 25171.1 119.9 41470.4 186.0 48894.7 221.2 76547.0 321.6 26018.3 167.9

Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Number Number Total Known 1 0 0 0 1 0 2 0 4 1 6 3 11 1 13 4 16 6 16 5 19 9 17 4 75 46 73 44 100 64 97 60 118 77 165 117 209 132 240 165 317 206 354 164 319 154 286 120 347 187 352 166 368 160 378 170 335 114

($ Millions) Price Average 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.5 4.5 271.2 90.4 86.8 86.8 398.1 99.5 481.1 80.2 371.8 74.4 214.3 23.8 200.5 50.1 2544.8 55.3 1701.2 38.7 3407.6 53.2 3788.3 63.1 8531.0 110.8 7535.5 64.4 9350.6 70.8 41663.4 252.5 69089.3 335.4 16769.9 102.3 7586.7 49.3 7465.1 62.2 15919.6 85.1 17410.5 104.9 18693.6 116.8 32254.6 189.7 13271.9 116.4

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, data from fig. 5.07 is included here.

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Figure 5.09 Venture-Backed Acquisitions by MoneyTree™ Industry Total Transaction Values 1980 to 2008 ($ Million)

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Software 0 0 0 0 0 0 0 5 40 0 104 83 274 Telecommunications 0 0 0 0 0 0 0 0 0 0 0 0 4 Biotechnology 0 0 0 0 0 0 0 0 0 0 0 68 61 Media and Entertainment 0 0 0 0 0 0 0 0 0 0 0 0 0 Financial Services 0 0 0 0 0 0 0 0 0 0 0 0 1407 Semiconductors 0 0 0 0 0 71 0 0 0 15 0 0 0 Networking and Equipment 0 0 0 0 0 0 0 0 0 0 0 0 0 IT Services 0 0 0 0 0 0 0 0 0 0 0 0 0 Industrial/Energy 0 0 0 0 5 99 0 0 11 0 20 40 180 Medical Devices and Equipment 0 0 0 0 0 101 0 6 4 250 1 0 436 Business Products and Services 0 0 0 0 0 0 0 387 0 0 12 0 0 Consumer Products and Services 0 0 0 0 0 0 87 0 227 0 0 10 1 Electronics/Instrumentation 0 0 0 0 0 0 0 0 0 0 0 0 37 Computers and Peripherals 0 0 0 0 0 0 0 0 0 47 79 0 16 Healthcare Services 0 0 0 0 0 0 0 0 199 60 0 0 94 Retailing/Distribution 0 0 0 0 0 0 0 0 0 0 0 0 35 Other 0 0 0 0 0 0 0 0 0 0 0 0 0 Total 0 0 0 0 5 271 87 398 481 372 214 201 2545

1993 186 299 25 119 161 38 347 0 231 43 0 0 13 161 0 80 0 1701

1994 523 790 39 29 109 67 354 0 771 295 0 29 49 84 178 90 0 3408

1995 500 334 97 45 734 327 794 19 79 221 0 23 42 69 475 29 0 3788

1996 1022 419 388 2107 67 0 1033 485 1115 313 185 362 14 889 130 2 0 8531

1997 2104 1097 426 1387 34 8 213 80 245 652 207 320 115 394 94 161 0 7536

1998 2897 948 172 210 463 468 1206 706 350 186 368 404 60 674 166 74 0 9351

1999 10359 2249 780 10341 431 1269 10518 676 721 498 1639 466 47 388 325 955 0 41663

2000 15725 10261 1206 2518 701 5243 18902 2361 2066 398 2218 592 4162 1374 286 1077 0 69089

2001 3063 1518 430 669 489 1439 5525 533 1240 611 245 171 209 357 262 8 0 16770

2002 1944 1257 115 324 211 563 751 603 113 565 142 61 20 59 855 3 0 7587

2003 2037 326 604 285 99 415 789 1011 59 525 154 235 21 64 85 757 0 7465

2004 4305 1748 713 2260 10 612 526 1681 613 1145 279 439 116 756 706 12 0 15920

2005 4772 1241 2637 1379 530 214 1468 1729 499 1156 252 403 72 270 789 0 0 17411

2006 4263 1420 1765 4470 938 922 603 490 426 1408 236 343 3 285 817 305 0 18694

2007 5308 1543 5513 1767 1040 896 853 2495 1719 2086 2561 1975 83 610 642 2968 195 32255

2008 3732 1693 1659 1429 988 677 609 538 514 511 437 284 117 49 27 10 0 13272

Figure 5.10 Venture-Backed Acquisitions by MoneyTree™ Industry Number of Companies 1980 to 2008

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Software 0 0 0 0 2 0 3 1 3 1 5 2 12 16 30 26 22 45 61 58 98 88 116 105 117 126 135 122 121 Media and Entertainment 0 0 0 0 0 0 0 1 0 0 0 1 1 5 2 4 9 14 8 19 32 48 19 13 30 26 26 38 30 Networking and Equipment 0 0 0 0 0 0 0 1 0 0 0 0 2 8 10 8 13 5 9 20 21 14 15 18 24 21 24 16 24 Semiconductors 0 0 0 0 0 1 0 0 0 1 1 3 1 2 3 5 1 1 9 8 16 12 13 12 14 11 15 15 21 Biotechnology 0 0 0 0 0 0 1 0 1 1 1 2 6 3 5 9 11 10 12 13 14 17 11 14 23 25 30 22 20 Telecommunications 0 0 0 0 0 0 1 1 0 2 1 1 2 4 5 4 7 12 16 20 30 34 37 30 24 27 29 31 20 IT Services 0 0 0 0 0 0 1 0 2 1 0 0 1 0 0 4 6 6 11 15 18 28 33 26 27 22 19 28 20 Industrial/Energy 0 0 0 1 2 1 1 2 2 3 3 3 8 6 12 8 6 13 19 19 12 13 10 7 9 12 9 22 18 Business Products and Services 0 0 0 0 0 0 0 1 1 0 1 1 1 3 1 0 3 3 7 10 14 21 17 15 13 14 18 27 13 Medical Devices and Equipment 0 0 0 0 0 1 1 2 2 2 2 0 12 4 8 9 7 15 10 11 7 15 11 8 22 25 20 22 12 Consumer Products and Services 0 0 0 1 0 0 1 0 1 0 0 1 2 3 2 1 8 9 7 11 11 14 4 5 7 7 4 5 9 Financial Services 0 0 0 0 0 0 0 0 0 0 0 0 6 3 3 4 5 5 7 11 8 16 11 9 11 7 13 11 6 Computers and Peripherals 0 0 1 0 0 2 1 2 1 2 3 1 10 10 6 4 10 10 12 9 7 5 1 9 9 9 7 4 6 Healthcare Services 0 0 0 0 0 0 1 1 1 1 1 1 5 0 9 9 4 5 14 6 10 8 12 4 6 14 8 7 5 Electronics/Instrumentation 1 0 0 0 0 0 0 1 2 2 0 1 4 3 2 1 4 7 4 2 4 9 3 3 5 3 5 2 5 Retailing/Distribution 0 0 0 0 0 1 0 0 0 0 1 0 2 3 2 1 2 5 3 8 13 11 6 8 5 2 6 5 4 Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 0 1 1 0 1 1 Total 1 0 1 2 4 6 11 13 16 16 19 17 75 73 100 97 118 165 209 240 317 354 319 286 347 352 368 378 335

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Figure 5.11 Private Equity-Backed Acquisitions by MoneyTree™ Industry Total Transaction Values 1980 to 2008 ($ Million)

Industry 1980 1981 1982 1983 1984 1985 1986 Industrial/Energy 0 0 0 0 644 110 63 Software 0 0 0 0 0 0 0 Telecommunications 0 0 0 0 0 0 0 Financial Services 0 0 0 0 0 0 0 Biotechnology 0 0 0 0 0 0 0 Media and Entertainment 0 0 0 0 0 0 0 Business Products and Services 0 0 0 0 0 0 0 Retailing/Distribution 0 0 0 0 0 0 0 Networking and Equipment 0 0 0 0 0 0 0 Computers and Peripherals 0 0 0 0 0 0 19 Consumer Products and Services 0 0 0 0 0 0 132 Semiconductors 0 218 0 0 0 71 0 Medical Devices and Equipment 0 0 0 0 0 101 0 Healthcare Services 0 0 0 0 0 0 0 IT Services 0 0 0 0 0 0 0 Electronics/Instrumentation 0 0 0 0 0 0 0 Other 0 0 0 0 0 0 0 Total 0 218 0 0 644 282 215

1987 25 24 0 317 0 0 387 0 0 0 95 0 6 0 0 0 0 854

1988 302 56 262 0 0 0 200 0 0 242 227 0 4 199 7 81 0 1580

1989 75 443 0 0 809 32 0 212 15 67 0 15 344 60 0 0 0 2071

1990 20 104 0 0 0 0 12 0 0 79 0 100 167 0 0 115 0 596

1991 130 135 0 0 68 0 7 619 0 0 10 70 0 0 0 0 0 1039

1992 282 696 81 1424 228 0 0 35 0 16 90 0 1311 94 0 37 0 4293

1993 953 625 299 732 1057 143 0 357 675 161 618 38 368 103 0 13 0 6141

1994 2012 913 1376 1733 351 123 0 90 1529 289 29 67 358 1054 0 49 0 9972

1995 2625 1287 2299 2968 794 405 1192 505 1482 264 573 327 614 951 19 43 0 16348

1996 2438 5958 3155 6561 999 3650 370 1371 6842 951 1305 0 1199 1559 485 181 0 37024

1997 8075 6479 2976 18410 583 4232 1383 8035 1355 394 2204 289 4980 5247 357 426 0 65423

1998 3788 4541 3884 44588 1696 12826 1999 5616 4278 730 2506 792 2264 789 1075 197 0 91567

1999 7844 39995 65791 16882 4977 23913 2201 3877 44539 1815 549 4705 3208 610 2164 81 0 223151

2000 3022 22039 17540 1505 1972 6733 2258 5663 18902 2569 1375 5243 481 286 31248 4491 0 125327

2001 3116 3258 7670 3566 540 738 245 2408 5525 357 568 1564 993 602 866 7582 0 39597

2002 3809 1944 7116 1538 2540 1112 142 178 751 59 1540 563 1011 1020 670 27 0 24019

2003 1634 4169 326 256 660 285 154 1636 877 64 1432 415 548 85 1809 21 190 14561

2004 6014 4631 2159 10 816 2260 1269 703 526 756 1101 612 1295 706 1848 221 245 25171

2005 8614 5045 1241 1005 4855 5259 486 0 2346 270 4166 214 3063 1717 2079 72 1039 41470

2006 2007 2008 16866 8318 6517 5299 5773 4452 2794 4978 2043 938 1370 1813 1765 5513 1776 9239 7902 1650 1859 3459 1537 690 3894 878 819 947 782 285 610 769 1642 19369 760 922 896 677 2312 4328 643 2398 1801 614 520 2643 538 3 3689 472 545 1055 100 48895 76547 26018

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, data from fig. 5.09 is included here.

Figure 5.12 Private Equity-Backed Acquisitions by MoneyTree™ Industry Number of Companies 1980 to 2008

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Software 0 0 0 0 2 0 3 3 4 4 7 5 14 22 33 30 31 54 73 75 105 91 116 110 120 130 144 135 134 Industrial/Energy 0 0 0 2 3 3 3 3 7 4 4 8 11 18 18 24 17 35 42 36 22 25 23 18 18 51 60 70 69 Media and Entertainment 0 0 0 0 0 0 1 1 0 1 0 1 1 6 5 6 16 21 20 29 38 52 21 15 30 30 36 53 34 Telecommunications 0 0 0 0 0 0 1 1 1 2 1 1 4 4 10 8 10 14 19 25 35 35 41 32 26 27 33 37 26 Consumer Products and Services 0 0 0 1 0 0 2 2 3 2 0 2 6 10 3 5 13 20 22 13 16 20 12 9 15 18 20 31 26 Networking and Equipment 0 0 0 0 0 0 0 2 0 2 0 0 2 10 11 11 16 7 12 27 21 14 16 19 24 25 27 18 25 Semiconductors 0 1 0 0 0 1 0 0 0 1 2 4 1 2 3 5 1 2 12 10 17 13 13 12 14 12 15 17 24 Biotechnology 0 0 0 0 0 0 2 0 1 4 1 2 7 6 8 15 14 13 18 23 16 18 13 15 24 28 31 22 22 Business Products and Services 0 0 0 0 0 0 0 1 3 0 2 2 1 3 1 3 4 7 10 13 15 23 17 15 16 20 29 41 22 IT Services 0 0 0 0 0 0 1 0 3 1 1 0 1 0 0 5 6 8 14 19 22 31 35 29 28 23 22 36 20 Medical Devices and Equipment 0 0 0 0 0 2 1 3 2 5 3 0 14 8 12 13 15 23 18 21 11 18 13 10 23 31 24 29 15 Healthcare Services 0 0 0 0 0 0 1 1 1 1 1 1 5 1 11 11 8 9 15 9 10 11 13 4 8 17 18 18 12 Financial Services 0 0 0 0 0 0 0 1 0 0 0 0 8 11 8 13 18 28 22 21 12 23 13 11 13 12 15 13 11 Electronics/Instrumentation 1 0 0 0 0 0 0 1 3 2 1 1 4 3 2 2 7 9 6 3 7 13 4 3 6 4 7 8 11 Retailing/Distribution 0 0 0 0 0 1 0 0 1 2 1 5 2 6 2 4 5 10 8 13 18 13 8 13 7 6 12 12 9 Computers and Peripherals 0 0 1 0 0 2 2 2 3 4 3 1 10 11 9 7 12 10 13 16 9 5 1 10 9 10 7 4 7 Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 1 2 4 2 5 6 Total 1 1 1 3 5 9 17 21 32 35 27 33 91 121 136 162 193 270 324 353 376 406 359 326 383 448 502 549 473
Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, data from fig. 5:10 is included here.

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Figure 5.13 Venture-Backed Merger & Acquisitions by Year

Year 2003 2004 2005 2006 2007 2008

Relationship Between Transaction Values vs. Cumulative Total Venture Investment < TVI 1x-4x TVI 4x-10x TVI >10x TVI 40% 40% 13% 7% 35% 34% 21% 10% 28% 40% 20% 12% 27% 36% 20% 17% 23% 37% 22% 18% 29% 28% 25% 18%

This chart is prepared by analyzing all deals where total venture investment and acquisition price are confirmed. Each deal is classified as a ratio of company acquisition (exit) price to total venture investment from all rounds. This chart compares the number of deals in each category. An acquisition where deal price is less than the total venture investment (“<TVI”) clearly did result in a good return. Four times the investment to ten times the investment is usually a good outcome. An acquisition for more than ten times venture investment is usually a very nice outcome.

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Performance
Over the long-term, venture capital funds have paid out a net 15-20% IRR to their investors. The most recent performance statistics confirm this. For the 20 year period ended on September 30, 2008, venture funds overall returned 17.0% annualized IRR. Among the fund segments, those designating themselves as early stage led the way with 21.6% annualized IRR. Shorter horizon returns are less significant. For example, the one year returns reflect falling valuations for public companies which then affect the valuations of private companies. Amplifying this effect in 2008, likely continuing into 2009 is the large number of later stage companies still in portfolios. These companies typically have positive EBITDA. Their portfolio valuations would be influenced by public markets through the use of ratios and comparables for pricing. Much of this IRR exists in the net asset values of portfolios. A continued awful exit market will delay exits (timing) and could reduce the values of the companies now awaiting an IPO or acquisition (amount realized). Both suggest lower short-term returns going forward.

METHODOLOGY
In the past, private equity performance has generally been measured in two ways. One way is an annualized internal rate of return (IRR) calculated since fund inception on a cumulative basis; the second is measuring the rate of return over the last one year, three years, five years, etc, otherwise known as the investment horizon. In both cases, returns of funds are calculated by Thomson Reuters net to limited partners after management fees and general partners’ carried interest (that is, the capital gains split). The IRR is calculated by Thomson Reuters by treating cash inflows as negative cash flows and distributions of cash and common shares from realized gains to investors as positive cash flows. In addition, the net asset value of

the fund is used as a terminal positive cash flow. The investment horizon return uses the same investment and distribution cash flow data as above, except that in addition to using the net asset value of the fund at the end of the period being measured as a terminal positive cash flow, it also uses the net asset value at the beginning of the period being measured as a negative initial cash flow. Both of these measures of performance use the net asset value as provided by the partnership, which is a subjective appraised unrealized value. However, these values can often be verified by the fund reports provided by general partners to their investors. For further information on valuations, readers should consult Appendix H in this publication on portfolio company valuations.

Figure 6.01 Performance of Private Equity Funds

Fund Type Seed/Early Focused Balanced Focused Later Stage Focused All Venture Buyout Funds Mezzanine Debt All Private Equity

Net IRR to Investors For Investment Horizon Ending 09/30/2008 for Private Equity Funds 1YR 3YR 5YR 10YR 20YR -1.5 3.7 5.0 37.1 21.6 -5.6 7.3 11.4 14.9 14.7 9.1 11.1 10.1 8.7 14.5 -1.5 6.4 8.5 17.1 17.0 -8.3 7.1 12.2 7.3 11.1 10.8 4.4 4.8 5.4 7.8 -7.1 7.6 11.0 9.3 12.9

Venture funds were classified into seed/early stage, balanced fund (investing in a variety of stages), or later stage categories depending on their investment focus. Returns information was provided on a time horizon basis, meaning for the one-year, three-year, five-year, 10-year, or 20-year time periods ending September 30, 2008. All returns are annualized and net to the LP investors. For example, the correct reading of the five-year all-venture number is: “over the five year period from October 2003 through September 2008, the industry as a whole returned a net annualized IRR to its investors of 8.5%.

