Chairman-elect US National Venture Capital Association; Cofounder and General Partner, DCM 35 years of US Venture Capital — A Historical Perspective for China 2007 CVCA Annual Meeting & China Venture Capital/Private Equity Summit November 2, 2007 Dixon Doll

Agenda  Evolution of U.S. VC industry, why a flourishing VC industry is important for China  Proper role of public policy  Putting U.S. lessons learned in context for China going forward – key messages Confidential & Proprietary 2

US Venture Capital Investment in Perspective  US GDP $12.5 trillion annually  Hedge fund intake $1.5 trillion over last 3 years estimated  Mutual fund intake $158 billion in 2006  Buyout intake $103 billion in 2006  Venture capital intake $28.6 billion in 2006 Venture capital fundraising & investment Is 0.2% of total GDP Source: BLS website, Investment Company Institute, Thomson Financial, NVCA 3

Confidential & Proprietary Venture-Backed Employment VC-Backed US Jobs (millions)As a % of total US Pvt Jobs in 2006 Outpaces Total US Job Growth VC-Backed Jobs = 9% Source: Venture Impact 2006 by Global Insight 4

Global Insight Study  In 2006, venture backed companies: Provided 10.4 million U.S. jobs Had sales of $2.3 trillion Represents 17.6% of GDP  Still dominated venture-created sectors 56% of biotech revenue 78% of computer and peripherals revenue 94% of computer and peripherals jobs 88% of software sector jobs  Outgrew the economy in every sector Confidential & Proprietary 5 Source: Venture Impact 2006 by Global Insight

Confidential & Proprietary “Buy Low… Sell High” Is Easier if You Really Buy Low! Company Total Venture Investment $M Recent Market Cap/ Acq Price $M (4/2007) Cisco3163,000 eBay745,890 Amazon.com818,640 Apple978,000 YouTube121,650 Google40150,000 JetBlue1732,000 WebVan Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial Confidential & Proprietary

VC Investment Peaked in 2000; Recently 20-23% of Peak; 2006 Was Higher Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial 7

Confidential & Proprietary IPO Levels Jumped in 2004 but not Sustained; New Hope in 2007? Source: Thomson Financial/National Venture Capital Association 8

Confidential & Proprietary State of Venture Capital – at Steady State Deal Flow and Equity into Venture-Backed Companies Source: PricewaterhouseCoopers – NVCA Moneytree™ report, Data: Thomson Financial Amount Invested ($B) Dollars Raised by U.S. VC Funds ($B) $9.2 $11.2 $12.5 $46.3 $87.7 $36.4 $22.2 $19.7 $22.5 $24.0 $26.7 9

Confidential & Proprietary Key U.S. VC Building Blocks…  Capital formation Prudent man rule – enabled pension investment LP laws Capital gains tax reduction  Empowered entrepreneurs Capital gains tax reductions Stock options/team building tools Reasonable bankruptcy laws  Protect companies – IP laws  Abundant customers willing to do business with SMEs  Exit markets – the NASDAQ  Face-to-face investing/proximity  Cultural acceptance 10

Confidential & Proprietary Building Blocks of the U.S. Venture Capital Industry  Unparalleled university research  High quality universal education  Proximity to talented entrepreneurs and engineers  Deep, liquid transparent capital markets 11

Confidential & Proprietary The Number of U.S. VC Firms has Peaked... Thankfully At Year End# Venture Firms Capital Under Mgt $1B $4B $30B $228B $255B $235B Source: 2007 NVCA Yearbook, prepared by Thomas Financial 12

Confidential & Proprietary United States - 56% Since 2000 Europe - 60% Since 2000 Israel - 65% Since Note: Chart scales vary for clarity Source: Ernst & Young/Dow Jones Venture One Number of Active IT VC Firms Declining

Confidential & Proprietary Globalization of VC and Technology  VC is truly a global business Entrepreneurs live and start companies everywhere Low-cost centers of technological excellence distributed globally Other potential markets to emerge (India, Eastern Europe, Russia)  Portfolio companies are increasingly global Companies must utilize global centers of technological excellence International markets more important for select disruptive technologies Companies must access many international markets from the get go  Emergence of many new important sectors like Cleantech 14

Confidential & Proprietary Cleantech Investments (US $M) Source: Dow Jones VentureOne and Ernst & Young 25% CAGR 21% CAGR 195% CAGR 15

Confidential & Proprietary Important VC – Related Public Policy Issues  Tax policy encouraging risk taking and company formation  Long-term support for University, government R&D  Creating entrepreneur friendly Legal system (creating law) Court system (enforcement)  Intellectual property protection  Investor friendly, confidence inspiring, securities regulatory system 16

Confidential & Proprietary Government Policies Can Be Harmful to VC  Misguided overreaching U.S. government policies, regulations, like Sarbox have harmed domestic VC industry by Sharply reducing IPOs Increasing costs of going public, ongoing compliance 17 Beware of Unintended Consequences

