State Of Venture Capital Q1 2012

www.startupcv.com

Whats Going On In The US VC Cycle?

LPs Invest In VCs VCs Invest In Startups

VCs return capital to LPs

Startups Exit Via M&A or IPO

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Agenda
LP Investments In VC VC Investing Activity Exit Activity Conclusions
Silicon Valley Hong Kong Honolulu Shenzhen

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US Venture Capital Raised Rebounding

.com boom & bust

Source: NVCA
Silicon Valley Hong Kong Honolulu Shenzhen

Conden,al Page 4

The Number Of US Venture Funds Raised Is Also Growing

Source: NVCA
Silicon Valley Hong Kong Honolulu Shenzhen

Conden,al Page 5

An Increasing Proportion Of New Funds Were Funded in 2011

Source: Thomson Reuters / NVCA Silicon Valley Hong Kong Honolulu Shenzhen " Page 6"

Why Might Fundraising Be Rebounding?

Venture firms appear to be more optimistic about the fundraising environment in 2012, especially those who have benefitted from the improving exit environment of late which has also been encouraging to our investors. - Mark Heesen, NVCA

Poor returns in public markets may be driving LPs back towards delinked & better performing alternative asset classes such as VC for longterm portfolio value

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Agenda
LP Investments In VC VC Investing Activity Exit Activity Conclusions
Silicon Valley Hong Kong Honolulu Shenzhen

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Venture Capital Invested Has Rebounded To $28B Per Year

Source: Thomson Reuters / NVCA Silico Valley Hong Kong Honolulu Shenzhen

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Software & Biotech Remain Largest Sectors With Internet & Cloud Growing

Source: Thomson Reuters / NVCA Silicon Valley Hong Kong Honolulu Shenzhen " Page 10"

Silicon Valley Growing Its Dominant Share Of VC Investment

Source: Thomson Reuters / NVCA Silicon Valley Hong Kong Honolulu Shenzhen " Page 11"

Early Stage Investing Has Returned In Strength

Source: Thomson Reuters / NVCA Silicon Valley Hong Kong Honolulu Shenzhen " Page 12"

But Seed Stage Deal Size Is Decreasing As Startups Become More Capital Efficient

Source: Thomson Reuters / NVCA Silicon Valley Hong Kong Honolulu Shenzhen " Page 13"

Crowdsourced Funding Helps Seed Stage Ventures JOBS Act Will Accelerate
$ Millions Raised WW US is about 50% (~$700M) 79% of crowdsourced funding is nonequity but this is growing

Source: Massolution, Crowdsource.org

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Crowdsourced Equity Is Mostly Small Tranches From Angels

Source: Massolution, Crowdsource.org

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Healthy Up-Rounds Have Returned To Majority Of Financings

Source: Fenwick & West Silicon Valley Hong Kong Honolulu Shenzhen " Page 16"

Upround Valuation Increase Has Recovered Reducing Dilution For Early Stage VCs

Source: Fenwick Silicon Valley Hong Kong Honolulu Shenzhen " Page 17"

Agenda
LP Investments In VC VC Investing Activity Exit Activity Conclusions
Silicon Valley Hong Kong Honolulu Shenzhen

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IPO and Especially M&A Markets Continue To Be Strong

Source: Thomson Reuters / NVCA Silicon Valley Hong Kong Honolulu Shenzhen " Page 19"

VC-backed IPO and M&A Deal Valuations Are Outstanding

Source: Thomson Reuters / NVCA

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VC Returns Continue to Outperform VC Continues To Outperform Public Markets

Public Markets
.com boom

.com bust

Source: NVCA, Cambridge Associates

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Condential! 21! !

Agenda
LP Investments In VC VC Investing Activity Exit Activity Conclusions
Silicon Valley Hong Kong Honolulu Shenzhen

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The Venture Market Is Firing On All Cylinders

Deals funded are up Deal quality is robust with good revenue and profitability Exit activity is excellent in both number of deals and valuations LPs are returning to venture asset class

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The Venture Funding Cycle Is Rebalancing As LPs Return To Market

LPs Invested $18B In VCs VCs Invested $28B In Portfolio

$160B In Venture Exits (IPO + M&A proceeds)

Sources: NVCA, Thomson Reuters, Cambridge
Silicon Valley Hong Kong Honolulu Shenzhen

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Market Equilibrium Will Return (One Way Or Another)

Strong VC M&A & IPO markets create strong returns for LPs (better than public markets) Healthy capital-efficient seed stage markets VCs solidly funding new deals LP funding growing but still lagging overall trend

Venture capital shrinks to match LP investment in VC

Funding continues if LPs increase allocation to VC sector

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Shameless Plug: Startup Capital Ventures

Source: NVCA, Cambridge Associates, SCV Analysis as of Q1 2012

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www.startupcv.com tdick@startupcv.com