NVCA2009Yearbook[1]

PREPARED BY3 Times Square18th Floor

New York, NY 10036www.thomsonreuters.com

1655 Fort Myer DriveSuite 850

Arlington, VA 22209www.nvca.org

INCLUDING STATISTICS FROM THEPricewaterhouseCoopers/National Venture Capital Association

MoneyTree™ Report based on data from Thomson Reuters

NATIONAL VENTURECAPITALASSOCIATION

PREPARED BY

NATIO

NA

LVEN

TURE

CA

PITAL

ASSO

CIATIO

NYEA

RBOO

K2009


YEARBOOK 2009

March 2009

Dear Reader:

On behalf of the National Venture Capital Association board of directors and staff, we arepleased to present you with the latest statistics that describe the activity of the venturecapital industry in the United States. These statistics reflect yet another all-time high levelof survey participation by venture capital practitioners. While accurately tracking the inputsinto this economic growth engine is important, these dollars represent a small portion ofwhat many of these companies have and will contribute to the United States economy interms of revenue, employment, and quality of medical care and living.

The statistics gathered and tracked by Thomson Reuters for ThomsonONE.com(VentureXpert) and this Yearbook are essential to enabling analysis of venture capital bypolicy think tanks and economists for use by government officials and foreign govern-ments. For example, recent analysis of Thomson Reuters data by Global Insight showsthat while venture capital investment represents 0.2% of US GDP, the revenue of compa-nies created by the industry represented 17.6% of GDP in 2006. For every venture capitaldollar invested in 1970-2001, there was $7.90 in US revenue during 2006 in those compa-nies. In these companies, for every $28,463 of venture capital invested in 1970-2001,there was one ongoing job in the year 2006.

Venture capital is unique. NVCA believes that it is more important than ever to effectivelytell the story of venture capital, differentiate it from other forms of alternative assets, andexplain what’s needed to continue creating great, leading-edge companies. We believethat a strong venture capital industry is essential to America’s future and improving ourquality of life.

Your comments are always welcome at [email protected].

Very truly yours,

Dan Broderick Mark G. Heesen John S. TaylorProlog Ventures NVCA President NVCA VP ResearchNVCA Director & Chairmanof the NVCA Research Committee

2 Thomson Reuters

NVCA BOARD OF DIRECTORS 2008-09

Executive Committee

Dixon Doll Terry McGuireChairman Chairman-electDCM Polaris Venture Partners

E. Rogers Novak Kate MitchellTreasurer At-LargeNovak Biddle Venture Partners Scale Venture Partners

Paul MaederAt-LargeHighland Capital Partners

Research Committee

Dan Broderick Diana FrazierChairman FLAG Capital Management, LLCProlog Ventures

Stephen Holmes John Jaggers InterWest Partners Sevin Rosen Funds

Board Members At-Large

Keith Crandell Thomas CrottyARCH Venture Partners Battery Ventures

Barbara Dalton Ira EhrenpreisPfizer, Inc. Technology Partners

James Fleming Jim Hale, IIIColumbia Capital FTV Capital

Deepak Kamra Robert KibbleCanaan Partners Mission Ventures

Jack Lasersohn Pascal LevensohnThe Vertical Group Levensohn Venture Partners

Trevor Loy David PrendFlywheel Ventures RockPort Capital Partners

Jonathan Root Ray RothrockU.S. Venture Partners Venrock Associates

Rob Soni R. David SprengMatrix Partners Crescendo Ventures

Bess WeathermanWarburg Pincus

For the National Venture Capital Association

Prepared by Thomson Reuters

Copyright © 2009 Thomson Reuters

The information presented in this report has been gathered with the utmost carefrom sources believed to be reliable, but is not guaranteed. Thomson Reuters dis-claims any liability including incidental or consequential damages ariising fromerrors or omissions in this report.

2009

National Venture Capital Association

Yearbook

Thomson Reuters 3


1655 Fort Myer Drive, Suite 850Arlington, Virginia 22209-3114Telephone: 703-524-2549Telephone: 703-524-3940www.nvca.org

PresidentMark G. Heesen

Vice President of ResearchJohn S. Taylor

Senior Vice PresidentMolly M. Myers

Vice President of Federal Policy & Political AdvocacyJennifer Connell Dowling

Vice President of Strategic Affairs & Public OutreachEmily Mendell

Vice President of Membership & Member FirmLiaisonJanice Mawson

Director of Federal Policy & Political AdvocacyEmily A. Baker

Director of MarketingJeanne Lazarus Metzger

Director of Federal Life Science PolicyKelly Slone

Public Policy ManagerSumi Singh

Membership Coordinator & Database AdministratorTerry Samm

Accounting Manager Beverley Badley

Manager of Administration and MeetingsAllyson Chappell

Administrative Assistant Gwendolyn Taylor

Thomson Reuters

3 Times Square, 18th FloorNew York, NY 10036Telephone: 646-223-4431Fax: 646-223-4470www.thomsonreuters.com

Vice President, Private Equity ProductsElizabeth Benson

Vice President, Deals and Private Equity OperationsShariq Kajiji

Deals PublisherJim Beecher

Editor-in-Charge, Deals GroupDavid Toll

Global Private Equity Operations ManagerAlex Tan

Operations Manager Private Equity—North AmericaJames Thisdelle

Contributor & Press ManagementMatthew Toole

Product ManagerLori Ann Silva

Team ManagerPaul Pantalla

Research EditorEamon Beltran

Senior Art DirectorDavid Cooke

Sales Manager – Publications (VCJ, PE Week)Greg Winterton (646-223-6787)

ThomsonONE.com Sales:Bill Moore (646-223-7285)

4 Thomson Reuters

National Venture Capital Association 2009 Yearbook

Table of Contents

What is Venture Capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 10Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Portfolio Company Post-Money Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 11Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Industry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 15

Capital Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Portfolio Company Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Exits: IPOs and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 51

Appendix A: Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Appendix B: MoneyTree Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Appendix C: MoneyTree Geographical Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Appendix D: Industry Codes (VEICs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Appendix E: Industry Sector VEIC Ranges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Appendix F: Stage Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Appendix G: Data Sources and Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Appendix H: Portfolio Company Valuation Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Appendix I: International Convergence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Appendix J: Non-US Private Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Thomson Reuters 5

6 Thomson Reuters

This page is intentionally left blank.

