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 current geographic footprint in 2010 will:

20%

8%

72%

Increase Decrease Remain the Same

Investment in 2010 in the following sectors will:

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 following sectors will:

45%

27%

16%

12%

40%

53%

26%

17%

15%

20%

58%

70%

0% 20% 40% 60% 80%

Europe

Israel

India

China

IncreaseUnchangedDecrease

Investment in 2010 in the following regions 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

IncreaseUnchangedDecrease

Investment in 2010 in the following stages will:

In 2010 the number of venture-backed IPOs will 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 acquisitions market 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 remain largely unchanged.

In 2010, venture funds raised on average will be:

87%

3%10%

Smaller Larger Same size

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

48%

27%

25%

More Funds Fewer Funds Same Number of Funds

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

90%

4% 6%

Shrink Expand Remain the same

In the next five years the venture capital industry 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 Skype moment.” - Simon Olson,

Partner, Draper Fisher Jurvetson, FIR Capital Brazil

“For 2010, we plan to broaden our geographic focus to include investments in Europe.” - John Huntz, Executive Director,

Arcapita Ventures

“It's the global economy, stupid. Focus on investments in the USA targeting customers in the ROW (rest of the world).” – Trevor Loy,

General Partner, Flywheel Ventures

Since Sep08 we have focused on firms that can reach breakeven on this round. In 2010 our

willingness to take finance risk will likely return.” - Bronson Lingamfelter, Associate, Rose Tech

Ventures

“In 2010 we are going to Carpe Per Diem - Sieze the day to make money for our

LPs.” - Venky Ganesan, Managing Director, Globespan

Capital Partners

“We will do more investment under better environment for new deals.” - Masatoshi Ueno,

CEO/Technology, Yasuda Enterprise Development America Inc.

“We will find new mistakes to make that we have not made before; but all in all things look pretty strong and the

team is optimistic.” - Bob More, General Partner, Frazier Healthcare

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

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

We will look for valuations to come into equilibrium and do

more transactions at that time.” – Jim Hale, Founding Partner, FTV

Capital

“We will raise our next fund and continue to invest in consumer-facing Internet companies like Twitter and

Zynga.” - Norman Fogelsong, General Partner, Institutional Venture Partners

“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/ seemingly undue precision reverse

engineer the early exit to drive w/ great focus what founders do now to grow their cos.” -

Becca Braun, President, JumpStart Ventures

“Move to accelerate the development of investment candidates and portfolio companies.” - Greg Knudson, Director, Rocket Ventures

“2010 will likely mark the renewal of Corporate Venture Capital as corporations 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 more traditional venture capitalists seek earlier access to capital-efficient deals.” - Christine Herron, Principal,

First Round Capital

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

Catamount Ventures

“With our new $1.2Bn NVP XI fund, we plan to continue 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; also build broader syndicate up front at initial

investment.” - George Arida, Managing Director, Venture Investors LLC

“Embrace more universities into our seed

stage model.” - Rudy Garza, Managing Partner,

G51 Capital

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

Ventures

“Work harder, maintain high standards, and see

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

NEA

“We will increase our investment pace because we 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 in 2010 as we come out of the recession.” – Don Rainey, General Partner, Grotech Ventures

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

Greeley, General Partner, Flybridge Capital Partners

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

s I

nv

es

ted

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 o

f Is

sues

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