<ul><li>The Hot Sectors! </li></ul><ul><li>The Facts About Exits </li></ul><ul><li>Sentiment in Ventureland </li></ul><ul>...
Where’s The Biggest Investment Opportunity Today? <ul><li>Greentech </li></ul><ul><li>Internet B2B </li></ul><ul><li>Mobil...
Anything Else Worth Investing In? <ul><li>Enterprise equipment </li></ul><ul><li>Telecom services </li></ul><ul><li>Health...
CONFIDENTIAL Exits:  Facts and Myths
Private Equity: A Potent Force  <ul><li>1 st  half of 2007 </li></ul><ul><ul><li>6 of 10 largest tech M&A done by Private ...
Field of Acquirers Has Shrunk <ul><li>2006 </li></ul><ul><ul><li>40% of all tech M&A above $50M done by  10 companies </li...
Myth #1 <ul><li>The IPO market is back! </li></ul>CONFIDENTIAL
Tech IPOs Have Become Rarer CONFIDENTIAL 1990’s 2001-2003 2004 -2007 IPOs Per Year 130 20-25 55 Today we have less than ha...
VC Exits above $50M  CONFIDENTIAL Past 4 years 1990’s M&A IPO 60% 40% 10% 90%
Significant “IPO Premium” CONFIDENTIAL Technology IPO Premium 26% 37% 43% … and investors enjoy continued upside potential...
2007 versus 1997 <ul><li>VCs deploying 2.5X more capital versus 10 years ago but…… </li></ul><ul><ul><li>Same # of exits a...
Implications? <ul><li>Buyer concentration = continual  tough  M&A market </li></ul><ul><li>No re-population of the buyer b...
A Shrinking Buyer Base <ul><li>1640 public tech companies today </li></ul><ul><ul><li>Down 35% from Peak in 2000! </li></u...
Myth #2 CONFIDENTIAL The bar is incredibly high for taking a company public….easier to sell the business
Public Market Facts <ul><li>2/3 of names on NASDAQ are < $500M market cap </li></ul><ul><ul><li>80% < $1 Billion Market Ca...
Non Bulge Bracket Relevant <ul><li>Bulge Bracket Firms did 25% of Tech IPOs during 80’s and 90’s </li></ul><ul><ul><li>40 ...
Small Cap IPOs…Not Just For Jeffries & Co; et.al…. <ul><li>1990-1998 </li></ul><ul><li>Avg market cap? </li></ul><ul><li>A...
Half the IPOs Raise <$100M  CONFIDENTIAL Note: IPOs from QI 2004 - Q2 2007. Source: Dealogic >$100M $50 - $100M <$50M
Clearly Not Just Tech…. CONFIDENTIAL
IPO vs. Sale of Business CONFIDENTIAL All IPOs between January 1, 2006, and June 30, 2007, where the market cap was less t...
Implied EBITDA? <ul><li>  $15.7M </li></ul>CONFIDENTIAL
Moderate Revenue Bar… CONFIDENTIAL Acme Packet Allot Comm Riverbed Networks ShoreTel Comm Pre-IPO  LTM Revenue  $58M $32M ...
Not Just Web Companies Going Public….. <ul><li>Other Tech IPOs in past 12 months…. </li></ul><ul><ul><li>Aruba, Bigband Ne...
What If….. <ul><li>… ..AT&T bought Cisco for $250M in 1991 </li></ul>CONFIDENTIAL
Instead…. <ul><li>Sequoia chose to take public at a $225M market cap </li></ul><ul><li>Good Decision? </li></ul>CONFIDENTIAL
Conclusion? <ul><li>Let’s get smart about the Small Cap IPO market…… </li></ul>CONFIDENTIAL
<ul><li>Data Analytics: </li></ul><ul><li>Attractive Economics For Customers and Investors </li></ul>CONFIDENTIAL
Thinking by Numbers <ul><li>Goal:  turning data into profits </li></ul><ul><li>Intuitive and experiencial expertise losing...
Analytics Coming of Age <ul><li>Retail </li></ul><ul><ul><li>Video to assess shopping patterns in stores </li></ul></ul><u...
Vintage Wine Price Predictor <ul><li>Princeton economics professor wondered….. </li></ul><ul><ul><li>what factors determin...
