Copyright 2000 Goldman Sachs DO NOT DISTRIBUTE 1 DO NOT DISTRIBUTE Internet Tsunami: The Second Wave Lawton Fitt October 2000 2 Agenda Agenda ? What’s Happening? ? Why is it Happening? Growth and Valuation Drivers ? What are Challenges to Internet Innovation?
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Copyright 2000 Goldman Sachs
DO NOT DISTRIBUTE
1
DO NOT DISTRIBUTE
Internet Tsunami:The Second Wave
Lawton FittOctober 2000
2
AgendaAgenda
?What’s Happening?
?Why is it Happening? Growth and Valuation Drivers
?What are Challenges to Internet Innovation?
Copyright 2000 Goldman Sachs
DO NOT DISTRIBUTE
2
DO NOT DISTRIBUTE
What’s HappeningWhat’s Happening
4
The birth of a $1.3The birth of a $1.3--trillion sectortrillion sector
$1.3Trillion
$1.3$1.3TrillionTrillion
$40$40BillionBillion
$40 $50 $64 $75 $103 $129 $129
$278
$550$626
$710
$1,633
$1,728
$1,292$1,347
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
97:Q1
97:Q2
97:Q3
97:Q4
98:Q1
98:Q2
98:Q3
98:Q4
99:Q1
99:Q2
99:Q3
99:Q4
00:Q1
00:Q2
9/26/00
0
100
200
300
400
500
600
Total Market Cap
No. of companies
Copyright 2000 Goldman Sachs
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Explosion in IPO activityExplosion in IPO activity
$23 $30 $69$544
$1,807$864
$1,602
$22,612
$16,415
1992 1993 1994 1995 1996 1997 1998 1999 2000YTD
$ millions
As of September 26, 2000
Deals 1 1 5 11 34 22 33 272 142
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Internet stock price history, 1998Internet stock price history, 1998--YTDYTD
GSInternetIndex+304%
NASDAQ+135%
S&P 500+47%
As of September 26, 2000
Gainsince1/1/98
0
100
200
300
400
500
600
700
800
12/3
1/19
97
2/13
/199
8
3/30
/199
8
5/12
/199
8
6/24
/199
8
8/06
/199
8
9/18
/199
8
10/3
0/19
98
12/1
4/19
98
1/28
/199
9
3/12
/199
9
4/26
/199
9
6/08
/199
9
7/21
/199
9
9/01
/199
9
10/1
4/19
99
11/2
6/19
99
1/10
/200
0
2/23
/200
0
4/05
/200
0
5/18
/200
0
6/30
/200
0
8/14
/200
0
9/26
/200
0
Copyright 2000 Goldman Sachs
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Average YTD performance by sector Average YTD performance by sector (September 26, 2000)(September 26, 2000)
-61.6%
-66.7%
-12.6%
-38.7%
-69.2%
-13.0%
-43.5%
-1.0%
-62.1%
-56.2%
-71.5%
-19.2%
-33.3%
-41.7%
-80.4%
-6.1%
Media/Portals
B2C
B2B
Application Hosting/Delivery
Media Services
Mobile Internet
Networks
Next Gen/iTV
Security
Software
Systems Integration
Investment Companies
e-Finance
e-Health
e-Learning
International
Infra
stru
ctur
e Average-45.3%
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The tidal wave of Internet venture capitalThe tidal wave of Internet venture capital