The imbalance between supply and demand for venture financing in Europe has created a favorable investment environment. However, visibility on the current opportunity is still limited due to poor quality statistics from the venture capital industry. The document suggests that the real performance of European venture capital is already on the rise based on independent data showing rising deal performance and Europe's disproportionate share of successful exits in recent years.

1. EUROPEAN VENTURE CAPITAL
INDUSTRY PERFORMANCE
Earlybird
December 2010
EARLYBIRD I 1 I CONFIDENTIAL

2. SUMMARY
Imbalance of supply and demand for venture financing
has created a very favourable investment environment
Visibility on the current opportunity is still limited
and prejudiced by poor quality of published industry
fund statistics
Real performance of European VC already on a rise
EARLYBIRD I 2 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

3. SUMMARY
Imbalance of supply and demand for venture financing
has created a very favourable investment environment
Visibility on the current opportunity is still limited
and prejudiced by poor quality of published industry
fund statistics
Real performance of European VC already on a rise
EARLYBIRD I 3 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

4. EUROPE HAS A VERY COMPETITIVE POSITION IN TECHNOLOGIES
Share of Regions in Triadic Patent Families
In Percent
Other
12.2 USA
30.5
Europe 28.2
29
Japan
Source: OECD Patent Database, June 2008
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5. IN FACT, EUROPE IS THE HOME OF 6 OF TOP 10 MOST INNOVATIVE COUNTRIES
Global Innovation Index (GII)
Innovation Inputs Innovation Outputs Global Innovation Index:
Institutions & policies, Human capacity, Knowledge, Competitiveness, Overall Rankings
Infrastructure, Market sophistication, Wealth
Business sophistication
Denmark 5.73 US 4.84 US 5.28
US 5.72 Germany 4.54 Germany 4.99
Sweden 5.64 Japan 4.12 Sweden 4.84
UK 5.60 Sweden 4.05 UK 4.82
Singapore 5.60 UK 4.04 Singapore 4.81
Switzerland 5.59 Singpore 4.02 Korea, South 4.73
Canada 5.48 Korea, South 4.01 Switzerland 4.73
Korea, South 5.45 Netherlands 3.96 Denmark 4.69
Hong Kong 5.45 Luxembourg 3.89 Japan 4.65
Germany 5.45 Norway 3.89 Netherlands 4.64
OECD-EU 5.00 OECD-EU 3.67 OECD-EU 4.34
World 3.66 World 2.65 World 3.14
Source: INSEAD, The Global Innovations, Rankings and Report 2008-2009
EARLYBIRD I 5 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

6. SHARP CONSOLIDATION OF THE VC-INDUSTRY IN EUROPE AND EVEN MORE SO IN
GERMANY DURING THE LAST DECADE...
Number of Active* VC Funds – 2009 vs. 1999
USA -15% Only 5
200 independent
funds with critical
size > € 100M
(for comparison:
In the US >300
funds!)
Europe -57% -85%
Germany -85% 30
1999 2009
* All VC funds, doing ≥ 4 investments per year
Sub-set of so-called "Investment Grade Funds": US$ 100M; > 50% non-captive capital; raised successor fund with vintage year ≥ 2006
Remark: In the US market publication requirements of endowments force essentially all GPs to publish financial performance
Source: NVCA; EVCA; Earlybird Estimates
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7. … WHILE THE ENTREPRENEUR POOL HAS GROWN…
Latent Entrepreneurs in Population between 18 and 64*
Europe USA
10.0%
7.4%
7.0%
5.2%
2006 2009 2006 2009
* Not yet involved in entrepreneurial activities, definitions slightly changed from 2006 to 2009
Source: Global Entrepreneurship Report 2006/2009
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8. … WITH MORE EXPERIENCED MANAGEMENT TEAMS
Earlybird Funds – No. of Portfolio Companies w/ Repeat Entrepreneurs EXAMPLE
100% w/o repeat entrepreneurs
w/ repeat entrepreneurs
53%
93% 92%
47%
7% 8%
1998 2000 2007
Fund Fund Fund
Source: Earlybird Analysis
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9. HOWEVER, THE COMPETITIVE POOL OF INNOVATION MEETS VERY LOW LEVEL OF
VENTURE CAPITAL INVESTMENTS IN EUROPE
Early Stage Investments in Proportion to GDP (2008)
Percent
US 0.123
Sweden 0.059
Netherlands 0.043
Finland 0.042
Norway 0.038
UK 0.033
Portugal 0.031 ~ 6x
Denmark 0.030
Switzerland 0.027
Romania 0.024
France 0.023
Ireland 0.021
Europe 0.021
Belgium 0.019
Germany 0.018
Spain 0.011
Austria 0.011
Greece 0.006
Poland 0.005
Hungary 0.002
Italy 0.002
Czech Republic 0.000
Source: EU: EVCA Yearbook '09, Eurostat, USA: NVCA Yearbook '09, IMF
EARLYBIRD I 9 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

