The document discusses the state of venture capital funding and innovation in late 2008. It notes that fundraising and exits were down significantly in the third quarter compared to previous years. While some startups were struggling due to the poor economy and tight funding environment, the document argues that society still benefits from innovation even if most startups fail or do not provide high returns. It concludes by providing some tips for venture capitalists to continue supporting entrepreneurs and their portfolio companies despite challenges, such as investing in unusual ideas and believing in what seems impossible.

1. The Reset Button The State of Funding Innovation in Q4, 2008

2. Let’s look on the bright side…

3. Now, for the bad news… IT’S NYSE HERE! worrying about mortgage payments vactioning in war torn public markets spending their last dollar to hit a home run

4. The model’s not working… Fundraising Exits SOURCE: NVCA / Thompson Reuters Exit Poll SOURCE: NVCA / Thompson Reuters VC Fundraising Q3 more money is invested than value is created

5. So, let’s export it to China… Israel Canada China Europe India SOURCE: EE Times Asia Survey 12/07

6. Still, nobody’s making real money… EXIT VALUES < $50 MM $5 > $500 MM FAILURE ACCEPTABLE SUCCESS 1 / 100 1 / 1,000 1 / 10,000 MANAGEMENT Bonus ~10% Value ~15% Value INVESTORS 1x w/ lost time 3-10x >10x EMPLOYEES Nothing Bonuses Millionaires SUPPORT Lawyers $$$ Lawyers + Bankers Everyone < $50 MM $50-500 MM > $500 MM

7. But, society is reaping rewards…

8. The point is…

9. It’s all about building companies… The Present Way The Right Way Goal Sell for $1 Billion Build a Great Company Selection Crazy Projections Crazy Ideas Valuation Arbitrary Ownership % Needs and Progress Assistance Fundraising Business Development

12. So, in conclusion… IT’S NYSE HERE!