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Figure 6.02 Five Year Rolling Averages Venture Capital vs. Public Markets as of 12/31/08
50 40 30 20 10 0 -10 -20
19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08
*VC S&P 500 NASDAQ

*

*2008 venture is through 9/30/2008

Figure 6.03 Five Year Rolling Averages: Venture Capital vs. Public Markets
Five-Year Period Venture Ending Capital 1990 6.5 1991 8.6 1992 8.7 1993 11.7 1994 13.1 1995 20.1 1996 22.4 1997 26.1 1998 26.6 1999 48.2 2000 48.2 2001 36.8 2002 26.9 2003 25.0 2004 -2.1 2005 -6.5 2006 1.3 2007 8.6 2008 *8.5
*Data as of 9/30/08 The comparison to major indices on a rolling five-year period basis is intended to smooth the effect of short term fluctuations. Remember that the 5-year statistics reflect significant devaluations and failures of the post-bubble period. Readers should note that a direct assessment of private equity returns with S&P 500 and NASDAQ total returns is misleading in the sense that the returns presented in this analysis for venture capital funds are IRRs (money-weighted returns), while the S&P 500 and NASDAQ index returns are geometric mean returns (time-weighted). Specifically, money-weighted returns are affected by the time value of money by application of a discount rate (the IRR), while time-weighted returns are simply the geometric mean of various holding period returns. Also remember that the venture capital statistic is for the asset class overall, and the two public-market indices are made up of selected, generally-successful public companies. A fairer comparison might be between the top quartile venture funds and the public indices but those statistics are not available for publication.

S&P 500 9.4 11.5 12.0 10.9 5.4 13.8 12.2 17.4 21.4 26.2 16.5 9.2 -1.9 -2.0 -3.8 -1.1 4.5 10.8 -4.1

NASDAQ 2.8 10.9 15.4 15.3 10.6 24.0 17.1 18.3 23.1 40.2 18.6 8.6 -3.2 -1.8 -11.8 -2.2 4.6 14.7 -4.7

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Figure 6.04 Venture Year Results for Selected Years Venture Funds as of 9/30/08

Year of Fund Formation 1990 1995 2000 2005 All Vintage Years

Annualized Pooled Return Since Inception 28.50 61.60 1.20 8.00 15.60

Realized Return (DPI) (times) 2.82 3.81 0.43 0.15 1.16

Unrealized Return (RVPI) (times) 0.17 0.33 0.63 0.99 0.48

Vintage year is defined by the year funds started investing. The vintage years presented are 1990, 1995, 2000, and 2005. In addition, combined results for all vintage years are presented as well. These returns are driven by both realized exits in the form of capital gains and unrealized valuations based upon interim valuations provided by the individual venture funds and verifiable by underlying fund reports. The valuations are used for the IRR analysis during the life of a portfolio, but do not reflect the capital distributions to the investors. For all of venture capital on a cumulative basis from inception of the funds through September 30, 2008, 1.16 times the original investment was realized and 0.48 times the original investment remained in unrealized portfolio valuations. Therefore, for all venture capital, this meant that 71% (1.16/(1.16+0.48)) of the overall gains reflected in the performance statistics were realized.

Figure 6.05 Venture Capital Investment vs. Net New Stock Mutual Fund Inflows

200 150 100 50
($ Billions)

0 -50 -100 -150 -200 -250 -300 2001 2002 2003 2004 2005 2006 2007 2008 Venture Capital Investment New Equity Mutual Fund Investment

This chart compares venture capital invested each year with new sales of equity mutual funds. The concept is to estimate capital entering public markets which could eventually be used as liquidity (exits) for venture portfolio companies. In 2008, while venture capital firms invested $28 billion, investors bled $234 billion from stock mutual funds. (Source: Investment Company Institute www.ici.org.) Clearly this bodes ill. Stepping back a year earlier, in 2007 the venture capital industry put $31 billion into companies and stock mutual funds attracted $93 billion. This gives a ratio of about 3 to 1. If both 2007 metrics became “run rates” for the next few years, could the US venture capital industry be successful? No one has estimated what the ideal or minimum multiples should be. But we know that 3 to 1 is probably far short of what is needed. For one thing, venture-backed companies represent between 1/3 and 1/4 of total IPOs. Also, for even a modest IRR on a particular portfolio company held for just four years, the holding would need to appreciate more than 3x. Plus the venture investors typically own half of the company or less. So even at 2007 levels, liquidity falls short. Given that the success of the venture capital ecosystem is dependent upon liquidity directly (IPOs) and indirectly (acquisitions by public companies) for exits, logic would suggest inflows at a strong multiple of venture investment are needed. Much thought work needs to be done on what that multiple needs to be. It’s clear that for the level of new liquidity seen in 2007 was insufficient. The 2008 outflow explains the lack of exits.

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Figure 6.06 Amount of Distributors to Limited Partners

Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Amt of Distributions ($ Billions) 15.6 17.5 12.8 30.2 84.8 14.7 10.7 7.8 15.0 21.0 15.8 19.7 *5.9

*Data through 9/30/08 This chart reflects capital paid out to limited partner investors by venture capital funds net of all fees, capital gains splits, and expenses.

Figure 6.07 Ratio of IPO Pre-Money Valuation of Amount Invested

Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

IPO Pre Post Offer Value Offer Amt Money Total Venture Inv. ($ Billion) ($ Billion) Valuation ($ Billion) 31.1 8.1 23.0 2.2 56.4 11.5 44.9 3.7 22.1 4.8 17.3 2.7 17.3 3.8 13.5 2.4 134.0 20.8 113.2 11.0 133.2 25.6 107.6 13.0 18.0 3.5 14.5 2.6 8.0 2.1 5.9 1.7 8.3 2.0 6.3 2.4 61.1 11.4 49.7 6.7 16.5 4.5 12.0 3.1 22.2 5.1 17.1 4.3 53.6 10.3 43.3 6.7 2.6 0.5 2.1 0.4

Ratio 10.5 12.1 6.4 5.6 10.3 8.3 5.6 3.5 2.6 7.4 3.9 4.0 6.5 5.3

This chart quantifies the quality of a year’s initial public offerings by comparing the IPO pre-money valuation to the total venture investment in those companies. For example, looking at 2008: “For the offering itself (not the first trade, end of first day, end of first week, etc.), subtracting the IPO amount ($0.5 billion) from the IPO valuation ($2.6 billion) gives the IPO pre-money valuation ($2.1 billion). The venture-backed companies which went public in 2008 had a cumulative (total) venture investment of $0.4 billion. This gives a ratio of 5.3x which is considerably stronger than the 4.0x ratio in 2006” But the sample size is small . and the conclusions are of limited use.

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Appendix A: Glossary
“A” round – a financing event whereby angel groups and / or venture capitalists become involved in a fast growth company that was previously financed by founders and their friends and families. Accredited investor – a person or legal entity, such as a company or trust fund, that meets certain net worth and income qualifications and is considered to be sufficiently sophisticated to make investment decisions in private offerings. Regulation D of the Securities Act of 1933 exempts accredited investors from protection of the Securities Act. The Securities and Exchange Commission has proposed revisions to the accredited investor qualifying rules, which may or may not result in changes for venture investors. The current criteria for a natural person are: $1 million net worth or annual income exceeding $200,000 individually or $300,000 with a spouse. Directors, general partners and executive officers of the issuer are considered to be accredited investors. Alternative asset class – a class of investments that includes venture capital, leverage buyouts, hedge funds, real estate, and oil and gas, but excludes publicly traded securities. Pension plans, college endowments and other relatively large institutional investors typically allocate a certain percentage of their investments to alternative assets with an objective to diversify their portfolios. Alpha – a term derived from statistics and finance theory that is used to describe the return produced by a fund manager in excess of the return of a benchmark index. Manager returns and benchmark returns are measured net of the risk-free rate. In addition, manager returns are adjusted for the risk of the manager’s portfolio relative to the risk of the benchmark index. Alpha is a proxy for manager skill. Angel – a wealthy individual that invests in companies in relatively early stages of development. Usually angels invest less than $1 million per startup. Anti-dilution – a contract clause that protects an investor from a substantial reduction in percentage ownership in a company due to the issuance by the company of additional shares to other entities. The mechanism for making an adjustment that maintains the same percentage ownership is called a Full Ratchet. The most commonly used adjustment provides partial protection and is called Weighted Average. “B” round – a financing event whereby investors such as venture capitalists and organized angel groups are sufficiently interested in a company to provide additional funds after the “A” round of financing. Subsequent rounds are called “C”, “D” and so on. Basis point (“bp”) – one one-hundredth (1/100) of a percentage unit. For example, 50 basis points equals one half of one percent. Banks quote variable loan rates in terms of an index plus a margin and the margin is often described in basis points, such as LIBOR plus 400 basis points (or, as the experts say, “beeps”). Beta – a measure of volatility of a public stock relative to an index or a composite of all stocks in a market or geographical region. A beta of more than one indicates the stock has higher volatility than the index (or composite) and a beta of one indicates volatility equivalent to the index (or composite). For example, the price of a stock with a beta of 1.5 will change by 1.5% if the index value changes by 1%. Typically, the S&P500 index is used in calculating the beta of a stock. Beta product – a product that is being tested by potential customers prior to being formally launched into the marketplace. Board of directors – a group of individuals, typically composed of managers, investors and experts who have a fiduciary responsibility for the well being and proper guidance of a corporation. The board is elected by the shareholders. Book – see Private placement memorandum. Bootstrapping – the actions of a startup to minimize expenses and build cash flow, thereby reducing or

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eliminating the need for outside investors. Bp – see Basis point. Bridge financing – temporary funding that will eventually be replaced by permanent capital from equity investors or debt lenders. In venture capital, a bridge is usually a short term note (6 to 12 months) that converts to preferred stock. Typically, the bridge lender has the right to convert the note to preferred stock at a price that is a 20% to 25% discount from the price of the preferred stock in the next financing round. See Mezzanine and Wipeout bridge. Broad-based weighted average anti-dilution - A weighted average anti-dilution method adjusts downward the price per share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A’s preferred stock is repriced to a weighted average of investor A’s price and investor B’s price. A broadbased anti-dilution method uses all common stock outstanding on a fully diluted basis (including all convertible securities, warrants and options) in the denominator of the formula for determining the new weighted average price. See Narrow-based weighted average anti-dilution . Burn rate – the rate at which a startup with little or no revenue uses available cash to cover expenses. Usually expressed on a monthly or weekly basis. Business Development Company (BDC) – a publicly traded company that invests in private companies and is required by law to provide meaningful support and assistance to its portfolio companies. Business plan – a document that describes a new concept for a business opportunity. A business plan typically includes the following sections: executive summary, market need, solution, technology, competition, marketing, management, operations, exit strategy, and financials (including cash flow projections). For most venture capital funds fewer than 10 of every 100 business plans received eventually receive funding. Buyout – a sector of the private equity industry. Also, the purchase of a controlling interest of a company Buy-sell agreement – a contract that sets forth the conditions under which a shareholder must first offer his or her shares for sale to the other shareholders before being allowed to sell to entities outside the company. C Corporation – an ownership structure that allows any number of individuals or companies to own shares. A C corporation is a stand-alone legal entity so it offers some protection to its owners, managers and investors from liability resulting from its actions. Capital Asset Pricing Model (CAPM) – a method of estimating the cost of equity capital of a company. The cost of equity capital is equal to the return of a risk-free investment plus a premium that reflects the risk of the company’s equity. Capital call – when a private equity fund manager (usually a “general partner” in a partnership) requests that an investor in the fund (a “limited partner”) provide additional capital. Usually a limited partner will agree to a maximum investment amount and the general partner will make a series of capital calls over time to the limited partner as opportunities arise to finance startups and buyouts. Capital gap - the difficulty faced by some entrepreneurs in trying to raise between $2 million and $5 million. Friends, family and angel investors are typically good sources for financing rounds of less than $2 million, while many venture capital funds have become so large that investments in this size range are difficult. Capitalization table – a table showing the owners of a company’s shares and their ownership percentages as well as the debt holders. It also lists the forms of ownership, such as common stock, preferred stock, warrants, options, senior debt, and subordinated debt. Capital gains – a tax classification of investment earnings resulting from the purchase and sale of assets. Typically, a company’s investors and founders have earnings classified as long term capital gains (held for a year or longer), which are taxed at a lower rate than ordinary income. by an outside investor (in a leveraged buyout) or a management team (in a management buyout).

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Capital stock – a description of stock that applies when there is only one class of shares. This class is known as “common stock”. Capped participating preferred stock – preferred stock whose participating feature is limited so that an investor cannot receive more than a specified amount. See Participating preferred stock. Carried interest — the share in the capital gains of a venture capital fund which is allocated to the General Partner. Typically, a fund must return the capital given to it by limited partners plus any preferential rate of return before the general partner can share in the profits of the fund. The general partner will typically receive a 20% carried interest, although some successful firms receive 25%-30%. Also known as “carry” or “promote.” Clawback – a clause in the agreement between the general partner and the limited partners of a private equity fund. The clawback gives limited partners the right to reclaim a portion of disbursements to a general partner for profitable investments based on significant losses from later investments in a portfolio. Closing – the conclusion of a financing round whereby all necessary legal documents are signed and capital has been transferred. Club deal – the act of investing by two or more entities in the same target company, usually involving a leveraged buyout transaction. Co-investment –the direct investment by a limited partner alongside a general partner in a portfolio company. Collateral – hard assets of the borrower, such as real estate or equipment, for which a lender has a legal interest until a loan obligation is fully paid off. Commitment – an obligation, typically the maximum amount that a limited partner agrees to invest in a fund. See Capital call. Common stock – a type of security representing ownership rights in a company. Usually, company founders, management and employees own common stock while investors own preferred stock. In the event of a liquidation of the company, the claims of secured and unsecured creditors, bondholders and preferred stockholders take precedence over common stockholders. See Preferred stock. Comparable – a publicly traded company with similar characteristics to a private company that is being valued. For example, a telecommunications equipment manufacturer whose market value is 2 times revenues can be used to estimate the value of a similar and relatively new company with a new product in the same industry. See Liquidity discount. Control – the authority of an individual or entity that owns more than 50% of equity in a company or owns the largest block of shares compared to other shareholders. Consolidation – see Rollup. Conversion – the right of an investor or lender to force a company to replace the investor’s preferred shares or the lender’s debt with common shares at a preset conversion ratio. A conversion feature was first used in railroad bonds in the 1800’s. Convertible debt – a loan which allows the lender to exchange the debt for common shares in a company at a preset conversion ratio. Also known as a “convertible note.” Convertible preferred stock – a type of stock that gives an owner the right to convert to common shares of stock. Usually, preferred stock has certain rights that common stock doesn’t have, such as decisionmaking management control, a promised return on investment (dividend), or senior priority in receiving proceeds from a sale or liquidation of the company. Typically, convertible preferred stock automatically converts to common stock if the company makes an initial public offering (IPO). Convertible preferred is the most common tool for private equity funds to invest in companies. Co-sale right – a contractual right of an investor to sell some of the investor’s stock along with the founder’s or majority shareholder’s stock if either the founder or majority shareholder elects to sell stock to a third-party. Also known as Tag-along right.

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Cost of capital – see Weighted average cost of capital. Cost of revenue – the expenses generated by the core operations of a company. Covenant – a legal promise to do or not do a certain thing. For example, in a financing arrangement, company management may agree to a negative covenant, whereby it promises not to incur additional debt. The penalties for violation of a covenant may vary from repairing the mistake to losing control of the company. Coverage ratio – describes a company’s ability to pay debt from cash flow or profits. Typical measures are EBITDA/Interest, (EBITDA minus Capital Expenditures)/Interest, and EBIT/Interest. Cram down round – a financing event upon which new investors with substantial capital are able to demand and receive contractual terms that effectively cause the issuance of sufficient new shares by the startup company to significantly reduce (“dilute”) the ownership percentage of previous investors. Cumulative dividends – the owner of preferred stock with cumulative dividends has the right to receive accrued (previously unpaid) dividends in full before dividends are paid to any other classes of stock. Current ratio – the ratio of current assets to current liabilities. Data room – a specific location where potential buyers / investors can review confidential information about a target company. This information may include detailed financial statements, client contracts, intellectual property, property leases, and compensation agreements. Deal flow – a measure of the number of potential investments that a fund reviews in any given period. Defined benefit plan – a company retirement plan in which the benefits are typically based on an employee’s salary and number of years worked. Fixed benefits are paid after the employee retires. The employer bears the investment risk and is committed to providing the benefits to the employee. Defined benefit plan managers can invest in private equity funds. Defined contribution plan – a company retirement plan in which the employee elects to contribute some portion of his or her salary into a retirement plan, such as a 401(k) or 403(b). The employer may also contribute to the employee’s plan. With this type of plan, the employee bears the investment risk. The benefits depend solely on the amount of money made from investing the employee’s contributions. Defined contribution plan capital cannot be invested in private equity funds. Demand rights – a type of registration right. Demand rights give an investor the right to force a startup to register its shares with the SEC and prepare for a public sale of stock (IPO). Dilution – the reduction in the ownership percentage of current investors, founders and employees caused by the issuance of new shares to new investors. Dilution protection – see Anti-dilution and Full ratchet. Disbursement – an investment by a fund in a company. Discount rate – the interest rate used to determine the present value of a series of future cash flows. Discounted cash flow (DCF) – a valuation methodology whereby the present value of all future cash flows expected from a company is calculated. Distressed debt – the bonds of a company that is either in or approaching bankruptcy. Some private equity funds specialize in purchasing such debt at deep discounts with the expectation of exerting influence in the restructuring of the company and then selling the debt once the company has meaningfully recovered. Distribution – the transfer of cash or securities to a limited partner resulting from the sale, liquidation or IPO of one or more portfolio companies in which a general partner chose to invest. Dividends – payments made by a company to the

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owners of certain securities. Typically, dividends are paid quarterly, by approval of the board of directors, to owners of preferred stock. Down round – a round of financing whereby the valuation of the company is lower than the value determined by investors in an earlier round. Drag-along rights – the contractual right of an investor in a company to force all other investors to agree to a specific action, such as the sale of the company. Drawdown schedule – an estimate of the gradual transfer of committed investment funds from the limited partners of a private equity fund to the general partners. Due diligence – the investigatory process performed by investors to assess the viability of a potential investment and the accuracy of the information provided by the target company. Dutch auction – a method of conducting an IPO whereby newly issued shares of stock are committed to the highest bidder, then, if any shares remain, to the next highest bidder, and so on until all the shares are committed. Note that the price per share paid by all buyers is the price commitment of the buyer of the last share. Early stage – the state of a company after the seed (formation) stage but before middle stage (generating revenues). Typically, a company in early stage will have a core management team and a proven concept or product, but no positive cash flow. Earnings before interest and taxes (EBIT) – a measurement of the operating profit of a company. One possible valuation methodology is based on a comparison of private and public companies’ value as a multiple of EBIT. Earnings before interest, taxes, depreciation and amortization (EBITDA) – a measurement of the cash flow of a company. One possible valuation methodology is based on a comparison of private and public companies’ value as a multiple of EBITDA. Earn out – an arrangement in which sellers of a business receive additional future payments, usually based on financial performance metrics such as revenue or net income. Elevator pitch – a concise presentation, lasting only a few minutes (an elevator ride), by an entrepreneur to a potential investor about an investment opportunity. Employee Stock Ownership Program (ESOP) – a plan established by a company to reserve shares for employees. Entrepreneur – an individual who starts his or her own business. Entrepreneurship – the application of innovative leadership to limited resources in order to create exceptional value. Enterprise Value (EV) – the sum of the market values of the common stock and long term debt of a company, minus excess cash. Equity – the ownership structure of a company represented by common shares, preferred shares or unit interests. Equity = Assets – Liabilities. ESOP – see Employee Stock Ownership Program. Evergreen fund – a fund that reinvests its profits in order to ensure the availability of capital for future investments. Exit strategy – the plan for generating profits for owners and investors of a company. Typically, the options are to merge, be acquired or make an initial public offering (IPO). An alternative is to recapitalize (releverage the company and then pay dividends to shareholders). Expansion stage – the stage of a company characterized by a complete management team and a substantial increase in revenues. Fair value – a financial reporting principle for valuing assets and liabilities, for example, portfolio companies in venture capital fund portfolios. This has received much recent attention as the Financial Accounting Standards Board (FASB) has issued definitive guidance (FAS 157) on this long standing principle.

