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  1. 1. 2004 New Era of Optimism in Software Heidi Roizen, Managing Director Mobius Venture Capital [email_address] Ann Winblad, Partner Hummer Winblad Venture Partners [email_address]
  2. 2. Hummer Winblad Venture Partners <ul><li>First Fund Exclusively for Software Investing </li></ul><ul><ul><li>Founded September 1989 </li></ul></ul><ul><li>$1B Under Management </li></ul><ul><ul><li>9 investment professionals </li></ul></ul><ul><ul><li>Fund V: $425M (raised 2001) </li></ul></ul><ul><li>All Stages, focus on early stage including seed </li></ul><ul><ul><li>Usually Part of First Round of Venture Funding </li></ul></ul><ul><ul><li>Usually Lead or Co-Lead </li></ul></ul><ul><li>90+ Investments to Date: 16 IPOs, 29 Acquisitions </li></ul>
  3. 3. Mobius Venture Capital <ul><li>Founded in 1996 in conjunction with Softbank </li></ul><ul><li>$2B Under Management </li></ul><ul><ul><li>13 investment professionals: 5 managing directors </li></ul></ul><ul><ul><li>Fund VI: $1.25B (raised 2000) </li></ul></ul><ul><li>All Stages, focus on early stage including seed </li></ul><ul><ul><li>Usually Part of First Round of Venture Funding </li></ul></ul><ul><ul><li>Usually Lead or Co-Lead </li></ul></ul><ul><li>100+ Investments to Date </li></ul>
  4. 4. Entrepreneurs, then VCs
  5. 5. Software Big Leader in Early Stage <ul><li>Software is the Big Leader in Early Stage </li></ul><ul><ul><li>27% of Early Stage Financings (Q1-Q3) 2003 </li></ul></ul><ul><ul><li>22% of Early Stage Dollars (Q1-Q3) 2003 </li></ul></ul><ul><li>Capital Efficient Profile Matches Era </li></ul><ul><ul><li>Early Stage Software Average (2002) Round is $4.0M </li></ul></ul><ul><ul><li>Average of other sectors is $6.2M Round </li></ul></ul><ul><li>Software Still the Largest Investment Area </li></ul><ul><ul><li>20% of Overall Investment Dollars (Q1-Q3), all stages </li></ul></ul><ul><ul><ul><li>But 28% Decline from 2002 </li></ul></ul></ul>
  6. 6. Drivers for Software Innovation and Investment Opportunity <ul><li>Outsourcing </li></ul><ul><ul><li>Leveraging high caliber 24X7 resources </li></ul></ul><ul><ul><ul><li>Specifically India </li></ul></ul></ul><ul><li>Open Source </li></ul><ul><ul><li>Driving innovation for early stage developers </li></ul></ul><ul><ul><li>Competitive ‘turmoil’ among the larger players </li></ul></ul><ul><li>Moore’s Law and Metcalf’s Law </li></ul><ul><ul><li>Broadband reaches critical mass deployment </li></ul></ul><ul><ul><li>Storage costs dramatically lower, affordable in personal devices </li></ul></ul><ul><li>On demand solutions </li></ul><ul><ul><li>New platforms, new pricing </li></ul></ul><ul><li>M&A at the top reopening market segments </li></ul><ul><ul><li>Documentum, Rational, JD Edwards…. </li></ul></ul>
  7. 7. Fast Pace of Technical Innovation Creates New Leaders and New Laggards
  8. 8. Consumer: Customer Demands Driving Innovation <ul><li>Digital Lifestyle demands: </li></ul><ul><ul><li>Communication and collaboration </li></ul></ul><ul><ul><ul><li>Interactivity across devices </li></ul></ul></ul><ul><ul><li>Immediacy </li></ul></ul><ul><ul><li>Omnipresence </li></ul></ul><ul><ul><ul><li>Always on, anywhere </li></ul></ul></ul><ul><ul><li>Customizable </li></ul></ul><ul><ul><ul><li>My content, my creativity </li></ul></ul></ul><ul><ul><li>Fair prices </li></ul></ul>
  9. 9. Broadband, Coupled with Cheap Storage Driving Digital Lifestyle
