Venture View: 2010

NVCA Predictions Survey Results

Venture View: 2010 VC Predictions Survey Results

•Fourth Annual Predictions Survey of the NVCA

•Conducted in Nov. 30 – Dec. 8, 2009

•More than 325 responses from VCs across the US

•For more information

– Contact: Emily Mendell (emendell@nvca.org)

– Contact: Channa Brooks (channa@tenorcom.com)

In 2010, venture capital investment will:

7%

44%29%

9%

11%

Increase substantially >$25 BN Increase slightly $21-25 BN Decrease slightly $15-21 BN

Decrease substantailly <$15 BN Remain unchanged from 2009

In 2010, our firm will invest in:

49%

18%

33%

More portfolio companies Fewer portfolio companies

The same number of portfolio companies

The percentage of deals outside our currentgeographic footprint in 2010 will:

20%

8%

72%

Increase Decrease Remain the Same

Investment in 2010 in the following sectorswill:

30%

15%

26%

43%

37%

39%

20%

32%

33%

46%

54%

25%

0% 20% 40% 60%

Software

Media/Entertain.

Internet

Clean Tech

Increase

Unchanged

Decrease

64%

33%

34%

37%

31%

38%

36%

34%

5%

29%

30%

30%

0% 10% 20% 30% 40% 50% 60% 70%

Semiconductors

Med Devices

Biotech

Wireless

Increase

Unchanged

Decrease

Investment in 2010 in the followingsectors will:

45%

27%

16%

12%

40%

53%

26%

17%

15%

20%

58%

70%

0% 20% 40% 60% 80%

Europe

Israel

India

China

Increase

Unchanged

Decrease

Investment in 2010 in the followingregions will:

31%

30%

20%

19%

15%

25%

25%

32%

28%

30%

45%

45%

49%

53%

55%

0% 20% 40% 60%

Seed

Early

Expansion

Late

Growth Equity

Increase

Unchanged

Decrease

Investment in 2010 in the followingstages will:

In 2010 the number of venture-backed IPOswill be:

26.1%

43.3%

20.4%

10.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0-19 20-29 30-50 >50

Mean: 26.32Min: 5 Max: 120Median: 25

In 2010 the # of venture-

backed acquisitions will:

91%

1%

8%

Increase Decrease Same

In 2010 the value of venture-

backed acquisitions will:

64%11%

25%

Increase Decrease Same

In 2010 the venture-backed acquisitionsmarket will improve.

In 2010 the # of venture

investors in our firm will:

22%

15%63%

Increase Decrease Same

In 2010 the # of admin

professionals in our firm will:

12%

17%

71%

Increase Decrease Same

In 2010 firms resources are expected to remainlargely unchanged.

In 2010, venture funds raised on average willbe:

87%

3%10%

Smaller Larger Same size

In 2010, the US venture industry will seeforeign limited partners in:

48%

27%

25%

More Funds Fewer Funds Same Number of Funds

In the next five years, the number of firms inthe venture industry will:

90%

4% 6%

Shrink Expand Remain the same

In the next five years the venture capitalindustry will shrink by:

20%

58%

21%1% 0%

< 15% 16-30% 31-50% 51-70% >70%

“Corporate venturing &job creation funds.” -Thomas O. Gephart,Managing Partner,

Ventana Capital

2010 will be Brazil's Skypemoment.” - Simon Olson, Partner,

Draper Fisher Jurvetson, FIRCapital Brazil

“For 2010, we plan to broaden our geographicfocus to include investments in Europe.” - John

Huntz, Executive Director, Arcapita Ventures

“It's the global economy, stupid. Focus oninvestments in the USA targeting customers in the

ROW (rest of the world).” – Trevor Loy, GeneralPartner, Flywheel Ventures

Since Sep08 we have focused on firms that can reachbreakeven on this round. In 2010 our willingness to takefinance risk will likely return.” - Bronson Lingamfelter,

Associate, Rose Tech Ventures

“In 2010 we are going to CarpePer Diem - Sieze the day to make

money for our LPs.” - VenkyGanesan, Managing Director,Globespan Capital Partners

“We will do more investment under better environmentfor new deals.” - Masatoshi Ueno, CEO/Technology,

Yasuda Enterprise Development America Inc.