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Fairness opinion – a letter issued by an investment bank that charges a fee to assess the fairness of a negotiated price for a merger or acquisition. FAS 157 – an an accounting standard developed by the Financial Accounting Standards Board (FASB) regarding the application of a fair value principle. First refusal – the right of a privately owned company to purchase any shares that employees would like to sell. Founders stock – nominally priced common stock issued to founders, officers, employees, directors, and consultants. Free cash flow to equity (FCFE) – the cash flow available after operating expenses, interest payments on debt, taxes, net principal repayments, preferred stock dividends, reinvestment needs and changes in working capital. In a discounted cash flow model to determine the value of the equity of a firm using FCFE, the discount rate used is the cost of equity. Free cash flow to the firm (FCFF) – the operating cash flow available after operating expenses, taxes, reinvestment needs and changes in working capital, but before any interest payments on debt are made. In a discounted cash flow model to determine the enterprise value of a firm using FCFF, the discount rate used is the weighted average cost of capital (WACC). Friends and family financing – capital provided by the friends and family of founders of an early stage company. Founders should be careful not to create an ownership structure that may hinder the participation of professional investors once the company begins to achieve success. Full ratchet – an anti-dilution protection mechanism whereby the price per share of the preferred stock of investor A is adjusted downward due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A’s preferred stock is repriced to match the price of investor B’s preferred stock. Usually as a result of the implementation of a ratchet, company management and employees who own a fixed amount of common shares suffer significant dilution. See Narrow-based weighted average anti-dilution and Broad-based weighted average anti-dilution. Fully diluted basis – a methodology for calculating any per share ratios whereby the denominator is the total number of shares issued by the company on the assumption that all warrants and options are exercised and preferred stock. Fund-of-funds – a fund created to invest in private equity funds. Typically, individual investors and relatively small institutional investors participate in a fund-of-funds to minimize their portfolio management efforts. Gatekeepers – intermediaries which endowments, pension funds and other institutional investors use as advisors regarding private equity investments. General partner (GP) – a class of partner in a partnership. The general partner retains liability for the actions of the partnership. Historically, venture capital and buyout funds have been structured as limited partnerships, with the venture firm as the GP and limited partners (LPs) being the institutional and high net worth investors that provide most of the capital in the partnership. The GP earns a management fee and a percentage of gains (see Carried interest). GP – see General partner. Going-private transaction – when a public company chooses to pay off all public investors, delist from all stock exchanges, and become owned by management, employees, and select private investors. Golden handcuffs – financial incentives that discourage founders and / or important employees from leaving a company before a predetermined date or important milestone. Grossing up – an adjustment of an option pool for management and employees of a company which increases the number of shares available over time. This usually occurs after a financing round whereby one or more investors receive a relatively large percentage of the company. Without a grossing up, managers and employees would suffer the financial and emotional consequences of dilution, thereby potentially affecting the overall performance of the company.

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Growth stage – the state of a company when it has received one or more rounds of financing and is generating revenue from its product or service. Also known as “middle stage.” Hart-Scott-Rodino Act – a law requiring entities that acquire certain amounts of stock or assets of a company to inform the Federal Trade Commission and the Department of Justice and to observe a waiting period before completing the transaction. Hedge fund – an investment fund that has the ability to use leverage, take short positions in securities, or use a variety of derivative instruments in order to achieve a return that is relatively less correlated to the performance of typical indices (such as the S&P 500) than traditional long-only funds. Hedge fund managers are typically compensated based on assets under management as well as fund performance. High yield debt – debt issued via public offering or public placement (Rule 144A) that is rated below investment grade by S&P or Moody’s. This means that the debt is rated below the top four rating categories (i.e. S&P BB+, Moody’s Ba2 or below). The lower rating is indicative of higher risk of default, and therefore the debt carries a higher coupon or yield than investment grade debt. Also referred to as Junk bonds or Subinvestment grade debt. Hockey stick – the general shape and form of a chart showing revenue, customers, cash or some other financial or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts to impress potential investors. Holding period – amount of time an investment remains in a portfolio. Hot issue – stock in an initial public offering that is in high demand. Hot money – capital from investors that have no tolerance for lack of results by the investment manager and move quickly to withdraw at the first sign of trouble. Hurdle rate – a minimum rate of return required before an investor will make an investment. Incorporation – the process by which a business receives a state charter, allowing it to become a corporation. Many corporations choose Delaware because its laws are business-friendly and up to date. Incubator – a company or facility designed to host startup companies. Incubators help startups grow while controlling costs by offering networks of contacts and shared backoffice resources. Indenture – the terms and conditions between a bond issuer and bond buyers. Initial public offering (IPO) – the first offering of stock by a company to the public. New public offerings must be registered with the Securities and Exchange Commission. An IPO is one of the methods that a startup that has achieved significant success can use to raise additional capital for further growth. See Qualified IPO. In-kind distribution – a distribution to limited partners of a private equity fund that is in the form of publicly trades shares rather than cash. Inside round – a round of financing in which the investors are the same investors as the previous round. An inside round raises liability issues since the valuation of the company has no third party verification in the form of an outside investor. In addition, the terms of the inside round may be considered self-dealing if they are onerous to any set of shareholders or if the investors give themselves additional preferential rights. Institutional investor – professional entities that invest capital on behalf of companies or individuals. Examples are: pension plans, insurance companies and university endowments. Intellectual property (IP) – knowledge, techniques, writings and images that are intangible but often protected by law via patents, copyrights, and trademarks. Interest coverage ratio – earnings before interest and taxes (EBIT) divided by interest expense. This is a key ratio used by lenders to assess the ability of a company to produce sufficient cash to pay its debt obligation.

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Internal rate of return (IRR) – the interest rate at which a certain amount of capital today would have to be invested in order to grow to a specific value at a specific time in the future. Investment thesis / Investment philosophy – the fundamental ideas which determine the types of investments that an investment fund will choose in order to achieve its financial goals. IPO – see Initial public offering. IRR – see Internal rate of return. Issuer – the company that chooses to distribute a portion of its stock to the public. J curve – a concept that during the first few years of a private equity fund, cash flow or returns are negative due to investments, losses, and expenses, but as investments produce results the cash flow or returns trend upward. A graph of cash flow or returns versus time would then resemble the letter “J”. Later stage – the state of a company that has proven its concept, achieved significant revenues compared to its competition, and is approaching cash flow break even or positive net income. Typically, a later stage company is about 6 to 12 months away from a liquidity event such as an IPO or buyout. The rate of return for venture capitalists that invest in later stage, less risky ventures is lower than in earlier stage ventures. LBO – see Leveraged buyout. Lead investor – the venture capital investor that makes the largest investment in a financing round and manages the documentation and closing of that round. The lead investor sets the price per share of the financing round, thereby determining the valuation of the company. Letter of intent – a document confirming the intent of an investor to participate in a round of financing for a company. By signing this document, the subject company agrees to begin the legal and due diligence process prior to the closing of the transaction. Also known as a “Term Sheet”. Leverage – the use of debt to acquire assets, build operations and increase revenues. By using debt, a company is attempting to achieve results faster than if it only used its cash available from pre-leverage operations. The risk is that the increase in assets and revenues does not generate sufficient net income and cash flow to pay the interest costs of the debt. Leveraged buyout (LBO) – the purchase of a company or a business unit of a company by an outside investor using mostly borrowed capital. Leveraged recapitalization – the reorganization of a company’s capital structure resulting in more debt added to the balance sheet. Private equity funds can recapitalize a portfolio company and then direct the company to issue a one-time dividend to equity investors. This is often done when the company is performing well financially and the debt markets are expanding. Leverage ratios – measurements of a company’s debt as a multiple of cash flow. Typical leverage ratios include Total Debt / EBITDA, Total Debt / (EBITDA minus Capital Expenditures), and Seniore Debt / EBITDA. L.I.B.O.R. – see The London Interbank Offered Rate. License – a contract in which a patent owner grants to a company the right to make, use or sell an invention under certain circumstances and for compensation. Limited liability company (LLC) – an ownership structure designed to limit the founders’ losses to the amount of their investment. An LLC itself does not pay taxes, rather its owners pay taxes on their proportion of the LLC profits at their individual tax rates. Limited partnership – a legal entity composed of a general partner and various limited partners. The general partner manages the investments and is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The general partner collects a management fee and earns a percentage of capital gains (see Carried interest), while the limited partners receive income, capital gains and tax benefits.

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Limited partner (LP) – an investor in a limited partnership. The general partner is liable for the actions of the partnership while the limited partners are generally protected from legal actions and any losses beyond their original investment. The limited partner receives income, capital gains and tax benefits. Liquidation – the sale of a company. This may occur in the context of an acquisition by a larger company or in the context of selling off all assets prior to cessation of operations (Chapter 7 bankruptcy). In a liquidation, the claims of secured and unsecured creditors, bondholders and preferred stockholders take precedence over common stockholders. Liquidation preference – the contractual right of an investor to priority in receiving the proceeds from the liquidation of a company. For example, a venture capital investor with a “2x liquidation preference” has the right to receive two times its original investment upon liquidation. Liquidity discount – a decrease in the value of a private company compared to the value of a similar but publicly traded company. Since an investor in a private company cannot readily sell his or her investment, the shares in the private company must be valued less than a comparable public company. Liquidity event – a transaction whereby owners of a significant portion of the shares of a private company sell their shares in exchange for cash or shares in another, usually larger company. For example, an IPO is a liquidity event. Lock-up agreement – investors, management and employees often agree not to sell their shares for a specific time period after an IPO, usually 6 to 12 months. By avoiding large sales of its stock, the company has time to build interest among potential buyers of its shares. London Interbank Offered Rate (L.I.B.O.R.) – the average rate charged by large banks in London for loans to each other. LIBOR is a relatively volatile rate and is typically quoted in maturities of one month, three months, six months and one year. Management buyout (MBO) – a leveraged buyout controlled by the members of the management team of a company or a division. Often an MBO is conducted in partnership with a buyout fund. Management fee – a fee charged to the limited partners in a fund by the general partner. Management fees in a private equity fund usually range from 0.75% to 3% of capital under management, depending on the type and size of fund. For venture capital funds, 2% is typical. Management rights – the rights often required by a venture capitalist as part of the agreement to invest in a company. The venture capitalist has the right to consult with management on key operational issues, attend board meetings and review information about the company’s financial situation. Market capitalization – the value of a publicly traded company as determined by multiplying the number of shares outstanding by the current price per share. MBO – see Management buyout. Mezzanine – a layer of financing that has intermediate priority (seniority) in the capital structure of a company. For example, mezzanine debt has lower priority than senior debt but usually has a higher interest rate and often includes warrants. In venture capital, a mezzanine round is generally the round of financing that is designed to help a company have enough resources to reach an IPO. See Bridge financing. Multiples – a valuation methodology that compares public and private companies in terms of a ratio of value to an operations figure such as revenue or net income. For example, if several publicly traded computer hardware companies are valued at approximately 2 times revenues, then it is reasonable to assume that a startup computer hardware company that is growing fast has the potential to achieve a valuation of 2 times its revenues. Before the startup issues its IPO, it will likely be valued at less than 2 times revenue because of the lack of liquidity of its shares. See Liquidity discount. Narrow-based weighted average anti-dilution – a type of anti-dilution mechanism. A weighted average anti-dilution method adjusts downward the price per

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share of the preferred stock of investor A due to the issuance of new preferred shares to new investor B at a price lower than the price investor A originally received. Investor A’s preferred stock is repriced to a weighed average of investor A’s price and investor B’s price. A narrow-based anti-dilution uses only common stock outstanding in the denominator of the formula for determining the new weighted average price. NDA – see Non-disclosure agreement. No-shop clause – a section of an agreement to purchase a company whereby the seller agrees not to market the company to other potential buyers for a specific time period. Non-cumulative dividends – dividends that are payable to owners of preferred stock at a specific point in time only if there is sufficient cash flow available after all company expenses have been paid. If cash flow is insufficient, the owners of the preferred stock will not receive the dividends owed for that time period and will have to wait until the board of directors declares another set of dividends. Non-interference – an agreement often signed by employees and management whereby they agree not to interfere with the company’s relationships with employees, clients, suppliers and sub-contractors within a certain time period after termination of employment. Non-solicitation – an agreement often signed by employees and management whereby they agree not to solicit other employees of the company regarding job opportunities. Non-disclosure agreement (NDA) – an agreement issued by entrepreneurs to protect the privacy of their ideas when disclosing those ideas to third parties. Offering memorandum – a legal document that provides details of an investment to potential investors. See Private placement memorandum. OID – see Original issue discount. Operating cash flow – the cash flow produced from the operation of a business, not from investing activPiggyback rights – rights of an investor to have his or her shares included in a registration of a startup’s shares in preparation for an IPO. ities (such as selling assets) or financing activities (such as issuing debt). Calculated as net operating income (NOI) plus depreciation. Option pool – a group of options set aside for long term, phased compensation to management and employees. Outstanding shares – the total amount of common shares of a company, not including treasury stock, convertible preferred stock, warrants and options. Pay to play – a clause in a financing agreement whereby any investor that does not participate in a future round agrees to suffer significant dilution compared to other investors. The most onerous version of “pay to play” is automatic conversion to common shares, which in essence ends any preferential rights of an investor, such as the right to influence key management decisions. Pari passu – a legal term referring to the equal treatment of two or more parties in an agreement. For example, a venture capitalist may agree to have registration rights that are pari passu with the other investors in a financing round. Participating dividends – the right of holders of certain preferred stock to receive dividends and participate in additional distributions of cash, stock or other assets. Participating preferred stock – a unit of ownership composed of preferred stock and common stock. The preferred stock entitles the owner to receive a predetermined sum of cash (usually the original investment plus accrued dividends) if the company is sold or has an IPO. The common stock represents additional continued ownership in the company. Participating preferred stock has been characterized as “having your cake and eating it too”. PEIGG – acronym for Private Equity Industry Guidelines Group, an ad hoc group of individuals and firms involved in the private equity industry for the purpose of establishing valuation and reporting guidelines.

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PIPEs – see Private investment in public equity. Placement agent – a company that specializes in finding institutional investors that are willing and able to invest in a private equity fund. Sometimes a private equity fund will hire a placement agent so the fund partners can focus on making and managing investments in companies rather than on raising capital. Portfolio company – a company that has received an investment from a private equity fund. Post-money valuation – the valuation of a company including the capital provided by the current round of financing. For example, a venture capitalist may invest $5 million in a company valued at $2 million “premoney” (before the investment was made). As a result, the startup will have a post-money valuation of $7 million. PPM – see Private placement memorandum. Preemptive rights – the rights of shareholders to maintain their percentage ownership of a company by buying shares sold by the company in future financing rounds. Preference – seniority, usually with respect to dividends and proceeds from a sale or dissolution of a company. Preferred return – a minimum return per annum that must be generated for limited partners of a private equity fund before the general partner can begin receiving a percentage of profits from investments. Preferred stock – a type of stock that has certain rights that common stock does not have. These special rights may include dividends, participation, liquidity preference, anti-dilution protection and veto provisions, among others. Private equity investors usually purchase preferred stock when they make investments in companies. Pre-money valuation – the valuation of a company prior to the current round of financing. For example, a venture capitalist may invest $5 million in a company valued at $2 million pre-money. As a result, the startup will have a “post-money” valuation of $7 million. Primary shares – shares sold by a corporation (not by individual shareholders). Private equity – equity investments in non-public companies, usually defined as being made up of venture capital funds and buyout funds. Real estate, oil and gas, and other such partnerships are sometimes included in the definition. Private investment in public equity (PIPEs) – investments by a private equity fund in a publicly traded company, usually at a discount and in the form of preferred stock. Private placement – the sale of a security directly to a limited number of institutional and qualified individual investors. If structured correctly, a private placement avoids registration with the Securities and Exchange Commission. Private placement memorandum (PPM) – a document explaining the details of an investment to potential investors. For example, a private equity fund will issue a PPM when it is raising capital from institutional investors. Also, a startup may issue a PPM when it needs growth capital. Also known as “Offering Memorandum”. Private securities – securities that are not registered with the Securities and Exchange Commission and do not trade on any exchanges. The price per share is negotiated between the buyer and the seller (the “issuer”). Prudent man rule – a fundamental principle for professional money management which serves as a basis for the Prudent Investor Act. The principle is based on a statement by Judge Samuel Putnum in 1830: “Those with the responsibility to invest money for others should act with prudence, discretion, intelligence and regard for the safety of capital as well as income.” In the 1970s a favorable interpretation of this rule enabled pension fund managers to invest in venture capital for the first time. Qualified IPO – a public offering of securities valued at or above a total amount specified in a financing agreement. This amount is usually specified to be sufficiently large to guarantee that the IPO shares will trade in a major exchange (NASDAQ or New

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York Stock Exchange). Usually upon a qualified IPO preferred stock is forced to convert to common stock. Quartile – one fourth of the data points in a data set. Often, private equity investors are measured by the results of their investments during a particular period of time. Institutional investors often prefer to invest in private equity funds that demonstrate consistent results over time, placing in the upper quartile of the investment results for all funds. Ratchet – a mechanism to prevent dilution. An antidilution clause in a contract protects an investor from a reduction in percentage ownership in a company due to the future issuance by the company of additional shares to other entities. Realization ratio – the ratio of cumulative distributions to paid-in capital. The realization ratio is used as a measure of the distributions from investment results of a private equity partnership compared to the capital under management. Recapitalization – the reorganization of a company’s capital structure. Red herring – a preliminary prospectus filed with the Securities and Exchange Commission and containing the details of an IPO offering. The name refers to the disclosure warning printed in red letters on the cover of each preliminary prospectus advising potential investors of the risks involved. Redemption rights – the right of an investor to force the startup company to buy back the shares issued as a result of the investment. In effect, the investor has the right to take back his/her investment and may even negotiate a right to receive an additional sum in excess of the original investment. Registration – the process whereby shares of a company are registered with the Securities and Exchange Commission under the Securities Act of 1933 in preparation for a sale of the shares to the public. Regulation D – an SEC regulation that governs private placements. Private placements are investment offerings for institutional and accredited individual investors but not for the general public. There is an exception that 35 non-accredited investors can participate. Restricted shares – shares that cannot be traded in the public markets. Return on investment (ROI) – the proceeds from an investment, during a specific time period, calculated as a percentage of the original investment. Also, net profit after taxes divided by average total assets. Rights offering – an offering of stock to current shareholders that entitles them to purchase the new issue, usually at a discount. Rights of co-sale with founders – a clause in venture capital investment agreements that allows the VC fund to sell shares at the same time that the founders of a startup chose to sell. Right of first refusal – a contractual right to participate in a transaction. For example, a venture capitalist may participate in a first round of investment in a startup and request a right of first refusal in any following rounds of investment. Risk-free rate – a term used in finance theory to describe the return from investing in a riskless security. In practice, this is often taken to be the return on US Treasury Bills. Road show – presentations made in several cities to potential investors and other interested parties. For example, a company will often make a road show to generate interest among institutional investors prior to its IPO. ROI – see Return on investment. Rollup – the purchase of relatively smaller companies in a sector by a rapidly growing company in the same sector. The strategy is to create economies of scale. For example, the movie theater industry underwent significant consolidation in the 1960’s and 1970’s. Round – a financing event usually involving several private equity investors. Royalties – payments made to patent or copyright owners in exchange for the use of their intellectual property.

