InnoTech.My 2007

Colin WongPresident of Prosperati

Bio

Bio

President CEO

U.S. VC Landscape

2006 $25.7B invested

Q3 2007 $7.1B invested Seed /

Early Stage$1.4B (20%)

VC Activity By Category

VC Activity By CategorySoftware represents $1.11B (Q3Y07) BioTech represents $1.1B

(Q3Y07)

Emergence of CleanTech-Alt Energy, Recycling, Power Conservation- $844M (Q3Y07)- 80% increase from Q2 Y07

ICT Investment Trends

Consumer oriented Technologies

Enterprise oriented Technologies

ICT Investment Trends

Consumer oriented Technologies

Enterprise oriented Technologies

Web-based Business Models•Software-as-a-Service (SaaS)•Web 2.0

Wireless/Mobility•Mobile navigation•TV•Advertising

Video Technologies

VC Activity By Location

VC Activity By Location

Silicon Valley represents 35% of all U.S. VC activity

Q3 Y07Silicon Valley – 287 dealsNew England – 119 dealsLA/Orange County – 56 deals

USA

San Francisco Bay Area

San Francisco Bay Area

Silicon Valley•20km radius• University Research• Venture Capital• Technology Entrepreneurs•35% of U.S. venture activity

Silicon Valley

Stanford University

Sequoia Capital

Apple

Oracle

Cisco

Yahoo

NVIDIA

Network Appliance

Google

Ebay

Intel

Adobe

Electronic Arts

Sun Microsyste

ms

NASA Research

Hewlett-Packard

Kleiner Perkins

Benchmark Capital

Draper Fisher Jurvetson

BlueRun Capital

Accel Partners

The U.S. Innovation Ecosystem

Stanford University

Sequoia Capital

Apple

Oracle

Cisco

Yahoo

NVIDIA

Network Appliance

Google

Ebay

Intel

Adobe

Electronic Arts

Sun Microsyste

ms

NASA Research

Hewlett-Packard

Kleiner Perkins

Benchmark Capital

Draper Fisher Jurvetson

BlueRun Capital

Accel Partners

Entrepreneurs

Venture

Capital

Research

Research

Build a world-class University The best MINDS from all over the world travel

here to study here Incredible pool of world class talent

Google Larry Page (Michigan) Sergei Brin (Mathematics prodigy from

Russia) PhD Computer Science candidates Started Google in a garage within Stanford

Research

Venture Capital

Access to EASY seed capital Google got $100K in seed capital from

Andy Bechtolsheim (Angel Investor & Co-Founder of Sun Microsystems) over lunch

Access to EASY startup capital Google got $1.1M in startup capital from

Sequoia and Kleiner Perkins No proven management team No proven technology No proven business model

Sequoia Capital got lucky?

VentureCapital

Sequoia Capital

AND MANY MORE….

A Question for You

What does Hewlett-Packard, Apple, Ebay, Microsoft, Google, Yahoo and YouTube have in common? No Proven Team No Proven Technology No Proven Business Model

How Do You Evaluate Startups?

Risk Aversion Reward Management

Banking Approach Investment Approach

Risk Cutting Reward Calculating

Proven concepts Innovation and Disruption

Banking vs. Investment PorfolioBanking Investment

• Cash Flow Oriented

• Short-term horizon (12 – 18 months)

• Collateralized Loan

• Proven Business Model

• ROI Oriented

• Long-term horizon (3 – 5 years)

• Preferred Equity

• Law of Numbers

1/2 of investments loose money

1/3 of investments break even

1/6 of investments make (lots of) money

1/6 $$$ > 5/6 $

Risk vs. Reward

Risk Cutting vs. Reward Projecting Risk Cutting▪ Concentrate on avoiding the company that

will loose 100% of your funding▪ The “Restaurant” Play

Reward Projecting▪ Concentrate on finding the company that will

give you a 100x return on your funding▪ The “Cure for Cancer” Play

Case-Study: Google

Seed funding: $100K from Andy Bechtolsheim (angel

investor & co-founder of Sun Microsystems) over lunch

Early stage funding: $1.1M from Kleiner Perkins, Sequoia

Capital on unproven management, technology and business model

IPO: $23B valuation - 2300x ROI Today: $210B valuation – 21,000x ROIAs a VC, what is the success / failure ratio you are willing to

risk?

Entrepreneurs

1 in 20 new companies survive past 1st year

More of a myth U.S. SBA : 50% of new companies fail in

first 5 years But mindset must be the same

Be willing to go off the business plan A business plan is just a beginning

Iterate through discoveries market/technology/business model

Entrepreneurs

The Iteration Game (Evolution) Raise more money than you need, to

iterate Don’t expect your 1st iteration to hit the lottery Every iteration tells you what you shouldn’t

do, to get you to what you need to do Google Business Model / Omid vs. Larry

Expect second or third round of VC funding

Build milestones Understand your failures

Closing

US Innovation Ecosystem is about:

For VCs Risking x failures to find the next Google

For Entrepreneurs Failure *is* an option Risking x failures (iterations) to find the

next Google

failureRisking to get outsized rewards

Fail Fast, Fail Often to Find Success

Thank You

It’s all about risk.

Colin Wongcolin@prosperati.com