*connectedthinking Comerica/Global Software Event Q and Year End Review Steve Bengston Emerging Company Services

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 1 MoneyTree Total Investments Q – Q ($ in billions) # of Deals ,444 2,151 1,975 1, , ,003 1,3371,904 2,161 1,795 1,

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 2 MoneyTree Total Investments 1980 –2003 ($ in billions) # of Deals ,138 1,413 1,485 1,391 1,401 1,583 1,479 1,507 1,421 1,360 1,234 1,163 1,874 2,6123,695 5,608 1,208 3,185 8,082 4,600 3,035 2,715 Annual Venture Capital Investments 1980 to 2003

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 3 Corporate Venture Capital Investments ($ in billions) # of Deals ,3222,149 1,

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 4 THE WORLD VIEW – Top 20 Countries Based on Investment (2001 Rankings in Parentheses) Note: There is no published data on Asia Pacific countries for 2002, therefore estimates from the AVCJ are shown

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 5 US $ Billion THE WORLD VIEW Top 20 Countries - Based on Investment Note: There is no published data on Asia Pacific countries for 2002, therefore estimates from the AVCJ are shown Country Ranking Investment Value Funds Raised Country Ranking Investment Value Funds Raised 1. USA Australia UK India France Israel Italy Spain Japan Hong Kong Germany Indonesia0.56N/A 7. South Korea Finland Netherlands South Africa Canada China Sweden Belgium

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 6 THE WORLD VIEW – Top 20 Countries Based on Growth (CAGR 98-02) Only Countries with investments of at least $0.225 billion in 2002 are shown Note: There is no published data on Asia Pacific countries for 2002, therefore estimates from the AVCJ are shown

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 7 Texas $369 – 7% 37 Deals Silicon Valley $1,619 – 33% 183 Deals New England $660 – 13% 94 Deals Midwest $ Deals South Central $ Deals Northwest $167- 3% 32 Deals Sacramento/N. CA $ Deals San Diego $165 – 3% 25 Deals Southeast $324 – 7% 68 Deals Southwest $ Deals LA/Orange County $255 – 5% 34 Deals DC/Metroplex $209 – 4% 39 Deals NY Metro $388 – 8% 39 Deals Philadelphia Metro $149 – 3% 25 Deals North Central $ Deals Q Total Investments - $4,923 ($ in millions) Colorado $108 – 2% 19 Deals AK/HI/PR $8.0 1 Deal Upstate NY $ Deals Investments by Region Q4 2003

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 8 Investments by Region Full-Year 2003 Full-Year 2003 Totals: $18,187 2,715 (15.1%) # of Deals % $ Change from (16.4%) (41.9%) (41.5%) 9.8% (26.9%) 11.8% (26.4%) (27.7%) (11.5%) (0.5%) (18.3%) (37.7%) 1.4% (9.3%) (6.9%) (15.5%) 19.2% NM (NM=Not Meaningful)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 9 Investments by Region - Annual Percent of Total U.S. Investments Top U.S. Regions – 1998 to 2003 (% of Total Dollars) ‘98 ’00 ‘99 ’01 ‘02’03 ’99 ‘98 ’98‘99’00‘01‘02’03 ‘02’03‘01‘00’98‘99 ’02 ‘00 ’01 ‘03

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 10 Investments by Industry Q # of Deals % Change in $ Amount from Q3 03 ($ in millions) Visit for Industry Definitions Q Totals: $4, % % 12.6% 55.2% 58.5% 1.5% 37.4% NM 1.9% (13.8%) (16.9%) (38.3%) (65.8%) (56.2%) (7.0%) (67.6%) 27.2% NM 7 (NM=Not meaningful)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 11 Investments by Industry Full-Year 2003 # of Deals % Change in $ Amount from 2002 ($ in millions) Visit for Industry Definitions Full-Year 2003 Total: $18,187 2,715 (15.1%) (19.5%) 12.7% (26.3%) (7.1%) (27.7%) (21.0%) (37.1%) (18.8%) 4.1% (13.9%) (16.8%) (10.6%) 96.4% (14.9%) (48.9%) (38.3%) NM (NM=Not meaningful)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 12 Investments by Industry - Percent of Total U.S. Investments Top 5 Industries – 1998 to 2003 (% of Total Dollars) ‘99‘00‘01‘98‘02‘98‘00 ‘99 ‘01‘02 ‘98‘99 ‘02‘01‘00‘98’99‘00‘01‘02 ‘98‘99‘00‘01‘02 ‘03