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Rule 144 – a rule of the Securities and Exchange Commission that specifies the conditions under which the holder of shares acquired in a private transaction may sell those shares in the public markets. S corporation – an ownership structure that limits its number of owners to 100. An S corporation does not pay taxes, rather its owners pay taxes on their proportion of the corporation’s profits at their individual tax rates. SBIC – see Small Business Investment Company. Scalability – a characteristic of a new business concept that entails the growth of sales and revenues with a much slower growth of organizational complexity and expenses. Venture capitalists look for scalability in the startups they select to finance. Scale-down – a schedule for phased decreases in management fees for general partners in a limited partnership as the fund reduces its investment activities toward the end of its term. Scale-up – the process of a company growing quickly while maintaining operational and financial controls in place. Also, a schedule for phased increases in management fees for general partners in a limited partnership as the fund increases its investment activities over time. Secondary market – a market for the sale of limited partnership interests in private equity funds. Sometimes limited partners chose to sell their interest in a partnership, typically to raise cash or because they cannot meet their obligation to invest more capital according to the takedown schedule. Certain investment companies specialize in buying these partnership interests at a discount. Secondary shares – shares sold by a shareholder (not by the corporation). Securities and Exchange Commission (SEC) – the regulatory body that enforces federal securities laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934. Seed capital – investment provided by angels, friends and family to the founders of a startup in seed stage. Seed stage – the state of a company when it has just been incorporated and its founders are developing their product or service. Senior debt – a loan that has a higher priority in case of a liquidation of the asset or company. Seniority – higher priority. Series A preferred stock – preferred stock issued by a fast growth company in exchange for capital from investors in the “A” round of financing. This preferred stock is usually convertible to common shares upon the IPO or sale of the company. Sharpe Ratio – a method of calculating the riskadjusted return of an investment. The Sharpe Ratio is calculated by subtracting the risk-free rate from the return on a specific investment for a time period (usually one year) and then dividing the resulting figure by the standard deviation of the historical (annual) returns for that investment. The higher the Sharpe Ratio, the better. Small Business Investment Company (SBIC) – a company licensed by the Small Business Administration to receive government capital in the form of debt or equity in order to use in private equity investing. Stock option – a right to purchase or sell a share of stock at a specific price within a specific period of time. Stock purchase options are commonly used as long term incentive compensation for employees and management of fast growth companies. Strategic investor – a relatively large corporation that agrees to invest in a young or a smaller company in order to have access to its proprietary technology, product or service. Subordinated debt – a loan that has a lower priority than a senior loan in case of a liquidation of the asset or company. Also known as “junior debt”. Success rate – the proportion of venture funded companies that are considered successful. A study of companies funded by VCs during the 1990s indicated that 14% of the companies went public and another 11%were acquired.

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Sweat equity – ownership of shares in a company resulting primarily from work rather than investment of capital. Syndicate – a group of investors that agree to participate in a round of funding for a company. Alternatively, a syndicate can refer to a group of investment banks that agree to participate in the sale of stock to the public as part of an IPO. Tag-along right – the right of a minority investor to receive the same benefits as a majority investor. Usually applies to a sale of securities by investors. Also known as Co-sale right. Takedown – a schedule of the transfer of capital in phases in order to complete a commitment of funds. Typically, a takedown is used by a general partner of a private equity fund to plan the transfer of capital from the limited partners. Tender offer – an offer to public shareholders of a company to purchase their shares. Term loan – a bank loan for a specific period of time, usually up to ten years in leveraged buyout structures. Term sheet – a document confirming the intent of an investor to participate in a round of financing for a company. By signing this document, the subject company agrees to begin the legal and due diligence process prior to the closing of the transaction. Also known as “Letter of Intent”. Tranche – a portion of a set of securities. Each tranche may have different rights or risk characteristics. When venture capital firms finance a company, a round may be disbursed in two or three tranches, each of which is paid when the company attains one or more milestones. Turnaround – a process resulting in a substantial increase in a company’s revenues, profits and reputation. Under water option – an option is said to be under water if the current fair market value of a stock is less than the option exercise price. Underwriter – an investment bank that chooses to be responsible for the process of selling new securities to the public. An underwriter usually chooses to work with a syndicate of investment banks in order to maximize the distribution of the securities. Venture capital – a segment of the private equity industry which focuses on investing in new companies with high growth potential and accompanying high risk. Venture capital method – a pricing valuation method whereby an estimate of the future value of a company is discounted by a certain interest rate and adjusted for future anticipated dilution in order to determine the current value. Usually, discount rates for the venture capital method are considerably higher than public stock return rates, representing the fact that venture capitalists must achieve significant returns on investment in order to compensate for the risks they take in funding unproven companies. Vesting – a schedule by which employees gain ownership over time of a previously agreed upon amount of retirement funding or stock options. Vintage – the year that a private equity fund stops accepting new investors and begins to make investments on behalf of those investors. Venture funds are generally benchmarked to funds of the same vintage year. Voting rights – the rights of holders of preferred and common stock in a company to vote on certain acts affecting the company. These matters may include payment of dividends, issuance of a new class of stock, merger or liquidation. Warrant – a security which gives the holder the right to purchase shares in a company at a pre-determined price. A warrant is a long term option, usually valid for several years or indefinitely. Typically, warrants are issued concurrently with preferred stocks or bonds in order to increase the appeal of the stocks or bonds to potential investors. Washout round – a financing round whereby previous investors, the founders and management suffer significant dilution. Usually as a result of a washout

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round, the new investor gains majority ownership and control of the company. Weighted average cost of capital (WACC) – the average of the cost of equity and the after-tax cost of debt. This average is determined using weight factors based on the ratio of equity to debt plus equity and the ratio of debt to debt plus equity. Weighted average anti-dilution – an anti-dilution protection mechanism whereby the conversion rate of preferred stock is adjusted in order to reduce an investor’s loss due to an increase in the number of shares in a company. Without anti-dilution protection, an investor would suffer from a reduction of his or her percentage ownership. Usually as a result of the implementation of a weighted average antidilution, company management and employees who own a fixed amount of common shares suffer significant dilution, but not as badly as in the case of a full ratchet. Write-down – a decrease in the reported value of an asset or a company. Write-off – a decrease in the reported value of an asset or a company to zero. Write-up – an increase in the reported value of an asset or a company. Zombie – a company that has received capital from investors but has only generated sufficient revenues and cash flow to maintain its operations without significant growth. Sometimes referred to as “walking dead.” Typically, a venture capitalist has to make a difficult decision as to whether to liquidate a zombie or continue to invest funds in the hopes that the zombie will become a winner.

These definitions were graciously provided by the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth. Please refer to the Center’s website for additional definitions and information at http://mba.tuck.dartmouth.edu/pecenter/resources/glossary.html. Used by permission. Thomson Reuters and National Venture Capital Association are grateful to the Center for its support.

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Appendix B: MoneyTree Report Criteria
The MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters

REPORT CRITERIA

Summary Description
The MoneyTree™ Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S.

General Definition
The report includes the investment activity of professional venture capital firms with or without a US office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spunout of existing companies. The report excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as rollups, change of ownership, and other forms of private equity that do not involve cash such as services-inkind and venture leasing. Investee companies must be domiciled in one of the 50 US states or DC even if substantial portions of their activities are outside the United States.

determining factor. Drawdowns on commitments are recognized at the time the company receives the money rather than recorded as a lump sum amount at the time the term sheet is executed. Convertible debt and bridge loans are recognized only when converted to equity. Once a company has received a qualifying venture capital financing round, all subsequent equity financing rounds are included regardless of whether the round involved a venture capital firm as long as all other investment criteria are met (e.g. cash-for-equity, not buyout or services in kind). Angel, incubator and similar investments are considered pre-venture financing if the company has received no prior qualifying venture capital investment and are not included in the MoneyTree results. Angel, incubator and similar investments that are part of a qualifying venture capital round or follow a qualifying venture capital round are included to the extent that such investments can be fully verified as meeting all other criteria (e.g. cash for equity, not buyout or services in kind). Direct investment by corporations (not through a venture capital arm) is excluded unless (a) the investment is clearly demonstrated to be primarily a financial investment rather than outsourced R&D or market development, (b) it is co-investment in an otherwise qualifying round, or (c) it follows a qualifying venture round in a company and meets all other criteria (e.g. cash-for-equity, not buyout or services in kind). Data is primarily obtained from a quarterly survey of venture capital practitioners. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies.

Specific Methodology
The focus of the report is on cash received by the company. Therefore, tranches not term sheets are the

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Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.

Disclaimer
PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Reuters have taken responsible steps to ensure that the information contained in the MoneyTree Report has been obtained from reliable sources. However, none of the parties can warrant the ultimate validity of the data obtained in this manner. Results are updated periodically. Therefore, all data is subject to change at any time.

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Appendix C: MoneyTree Geographical Definitions
The Geographical Regions identified in the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters and used in the 2009 NVCA Yearbook are as follows: Alaska/Hawaii/Puerto Rico: Alaska, Hawaii, and Puerto Rico Colorado: The state of Colorado DC/Metroplex: Washington, D.C., Virginia, West Virginia, and Maryland LA/Orange County: Los Angeles, Ventura, Orange, and Riverside Counties (i.e., southern California, except San Diego) Midwest: Illinois, Missouri, Indiana, Kentucky, Ohio, Michigan, and western Pennsylvania New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and parts of Connecticut (excluding Fairfield county) New York Metro: Metropolitan NY area, northern New Jersey, and Fairfield County, Connecticut North Central: Minnesota, Iowa, Wisconsin, North Dakota, South Dakota, and Nebraska Northwest: Washington, Oregon, Idaho, Montana, and Wyoming Philadelphia Metro: Eastern Pennsylvania, southern New Jersey, and Delaware Sacramento/Northern California: Northeastern California San Diego: San Diego area Silicon Valley: Northern California, bay area and coastline South Central: Kansas, Oklahoma, Arkansas, and Louisiana Southeast: Alabama, Florida, Georgia, Mississippi, Tennessee, South Carolina, and North Carolina Southwest: Utah, Arizona, New Mexico, and Nevada Texas: The state of Texas Upstate New York: Northern New York state, except Metropolitan New York City area

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Appendix D: Industry Codes (VEIC)
VEIC
1000 1100 1110 1120 1125 1130 1135 1199 1200 1210 1215 1220 1230 1299 1300 1310 1320 1325 1330 1399 1400 1500 1510 1515 1520 1521 1522 1523 1524 1525

INDUSTRY DESCRIPTION
COMMUNICATIONS Commercial Communications Radio & TV Broadcasting Stations CATV & Pay TV Systems Cable Service Providers Radio & TV Broadcasting & Other Related Equipment Services to Commercial Communications Other Commercial Communications Telephone Related Long Distance Telephone Services Local Exchange Carriers (LEC) Telephone Interconnect & Other Equipment Telephone answering and/or management systems, PBXs Other Telephone Related Wireless Communications Mobile Communications, Cellular, Pagers Wireless Communications Services Messaging Services Wireless Communications Components Other Wireless Communications Facsimile Transmission Data Communications Local Area Networks (incl. voice/data PBX systems) Wide Area Networks Data Communications Components Communications Processors/ Network Management Protocol Converters & Emulators Modems and Multiplexers Other Data Communication Components Switches/Hubs/Routers/Gateways/ ATM

VEIC
1530 1549 1550 1551 1552 1553 1559 1560 1561 1562 1563 1569 1600 1610 1620 1630 1640 1699 1700 1710 1720 1800 1810 1825 1899

INDUSTRY DESCRIPTION
Network test, monitor and support equipment Other Data Communications Internet Communications and Infrastructure NEC Internet Access Services and Service Providers Internet Multi-media services (fax, phone, email, video, television) Internet backbone Infrastructure Other Internet Communications E-Commerce Technology Internet Security and Transactions services E-Commerce Services E-Commerce Enabling Software Other E-Commerce Satellite Microwave Communications Satellite Services/Carriers/Operators Satellite Ground (and other) Equipment Microwave Service Facilities Microwave & Satellite Components Other Satellite & Microwave Media and Entertainment Entertainment Publishing Other Communications Related Defense Communications Communications Services Other Communications Products (not yet classified)

2000 COMPUTER RELATED 2100 2110 2111 2112 2119 Computers and Hardware Mainframes & Scientific Computers Mainframes Scientific Computers and Super Computers Other Mainframe and & Scientific Computers

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VEIC
2120 2121 2122 2123 2124 2125 2126 2130 2140 2141 2142 2143 2144 2149 2200 2210 2220 2230 2234 2236 2238 2239 2250 2255 2260 2280 2290 2295 2299 2300 2311 2312 2313 2315 2316 2317 2318 2319

INDUSTRY DESCRIPTION
Mini & Micro Computers Fail Safe Computers Mini Computers (small business) Personal Computers (microcomputers/desktop) Other Mini & Micro Computers Portable Computers (notebooks/laptops) HandHeld Computing (PDA) Optical computing Servers & Workstations Servers Web Servers Workstations Thin Client hardware Other Servers & Workstations Computer Graphics & Digital Imaging CAD/CAM, CAE, EDA Systems Graphic Systems Scanning Hardware OCR (Optical Character Recognition) OBR (Optical Bar Recognition) MICR (Magnetic Ink Character Recognition) Other Scanning Hardware NEC Graphics Printers/Plotters Graphics/Enhanced Video Cards Other Graphics Peripherals Multimedia Graphics NEC Digital Imaging Hardware and Equipment Digital Imaging Services Other Computer Graphics and Digital Imaging Integrated Turnkey Systems and Solutions Business and Office Consumer Retailing Transportation Finance/Insurance/Real Estate Agriculture Recreation/Entertainment Manufacturing/Industrial/ Construction

VEIC
2320 2321 2322 2323 2324 2325 2399 2500 2510 2511 2512 2513 2519 2520 2521 2522 2523 2524 2529 2530 2531 2532 2533 2539 2540 2541 2542 2543 2546 2549 2550 2551 2552 2553 2559 2560

INDUSTRY DESCRIPTION
Medical/Health Computer Related Communications Products/Services Education Reference Scientific Other Integrated Systems and Solutions Peripherals Terminals Intelligent Terminals Portable Terminals Graphics Terminals Other Terminals Printers Laser Printers Color Printers Inkjet Printers Dot-Matrix printers Other Printers Data I/O Devices Mouse input devices Touch Pad devices Pen based Computing Devising Other Data I/O Devices Disk Related Memory Devices Floppy Disks & Drives Winchester Disks & Drives Optical Disks & Drives, CD-ROM, DVD Disk Drive Components Other Disk Related Tape Related Devices Magnetic Tapes Tape Heads & Drives Continuous Tape Backup Systems Other Tape Related Devices Other Memory Devices and Peripheral Cards (exc. semiconductors) PC or PMCIA Cards Memory Cards Sound Cards Communication Cards Other Memory Devices and Peripherals

2561 2562 2563 2564 2569

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VEIC
2590 2600 2630 2640 2650 2655 2660 2665 2670 2675 2691 2699 2700 2710 2711 2712 2713

INDUSTRY DESCRIPTION
Other Peripherals (not yet classified) Computer Services Time Sharing Services Computer Leasing & Rentals Computer Training Services Backup and Disaster Recovery Data Processing, Analysis & Input Services Computer Repair Services Computerized Billing & Accounting Services Computer Security Services Data Communications Systems Management Other Computer Services Computer Software Systems Software Database & File Management Operating Systems & Utilities Program Development Tools/ Languages (Including CASE/engineering) Graphics Software and Digital Imaging Software Other Systems Software NEC Communications/Networking Software Security/firewalls/encryption Software Email software GroupWare Multimedia software (video, fax, television) Other Communications/Networking Software Applications Software Business and Office Software Home Use Software Educational Software Manufacturing/Industrial Software Medical/Health Software Banks/Financial Institutions Software Retailing software Integrated Software

