® timothy e. taylor 1 10.15.02 why the southeast? medical device and h/c trends day job or your own...

Timothy E. Taylor 1

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10.15.0210.15.02

Why the Southeast?Medical Device and H/C TrendsDay job or Your Own Company?

Timothy E. TaylorCofounder- Endius, Inc.Venture Capitalist-HMC

Vanderbilt UniversityVanderbilt University Biomedical EngineeringBiomedical Engineering

8.30.02

Timothy E. Taylor 2

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I. Economic Overview

II. Entrepreneurial Environment

III. Overview of Venture Capital Market

Table of Contents

Fact Book:

Venture Capital Investment Climate in the Southeastern United States

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Economic Overview

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Note: Southeast includes Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee and Virginia/Washington, D.C.

Economic Overview

Other Harbert Southeastern Locations

Harbert Venture Partners Locations

• Strong regional economy

• Substantial research support focused on IT and Life Sciences

• Blue chip IT and Life Sciences corporate presence

• Region dedicated to entrepreneurial growth

• Leader in innovation

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$7.5

$5.3

$2.7

$1.8 $1.7$1.3 $1.2 $1.0

$0.0

$2.0

$4.0

$6.0

$8.0

U.S.ExcludingSoutheast

J apan Germany France Southeast UnitedKingdom

Italy China

• 5th largest economy in the world

Strong Regional Economy

2000 Comparative Gross Domestic Product (GDP) ($ in trillions)

Source: Based upon most recently available data from the Bureau of Economic Analysis.

Economic Overview

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2.4%

2.2% 2.2% 2.2%

2.0%

1.9% 1.9% 1.9%

1.8% 1.8%

1.6%

1.8%

2.0%

2.2%

2.4%

FL GA WA CA NC TN TX VA WI MN

• Five of the ten fastest growing, large ($100 billion+ GSP) states are located in the Southeast

Projected Annual Real Gross State Product (GSP) Growth 2000 – 2010(Highest growth states with 2000 GSP > $100 billion)

Strong Regional Economy

Gross State Product (GSP)

U.S. GDP Growth = 1.8%

• The Southeastern U.S. economy is expected to continue its historical growth at a pace higher than the rest of the U.S.

Source: Bureau of Economic Analysis.

Southeast

U.S. Excluding Southeast

Economic Overview

Historical1980 - 2000 Projected

2000 - 2010

3.9%

2.1%

3.1%

1.8%

0.0%

1.0%

2.0%

3.0%

4.0%

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Entrepreneurial Environment

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Substantial Research Support Focused on IT and Life Sciences


North Carolina / Research Triangle ParkUniversity of North Carolina ($510M)Duke University ($478M)North Carolina State University ($413M)Wake Forest University ($187M) North Carolina Biotechnology Center ($9M)North Carolina Tech. Dev. Authority

North Carolina / Research Triangle ParkUniversity of North Carolina ($510M)Duke University ($478M)North Carolina State University ($413M)Wake Forest University ($187M) North Carolina Biotechnology Center ($9M)North Carolina Tech. Dev. Authority

GeorgiaEmory University ($248M)Georgia Tech ($101M)

Centers for Disease Control ($4.3B)Georgia Adv. Tech. Dev. Ctr.Southeastern Technology Center

GeorgiaEmory University ($248M)Georgia Tech ($101M)

Centers for Disease Control ($4.3B)Georgia Adv. Tech. Dev. Ctr.Southeastern Technology Center

TennesseeVanderbilt University ($218M)

Dept. of Energy – Oak Ridge Lab ($2.1B)

TennesseeVanderbilt University ($218M)

Dept. of Energy – Oak Ridge Lab ($2.1B)

FloridaUniversity of Florida ($380M)

NASA Kennedy Space Center ($1.0B)Bell Labs

FloridaUniversity of Florida ($380M)

NASA Kennedy Space Center ($1.0B)Bell Labs

Virginia / Washington, D.C.University of Virginia ($247M)Virginia Tech ($123M)Medical College of Virginia/Virginia Commonwealth University ($122M)