10. IN SUMMARY: COMPARABLE TECHNOLOGY AND MANAGEMENT POOL SERVED WITH ONLY
A FRACTION OF VENTURE CAPITAL IN EUROPE
Availability of Ingredients for Innovation-Based Entrepreneurship – USA vs. Europe USA
Europe
100%
15,942
Innovation*
14,795 X1.1
7.0 X0.9
Management**
7.4
0.123
Capital***
0.021 X5.9
* Exemplified by number of Triadic patent families 2006, OECO Fact book 2009
** Entrepreneurial intentions, no. of people (aged 18-64) not yet involved in entrepreneurial activity per 100 individuals, 2009
*** Invested early-stage venture capital as percentage of GDP, DE in comparison to the US, 2008
Source: NVCA, EVCA, OECD, World Bank, Eurostat Global Entrepreneurship Monitor Report 2006
EARLYBIRD I 10 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

11. ONLY A FRACTION OF STARTUPS RECEIVE FUNDING IN EUROPE
Number of Midstage (>$ 5M) VC Deals – USA and Europe USA
Europe
1,598
1,430 1,464
1,328 1,345
1,169 1,146
1,092
304 261
232 244 245 221
192 191
2003 2004 2005 2006 2007 2008 2009 2010
Source: EVCA, Venturesource
EARLYBIRD I 11 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

12. MANY TECHNOLOGIES AND PATENTS REMAIN UNUSED FOR STARTUPS
Share of Patents Used to Start a New Company
In Percent
7.8%
5.1%
3.8%
2.7%
USA EU Japan Germany
Source: PatVal-EU servey 2007
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13. THIS MARKET IMBALANCE LEADS TO SIGNIFICANT EUROPEAN ADVANTAGES IN ENTRY
VALUATIONS, CAPITAL EFFICIENCY AND HIT RATE
Benchmarking of VC Performance Drivers, Europe vs. USA, 2004-2010 ytd
USA
Europe
USA = 100%
Significantly Lower Average Entry
Entry Valuations Valuation* $ 5.5M $ 16.1M
and
Average
Lower
Capital Invested $ 44M $ 79M
Capital Intensity
Prior to Exit
but only
Slightly Lower Average Exit $ 304M $ 388M
Exit Valuations Valuation
* Average median pre-money valuations of the years 2004-2010 ytd
Source: EVCA, Earlybird analysis
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14. SUMMARY
Imbalance of supply and demand for venture financing
has created a very favourable investment environment
Visibility on the current opportunity is still limited
and prejudiced by poor quality of published industry
fund statistics
Real performance of European VC already on a rise
EARLYBIRD I 14 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

