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Shaking the MoneyTree™. Q2 2006 Update August 2006. PricewaterhouseCoopers/ National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial. PwC. Today’s program. The MoneyTree Report – Q2 2006 Analysis presented by Jeff Barber, PricewaterhouseCoopers LLP

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  1. Shaking the MoneyTree™ Q2 2006 Update August 2006 PricewaterhouseCoopers/ National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial PwC

  2. Today’s program • The MoneyTree Report – Q2 2006 Analysis • presented by Jeff Barber, PricewaterhouseCoopers LLP • Venture Capital Panel • Will Dunbar, Core Capital • Michael Ramich, Frontier Capital • Question and Answer Session PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  3. Speaker Bios PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  4. Jeff Barber • Jeff Barber is the managing partner of the PricewaterhouseCoopers Raleigh office. He also serves as the partner-in-charge of the PwC Carolinas Technology Industry Group. In this capacity he leads a team of 30 professionals in providing services and support to over 75 technology-based companies. Jeff has over twenty years of experience serving technology companies, including extensive experience working with clients from the organizational stage through the initial public offering and subsequent expansion. • Jeff spent two years in the PwC National Office in New York City where he worked in the Firm’s Accounting and SEC Group. His responsibilities there included researching accounting issues, writing various PricewaterhouseCoopers publications and assisting the Firm’s national consulting partners in their consultation on client related matters. • Jeff is actively involved in the Triangle area business community. He is currently on the board of directors of the Council for Entrepreneurial Development (“CED”), where he is a past chairman of the board, and the North Carolina Technology Association (“NCTA”), where he has served as Treasurer. In January 2006, Jeff received the NCTA “Volunteer of the Year” award. In June 2000, Jeff received the CED “Outstanding Service” award. Jeff is also actively involved in various civic organizations. He currently serves on the board of directors of the North Carolina Museum of Art Foundation and the Juvenile Diabetes Research Foundation. In the past, he has served as a member of the UNC Accounting Advisory Board and a member of the NCSU College of Management Board of Advisors. In addition, Jeff has served as president of Artspace, Inc., chairman of the board of the Community Learning Centers, Inc., a member of the board of directors of the Greater Raleigh Chamber of Commerce and a member of the board of directors of the United Arts Council. Jeff is a graduate of the Leadership Raleigh and Leadership Lexington (KY) training programs. He holds a B.S. in Accounting from the University of Kentucky. PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  5. Will Dunbar • Prior to joining Core Capital, Mr. Dunbar was CEO and founder of Pebble Hill Capital, an investment company which provided early-stage financing to information technology and communications companies. Early stage investments included such companies as webMethods. Previously, Mr. Dunbar was a Portfolio Manager at Allied Capital, a publicly-traded firm providing venture capital and private equity, and President of Allied Capital Corporation II, a $100 million publicly-traded private equity fund. During that period, Allied II invested in or acquired forty-six privately-held small or mid-sized growth companies. Mr. Dunbar also served as Executive Vice President of Allied Capital Advisers, the management company for the Allied family of funds, and as Chief Investment Officer for Allied's private equity activities. He began his investment career at Venture America, a venture capital firm specializing in early-stage, high technology investments, and was involved in the early stage funding of Discovery Communications and Digene. Mr. Dunbar also held positions in LBO Lending at Chase Manhattan Bank and in technology operations at NationsBank. • Mr. Dunbar serves on the Board of Solstice Software, SwapDrive, Foresight, and Trinity Convergence. He is a member of Young Presidents Organization and serves on numerous non-profit boards, including Venture Philanthropy Partners and Boys & Girls Clubs of Greater Washington. He has also served on the Board of the Mid-Atlantic Venture Association and the National Association of Small Business Investment Companies (NASBIC). From November 1994 to November 1995 he served as Chairman of NASBIC. Mr. Dunbar has an MBA from Harvard University and a BA from Davidson College. He resides with his wife and three children in Alexandria, Virginia. PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  6. Michael Ramich • Michael is a Partner at Frontier Capital where he is responsible for developing, analyzing, executing and monitoring investment opportunities, and has been instrumental in crafting Frontier’s extensive sourcing and monitoring process. Prior to Frontier, Michael was with General Electric. Through roles in corporate mergers and acquisitions, internal consulting, and operating finance, Michael gained strategic and financial experience in a number of GE’s industrial and financial businesses. In addition, Michael’s initial exposure to growth capital investing came with JH Whitney in Stamford, CT. He currently serves on the Boards of Accipiter Solutions, Plan Express, and Quickparts.com. • Michael holds a Bachelor of Arts in Economics from Duke University and an MBA from Harvard Business School. PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  7. About The Report • PricewaterhouseCoopers and the National Venture Capital Association produce the MoneyTree Report™ based on data from Thomson Financial • ‘Core’ measure of equity investments in venture-backed companies in the United States • Companies have received at least one round of financing