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PwC Getting that VC Round of Funding Best of Times…Worst of Times NBIA - May 2001 Steve Bengston Managing Director Emerging Company Services PricewaterhouseCoopers PricewaterhouseCoopers MoneyTree  Survey in partnership with VentureOne

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 3 About The Survey Designed to measure ‘core’ Venture Capital investing in the United States Firms included in the survey are: Professional Venture Capital Firms, Limited Partners, Investment Banks, Venture Leasing and SBICs Electronic questionnaire is available to download from the website Reports are issued nationally and locally on trends in investing MoneyTree ™ survey is in its 7th year, 1st year with Venture One Results available online (

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 4 Venture Capital Dictionary - Updated Momentum Investing has become... Buy High, Sell Low Broker means... Poorer than you were in 2000 Standard & Poor is... Your life in a nutshell Stock Split is when... Your ex spouse and lawyer split your assets

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 5 MoneyTree Total Investments Q Q ($ in billions) # of Deals , ,372 1,5691,192 1,0501,0721,

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 6 Texas $1, Deals Silicon Valley $3, Deals New England $1, Deals Midwest $ Deals South Central $8 3 Deals Northwest $ Deals Sacramento/N. CA $24 1 Deal San Diego $ Deals Investments by Region Q Southeast $ Deals Southwest $66 10 Deals Estimate / Other $579 9 Deals LA/Orange County $ Deals DC/Metroplex $ Deals NY Metro $ Deals Philadelphia Metro $ Deals North Central $ Deals Q Total Investments - $10,175 ($ in millions) Upstate NY $25 4 Deals Colorado $ Deals

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne Investments by Industry Q # of deals $ Decrease from Q4 00 ($ in millions) % 28% 39% 43% 25% 37% 16% 13% 36% (11%) 33 % (28%) Please visit for Industry Definitions Q Totals: $10, % 21 (8%)

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 8 Investments by Type of Financing Q Q Total Investments - $10,175 % of Total Investments ($ in millions) First $2,050 20% Third $1,547 15% Fourth & Beyond $1,355 13% Corporate $165 2% Other $1,675 17% Seed $33 0% Second $3,349 33%

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 9 Investments in Technology Companies 1,505 deals 995 deals ($ in millions) 651 deals

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 10 1,268 Deals 473 Deals 787 Deals ($ in millions) Investments in Internet Companies

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 11 ($ in millions) Investments in Technology & Internet-Related Companies

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 12 ($ in millions) Software Investments Q Q1 2001

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 13 ($ in millions) Communications & Networking Investments Q Q1 2001

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 14 ($ in millions) Consumer & Business Services Investments Q Q1 2001

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 15 # of deals in Q $ Decrease from Q400 ($ in millions) Q Internet Total: $7, % Q400 Q % 56% 51% (44%) 26% 33% Internet Investments by Subcategory Q vs. Q Please visit for Internet Subcategory Definitions

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 16 Percentage of Total Investments in Formative* Stage Companies * Formative Stage includes companies in the Start-up and Early Stages of Development

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 17 ($ in millions) Median Deal Size - Internet & Total Investments

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 18 Venture Capital FirmLocationTotal Deals Bessemer Venture PartnersWellesley Hills, MA 17 New Enterprise Associates Menlo Park, CA 17 J.P. Morgan Partners Baltimore, MD 13 Mayfield FundMenlo Park, CA 10 BancBoston Ventures Boston, MA 10 Sequoia CapitalMenlo Park, CA 10 SOFTBANK Venture Capital Mountain View, CA New York, NY ABS Ventures Q Most Active Venture Firms Menlo Park, CA Interwest Partners

PwC Global Private Equity 2000 A Review of the Global Private Equity and Venture Capital Markets

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 20 The World View: Top 20 Countries by Investment Asia Pacific 9. Hong Kong 11. Taiwan 12. Japan 15. Korea 17. Singapore 19. Australia 2. United Kingdom 3. Germany 4. France 5. Italy 7. Netherlands 8. Sweden 13. Spain 14. Belgium 16. Switzerland 20. Norway Western Europe North America 1. USA 6. Canada Middle East & Africa 10. Israel 18. South Africa 73% 20% 1% 4% Less than 1%