Thomson Reuters 7

Venture capital has enabled the United States to sup-port its entrepreneurial talent and appetite by turningideas and basic science into products and servicesthat are the envy of the world. Venture capital fundsand builds companies from the simplest form – per-haps just the entrepreneur and an idea expressed as abusiness plan – to freestanding, mature organizations.

Risk Capital for Business

Venture capital firms are professional, institutionalmanagers of risk capital that enables and supports themost innovative and promising companies. Thismoney funds new ideas that could not be financedwith traditional bank financing, that threaten estab-lished products and services in a corporation, and thattypically require five to eight years to be launched.

Venture capital is quite unique as an institutionalinvestor asset class. When an investment is made in acompany, it is an equity investment in a companywhose stock is essentially illiquid and worthless until acompany matures five to eight years down the road.Follow-on investment provides additional funding asthe company grows. These “rounds,” typically occur-ring every year or two, are also equity investment, withthe shares allocated among the investors and manage-ment team based on an agreed “valuation.” But, unlessa company is acquired or goes public, there is littleactual value. Venture capital is a long-term investment.

More Than Money

The U.S. venture industry provides the capital to cre-ate some of the most innovative and successful com-panies. But venture capital is more than money.Venture capital partners become actively engagedwith a company, typically taking a board seat. With astartup, daily interaction with the management team iscommon. This limits the number of startups in whichany one fund can invest. Few entrepreneurs approach-ing venture capital firms for money are aware thatthey essentially are asking for 1/6 of a person!

Yet that active engagement is critical to the success ofthe fledgling company. Many one- and two-person

companies have received funding but no one- or two-person company has ever gone public! Along the way,talent must be recruited and the company scaled up.Ask any venture capitalist who has had an ultra-suc-cessful investment and he or she will tell you that thecompany that broke through the gravity evolved fromthe original business plan concept with the carefulinput of an experienced hand.

Deal Flows — Where The Buys Are

For every 100 business plans that come to a venturecapital firm for funding, usually only 10 or so get aserious look, and only one ends up being funded. Theventure capital firm looks at the management team,the concept, the marketplace, fit to the fund’s objec-tives, the value-added potential for the firm, and thecapital needed to build a successful business. A busyventure capital professional’s most precious asset istime. These days, a business concept needs to addressworld markets, have superb scalability, be made suc-cessful in a reasonable timeframe, and be truly inno-vative. A concept that promises a 10 or 20 percentimprovement on something that already exists is notlikely to get a close look.

What is Venture Capital?

Venture Capital Backed CompaniesKnown for Innovative Business Models

Employment at IPO and Now

Company As of IPO Current # ChangeThe Home Depot 650 331,000 330,350 Starbucks Corporation 2,521 176,000 173,479 Staples 1,693 75,588 73,895 Whole Foods Market, Inc. 2,350 52,900 50,550 eBay 138 15,500 15,362

Venture Capital Backed CompaniesKnown for Innovative Technology and Products

Employment at IPO and Now

Company As of IPO Current # ChangeMicrosoft 1,153 91,000 89,847 Intel Corporation 460 86,300 85,840 Medtronic, Inc. 1,287 40,000 38,713 Apple Inc. 1,015 35,100 34,085 Google 3,021 16,805 13,784 JetBlue 4,011 11,632 7,621

Source: IHS Global Insight. Current data is FY 2007 Year End Data

Many technologies currently under development byventure capital firms are truly disruptive technologiesthat do not lend themselves to being embraced bylarger companies whose current products could becannibalized by this. Also, with the increased empha-sis on public company quarterly results, many largerorganizations tend to reduce spending on research anddevelopment and product development when thingsget tight. Many talented teams have come to the ven-ture capital process when their projects were turneddown by their companies.

Common Structure — Unique Results

While the legal and economic structures used to createa venture capital fund are similar to those used by otheralternative investment asset classes, venture capitalitself is unique. Typically, a venture capital firm willcreate a Limited Partnership with the investors as LPsand the firm itself as the General Partner. Each “fund,”or portfolio, is a separate partnership. A new fund isestablished when the venture capital firm obtains nec-essary commitments from its investors, say $100 mil-lion. The money is taken from investors as the invest-ments are made. Typically, an initial funding of a com-pany will cause the venture fund to reserve three orfour times that first investment for follow-on financ-ing. Over the next three to eight or so years, the ven-ture firm works with the founding entrepreneur togrow the company. The payoff comes after the compa-ny is acquired or goes public. Although the investorhas high hopes for any company getting funded, onlyone in six ever goes public and one in three is acquired.

Economic Alignment of all Stakeholders —An American Success Story

Venture capital is rare among asset classes in that suc-cess is truly shared. It is not driven by quick returns ortransaction fees. Economic success occurs when thestock price increases above the purchase price. Whena company is successful and has a strong public stockoffering, or is acquired, the stock price of the compa-ny reflects its success. The entrepreneur benefits fromappreciated stock and stock options. The rank and fileemployees throughout the organization historicallyalso do well with their stock options. The venture cap-ital fund and its investors split the capital gains per apre-agreed formula. Many college endowments, pen-

sion funds, charities, individuals, and corporationshave benefited far beyond the risk-adjusted returns ofthe public markets.

