Silicon Valley/Bay Area VC Update Bus 290/291 Dr. MARK FRUIN

Improving Outlook 2004  Traditional hardware and software products shifting to slower growth path  Adaptable Web-hosted business services picking up; “software as hosted service” is trend –Buy only what you need online/on-demand/via subscription –As opposed to traditonal client-server programs, like Oracle and Microsoft  In 2004, VC reversed three-year downward trend investing –$20.9 billion in 2,876 deals –Up 11 percent from $18.9 billion in 2003

Healthcare Ahead of Software in Bay Area VC Investing  In 2004, $5.6 billion invested in healthcare, including biotech, medical devices, and other healthcare related areas,  In 2004, $5.1 billion in software, up from previous 3 years but lower than healthcare

Valuations Up  In 2004, valuations of companies receiving venture financing rose to median of $13 mil –Highest median figure since 2001 –Part of the reason for this is that later stage companies are getting the lion’s share of funds

Sources of Information  National Venture Capitalist Association  Thomson Venture Economics  VentureOne, unit of Dow Jones Newswires  Vector Capital, SF-based private-equity firm