Don’t Need to Drink It…. <ul><li>Professor speculated that tasters were unreliable </li></ul><ul><li>Modeling pinpointed i...
“ Expert” Backlash…. <ul><ul><li>Wine experts blasted approach </li></ul></ul><ul><ul><ul><li>Convinced industry publicati...
Still Some Work To Do <ul><li>Many failed attempts… </li></ul><ul><li>Companies burned by unfulfilled promises  </li></ul>...
<ul><li>Managed Services: </li></ul><ul><li>A Trend To Bet On </li></ul>CONFIDENTIAL
Services….Upheaval in the Equipment Space <ul><li>New and more effective models emerging </li></ul><ul><ul><li>Department ...
Services….More Acceptance From Resellers <ul><li>VAR margins down to 10% to 20% </li></ul><ul><li>Finally learning to sell...
Services = Customer Lock-in <ul><li>Services keep customers loyal </li></ul><ul><ul><li>Nokia expects  $500M  in revenue f...
Operational Benefits of Managed Services Model <ul><li>No legacy platforms to maintain </li></ul><ul><ul><ul><li>3000 Micr...
Service Provider =  More Valuable Company <ul><li>Acquirers gain immediate leverage </li></ul><ul><ul><li>customers are re...
Salesforce.com <ul><li>  35,000  Customers </li></ul><ul><li>  1,000,000  Users </li></ul>CONFIDENTIAL
<ul><li>Software Tools: </li></ul><ul><li>Not Entirely a Shitty Business </li></ul>CONFIDENTIAL
Two Honorable Mentions <ul><li>Adobe  = $25B market cap,  9x rev mult. </li></ul><ul><li>Divx   = $0.5B market cap, 7x rev...
Worth a Second Look? <ul><li>Consumer auction site </li></ul><ul><li>Job boards </li></ul><ul><li>Services targeting the a...
New Fixes to Age Old Problems….Rarely work <ul><li>Verifiable Email </li></ul><ul><li>Better local Search </li></ul><ul><l...
<ul><li>VC Sentiment 2007: </li></ul><ul><li>What Are We Thinking? </li></ul>CONFIDENTIAL
Current Beliefs in Venture Land <ul><li>Early stage has best return profile </li></ul><ul><li>Ad supported businesses scal...
Indeed….Search is King CONFIDENTIAL 1800 contacts 8.7%     68% The Street.com 5.1%   64% WebMD 8.6%   63% 1800 Flowers 8.5...
Positive (but weak) Relationship Between Ad $ and Non Search Traffic CONFIDENTIAL CONFIDENTIAL Percentage of Visitors from...
P&G….The Gold Standard of Advertising Efficiency  CONFIDENTIAL Advertising as a % of Sales Organic Sales Growth 9.0% R-Squ...
Strong Opinions in Web 2.0 Land… <ul><li>Web companies should create open platforms </li></ul><ul><li>Users should have ac...
Have E-Tailers Learned Something Since the Bubble? CONFIDENTIAL Blue Nile 129%   $1.3B Overstock   36%   $510M 1800 Contac...
… And Mobile as Well… <ul><li>Mobile apps cannot be monetized with advertising </li></ul><ul><li>Mobile start-ups cannot s...
Opinions Formed About Software…. <ul><li>SaaS is a superior model in enterprise software </li></ul>CONFIDENTIAL
Heathcare Services….. CONFIDENTIAL Athena Health = $1.1B Market Cap Trailing Revenues = $75M
<ul><li>and yet….. </li></ul>CONFIDENTIAL
Just a Few Years Ago…. <ul><li>You couldn’t lose ….. </li></ul><ul><ul><li>following what big company CIOs said </li></ul>...
You Can’t Lose With…. <ul><li>Millions of users!  </li></ul><ul><li>Successful founders doing it again! </li></ul><ul><ul>...
You Can’t Win….  <ul><li>In a web deal with limited user uptake </li></ul><ul><li>Being a ‘dumb pipe’ </li></ul><ul><li>Ba...
<ul><li>Parting thoughts… </li></ul>CONFIDENTIAL
VCs and Entrepreneurs Seeing Stars <ul><li>Iconic examples used to justify lofty valuations in consumer space… </li></ul><...