Beyond the IPO

Many of the most exciting venture capital backedcompanies left the venture portfolios after they wentpublic. Far from being a destination, the IPO processprovides needed growth capital for a growing compa-ny. A 2009 analysis by IHS Global Insight shows thatmore than 90% of the jobs at today’s venture backedpublic companies were created after it went public.That is, these companies on average are 10% of theirmature size at the time they go public.

What’s Ahead

Much of venture capital’s success has come from theentrepreneurial spirit pervasive in the American culture,financial recognition of success, access to good science,and fair and open capital markets. It is dependent upona good flow of science, motivated entrepreneurs, protec-tion of intellectual property, and a skilled workforce.

The nascent deployment of venture capital in othercountries is gated by a country’s or region’s cultur-al fit, tolerance for failure, services infrastructurethat supports developing companies, intellectualproperty protection, efficient capital markets, andthe willingness of big business to purchase fromsmall companies.

The Exit FunnelOutcomes of the 11,686 Companies

First Funded 1991 to 2000

Went/Going Public 14%

Acquired 33%

Known Failed 18%

Still Private or Unknown*

35%

*Of these, most have quietly failed

8 Thomson Reuters

Executive Summary

Introduction

The 2009 National Venture Capital AssociationYearbook provides a summary of all of venture capi-tal activity in the United States. This includes invest-ments into portfolio companies to capital managed bygeneral partners to fund raising from limited partnersto valuations of companies receiving venture capital

investments to exits of the investments by either IPOsor mergers and acquisitions to performance of privateequity funds with data from the Thomson ReutersPerformance Database. The statistics for this publica-tion were assembled primarily from the MoneyTree™Report by PricewaterhouseCoopers and the NationalVenture Capital Association based on data fromThomson Reuters and analyzed through theThomsonONE.com (VentureXpert) database ofThomson Reuters, which has been endorsed by theNVCA as the official industry database.

Industry Resources

Venture capital under management in the UnitedStates by the end of 2008 decreased 24% from 2007year-end levels because large funds, raised during2000 ($105 billion total raised) at the height of thebubble, rolled out of the industry’s managed capitaland were replaced with smaller and more targetedfunds ($28 billion raised in 2008). The overall con-traction in capital under management is reflected inthe anticipated decrease in active firms and funds. We

The year 2008 was a difficult year for the US venture capital industry in many ways. While overall fundraisingand company investment each retreated from post-bubble highs in 2007, very bad exit opportunities stifled theforward progress of the large number of companies just reaching the maturity level at which they would typi-cally go public or be acquired.In the second quarter of 2008, no venture backed companies went public – a situation which had not occurredfor over 30 years! In fact, only six venture-backed companies went public in 2008. Instead, these later stagecompanies needed large, later rounds of financing as well as the continued attention and support by the invest-ing venture capitalists. The required time and capital made it difficult for the industry to turn its attention tolaunching the next generation of great companies. Nonetheless, over 1,100 new companies were added to ven-ture fund portfolios during 2008.The lack of distributions to the institutional investors who provide the capital to the industry have left these pro-fessional money managers with little capital to recycle back to the industry. The year started with a difficultfundraising environment for all but the most demonstrably promising funds and ended with tough conditions forall. Even when this overview is being written several weeks into 2009, little has improved. Exits and fundraisingremain challenging. But the industry is very much open for business. Reports from across the industry are thatexcellent teams are coming to venture firms with very strong business plans. That part of the venture capitalecosystem is working well. The most recent industry performance index continues to show that over the long haul the industry pays 15-20% IRR to its investors. All indications are that this will continue. However, a continued poor exit market willstress returns both because of lower exit valuations and delayed realizations.

Thomson Reuters 9

1988 1998 2008No. of VC Firms in Existence 377 624 882No. of VC Funds in Existence 715 1,085 1,366No. of Professionals 3,468 5,616 7,497No. of First Time VC Funds Raised 15 58 44No. of VC Funds Raising Money This Year 104 288 210VC Capital Raised This Year ($B) 4.4 29.7 27.9VC Capital Under Management ($B) 25.5 92.0 197.3Avg VC Capital Under Mgt per Firm ($M) 67.6 147.4 223.7Avg VC Fund Size to Date ($M) 34.7 60.6 104.4Avg VC Fund Size Raised This Year ($M) 42.3 103.1 132.9Largest VC Fund Raised to Date ($M) 1,175.0 5,000.0 5,000.0

Figure 1.0Venture Capital Under Management

Summary Statistics

expect further declines in the number of firms andfunds from this current level as firms which mostrecently raised money and invested at the height of thebubble, wrap up their portfolios and exit the industry.At year end 2008, 882 venture firms managed 1,366funds which had committed capital of $197.3 billion.

Commitments

New commitments to venture capital funds in theUnited States decreased in 2008 to $27.9 billion fromtheir post-bubble record levels in 2007. In 2008, 210funds got investor commitments — a decrease of 15%.The dollar amount of those commitments fell 21%.Most of the successful fundraising during 2008occurred in the first nine months. That said, overallfundraising (new capital committed by investors)remained in line with the amount of previously-raisedcapital being deployed or invested by venture capital-ists in companies. That is, new commitments of capitaland capital deployed remained pretty much in balance.

As the economy worsened toward the end of 2008,many institutional investors (e.g., pension plans,endowments, money managers) saw the public por-tion of their portfolios fall and found themselves over-allocated to alternative asset classes including venture

capital. This “denominator” effect made it difficultfor institutional investors to make any new commit-ments near year end 2008.