Confidential & Proprietary A Tale of Two Markets 5,049 2, Peak (3/10/2000) NASDAQ 4/30/2007 (50%) 11,723 13, Peak (1/14/2000) Dow 4/30/ % There are significant disparities between tech markets and capital markets in general 18

Confidential & Proprietary Tech IPOs Continue to Decline # of U.S. VC Backed Tech IPOs Amount Invested ($B) $90B $80B $70B $60B $50B $40B $30B $20B $10B $9.2 $11.2 $12.5 $46.3 $87.7 $36.4 $22.2 $19.7 $22.5 $24.0 $26.7 $14.5 Source: VentureSource and National Venture Capital Association MoneyTree™ Report 19

Confidential & Proprietary Source: Thomson Financial/National Venture Capital Association M&A IPO Number of Exits M&A Has Become the Primary Venture Exit Annualized 20

Confidential & Proprietary Global Private Equity Market Source: Marketview More U.S. Companies Have Gone Private but Q3’07 May See a Slowdown 25% 20% 15% 10% 5% 0% % of U.S. M&A Volume Private Equity Volume ($USB) 21

Confidential & Proprietary Weak US Capital Markets Offset by Global Strength Source: World Federation of Exchanges, 10/23/06 North America 4 Exchanges $19.9 Trillion NYSE $14.4T NASDAQ $3.7T Latin & South America 7 Exchanges $1.1 Trillion Middle East & Africa 4 Exchanges $0.8 Trillion Europe 18 Exchanges $13.4 Trillion London $3.4T Euronext $3.4T Asia-Pacific 17 Exchanges $10.2 Trillion* Tokyo $4.4T Hong Kong $1.4T * Osaka & the National Stock Exchange of India are not included in the total for Asia-Pacific to avoid double counting Tokyo & Bombay 22

Confidential & Proprietary Capitalization of Global Markets Source: World Federation of Exchanges, 2006 Development of Markets Abroad is Healthy

Tax Policy is an Important Lever Capital gains tax revenue forecast vs actual in billions Tax Revenue in Billions Source: Treasury Department and Congressional Budget Office Confidential & Proprietary 24 Bush tax cuts 2003 Latest CBO estimates

Individual Long-Term Capital Tax Rates The rates are based on long-term capital gains tax rates applicable to gains on sales of share. *Long-term capital gains listed securities are exempt. Source: Individual Taxes , Worldwide Summaries (PricewaterhouseCoopers), European Tax Handbook 2005 (International Bureau of Fiscal Documentation) and various government web sites. Confidential & Proprietary 25 0% 10% 12.5% 14.5% 15% 17.6% 19% 20% 23.5% 25% 26% 28% 30% 32% 43% Currently After Lapse (2011) 0% 20% *

Confidential & Proprietary Total U.S. Tort Costs Source: Towers Perrin, 2006 Cost of Litigation is Growing in the U.S Tort Costs ($B) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Tort Costs as % of GDP 26

Confidential & Proprietary % of World Population 4.81 U.S.China U.S.China 19 Percentage of World Population Source: Stocks for the Long Run and Future For Investors, Jeremy J. Siegel 27

Confidential & Proprietary Percentage of World’s GDP % of World’s GDP 21 U.S.China U.S.China 19 Source: Stocks for the Long Run and Future For Investors, Jeremy J. Siegel 28

Confidential & Proprietary Top Markets Where the Cost of Complying With Corporate Governance Regulation is Too High U.SUK & Ireland CanadaIndiaAustria, Germany, Liechtenstein, Switzerland IsraelChinaNordic Countries France, Italy, Monaco, Portugal, Spain Benelux 29

Confidential & Proprietary Top Markets Where Regulation is Too Lax and Creates Additional Business Risk IndiaCentral/ Eastern Europe ChinaCIS & Russia Latin America Other AsiaMiddle East (excl Israel) AfricaIsraelSouth Korea 30

Confidential & Proprietary Top Markets Where Intellectual Property Laws Create Additional Financial Risk ChinaIndiaU.S.IsraelOther Asia CanadaSouth Korea Latin America Middle East (excl. Israel) Central & Eastern Europe 31

Confidential & Proprietary Public Policy Implications for China  Establishment of one industry voice, CVCA, is an important positive step  Creation of the domestic Shenzhen, Shanghai Exchanges also desirable  Caution against overregulation which could discourage new company formation and restrict foreign capital inflows  Importance of strong capital market oversight and governance agencies like CSRC 32

Confidential & Proprietary Key Messages Summarized  China VC industry today still in very early stage (roughly same as U.S. in late 70’s)  Industry always has been cyclical – new cycle every years. Anticipate downturns.  Flourishing VC industry a crucial element for leveraged job creation, innovation, and long- term economic growth 33

Confidential & Proprietary Key Messages Summarized (cont.)  Public policy plays major role in successful evolution of VC industry Taxation, Legal, R&D Support, Governance, Etc.  Excessive government intervention has periodically damaged U.S. VC industry (Sarbox)  NVCA in U.S. has played important role in influencing public policy - I strongly encourage CVCA to do the same in China Thank You. 34