Golden age for technology and innovation vfinal acg

A Golden Age for Technology and Innovation Jeff Bussgang General Partner, Flybridge Capital Partners June 10, 2010

Envision the future – think big Source: YouTube, “How not to pitch a Venture Capitalist”

Why the optimism?
The macro perspective
Lingering overhang from scary times and uncertainty
But, we are in the middle of an unprecedented boom in technology and innovation – a true “Golden Age”
Growth opportunity ahead of us is more rapid, and global, than ever before
Massachusetts is very well positioned for the future
During an innovation age, we have an innovation economy that is the envy of the world
Massachusetts Miracle v2.0 ?

Context for my (contrarian?) perspective
General Partner at Flybridge Capital Partners, early-stage VC firm based in Boston, $560M under management
We have 40+ active portfolio companies, 30+ in MA, >1000 employees
Entrepreneur-in-Residence at Harvard Business School
Former entrepreneur
Cofounder Upromise (acq’d by SallieMae), VP at Open Market (IPO ‘96)
Author: Mastering the VC Game
Other community activities
Progressive Business Leader Co-Chair
MITX Board Member

Today are glory days for technology
We have made unprecedented advances in technology over the last 10 years…
… and we ain’t seen nothing yet!
An explosion in computing power, connectivity and entrepreneurship with an outlook for accelerated growth over the next 10 years
Social media and networking
Completion of the Human Genome Mapping project
The “i” generation, training “Net Natives – iPod, iPhone, iPad
‘ Cloud computing’
Nanotechnology
Synthetic Biology
Green consumer
Renewable energy
Broadband penetration

Conventional wisdom still clouded by economic crisis… Source: Iceland's Eyjafjallajokull volcano – Boston.com PIIGGS

… investors have gotten spooked… VIX = CBOE Volatility Index, also known as the “fear index”

..but consumer sentiment is (finally) trending positive DE FR ES UK 0 20 -20 -40 E.U. Consumer confidence index (EC indicator) Source: Thomson Datastream Japan Japan Confidence Index (National indicator) +14 U.S. Consumer Sentiment Index (1966 = 100) +18 Jan 2007 Sep 2009 Jan 2008 Jan 2007 Aug 2009 Jan 2008 Jan 2007 Sep 2009 Jan 2008 Nov '08–Sep '09 Dec '08–Aug '09 Jan 2009 Jan 2009 Jan 2009

Entrepreneurial interest and passion are stronger than ever Source: Challenger, Gray & Christmas, Inc; Princeton Review top 50 Entrepreneurial Colleges for 2009; Ewing Marion Kauffman Foundation Annual Average (%) CAGR 67% Percentage of job seekers starting their own business is escalating Entrepreneurship is expanding globally
2008 – Inaugural year
3 million participants
75 countries
2009
5 million participants
100 countries
Collegiate entrepreneurship is indisputably on the rise
5,000 entrepreneurship college courses in 2009 (250 in 1985)
500+ entrepreneurship degree programs in 2009 (~100 1980)
“ Today entrepreneurship is the fastest-growing course of study on campuses nationwide.”
- Jerome Katz; professor at St. Louis University

More business plan competitions…. ….with more resources and record submissions Source: Robert W. Fairlie using Current Population Survey $50K $200k $225k $30k $20k $200k

Technology startup incubator programs are multiplying

Tech company market caps have grown nicely - Dow flat Market Cap ($B) Dow $ 0.9 T $ $1.2 T Dow flat at 10,000 CAGR 34% Source: Yahoo Finance

Tech company balance sheets are strong with tons of cash Source: Bloomberg BusinessWeek

Still huge opportunities for innovation and growth Example: Internet and Mobile consume many eyeballs and little advertising $’s Source: Morgan Stanley

Example: Internet only 5% of all ad spend in the US in 2009 Source: Martin Langeveld at Nieman Journalism Lab; data from NAA, TVB, IAAB, McCann Internet advertising still only a fraction of future potential