Top 5 Internet Market Cap Leaders CONFIDENTIAL Google + Yahoo + eBay + Yahoo!Japan + Amazon $32B = Nasdaq trough  $325B = ...
2007…….Greed > Fear <ul><li>Write-offs are rare these days </li></ul><ul><li>Mediocre companies getting funded </li></ul><...
<ul><li>Risky to Redline ANY sector….even  lowly optical, storage, comm, healthcare services…. </li></ul>CONFIDENTIAL
Perseverance Pays…. CONFIDENTIAL Note: As of Aug. 22.  Sources: Investment Company Institute; Journal of the Academy of Fi...
Following The Crowd Doesn’t… CONFIDENTIAL Note: As of Aug. 22.  Sources: Investment Company Institute; Journal of the Acad...
<ul><li>Discussion </li></ul>CONFIDENTIAL
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Thoughs From a Clearstone Offsite

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  • Presence: a system to manage and control availability and responses, which would let people maintain the benefits of their communications devices, but control them in such a way that they don&apos;t become a burden.
  • Presence: a system to manage and control availability and responses, which would let people maintain the benefits of their communications devices, but control them in such a way that they don&apos;t become a burden.
  • Things they sell stopped changing years ago VCs made investment in VoIP in mid to late 1990’s…right about the trend, not the decade… Convergence will lead to a new competitive environment where vendors of IT applications, data infrastructure, Carrier and service provider enter the voice communications market
  • Thoughs From a Clearstone Offsite

    1. 1. <ul><li>The Hot Sectors! </li></ul><ul><li>The Facts About Exits </li></ul><ul><li>Sentiment in Ventureland </li></ul><ul><li>Thoughts on Three Rising Trends </li></ul>CONFIDENTIAL
    2. 2. Where’s The Biggest Investment Opportunity Today? <ul><li>Greentech </li></ul><ul><li>Internet B2B </li></ul><ul><li>Mobile/Wireless </li></ul><ul><li>Media & Entertainment </li></ul><ul><li>Security </li></ul>CONFIDENTIAL 55% 23% 11% 7% 4% Poll conducted at AlwaysOn Conference Summer 2007
    3. 3. Anything Else Worth Investing In? <ul><li>Enterprise equipment </li></ul><ul><li>Telecom services </li></ul><ul><li>Healthcare services </li></ul><ul><li>Biometrics </li></ul><ul><li>Semiconductors </li></ul><ul><li>Financial services </li></ul>CONFIDENTIAL
    4. 4. CONFIDENTIAL Exits: Facts and Myths
    5. 5. Private Equity: A Potent Force <ul><li>1 st half of 2007 </li></ul><ul><ul><li>6 of 10 largest tech M&A done by Private Equity </li></ul></ul><ul><ul><li>Europe no exception </li></ul></ul><ul><ul><ul><li>2 largest: Freescale, Philips Semi </li></ul></ul></ul><ul><ul><li>Pending PE debt issuance </li></ul></ul><ul><ul><ul><li>Jan 06 = $40B </li></ul></ul></ul><ul><ul><ul><li>June 07 = $250B </li></ul></ul></ul>CONFIDENTIAL
    6. 6. Field of Acquirers Has Shrunk <ul><li>2006 </li></ul><ul><ul><li>40% of all tech M&A above $50M done by 10 companies </li></ul></ul><ul><ul><li>Average market cap of acquirers = $100B </li></ul></ul>CONFIDENTIAL Enormous buying power in hands of a few
    7. 7. Myth #1 <ul><li>The IPO market is back! </li></ul>CONFIDENTIAL
    8. 8. Tech IPOs Have Become Rarer CONFIDENTIAL 1990’s 2001-2003 2004 -2007 IPOs Per Year 130 20-25 55 Today we have less than half the IPOs of pre-bubble 1990’s
    9. 9. VC Exits above $50M CONFIDENTIAL Past 4 years 1990’s M&A IPO 60% 40% 10% 90%
