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Nanotechnology: A Look Into the Invisible Future. Prepared for Technology Awareness Forum January 19, 2005. Agenda. Venture Capital Industry Funding Environment for Nanotech Is the VC Industry Interested in Nanotech Venture Firms Investing in the Category What Venture Capitalists Look for

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Prepared for technology awareness forum january 19 2005

Nanotechnology: A Look Into the Invisible Future

Prepared for

Technology Awareness Forum

January 19, 2005


Agenda
Agenda

  • Venture Capital Industry

  • Funding Environment for Nanotech

    • Is the VC Industry Interested in Nanotech

    • Venture Firms Investing in the Category

  • What Venture Capitalists Look for

  • Capturing the Attention of Venture Investors

  • Summary



Venture capital investments in 000s
Venture Capital Investments($ in 000s)

~

~

$50,000

$45,000

$54.5 B

Est. $20.0 B

$40,000

$105.9 B

$35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$0

2002

2003

2004

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1980

1981

1982

1983

1984

1999

2000

2001

Source: Thomson Venture Economics


Uninvested venture capital overhang still significant
Uninvested Venture Capital“Overhang” still Significant

$53.4 Billion

Source: SVB Estimates & Venture Economics


Overhang analysis available cash investment rate
Overhang AnalysisAvailable Cash/Investment Rate

Current Overhang / Expected Investment








Good news

Good News

$200 Million Annually


Not so good news

Not So Good News

Only 1% of Venture Investments


Federal funding nano r d

Federal Funding Nano R&D

$116M in 1997

to

$961M in 2004

An 8x Increase….


Leading nanotech investors

Draper Fisher (10 deals)

Harris & Harris group (9)

Ardesta/MEMS Tech (4)

NGEN Partners (NextGen Partners) (4)

Sevin Rosen (4)

Zero Stage (4)

Alloy Ventures (3)

Arch Venture Partners (3)

CB Health Ventures (3)

Eastman Ventures (3)

Morgenthaler (3)

New Enterprise Associates (3)

SBV Venture Partners (Sigefi, Burnette & Vallee) (3)

Leading Nanotech Investors




Which way is the wind blowing
Which Way is the Wind Blowing?

  • Bulk of the Investments

    • Tools

  • Distant Second

    • Optics

  • Close Third

    • Bio/Pharma; Materials; and, Solar/Power





New user experience top 10 wired 40

Google

Amazon.com

Apple Computer

Genentech

eBay

Samsung Electronics

Yahoo!

Electronic Arts

Pixar

Cisco Systems

New User ExperienceTop 10 Wired 40


Mini due diligence process is it venture capable

Management

Relevant domain expertise

Fundable

Product/Service

Explicit customer need

Clear and compelling value proposition (ROI)

Market

Size (> $100M) and sustainable business drivers

Target segment well defined

Validation

Customers, customers, customers

Maturity of the distribution plan

Deal

Reasonable valuation and terms

Raising enough money to hit meaningful milestones

Mini Due Diligence ProcessIs it “Venture Capable”



Investing In Talent

Factors considered most important by investment professionals

(Weighted importance out of 100*)

Management Team

37

24

Market Sector

Business Model

20

Proprietary Product/Service

19

Source: Spencer Stuart/NVCA VC-backed Leadership survey


“As a founder, think hardest about the team. Are these the people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”John Doerr, Kleiner Perkins Caufield & Byers


Product service

Product/Service people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”


Sustaining vs disruptive technologies
Sustaining vs. Disruptive Technologies people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”

  • Sustaining Technology

    • Foster improved product performance

  • Disruptive Technology

    • Bring to the market a very different value proposition

The Innovator’s Dilemma – Clayton Christensen


Sustaining vs disruptive technologies1

Sustaining Technology people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”

B

A

Sustaining vs. Disruptive Technologies

Cost

Sustaining Technology

  • Improves performance along an existing utility curve

Performance


Sustaining vs disruptive technologies2

B people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”

Disruptive Technology

A

Sustaining vs. Disruptive Technologies

Cost

Disruptive Technology

  • Moves the market to new utility curve

Performance


Market

Market people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”


Market characteristics
Market Characteristics people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”

  • Worth Winning

    • $250 million

  • Sustainable Drivers

    • Y2k

  • Well Defined

    • Subsegment


Validation

Validation people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”


Seeing the future beta users customers and distribution
Seeing the Future people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”Beta Users, Customers and Distribution


Deal people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”


Return expectations
Return Expectations people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”

5-10x your investment

or

30%+ IRR


Sherpa pocket guide to success
Sherpa Pocket Guide to Success people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”

Quick Go vs. No Go Decision

(4x in 5 Years = 32% IRR)


Summary

Summary people I want to be in trouble with for the next 5, 10, 15 years of my life? Because as you build a new business, one thing’s for sure: you will get into trouble.”


“It is not the strongest of the species that survives, nor the most intelligent; it is the one that is most adaptable to change.”

Charles Darwin, British Naturalist


Sherpa partners llc 5050 lincoln drive suite 490 minneapolis mn 55436

Sherpa Partners, LLC the most intelligent; it is the one that is most adaptable to change.”5050 Lincoln Drive - Suite 490Minneapolis, MN 55436

Rick Brimacombwww.sherpapartners.comDirect: 952-942-1074Main: 952.942.1070


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