involving a professional VC firm or equivalent • Captures: tranches, not term sheets, foreign VCs, qualified private placement • Excludes: debt, bridge loans, recaps, roll-ups, IPOs, PIPEs, leasing, etc. • MoneyTree™ Report in its 12th year • Results online at www.pwcmoneytree.com, www.nvca.org, www.ventureeconomics.com PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  8. The National PictureHistorical Trends PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  9. MoneyTree Total Investments: Q1 1997 – Q2 2006 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  10. MoneyTree Total Investments: 1980 – YTD Q2 2006 Annual Venture Capital Investments 1980 to YTD Q2 2006 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  11. MoneyTree Total Investments: 1995 – YTD Q2 2006 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  12. Investments by Region: Q2 2006 ($ in millions) New England $708.1 100 Deals Upstate NY $12.1 7 Deals Northwest $367.9 51 Deals NY Metro $535.5 58 Deals Sacramento/N. CA $7.2 2 Deals North Central $73.7 13 Deals Philadelphia Metro $274.8 34 Deals Silicon Valley $2,253.2 291 Deals Midwest $ 197.5 32 Deals Colorado $84.4 19 Deals LA/Orange County $452.8 52 Deals DC/Metroplex $454.7 54 Deals Southwest $78.5 14 Deals South Central $3.3 3 Deals San Diego $ 207.3 24 Deals Southeast $293.5 54 Deals Texas $335.5 45 Deals AK/HI/PR $1.7 2 Deals Q2 2006 Total Investments - $6,345 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  13. Investments by Region: Q2 2006 NM = Not Meaningful Q2 2006 Total: $ 6,345 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  14. Investments by Region – Quarterly Percent of Total U.S. Investments Top U.S. Regions – Q2’06 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  15. Q2 2006 Top 10 States Garnering Venture Funds • State DealsInvestment Amount • 1. California 369 $ 2,920,509,100 • 2. Massachusetts 89 $ 664,118,700 • 3. Texas 45 $ 335,538,100 • 4. Maryland 33 $ 334,020,000 • 5. Washington 41 $ 311,603,900 • 6. New Jersey 27 $ 249,286,200 • 7. Pennsylvania 31 $ 248,041,300 • 8. New York 37 $ 230,478,400 • 9. North Carolina 19 $ 150,492,300 • 10. Illinois 12 $ 126,872,100 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  16. Investments by Industry: Q2 2006 Q2 2006 Total: $6,345 NM = Not Meaningful Visit www.pwcmoneytree.com for Industry definitions PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  17. Investments by Industry – Quarterly Percent of Total U.S. Investments Top 5 Industries – Q2 ‘05 to Q2 ‘06 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  18. Life Science Investments – Percent of Total U.S. Investments Life Science Sectors – Q2 ’05 to Q2 ‘06 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  19. Investments by Stage of Development: Q2 2006 Q2 2006 Totals: $6,345 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  20. Stage of Development – Quarterly Percent of Total First Sequence Dollars Stage Development – Q2 2005 to Q2 2006 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  21. Stage of Development – Quarterly Percent of Total First Sequence Deals Stage Development – Q2 2005 to Q2 2006 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  22. Investments by Sequence of Financing: Q2 2006 Q2 2006 Totals: $6,345 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  23. First Sequence Financing – Investment Amount First Sequence Investments PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  24. First Sequence Financing – Number of Deals First Sequence Deals PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  25. First Sequence Financing –Percent of Total U.S. Investments PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  26. First Sequence Deals in Startup & Early Stage Companies PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  27. Median Deal Size vs. Mean Deal Size –Quarterly Total U.S. Investments PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  28. Post-Money Valuations – Early Stage Companies 1995 to Q1 2006 12 Month Average PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  29. Post-Money Valuations – Expansion Stage Companies 1995 to Q1 2006 12 Month Average PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  30. Post-Money Valuations – Later Stage Companies 1995 to Q1 2006 12 Month Average PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  31. Q2 2006 – Most Active Venture Investors PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  32. Thomson Venture Economics’U.S. Private Equity Performance Index (PEPI) (Investment Horizon Performance as of 3/31/2006) Source: Thomson Venture Economics/National Venture Capital Association *The Private Equity Performance Index (PEPI) is based on the latest quarterly statistics from Thomson Venture Economics’ Private Equity Performance Database analyzing the cashflows and returns for over 1814 US venture capital and private equity partnerships with a capitalization of $657 billion. Sources are financial documents and schedules from Limited Partners investors and General Partners. All returns are calculated by Thomson Venture Economics from the underlying financial cashflows. Returns are net to investors after management fees and carried interest. PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  33. Analysis of Venture-Backed IPO and M&A Activity **Includes all companies with at least one U.S. VC investor that trade on U.S. exchanges, regardless of domicile ***Only accounts for deals with disclosed values Source: Thomson Venture Economics/National Venture Capital Association PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  34. Venture Capital and LBO/Mezzanine Fundraising* *These figures take into account the subtractive effect of downsized funds ** This category includes LBO, Mezzanine, Turnaround and Recapitalization-focused funds ***Date current as of 7/17/06 Source: Thomson Venture Economics/National Venture Capital Association PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  35. North Carolina PictureHistorical Trends

