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  1. 1. Ohio Venture Association The Quiet Recovery – the Regional Core Competencies of Our Expanding Venture Community September 12, 2008 Mark G. Heesen President
  2. 2. Venture Capital – Barely a macroeconomics rounding error in the world of US finance….
  3. 3. US Venture Capital Investment in Perspective <ul><li>US GDP $12.5 trillion annually </li></ul><ul><li>Hedge fund intake $1.5 trillion over last 3 years estimated </li></ul><ul><li>Buyout equity intake $168 billion in 2007 </li></ul><ul><li>Mutual fund intake $92 billion in 2007 </li></ul><ul><li>Venture capital intake $37 billion in 2007 </li></ul><ul><ul><li>Venture capital fundraising & investment Is 0.3% of total GDP </li></ul></ul>Source: BLS website, Investment Company Institute, Thomson Reuters, NVCA
  4. 4. Global Insight Study <ul><li>In 2006, venture backed companies: </li></ul><ul><ul><li>Provided 10.4 million US jobs </li></ul></ul><ul><ul><li>Had sales of $2.3 trillion </li></ul></ul><ul><ul><ul><li>Represents 17.6% of GDP </li></ul></ul></ul><ul><ul><li>Still dominated venture-created sectors </li></ul></ul><ul><ul><ul><li>56% of biotech revenue </li></ul></ul></ul><ul><ul><ul><li>78% of computer and peripherals revenue </li></ul></ul></ul><ul><ul><ul><li>94% of computer and peripherals jobs </li></ul></ul></ul><ul><ul><ul><li>88% of software sector jobs </li></ul></ul></ul><ul><ul><li>Outgrew the economy 2003-2006 in every sector </li></ul></ul>Source: Venture Impact 2006 by Global Insight
  5. 5. Venture Capital Investment is Productive ... <ul><li>For VC every dollar invested in 1970-2001, there was $7.90 in US revenue during 2006 </li></ul><ul><li>For every $28,463 of venture capital invested in 1970-2001, there was one job in the year 2006 </li></ul><ul><li>Note these ratios are based on investment through 2001 ($296B) because investment after that time has likely had little effect on 2006 jobs and revenues. If investment through 2006 ($421B) is used, the ratios would be $5.55 and $40,364 respectively </li></ul>Source: Venture Impact 2006 by Global Insight
  6. 6. Fundraising & Resources
  7. 7. The Number of US VC Firms Has Peaked .. Thankfully Source: 2008 NVCA Yearbook, prepared by Thomson Reuters, figure 1.04
  8. 8. VC Fundraising Was Strong Thru 2000 - Recent Increase Way Below Bubble Levels Source: Thomson Reuters/NVCA Does not include Corporate Venture groups.
  9. 9. Investment Marches On - Rumors that the Venture Industry has stopped investing are greatly exaggerated
  10. 10. VC Investment Peaked in 2000; Recently 20-23% of Peak; Recent Steady Increases Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  11. 11. Most Recent Quarters Have Been Consistent – What is the “Right” Level? Some Recent Growth Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  12. 12. In 1H 2008, Life Sciences drew 28% of Funding but Medical Devices comprises an ever-growing proportion Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  13. 13. Clean Technology grows significantly: In First Half 2008, $1.8B in 125 Deals Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  14. 14. Average Clean Tech Deal Size is Increasing Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  15. 15. Number of First Time Fundings (New Projects) is At Post-Bubble High! Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  16. 16. The Buckeye State Stats and Sectors …
  17. 17. Ohio Tracks Below National Trends (National: 1/3 of peak, now at 1998 levels) Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  18. 18. Ohio Sector Splits Medical Devices Lead the Way! (Most recent 8 quarters) Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  19. 19. The Exit Scene - the importance of acquisitions has become clear over the past several years
  20. 20. IPO Levels Were Good in 2004 and Okay in 2007; Awful Now Source: Thomson Reuters/National Venture Capital Association
  21. 21. The Most IPOs Were in 1996 & 2000; Then 2004 & 2007 Showed Promise; 2008 is Awful Source: Thomson Reuters/National Venture Capital Association
  22. 22. 2007 Set A Median Valuation Record; The Handful of 2008 IPOs Show Some Strength Source: Thomson Reuters/National Venture Capital Association
  23. 23. IPOs YTD 2008: Bleak!!! <ul><li>Only 5 IPOs in Q1 and 0 in Q2! </li></ul><ul><li>Last zero IPO quarter was in 1978 … 30 years ago! </li></ul><ul><li>IPO in context: </li></ul><ul><ul><li>Approached 90/quarter in 1999 </li></ul></ul><ul><ul><li>25/quarter is typical </li></ul></ul><ul><ul><li>35/quarter suggested by historical levels </li></ul></ul><ul><ul><ul><li>1,000 new port cos/year x 14% historical IPO rate = 140/year </li></ul></ul></ul>Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  24. 24. What’s in the IPO Pipeline? IPOs During Period and Registration Counts at Period End Source: Thomson Reuters/National Venture Capital Association
  25. 25. IPOs Don’t Happen Overnight – and Sometimes Don’t Seem to Happen Source: Thomson Reuters/National Venture Capital Association 8.56 236.99 0.28 5 1H08 8.65 346.01 10.33 86 2007 8.20 255.26 5.12 57 2006 6.13 203.35 4.46 56 2005 6.75 254.90 11.01 93 2004 Median Age Yrs Median Val $M IPOs $B # IPOs Year
  26. 26. VB Acquisition Counts had been Steady; Low in 2008 Source: Thomson Reuters/National Venture Capital Association
  27. 27. M&A Proceeds Vary Greatly As the Mix between “Good” Exits and Fire Sales Shift; Now low Source: Thomson Reuters/National Venture Capital Association
  28. 28. Venture Exit Counts- IPOs and M&A by Year - 2008 is Dismal! Source: Thomson Reuters/National Venture Capital Association
  29. 29. Public Policy Big Wins and Bigger Challenges
  30. 30. No one has repealed the business cycle or the nature of failure …
  31. 31. Key US VC building blocks ... <ul><li>Capital formation </li></ul><ul><ul><li>Prudent man rule – enabled pension investment </li></ul></ul><ul><ul><li>LP laws </li></ul></ul><ul><ul><li>Capital gains tax reduction </li></ul></ul><ul><li>Empowered entrepreneurs </li></ul><ul><ul><li>Capital gains tax reductions </li></ul></ul><ul><ul><li>Stock options/team building tools </li></ul></ul><ul><ul><li>Reasonable bankruptcy laws </li></ul></ul><ul><li>Protect companies – IP laws </li></ul><ul><li>Abundant customers willing to do business with SMEs </li></ul><ul><li>Exit markets – the NASDAQ </li></ul><ul><li>Face-to-face investing/proximity </li></ul><ul><li>Cultural acceptance </li></ul>
  32. 32. For First Fundings From 1991 to 2000, Approximately 33% Were Acquired and 14% Went Public [11,686 Companies Total] Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters
  33. 33. Mark G. Heesen President
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