The State of Venture Investing and Observations on the IndustryJune 6, 2013

Mark G. HeesenNVCA President

The Number of US VC Firms Has Peaked .. Thankfully

At Year End

# Active Firms

Capital Managed

1970 28 $1B 1980 87 $4B 1990 100 $28B

2000 1,053 $224B 2012 522 $199B

Source: 2013 NVCA Yearbook, prepared by Thomson Reuters, figure 1.04

$0

$20

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$12019

88

1989

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1Q13

$ B

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VC Investment Peaked in 2000; Industry is Smaller Now; $27B in 2012

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

$105b

$32b

$27b

$6b

Clean Tech Deal Sizes Have Declined – All Sectors Driving Toward Capital Efficiency

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13

Ave $M CT 11.7 6.4 6.9 3.9 5.3 6.4 11.8 11.6 13.6 10.2 12.8 13.1 12.3 6.0

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Average Clean Tech Deal Size $M

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

First Fundings - VCs Continue To Invest in Promising Companies –

1,000-1,300 Considered Healthy; Life Sci particularly slow now

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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13# Cos 1,430 2,469 3,390 1,234 850 776 975 1,076 1,280 1,417 1,305 828 1,086 1,325 1,203 263

# F

irst

Tim

e F

undi

ngs

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

The Number of First Fundings of Life Sciences Companies is Way Down…

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13

# LS FF 153 193 203 167 191 170 178 168 190 205 275 270 256 173 188 180 140 20

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Note: For this chart, biotech, pharmaceuticals, med devices, and therapeutics are included. HC services is not.

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

Investment Trends from NVCA 2013 Yearbook

• A record 48 states and DC reported venture deals in 2012• That said, a record 53% of the $ went to CA cos• In 2012, 522 traditional and CVC groups invested vs 1,053 in

bubble• In 2012, 10 largest funds raised 48% of capital leaving 173

funds with the other 52%• # of IPOs down from 2011 to 2012, but total IPO valuation

$122.3 (hi since 1986) and proceeds of 21.5B• Corporate VC 8.2% of dollars and engaged in 15.2% of

deals• 51.8% of deals are seed and early – highest since 1985

Source: NVCA 2013 Yearbook, prepared by Thomson Reuters

A Closer Look at Recent Minnesota Investing

Note that data “cuts” can be done from the historical trend data section of www.pwcmoneytree.com or from the

National Aggregate Spreadsheet which can be downloaded from that site.

Minnesota investing – recent pressure and slow first quarter

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13

$M Inv 257 340 617 951 475 343 208 388 274 305 413 485 285 145 291 253 40

# Deals 89 77 84 106 87 58 57 52 43 46 61 52 39 31 49 30 10

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

Recent Minnesota Financings Are Follow-On Rounds into Life Science Companies

(Not shown: Recent first fundings $ heavily into Software, not LS!)

Med Dev50%

Bio23%

SW17%

Ind/Energ5%

HC Svcs2%

Other3%

VC Dollar Investment – 2Q 2011 to 1Q 2013

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

The Exit Scene - the importance of acquisitions has become clear

over the past several years

but the IPO market remains the key!

IPO Levels Overall Below What is Needed; 2012 Numbers Driven by Facebook & friends ($16.0B)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13

$Offer B 5.8 4.2 24.0 27.4 4.1 2.3 2.0 10.3 5.1 7.1 12.4 0.8 2.0 7.7 10.7 21.5 0.7

Count 141 79 280 238 37 24 26 83 59 68 92 7 13 69 51 49 8

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Source: Thomson Reuters/National Venture Capital Association

M&A Activity

Source: Thomson Reuters/National Venture Capital Association

Venture Exit Counts- IPOs and M&A by Year

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q13

#M&A 97 116 143 189 227 380 384 363 323 402 443 485 488 422 360 545 498 469 77

#IPO 202 270 141 79 280 238 37 24 26 83 59 68 92 7 13 69 51 49 8

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Source: Thomson Reuters/National Venture Capital Association

2012 Was First Post-Bubble Year That Distributions Exceeded Contributions in the US

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Dist/Contrib 149% 226% 92% 35% 42% 64% 96% 71% 95% 47% 47% 94% 94% 162%

0%

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100%

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250%

US VC - Ratio of LP Distributions to LP Contributions

Source: Cambridge Associates, NVCA

Recent Battles

• J.O.B.S. Act of 2012• VC fund registration/regulation• Taxation of long term capital gains taken as carried

interest• FDA reform• Clean technology science funding/supportive

policies (ARPA-E support)• Healthcare• Internet regulation• Preserving investment company accounting

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