15. PUBLISHED INDUSTRY DATA FOR EUROPEAN VC MISLEADING
 Reported performance of post-bubble vintages still open
− High share of still private portfolio companies
− Especially well performing companies remain in the VC portfolio during
challenging capital markets at rather low book values
 Published industry data not credible
− Sample for official industry stats way too small: industry performance data
based on just roughly 15% of all funds
− European performance not comparable and with negative bias because of
overweighing small funds as well as funds without going concern
Source: Earlybird
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16. THEREFORE: PERFORMANCE OF THE POST BUBBLE VINTAGES NOT YET VISIBLE
Assembly of NAV, European Venture Funds by Vintage
Percent
100%
Unrealized 7
22
It takes 6-7 years
36
to display the performance
50 52 of a venture fund
65
75*
84
96 100 100 100 100
Realized 93
78
64
50 48
35
25
16
4
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
* Est., data not available
Source: Cambridge Associates: Global VC & PE Index and Benchmark Statistics 2009
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17. ESPECIALLY SMALL FUNDS UNDERPERFORM THE INDUSTRY
Fund Size
$ millions
18%
16%
14%  Concave relationship between
IRR and fund size
12%
 Fund size is measured as
10% capital committed at closing
 Regression results control for
8% vintage year, fund category
6%
4%
2%
0%
10 20 50 100 200 500 1,000 2,000 5,000
Source: Lerner, Leamon and Hardymon [2011]
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18. EUROPEAN INDUSTRY STATISTICS REVEAL A SMALL-FUND-BIAS AS OPPOSED
TO THE US
Thomson Reuter (and EVCA) Data Base, Structure of Contained VC-Funds 1996 - 2008 Investment
Percent grade sizes
Europe: 100% = 589 Funds USA: 100% = 605 Funds
US$ 1,000m+ 0.3 4.2
US$ 500m - 1,000m 1.5 22.6% or 12.4 73.4% or
137 funds 432 funds
over 13 over 13
US$ 250m - 500m 5.6 vintages 25.1 vintages
US$ 100m - 250m 15.2 31.6
US$ 50m - 100m 19.3 11.9
US$ 25m - 50m 21.5 7.5
US$ 0m - 25m 36.5 7.3
Source: Thomson Reuter, Earlybird Analysis
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19. OFFICIAL STATISTICS FOR EUROPEAN VC NOT REPRESENTATIVE
Post-bubble industry consolidation of European VC industry
~ 1,600  65% of EVCA listed funds have disappeared since the burst of
the bubble
 Only 30% of the remaining funds considered active by EVCA*
 Only moderate industry consolidation in the US during the same
-57% time frame
Negative bias of 'industry-leading' Thomson Venture database
711  Most likely, large part of the contained fund managers are not
going concern, i.e. have not raised funds since 2005
 Many of the top-performing funds are not publishing their financial
data in Thomson database (e.g. Accel; Draper; Balderton;
Healthcap; Index)
 As a result, Thomson Venture database largely refers to non-
contributing long tail of European VCs
1999 2009
* Doing ≥ 4 investments per year
Remark: in the US market publication requirements of endowments force essentially all GPs to publish financial performance
Source: EVCA, Earlybird Analysis
EARLYBIRD I 19 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

20. SUMMARY
Imbalance of supply and demand for venture financing
has created a very favourable investment environment
Visibility on the current opportunity is still limited
and prejudiced by poor quality of published industry
fund statistics
Real performance of European VC already on a rise
EARLYBIRD I 20 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

21. INDEPENDENT DATA BASES PROVIDE EVIDENCE FOR RISING PERFORMANCE OF EUROPEAN
VENTURE ON INDIVIDUAL DEAL LEVEL…
CEPRES, Investments Made 2002 - 2009, Mean USA Europe
3.14x
17.1%
Other data bases pointing in
the same direction are
 Dow Jones VentureSource
 Adams Street Partners
7.5% 1.32x 1.35x
0.43x
IRR TVPI DPI
Source: CEPRES
EARLYBIRD I 21 I CONFIDENTIAL HB_Techcrunch_EU VC Perf_Dec 2010

22. OUTPERFORMANCE BASED ON OVERPROPORTIONAL SHARE IN SUCCESSFUL EXITS
IN RECENT YEARS
Overview US- vs. European Share in VC Value Contribution, 2004 - 2008
Percent
100%
Europe 18 22
36
41
USA 82 78
64
59
Total capital No. of exits No. of Home Runs: Total no.
invested > US$ 100m 10x cap vs. Invested of exits
Source: Dow Jones VentureSource
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