Department of Defense ($48.5B)National Institute of Health ($23.5B)Environmental Protection Agency ($7.3B)National Science Foundation ($4.8B)NASA Langley/Goddard Research Center ($1.2B)Virginia Biotechnology Research Park

Virginia / Washington, D.C.University of Virginia ($247M)Virginia Tech ($123M)Medical College of Virginia/Virginia Commonwealth University ($122M)

Department of Defense ($48.5B)National Institute of Health ($23.5B)Environmental Protection Agency ($7.3B)National Science Foundation ($4.8B)NASA Langley/Goddard Research Center ($1.2B)Virginia Biotechnology Research Park

AlabamaUniversity of Alabama (Birmingham) ($296M)

Redstone Arsenal ($12.0B)Cummings Research Park ($4.2B)NASA Marshall Space Center ($2.2B)Missile Defense Agency ($2.1B)Southern Research Institute

AlabamaUniversity of Alabama (Birmingham) ($296M)

Redstone Arsenal ($12.0B)Cummings Research Park ($4.2B)NASA Marshall Space Center ($2.2B)Missile Defense Agency ($2.1B)Southern Research Institute

Note: Dollar amounts represent annual R&D budgets/actual expenditures, based upon most recently available data.

Sources: Company annual reports, web sites and individual sources.

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Life Sciences and Blue Chip IT Corporate Presence in the Southeast*


c-

* The depiction of the trademarks, service marks and logos on this page are for informational purposes only and are not intended to imply any affiliation with, or endorsement of, Harbert Venture Partners by their owners. The trademarks, service marks and logos listed are in alphabetical order and their placement on the page is not intended to imply a specific geographic location or headquarters of any entity.

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Region Dedicated to Entrepreneurial Growth

North Carolina / Research Triangle Park

• Academic R&D funding – 1st in nation

• > 100 R&D facilities• Concentration of science degrees –

1st in nation• Home of Duke University,

University of North Carolina and North Carolina State University

North Carolina / Research Triangle Park

• Academic R&D funding – 1st in nation

• > 100 R&D facilities• Concentration of science degrees –

1st in nation• Home of Duke University,

University of North Carolina and North Carolina State University

Georgia• Atlanta software job growth – 2nd

in nation• Atlanta high-tech employment – 7th

in nation• Home of Center for Disease

Control, Emory University and Georgia Tech

Georgia• Atlanta software job growth – 2nd

in nation• Atlanta high-tech employment – 7th

in nation• Home of Center for Disease

Control, Emory University and Georgia Tech

Tennessee• Home to 30 publicly

traded healthcare companies with > $36 billion in revenue

• Nashville high-tech job growth – 2nd in nation

• Home to Vanderbilt Medical Center and 16 other area universities

Tennessee• Home to 30 publicly

traded healthcare companies with > $36 billion in revenue

• Nashville high-tech job growth – 2nd in nation

• Home to Vanderbilt Medical Center and 16 other area universities

Florida• 7.5 million labor force – 4th in

nation• 3,149 patents in 2001 – 1st in

Southeast• $7B and $4B contracts for NASA

and Department of Defense, respectively

• 2nd in nation in healthcare employment (300,000) and number of healthcare firms (2,200)

Florida• 7.5 million labor force – 4th in

nation• 3,149 patents in 2001 – 1st in

Southeast• $7B and $4B contracts for NASA

and Department of Defense, respectively

• 2nd in nation in healthcare employment (300,000) and number of healthcare firms (2,200)

Virginia / Washington, D.C.• 5th largest high-technology center

in the nation• Telecom employment – 3rd in nation• D.C. area has 4,700 high-tech firms

and > 246,000 high-tech employees

• 50% of the nation’s Internet traffic flows through Fairfax County

Virginia / Washington, D.C.• 5th largest high-technology center

in the nation• Telecom employment – 3rd in nation• D.C. area has 4,700 high-tech firms

and > 246,000 high-tech employees

• 50% of the nation’s Internet traffic flows through Fairfax County

Alabama• One of the leading centers for

AIDS, cancer and heart research• 8% of all anti-cancer therapeutic

drugs developed at Southern Research Institute

• Cummings Research Park – 2nd largest research facility in U.S.; 4th largest in world

Alabama• One of the leading centers for

AIDS, cancer and heart research• 8% of all anti-cancer therapeutic

drugs developed at Southern Research Institute

• Cummings Research Park – 2nd largest research facility in U.S.; 4th largest in world


Sources: AeANET/Cyberstates, Bureau of Labor Statistics, Capital IQ, META Group, Metropolitan New Economy Index, local Chamber of Commerce web sites and company web sites.