Global opportunity: The world is truly flat The middle class is exploding Source: Goldman Sachs: Innovation 2010 BusinessWeek / BCG Survey Results; Telco 2.0 Mobile and Fixed Future Broadband Business Models The Expanding World Middle Class +42% No of companies Non-US US now home to less than 40% of the top 50 Most innovative companies 2006 2010 Global broadband access is growing exponentially Million, year-end Personal/mobile Shared/premise

Mobile internet technology Source: Morgan Stanley

Ridiculous growth in data traffic…. Source: Morgan Stanley

Cloud computing and the data explosion Worldwide Cloud Services Revenue Revenue ($B) Source: Gartner; Morgan Stanley; IDC “ Cloud Computing will be as influential as E-business” -Gartner Research Cloud computing enabling massive growth in volume of digital data CAGR 28% Data Volume (ZB) CAGR 43%

Personalized medicine and human genome sequencing Source: Richard Gibbs, director of Baylor's Human Genome Sequencing Center Human Genome Project 1990-2003, $3B cost, 92% coverage $5,000 100% coverage 0.1% error rate The Cost of Sequencing a Human High resolution scans available at low costs are changing the practice of biomedical research and reshaping the questions that scientists ask “ Moore's law for circuits and Metcalfe's law for networks. These principles are now at play in genetics, he argues, particularly in DNA sequencing and DNA synthesis” $1000 holy grail

New discovery paths enabled by DNA sequences and technologies: e.g. Synthetic Biology Source: The Economist May 2010 Dr. Venter and Dr. Smith created new life from lab chemicals. “ The result is the first creature since the beginning of creatures that has no ancestor” The era of synthetic biology is dawning

Renewable energy Economics and climate awareness have driven large growth in the development of renewable energy sources Source: Best Solar Market Trends, Angel Research, Wikipedia Wind Power Solar Power Installed Capacity (GW) Installed Capacity (GW) Olmedilla Photovoltaic Park; Spain; 60 MW Roscoe Wind Farm; Texas; 780 MW CAGR 20% CAGR 33% International Energy Agency (IEA) maintains forecast for renewable energy generation to constitute 60 per cent of all electricity produced by 2030

Massachusetts is very well positioned for the future
A mecca of intellectual capital – academia, innovation, diverse industries and ideas
Successful tech companies, big and small – to partner, poach and/or sell to
Committed funding sources – venture capital, private equity, angels

Mass factoids 1: Local tech companies are thriving
Strong IT IPOs in the last 3 years
A123 – Sept. 2009, $378M
Athena Health – Sept. 2007, $113M
Constant Contact – Oct. 2007, $70M
EnerNOC – Dec. 2007, $98M
Glass House – filed for $100M
LogMeIn – July 2009, $86M
Netezza – July 2007, $108M
TechTarget – May 2007, $100M
Virtusa – Sept. 2007, $62M
ZipCar – filed for $75M
Major MA companies have emerged as leading aggregators and consolidators Add images

Mass factoids 2: Multiple, robust micro-clusters Robotics Cloud Computing Online Video Gaming E-Commerce Marketing Technology

Mass factoids 3: Enviable funding and intellectual capital VC Investment Per Capita 2008 Source: NVCA 2009 Yearbook; NIH (2008); Center for an Urban Future; United Nations Educational, Scientific and Cultural Organizations (UNESCO) and the National Science Foundation
Massachusetts Intellectual Capital
74 Colleges and Universities
265,000 students
$1.5 billion per year on R&D
MA is #1 California: $388/person New York: $67/person Boston: $457/person NIH Funding 2008 Boston is #1 R&D as a % of GDP 2003-2007

The next 10 years will be a golden age for technology and innovation
Don’t let the short-term bumps spook you
Globalization, digitization, expansion and dissemination of human knowledge entering unprecedented levels
Massachusetts is in great shape to ride this wave
Our innovation-driven economy is the envy of the world during this golden age for innovation
Recap

“ Anything is Possible!” – Kevin Garnett

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Golden age for technology and innovation vfinal acg

by Jeffrey Bussgang on Jun 10, 2010

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