VEIC
2739 2740 2741 2743 2744 2748 2749 2750 2751 2752 2753 2754 2755 2760 2761 2762 2763 2765 2766 2768 2769 2780 2781 2782 2783 2784 2785 2798 2799 2800 2810 2811 2812 2813 2814 2815 2816 2817 2818 2819

INDUSTRY DESCRIPTION
ERP Software Recreational Software Scientific Software Agricultural Software Transportation Software Other Industry Specific Software Other Applications Software Artificial Intelligence Related Software Expert Systems Natural Language Computer-Aided Instruction Artificial Intel Programming Aids Other Artificial Intelligence Related Software Services Programming Services/Systems Engineering Software Consulting Services Software Distribution/Clearinghouse Internet/Web design and programming Services Internet graphics services Other Internet Software Services Other Software Services Internet Systems Software Site Development and Administration Software Internet Search software and engines WebServer Software JAVA/ActiveX Web Authoring/Development Other Internet Systems Software Other Software Related Internet and Online Related NEC E-Commerce — Selling Products via the Internet Business and Office Consumer Retailing Publishing Transportation Finance/Insurance/Real Estate Agriculture Recreation/Entertainment Manufacturing/Industrial/Construction

2716 2719 2720 2721 2722 2723 2724 2729 2730 2731 2732 2733 2734 2735 2736 2737 2738

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VEIC
2820 2821 2822 2823 2824 2825 2826 2829 2830 2831 2832 2833 2834 2835 2836 2837 2838 2839 2840 2841 2842 2843 2844 2845 2846 2847 2849 2850 2851 2852 2853 2854 2855 2856 2857 2858 2859 2860 2861 2862 2863

INDUSTRY DESCRIPTION
Medical/Health Computer Related Communications Products/Services Education Reference Scientific Legal Other Ecommerce selling Products Ecommerce — Selling Services via the Internet Business and Office Consumer Retailing Publishing Transportation Finance/Insurance/Real Estate Agriculture Recreation/Entertainment Manufacturing/Industrial/ Construction Medical/Health Computer Related Communications Products/Services Education Reference Scientific Legal Recreation/Entertainment Services Other E-Commerce selling Services Providing Information via the Internet (non Ecommerce) Business and Office Consumer Retailing Publishing Transportation Finance/Insurance/Real Estate Agriculture Recreation/Entertainment Manufacturing/Industrial/ Construction Medical/Health Computer Related Communications Products/Services Education

VEIC
2864 2865 2866 2869 2870 2871 2873 2879 2900 2910 2911 2990

INDUSTRY DESCRIPTION
Reference Scientific Legal Other Information via the Internet Internet Services Internet Marketing Services Data warehousing Services Other Internet Services and Online databases Other Computer Related Voice Synthesis Voice Recognition Other Computer Related (not yet classified)

3000 OTHER ELECTRONICS RELATED 3100 3110 3111 3112 3113 3114 3115 3119 3120 3132 3139 3140 3160 3170 3200 3300 3310 3400 3410 3420 3499 3500 3510 Electronic Components Semiconductors Customized Semiconductors Standard Semiconductors Other Semiconductors Flash Memory Optoelectronics semiconductors (incl. laser diodes) Other Semiconductors Microprocessors Controllers and Sensors Controllers Sensors Other Controllers/Sensors Circuit Boards Display Panels Other Electronics Related (including keyboards) Batteries Power Supplies Uninterruptible Power Supply (UPS) Electronics Related Equipment Semiconductor Fabrication Equip. Wafer Products Component Testing Equipment Other Electronics Related Equipment Laser Related Laser Components (incl. beamsplitters, excimers) 3599Other Laser Related

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VEIC
3600 3610 3620 3630 3699 3700 3710 3720 3799 3800 3810 3820 3830 3835 3899 3900 3910 3920 3930 3940 3989 3990

INDUSTRY DESCRIPTION
Fiber Optics Fiber Optic Cables Fiber Optic Couplers and Connectors Fiber Optic Communication Systems (see 1510) Other Fiber Optics Analytical & Scientific Instrumentation Chromatographs & Related Laboratory Equipment Other Measuring Devices Other Analytical & Scientific Instrumentation Other Electronics Related Military Electronics (excluding communications) Copiers Calculators Security/Alarm Sensors/Detectors Other Electronics Related Optoelectronics Photo diodes Optoelectronics fabrication equipment Lenses with Optoelectronics applications Advanced photographic processes (incl. lithographs) Other Optoelectronics Related Other Electronics and Semiconductor Related

VEIC
4121 4122 4123 4129 4200 4210 4220 4230 4240 4250 4290 4300 4310 4311 4312 4319 4320 4321 4322 4329 4330 4340 4390 4400 4410 4420 4490 4500 4510

INDUSTRY DESCRIPTION
Therapeutic Monoclonal Antibodies Immune Response Effectors (interferons, vaccines) Other Therapeutic Proteins (incl. hormones & TPA) Other Therapeutic Biotechnology Genetic Engineering Agricultural/Animal Biotechnology Genetically Engineered Plants Genetic Eng Microorganisms to raise plant yield Other Plant Related Biotechnology Biotech Related Animal Health & Nutrition Products Genetically Engineered Animals Other Animal Related Biotechnology Industrial Biotechnology Biochemical Products Biotech Related Fine Chemicals (NOT Pharmaceuticals.) Biotech Related Commodity Chemicals Other Biochemical Products Biotech Processes for Food Industrial Applications Biotech Related Food Enzymes and Cultures Biotech Related Food Diagnostics Other Biotech Processes for Food Industrial Products Biotech Processes for Pollution/Toxic Waste Control Biotech Processes for Enhanced Oil Recovery/Mining Other Industrial Biotechnology Biosensors Biosensors for Medical Diagnostic Applications Biosensors for Industrial Applications Other Biosensors Biotech Related Research & Production Equipment Biotech Related Analytical Instruments & Apparatus

4000 BIOTECHNOLOGY 4100 4110 4111 4112 4113 4119 4120 Human Biotechnology Medical Diagnostic Biotechnology Products In Vitro Monoclonal Antibody Diagnostics In Vivo Monoclonal Antibody Diagnostics/Imaging DNA/RNA Probes Other Medical Diagnostic Biotechnology Therapeutic Biotechnology Products

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VEIC
4520 4525 4599 4600 4610 4699 4900

INDUSTRY DESCRIPTION
Biotech Related Production Equipment Biotech laser and optronic applications Other Biotech Research & Production Equipment Biotech Related Research & Other Services Pure & Contract Biotechnology Research Other Biotechnology Services Other Biotechnology Related

VEIC
5414 5420 5429 5430 5440 5499 5500 5510 5520 5530 5540 5550 5599

INDUSTRY DESCRIPTION
Dependent Care (child care, assisted living) Managed Care (PPO and other) Other Healthcare Facilities Ambulance and Emergency Services Hospital/Institutional Management and Medical Office Management Other Medical/Health Services NEC Pharmaceuticals Pharmaceutical Research Pharmaceutical Production Pharmaceutical Services Pharmaceutical Equipment Pharmaceutical Drugs/Fine Chemicals (non-biotech) Other Pharmaceuticals

5000 MEDICAL/HEALTH RELATED 5100 5110 5120 5121 5122 5123 5124 5125 5130 5140 5200 5210 5220 5221 5230 5240 5299 5300 5310 5340 5350 5380 5399 5400 5410 5412 Medical Diagnostics Diagnostic Services Medical Imaging X-Rays CAT Scanning Ultra Sound Imaging Nuclear Imaging Other Medical Imaging Diagnostic Test Products & Equipment Other Medical Diagnostics Medical Therapeutics Therapeutic Services Surgical Instrumentation & Equipment Surgical lasers (including laser delivery fibers) Pacemakers & Artificial Organs Drug Delivery & Other Equipment Other Therapeutic (including defibrillators) Medical/Health Products Disposable Medical Products Handicap Aids Medical Monitoring Equipment Health related optics (including glasses, lenses) Other Medical/Health Products (NEC) Medical Health Services Hospitals/Clinics/Primary Care Long Term Care/Home Care/Elder Care

6000 ENERGY RELATED 6100 6200 6300 6400 6410 6420 6430 6499 6500 6510 6511 6512 6520 6530 6540 6599 6600 6700 6710 Oil & Gas Exploration and Production Oil & Gas Exploration Services Oil & Gas Drilling & Support Services Oil & Gas Drilling, Exploration & Extraction Equipment Oil & Gas Drilling & Extraction Equipment Oil & Gas Drilling Instrumentation Oil & Gas Exploration Equip Instrumentation Other Oil & Gas (NEC) Alternative Energy Solar Energy Photovoltaic Solar Other Solar Wind Energy Geothermal Energy Energy Co-Generation Other Alternative Energy (inc. nuclear energy) Enhanced Oil Recovery/Heavy Oil/Shale Coal Related Coal Mining

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VEIC
6720 6799 6800 6900

INDUSTRY DESCRIPTION
Coal Related Equipment Other Coal Related Energy Conservation Related Other Energy Related

VEIC
7399 7400 7410 7420 7430 7431 7432 7433 7434 7450 7499 7500 7510 7520 7530 7540 7550 7560 7599 7999

INDUSTRY DESCRIPTION
Other Food and Beverages Consumer Products Clothing, Shoes & Accessories (incl. jewelry) Health & Beauty Aids Home Furnishings and Housewares Housewares Furnishings & Furniture Garden and Horticultural Products Other Home Furnishings (NEC) Mobile Homes Other Consumer Products Consumer Services Fast Food Restaurants Other Restaurants Hotels and Resorts Auto Repair Shops Education & Educational Products and Materials Travel Agencies and Services Other Consumer Services Other Consumer Related (not yet classified)

7000 CONSUMER RELATED 7100 7110 7120 7125 7130 7140 7150 7155 7160 7170 7199 7200 7210 7220 7230 7240 7245 7246 7247 7248 7250 7299 7300 7310 7320 7330 7340 7350 Leisure & Recreational Products and Services Movies, Movie Products & Theater Operations Amusement & Recreational Facilities Casinos and Gaming Toys & Electronic Games Sporting Goods, Hobby Equipment & Athletic Clothes Sports Facilities (Gyms and Clubs, Golf Courses) Sports TVs, Radio, Stereo Equipment & Consumer Electronics Music, Records, Production and Instruments Other Leisure/Recreational Products and Services Retailing Related Drug Stores Clothing and Shoe Stores Discount Stores Computer Stores Retail Publishing (Books, Magazines, newsletters) Office Supply Stores Music and Electronics Stores Specialty Department and Retail Stores Franchises (NEC) Other Retailing Related Food and Beverages Wine & Liquors Health Food Soft Drinks & Bottling Plants Food Supplements/Vitamins General Food Products/Grocery/ Convenience Stores

8000 INDUSTRIAL PRODUCTS 8100 8110 8111 8112 8113 8114 8115 8119 8120 8121 8129 8130 8140 8141 8142 Chemical & Materials Plastic Fabricators Homogeneous Injections/Extrusions Non-Homogeneous Injections/ Extrusions Fiber-Reinforced (Plastic) Composites Other Fabricated Plastics Processor for Working with Plastics Other Plastic Fabrication Coating & Adhesive Manufacturers Optical coatings Other Coating and Adhesive Membrane & Membrane-Based Products Specialty/Performance Materials Semiconductor Material(e.g.. silicon wafers) III/V Semiconductor Mater(e.g. gallium arsenide)

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VEIC
8143 8144 8145 8146 8147 8148 8149 8150 8151 8152 8160 8161 8162 8170 8189 8199 8200 8210 8220 8221 8230 8240 8250 8260 8299 8300 8310 8320 8330 8340 8350 8360 8370

INDUSTRY DESCRIPTION
Specialty Metal(s) incl. coatings, alloys, clad Ceramics Lubricant & Functional Fluids Other Specialty Materials Specialty material for laser generation Superconducting materials Other Specialty/Performance Materials Commodity Chemical & Polymers Industrial Chemicals Polymer (Plastics) Materials Specialty/Performance Chemicals Electronic Chemicals Other Industrial Chemicals Agricultural Chemicals Other Commodity Chemical and Polymers Other Chemical & Material(not yet classified) Industrial Automation Energy Management Industrial Measurement & Sensing Equipment Laser related measuring & sensing equipment Process Control Equipment & Systems Robotics Machine Vision Software & Systems Numeric & Computerized Control of Machine Tools Other Industrial Automation (NEC) Industrial Equipment and Machinery Machine Tools, Other Metalworking Equipment Hoists, Crane & Conveyors Pumps, Ball Bearings, Compressors, Industrial Hardware Mining Machinery Industrial Truck and Tractors Other Industrial Process Machinery Power Transmission Equipment (generator & motors)

VEIC
8399 8500 8510 8520 8530 8599 8600 8700

INDUSTRY DESCRIPTION
Other Industrial Equipment & Machinery Pollution and Recycling Related Air Filter & Air Purification & Monitoring Equip. Chemical and Solid Material Recycling Water Treatment Equipment & Waste Disposal Systems Other Pollution & Recycling Related Other Industrial Product (not yet classified) Industrial Services

9000 OTHER SERVICES AND MANUFACTURING 9100 9110 9125 9130 9140 9150 9160 9180 9199 9200 9210 9220 9230 9235 9240 9250 9254 9255 9299 9300 9310 9320 9330 Transportation Airlines and aviation related9120 Trucking Railway Related Leasing of Railcars, Buses and Cars Mail and Package Shipment Motor Vehicles, Transportation Equipment & Parts Airfield and Other Transportation Services Advanced Aircraft/Aerospace Other Transportation Finance, Insurance, Real Estate Insurance Related Real Estate Banking Non Bank Credit Securities & Commodities Brokers and Services Investment Groups Venture Capital and Private Equity Investors Financial Transaction Services Other Financial, Insurance & Real Estate Business Services Engineering Services Advertising and Public Relations Leasing (not elsewhere classified)

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VEIC
9340 9350 9360 9399 9400 9410 9415 9420 9430 9440 9450 9460 9470 9499 9500 9510 9520 9530 9540 9599 9600

INDUSTRY DESCRIPTION
Distributors, Importers and Wholesalers Consulting Services Media Related Services Other Services (not elsewhere classified) Manufacturing Business Products and Supplies Office Automation Equipment Office Furniture & Other Professional Furnishings Textiles (Synthetic & Natural) Hardware, Plumbing Supplies Books, Cards and Other Publishings Packaging Products & Systems Printing & Binding Other Manufacturing (not elsewhere classified) Agriculture, Forestry, Fishing Agriculture related Forestry related Fishing related Animal husbandry Other Agriculture, Forestry, Fishing Mining (non-energy related)

VEIC
9700 9710 9720 9730 9740 9750 9799 9800 9810 9820 9830 9899 9900 9910 9912 9914 9915 9918 9920 9999

INDUSTRY DESCRIPTION
Construction and Building Products Construction Manufacturer of Building Products Manufacturer of Pre-Fabricated Buildings & Systems Distribution of Building Products & Systems Construction Services Other Construction & Building Products Related Utilities Electric Companies Water, Sewage, Chem & Solid Waste Treatment Plants Gas Transmission & Distribution Other Utilities & Related Firms Other Products NEC Conglomerates Socially Responsible Environmentally Responsible Women-Owned Minority-Owned Holding Companies Other2008 NVCA Yearbook

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Appendix E: Industry Sector VEIC Ranges
Industry analysis is based upon the following industry sectors: Biotechnology, Business Products and Services, Computers and Peripherals, Consumer Products and Services, Computer Software, Electronics/Instrumentation, Financial Services, Healthcare Services, Industrial/Energy, IT Services, Media and Entertainment, Medical Devices and Equipment, Networking and Equipment, Retailing/Distribution, Semiconductors, Telecommunications and Other. These sectors are based on the 17 industry classifications of the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

Biotechnology 4000, 4100, 4110, 4111, 4112, 4113, 4119, 4120, 4121, 4122, 4123, 4129, 4130, 4200, 4210, 4220, 4230, 4240, 4250, 4290, 4300, 4310, 4311, 4312, 4319, 4320, 4321, 4322, 4329, 4330, 4340, 4390, 4400, 4410, 4420, 4490, 4500, 4510, 4520, 4525, 4599, 4600, 4610, 4699, 4900, 5500, 5510, 5520, 5530, 5540, 5550, 5599 Business Products and Services 2811, 2824, 2831, 2844, 9300, 9310, 9320, 9330, 9340, 9350, 9360, 9399 Computers and Peripherals 2000, 2100, 2110, 2111, 2112, 2119, 2120, 2121, 2122, 2123, 2124, 2125, 2126, 2130, 2140, 2141, 2142, 2143, 2144, 2149, 2220, 2230, 2234, 2236, 2238, 2239, 2250, 2255, 2260, 2280, 2290, 2295, 2299, 2500, 2510, 2511, 2512, 2513, 2519, 2520, 2521, 2522, 2523, 2524, 2529, 2530, 2531, 2532, 2533, 2539, 2540, 2541, 2542, 2543, 2546, 2549, 2550, 2551, 2552, 2553, 2559, 2560, 2561, 2562 2563 2564 2569 2590 3170 Consumer Products and Services 2812, 2832, 7000, 7300, 7310, 7320, 7330, 7340, 7399, 7400, 7410, 7420, 7430, 7431, 7432, 7433, 7434, 7450, 7499, 7500, 7510, 7520, 7530, 7540, 7550, 7560, 7599, 7999 Computer Software 1563, 2200, 2210, 2300, 2311, 2312, 2313, 2315, 2316, 2317, 2318, 2319, 2320, 2321, 2322, 2323, 2324, 2325, 2399, 2700, 2710, 2711, 2712, 2713, 2716, 2719, 2720, 2721, 2722, 2723, 2724, 2729, 2730, 2731, 2732, 2733, 2734, 2735, 2736, 2737, 2738, 2739, 2740, 2741, 2743, 2744, 2748, 2749, 2750, 2751, 2752, 2753, 2754, 2755, 2780, 2781, 2782, 2783, 2784, 2785, 2798, 2799, 2900, 2910, 2911, 2990, 8250 Electronics/Instrumentation 3000, 3100, 3160, 3200, 3300, 3310, 3400, 3420, 3499, 3500, 3510, 3599, 3700, 3710, 3720, 3799, 3800, 3810, 3820, 3830, 3835, 3899 Financial Services 2816, 2836, 9200, 9210, 9220, 9230, 9235, 9240, 9250, 9254, 9255, 9299 Healthcare Services 2820, 2840, 5400, 5410, 5412, 5414, 5420, 5429, 5430, 5440, 5499 Industrial/Energy 2819, 2837, 2839, 6000, 6100, 6200, 6300, 6400, 6410, 6420, 6430, 6499, 6500, 6510, 6511, 6512, 6520, 6530, 6540, 6599, 6600, 6700, 6710, 6720, 6799, 6800, 6900, 8000, 8100, 8110, 8111, 8112, 8113, 8114, 8115, 8119, 8120, 8121, 8129, 8130, 8140, 8143, 8144, 8145, 8146, 8147, 8148, 8149, 8150, 8151, 8152, 8160, 8161, 8162, 8170, 8189, 8199, 8200, 8210, 8220, 8221, 8230, 8240, 8260, 8299, 8300, 8310, 8320, 8330, 8340, 8350, 8360, 8370, 8399, 8500, 8510, 8520, 8530, 8599, 8600, 8700, 9000, 9100, 9110, 9120, 9125, 9130, 9140, 9150, 9160, 9180, 9199, 9400, 9410, 9415, 9420, 9430, 9440, 9460, 9470, 9499, 9500, 9510, 9520, 9530, 9540, 9599, 9600, 9700, 9710, 9720, 9730, 9740, 9750, 9799, 9800,

