Venture Capital Outlook 2014San Diego Venture Group

January 23, 2014

Bobby Franklin

NVCA President & CEO

The Number of U.S. Venture Firms: Back to Rational Levels

Year Number of Active Firms

CapitalManaged

1970 28 $1B

1980 87 $4B

1990 96 $28B

2000 1,022 $220B

2010 462 $177B

2013 382 $203B

VC Raised $17B in 2013: Down but hardly out

Year Number of Funds

VC Dollars Raised

2009 159 $16.1B

2010 173 $13.2B

2011 186 $18.9B

2012 208 $19.5B

2013 186 $16.7B

$80

$100

$120

VC Investment by Year

$105B

$0

$20

$40

$60

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

$ Billion Invested

4

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,

Data: Thomson Reuters

B

$32B

$29.4B

VC Fundraising vs. Investment in 2013

Six consecutive years with a considerable gap between venture capital fundraising and

dollars invested.dollars invested.

Is it an issue?

IT Software Attracting Most VC Dollars

60%

80%

100%

% of Total VC Investment $

25%

19%

37%

15

0%

20%

40%

60%

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

% of Total VC Investment $

Software Biotech

19%

6

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,

Data: Thomson Reuters

%15%

Seed stage slowing, Early stage increasing

7

San Diego Metro VC Investment

2.297

1.579

1.8461.9

2.4

250

300

8Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,

Data: Thomson Reuters

235

156

114125 132

143130

169

134114

135114 105 97

0.997

0.825

1.197 1.203 1.23 1.209

0.9390.881 0.927

1.156

0.757

-0.1

0.4

0.9

1.4

50

100

150

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Bill

ion

s In

ve

ste

d

# o

f D

ea

ls

2013 San Diego Metro VC Investment by Industry

9%

4%7%

$ Funded

Biotech

Medical Devices

9Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report,

Data: Thomson Reuters

51%

17%

12%Software

Industrial/Energy

IT Services

Other

2013: More Life Sciences IPOs than the prior 5 years combined

Source: Thomson Reuters/National Venture Capital Association

10

380384363

323

402443

485488

423

360

543499488

377400

500

600

# D

ea

lsM&A Exits are Down

143

189227

323

0

100

200

300

1997 1999 2001 2003 2005 2007 2009 2011 2013

# D

ea

ls

Source: Thomson Reuters/National Venture Capital Association

11

The future of venture capital

• Today, capital is essential to grow a company,not necessarily to start it

• Tomorrow, better fund performance and returns • Tomorrow, better fund performance and returns to LPs

• Venture Capital continues to fuel innovation in a way unlike any other asset class

The Washington Environment

• Gridlock: Last year, Congress passed only 57 bills that got the President’s signature and became law – lowest in history

• The obvious right thing to do is often widely supported by elected officials, but it gets tangled with other issues• Immigration• Tax Reform

• NVCA can and does make a difference

In Summary...

• Venture capital had a great 2013 and 2014 will likely be even better

• Venture capital continues to play an important role in the entrepreneurial ecosystemrole in the entrepreneurial ecosystem

• Washington is messy but necessary for the innovation economy

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