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 13 Investments by Financing Sequence - Q # of Deals % Change in $ Amount from Q3 03 ($ in millions) Q Totals: $4, % % 32.0% 34.1% (16.2%) (4.1%)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 14 Investments by Financing Sequence - Full-Year 2003 # of Deals % Change in $ Amount from 2002 ($ in millions) Full-Year 2003 Total: $18,187 2,715 (15.1%) (2.4%) (21.1%) (21.3%) (5.1%) (24.4%)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 15 First Sequence Financing - Percent of Total U.S. Investments

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 16 $ in Billions First Sequence Financing - Amount and % of Total U.S. Investments

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 17 First Sequence Financing - Deals and % of Total U.S. Deals

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 18 Median Deal Size vs. Mean Deal Size - Quarterly Total U.S. Investments ($ in millions)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 19 Q Most Active Venture Investors Venture Capital FirmLocationTotal Deals Polaris Venture PartnersWaltham, MA 21 Mobius Venture CapitalPalo Alto, CA18 New Enterprise AssociatesBaltimore, MD17 Sevin Rosen FundsDallas, TX16 Menlo VenturesMenlo Park, CA14 Draper Fisher JurvetsonRedwood City, CA13 InterWest PartnersMenlo Park, CA12 St. Paul Venture CapitalEden Prairie, MN13 Versant VenturesMenlo Park, CA12 Village VenturesWilliamstown, MA12 Warburg PincusNew York, NY12

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 20 Full-Year 2003 – Most Active Venture Investors Venture Capital FirmLocationTotal Deals New Enterprise AssociatesBaltimore, MD73 Draper Fisher JurvetsonRedwood City, CA52 Sevin Rosen FundsDallas. TX50 Polaris Venture PartnersMenlo Park, CA47 U.S. Venture PartnersSanta Clara, CA43 Intel CapitalPalo Alto, CA43 Mobius Venture CapitalAustin, TX42 Warburg PincusNew York, NY42 Venrock AssociatesNew York, NY40

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 21 Summary: Best of Times  $18B for full year ’03, 6 th largest, above any year before 1998  VC Inv. $ up 20% in Q4’03 in Silicon Valley vs Q3’03  $50+ B committed capital unspent-money not the problem  NASDAQ at 2100, 23 month high  IPO mkt strengthening: 30 in registration  Chip sales up 10% YTD ’03 vs. ‘02, usually leading indicator  SEMI book to bill at 1.27  66% LP’s report private equity returns meet/exceed expectations. 45% LP’s plan to increase vc allocation, only 9% plan to decrease vc allocation.  Cisco stock at 2 year high and acquiring again…Okena ($154M), SignalWorks ($14M), Linksys ($500M), Twingo ($5M)  California 6 th largest economy in world, will likely surpass France (who won’t?) in 2004  Silicon Valley still place to be, flight to quality, #1 by widening margin (33% total)  Silicon Valley 2x vs #2 New England, 4x vs #3 NY  US 6:1 vs #2 Country (UK)

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 22 Summary: Not So Good Times  Valuations (public & private) down 50+%, often 1-3x revenues  Sun, HP, Apple, Solectron, AMD, Palm, mkt caps all <1x revenues  Intel VC portfolio down 67% from ‘01  Fortune 500 IT spending flat with aversion towards startups  Venture Backed IPO mkt still weak  Average of 8 VC backed IPO’s per quarter for last 12 quarters, 17 in Q4’03  Warren Buffet and John Bogle both forecast 10 years poor stock mkt return  IT Unemployment at record level – 6% in ’03 (1% in ’97, 4% in ’02)  Silicon Valley job levels won’t return to bubble levels until 2010  Total US employment levels down 2.7 million jobs since March ’01…jobless recovery  Average life expectancy S&P 500 company: 100 years in ’38, 20 years now  Consumer confidence lowest level in 9 years  % Fortune 500 offer health benefits to retirees: 66% in ’88, 34% in ’02  Tech Spending as % Capital Budget: 19% in ’90, 59% in ’00, no upside?  Gates says Fortune 500 tech spending won’t return to bubble levels in his lifetime

PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree™ Survey SF_SJ_04_081_A 23 Implications for Finnish Entrepreneurs  Don’t rely on VC financing, raise as little as you have to  Bootstrap, customer financing, get to cash flow break even ASAP  Keep burn rate down, be cheap, when in doubt don’t spend  Focus on sales, referenceable customers  Watch cash balance, know where all cash goes  Use Comerica and PricewaterhouseCoopers  Be prepared to move hdqtr to US: Israeli model

*connectedthinking Steve Bengston Managing Director Emerging Company Services