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Venture Capital in the US: “A machine for business building”

Venture Capital in the US: “A machine for business building”. Mikko Suonenlahti, Partner, 3i March 22, 2004 mikko_suonenlahti@3i.com. A machine for business building. Predominantly a US Phenomenon. Global Venture Capital Market – 2002 100% = $29.4B .

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Venture Capital in the US: “A machine for business building”

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  1. Venture Capital in the US: “A machine for business building” Mikko Suonenlahti, Partner, 3i March 22, 2004 mikko_suonenlahti@3i.com

  2. A machine for business building Predominantly a US Phenomenon Global Venture Capital Market – 2002 100% = $29.4B Investments by State 100% = $21.2B Other (44%) Non U.S. (28%) U.S. (72%) California (40%) Massachusetts (16%) NB. Corporate R&D in G7 countries was $442B in 1999 Source: PWC MoneyTree Survey

  3. A machine for business building The European Perspective of Venture CapitalQ3 - 2003 100 % UK Germany France Sweden Other Source: Venture Source

  4. A machine for business building U.S. venture capital activity: Total equity investments into venture-backed companies • Free market • mantra: • Telecom • Financial • Technology • Advances: • Internet • Y2K Source: PWC MoneyTree Survey, 3i

  5. A machine for business building Financial Returns* *As of June 30, 2003 Source: NVCA

  6. A machine for business building The US Venture Industry Source: NVCA

  7. A machine for business building Venture Capital in the USVenture funded firms account for: • 12.5 million employees, 11% of US payroll • 1.1 trillion in annual revenues, 11% of US GDP • More Federal taxes per $1,000 in assets than their peers – paid $58.8 billion of Federal taxes and $7.8 billion in state and local taxes • More sales per $1,000 in assets than their peers • $13.8 billion of net income, $21.7 billion of exports and invested $157.3 billion in R&D Source: NVCA

  8. A machine for business building Venture Capital in Massachusetts

  9. A machine for business building Venture backed IT businesses in New England 1970 – 2000

  10. A machine for business building 3i US Venture Capital investments which have gone public* - a selection of 29 IPO’s: • Idec - cancer drugs, $5.6B • LSI Logic – custom semiconductors, systems on a single chip, $3.0B • Amylin Pharma – diabetes drugs, $2.1B • Dura Pharma – asthma drugs. Elan acquires for $1.7B • Medisense – diabetes monitoring systems. Abbott acquires for $0.8B • RSA Security – identity management solutions, $0.6B • Biopure – oxygen therapeutics, $0.2B • Transwitch – VLSI solutions for global communications equipment supplies, $0.1B *Market caps July, 2003, for 3i US legacy business investments

  11. A machine for business building Venture backed IT businesses which are publicly quoted in New England in 2003* *Market caps June, 2003

  12. A machine for business building

  13. A machine for business building A Model for investing • $30 - 50 Million in VC Funding • 2 - 4 Financing Rounds • Target $120 - 150 Million liquidity event* *Sweet spot of M&A market is $20-100MM in July, 2003

  14. A machine for business building US Venture Capital - Q1 2003 Source: Money Tree, 3i Analysis

  15. A machine for business building Venture Capital in 2002* *Technology Only Source: NVCA, EVCA, CVCA, FVCA, 3i analysis

  16. A machine for business building Venture Capital in 2002* *Technology Only Source: NVCA, EVCA, CVCA, FVCA, 3i analysis

  17. A machine for business building Venture Capital in 2002* *Technology Only Source: NVCA, EVCA, CVCA, FVCA, 3i analysis

  18. A machine for business building Christopher Columbus was the first to explore uncharted seas to the West – backed by venture capital – and options. A crew of 87 experienced seamen accompanied Christopher on the Nina, Pinta, and Santa Maria

  19. A machine for business building Attitude towards risk – 14,000 venture backed companies •20% find a safe harbour • 10% shipwrecks

  20. A machine for business building NVCA Long Term Public Policy Agenda • Access to Capital and Liquidity • Tax policy favoring capital formation • Open, fair and vibrant capital markets • Increased basic R&D Funding • Enhanced Human Resources • Open immigration policies • Aggressive adult and youth education policies • Broad use of options for all employees

  21. A machine for business building NVCA Public Policy Agenda 2003 • Capital gains reduced from 20% to 15% • Oppose mandatory expensing of options, encourage transparency • Prevent payroll taxes on options • Ensure corporate governance roles (Sarbanes-Oxley), continue to allow for full VC participation in private and public companies • Work with SEC to reform IPO process • Broadband deployment • Etc.

  22. A machine for business building NVCA in the 1970’s • Persuaded Congress to reduce capital gains taxes. • Removed barriers to pension fund investing in venture capital as an asset class.

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