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9810, 9820, 9830, 9899 IT Services 1560, 1561, 1562, 1569, 2600, 2630, 2640, 2650, 2655, 2660, 2665, 2670, 2675, 2691, 2699, 2760, 2761, 2762, 2763, 2765, 2766, 2768, 2769, 2800, 2870, 2871, 2873, 2879 Media and Entertainment 1110, 1120, 1125, 1130, 1135, 1199, 1700, 1720, 2814, 2818, 2834, 2838, 2843, 2848, 2850, 2851, 2852, 2853, 2854, 2855, 2856, 2857, 2858, 2859, 2860, 2861, 2862, 2863, 2864, 2865, 2866, 2869, 7100, 7110, 7120, 7125, 7130, 7140, 7150, 7155, 7160, 7170, 7199, 9450 Medical Devices and Equipment 5000, 5100, 5110, 5120, 5121, 5122, 5123, 5124, 5125, 5130, 5140, 5200, 5210, 5220, 5221, 5230, 5240, 5299, 5300, 5310, 5340, 5350, 5380, 5399 Networking and Equipment 1400, 1500, 1510, 1515, 1520, 1521, 1522, 1523, 1524, 1525, 1530, 1549, 3600, 3610, 3620, 3630, 3699 Retailing/Distribution 2810, 2813, 2815, 2817, 2821, 2823, 2825, 2826, 2829, 2830, 2833, 2835, 2841, 2845, 2846, 2849, 7200, 7210, 7220, 7230, 7240, 7245, 7246, 7247, 7248, 7250, 7299, 7350 Semiconductors 3110, 3111, 3112, 3114, 3115, 3119, 3120, 3130, 3132, 3135, 3139, 3140, 3410, 3900, 3910, 3920, 3930, 3940, 3989, 3990, 8141, 8142 Telecommunications 1000, 1100, 1200, 1210, 1215, 1220, 1230, 1299, 1300, 1310, 1320, 1325, 1330, 1399, 1550, 1551, 1552, 1553, 1559, 1600, 1610, 1620, 1630, 1640, 1699, 1710, 1800, 1810, 1825, 1899, 2822, 2842 Other 9900, 9910, 9912, 9914, 9915, 9918, 9920, 9999

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Appendix F: Stage Definitions
SEED/START-UP STAGE FINANCING
This stage is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept. This involves product development and market research as well as building a management team and developing a business plan, if the initial steps are successful. This is a pre-marketing stage.

EARLY STAGE FINANCING
This stage provides financing to companies completing development where products are mostly in testing or pilot production. In some cases, product may have just been made commercially available. Companies may be in the process of organizing or they may already be in business for three years or less. Usually such firms will have made market studies, assembled the key management, developed a business plan, and are ready or have already started conducting business.

EXPANSION STAGE FINANCING
This stage involves working capital for the initial expansion of a company that is producing and shipping and has growing accounts receivables and inventories. It may or may not be showing a profit. Some of the uses of capital may include further plant expansion, marketing, working capital, or development of an improved product. More institutional investors are more likely to be included along with initial investors from previous rounds. The venture capitalist’s role in this stage evolves from a supportive role to a more strategic role.

LATER STAGE
Capital in this stage is provided for companies that have reached a fairly stable growth rate; that is, not growing as fast as the rates attained in the expansion stages. Again, these companies may or may not be profitable, but are more likely to be than in previous stages of development. Other financial characteristics of these companies include positive cash flow. This also includes companies considering IPO.

ACQUISITION FINANCING
An acquisition of 49% stake or less. Firm acquires minority shares of a company. Thomson Reuters includes these deals in standard venture capital disbursement data when calculating venture capital disbursements where the funding is by a venture capital firm.

ACQUISITION FOR EXPANSION
Funds provided to a company to finance its acquisition of other companies or assets. A consolidator of companies in specific industries.

MANAGEMENT/LEVERAGED BUYOUT
These funds enable an operating management group to acquire a product line or business, at any stage of development, from either a public or private company. Often these companies are closely held or family owned. Management/leveraged buyouts usually involve revitalizing an operation, with entrepreneurial management acquiring a significant equity interest.

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RECAP/ TURNAROUND
Financing provided to a company at a time of operational or financial difficulty with the intention of improving the company’s performance.

SECONDARY BUYOUT
A buyout deal on top of a buyout deal. Secondary buyouts are distinguished when the initial firm investor is different from the current investing firm.

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Appendix G: Data Sources and Resources
For this publication, the main source for data was ThomsonONE.com (VentureXpert), the online research database of Thomson Reuters.ThomsonONE.com is endorsed by the NVCA as the official United States venture capital activity database. By using data gathered through the MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters, ThomsonONE.com contains investment, fund raising, portfolio company information, Deals Insight and Reuters News along with other statistical data. Other information contained in this database is gathered through a variety of public and proprietary sources including, but not limited to, the Thomson Reuters performance surveys. This publication is produced on an annual basis primarily using year-end data; however, the underlying databases can be accessed online to provide the most up-to-date and comprehensive global private equity statistics and profile information available.

MoneyTree™ Data
PricewaterhouseCoopers, Thomson Reuters, and the National Venture Capital Association joined forces in December 2001 to produce what was then known as the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey. Conducted on a quarterly basis, the designated PwC/NVCA MoneyTree Report allows Thomson Reuters unparalleled access to primary sources of information from general partners.

Timeliness of Data
Many of the tables and charts presented in this report can be produced by using ThomsonONE.com. One of advantages of using ThomsonONE.com is that the reader can customize a report to better fit the needs of what they are seeking. In addition, because the online database is continuously updated, the information available is more up-to-date than what can be presented in this report. Readers should note that timely industry information on details concerning venture capital investment is available from other sources such as PricewaterhouseCoopers at www.pwcmoneytree.com, the ‘Industry Stats & News’ section of the NVCA website, www.nvca.org, and the ‘Financial Press Releases’ segment of the private equity section of Thomson Reuters found at http://f inancial.thomsonreuters.com/thomsononecom_pevc. Also, additional information on data such as fund raising and fund performance are available on both the NVCA website and the private equity portion of the Thomson Reuters website.

Sources of Data
The online database of Thomson Reuters is ThomsonONE.com (VentureXpert), the foremost information provider for private equity professionals worldwide. The private equity portion of Thomson Reuters offers an incomparable range of products from directories to conferences, journals, newsletters, research reports, and the ThomsonONE.com Private Equity database. As of February 2009, the database included over 77,400 portfolio companies, 250,900 executives, 13,580 private equity firms, 28,700 private equity funds, and 138,800 financing rounds. By establishing working relationships with private equity and venture capital firms, institutional investors, and industry associations such as the NVCA, PricewaterhouseCoopers and other such entities around the world, Thomson Reuters has been able to gather, on a timely basis, complete and accurate information.

Verification and Updating of Data
Collectively, PricewaterhouseCoopers, Thomson Reuters, and the NVCA have the utmost commitment to provide an accurate historical record of venture capital activity. On a daily basis, the database is constantly analyzed for consistency, crosschecked with other data sources, and updated as new information comes in. On a quarterly basis, we have worked with many venture firms to ensure that that their current and past data is correct. Primarily for this reason, the private equity news releases of Thomson Reuters will often restate statistics from prior news releases. With

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the availability of the online data access, users are encouraged to always use the most current numbers even regarding historical activity so as to maintain accuracy and comparability. • Plan your companies’ exits with data on both venture-backed IPOs and mergers and acquisitions • Aid in recruiting talented executives from other venture-backed companies • Quickly spot venture-backed companies in competition with your own portfolio companies • Create industry analyses to benchmark both performance and portfolio investments • Find other venture capitalists likely to support follow-on rounds • Provide clarity to investment decisions by comparing them to current market conditions • Compile valuation reports for comparable portfolio companies • Identify prospective investors and their investment histories • Benchmark valuations among recent transactions and obtain valuation comparables • Analyze investment trends by industry • Utilize returns information to limited partners using appropriate benchmarks • Tailor your pitch to investor focus size and limited partner type

Reporting Functionality of ThomsonONE.com
Users can access information in terms of profiles on private equity companies, funds, firms, executives, IPOs, and limited partners. In addition, users can access the analytics portion of the database, which contains investment, valuation, IPO analytic, merger analytic, fund performance, fund raising, and fund statistic information along with venture capital information such as aggregate fund raising, investments, and IPOs broken out into state and nation profiles.

Comprehensiveness of ThomsonONE.com
Both the breadth and depth of ThomsonONE.com can perhaps best be shown in that it, among other types of information, the user can find the answers to the following questions: • What is the performance at quarter end for private equity funds that were formed from 1998 to 2008? • Which venture firms are most active in funding online financial services companies in the Ohio Valley? • How much money was raised by each fund stage in 2008? • What was a particular venture-backed IPO’s oneyear return at the end of 2008? • As of December 2008, was the 10-year return to small buyout funds larger than that of large buyout funds? • How much money was committed to mezzanine funds from 1997 to 2008? • How much money was invested in the venture capital industry from 1987 to 2008? • In 2008, how much money was invested at each development stage in Research Triangle Pharmaceutical companies? In addition, there are also advantages of using the database for a general partner as well. Although this is not an inclusive list, utilizing the database by general partners can be helpful to them for among the following reasons:

Reporting Functionality of LPXpert
Another database is available to users: LPXpert, an online portfolio monitoring system that allows institutional investors to analyze their portfolio activity in both a cost-effective and timely manner. Over 100 different types of reports can be produced detailing firm, fund, portfolio company, executive, IPO profiles and fund performance analysis. A description of the features provided include portfolio highlights that show changes in portfolio activity between reporting periods. These changes can include the number of funds invested in, committed capital, the amount of capital called, and percent overlap of investments, a particularly valuable tool for large institutional investors investing in various funds.

Comprehensiveness of Data of LPXpert
The extent to how comprehensive LPXpert is can be shown by providing the following examples of the types of queries that could be researched using this product: • What other funds have co-invested alongside the funds I have invested in? • What are the other funds managed by the firms I

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have invested with, but that I am not currently invested in? • How have my funds performed over the last 10 years ending December 31, 2008? • Of the amount that I have invested in my portfolio of funds, what is the industry distribution by percentage? • Of the funds I have invested in, how has the amount of dollars invested changed between reporting periods? 800-782-5555. For information on NVCA membership, which can include a free trial, certain free reports for participating members, and discounts on an annual subscription, please contact Janice Mawson at the NVCA. You may contact her online through the link on the member benefits section of the NVCA website or at 703-524-2549. For information on services PricewaterhouseCoopers provides for venture capital firms as well as emerging companies, please visit their website at www.pwcmoneytree.com or contact them at 1-877-PwC-TICE.

Accessing ThomsonONE.com, LPXpert, and Other Services
For more information on ThomsonONE.com or LPXpert, please visit http://financial.thomsonreuters.com/thomsononecom_pevc or by phone at 1-

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Appendix H: Portfolio Company Valuation Guidelines
In the United States, a venture capital fund is usually organized as a limited partnership. The institutional investors providing capital to a fund typically become limited partners (LPs). The venture firm becomes a general partner (GP) in the limited partnership. In most of the limited partnership agreements defining GP-LP relationship, the GPs are required to provide financial reports quarterly (unaudited) and annually (audited) prepared according to United States Generally Accepted Accounting Principles (“GAAP”). GAAP generally requires the use of investment company accounting which mandates that a fair value to be assigned to the individual portfolio companies. This is consistent with the LPs need for fair values of their investments as well as 3rd party or regulatory requirements, e.g., ERISA-regulation. Guidelines fall into two categories. The first is portfolio performance presentation formats, calculations, and disclosure. An example of the former is the Private Equity Provisions of the Global Investment Performance Standards (GIPS). This was developed by the CFA Institute. While many of the specifications and terminology line up with current practice in the United States, the NVCA has not endorsed or otherwise commented on these standards. Neither NVCA nor Thomson Financial has determined how widespread the adoption of those standards is or will likely be. This document and accompanying guidance can be currently found at http://www.cfainstitute.org/centre/codes/gips/. Much more attention is being paid to the other category: portfolio company valuation guidelines. The chronology and sections below refer to this category. Suffice it to say for now that portfolio valuation guidelines developed by the Private Equity Industry Guidelines Group (PEIGG, www.peigg.org/home.html > Valuations), most recently revised in March 2007, are the most commonly referred to in the US. An unrelated European consortium has created “international” guidelines which they intend to conform to IASB rules. That version has received little attention in the US. the life of a typical venture fund is at least 10 years, longer in the life sciences arena. During that period the venture capital fund reports progress to the limited partners. In many cases, this means quarterly portfolio updates and a complete audited annual financial statement. For a typical venture fund, very little money is paid out in the first four or five years. Also, while every portfolio company receives funding with high expectations, it can take several years to determine if a particular company is a likely winner. Therefore, understanding progress in the portfolio requires some estimate of the success of the investee companies by the venture capital or private equity firm. While many investors and fund managers agree that financial measurements mean little for the first three or so years of a fund, after that the fund wants to communicate progress to the investors. This is where specific valuation rules and processes become important. The agreed valuation procedures for individual portfolio companies become the basis for progress assessment as the fund matures and ultimately distributes cash to the investors. So while portfolio company valuations are more of an art than a science, especially for pre-revenue or even pre-EBITDA companies, most limited partner agreements (LPAs) establishing a venture capital fund require the venture firm to provide quarterly and annual financial statements using Generally Accepted Accounting Principles (GAAP). GAAP requires fair value measurement for portfolio positions. Therefore, most GPs must issue financial statements using fair value.

Why Valuation Guidelines Matter
What ultimately matters to the investors and private equity practitioners is the cash which has been distributed to the investors during the life of the fund compared with the original money put in. However,

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The Evolution of Valuation Guidelines: 1989 to 2008
This section reviews the various efforts to create comprehensive portfolio company valuation guidelines for US private equity. 1989-1990 – A group of investors, private equity fund managers, and fund-of-fund managers formed a group to develop a set of portfolio company valuation guidelines. Contrary to a very persistent rumor, the NVCA did not endorse, adopt, bless, publish, or otherwise opine on the guidelines. Decade of the 1990s – Two noteworthy developments occurred in the 1990s. Despite no endorsement by the NVCA these guidelines became accepted practice by much of the US industry, especially in the venture capital side of private equity. These guidelines were referred to by many as being issued by the NVCA but in fact they were not. The second development is international venture associations creating localized guidelines based heavily on these guidelines. These were created in Europe and other international regions. In fact, by 2005, there had been multiple iterations of the European and British guidelines. 2003 – A self-appointed group of private equity practitioners, fund managers, fund-of-fund managers and others formed the Private Equity Industry Guidelines Groups (PEIGG). The overall constitution of this group is not hugely different from the 1989-1990 group. The PEIGG group announced that it was contemplating taking on four initiatives, of which portfolio company valuation guidelines was the first one. December 2003 – After an extensive input phase and review by various industry groups and service providers, the first version of the PEIGG guidelines were issued. Throughout the process PEIGG had been actively soliciting feedback and input from a number of industry groups including the NVCA. March 2004 – NVCA board issued statement of support, but not endorsement as some pundits had hoped. NVCA position was widely consistent with input provided by members of the NVCA CFO Task Force, members at large, and the NVCA Board of Directors. The text of NVCA’s statement is printed below. March/April 2004 – The Institutional Limited Partners Association (ILPA) hails NVCA support as welcome support – especially as it relates to the GP and LPs mutually agreeing to the valuation process. PEIGG also hails the NVCA support. July 2004 – After consulting quietly with various industry groups, PEIGG issues guidance on controversial paragraph 30 which was the most discussed and debated provision in the guidelines. September 2004 – Based on input from ILPA and others, PEIGG agrees to minor wording changes in two paragraphs. This becomes PEIGG guidelines version 2. These two wording changes were consistent with, and in part inspired by, language the NVCA board used in its March 2004 statement of support. October 2004 – ILPA endorses the PEIGG guidelines. December 2004 – As most fund accounting year’s end, GPs prepare for their first audits since the effective date of AICPA’s SAS 101 rule. Essentially that rule says that if a reporting entity claims to be reporting “fair value” – which is required by GAAP – then the auditors must document and test that this is, in fact, true. It was not clear to what extent this increased scrutiny would affect valuation expectation and practices. March 2005 – NVCA board issues an updated statement, which now refers to the September 2004 version of the PEIGG guidelines. The NVCA also decided to make the PEIGG document widely available to its members. The text of that statement is below. April 2006 – Guidelines issued by a consortium of three Europe-based venture capital associations (AFIC, BVCA, EVCA) are released. The authors cite compliance with IASB rules. Informal feedback from US venture capital professionals reviewing this document was that the document was more formulaic than PEIGG’s counterpart and only partially compliant with US GAAP as defined at that time. Subsequently, 30 non-US private equity and venture capital associations endorsed this document. Go to http://www.privateequityvaluation.com. The most recent edition is October 2006. These guidelines have