Investment

Venture capital investment in United States portfo-lio companies decreased 8% from the post-bubblehigh in 2007, but the total was still above 2006 lev-els. In 2008, venture capitalists invested $28.4 bil-lion dollars in 3,832 deals. This modest decline fol-


10 Thomson Reuters

0

20

40

60

80

100

120

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

($B

illio

ns)

Figure 3.0Capital Commitments to

U.S. Venture Funds ($ Billions)1980 to 2008

0

20

40

60

80

100

120

($B

illio

ns)

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Figure 4.0Investments

to Portfolio Companies ($ Billions)1980 to 2008

0

50

100

150

200

250

300

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

($B

illio

ns)

Figure 2.0Capital Under Management


lows 4 consecutive years of modest increases.

Despite these global economic concerns, the UnitedStates venture capital industry invested in 1,179 firsttime companies in 2008. While this is below the levelof the prior two years, new portfolio companies arebeing sought out and funded.

During 2008, a near-record number of later stagedeals were done. This is not surprising because of alarge number of portfolio companies reaching maturi-ty with no or lousy exit opportunities open to them.Despite the time and capital commitments to thesemature portfolio holdings, venture capitalists alsoinvested in companies in the seed state and early stageat near post-bubble levels.

Portfolio Company Post-MoneyValuations

Round valuations overall appeared to be significantlylower in 2008 than they were overall in the period1995-2008. In 2008, the median financing round wasat a reported $13.3 million, compared with the recenthistory of $30.0 million. The calculated average (ormean) round valuation, which of course can be affect-ed by particularly large rounds, was $46.7 million in2008 versus $72.9 million over the 14-year compari-son period. Of those sectors with sufficient reportedresults, only two reported an increase in median roundvaluations: the media and entertainment sector andthe medical devices and equipment sector.

Exits

The year 2008 was an awful year for venture-backedcompanies exiting through initial public offerings oracquisitions. Only six venture-backed companies wentpublic and the proceeds from acquisitions dropped bymore than 50%. This comes at a time when a recordnumber of companies founded during or just after thetech bubble entered the “later stage” of maturity and,in more typical times, would have exited.

One has to go back to the 1970s to find years with fewerIPOs. The six companies which did go public brought inless than one-half billion dollars in proceeds. Of the sixIPOs, two were Healthcare Services companies and twowere in Medical Devices and Equipment. Of the 16

MoneyTree™ sectors, 12 saw no IPOs.

The number of venture-backed companies acquiredduring 2008 (335) declined from 2007 (378) to a levelconsistent with other post-bubble years. While 2007was the post-bubble high water mark for strong acqui-sition exits, in 2008 the total disclosed proceedsdropped 59% to $13.3 billion. While M&A exits wereat best a mixed picture, 18% of those companies soldfor more than ten times the total venture investment(TVI) in those companies.

Performance

Over the long-term, venture capital funds have paidout a net 15-20% IRR to their investors. The mostrecent performance statistics confirm this. For the 20year period ended on September 30, 2008, venturefunds overall returned 17.0% annualized IRR. Amongthe fund segments, those designating themselves asearly stage led the way with 21.6% annualized IRR.Shorter horizon returns are less significant. For exam-

2009 NVCA Yearbook

Thomson Reuters 11

No. of Investment No. of InvestmentIndustry Group Companies Amt ($Bil) Companies Amt ($Bil)Information Technology 1,905 14.0 659 2.9Medical/Health/Life Science 734 8.2 234 1.5Non-High Technology 553 6.2 286 1.8Total 3,192 28.4 1,179 6.2

All Investments Initial Investments

Figure 5.02008 InvestmentsBy Industry Class

Startup-Seed5%

Early19%

Expansion38%

Later38%

Figure 6.02008 Investments

By Company Stage

ple, the one year returns reflect falling valuations forpublic companies which then affect the valuations ofprivate companies. Amplifying this effect in 2008,likely continuing into 2009 is the large number of laterstage companies still in portfolios. These companiestypically have positive EBITDA. Their portfolio valu-ations would be influenced by public markets throughthe use of ratios and comparables for pricing. Much ofthis IRR “exists” in the net asset values of portfolios.A continued awful exit market will delay exits (timing)and could reduce the values of the companies nowawaiting an IPO or acquisition (amount realized). Bothsuggest lower short-term returns going forward.

When analyzing the performance results fromThomson Reuters, several points need to be empha-sized. For example, a large portion of the investmentperformance of the funds in any analysis of venturecapital performance is dependent on unrealizedreturns that are subject to the various valuation meth-ods used by firms for valuing year-end portfolioinvestments. By definition, these investments are usu-ally illiquid and the valuations applied to them couldhave a liquidity premium applied to them. Later stagefunds may be a bit more efficient in pricing since theytend to have valuations that are more closely correlat-ed with public stocks.


