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ACG – NYThe Future of Digital Media<br />Jeff Bussgang<br />General Partner<br />Flybridge Capital Partners<br />March 30, 2011<br />

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Summary View<br />We are in the middle of an unprecedented boom in technology and innovation <br />A true “Golden Age” for innovation<br />Growth opportunity ahead of us is more rapid and global than ever before<br />US is well positioned for the future<br />During an innovation age, we have an innovation economy that is the envy of the world<br />

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Context for My Perspective<br />General Partner at Flybridge Capital Partners, early-stage VC firm based in Boston, $560M under management<br /><ul><li>40+ active portfolio companies, investing out of Fund 3 ($280M)</li></ul>Entrepreneur-in-Residence at Harvard Business School<br />Former entrepreneur<br /><ul><li>Cofounder/President Upromise (acq’d by SallieMae)

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VP at Open Market (IPO ‘96)</li></ul>Author: Mastering the VC Game<br />

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Today Are Glory Days for Technology<br />We have made unprecedented advances in technology over the last 10 years…<br />…and we ain’t seen nothing yet!<br /><ul><li>Social media and networking

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The “i” generation, training “Net Natives – iPod, iPhone, iPad

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‘Cloud computing’

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Broadband penetration

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Nanotechnology

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Synthetic Biology

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Completion of the Human Genome Mapping project

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Green consumer

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Renewable energy</li></ul>An explosion in computing power, connectivity and entrepreneurship with an outlook for accelerated growth over the next 10 years<br />

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Why Is This Happening Now?<br />Ingredients for a Vibrant<br />Start-Up Ecosystem<br /><ul><li>Intellectual Capital – academia, innovation, diverse industries and ideas

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Venture Capital

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Advisors, Angels, Accelerators

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Successful Companies – to partner, poach and/or sell to</li></li></ul><li>Example: MIT – Factory of Innovation<br />33,600 companies (300 each year) employ 3.3 million people, generate sales of $2 trillion. 282 patents in 2008 <br />

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Venture Capital: Regional Comparison<br />Total VC Investment 2010<br />Boston: $2.4B<br />New York: $1.3B<br />California: $11.1B<br />Source: NVCA 2011 Yearbook<br />

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Why Now? Contextual Forces<br />Lean Start-Ups<br />Cloud Computing<br />Moore’s Law<br />Reduced Cost To Experiment<br />Opportunity for Angels & VCs<br />

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Technology startup incubator programs are multiplying<br />

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

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Large tech company market caps have grown 63% in last 2 years<br />Market Cap ($B)<br />Dow<br />$1.4 T<br />Dow grew 11%<br />63%<br />$ 0.85 T<br />

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Mid-size tech company market caps have grown 117% in last 2 years<br />Market Cap ($B)<br />Dow<br />$268 B<br />Dow grew 11%<br />117%<br />$ 123 B<br />

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Tech company balance sheets are strong with tons of cash<br />Source: Bloomberg BusinessWeek. images.businessweek.com/mz/.../0503_tech_cash_pile.pdf?...technology<br />

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Next Wave of Valuable Internet Properties Emerging<br />

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Bubble-Driven orFundamentals-Driven?<br />$8-10B valuation<br />IPO Filed<br />$10B valuation<br />IPO Filed<br />$65B valuation<br />$15-25B valuation<br />

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Still huge opportunities for innovation and growthInternet & Mobile consume many eyeballs, little advertising $’s<br />Source: Morgan Stanley<br />

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Mobile internet technology<br />Source: Morgan Stanley <br />

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The “i” generation has arrived<br />Source: Top Mobile Internet Trends, Matt Murphy/Mary Meeker – 2/10/11; Apple<br />

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Ridiculous growth in data traffic….<br />Source: Morgan Stanley <br />

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

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

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All The New Jobs Are Created By Startups<br />Excluding jobs from new firms, US net employment growth rate is negative<br />Without startups, net job creation for the American economy would be negative in all but a handful of years<br />

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Conclusion<br />Unique and special time for entrepreneurship<br />Unique and special time for technology and innovation<br />Digital Media is being transformed by a host of global contextual forces<br />For the foreseeable future, US has huge edge in generating these innovations, which will be the engine that will drive our economy<br />