  36. MoneyTree Total North Carolina Investments1995 – YTD 2006 ($ in millions) 37 61 77 78 99 153 93 84 72 54 55 38 # of Deals PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  37. MoneyTree Total North Carolina Investments1999 – Q2 2006 ($ in millions) 2002 2001 2006 2003 2004 2005 1999 2000 # of Deals 15 24 18 42 41 39 38 35 31 24 23 15 20 23 20 21 13 28 13 18 9 14 17 14 12 14 11 19 19 18 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  38. MoneyTree Total North Carolina Investments – 1999 – Q2 2006 ($ in millions) 99 153 93 84 72 55 38 54 # of Deals PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  39. MoneyTree Total North Carolina Deals– 1999 – Q2 2006 Amount Invested (in millions) $761 $1,830 $590 $553 $349 $323 $471 $268 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  40. Total North Carolina Investments by Industry – Q2 2006 % Change in $ Amount from Q2 2005 Total Deals Q2 2006 ($ in millions) 3 65.4% 1 201.4% 1 100.0$ 2 (39.0%) 1 100.0% 1 100.0% 1 433.3% 5 (44.4%) 1 104.0% 1 (83.3%) 1 (95.3%) 1 100.0% $.6 Q2 2006 Total: $150.5 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial 1 100% 2 (41.2%) Q3 2003 Total: $98.5 Industry Definitions @ www.pwcmoneytree.com

  41. Biotechnology Investments in NC vs. U.S. 1999 – Q2 2006 ($ in millions) 1.8% # of Deals 17 7 14 17 15 20 12 15 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial Amount Invested (in millions) $368 $44 $272 $822 $1,877 $367 $641 $622

  42. Software Investments in NC vs. U.S. 1999 – Q2 2006 ($ in millions) $16 0.6% # of Deals 8 9 24 27 25 38 21 18 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial Amount Invested (in millions) $368 $44 $272 $822 $1,877 $367 $641 $622

