1. THE FUTURE OF HIGH TECH STARTUPS Investments by Venture Capitalists in 2000 v. 2001

2. The number of companies funded by VC’s: 7,094 (with 842 in telecom) in 2000 3,928 (with 484 in telecom) in 2001

3. Total Amount Invested in U.S. down 63%: $99.6 billion in 2000 – $17.9 billion in telecom $36.5 billion in 2001 – $5.9 billion in telecom

4. Average Investment Size: Approximately $14.0 million in 2000 -$21.3 million in telecom Approximately $9.3 million in 2001 -$12.2 million in telecom

5. Small Growth in 4Q over 3Q 2001: $7.1 billion invested in 4Q2001 $7.0 billion invested in 3Q2001 856 companies funded in 4Q2001 810 companies funded in 3Q2001

6. SAMPLE TERMS FOR VENTURE CAPITAL EARLY ROUND INVESTMENTS DURING AND AFTER THE INTERNET BUBBLE TERM BEFORE AFTER CLOSING 1-2 month cycle, 3-5 month cycle, single closingtranches based on milestones

7. TERM BEFORE AFTER Dividends None, or non- Mandatory, cumulative payable cumulative 8% when, as and if per year declared by Board

8. TERM BEFORE AFTER LiquidationOriginal purchaseMultiple of Preferencesprice plus accrued2-3x original dividends, and purchase price participation withplus common stockparticipation with capwith common stock

9. TERM BEFORE AFTER RedemptionNone At option of holders, up to 50% in 5 years and remaining 50% in 6 years at purchase price plus accrued dividends

10. TERM BEFORE AFTER Automatic Qualified IPO with Qualified IPO of Conversion no per share price at least 5x limit purchase price

11. TERM BEFORE AFTER Anti-Standard broad-based Same Dilutionweighted average anti-dilution

12. TERMBEFORE AFTER Voting Investors must approve: Investors must approve: change Rights change of rights, creation of rights, creation of senior or of senior securities, pari passu securities; payment of payment of dividends, dividends, liquidation, board liquidation size, merger, consolidation or acquisition, redemption, debt or other

13. TERM BEFORE AFTER Board Seats2-3 Investors; Same 2-3 Common Stock; 1 outsider

14. TERM BEFORE AFTER PreemptiveRight to maintain Same Rightspro rata ownership

15. TERM BEFORE AFTER Pay to PlayNone Preferred loses anti- dilution if don’t participate in later down round, or preferred converts to common if don’t participate in later down round

16. TERM BEFORE AFTER Right ofInvestors have Same First Refusalright to purchase shares not purchased by Company to be sold by other shareholders

17. TERM BEFORE AFTER Co-SaleNone or limited to Right to sell Rightsright to sell with with founder founder who sellsor any other sharesshareholder (other than another investor) whosells shares

18. TERM BEFORE AFTER Drag-Along NoneRight to force Rightsshareholders to approve sale of company upon Board and majority shareholder approval

19. TERM BEFORE AFTER Registration Two demand rights Two demand rights Rights after IPO, piggyback on earlier of 4-5 rights subject to years of closing cutback, S-3 rights or following IPO, piggyback rights subject to cutback, S-3 rights

20. TERM BEFORE AFTER Founder Portion up front, Same Vesting 2-4 year vesting

21. TERM BEFORE AFTER EmploymentNone May have with founders, Agreements key technical employees

22. TERM BEFORE AFTER Information Quarterly and annualMonthly, Rights financial statementsquarterly and annual financial statements, annual business plan and budget