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2004 New Era of Optimism in Software

2004 New Era of Optimism in Software. Heidi Roizen, Managing Director Mobius Venture Capital hroizen@mobiusvc.com Ann Winblad, Partner Hummer Winblad Venture Partners awinblad@humwin.com. Hummer Winblad Venture Partners. First Fund Exclusively for Software Investing

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2004 New Era of Optimism in Software

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  1. 2004New Era of Optimism in Software Heidi Roizen, Managing Director Mobius Venture Capital hroizen@mobiusvc.com Ann Winblad, Partner Hummer Winblad Venture Partners awinblad@humwin.com

  2. Hummer Winblad Venture Partners • First Fund Exclusively for Software Investing • Founded September 1989 • $1B Under Management • 9 investment professionals • Fund V: $425M (raised 2001) • All Stages, focus on early stage including seed • Usually Part of First Round of Venture Funding • Usually Lead or Co-Lead • 90+ Investments to Date: 16 IPOs, 29 Acquisitions

  3. Mobius Venture Capital • Founded in 1996 in conjunction with Softbank • $2B Under Management • 13 investment professionals: 5 managing directors • Fund VI: $1.25B (raised 2000) • All Stages, focus on early stage including seed • Usually Part of First Round of Venture Funding • Usually Lead or Co-Lead • 100+ Investments to Date

  4. Entrepreneurs, then VCs

  5. Software Big Leader in Early Stage • Software is the Big Leader in Early Stage • 27% of Early Stage Financings (Q1-Q3) 2003 • 22% of Early Stage Dollars (Q1-Q3) 2003 • Capital Efficient Profile Matches Era • Early Stage Software Average (2002) Round is $4.0M • Average of other sectors is $6.2M Round • Software Still the Largest Investment Area • 20% of Overall Investment Dollars (Q1-Q3), all stages • But 28% Decline from 2002

  6. Drivers for Software Innovation and Investment Opportunity • Outsourcing • Leveraging high caliber 24X7 resources • Specifically India • Open Source • Driving innovation for early stage developers • Competitive ‘turmoil’ among the larger players • Moore’s Law and Metcalf’s Law • Broadband reaches critical mass deployment • Storage costs dramatically lower, affordable in personal devices • On demand solutions • New platforms, new pricing • M&A at the top reopening market segments • Documentum, Rational, JD Edwards….

  7. Fast Pace of Technical Innovation Creates New Leaders and New Laggards

  8. Consumer:Customer Demands Driving Innovation • Digital Lifestyle demands: • Communication and collaboration • Interactivity across devices • Immediacy • Omnipresence • Always on, anywhere • Customizable • My content, my creativity • Fair prices

  9. Broadband, Coupled with Cheap Storage Driving Digital Lifestyle

  10. Enterprise:Customer Demands Driving Innovation • Real Time Connected Enterprise • Communication and collaboration • Interactivity and security across enterprise and industry partners • Shift of business value to communications platform • Immediacy • Real time business performance management • Confidence, Security, Privacy • Sarbanes Oxley effect, GLB, HIPPA • Open architecture • Solutions and pricing • Undeniable short term ROI • Software as a service/utility

  11. Internet Era Creates New IT Infrastructure • End to end integration of transactions • Existing applications and data leveraged • Applications acting as processes • Workload optimized to any server • Massive amounts of information: stored and ‘flowing’

  12. New Set of Software Challenges: Expanding the Software Stack

  13. 2004: Start of Era of Optimism • Most CIOs are budgeting for new projects • Cost Reduction and Integration (2001-2003) • Integration and New Project Expansion (2004 - ) • Will lead new phase of venture capital investing • Demand improving: • Enterprise • Consumer • Small and medium business • Early Stage Venture Capital at stable bottom • Best time to start a company • Best time to invest, especially at seed • Best time to be an optimist

  14. Fewer Investors, Better Companies? • Corporate/Strategic investors have abandoned the sector • $211M in 2003 versus $6B in 2000 • Individual investors have abandoned the sector • $84M in 2003 versus $2.4B in 2000 • VCs syndicating most deals • Multiple VCs in most rounds

  15. Recent Hummer Winblad Investments Focused on Enterprise Infrastructure • Security, Reliability • Voltage • Cenzic • Data and Disaster Recovery • Abhai • Management • Scalent • Jareva (early); (acquired by Veritas) • Application Integration • Knowmadic • Provisioning and Identity Management • Bridgestream

  16. Recent Mobius Venture Capital Investments • Planitax: enterprise tax software • MessageCast: Broadcast IM management • CastBridge: user-driven data sharing • Auctiondrop: “you drop it off, we sell it on eBay” • Perpetual Entertainment: MMOG • Reactrix: visual display meets motion sensor

  17. Closing Advice • The opportunity window is open now in software • Make lots of friends with engineers • Meet customers early • Customers know what they want and are smart technologists • Focus, Focus, Focus • Otherwise tough to be “Best” at anything • The intellectual capital in your company and coaching your company is more important than money • Most companies die of self inflicted wounds

  18. Q&A Heidi Roizen hroizen@mobiusvc.com Ann Winblad awinblad@humwin.com

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