“We will find new mistakes to make that wehave not made before; but all in all things

look pretty strong and the team isoptimistic.” - Bob More, General Partner,

Frazier Healthcare Ventures

“The IPO market for VC backed companies will finally reopen in the USand several IPOs will reach $1 billion market capitalizations or more.” -Pascal Levensohn, Founder and Managing Partner, Levensohn VenturePartners

“Take more companies public.” – Richard Kramlich, General Partner/Co-Founder, NEA

We will look for valuations to comeinto equilibrium and do more

transactions at that time.” – JimHale, Founding Partner, FTV Capital

“We will raise our next fund and continue to invest inconsumer-facing Internet companies like Twitter and Zynga.” -

Norman Fogelsong, General Partner, Institutional VenturePartners

“500K to 1M as early as possible in great teams = early stage investing.”- Steve Fredrick, General Partner, Grotech Ventures

What will you do differently in 2010?

Relentlessly & w/ seeminglyundue precision reverse

engineer the early exit todrive w/ great focus whatfounders do now to growtheir cos.” - Becca Braun,

President, JumpStartVentures

"2010 will be another difficult year for the USventure capital industry as the consolidation of our

industry continues and very bad 10yr return numbersare released. The silver lining: it will be a great yearto make a few excellent investments." - Bob Pavey,

Morgenthaler Ventures

“Move to accelerate thedevelopment of investmentcandidates and portfoliocompanies.” - Greg Knudson,Director, Rocket Ventures

“2010 will likely mark the renewal of Corporate Venture Capital ascorporations will rediscover the value of tapping external innovation.” -Bernard Slede, Portfolio Manager, HP Corporate Venture Capital

Actually spend meaningful time with investment bankers, again.” - Gerry Langeler, Managing Director, OVP Venture Partners

“The makeup of seed syndicates will evolve in 2010, as moretraditional venture capitalists seek earlier access to capital-efficient deals.” - Christine Herron, Principal, First Round

Capital

“Hopefully nothing. We're rockin' here atCatamount.” - Jed Smith, Managing Director,

Catamount Ventures

“With our new $1.2Bn NVP XI fund, we plan tocontinue our expansion along 3 vectors: 1. Stages(early & late)2. Regions and 3. Sectors.” - Sergio

Monsalve, Principal, NVP

“More reserve capacity per deal and less deals per fund; alsobuild broader syndicate up front at initial investment.” - George

Arida, Managing Director, Venture Investors LLC

“Embrace more universitiesinto our seed stage model.” -

Rudy Garza, ManagingPartner, G51 Capital

As start-up capital efficiency continues to improve, we will do more earlierstage deals.” – John Backus, Managing Partner, New Atlantic Ventures

“Work harder, maintainhigh standards, and see

more companies.” - C.W.Newhall, General Partner,

Co-Founder, NEA

“We will increase our investment pace becausewe believe this a great time to invest -

innovation and strong companies abound!” -Jeanne M Sullivan, General Partner, StarVest

Partners L.P.

“We will fund growth more aggressively in2010 as we come out of the recession.” – DonRainey, General Partner, Grotech Ventures

“Expect to see us be more aggressiveseeding new opportunities.” - Michael

Greeley, General Partner, Flybridge CapitalPartners

What will you do differently in 2010?

Historical Data for the Venture Industry

0.0

20.0

40.0

60.0

80.0

100.0

120.0

BN Raised 18.1 30.6 58.2 106.6 38.0 3.8 10.6 19.2 28.9 31.9 36.1 28.6 8.3

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q309

Source: Thomson Reuters/NVCA

Venture Capital Fundraising 1997-2009

$14$20

$52

$101

$39

$21 $19 $22 $23$26

$31 $28

$12

$0

$20

$40

$60

$80

$100

$120

$B

illi

on

sIn

ve

ste

d

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

Q3

09

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,Data: Thomson Reuters

Venture Capital Investment 1997-2009

0

100

200

300

400

500

600

700

Nu

mb

er

of

Issu

es

M&A

IPO

M&A 164 209 240 317 353 319 285 348 350 375 378 348 189

IPO 136 77 260 264 41 24 29 93 56 57 86 6 8

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Q3 09

Source: Thomson Reuters/National Venture Capital Association

Venture Capital Exits 1997-2009