The document discusses the growth and potential of European venture capital, highlighting its competitive advantages such as lower entry valuations and improved capital efficiency compared to the US. It outlines the strong performance of European VC funds, an increase in high-value exits, and the maturing landscape of the entrepreneurial ecosystem. It concludes that despite market challenges, European venture capital is positioned for significant growth in the coming decade, supported by strong fundamentals in technology innovation.

1. European Venture Capital: “A Coming of Age”

2. A Compelling Case for European Venture Capital Innovation quality and world class technology Growing strength of the European entrepreneurial base Growing maturity of the VC funds landscape with top performers now matching US top quarter peers Lower entry valuations and superior capital efficiency Market inefficiencies provide opportunity to back successful teams and generate superior returns

3. European Venture Capital’s Market Drivers Core technology expertise Global consumer markets Large localised markets Eastern European development Regulatory environment for VC ecosystem moving in the right direction Innovation Drivers Financial Markets Entre- preneurial Spirit IPO market temporarily closed Global M&A and trade sales Limited VC competition High profile successes Entrepreneurial activity Virtual hubs Serial entre-preneurship

4. Europe benefits from a high quality deal flow due to its Innovative Potential… * These refer to triadic patent families, which are a set of patents registered in Europe, Japan, and the US to protect the same invention and are attributed to the country of residence of the inventor. They capture important inventions only and are internationally comparable Source: OECD Factbook 2008 Rank R&D as % GDP (2006 or latest available year) Rank Researchers (2006 or latest available year) (per 1,000 employed, full-time equivalent) Rank Patents* (2005) (per 1,000,000 inhabitants) 1 Israel 1 Finland 1 Japan 2 Sweden 2 Sweden 2 Switzerland 3 Finland 3 Japan 3 Germany 4 Japan 4 New Zealand 4 Netherlands 5 Korea 5 Denmark 5 Sweden 6 Switzerland 6 US 6 Korea 7 Iceland 7 Norway 7 US 8 US 8 Australia 8 Luxembourg 9 Germany 9 France 9 Finland 10 Austria 10 Belgium 10 Denmark Denmark, France, UK, Belgium, Luxembourg, Netherlands, Czech Republic in next 10 Luxembourg, Austria, Germany, Switzerland, Ireland, UK in next 10 France, Austria, Belgium, UK, Norway, Ireland in next 10

5. Europe has become a predominant technology innovator in a number of high growth industries Biopharmaceuticals, UK Medical devices and equipment, Germany Clean / renewable energy, Germany Wireless telecom technologies, Scandinavia Open source software, Scandinavia Semi conductors, UK & Germany

6. Europe’s* relative drought in Venture Capital financing drives a favourable competitive landscape for both GPs and LPs VC investment as % of GDP by geography, 2008 * Europe: All European countries/regions mentioned in the chart Source: PEREP_Analytics for European countries Dow Jones VentureSource for USA

7. A growing number of funds have learned from their mistakes and have the potential for outperformance Source: Dow Jones VentureSource VC teams’ maturity by number of funds raised W. Europe U.S. Ratio  2 73 334 4.6x  3 58 202 3.5x  4 28 132 4.7x  5 8 94 11.8x  6 4 65 16.3x Time since early growth of VC industry (years) 10 - 15 50 - 60 4 – 5x

8. US VC still has a dramatic lead over all the other global regions... Total Capital Invested Source: Dow Jones VentureSource US Venture Capital growth beats all other regions combined ~4.5 to 5.0x USA Europe

9. … Global exits tell a different story 46 home runs 82 home runs Total capital invested Total no. of exits No. of exits > $100m No. of home runs: 10x cap vs. invested Source: Dow Jones VentureSource Data 2004 - 2008 4.7x USA/Europe 1.4x 3.4x 1.8x 100%

10. Less capital used to build winners in Europe Average invested prior to $100m+ exit $ millions Exits in the same order of magnitude need a lower amount of Venture Capital in Europe Source: Dow Jones VentureSource

11. European capital efficiency results both from low entry valuations… ~1.5 to 2.5x Early stage entry valuations for Venture Capital investments € millions Source: Dow Jones VentureSource

12. … And lower cost of growing businesses / tight control of cash invested Median European investments € millions Source: Dow Jones VentureSource Median U.S. investments € millions

13. Leading to higher return potential in Europe Multiple of cap vs. invested ($100m+ exits) Less capital invested and lower entry valuations means higher returns in Europe Source: Dow Jones VentureSource

14. European VCs have recently demonstrated robust exit performance by international standards Median time to liquidity (2002 – H1’ 2008) US: Europe: Median time to exit Source: Dow Jones VentureSource Exits > $100m Exits > €100m

15. Successful European VCs have a growing base of Serial Entrepreneurs Companies with serial entrepreneurs as % of total European portfolio # surveyed firms: Source: Abingworth, Atlas Venture, Earlybird, HealthCap, Index Ventures, Sofinnova, TVM, Wellington Partners 8 (funds covered: 16) 100%

16. European VC companies grow faster than their US peers post IPO Europe vs US, post IPO performance of all VC backed IPOs*, 01/04 to 06/08 EU VC IPO US VC IPO FTSE 100 NASDAQ100 US and European VC-backed IPOs – post-IPO performance * NB excludes Google Source: CapitalIQ, DFJ Esprit

