Building Companies in A Global Economy

Promod Haque, Managing Partner, NVP

Promod.Haque@nvp.com

NVP - Actively Partnering with Entrepreneurs to Build Significant Businesses

• 44 year heritage • Managing >$1.8 billion in venture capital • Funded over 350 companies• Focused on early stage and select later stage

IT investments:– Systems (Communications, Enterprise)– Services (Communications, Infrastructure)– Software (Infrastructure, Applications)– Semiconductors & Components– Consumer/Internet Technologies

NVP Investment Strategy

• Early-stage projects with world-class technologies and entrepreneurs

• Later-stage companies with existing customers, strong sales and top tier management and co-investors

• “Special situations” with definable, unusual opportunities

Selected NVP Success Stories

NVP Value Proposition

Money

Network of Portfolio Companies

Experienced VCs with Operating Experience

Large VC Firm with History Through Down Cycles

Later Stage Follow-On Financing Support

Value Added Services:PR, Research, Forums

Intl. BusinessDevelopment

The VC Business Model Has Changed • Exit Valuations Have Dropped and Are

Trending Towards Those of the Early ’90’s

• Requires Prudent Use of Capital– $15-20 million to build enterprise software

company– $30-35 million to build a hardware/systems

company– $30-40 million to build a semiconductor company

• Focus on Capital Efficiency

• Capital efficient business models are still possible

• NVP investing in “hybrid” companies and we see this trend continuing

Hybrid Investments & Micro-Multinational Companies• U.S cannot afford to focus on a U.S.-centric market alone

• Venture capitalists are leveraging their expertise in other countries to help develop partnerships and channels these companies need to prosper in the global marketplace

• NVP is definitely seeing more cross-border or “hybrid” investments from day one

• NVP rarely looks at investing in new private companies unless they have some form of operations overseas

• Early-stage private companies must take an overall multinational and global approach to doing business

NVP Hybrid Investments

• 30% of NVP portfolio companies have operations overseas, and that figure is rising

• Six of the most recent companies in which NVP has invested (in the past 18 months) are considered to be "hybrid" or "cross-border" investments

• Many of these companies are focusing heavily on India as a strategic market or have operations in India

Acquired by

Acquired by

What NVP Looks For in Companies• Breakthrough projects with world-class

technologies

• Passion and vision of entrepreneurs– Proven track record?– Prior NVP interaction?– High domain expertise

• Marketplace opportunity

• Unique value proposition to the customer

• Customer validation and traction

• Capital efficiency

Key Attributes of Disruptive Technology Companies

1. Founding/management teams that shape opportunities, execute deals and achieve revenue.

2. Innovative core development teams that have developed distinctive technologies based on customer needs

3. Technology discontinuity/value proposition aligned, solving a significant problem distinctively

4. Secure blue chip customers5. Understand how to develop and

leverage strategic alliances

Characteristics of a Successful Founding Team• Skill sets of the founders are balanced

and complimentary• Ability to articulate their vision to

investors, employees and customers• Understand their limitations and are

willing to be accountable to a board of directors

• Focused, tenacious, persistent and patient in their execution

• Willing to enlarge the “inner circle” as the company grows over time

What We Look For In Entrepreneurs

“Conventional wisdom paints the entrepreneur as a driven, undisciplined romantic, operating in a frenzy of energy. With a little luck, he achieves his goal just before he goes under.

On the contrary, the typical successful entrepreneur is a mature and careful person who fearfully recognizes that there’s much more he doesn’t know about his new business than he’d like. He’s thirsty for help from any sensible and credible source. He’s in a hurry, but only because time is precious. And he knows that cash flow is king.”

James McManusMarketing Corporation of America

What’s Hot

• IP Managed Services– Revenues from IP VPN services in the US will rise from $2.9 billion in

2004 to $8.1 billion in 2009

• End-to-End Custom ASIC Solutions– Predictable, reliable and cost-effective alternatives to traditional chip

design and supply chain models enable more companies to use an ASIC approach for their mainstream designs

• VoIP Infrastructure– The global market for VoIP will reach $82 billion in 2005 and $196.5

billion by 2007

• IPTV– Rapid advances in broadband access and compression technologies

will drive down delivery costs exponentially

• Service Oriented Architecture– Industry analyst IDC forecasts SOA software market to hit $1.2 billion

in 2005 and reach $10.9 billion by 2008Source: In-Stat; Gartner; Insight Research

Thank You!

www.nvp.com

Questions?

Contact Information

• Promod Haque, Managing Partner– +1 650 321-8000– Promod.Haque@nvp.com

• Norwest Venture Partners525 University Avenue, Suite 800Palo Alto, California USA 94301www.nvp.com