12 Thomson Reuters

Business Products and Services2%

Computers and Peripherals1%

Consumer Products and Services2%

Electronics/Instrumentation2%

Financial Services2%

Healthcare Services1%

Biotechnology16%

Semiconductors6%

Networking and Equipment2%

Retailing/Distribution1%

Medical Devices and Equipment12%

Media and Entertainment7%

IT Services7%

Industrial/Energy16%

Software17%

Telecommunications6%

Figure 7.0Venture Capital Investments in 2008

By Industry Sector

Avg Upper LowerVal Quartile Quartile

Biotechnology 44.2 158.2 94.0 14.6 3.1 0.1Business Products and Services 17.0 42.2 23.8 12.0 5.2 2.0Computers and Peripherals NA NA NA NA NA NAConsumer Products and Services 24.8 77.0 27.0 10.2 8.0 2.0Electronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy 33.7 200.0 33.8 5.9 2.2 0.1IT Services 36.5 188.0 33.0 10.1 4.5 0.3Media and Entertainment 161.6 1,000.0 68.7 28.1 17.6 3.0Medical Devices and Equipment 44.5 140.0 63.1 34.1 13.6 1.2Networking and Equipment NA NA NA NA NA NAOther NA NA NA NA NA NARetailing/Distribution NA NA NA NA NA NASemiconductors 38.9 70.0 42.3 37.8 30.0 14.2Software 25.9 113.0 36.9 22.4 7.5 0.5Telecommunications 40.3 141.3 30.0 12.0 9.0 6.0Total 46.7 1,000.0 57.9 13.3 4.7 0.1

MinCompany Industry Max Median

Figure 9.0Valuations Per Company Industry

2008 Financings ($ Millions)

Number of Pct of Investment Pct ofState Companies Total ($ Millions) TotalCA 695 47% 5,917.3 55.2%MA 138 9% 898.2 8.4%NY 125 8% 768.0 7.2%TX 56 4% 510.2 4.8%WA 69 5% 405.2 3.8%VA 37 3% 291.3 2.7%IL 23 2% 229.5 2.1%MD 32 2% 220.6 2.0%NJ 33 2% 182.0 1.7%PA 51 3% 168.0 1.6%All Others 223 15% 1,123.7 10.5%Total 1,482 10,713.8

Figure 8.02008 Investments

By State

0

50

100

150

200

250

300

'80'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Year

No

.o

fIP

Os

0

5

10

15

20

25

30

Offe

r($

Billio

ns)

No. of IPOs

Offer ($ Billions)

Figure 10.0Venture-Backed IPOs

Although these measures seem to make venture capi-tal returns and public market returns directly compa-rable, the returns to public markets are almost alwaysstated as time-weighted returns while it is recom-mended that venture capital returns be calculated asmoney-weighted returns, or internal rates of return.By definition, neither method is “right” or “wrong”,but just different calculations of performance.Therefore, readers should bear in mind that addition-al care must be taken when directly comparing publicand private market performance.

Venture capital funds by their nature are long-terminvestments and should be measured with this inmind. Short-term performance can be misleadingbecause the underlying investments are highly illiq-uid. Also, since performance is in large part affect-ed by capital gains that have not been distributedyet, short-term performance is more of an indicatorof performance as opposed to a truer representa-tion. Readers should bear this in mind when com-paring short-term versus long-term asset class per-formance.

2009 NVCA Yearbook

Thomson Reuters 13

Net IRR to Investors For Investment HorizonEnding 09/30/2008 for Private Equity Funds

Fund Type 1YR 3YR 5YR 10YR 20YRSeed/Early Focused -1.5 3.7 5.0 37.1 21.6Balanced Focused -5.6 7.3 11.4 14.9 14.7Later Stage Focused 9.1 11.1 10.1 8.7 14.5All Venture -1.5 6.4 8.5 17.1 17.0Buyout Funds -8.3 7.1 12.2 7.3 11.1Mezzanine Debt 10.8 4.4 4.8 5.4 7.8All Private Equity -7.1 7.6 11.0 9.3 12.9

Figure 11.0Performance of Private Equity funds

Five-Year PeriodEnding S&P 500 NASDAQ1990 6.5 9.4 2.81991 8.6 11.5 10.91992 8.7 12.0 15.41993 11.7 10.9 15.31994 13.1 5.4 10.61995 20.1 13.8 24.01996 22.4 12.2 17.11997 26.1 17.4 18.31998 26.6 21.4 23.11999 48.2 26.2 40.22000 48.2 16.5 18.62001 36.8 9.2 8.62002 26.9 -1.9 -3.22003 25.0 -2.0 -1.82004 -2.1 -3.8 -11.82005 -6.5 -1.1 -2.22006 1.3 4.5 4.62007 8.6 10.8 14.72008 8.5 -4.1 -4.7

VentureCapital

Figure 12.0Five Year Rolling Averages:

Venture Capital vs. Public Market Indexes


14 Thomson Reuters


Industry Resources

METHODOLOGY

The number of firms in existence will vary on arolling eight-year basis as firms raise new funds or donot raise funds for more than eight years. Under thismethodology, we estimate that there are currently 882firms with limited partnerships “in existence”. Toclarify, this is actually stating that there are 882 firmsthat have raised a venture capital partnership in thelast eight years. In reality, there may well be fewerfirms actually making new investments.

For this publication, we are primarily counting thenumber of firms with limited partnerships and areexcluding other types of investment vehicles. From thatdescription, it may appear that the statistics for totalindustry resources may be underestimated. However,this must be balanced with the fact capital under man-agement by captive and evergreen funds is difficult tocompare equitably to typical limited partnerships withfixed lives. For this analysis only, the firms counted forcapital under management include firms with fixed lifepartnerships and venture capital funds raised. If a firm

raised both buyout and venture capital funds, only theventure funds would be counted in the calculation ofventure capital under management.

Venture capital under management in the United States by the end of 2008 decreased 24% from 2007 year-endlevels because large funds raised in during 2000 ($105 billion total raised) at the height of the bubble rolledout of the industry’s managed capital and were replaced with smaller and more targeted funds ($28 billionraised in 2008). The overall contraction in capital under management is reflected in the anticipated decreasein active firms and funds. The industry’s current investment and fundraising levels are approximately 1/3 of thebubble peak. We would expect further declines in the number of firms and funds from this current level as firmswhich raised money and invested at the height of the bubble wrap up their portfolios and exit the industry.

