New Atlantic Ventures Sweden-US Entrepreneurial Forum September 2011 Why is There a Valley of Death in Early Stage? #sweus John

NAV “At A Glance” 2 Portfolio company VA/DC/MD (3) New York City (6) (CA & WA) NAV Office Boston (5)  Early Stage Venture Capital  Modest Fund Size: ‒$117m current fund (NAV III)  East Coast Focus  Top Decile Post-2000 Performance  Blue Chip LP Base, 50% from EU  Key Difference: Thesis-Led Investors 19 Companies:

Why Care About VC & Entrepreneurs? 3 US GDP $15 Trillion/year US VC Investments $15 Billion/year (.1%) 20% of all US jobs are in companies that are or once were venture backed

VC Creates Job Ecosystems 4 Not all companies should be VC-backed 1990’s eBay creates 1M Powersellers 2000’s Amazon creates 1.3M Stores -40% of Amazon Revenue 2010s Apple creates 500,000 App developers -Facebook platform creates $15B ecosystem

Where is the Real Valley of Death? 5 Between Angel Investments and Early Stage VC! Source: Angel Venture Capital # of Companies61,9003,047 Funded Total $ Invested$20.1B$23.26B

Annual US VC fund-raising Volatility over the past decade ► Fund-raising has declined in the United States since ► 2009 marks the fewest funds raised in 16 years. ► In dollar terms, 2009 was the low point in terms of dollars raised since 1997, with the exception of ► 2010 is on pace for another annual decline – only US$6.4 billion raised in 33 funds as of 30 June Source: Dow Jones VentureSource; Ernst & Young Venture Insights

US VC funds raised by stage focus Clear shift in dollars toward multi-stage funds as investors seek greater flexibility, growth equity opportunities Number of funds closed $83.3 $44.8 $ 19.2 $8.9 $20.7 $27.7 $30.3 $37.1 $26.4 $14.5 $6.4 Amount of funds closed (US$b) Source: Dow Jones VentureSource; Ernst & Young Venture Insights

Declining number of VC firms actively investing United States Number of firms making 4 or more investments in year Number of firms making 1-3 investments in year New England Bay Area Source: Dow Jones VentureSource; Ernst & Young Venture Insights

Why the Decline? Entrepreneurs, LPs & GPs got greedy in the late 1990s – VC fund sizes ballooned – Too many VCs = too many marginal companies funded – Fund sizes drove shift to late stage – Exit market dried up in US: 9/11 & 9/08 Returns for the decade were flat, on average BUT, many funds small early stage funds did quite well 9