    10. 10. Significant “IPO Premium” CONFIDENTIAL Technology IPO Premium 26% 37% 43% … and investors enjoy continued upside potential Business Services Healthcare Services
    11. 11. 2007 versus 1997 <ul><li>VCs deploying 2.5X more capital versus 10 years ago but…… </li></ul><ul><ul><li>Same # of exits above $100M </li></ul></ul><ul><ul><li>500% Increase in M&A exits </li></ul></ul><ul><ul><li>80% decline in IPO exits </li></ul></ul>CONFIDENTIAL
    12. 12. Implications? <ul><li>Buyer concentration = continual tough M&A market </li></ul><ul><li>No re-population of the buyer base </li></ul><ul><ul><li>Selling our best companies </li></ul></ul><ul><ul><li>Mortgaging our future? </li></ul></ul>CONFIDENTIAL
    13. 13. A Shrinking Buyer Base <ul><li>1640 public tech companies today </li></ul><ul><ul><li>Down 35% from Peak in 2000! </li></ul></ul><ul><ul><li>7 straight years of fewer public tech companies </li></ul></ul>CONFIDENTIAL
    14. 14. Myth #2 CONFIDENTIAL The bar is incredibly high for taking a company public….easier to sell the business
    15. 15. Public Market Facts <ul><li>2/3 of names on NASDAQ are < $500M market cap </li></ul><ul><ul><li>80% < $1 Billion Market Cap </li></ul></ul><ul><li>Vaunted NYSE? </li></ul><ul><ul><li>Nearly 40% < $1 Billion market cap </li></ul></ul><ul><ul><ul><li>25% < $500M market cap </li></ul></ul></ul>CONFIDENTIAL
    16. 16. Non Bulge Bracket Relevant <ul><li>Bulge Bracket Firms did 25% of Tech IPOs during 80’s and 90’s </li></ul><ul><ul><li>40 to 60 deals/Year </li></ul></ul><ul><ul><li>Today do 80% of Tech IPO’s </li></ul></ul><ul><ul><ul><li>~ 40 deals/Year </li></ul></ul></ul><ul><li>What about the other 100 deals? </li></ul><ul><ul><li>Many are not getting done…but could </li></ul></ul>CONFIDENTIAL
    17. 17. Small Cap IPOs…Not Just For Jeffries & Co; et.al…. <ul><li>1990-1998 </li></ul><ul><li>Avg market cap? </li></ul><ul><li>Avg raise ? </li></ul><ul><li>65 tech IPOs </li></ul><ul><li>$197M </li></ul><ul><li>$37M </li></ul>CONFIDENTIAL
    18. 18. Half the IPOs Raise <$100M CONFIDENTIAL Note: IPOs from QI 2004 - Q2 2007. Source: Dealogic >$100M $50 - $100M <$50M
    19. 19. Clearly Not Just Tech…. CONFIDENTIAL
    20. 20. IPO vs. Sale of Business CONFIDENTIAL All IPOs between January 1, 2006, and June 30, 2007, where the market cap was less than $300 million... Business Services Health Care Technology Consumer Financial Services TOTAL Number of IPOs 14 44 23 10 16 107 Average Enterprise Value $224.9M $212.5M $274.4M $270.3M $325.5M $236.1M Average LTM EBITDA Multiple 16.8x 24.3x 17.4x 11.6x 17.3x 18.6x
    21. 21. Implied EBITDA? <ul><li> $15.7M </li></ul>CONFIDENTIAL
    22. 22. Moderate Revenue Bar… CONFIDENTIAL Acme Packet Allot Comm Riverbed Networks ShoreTel Comm Pre-IPO LTM Revenue $58M $32M $49M $71M PeopleSupport = $37M …..Compellent = $38M
    23. 23. Not Just Web Companies Going Public….. <ul><li>Other Tech IPOs in past 12 months…. </li></ul><ul><ul><li>Aruba, Bigband Networks, Infinera, Starent Networks, Veraz, Airvana, Mitel…. </li></ul></ul>CONFIDENTIAL
    24. 24. What If….. <ul><li>… ..AT&T bought Cisco for $250M in 1991 </li></ul>CONFIDENTIAL
    25. 25. Instead…. <ul><li>Sequoia chose to take public at a $225M market cap </li></ul><ul><li>Good Decision? </li></ul>CONFIDENTIAL
    26. 26. Conclusion? <ul><li>Let’s get smart about the Small Cap IPO market…… </li></ul>CONFIDENTIAL