Industry headcount fell as well. The number of estimated industry principals fell 16% in 2008 also as part ofthe ongoing post-bubble contraction to approximately 7,500. At year end 2008, 882 venture firms managed1,366 funds which had committed capital of $197.3 billion.

Thomson Reuters 15

0

50

100

150

200

250

300

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

($B

illio

ns)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Private Independent 2,062 2,909 4,314 6,824 9,194 11,175 14,549 16,745 17,898 21,667 22,144 21,403 22,245 24,399 28,502 33,519 40,096 51,566 75,265 118,970 184,432 209,055 209,655 211,470 220,242 229,247 236,708 223,869 176,672Financial Institutions 1,218 1,993 2,234 3,099 3,539 4,124 4,296 4,408 4,466 4,060 4,014 3,515 3,344 3,419 4,038 4,924 5,705 8,521 12,220 17,853 25,504 27,405 26,710 26,382 26,273 25,244 24,473 20,928 13,182Corporations 516 759 744 1,018 1,179 1,773 1,772 2,172 2,296 2,137 2,370 2,281 2,454 1,753 1,805 1,698 2,555 2,715 3,421 6,973 13,135 14,304 14,444 14,103 14,073 14,898 14,913 11,938 6,440Other 304 439 509 459 689 828 883 875 840 735 671 601 357 229 356 459 544 899 1,094 1,503 2,129 2,336 2,290 2,244 2,311 2,012 2,006 1,565 1,006Total 4,100 6,100 7,800 11,400 14,600 17,900 21,500 24,200 25,500 28,600 29,200 27,800 28,400 29,800 34,700 40,600 48,900 63,700 92,000 145,300 225,200 253,100 253,100 254,200 262,900 271,400 278,100 258,300 197,300

Figure 1.01Capital Under Management


Figure 1.02Total Capital Under Management

By Firm Type 1980 to 2008 ($ Millions)

Venture capital under management can be a complexstatistic to estimate. Indeed, capital under manage-ment reported by firms can differ from firm to firm asthere’s not one singular definition. For example, somefirms include only cumulative committed capital, oth-ers may include committed capital plus capital gains,and still other firms define it as committed capitalafter subtracting liquidations. To complicate matters,it is difficult to compare these totals to European pri-vate equity firms which include capital gains as partof their capital under management measurements.

For purposes of the analysis in this publication, wehave tried to clarify the industry definition of capitalunder management as the cumulative total of commit-ted capital less liquidated funds or those funds thathave completed their life cycle. Typically, venturecapital firms have a stated 10-year fixed life span,except for life science funds which are often estab-lished as 12-year funds. Figure 1.07 shows the realityof fund life. Thomson Reuters calculates capital undermanagement as the cumulative amount committed to


16 Thomson Reuters

143135

119

135

150

89

58 53

0

20

40

60

80

100

120

140

160

0-10

10-2

5

25-5

0

50-1

00

100-

250

250-

500

500-

1000

1000

+

Total Total Total Firms That Raised Capital Avg AvgCumulative Cumulative Cumulative Existing Funds in the Last Managed Fund Size Firm Size

Year Funds Firms Capital ($B) Funds 8 Vintage Years ($B) ($M) ($M)1980 186 117 5.8 129 92 4.1 31.8 44.61981 250 154 7.9 188 127 6.1 32.4 481982 321 192 9.8 248 162 7.8 31.5 48.11983 434 236 13.4 355 208 11.4 32.1 54.81984 550 288 16.8 459 260 14.6 31.8 56.21985 639 320 20.2 541 297 17.9 33.1 60.31986 718 354 24.1 603 332 21.5 35.7 64.81987 820 390 27.7 681 362 24.2 35.5 66.91988 901 411 31.3 715 377 25.5 35.7 67.61989 996 440 36.5 746 392 28.6 38.3 731990 1055 457 39 734 393 29.2 39.8 74.31991 1094 465 41.2 660 373 27.8 42.1 74.51992 1170 486 45.2 620 365 28.4 45.8 77.81993 1264 518 50 625 376 29.8 47.7 79.31994 1369 549 58.7 651 389 34.7 53.3 89.21995 1527 615 68.3 707 429 40.6 57.4 94.61996 1674 675 80.2 773 469 48.9 63.3 104.31997 1899 774 100.2 903 548 63.7 70.5 116.21998 2140 859 131 1085 624 92 84.8 147.41999 2488 994 186.5 1394 752 145.3 104.2 193.22000 2907 1138 270.3 1737 881 225.2 129.6 255.62001 3147 1222 303.1 1883 943 253.1 134.4 268.42002 3221 1238 311.8 1852 938 253.1 136.7 269.82003 3327 1293 322.5 1800 968 254.2 141.2 262.62004 3497 1358 343.1 1823 1003 262.9 144.2 262.12005 3677 1428 371.6 1778 1024 271.4 152.6 2652006 3862 1502 409.1 1722 1027 278.1 161.5 270.82007 4081 1592 444.7 1593 1019 258.3 162.1 253.52008 4273 1648 467.6 1366 882 197.3 144.4 223.7

Figure 1.04Fund and Firm Analysis

Capital Under Management ($ Millions)This chart shows capital committed to US venture firms in active funds.While much of the capital is managed by larger firms, of the 882 firms inexistence at the end of 2008, roughly 60% of them (532) managed $100 mil-lion or less. By comparison, 53 firms managed active funds totaling morethan $1 billion.

The correct interpretation of this chart is that since the beginning of the industry to the end of 2008, 1,648 firms had been founded and 4,273 funds hadbeen raised. Those funds totaled $467.6 billion. At the end of 2008, 882 firms as calculated using our eight-year methodology managed 1,366 individualfunds, each fund typically a separate limited partnership. Capital under management by those funds at the end of 2008 is $197.3 billion. The average firmsize is $223.7 million.