  10. 10. Enterprise: Customer Demands Driving Innovation <ul><li>Real Time Connected Enterprise </li></ul><ul><ul><li>Communication and collaboration </li></ul></ul><ul><ul><ul><li>Interactivity and security across enterprise and industry partners </li></ul></ul></ul><ul><ul><li>Shift of business value to communications platform </li></ul></ul><ul><ul><li>Immediacy </li></ul></ul><ul><ul><ul><li>Real time business performance management </li></ul></ul></ul><ul><ul><li>Confidence, Security, Privacy </li></ul></ul><ul><ul><ul><li>Sarbanes Oxley effect, GLB, HIPPA </li></ul></ul></ul><ul><ul><li>Open architecture </li></ul></ul><ul><ul><li>Solutions and pricing </li></ul></ul><ul><ul><ul><li>Undeniable short term ROI </li></ul></ul></ul><ul><ul><ul><li>Software as a service/utility </li></ul></ul></ul>
  11. 11. Internet Era Creates New IT Infrastructure <ul><ul><li>End to end integration of transactions </li></ul></ul><ul><ul><li>Existing applications and data leveraged </li></ul></ul><ul><ul><li>Applications acting as processes </li></ul></ul><ul><ul><li>Workload optimized to any server </li></ul></ul><ul><ul><li>Massive amounts of information: stored and ‘flowing’ </li></ul></ul>
  12. 12. New Set of Software Challenges: Expanding the Software Stack
  13. 13. 2004: Start of Era of Optimism <ul><li>Most CIOs are budgeting for new projects </li></ul><ul><ul><li>Cost Reduction and Integration (2001-2003) </li></ul></ul><ul><ul><li>Integration and New Project Expansion (2004 - ) </li></ul></ul><ul><ul><ul><li>Will lead new phase of venture capital investing </li></ul></ul></ul><ul><li>Demand improving: </li></ul><ul><ul><li>Enterprise </li></ul></ul><ul><ul><li>Consumer </li></ul></ul><ul><ul><li>Small and medium business </li></ul></ul><ul><li>Early Stage Venture Capital at stable bottom </li></ul><ul><ul><li>Best time to start a company </li></ul></ul><ul><ul><li>Best time to invest, especially at seed </li></ul></ul><ul><ul><li>Best time to be an optimist </li></ul></ul>
  14. 14. Fewer Investors, Better Companies? <ul><li>Corporate/Strategic investors have abandoned the sector </li></ul><ul><ul><li>$211M in 2003 versus $6B in 2000 </li></ul></ul><ul><li>Individual investors have abandoned the sector </li></ul><ul><ul><li>$84M in 2003 versus $2.4B in 2000 </li></ul></ul><ul><li>VCs syndicating most deals </li></ul><ul><ul><li>Multiple VCs in most rounds </li></ul></ul>
  15. 15. Recent Hummer Winblad Investments Focused on Enterprise Infrastructure <ul><li>Security, Reliability </li></ul><ul><ul><li>Voltage </li></ul></ul><ul><ul><li>Cenzic </li></ul></ul><ul><li>Data and Disaster Recovery </li></ul><ul><ul><li>Abhai </li></ul></ul><ul><li>Management </li></ul><ul><ul><li>Scalent </li></ul></ul><ul><ul><li>Jareva (early); (acquired by Veritas) </li></ul></ul><ul><li>Application Integration </li></ul><ul><ul><li>Knowmadic </li></ul></ul><ul><li>Provisioning and Identity Management </li></ul><ul><ul><li>Bridgestream </li></ul></ul>
  16. 16. Recent Mobius Venture Capital Investments <ul><li>Planitax: enterprise tax software </li></ul><ul><li>MessageCast: Broadcast IM management </li></ul><ul><li>CastBridge: user-driven data sharing </li></ul><ul><li>Auctiondrop: “you drop it off, we sell it on eBay” </li></ul><ul><li>Perpetual Entertainment: MMOG </li></ul><ul><li>Reactrix: visual display meets motion sensor </li></ul>
  17. 17. Closing Advice <ul><li>The opportunity window is open now in software </li></ul><ul><li>Make lots of friends with engineers </li></ul><ul><li>Meet customers early </li></ul><ul><ul><li>Customers know what they want and are smart technologists </li></ul></ul><ul><li>Focus, Focus, Focus </li></ul><ul><ul><li>Otherwise tough to be “Best” at anything </li></ul></ul><ul><li>The intellectual capital in your company and coaching your company is more important than money </li></ul><ul><ul><li>Most companies die of self inflicted wounds </li></ul></ul>
  18. 18. Q&A Heidi Roizen [email_address] Ann Winblad [email_address]

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