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Mgh Oc Venture Group 2007 09 12
 

Mgh Oc Venture Group 2007 09 12

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Mark Heesen's VC in the OC Keynote

Mark Heesen's VC in the OC Keynote

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    Mgh Oc Venture Group 2007 09 12 Mgh Oc Venture Group 2007 09 12 Presentation Transcript

    • VC in the OC Breakfast Keynote Address September 12, 2007 Mark G. Heesen President
    • Venture Capital – Barely a macroeconomics rounding error in the world of US finance….
    • US Venture Capital Investment in Perspective US GDP $12.5 trillion annually Hedge fund intake $1.5 trillion over last 3 years estimated Mutual fund intake $158 billion in 2006 Buyout intake $103 billion in 2006 Venture capital intake $28.6 billion in 2006 Venture capital fundraising & investment Is 0.2% of total GDP Source: BLS website, Investment Company Institute, Thomson Financial, NVCA
    • Global Insight Study In 2006, venture backed companies: Provided 10.4 million US jobs Had sales of $2.3 trillion Represents 17.6% of GDP Still dominated venture-created sectors 56% of biotech revenue 78% of computer and peripherals revenue 94% of computer and peripherals jobs 88% of software sector jobs Outgrew the economy 2003-2006 in every sector Source: Venture Impact 2006 by Global Insight
    • Venture-Backed Employment VC-Backed US Jobs (millions) As a % of total US Pvt Jobs in 2006 10.4 10.5 VC-Backed 10 Jobs = 9% 9.4 9.5 Outpaces 2003 - 2006 9 8.7 Total US Job Growth 3.6% 4.0% 8.5 3.0% 8 1.7% 2.0% 1.0% 7.5 2000 2003 2005 0.0% VC-Backed Growth Pvt Sector Growth Source: Venture Impact 2006 by Global Insight
    • VC-Backed Companies Share of Total Employment Top Sectors 2006 Software Employment Computers and Peripherals Employment 12% 6% 88% 94% VC-Backed Total VC-Backed Total Telecomm Employment Medical Devices Employment 17% 48% 52% 83% VC-Backed Total VC-Backed Total Source: Venture Impact 2006 by Global Insight
    • Venture Capital Investment is Productive ... For VC every dollar invested in 1970-2001, there was $7.90 in US revenue during 2006 For every $28,463 of venture capital invested in 1970- 2001, there was one job in the year 2006 Note these ratios are based on investment through 2001 ($296B) because investment after that time has likely had little effect on jobs and revenues. If investment through 2006 ($421B) is used, the ratios would be $5.55 and $40,364 respectively Source: Venture Impact 2006 by Global Insight
    • Fundraising & Resources
    • The Number of US VC Firms Has Peaked .. Thankfully At Year # Venture Capital Under End Firms Mgt 1970 28 $1B 1980 89 $4B 1990 395 $30B 2000 881 $228B 2001 946 $255B 2006 798 $235B Source: 2007 NVCA Yearbook, prepared by Thomson Financial, figure 1.04
    • Investment Marches On - Rumors that the Venture Industry has stopped investing are greatly exaggerated
    • VC Investment Peaked in 2000; Recently 20-23% of Peak; 2006 Was Higher $120,000 $100,000 $ Million Invested $80,000 $60,000 $40,000 $20,000 $0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • 1998 to 2006:IT share from 53% to 50%; LS share from 13% to 28% In 2007, LS is 33% (Was 35% in Q1 2007!) 1998 2006 1H07 0% 20% 40% 60% 80% 100% IT Life Sciences Consumer, Other Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • Cleantech/Greentech shows significant growth nationally $1,600 140 $1,400 120 $1,200 100 $1,000 80 Invested $M $800 # Deals 60 $600 40 $400 20 $200 $0 0 2000 2001 2002 2003 2004 2005 2006 1H07 Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • Number of First Time Fundings (New Projects) is On Track to Post-Bubble High! 3,500 3,000 2,500 2,000 1,500 1,000 500 - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 891 1,143 1,286 1,408 2,442 3,370 1,217 835 749 909 997 1,134 592 First Fundings Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • The Reconcentration of Investment Within the US