    27. 27. <ul><li>Data Analytics: </li></ul><ul><li>Attractive Economics For Customers and Investors </li></ul>CONFIDENTIAL
    28. 28. Thinking by Numbers <ul><li>Goal: turning data into profits </li></ul><ul><li>Intuitive and experiencial expertise losing out to number crunching </li></ul><ul><li>Still…..statistical analysis faces tremendous skepticism </li></ul><ul><ul><li>threatens information monopoly of experts </li></ul></ul><ul><li>Money Ball effect could help drive acceptance </li></ul>CONFIDENTIAL
    29. 29. Analytics Coming of Age <ul><li>Retail </li></ul><ul><ul><li>Video to assess shopping patterns in stores </li></ul></ul><ul><ul><ul><li>Getting people to stay longer/spend more </li></ul></ul></ul><ul><ul><li>Data filtering to lower returns/avoid markdowns </li></ul></ul><ul><li>Web </li></ul><ul><ul><li>Too many to list…. </li></ul></ul><ul><li>Consumer Marketing </li></ul><ul><ul><li>Modeling consumer buying proclivity </li></ul></ul><ul><li>Hospitality Industry </li></ul><ul><ul><li>Gary Loveman’s majic at Harris Casino </li></ul></ul>CONFIDENTIAL
    30. 30. Vintage Wine Price Predictor <ul><li>Princeton economics professor wondered….. </li></ul><ul><ul><li>what factors determine wine prices? </li></ul></ul>CONFIDENTIAL
    31. 31. Don’t Need to Drink It…. <ul><li>Professor speculated that tasters were unreliable </li></ul><ul><li>Modeling pinpointed important variables </li></ul><ul><li>Most important determinate of vintage quality? </li></ul><ul><ul><li>seasonal temperature </li></ul></ul><ul><ul><li>obvious but overlooked </li></ul></ul>CONFIDENTIAL
    32. 32. “ Expert” Backlash…. <ul><ul><li>Wine experts blasted approach </li></ul></ul><ul><ul><ul><li>Convinced industry publications not to print it </li></ul></ul></ul><ul><ul><li>Gauge has proven far more accurate than experts </li></ul></ul>CONFIDENTIAL
    33. 33. Still Some Work To Do <ul><li>Many failed attempts… </li></ul><ul><li>Companies burned by unfulfilled promises </li></ul><ul><li>Uphill battle to prove efficacy </li></ul><ul><li>But companies remain interested…. </li></ul><ul><ul><li>Top line boosters > cost reduction tools </li></ul></ul>CONFIDENTIAL
    34. 34. <ul><li>Managed Services: </li></ul><ul><li>A Trend To Bet On </li></ul>CONFIDENTIAL
    35. 35. Services….Upheaval in the Equipment Space <ul><li>New and more effective models emerging </li></ul><ul><ul><li>Department managers controlling more IT spending </li></ul></ul><ul><ul><li>IT organizations want to know less and less </li></ul></ul><ul><ul><li>Coupling managed service with purchase </li></ul></ul><ul><ul><li>Cisco leading charge </li></ul></ul>CONFIDENTIAL
    36. 36. Services….More Acceptance From Resellers <ul><li>VAR margins down to 10% to 20% </li></ul><ul><li>Finally learning to sell services </li></ul><ul><li>Europe as a model </li></ul>CONFIDENTIAL
    37. 37. Services = Customer Lock-in <ul><li>Services keep customers loyal </li></ul><ul><ul><li>Nokia expects $500M in revenue from SoonR type service in 4 years </li></ul></ul><ul><ul><ul><li>Hopes service will keep users on Nokia platform </li></ul></ul></ul>CONFIDENTIAL
    38. 38. Operational Benefits of Managed Services Model <ul><li>No legacy platforms to maintain </li></ul><ul><ul><ul><li>3000 Microsoft developers maintain Windows 2000 </li></ul></ul></ul><ul><li>Upgrades pushed out daily </li></ul><ul><li>Birds eye view of customer behavior </li></ul><ul><li>Land and expand </li></ul><ul><li>Much shorter sale-to-revenue cycle </li></ul>CONFIDENTIAL
