1. New Atlantic Ventures Sweden-US Entrepreneurial Forum September 2011 Why is There a Valley of Death in Early Stage? #sweus John Backus john@navfund.com @jcbackus

2. 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:

3. 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

4. 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

5. Where is the Real Valley of Death? 5 Between Angel Investments and Early Stage VC! Source: https://secure.wikimedia.org/wikipedia/en/wiki/Angel_investing 2010 Angel Venture Capital # of Companies61,9003,047 Funded Total $ Invested$20.1B$23.26B

6. Annual US VC fund-raising Volatility over the past decade ► Fund-raising has declined in the United States since 2007. ► 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 2003. ► 2010 is on pace for another annual decline – only US$6.4 billion raised in 33 funds as of 30 June 2010. Source: Dow Jones VentureSource; Ernst & Young Venture Insights

7. US VC funds raised by stage focus Clear shift in dollars toward multi-stage funds as investors seek greater flexibility, growth equity opportunities 501 289 154 91 161 172 166 170 145 76 33 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

8. 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 1338 1240 1122 1053 1040 1018 1013 998 989 885 657 New England Bay Area 750 635 568 546 564 529 546 542 539 473 325 454 377 306 301 340 304 300 302249 236 150 Source: Dow Jones VentureSource; Ernst & Young Venture Insights

9. 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