    • Top 5 States by Percentage Invested Within State in 2006 (75% of Investment by CA-domiciled funds was into CA companies) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 CA WA TX NC RI 75.0 53.0 50.0 44.0 41.0 % in state Source: NVCA 2007 Yearbook produced by Thomson Financial
    • # of States Receiving Funding from CA VCs in 2006 is Up! 40 35 30 25 20 15 10 5 0 1985 1995 2006 31 30 37 # States Source: NVCA 2007 Yearbook produced by Thomson Financial
    • California Share seems to be Ever- Increasing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1998 2000 2006 1H07 62% 59% 52% 51% 49 states % 9% 8% 12% 15% SoCal% 29% 33% 36% 34% NorCal % Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • What’s Happening in the Californias and the OC? Latest Data from the PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial For an interactive state analysis tool: www.pwcmoneytree.com
    • SoCal Investment – Tracks at or above national trends $10,000 800 $9,000 700 $8,000 600 $7,000 # Upstate Deals 500 $M Invested $6,000 $5,000 400 $4,000 300 $3,000 200 $2,000 100 $1,000 $0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 1,283 1,841 4,805 8,929 3,595 2,222 1,909 2,215 2,707 3,169 2,132 $M 252 330 486 742 398 257 265 274 320 346 191 # Deals $M # Deals Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • SoCal’s share has grown over the past decade (MoneyTree regions aggregated for presentation) 80% 70% 60% 50% 40% 30% 20% 10% 0% 1998 1H07 17% 12% MidAtl & NY 11% 13% New England 9% 15% SoCal% 29% 34% NorCal % Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • The Exit Scene - the importance of acquisitions has become clear over the past several years
    • IPO Levels Jumped in 2004 but not sustained; New hope in 2007? 30.0 300 25.0 250 20.0 200 Number of IPOs Offer $B 15.0 150 10.0 100 5.0 50 0.0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 Source: Thomson Financial/National Venture Capital Association
    • Recent Median IPO Valuations Are Consistently Higher than Pre-1999 400 300 200 100 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 108 182 342 247 322 223 228 255 203 255 346 Median Val ($M) Source: Thomson Financial/National Venture Capital Association
    • What’s in the IPO Pipeline? IPOs During Period and Registration Counts at Period End 100 80 60 40 20 0 2003 2004 2005 2006 1Q07 2Q07 29 93 56 57 18 26 IPOs Done 31 57 16 36 44 40 In Reg on last day Source: Thomson Financial/National Venture Capital Association
    • “Happy” Acquisitions Do Exist – 4Q 2006 Was Strong Ratio of sale price to total VC investment 400 # of M&A Exits 300 200 100 0 2003 2004 2005 2006 1H07 17 39 38 60 7 >10x TVI 38 72 69 67 10 4x-10x TVI 125 116 135 114 18 1x-4x TVI 113 115 104 94 20 < TVI Source: Thomson Financial/National Venture Capital Association – Undisclosed txns are prorated
    • Venture Exit Counts- IPOs and M&A by Year 700 M&A 600 IPO 500 Number of Issues 400 300 200 100 0 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 1H07 Year Source: Thomson Financial/National Venture Capital Association
    • For First Fundings From 1991 to 2000, Approximately 33% Were Acquired and 14% Went Public [11,686 Companies Total] Acquired 33% Public or In Reg 14% Still Private 35% Known Failed 18% Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • Of Companies Receiving First Funding in 2001 and 2002, There Are Few Exits [2040 Companies Total] Acquired 21% Public or In Reg 3% Known Failed 8% Still Private 68% Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial
    • Public Policy and The Venture Industry Big Challenges …
    • What’s Running the Show in 2007? An expensive war Congressional eagerness to eliminate middle class AMT Revenue scoring It’s silly season* Vague legislation creating less predictable outcomes * - Defined as the 4-year period leading up to a presidential election
    • Mark G. Heesen President