    39. 39. Service Provider = More Valuable Company <ul><li>Acquirers gain immediate leverage </li></ul><ul><ul><li>customers are readily accessible versus behind the firewall </li></ul></ul>CONFIDENTIAL
    40. 40. Salesforce.com <ul><li> 35,000 Customers </li></ul><ul><li> 1,000,000 Users </li></ul>CONFIDENTIAL
    41. 41. <ul><li>Software Tools: </li></ul><ul><li>Not Entirely a Shitty Business </li></ul>CONFIDENTIAL
    42. 42. Two Honorable Mentions <ul><li>Adobe = $25B market cap, 9x rev mult. </li></ul><ul><li>Divx = $0.5B market cap, 7x rev mult. </li></ul>CONFIDENTIAL Stay clear of niche development environment tools Target consumer friendly apps (i.e Flash, MPEG 4) Way of playing media & content trend
    43. 43. Worth a Second Look? <ul><li>Consumer auction site </li></ul><ul><li>Job boards </li></ul><ul><li>Services targeting the aging population </li></ul><ul><li>Virus protection </li></ul><ul><li>Online banking </li></ul>CONFIDENTIAL
    44. 44. New Fixes to Age Old Problems….Rarely work <ul><li>Verifiable Email </li></ul><ul><li>Better local Search </li></ul><ul><li>Improving marketing response rates </li></ul><ul><li>Targeting the “under-served” SMB </li></ul><ul><li>Fuel Additives? </li></ul>CONFIDENTIAL
    45. 45. <ul><li>VC Sentiment 2007: </li></ul><ul><li>What Are We Thinking? </li></ul>CONFIDENTIAL
    46. 46. Current Beliefs in Venture Land <ul><li>Early stage has best return profile </li></ul><ul><li>Ad supported businesses scale the best </li></ul><ul><ul><li>Enormous $300 billion spend to tap into! </li></ul></ul><ul><li>Search is the driver of economic activity </li></ul><ul><li>Paying up for a hot company is smart </li></ul><ul><li>Emerging markets are hot </li></ul>CONFIDENTIAL
    47. 47. Indeed….Search is King CONFIDENTIAL 1800 contacts 8.7% 68% The Street.com 5.1% 64% WebMD 8.6% 63% 1800 Flowers 8.5% 62% Blue Nile 6.6% 60% The Knot 7.6% 55% Move.com 4.1% 53% Netflix 13.0% 50% FTD Group 7.2% 48% DrugStore 10.1% 48% Overstock 10.5% 47% CNET 5.9% 46% Monster 7.7% 45% RealNetworks 23.0% 36% Direct Access Big 5 Search As of August 25, 2007
    48. 48. Positive (but weak) Relationship Between Ad $ and Non Search Traffic CONFIDENTIAL CONFIDENTIAL Percentage of Visitors from a Nonsearch-Engine Source Sales and Marketing Spending as Pct of FY06 Revenue 35% 40% 55% 65% 70% 0% 15% 25% 30% 35% 40% 5% 10% 20% 45% 50% 30% 45% 60% RNWK TSCM WBMD FLWS NILE KNOT NFLX MOVE DSCM OSTK FTD MNST CNET PCLN REDE CTAC Trend line
    49. 49. P&G….The Gold Standard of Advertising Efficiency CONFIDENTIAL Advertising as a % of Sales Organic Sales Growth 9.0% R-Squared = .84 9.5% 10.0% 10.5% 11.0% 0.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2.0%
    50. 50. Strong Opinions in Web 2.0 Land… <ul><li>Web companies should create open platforms </li></ul><ul><li>Users should have access and control of their data </li></ul><ul><li>Social features are the future of all consumer web apps </li></ul><ul><li>E-tailing is not very interesting </li></ul>CONFIDENTIAL
    51. 51. Have E-Tailers Learned Something Since the Bubble? CONFIDENTIAL Blue Nile 129% $1.3B Overstock 36% $510M 1800 Contacts 42% $312M 1800 Flowers 61% $620M 2007 YTD Performance Market Cap As of August 25, 2007