Figure 1.03Distribution of Firms

By Capital Managed 2008

2009 NVCA Yearbook

Thomson Reuters 17

No. Estimated Avg MgtPrincipals Industry Per Principal

Year Per Firm Principals ($M)2007 8.7 8892 28.92008 8.5 7497 26.3

Figure 1.05Principals Information

State ($ Millions)CA 84,479.5MA 36,148.6NY 17,950.0CT 11,780.9MD 7,316.1Total* 157,675.0

Figure 1.06Top 5 States

By Capital Under Management 2008

*Total includes above 5 states onlyThe correct interpretation of this chart is that at year end 2008, there were7,497 principals (people who go to board meetings) in the industry. A prin-cipal on average manages $26.3 million and the average firm is made up of8.5 principals.

State 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008CA 1,099 1,349 2,288 3,051 4,090 4,880 5,871 6,458 6,720 7,849 7,428 7,524 7,678 8,282 9,087 11,421 14,192 19,455 26,254 48,317 78,830 89,359 90,067 92,500 97,866 104,497 110,241 103,763 84,479MA 530 761 990 1,509 1,830 2,200 2,769 3,419 3,793 4,263 4,364 4,003 4,967 4,990 5,285 6,762 7,409 10,297 14,779 22,006 35,805 43,276 45,776 44,610 45,415 47,665 50,391 48,159 36,149NY 1,247 1,659 1,811 2,765 3,245 3,598 4,672 4,840 4,664 6,347 6,531 6,208 6,092 6,845 8,168 9,307 10,893 11,714 21,639 30,728 44,727 46,033 43,733 43,021 43,217 42,890 35,581 30,874 17,950CT 255 528 607 753 879 1,287 1,440 1,678 1,757 1,614 1,762 1,638 1,741 1,583 1,743 1,827 1,902 3,396 4,578 6,975 9,021 12,286 12,112 12,065 13,924 13,874 15,057 13,083 11,781MD 42 84 55 120 258 252 403 431 417 451 634 565 476 1,011 1,249 1,260 2,144 2,243 3,090 4,878 8,709 8,458 8,430 8,418 8,906 9,417 11,396 10,868 7,316WA 27 61 76 264 267 316 411 388 428 406 391 201 247 231 182 302 464 677 1,083 1,796 2,814 3,638 3,640 3,512 4,493 4,469 4,467 5,508 4,954TX 89 96 111 331 409 500 539 792 791 874 917 852 889 976 1,186 1,097 1,249 1,716 3,019 4,667 7,211 8,373 8,207 8,127 8,446 8,122 7,794 6,165 4,591DC 1 1 1 1 3 36 38 49 56 58 59 59 57 23 1,039 1,307 2,850 3,496 3,579 3,716 4,478 5,268 4,223 3,956 2,733 3,046 4,153 4,346 4,410NJ 109 86 85 216 547 617 718 757 747 752 970 896 558 543 757 1,017 1,487 1,550 2,175 2,699 3,635 4,296 4,181 4,389 4,092 4,091 5,177 5,073 4,174IL 84 133 167 337 405 444 465 688 876 841 849 811 1,047 1,316 1,388 1,484 1,306 1,769 2,221 3,539 4,172 4,590 5,294 5,692 5,789 5,536 5,430 4,575 3,851PA 18 30 38 101 140 435 510 540 557 649 685 712 691 488 655 727 987 1,493 1,662 2,598 4,892 5,093 4,911 5,304 5,182 5,104 5,680 5,370 3,803VA 3 1 17 51 67 73 79 79 85 107 93 57 43 38 35 86 111 194 583 1,312 2,554 2,752 2,763 2,943 3,141 3,720 3,613 3,494 2,310MN 59 51 55 137 192 200 299 343 683 765 914 839 795 872 926 899 529 629 717 1,093 2,202 2,141 2,317 2,307 2,315 2,403 2,550 2,441 1,644CO 138 147 190 213 342 365 434 330 457 565 517 498 378 462 408 370 440 753 1,015 3,186 4,751 5,266 5,408 5,394 5,218 4,897 4,686 3,033 1,571NC 13 14 26 29 30 34 55 88 90 127 116 111 112 110 149 129 264 580 769 971 1,314 1,394 1,542 1,738 1,619 1,449 1,658 1,540 1,204UT 4 4 4 4 9 9 19 20 15 16 16 16 11 10 26 31 31 94 96 130 272 479 452 526 540 499 603 1,130 1,159OH 214 835 833 877 924 860 901 981 845 261 262 279 310 436 478 451 378 689 768 1,243 1,856 1,878 1,878 1,855 2,053 1,878 1,790 1,652 1,008GA 0 0 3 47 51 53 59 140 226 231 243 196 195 249 246 240 166 253 558 687 1,286 1,279 1,274 1,197 1,229 1,267 1,268 1,443 853TN 2 2 2 4 30 103 129 193 186 221 264 281 276 203 297 305 459 522 750 1,062 1,197 1,289 1,169 1,161 1,048 1,040 844 675 569FL 8 8 70 111 126 126 132 174 194 199 134 111 99 153 227 324 305 448 763 1,142 1,765 1,730 1,661 1,567 1,556 1,718 1,436 1,166 530MI 0 0 83 109 141 142 152 238 231 237 150 125 94 95 92 27 27 253 259 620 709 712 711 751 944 780 796 510 503MO 3 3 17 17 34 577 604 637 615 631 669 665 656 109 139 120 125 147 112 122 215 241 209 198 296 276 335 547 460LA 4 1 3 6 6 7 7 7 7 7 5 2 11 23 32 49 90 275 368 444 478 731 727 709 745 585 512 437 421KY 0 16 15 16 16 16 16 16 16 0 0 0 0 0 7 7 7 7 7 7 7 7 0 14 14 18 218 220 225WI 93 131 127 181 184 180 97 96 93 104 104 79 80 82 166 169 168 137 140 110 184 183 90 89 100 85 255 258 185ME 1 1 1 1 1 1 1 21 26 26 26 26 28 29 100 89 87 87 89 207 203 291 218 219 215 217 278 162 165AL 0 0 0 0 0 127 132 133 129 138 139 139 140 6 6 6 6 5 24 33 108 108 107 107 125 178 177 169 161AZ 15 16 15 16 57 41 44 44 74 76 77 76 35 45 44 45 10 9 38 38 37 48 89 124 125 143 116 117 139IN 13 14 23 32 60 45 56 57 78 99 89 82 99 101 111 112 194 176 192 207 479 477 466 499 409 417 429 415 119RI 1 1 1 2 2 15 16 16 36 37 38 36 37 23 23 23 0 0 0 0 0 24 24 24 24 24 97 98 100NM 0 0 15 27 42 72 101 137 135 173 261 247 235 209 182 155 152 120 12 12 12 12 12 34 35 70 75 77 78ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 14 14 14 14 14 14 85 86 73IA 0 38 37 41 42 50 52 106 102 65 66 63 63 55 56 5 5 16 17 16 16 60 60 55 65 54 60 68 69OK 23 25 24 1 1 1 29 29 28 38 38 37 38 39 10 10 32 23 67 66 140 140 140 139 117 118 111 117 42VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 41 41 41 41 41 41 55 40PR 0 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 40 40 39 69 68 68 68 69 29 31 31DE 1 1 7 7 35 39 41 40 39 48 42 42 14 9 52 101 122 114 117 115 140 140 116 68 56 56 57 57 31NH 0 0 0 1 1 24 25 25 50 51 52 51 51 28 28 47 19 66 67 66 66 66 84 65 66 19 30 30 31MS 3 3 3 0 0 0 0 0 0 0 0 0 0 0 0 25 25 25 26 26 25 53 53 28 28 28 29 30 30OR 0 0 1 18 130 170 178 206 243 249 251 232 118 75 75 78 30 30 40 40 100 100 113 83 85 86 76 79 23SC 0 1 1 2 2 2 2 2 2 16 16 15 15 16 16 29 29 13 13 13 79 80 93 80 80 86 86 87 21SD 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 10 74 73 168 168 167 167 162 163 101 102 19HI 0 0 0 0 2 2 2 2 2 2 2 2 0 0 0 2 2 2 2 11 11 11 11 9 16 16 16 8 14ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13KS 0 0 0 0 0 0 0 0 0 0 13 13 13 14 14 38 47 66 53 52 52 51 51 28 19 0 0 0 0NE 0 0 0 0 0 0 0 0 1 1 1 1 1 12 12 106 137 138 141 140 176 165 165 71 38 38 38 39 0MT 0 0 0 0 0 0 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 21 21 21 21 21 21 21 21 0WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 118 118 117 117 118 119 119 120 0AR 0 0 0 0 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 72 71 71 71 71 71 72 72 0 0NV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 24 23 23 23 23 23 24 24 0 0AK 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Total 4,100 6,100 7,800 11,400 14,600 17,900 21,500 24,200 25,500 28,600 29,200 27,800 28,400 29,800 34,700 40,600 48,900 63,700 92,000 145,300 225,200 253,100 253,100 254,200 262,900 271,400 278,100 258,300 197,300