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 21 The World View: Top 20 Countries by Investment North America #1 in 1999: –$99 billion invested (73% of global investments), virtually all in US UK, #2, eight times smaller with $12 billion invested. Remaining top 10 (in order) are: –Germany – France – Italy – Canada – Netherlands – Sweden – Hong Kong – Israel

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 22 The World View: Top 20 Countries Based on Investment Growth (Five Years) - % North America 7. USA (40%) 15. Canada (24%) Middle East & Africa 6. Israel (54%) 1. Sweden (201%) 2. Switzerland (119%) 4. Italy (59%) 5. Belgium (58%) 8. Germany (42%) 9. Spain (41%) 10. UK (39%) 11. Netherlands (32%) 12. France (30%) 14. Norway (25%) Western Europe 3. Taiwan (60%) 13. Singapore (28%) 16. Hong Kong (13%) 17. Korea (4%) Asia Pacific

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 23 The World View: Top 20 Countries Based on Investment Growth Over the last five years, investment in Western Europe and North America has grown at around the same rate, an average of 40% Eight countries are growing faster than the USA: the topfive are: –Sweden (201%) –Switzerland (119%) –Taiwan (60%) –Italy (59%) –Belgium (58%)

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 24 Summary: Half Full/Half Empty $10.2B Q1 ‘01 vc spending 6th highest qtr in history, > all ’96 Q1 ‘01 39% lower Q4 ‘00, 61% lower Q1 ‘ vc spending likely 3rd highest year ever –30% decline Q2-Q4 = $26B ‘01 vs. $17B in ‘98 $9.5M ave deal size 5th highest ever B2B=Back to Basics: Technology, Team, Revenues, Profits Hot: Nothing! Warm: Infrastructure, Wireless (short list) Cold: ASP, Consumer, Exchanges (long list)

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 25 Summary VC Spending likely decline 15-30%/qtr thru 2001 –Portfolio problems –Future Vision Cloudy –Valuations continue to decline: Why invest now? 80 Internet stocks <$1 –LP funds drying up for some firms - need to stretch out fund –Liquidity horizon ugly: 5 IPO’s (1 IT) in Q1 vs 16 Q4, 70 Q3, 40 Withdrawn Q1 $ Value of all tech M&A down 45% in Q1 ‘01 vs Q4 ‘00 with # deals down 10% $2B in Internet M&A YTD ‘01 vs $52B in same period ‘00 Q $100M+ deals –Telseon-Gigabit Bandwidth Fiber-Based Data Services –Giantloop Network-Optical Network Services –SANrise-Secure Data Management Services –Xtera Communications-Technologies for Long-Haul Fiber Optics Systems –Sigma Networks-Operate Broadband Metro Interconnect Networks –Multiplex-Optoelectronics for Telecommunications sub-systems

PricewaterhouseCoopers MoneyTree Survey in partnership with VentureOne 26 Summary/Predictions IPO mkt may be essentially closed till M&A is King Revenge of VC’s: Valuations Down 50%, Term Sheets Tougher –Many vc’s in denial about quality their own portfolio –Many vc’s focusing on doing Series B/C deals at Series A prices Bankruptcy Attorneys in Demand: More Closings Coming –147 Internet closings in Q1 ‘01 vs 5 in Q1 ‘00 –20% of vc firms gone in 1 year, 50% in 3 years VC’s have record $ to invest –$35B raised in ‘00 not invested yet –Fundraising still vibrant, $16B in Q1 ‘01, exceeds spending –Returns to LP’s still likely to exceed other asset classes: Where else 30%? –Spending decline 10-30%/qtr this year, flat in Drivers of VC Activity Still in Place –Money, Talent, Disruptive Technologies

PwC Steve Bengston Managing Director Emerging Company Services PricewaterhouseCoopers

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