    52. 52. … And Mobile as Well… <ul><li>Mobile apps cannot be monetized with advertising </li></ul><ul><li>Mobile start-ups cannot succeed without a carrier deal </li></ul><ul><li>… and yet ABI Research says mobile advertising will be a $19B business in 2011? </li></ul>CONFIDENTIAL
    53. 53. Opinions Formed About Software…. <ul><li>SaaS is a superior model in enterprise software </li></ul>CONFIDENTIAL
    54. 54. Heathcare Services….. CONFIDENTIAL Athena Health = $1.1B Market Cap Trailing Revenues = $75M
    55. 55. <ul><li>and yet….. </li></ul>CONFIDENTIAL
    56. 56. Just a Few Years Ago…. <ul><li>You couldn’t lose ….. </li></ul><ul><ul><li>following what big company CIOs said </li></ul></ul><ul><ul><li>Landing a ‘blue chip’ partner to peddle your products </li></ul></ul><ul><ul><li>Investing in ‘real technology companies’ </li></ul></ul><ul><ul><ul><li>Remember Nano? </li></ul></ul></ul>CONFIDENTIAL
    57. 57. You Can’t Lose With…. <ul><li>Millions of users! </li></ul><ul><li>Successful founders doing it again! </li></ul><ul><ul><li>Mahalo, Joost, Clearwire </li></ul></ul><ul><li>Alternative energy deals! </li></ul><ul><li>Paying up for hot deals with traction! </li></ul><ul><li>Following Sequoia! </li></ul>CONFIDENTIAL
    58. 58. You Can’t Win…. <ul><li>In a web deal with limited user uptake </li></ul><ul><li>Being a ‘dumb pipe’ </li></ul><ul><li>Backing uninspiring founders </li></ul><ul><li>In the optical , home networking , or tools space </li></ul><ul><li>Taking on Ebay or Cisco or _______ </li></ul><ul><li>Selling voice services </li></ul><ul><li>Owning a small % </li></ul>CONFIDENTIAL
    59. 59. <ul><li>Parting thoughts… </li></ul>CONFIDENTIAL
    60. 60. VCs and Entrepreneurs Seeing Stars <ul><li>Iconic examples used to justify lofty valuations in consumer space… </li></ul><ul><ul><li>Facebook </li></ul></ul><ul><ul><li>Skype </li></ul></ul><ul><ul><li>YouTube </li></ul></ul><ul><ul><li>Google </li></ul></ul><ul><li>Enterprise market now has a celebrity too! </li></ul><ul><ul><li>VMWare ~ $22B market cap </li></ul></ul>CONFIDENTIAL
    61. 61. Top 5 Internet Market Cap Leaders CONFIDENTIAL Google + Yahoo + eBay + Yahoo!Japan + Amazon $32B = Nasdaq trough $325B = market value – 2007 Source: Morgan Stanley
    62. 62. 2007…….Greed > Fear <ul><li>Write-offs are rare these days </li></ul><ul><li>Mediocre companies getting funded </li></ul><ul><li>CVP portfolio no exception…. </li></ul><ul><ul><li>Communicado and SoonR perhaps should not have been able to raise money </li></ul></ul>CONFIDENTIAL
    63. 63. <ul><li>Risky to Redline ANY sector….even lowly optical, storage, comm, healthcare services…. </li></ul>CONFIDENTIAL
    64. 64. Perseverance Pays…. CONFIDENTIAL Note: As of Aug. 22. Sources: Investment Company Institute; Journal of the Academy of Finance; Morningstar. 1982-2001 Compound Annual Return <ul><li>All trading days </li></ul>11.8% <ul><li>Minus 10 best days </li></ul>9.0% <ul><li>Minus 30 best days </li></ul>5.3% <ul><li>Minus 50 best days </li></ul>2.4%
    65. 65. Following The Crowd Doesn’t… CONFIDENTIAL Note: As of Aug. 22. Sources: Investment Company Institute; Journal of the Academy of Finance; Morningstar. Net Inflow into Real Estate Mutual Funds 2006 $9.4 billion 2007 Return of Real Estate Funds - 8.5%
    66. 66. <ul><li>Discussion </li></ul>CONFIDENTIAL
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