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Venture World 2005. Michael Danaher Wilson Sonsini Goodrich & Rosati October 2005. Venture World – 2000. IT’S A MAD MAD MAD MAD WORLD. Venture World – 2002. WATERWORLD. Budget = $175,000,000 • Box Office = $88,246,220. Venture World – 2005.

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venture world 2005

Venture World 2005

Michael Danaher

Wilson Sonsini Goodrich & Rosati

October 2005

venture world 2000
Venture World – 2000

IT’S A MAD MAD MAD MAD WORLD

venture world 2002
Venture World – 2002

WATERWORLD

Budget = $175,000,000 • Box Office = $88,246,220

venture world 20051
Venture World – 2005

MASTER AND COMMANDER: THE FAR SIDE OF THE WORLD

slide5
The Nasdaq Force Field Continues
  • Valuation Trends
  • Deal Terms
  • Exit Strategies
  • Tilting Towards Asia
slide7

$82.8

$80

$58.8

$60

$50.5

$40

$26.9

$17.8

$17.1

$20

$13.1

$12.7

$9.2

$9.4

$7.0

$5.4

$0

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1H05

The Nasdaq Force Field Continues FUND INFLOWS

Funds Raised ($B)

$18.8*

Source: “Venture Capital Industry Overview,” VentureSource, October 2005

* Annual projection

Source: Bloomberg, Nasdaq 1994-2005

2005 fund formation
2005 Fund Formation
  • Roman Numeral Funds Dominate
    • Accidental result of year 2000 venture market
2005 fund formation1
2005 Fund Formation
  • Increased Focus on China and India
    • More geographic funds
    • More talk about Asian strategies
slide10

So Goes Nasdaq... FUND OUTFLOWS

Amount Invested ($B)

Number of Deals

1605

$21.6**

* YTD05 = 1Q05-3Q05 ** Annual projection

Source: “Venture Capital Industry Overview,” VentureSource, October 2005

Source: Bloomberg, Nasdaq 1992-2005

so goes nasdaq liquidity events
So Goes Nasdaq... LIQUIDITY EVENTS

284

Amont Paid ($B)

Number of Transactions

$30.0**

Source: “Venture Capital Industry Overview,” VentureOne, October 2005

* YTD05 = 1Q05-3Q05 ** Annual projection

Source: Bloomberg, Nasdaq 1992-2005

for venture funds it s still a hits business
For Venture Funds, It’s Still a “Hits” Business

THE BLAIR WITCH PROJECT

Budget = $60,000

Box Office = over $150 million

median pre money valuations by round
Median Pre-money Valuations by Round

$40

$29

$30

$25

$20

$14

$13

$10

$6

$5

$3

$3

$0

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

Later Stage

Second Round

First Round

Seed Round

Source: “Venture Capital Industry Overview,” VentureOne, October 2005

ws investments
WS Investments

Percentage of Series A Deals Increased—But Valuations Did Not

Source: WS Investment Data, October 2005

ws investments1
WS Investments

Source: WS Investment Data, October 2005

wsgr venture financing
WSGR Venture Financing

Up Rounds Are Up

Source: WSGR Transaction Data, October 2005

deal terms
Deal Terms

Plain Vanilla Is In

deal terms1
Deal Terms

Source: WSGR Transaction Data, October 2005

deal terms2
Deal Terms

(9% in 2004)

(13% in 2004)

Source: WSGR Transaction Data, October 2005

deal terms3
Deal Terms
  • New Trend?
    • Partial Founder cash-outs in later stage deals
ipos still down

YTD05*

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

0%

20%

40%

60%

80%

100%

IPOs

M&As

IPOs still Down

Source: “Venture Capital Industry Overview,” VentureOne, October 2005

* YTD05 = Q105 – Q305

who s killing the ipos
Who’s Killing the IPOs?
  • Multiple Theories
    • The SEC and the accountants?
    • Higher perceived liability risk?
    • Higher certainty of M&A exits?
    • Investor impatience?
    • Reduced market receptivity to young companies?
    • Reduced supply of candidates?
    • The butler?
reckless prediction 1
Reckless Prediction #1
  • IPO Rates to Double in 1-2 years
    • Capital markets will want high-growth companies
    • Lots of good companies being built
    • Regulatory and accounting costs will be reined in
reckless prediction 2
Reckless Prediction #2
  • The “Build to Sell” Business Model Will Become More Common
    • e.g.
      • Spin-in’s
      • “Bio wells”
is cisco marxist
Is Cisco Marxist?

Karl Marx

John Chambers

venture investment in asia
Venture Investment in Asia
  • Intel
    • 600 venture deals
    • 300 in China
  • WSGR
    • Approaching nearly 2 financings per week in China
    • Approaching nearly 1 financing per week in India
  • India
    • 5 years behind China
    • Venture financings: $884 million in 2003, $1.3 billion in 2004
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