  43. Average Deal Size – NC vs. U.S.1999 – Q2 2006 ($ in millions) PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  44. North Carolina Companies Funded in Q2 2006 Company Name Company Name Industry Amount Alveolus, Inc. Medical Devices & Equipment $ 15,000,300 Batanga.com Media & Entertainment $ 5,000,000 Bloodhound, Inc. Software $ 1,000,000 Broadwick Corporation Software undisclosed CeNeRx BioPharma, Inc. Biotechnology $ 1,600,000 ChannelAdvisor Corporation Business Products & Services $ 2,999,900 Clinipace, Inc. Software $ 580,000 Hatteras Networks, Inc. Networking & Equipment $ 21,000,100 HyperBranch Medical Technology, Inc. Medical Devices & Equipment $ 500,000 Integrian, Inc. Telecommunications $ 5,120,000 Intervolve, Inc. Software $ 2,000,000 Liquidia Technologies Industrial/Energy $ 6,000,000 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  45. North Carolina Companies Funded in Q2 2006 Company Name Industry Amount (continued) Motricity, Inc. Telecommunications $ 37,000,000 Nextreme Thermal Solutions, Inc. Electronics/Instrumentation $ 8,075,000 Nitronex Corporation Semiconductors $ 22,000,000 Overture Networks, Inc. Telecommunications $ 7,500,000 Primo Water Corporation Consumer Products and Services $ 13,160,000 StrikeIron, Inc. IT Services $ 640,000 Visitar, Inc. Software $ 1,317,000 $ 150,492,300 PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  46. VC Funds Active in North Carolina • Academy Funds • A.M. Pappas & Associates LLP • BancAmerica Capital Investors • BB&T Capital Partners • CapitalSouth Partners LLC • Carolina Financial Group • Carousel Capital Partners • Centura SBIC Inc. • Charlotte Angel Partners • Core Capital • Fairview Capital LLC • First Union Ventures Group • Franklin Street Partners • Frontier Capital LLC • Gardiner Capital • Glenwood Venture Partners • Golden Pine Ventures • Grotech Capital Group • Halifax Group • Hatteras BioCapital • H.I.G. Ventures • Intersouth Partners Kodiak Venture Partners Lovett Miller & Company, Inc. Massey Burch NC IDEA New Enterprise Associates Noro-Moseley Partners Novak Biddle Venture Partners Remington Capital Partners Research Triangle Ventures River Cities Capital Funds SJF Ventures Southern Capitol Ventures Southeast Interactive Technology Funds The Atlantis Group The North Carolina Enterprise Fund The Aurora Funds The Trelys Funds TriState Investment Group Wachovia Capital Partners Wakefield Group Venture First Associates PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  47. Entrepreneurs and Venture Capital On-Line Resource List • www.pwc.com - The PricewaterhouseCoopers Global website. • www.pwcmoneytree.com, www.nvca.org, www.ventureeconomics.com - The PricewaterhouseCoopers/National Venture Capital Association MoneyTree TM Report based on data from Thomson Financial is a quarterly study of equity investments made by the venture capital community in private companies in the U.S. The survey identifies regional and national trends, entrepreneurial developments and promising industry segments. • www.pwcnextwave.com - PricewaterhouseCoopers’ thought leadership articles for the world of private equity. • www.cfodirect.com - CFOdirect Network – PricewaterhouseCoopers’ online accounting, finance and business resource for senior financial executives. • www.pwcV2R.com - The Vision to Reality Entrepreneur Resource Center site offers proven business plan templates, financial models, technology-specific ratios, benchmarks and more. • www.pwcvc.com - The VC BestPractices site serves to provide an aggregate, comparative view of key issues and activities impacting the venture capital community, and to identify best practices. • www.barometersurveys.com - PricewaterhouseCoopers’ Trendsetter and Technology Barometers site – result & analysis of the quarterly survey of fast-growth and large company CEO’s. • www.cednc.org - The Council for Entrepreneurial Development • www.nc-tech.org - North Carolina Technologies Association PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

  48. For more information, contact:Jeff BarberorPeter CoodeCarolinas Technology Industry GroupPhone 919 755-3000jeff.barber@us.pwc.competer.j.coode@us.pwc.com PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial

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