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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”
slide26
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

slide27
“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
sustaining vs disruptive technologies
Sustaining vs. Disruptive Technologies
  • 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

B

A

Sustaining vs. Disruptive Technologies

Cost

Sustaining Technology

  • Improves performance along an existing utility curve

Performance

sustaining vs disruptive technologies2
B

Disruptive Technology

A

Sustaining vs. Disruptive Technologies

Cost

Disruptive Technology

  • Moves the market to new utility curve

Performance

market characteristics
Market Characteristics
  • Worth Winning
    • $250 million
  • Sustainable Drivers
    • Y2k
  • Well Defined
    • Subsegment
return expectations
Return Expectations

5-10x your investment

or

30%+ IRR

sherpa pocket guide to success
Sherpa Pocket Guide to Success

Quick Go vs. No Go Decision

(4x in 5 Years = 32% IRR)

slide40
“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

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