17. Europe originated a number of companies having reached > $1Bn value post exit Company Name Source: Dow Jones VentureSource Industry Country Round A Exit Year Software Sweden 2001 2008 Solar energy Germany 2004 2008 Internet UK 1999 2008/ 1999 Solar energy Norway 2001 2007 Internet UK 2001 2006 Clean tech Germany 2002 2006

18. Europe originated a number of companies having reached > $1Bn value post exit Company Name Source: Dow Jones VentureSource Industry Country Round A Exit Year Telecom Luxembourg 2003 2005 Internet France 1997 2005 Telecom France 2000 2005 Semi-conductor UK 1999 2004 Pharma Switzerland 2000 2004 Software UK 1998 2001

19. Despite very difficult market environment Europe continues to generate exciting exits Source: EVCA Company Name Industry Country Round A Exit Year Acquirer Exit Multiple Medical Device France 2003 2009 Medtronic >10x Software UK 1999 2008 Symantec 6x Biotech Germany 2000 2008 Bayer >5x Healthcare Germany 1998 2008 Lonza Group 13x Internet UK 2006 2008 AOL 5x Telecom Germany 2005 2008 KPN >5x Communi-cations Denmark 2006 2008 Vodafone 6x Chemicals Portugal 2002 2008 Devan Chemicals >5x

20. European VC-backed IPOs with an exit multiple ≥5x, 2005-2008 Source: EVCA Industry Country Round A Exit Year Stock Exchange Exit Multiple Solar energy Norway 2001 2007 Oslo >10x Internet Germany 1999 2007 Frankfurt 22x Financial Services Italy 2000 2007 Milan 22x Healthcare Germany 2004 2007 Frankfurt 9x Company Name

21. European VC-backed IPOs with an exit multiple ≥5x, 2005-2008 Source: EVCA Industry Country Round A Exit Year Stock Exchange Exit Multiple Clean energy Germany 2004 2006 Frankfurt 27x Internet Germany 1999 2006 Frankfurt 52x Software France 1995 2006 Euronext Paris 9x Biotech Austria 1998 2006 Vienna >5x Internet Germany 2004 2006 Frankfurt 6x Company Name

22. European VC-backed M&As with an exit multiple ≥5x, 2005-2008 Source: EVCA Company Name Novosis Industry Country Round A Exit Year Acquirer Exit Multiple Software Sweden 1997 2007 TIBCO 9x Software Sweden 2005 2007 CSR 7x Internet Sweden 2001 2007 Digital River 5x Healthcare Germany 2003 2007 Amgen 6x Technology Germany 1999 2007 Celesio >5x Pharma Germany 2001 2006/ 2008 Schweizerhall Holding 5x Information Technology Germany 2000 2006 Amadeus >5x Biotech Switzerland 2001 2005 Roche >7x

23. European VC-backed M&As >$100m with a multiple of cap vs invested ≥10x, Exit year 2006-2008 Company Name Source: Dow Jones VentureSource Industry Country Round A Exit Year Acquirer Software Sweden 2001 2008 Sun Microsystems Internet UK 2006 2008 AOL Software UK 1999 2008 Symantec Internet UK 2006 2007 CBS Internet Germany 2006 2007 Holtzbrinck Group

24. European VC-backed M&As >$100m with a multiple of cap vs. invested ≥10x, Exit year 2006 & 2007 Company Name Coding Technologies Source: Dow Jones VentureSource Industry Country Round A Exit Year Acquirer Software UK 1999 2006 Amdocs Information Services Germany 2000 2007 Deutsche Telekom Software Sweden 1998 2007 Dolby Laboratories Energy UK 2004 2007 Petroleum Geo-Services Software Norway 2002 2007 Bacou-Dalloz Communi-cations UK 1999 2006 Pearson

25. European VC-backed IPOs with a multiple of cap vs. invested ≥10x, Exit year 2006 & 2007 Source: Dow Jones VentureSource Company Name Vivalis Industry Country Round A Exit Year Stock Exchange Industrial Biotech France 1999 2007 Euronext Paris Healthcare Finland 2002 2007 Helsinki Energy Norway 2005 2007 Oslo Biotech France 2002 2007 Euronext Paris Nano tech Germany 2002 2006 Frankfurt Information technology Germany 2001 2006 Frankfurt

26. European VC-backed IPOs with a multiple of cap vs. invested ≥10x, Exit year 2006 & 2007 Source: Dow Jones VentureSource Company Name Industry Country Round A Exit Year Stock Exchange Clean tech Germany 2001 2006 Frankfurt Telecom France 2004 2006 Euronext Paris Software & Hardware Belgium 1995 2006 Euronext Brussels Trans-portation Spain 2004 2006 Madrid Information Services France 2000 2006 Euronext Paris Internet Germany 2000 2006 Frankfurt

27. The next decade will be strong for Venture Capital in Europe Confirming its high potential, Europe has demonstrated strong exit performance Europe has recently generated multiple “home run” exits Europe benefits from a higher capital efficiency than the US European Venture Capital has very strong fundamentals within the context of an inefficient market Europe ranks high on a number of key technology creation indicators The imbalance between VC funding (Supply) and investment opportunities (Demand) drives a favourable competitive landscape The structure and performance of the European Venture Capital highlights the great potential of an early maturing industry A number of funds based in Europe have achieved US top quartile performance A growing number of funds have learned from their mistakes and have the potential for outperformance

28. Acknowledgements EVCA would like to thank warmly to all the contributors to this document, with a special thought for Hendrik Brandis, Earlybird Simon Cook, DFJ Esprit James McNaught-Davis, Wheb Ventures Vincenzo Narciso, UBP