Ohio's Venture Community: On the Path of Growth and Recovery

1. Ohio Venture Association The Quiet Recovery – the Regional Core Competencies of Our Expanding Venture Community September 12, 2008 Mark G. Heesen President

2. Venture Capital – Barely a macroeconomics rounding error in the world of US finance….

3. US Venture Capital Investment in Perspective • US GDP $12.5 trillion annually • Hedge fund intake $1.5 trillion over last 3 years estimated • Buyout equity intake $168 billion in 2007 • Mutual fund intake $92 billion in 2007 • Venture capital intake $37 billion in 2007 • Venture capital fundraising & investment Is 0.3% of total GDP Source: BLS website, Investment Company Institute, Thomson Reuters, NVCA

4. In 2006, venture backed companies: Provided 10.4 million US jobs Had sales of $2.3 trillion Represents 17.6% of GDP Still dominated venture-created sectors 56% of biotech revenue 78% of computer and peripherals revenue 94% of computer and peripherals jobs 88% of software sector jobs Outgrew the economy 2003-2006 in every sector Global Insight Study Source: Venture Impact 2006 by Global Insight

5. For VC every dollar invested in 1970-2001, there was $7.90 in US revenue during 2006 For every $28,463 of venture capital invested in 1970-2001, there was one job in the year 2006 Note these ratios are based on investment through 2001 ($296B) because investment after that time has likely had little effect on 2006 jobs and revenues. If investment through 2006 ($421B) is used, the ratios would be $5.55 and $40,364 respectively Venture Capital Investment is Productive ... Source: Venture Impact 2006 by Global Insight

6. Fundraising & Resources

7. The Number of US VC Firms Has Peaked .. Thankfully Source: 2008 NVCA Yearbook, prepared by Thomson Reuters, figure 1.04

8. VC Fundraising Was Strong Thru 2000 - Recent Increase Way Below Bubble Levels Does not include Corporate Venture groups. Source: Thomson Reuters/NVCA

9. Investment Marches On -Rumors that the Venture Industry has stopped investing are greatly exaggerated

10. VC Investment Peaked in 2000; Recently 20-23% of Peak; Recent Steady Increases Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

11. Most Recent Quarters Have Been Consistent – What is the “Right” Level?Some Recent Growth Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

12. In 1H 2008, Life Sciences drew 28% of Funding but Medical Devices comprises an ever-growing proportion Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

13. Clean Technology grows significantly:In First Half 2008, $1.8B in 125 Deals Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

14. Average Clean Tech Deal Size is Increasing Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

15. Number of First Time Fundings (New Projects) is At Post-Bubble High! Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

16. The Buckeye StateStats and Sectors …

17. Ohio Tracks Below National Trends(National: 1/3 of peak, now at 1998 levels) Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

18. Ohio Sector SplitsMedical Devices Lead the Way!(Most recent 8 quarters) Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

19. The Exit Scene - the importance of acquisitions has become clear over the past several years

20. IPO Levels Were Good in 2004 and Okay in 2007; Awful Now Source: Thomson Reuters/National Venture Capital Association

21. The Most IPOs Were in 1996 & 2000; Then 2004 & 2007 Showed Promise; 2008 is Awful Source: Thomson Reuters/National Venture Capital Association

22. 2007 Set A Median Valuation Record; The Handful of 2008 IPOs Show Some Strength Source: Thomson Reuters/National Venture Capital Association

23. IPOs YTD 2008: Bleak!!! • Only 5 IPOs in Q1 and 0 in Q2! • Last zero IPO quarter was in 1978 … 30 years ago! • IPO in context: • Approached 90/quarter in 1999 • 25/quarter is typical • 35/quarter suggested by historical levels • 1,000 new port cos/year x 14% historical IPO rate = 140/year Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

24. What’s in the IPO Pipeline?IPOs During Period and Registration Counts at Period End Source: Thomson Reuters/National Venture Capital Association

25. IPOs Don’t Happen Overnight – and Sometimes Don’t Seem to Happen Source: Thomson Reuters/National Venture Capital Association

26. VB Acquisition Counts had been Steady; Low in 2008 Source: Thomson Reuters/National Venture Capital Association

27. M&A Proceeds Vary Greatly As the Mix between “Good” Exits and Fire Sales Shift; Now low Source: Thomson Reuters/National Venture Capital Association

28. Venture Exit Counts- IPOs and M&A by Year - 2008 is Dismal! Source: Thomson Reuters/National Venture Capital Association

29. Public PolicyBig Wins and Bigger Challenges

30. No one has repealed the business cycle or the nature of failure …

31. Key US VC building blocks ... • Capital formation • Prudent man rule – enabled pension investment • LP laws • Capital gains tax reduction • Empowered entrepreneurs • Capital gains tax reductions • Stock options/team building tools • Reasonable bankruptcy laws • Protect companies – IP laws • Abundant customers willing to do business with SMEs • Exit markets – the NASDAQ • Face-to-face investing/proximity • Cultural acceptance

32. For First Fundings From 1991 to 2000, Approximately 33% Were Acquired and 14% Went Public[11,686 Companies Total] Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters

33. Mark G. Heesen President