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Best Medical Device Cities

• U.S.: Boston, Minneapolis, San Francisco and Warsaw, Indiana.

• Southeast: Memphis, Atlanta, RTP, NC. Jacksonville, Nashville and Birmingham.


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1,138

438

163134

64 62 48 37 28

0

100

200

300

400

500

U.S.ExcludingSoutheast

J apan Germany Southeast France UnitedKingdom

Canada Taiwan Italy

-100

0

100

200

300

'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01

Japan

Southeast

U.S. Excl. Southeast

France

Germany

Leader in Innovation

1 By state or country of origin, patent is determined by the residence of the first-named inventor.Source: United States Patent and Trademark Office.

Patents Issued 1981-2001 (in thousands) 1

Relative Growth of Patents Issued Annually, Indexed to 1981


49.7% 2.8% 2.7%5.9%7.1%19.1% 2.1% 1.6% 1.2%% of Worldwide Market Share


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Overview of Venture Capital Market


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10,732

5,492

3,296

2,329 2,219 2,055 1,941

0

1,000

2,000

3,000

4,000

5,000

6,000

California Northeast Southeast West Excl.California

Midwest Mid-Atlantic Southwest

$105.7$47.7

$27.1

$20.4 $18.9$17.2 $15.9

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

California Northeast Southeast West Excl.California

Mid-Atlantic Southwest Midwest


Venture Funding by Region

Number of Venture Deals by Region

1995-2001

Note: Northeast - CT, ME, MA, NH, NY, VT, RI; Southeast – AL, DC, FL, GA, MS, NC, SC, TN, VA; West Excluding California – AK, CO, ID, HI, MT, NV, OR, UT, WA, WY; Mid-Atlantic – DE, MD, NJ, PA;Southwest – AR, AZ, LA, NM, OK, TX;Midwest – IL, IN, IA, KS, KY, MI, MN, MO, NE, ND, OH, SD, WV, WI.

Source: VentureXpert/SDC.

Venture Dollars Invested by Region

1995-2001 ($ in billions)

• Southeast trails only California and the Northeast in demand for venture dollars

• Southeastern companies accounted for approximately 12% of total venture deals done between 1995 and 2001

41.8% 7.5% 6.8%8.0%10.7%18.9% 6.3%% of U.S. Share

38.2% 7.9% 7.3%8.3%11.8%19.6% 6.9%% of U.S. Share


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Limited In-Region Funding Available

• Between 1995 and 2001, of the $20.8 billion1 venture capital invested in Southeastern companies only 18% has come from Southeastern venture firms

1 Excludes $6.4 billion of venture capital invested in Southeastern companies by unknown sources.Source: VentureXpert/SDC.

Share of Venture Dollars Invested in Southeast1

1995-2001

• Between 1995 and 2001, $16.9 billion has been invested in Southeastern companies by firms OUTSIDE of the Southeast

• Between 1995 and 2001, only $3.8 billion has been invested in Southeastern companies by LOCAL Southeastern firms

82% 18%

Out of Region

In Region



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Medical Device and H/C Trends• U.S. spends $1.4 trillion, or 14% of its gross domestic product on medical care.• Could be spending close to $3 trillion, or 17% of the total national output within ten years.• Areas of highest growth: Cardiology; drug eluting stents, Atrial Fibrillation, wearable devices, Spine, Neurological and Osteobiologics. • Areas of Low growth/upside: Dental, hearing, diagnostics, Orthopedic Hip and Knee Implants, Imaging and Laser Vision.• Devices are viewed as “Defensive Play” on Wall Street which should continue to drive growth.• Returning back in favor for Venture Capitalist but not as hot as early 80’s.• Fifth largest funded sector by VC’s.