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gotten little traction in the US and expected to be updated in 2009. September 2006 – Financial Accounting Standards Board (FASB) issues its long-awaited and long-anticipated fair value measurement standard as FAS 157. Only a few of its 145 pages relate directly to typical venture capital and private equity funds. Because FASB maintains that this is a clarification and further definition of fair value which was already required for portfolio accounting, some auditors began requiring selective compliance in advance of the 2008 effective date. March 2007 – PEIGG issues a revised portfolio company valuation guidelines document to reflect the Fair Value Measurement standard (FAS 157). September 2007 – NVCA board reaffirms its prior position on the PEIGG guidelines to refer to the most recent version. March 2008 – the International Private Equity Valuation & Venture Capital Valuation (IPEV) Board reconstitutes and re-launches itself, expanded to include 5 practitioners from the United States. The initial focus of the group is on convergence of US PEIGG and IPEV valuation guidelines. Details at www.privateequityvaluation.com. August 2008 – SEC proposes a roadmap toward global accounting standards and publishes for public comment the concept of adoption of International Financial Reporting Standards. Details are at http://www.sec.gov/news/press/2008/2008-184.htm. September 2008 – At this point, visible signs of a valuation whirlpool are hard to miss. This changed what appeared a couple of months earlier to be a generally painless implementation of FAS 157 to a fluid environment with no precedent and little guidance. December 2008 - The decreases in public market valuations accelerate. This makes valuation of even ontrack, pre-revenue companies tricky. The NVCA issues a one page information letter to its members to shed light on applying FAS 157 in a valuation microburst/whirlpool. (Text below)

The PEIGG Guidelines
While the NVCA has not specifically endorsed the PEIGG portfolio company valuation guidelines (see statement in next section below), it believes that the guidelines document should be readily accessible to its members for reference and use. Be sure to refer to www.peigg.org for the latest version and guidance on the document. The NVCA thanks the members of PEIGG for their efforts and for their permission to reprint the guidelines here. The guidelines as updated in March 2007 to reflect FAS 157 are printed below.

investor’s need for fair value data to report investments in their own financial statements, a manager’s need to report and measure valuations in accordance with fund agreements, and the need to determine the allocation of distributions of fund realizations. This has led to increased scrutiny of portfolio company values and the need for greater consistency of valuation methodologies employed by managers of private equity funds. However, by its very nature private equity is an asset class in which judgment plays a significant role. Accordingly, investors in the same company may have different, but supportable, views on valuation. 2. The objective of the Updated U.S. Private Equity Valuation Guidelines (“Guidelines”) is to provide managers a framework for valuing investments in portfolio companies at fair value and to provide greater consistency within the private equity industry with regard to valuations. Historically there were few authoritative guidelines compliant with U.S. generally accepted accounting principles (GAAP) that required specific procedures for esti-

OVERVIEW
Introduction

1. As the U.S. private equity industry (defined as venture, buyout, mezzanine, and other investments in private companies) has grown and matured, its participants have become increasingly interested in the appropriate reporting of fund values. The interest stems from a number of sources, such as an investor’s desire to measure interim performance,

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mating fair value of investments in portfolio companies held by private equity investors. In September, 2006, the Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 157, Fair Value Measurements. The Updated U.S. Private Equity Valuation Guidelines are intended to assist managers in their estimation of fair value and are intended to be consistent with GAAP (FASB Statement No. 157) and the AICPA Audit and Accounting Guide - Audits of Investment Companies. The AICPA Guide’s definition of Investment Companies includes Private Equity Investors (paragraph 1.03) and requires investments to be reported at fair value (paragraph 1.32). 3. These Guidelines were created jointly by managers (i.e., general partners) and investors (i.e., limited partners) incorporating feedback from a wide number of industry participants. The Guidelines are not intended to be all encompassing, nor are they intended to eliminate all subjectivity. Rather, they are to be a guide to assist managers and investors in agreeing to a valuation framework while allowing a manager to exercise its best judgment in applying the Guidelines. 4. Included in these Guidelines are terms that are subjective in nature, such as materiality, and could have different meanings in various factual situations. While it is outside the scope of these Guidelines to force specific definitions upon its users, the manager, in consultation with the Valuation Policy Committee (as discussed below) may develop and document appropriate definitions of these subjective terms. 5. The Guidelines are not intended in any way to modify the provisions of the fund agreement relating to the subject matter hereof. To the extent the Guidelines are adopted by a manager and a Valuation Policy Committee and in one or more respects the Guidelines are inconsistent with the fund agreement, the fund agreement would govern (absent a specific amendment thereto).
Fair Value Concept

a liability in an orderly transaction between market participants at the measurement date” (FASB Statement No. 157, paragraph 5). The objective is to estimate the exchange price at which hypothetical willing marketplace participants would agree to transact in the principal market, or lacking a principal market, the most advantageous market. No matter which market is deemed most appropriate, fair value is the estimated “exit price” in that market. 7. Securities of private companies, by definition, will not have quoted market prices available. However, private companies at times engage in arm’s-length transactions for issuances of their equity or debt securities. The value of these transactions could serve as an observable market price similar to a quoted market price if the transaction is both recent and between willing parties for the same securities as those for which the fair value determination is being made (deemed a level 2 input by FASB Statement No. 157), and could therefore be used as an estimate of the theoretical exit price. 8. When quoted market prices or arm’s-length transaction prices as described above are not available, the estimate of fair value should incorporate all reasonably available information about the business and utilize assumptions that market participants would normally use in their estimates of value. The estimate of fair value should seek to best replicate the amount at which the investment could be sold in a current transaction between willing parties. 9. In determining the fair value of individual investments using these Guidelines, managers are expected to use their judgment. In utilizing judgment, substance takes precedence over form. For example, when a manager’s past experience indicates that liquidation preferences will likely be renegotiated or may not be fully enforced at the time of liquidation, the manager is strongly encouraged to use the expected results rather than the form of the agreement. 10. Valuations should be updated on each measurement date, generally on a quarterly basis. Of course, valuations used for annual and quarterly performance reporting should be used in private placement memorandums and other marketing materials.

6. The Guidelines seek to have all investments in portfolio companies reported at fair value on a consistent, transparent and prudent basis. Fair value as defined in accordance with GAAP is “the price that would be received to sell an asset or paid to transfer

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Valuation Policy Committee

11. These Guidelines acknowledge the perception that bias exists or has the potential to exist in a nonindependent (versus independent) valuation performed by a fund’s manager. As a result, it is recommended that the manager of each private equity fund establish a Valuation Policy Committee consisting of a subset of the fund’s investor representatives. The Valuation Policy Committee could be all of, or a portion of, a fund’s advisory committee, if such a committee exists. (Neither these Guidelines nor GAAP require managers to obtain independent valuations). 12. The fund manager, in consultation with the Valuation Policy Committee, should establish the written valuation parameters to be consistently followed by the fund’s manager using these Guidelines. The agreed upon valuation policy and deviations from that policy should be communicated to the Valuation Policy Committee and the limited partners by the manager. Private equity fund managers are solely responsible for establishing and documenting valuation policy, practices, procedures and methodologies as well as valuing their investments in portfolio companies The Valuation Policy Committee should not set, formulate or approve the valuations, except as required by the fund agreement. The Valuation Policy Committee should periodically discuss the level of the manager’s adherence to the fund’s valuation policy parameters.

14. Managers of funds should, without undue cost and effort, contact other sophisticated investors to discuss the valuations of common investments and the factors considered in their valuations. However, managers are not required to use other investors’ valuations since the estimate of fair value is the responsibility of the managers. 15. To value an investment, managers should place the most weight on valuation methodologies that are clearly objective and timely. On each valuation date managers need to take into account available information from market participants, the relevant marketplace and the global economy along with specific facts and circumstances in determining the fair value of their investments. 16. Historically, the Private Equity Industry used cost or the value of the latest round of financing as an approximation of fair value; often without taking into account other facts and circumstances. Such an approach is incompatible with the concept of fair value described above. At each valuation date a manager must make a determination of fair value for each investment. As further outlined below, these Guidelines provide a consistent and transparent methodology for determining fair value. However, a manager may conclude, after considering the facts and circumstances as outlined below, that the best indication of fair value is provided by cost or the value of the latest round of financing. 17. FASB Statement No. 157 allows managers to utilize three valuation techniques, either alone or in combination. These Guidelines encourage managers to use the “market approach” in most situations (see FASB Statement No. 157, paragraph 18a) utilizing Comparable Company Transactions or Performance Multiple inputs, as the primary technique to estimate the fair value of equity securities in private companies. For Private Equity, the market approach usually is the most appropriate. 18. In addition to the market approach technique discussed above, there are other valuation methodologies, some of which are discussed in paragraphs 41 and 42. These other methodologies or techniques may be appropriate in certain circumstances, and include discounting cash flows, valuing net

II. PRIVATE COMPANY VALUATION METHODOLOGIES
General Guidelines

13. Managers are to fairly value the investments in their portfolio companies on a consistent, transparent and prudent basis. Since value is often realized through a liquidity event of the entire company, the value of the company as a whole at the reporting date will often provide the best evidence of the value of the investment in that company. As a result, the methodologies discussed in this section involve estimating the value of the company as a whole as an initial step for valuing the company’s privately issued securities. The manager will then need to determine how the total enterprise value is distributed among the various securities of the company.

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assets, and industry-specific benchmarking (described in FASB Statement No.157 as the income and cost approaches). 19. Other valuation matters, including valuing interest bearing securities, PIK dividends, warrants, liquidation preferences, convertible securities, escrows, and other rights, privileges and preferences of preferred securities are discussed in paragraph 47. 20. Determination of valuation adjustments should typically be based upon actual positive and negative events, not upon expected accomplishments and performance. 21. Regardless of the valuation methodology used, once used, it should continue to be used until a new methodology will provide a better approximation of the investment’s current fair value. It is expected that there would not be frequent changes in valuation methodology.
Cost / Latest Round of Financing

24. A subsequent equity financing that includes substantially the same group of investors as the prior financing is an appropriate factor to consider in valuing prior investments unless it can be demonstrated that the financing no longer represents fair value. This approach may be different from historic practice, where, typically the value of prior investments was not increased in a subsequent higher priced financing round unless a new investor ‘validated’ the new pricing. 25. If a private financing will be completed with a high degree of certainty in the near future, and the pricing of the transaction has been substantially agreed, to establish the value of a previous investment, a manager should consider their best estimate of the upcoming new financing if it can be objectively determined that the prospective financing is at fair value. 26. Occasionally a round of financing includes a significant investment from a strategic investor paying a premium due to benefits accruing uniquely to itself. The manager must evaluate whether such a premium is representative of what the most likely buyers of the company would also pay upon exit, and therefore, whether the price paid by the strategic investor is deemed to be the exit price (fair value) expected from market participants.
Deviations from Cost / Latest Round of Financing

22. While entry prices and exit prices are different conceptually, for the Private Equity Industry these Guidelines presume the manager at the time of the initial investment has considered near term company performance in determining investment valuation. Therefore, cost (the transaction price) may be fair value (the exit price) upon purchase. The transaction price may not represent fair value upon purchase when: a) The transaction is between related parties; b) The transaction occurs under duress; c) The transaction price includes transaction costs (transaction costs are expensed under GAAP); d) The market in which the initial transaction takes place is different than the principal or most advantageous market in which the exit transaction would take place. 23. Managers should reconsider a company’s fair value in connection with each material equity financing, regardless of the manager’s participation. The value of the last round of financing is a factor in determining fair value, but it is not necessarily the only factor.

27. After some period of time, cost or the latest round of financing becomes less reliable as an approximation of fair value. Therefore, the manager must assess whether fair value has changed even though there has not been a new round of financing. Examples of changes in circumstances which indicate a change in fair value may include, but are not limited to, the following: a) The current performance of the company is significantly above or below the expectations at the time of the original investment. Potential indicators of this situation will include evaluation of the company’s success or failure in attaining certain milestones, achieving technology breakthroughs, developing proprietary technology, progressing through clinical trials or significantly exceeding or failing to meet budgets.

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b) Market, economic or company specific conditions have significantly improved or deteriorated since the time of the original investment. Potential indicators of this situation will include evaluation of broad changes in the economic climate, changes in the financing markets, changes in the legal or regulatory environment in which the company operates, changes in the company’s cost structure, increased or decreased risk factors faced by the company, or significant fluctuations in share prices of quoted companies operating in the same or a related industry. c) Substantial decreases in the value of quoted, more senior securities of the company (e.g., public debt), defaults on any obligations of the company, a bankruptcy filing, significant ownership dilution caused by recapitalization of the company, or liquidity concerns that are expected to be more than short term in nature are circumstances which may indicate a potential impairment in value. 28. Estimating the extent of a change in fair value, if any, may not easily lend itself to an analytical process. As a result, the manager will be required to exercise prudent judgment and carefully consider the broad indicators of potential changes to fair value (such as market conditions, relevant stock market indices, and other factors as discussed above). 29. The result of such consideration will provide indications whether the carrying value of the investment should be increased or decreased to represent fair value. The longer that fair value has been estimated using cost or the price paid at the most recent round of financing, the more consideration should be given to reviewing changed circumstances and potentially determining fair value utilizing other inputs. Managers may consider historic cost or the price paid at the most recent round of financing in making their fair value determination, but should not use cost or the most recent financing price as the sole determinate of fair value. 30. These Guidelines recognize that building longterm value in a private equity backed business is not an easy task. Usually, many positive events need to happen in order for portfolio companies to succeed. However, managers often become aware that certain of their investments are likely to fail given their insight into the company. Even private companies that have significant manager involvement face a daunting task to create value for investors. Thus, it is natural that decreases in value may be more easily identified and justified than increases in value. However, both decreases and increases in investment fair value should be recognized when warranted. Because of the difficultly in building sustainable, long-term value in a private equity backed business, increases in value should only be made where the manager can support the increase using the methodologies discussed in these guidelines or using other techniques common to the marketplace, remembering that fair value is defined as the exit price on the measurement date in a hypothetical transaction. Diligence, prudence and caution should be applied when valuing private companies, and in particular when considering the valuation write-up of early-stage companies, in the absence of market-based financing events. All such changes and the factors upon which the changes are made should be reviewed with the Valuation Policy Committee. However, managers must recognize that there should be no bias toward either increasing or decreasing carrying value to record fair value. 31. When valuation adjustments are necessary, the methodology used should be based on relevant comparable data wherever possible (“relevant comparable data” as used in these Guidelines is intended to be consistent with the input hierarchy discussed in paragraphs 22-31 of FASB Statement No. 157). Recommended methodologies are discussed below.
Comparable Company Transactions

32. This methodology involves deriving the value of a company through examination of third-party investments in comparable equity securities of the company, examination of transactions in equity securities of comparable companies and direct comparisons to similar companies. These comparisons should be appropriately adjusted for any control premiums, synergistic benefits or other excess benefits or detriments that accrue to the owner when determining a proper comparable valuation. 33. These Guidelines acknowledge that until a company achieves marketplace acceptance for its product or service, it is unlikely that truly comparable

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companies with determinable fair values will be readily identifiable. 34. To the extent comparable transactions cannot be ascertained and fair value cannot be reasonably assessed and reliably measured using comparable transactions, the following Performance Multiple methodology should be used, if applicable.
Performance Multiple

pany, but these changes may not yet have affected performance. The manager needs to consider these changes in evaluating a company’s sustainable performance. Managers should share with the Valuation Policy Committee the factual data and their assumptions that support the sustainable performance used in the valuation determination. 39. The multiples used should be those that are used regularly and routinely to value companies in the industry in which the subject company is operating. If the multiples used are derived from public company comparables, a discount to a private company’s equity value may be appropriate. Discounts applied to private securities may be higher than those applied to restricted public securities, which are discussed in paragraph 46. Managers should share with the Valuation Policy Committee the factual data that generates the multiples used in the valuation process. 40. To the extent fair value cannot be reasonably assessed and reliably measured using performance multiples, the following methodologies may be considered.
Other Valuation Methodologies

35. The performance multiple methodology applies a relevant multiple to the performance of the company being valued in order to derive the value of the company. This approach is most applicable to companies that have achieved positive and sustainable operating performance. 36. The valuation determined using this methodology is calculated by applying the most appropriate and reasonable multiple derived from reference to market based conditions of quoted companies or recent private transactions. The multiple to be used, which may need to be adjusted for differences in terms of growth prospects and risk attributes (depending on the size of the comparison sample, among other factors), should be one of the following: a) Current average comparable public company multiple for similar companies in the industry; b) Current average multiples for recent private transactions of similar companies in the industry; and c) The original acquisition multiple when no other similar public or private multiples can be ascertained. The most appropriate and reasonable multiple as determined above will be applied to the relevant operating performance metrics of the company to estimate fair value. 37. The manager should be confident that reasonable, relevant and sustainable performance metrics are utilized, which may necessitate the adjustment for one-time and non-recurring items. 38. There may be significant changes in the financial, regulatory, economic or legal climate in which the company operates which harm or enhance the prospects of the com-

41. A few other valuation methodologies, which may be appropriate in certain circumstances, are as follows: a) Because of the need to use significant estimates and forward-looking information, discounted cash flow (DCF) methodologies should only be used in limited situations using a discount rate commensurate with the risks involved. These situations would involve instances where the methodologies previously discussed in these Guidelines prove incapable of addressing the specific circumstances. b) Net asset valuation methodologies should be used for valuing investments in businesses whose value is derived primarily from the underlying value of their tangible assets rather than their performance. c) Industry-specific benchmarks, which are customarily and routinely used in specific industries such as price per subscriber or other industry norms, should only be used in estimating fair value where appropriate. 42. In those circumstances where there are indications that a change in carrying value is appropriate

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based on paragraph 27, but the methodologies described in paragraphs 32-41 are not applicable, the manager should exercise prudent judgment in considering assumptions that marketplace participants would utilize in their estimate of fair value. rities which trade in inactive markets, where transactions do not occur with sufficient frequency and volume to provide ongoing pricing data. Therefore, the last transacted price may not provide the best indication of fair value. In such situations, an adjustment to the last transacted price may be appropriate or other valuation techniques may be utilized based on all relevant factors.