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INVESTMENTS BY INDUSTRY

$ Invest

%/Tot

Deals

Software $1016

M17.8% 199

Biotechnology $958M 16.8% 81

Telecommunications $657M 11.5% 75

Networking and Equipment $633M 11.1% 57

Medical Devices and Equipment $556M 9.8% 73

Retailing/Distribution $394M 6.9% 90

IT Services $360M 6.3% 50

Semiconductors $284M 5.0% 31

Computers and Peripherals $185M 3.2% 27

Media and Entertainment $161M 2.8% 28

Healthcare Services $144M 2.5% 19

Industrial/Energy $138M 2.4% 33

Financial Services $72M 1.3% 14

Consumer Products and Services $55M 1.0% 14

Electronics/Instrumentation $35M 0.6% 10

Other $28M 0.5% 8

Business Products and Services $27M 0.5% 10


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INVESTMENTS BY REGION $ Invest %/Tot Deals

Silicon Valley $127M 22.8% 22

Northwest $81M 14.6% 6

San Diego $73M 13.2% 7

New England $73M 13.2% 11

Southeast $49M 8.9% 6

LA/Orange County $47M 8.4% 5

South Central $32M 5.8% 2

Colorado $29M 5.2% 3

Midwest $28M 5.0% 3

North Central $9M 1.7% 1

SouthWest $5M 0.9% 2

NY Metro $2M 0.3% 2

Texas $1M 0.2% 2

Philadelphia Metro $0M 0.0% 1


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Day Job or Start Up(Which should you do?)

Advantages of having a Day Job:

1. Good experience for your resume’.2. Opportunity to learn backoffice operations and proven procedures.3. Low stress after quitting time. 4. You can have a life outside of work.5. Fairly stable income.6. Mentoring usually available.7. H/C benefits and forced 401(k) savings8. Work 25 years, retire and start a new life at 50.9. Helps you learn to be a team player.


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Day JobDisadvantages1. You are not the boss and corporate America is not a democracy. At best, the company will be a meritocracy, if you find the right company.2. Advancement and pay increases are generally time based not performance based and can be slower than you like.3. Usually requires less creativity and more rule following.4. Your manager may not be as bright as you but he or she will determine your future.5. Flex time/Family Friendly is still mostly lip service so be prepared to punch a clock and drive the desk.6. Over time you might get lulled into the low stress routine and give up on your dreams.7. You are at the mercy of the company. They own you.8. Being Politically Correct is the important.9. Leaders and self starters are often held back.


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Starting a CompanyAdvantages

1. Freedom and flexibility.2. Will help you define who you are earlier in life.3. Life will be more exciting and depressing. (more highs and lows)4. Better opportunity to build real wealth. You normally don’t get rich working for someone else.5. Builds self esteem.6. Allows you to live a balanced life once you’ve made it.7. Serial Entrepreneurs are highly respected in the business world.8. Better opportunity to help others and be a mentor.


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Starting a CompanyDisadvantages 1. You sell your soul to investors and shareholders unless you bank roll it yourself.2. You won’t have a life for several years.3. You will think about your business 100% of the time, even when you sleep.4. You will drive everyone around you who are not in the business-crazy.5. You will not be a good spouse or boy/girlfriend.6. You will develop the curse of not being able to work for anyone.7. You will think you are smarter than you really are if your business succeeds.8. You will think the world is here just for you and your business.9. You lose sleep and fall out of shape.10. Your attitude is determined by the price of your stock that day.


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My SuggestionCareer Path

• During college, work for a VC or investment firm even if you have to work as a free intern.

• Post graduation, work for one or two large biomedical firms for no more than five years. Get MBA at night and ask them to pay for it. As you move up, try not to be forced into a technical position unless you want to.

• Join a small company at the executive level. • Get married but let the spouse know you are quitting your day job.• Start your own company with a partner. (it may take three deals to hit one.)• Start your own company without a partner.• Start family. (35-41 years of age)• Semi retire when children are born thru K school.• Go back to work when kids get in elementary school.• Slow down at 55 working at the 60% level.• Write book at 65 and consult at the 30% level as long as you can.

® timothy e. taylor 1 10.15.02 why the southeast? medical device and h/c trends day job or your own...

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