III. VALUATION OF PUBLICLY TRADED SECURITIES
Unrestricted

IV. OTHER MATTERS
47. There are a wide variety of securities and capital structures used in the private equity industry. Such securities should be valued consistent with the Guidelines set forth above. Some examples and valuation guidance for securities and structures which have not been specifically addressed by these Guidelines include: a) The carrying value of private interest bearing securities should be based on the underlying company’s ability to service and repay debt. b) PIK dividends should be accrued in accordance with the terms of the underlying security. A valuation discount may be necessary depending on the health of the company and the realizability of the underlying securities. c) Valuations of securities denominated in currencies other than the base currency of the fund should be adjusted for changes in the spot prices of the currency. d) Warrants should be carried at their fair value. e) The rights associated with preferred stock are generally divided into two broad categories—economic rights and control rights. Once the enterprise value of the company is determined in accordance with these Guidelines, fair value should be determined by allocating value to shares of preferred and common stock based on their relative economic and control rights. In addition, when making their fair value determination managers should recognize that liquidation preferences are often granted to investors as an inducement to invest in a company. When a manag-

43. Actively traded public equity and public debt securities are required to be valued at the closing price or bid price, except as discussed below. Active markets are defined as a market in which transactions occur with sufficient frequency (daily) and sufficient volume to provide pricing information on an ongoing basis, regardless of the size of the position held. 44. Discount (blockage) factors for unrestricted securities that trade in an active market are prohibited by GAAP (FASB Statement No. 157).
Restricted

45. A discount from values of actively traded securities should be taken for holdings of securities when there is a formal restriction that limits sale of the securities. Examples of restrictions that may warrant a discount include rule 144 holding periods and underwriter’s lock-ups. Discounts for restricted equity securities from their market price typically range from 0% to 30%. When determining a discount to actively traded restricted securities, factors that should be taken into consideration include the company’s trading characteristics (the extent to which the market for the security is active), the investor’s ability to sell its position when the restriction expires, and the term of the restriction. The adjustment of the discount will vary depending on the duration of the restriction. As the remaining length of the restriction decreases, the amount of the discount should also decrease. Limitations on sale based on rule 144’s volume tests or based on a closed trading window for board members do not qualify as formal restrictions related to the security itself. Therefore discounts are not allowed by GAAP in these situations.
Inactive

46. A quoted price is not readily available for secu-

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er’s past experience indicates that liquidation preferences will be renegotiated or will not be fully enforced at the time of liquidation, the manager is strongly encouraged to use the expected results in determining the valuation of a security which has a liquidation preference. f) Currently convertible securities should be valued at the excess of the value of the underlying security over the conversion price as if the security was converted when the conversion feature is “in the money” (appropriately discounted if restricted). If the security is not currently convertible, the use of an appropriate discount in valuing the underlying security should be considered. If the value of the underlying security is less than the conversion price, the carrying value of the convertible security should be based on the underlying company’s ability to service and repay the security. g) If deemed determinable beyond a reasonable doubt (virtually certain) escrows from the sale of a portfolio company should be valued at an amount that the manager, using its best estimate, ultimately expects to receive from the buyer in light of the escrow’s various conditions. h) Because of the inefficiencies of the secondary market, purchase and sale transactions of partnership interests in and of themselves may not be appropriate in determining the value of portfolio company valuations or positions in funds. 48. FASB’s Statement No. 157 Fair Value Measurements utilizes a hierarchy described as Level 1, 2 and 3 inputs (Statement No. 157 paragraphs 21-31). The FASB valuation hierarchy has not been restated in these Guidelines. The concepts outlined in these Guidelines are intended to be consistent with Level 1, 2 and 3 inputs as defined. The input level is a required GAAP disclosure and provides users of financial statements with additional clarity in how a manager made their determination of fair value. tency of valuation standards/methodologies by both managers of, and investors in, private equity funds. These Guidelines are designed to provide a framework for addressing the majority of the private equity industry’s valuation questions on a consistent, transparent and prudent basis. It is recommended that managers and investors collaborate to share experiences and best practices across relationships. This collaboration will narrow the range of specific definitions of subjective terms and will enhance the consistent application of these Guidelines. 50. The key goals of these Guidelines are as follows: • Encourage managers to approach valuation from a consistent, transparent and prudent basis. • Focus the private equity industry on the need to determine fair value for each of their investments in a manner that is consistent with these Guidelines. • Provide greater transparency into valuation results through the use of the Valuation Policy Committee as described in the Guidelines. 51. The Guidelines are not intended to be all encompassing, nor are they intended to eliminate all subjectivity. Rather, they are to be a guide to assist managers and investors in agreeing to a valuation framework while allowing a manager to exercise its best judgment in applying the Guidelines. 52. The Private Equity Industry Guidelines Group acknowledges that the application of these guidelines may result in a departure from past valuation practices. It is recommended that managers and investors work jointly to develop a timetable to implement these guidelines. It is expected that over time the broad use of these Guidelines will become industry practice 53. These Guidelines are consistent with US Generally Accepted Accounting Principles. If managers adopt these Guidelines it is expected that their determination of fair value will be GAAP compliant. However, it is also understood that a manager may be GAAP compliant without utilizing these Guidelines.

V. CONCLUSION
49. As the private equity industry has matured in the United States, there is a need for greater consis-

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NVCA Position on Portfolio Company Valuation Guidelines (March 2007 Version)
The NVCA Board of Directors reaffirmed its support for the latest iteration (March 2007) of the PEIGG Guidelines on September 18, 2007. While the NVCA has not specifically endorsed the PEIGG or other valuation guidelines, the NVCA board statement of support is below: The NVCA recommends that its members create, follow and communicate clearly the specific procedures and methodologies used for valuing their portfolios. These methodologies should be agreed to by the firm’s investors (LPs), and conform, when required, to Generally Accepted Accounting Principles and fair value measurement standards, recognizing that the ultimate responsibility for valuations remains with the general partner. When evaluating current valuation procedures or developing new approaches, the NVCA suggests its members include a review of the Private Equity Industry Guidelines Group (PEIGG) December 2003 “Private Equity Valuations Guidelines” document, as reissued in March 2007 (found at www.peigg.org). We commend the fine efforts of PEIGG, an independent group which sought and reflected input from the NVCA and other industry stakeholders. The NVCA encourages diligence, prudence, and caution when implementing the specific elements of any guideline, such as valuation changes to early-stage companies in the absence of market-based financing events.

investors as they attempt to value privately-held investments at December 31, 2008? The short answer is: despite the current very challenging economic environment, Fund managers must continue to exercise their sound judgment in estimating the Fair Value of each portfolio company after considering the relevant facts, including current market conditions. The valuation process does not change, but much more judgment is required when we are in a period of economic discontinuity. Virtually all LP agreements require GPs to use US GAAP for financial reporting. US GAAP requires Fair Value reporting for virtually all VC firms because they are “investment companies.” US GAAP continues to define Fair Value as: “the price that would be received to sell an asset…in an orderly transaction between market participants at the measurement date.” Fund managers need to establish Fair Values even though they may not currently need to sell, or cannot sell, their private investments in this market. GPs must use their judgment in estimating the current Fair Values of their investments, even though “exit markets” may have few buyers, IPO markets appear closed, and there are few, if any, relevant comparable transactions. Such judgment should take into account all relevant information, including a financing round’s specific terms and conditions. There are no easy outs, rules of thumb or safe harbors for establishing Fair Value. As always, best considerations for Fair Value determination include the following: • The Fair Value of an investment portfolio is the sum of the Fair Value determined for each portfolio company using a “bottoms up” approach. Applying a “top-down” overall percentage adjustment to the aggregate portfolio’s value is not compliant with US GAAP. • Valuations should reflect specific factors in a buy/sell context. For example, a GP could ask: “Given my portfolio company’s current cash position, cash burn rate, performance compared to plan, probability of meeting forecasts, the projected environment for its product or technology, etc., as a board member, what is the lowest price that I would

NVCA Member Alert – Fair Value Considerations for Venture Capitalists December 2008
The following alert was sent to the NVCA membership to highlight certain issues and considerations to be explored in the application of FAS 157, the fair value measurement standard. The NVCA thanks David Larsen of Duff and Phelps and several members of the NVCA CFO Task Force for their role in drafting this document: “We are operating in a severely distressed investment environment that has deteriorated rapidly in the past few months. What does this mean for venture capital

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sell the company’s stock today in an orderly sale with a willing buyer?” [Footnote: A fund manager should not assume a “fire sale” of the stock, but should assume “exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary…” SFAS 157, Paragraph 7]. • The valuations set by the most recent financing round – perhaps even one in the third quarter of 2008 – may be stale and inappropriate for determining Fair Value, especially given current market conditions. • The Fair Value at December 31 in many cases will likely be different from the value at September 30, given the deterioration of the macro economic environment. • Each valuation should reflect a company’s degree of progress from the prior reporting date to the current one. • To determine a portfolio company’s Fair Value, GPs should apply their judgment in a consistent manner and evaluate the same data they use for monitoring a company’s performance and progress. There is no magic formula or weighting of factors. In summary, determining Fair Value continues to require the exercise of judgment based on objective evidence, such as calibrating the original investment decision with the current performance of the company and the current economic environment. The fact that the macro market is distressed probably adversely impacts the value of most companies. This negative impact may be compounded by disappointing company performance or mitigated by tangible and sustainable company progress. If you need more details about Fair Value, you might consider the 18-page PEIGG Valuation Guidelines at www.peigg.org, or you can download the 158-page SFAS 157 at www.fasb.org.”

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Appendix I: International Convergence
A GP’s Primer on Global Accounting Standards Convergence
A recent flurry of media coverage has focused on the possible upcoming convergence of US and international accounting standards. Much of this coverage discusses which accounting system casts which public companies in the most favorable light. While that particular matter seems distant from the US venture capital industry, there are two key aspects of convergence that it appears we need to focus on: • Determining which system (current US GAAP vs. International vs neither) is the best system overall for the US business community going forward. We would expect this dialogue to center on transparency, reliability, relevance, comparability, and ongoing costs in addition to any conversion costs, which might not be insignificant. • Addressing matters which specifically affect our funds. One area already identified is the financial statements provided by GPs to LPs under international rules, should the international rules become the new US rules. As a first step towards understanding and engaging in constructive dialogue in both of these areas, the NVCA CFO Task Force has appointed a subgroup to begin gathering facts, analysis, and expert opinion on what all of this means to our industry. Standards Board (“IASB”) which was Europe-centric. These rules became known as the International Financial Reporting Standards (“IFRS,” pronounced “IFF-ers” or “EYE-fers”). Over recent years, the large number of multinational corporations complained that they had to endure keeping two sets of books and this prompted the concept of convergence. In early September 2008, the SEC and the FASB announced steps to pave the way for US public companies to convert from US GAAP to IFRS. The SEC “roadmap” provides for a three-year run-up to an SEC “go-no go” decision in 2011. 2011 is also the year that major US trading partners, Canada, Japan, Korea and India have indicated plans to adopt IFRS. At about the same time, the FASB and the IASB met to review and re-orient their convergence plan to be consistent with the SEC’s proposed schedule. The updated FASB-IASB memorandum of understanding is at http://www.fasb.org/intl/MOU_09-11-08.pdf. As 2008 drew to a close and much Washington attention was focused on rescuing troubled assets and economic stimulus, it was not clear what the direction or priority for this would be going forward. Please check the www.nvca.org website for updates. Nothing in the SEC proposal or the FASB-IASB memorandum says that the US will conclusively “converge” to or switch over to IFRS. This all contemplates a well-thought-out and informed decision in three years. But large processes are being set in motion that may be difficult to stop. It is worth pointing out that the SEC roadmap refers to public company reporting; however we should logically expect alignment of private and public company rules. What is not clear at this time is what the current global economic turmoil will do the priority of this project or its timetable.

Why Has The Convergence Issue Come to the Surface at This Time?
For years, the United States has been developing generalized accounting principles referred to as Generally Accepted Accounting Principles (“GAAP”). The keeper/arbiter/decider of GAAP is the Financial Accounting Standards Board (“FASB”). FASB develops and updates GAAP and the SEC has adopted these accounting rules for public company reporting and other situations over which the SEC has jurisdiction. In recent years, on a parallel track, a separate set of rules emerged from the International Accounting

US GAAP vs IFRS – Never Generalize
Even viewed from 30,000 feet, it is difficult to generalize on how the two systems compare. First, while the IASB produces plain vanilla IFRS standards,

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there is no one flavor of IFRS in use. Much like the original UNIX kernel, each country/jurisdiction has been able to create its own version of IFRS. But unlike UNIX, sometimes the differences among the localized IFRS versions are large. So an apples-toapples comparison of “IFRS-compliant” financials from different jurisdictions can be difficult. Second, it is true that IRFS itself is a very thin document compared to GAAP, which has grown to roughly a 2foot stack of written rules. However, to implement IFRS, you need the implementation guide which combines with the original document to create its own 2-foot stack. Again, much of the surface comparisons are not useful. Until this point, US venture capital firms have been using exclusively US GAAP accounting standards. However, in early November, we received a report from a member firm with international intermediaries for overseas investment where the local auditors raised the question of whether those financial statements need to be IFRS-compliant. for the plan sponsors while accounting rules abandon the current fair value reporting requirements.

How International GPs Now Handle LP Reporting
A logical question arising from the above paragraph is how venture capital firms operating in IFRS jurisdictions are currently reporting to LPs, including those subject to Department of Labor ERISA fair-value reporting rules. The initial, and somewhat limited, review by the NVCA CFO Task Force subgroup is that they simply are not doing so. Many of international GPs continue to produce financial statements in accordance with US GAAP for both their US and international LPs. Those reporting under IFRS are incurring the additional effort and expense of also providing a separate US GAAP-type fair value schedule.

Recent Events
A full chronology of events is posted under Valuation Guidelines on the NVCA website www.nvca.org. This document is updated from the chronology in Appendix H of the NVCA 2008 Yearbook prepared by Thomson Reuters. Even as the US industry works toward compliance with the FASB’s Statement 157 on fair value measurement starting with 2008 financials, dialogue has begun on convergence. In March 2008, the International Private Equity & Venture Capital Valuation (IPEV) board reconstituted and re-launched itself. IPEV was expanded to include five practitioners from the United States who are familiar with the venture industry. The initial focus of the group is on convergence of US Private Equity Industry Guidelines Group (“PEIGG”) and IPEV fair value guidelines. Details are online at www.privateequityvaluation.com.

GP-to-LP Reporting
One area already identified as a possible problem area is GP to LP reporting. Virtually all LP agreements (or accompanying documents) require GPs to provide GAAP-compliant financial reports to LPs. Annual audits of these reports are GAAP-based. Under GAAP, the US venture capital industry provides fairvalue portfolio reports under the special rules of “investment company reporting”. Our early analysis of IFRS shows special investment company rules for portfolios of publicly-traded companies but no such provisions for portfolios of private companies. Most of the SEC and FASB efforts to date have focused on public company reporting. We are very early on in verifying and creating awareness of the lack of private portfolio provisions. The initial reading is that, under IFRS, the financial statements for a number of the portfolio companies would have to be consolidated into the operating financials of the venture capital fund itself. This would create a mishmash report, essentially unusable to the LPs in determining the value of their own portfolio holdings. This would mean an end to fair value reporting as we have known it. A potential further complication could arise if DOL ERISA fair value rules remain in place

Going Forward
With the international and domestic attention on other economic matters, it is not clear how quickly any accounting standard convergence activities will move. However, the NVCA CFO Task Force has begun the process of preparing for the future dialogue and the NVCA has several efforts underway to understand the implications. For more information, please contact NVCA Vice President of Research, John Taylor, john.taylor@nvca.org.

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Appendix J: Non-US Private Equity
As interest in globalization increases with each year, private equity investors have continued to broaden their investment criteria to include overseas ventures so as to increase portfolio diversification and search for higher returns. As such, Appendix J is produced for readers to analyze non-US private equity data. All data is reported in US dollars.

Introduction
This appendix highlights various aspects of private equity activity outside of the United States and provides valuable information for comparison to the United States private equity environment. However, this appendix is not directly comparable to domestic data found in this Yearbook due to differences in definitions between the regions and variations in the currencies of each region. Additionally, this appendix provides a brief overview of non-US private equity; data herein is not as comprehensive as the United States data presented elsewhere in this publication. Despite this, the reader can use this appendix to analyze trends in private equity outside of the United States. All data is provided by Thomson Reuters. As mentioned previously, readers should note the differences in methodology and definitions of private equity between United States and other regions before analyzing the data. For example, private equity outside of the United States provides equity capital for entities not publicly traded and consists of buyouts and venture capital. The category of buyouts includes management buyouts (management from inside the company investing with private equity investors), leveraged buyouts (the target taking on a high level of debt secured by assets), institutional buyouts (outside investors buying a business from existing shareholders), and management buy-ins (management from outside the company investing with private equity investors). On the other hand, venture capital describes the process of financing companies at the seed, start-up, or expansion stages. The United States places more emphasis on the early stages of development than do other regions, based on historical analysis of investments by stage. Like in the United States, non-US venture capital is considered a subset of private equity. For ease of analysis and to avoid differences in definitions between venture capital and buyouts inside

and outside of the United States, it is perhaps most comparable to analyze aggregate private equity in the two regions as opposed to any classifications contained within. **Special Note: The methodology used to generate the data within this appendix differs slightly from the methodology used in previous years, causing data to vary slightly from previous Yearbook issues. However, trends reported in the past remain intact. Additionally, most data is now replicable on Thomson ONE Banker Private Equity and VentureXpert.

Commitments
Private equity commitment levels, outside of the United States, increased in 2008 from the record levels previously set in 2006. During 2008 commitments totaled $150.8 billion, a 7% increase from the previous year. 2008 represents the biggest year for commitments outside of the United States on record. Buyouts funds accounted for a vast majority of the funds, 76%, of committed funds, a 1.8 percentage point increase from 2007. Balanced stage financing accounted for 12%, a decline from 17% in the previous year, while early stage financing accounted for 3.4%, a slight increase from 2006 when early stage financing account for 2.9% of commitments. It should be noted that these totals reflect not only the amount raised by independent funds, but also include capital gains and the amount raised by both captive funds and funds of funds, as well.

Investments
Private equity investing outside of the United States reached $43.3 billion in 2008, a 12.5% decrease from $49.5 billion invested in the previous year. Buyout stage financing, which typically garners the largest percentage of investment dollars due the large trans-

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action size associated with these deals, led activity in 2007, accounting for 63.3% of total investments. Leading all activity outside of the United States, investments in the United Kingdom totaled $6.6 billion during 2008, a 21% decrease from 2007 levels. Investments in German totaled $5.7 billion, a 21% increase compared to year-earlier levels. In the emerging markets, private equity investments in India reached $4.4 billion, a 2% increase from 2007 and investments in China totaled $4.1 billion a 24% increase from a year ago.

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