Figure 1.07Capital Under Management By State 1980 to 2008 ($ Millions)

funds on a rolling eight-year basis. Current capitalunder management is calculated by taking the capitalunder management calculation from the previous year,add in the current year’s funds’ commitments, andsubtracting the capital raised eight years prior.For this analysis, Thomson Reuters classifies ven-

ture capital firms using four distinct types: privateindependent firms, financial institutions, corpora-tions, and other entities. ‘Private independent’ firmsare made up of independent private and public firmsincluding both institutionally and non-institutional-ly funded firms and family groups. ‘Financial insti-tutions’ refers to firms that are affiliates and/or sub-sidiaries of investment banks and non-investmentbank financial entities including commercial banksand insurance companies. The ‘Corporations’ classi-fication includes venture capital subsidiaries andaffiliates of industrial corporations. The capitalunder management data referred to in this sectionconsist primarily of venture capital firms investingthrough limited partnerships with fixed commit-ment levels and fixed lives and does not includeinfinite lived “evergreen funds” or true captive cor-porate industrial investment groups without fixedcommitment levels. The term ‘evergreen funds’refers to funds that have a continuous infusion ofcapital from a parent organization as opposed to thefixed life and commitment level of a closed-endventure capital fund.


18 Thomson Reuters

Life of IT Funds % ofIn Years Funds<= 10 7%11-12 20%13-14 27%15-16 22%17-18 14%>=19 10%

Figure 1.08Life of IT Funds in Years

Source: Adams Street Partners, based on 2006 analysis of funds then dis-solved. This chart tracks the year in which a 10-year fund is, in fact, dis-solved. These later periods are referred to as "out years." By this point intime, most of the strong exits have occurred, the companies that are goingto outright fail have done so, and the portfolio consists of a few portfoliocompany holdings which are difficult to sell at a favorable price.

Capital Commitments

Methodology

As defined by Thomson Reuters, capital commitments arefunds raised by private equity limited partnerships fromtheir limited partners. There are three sources of data for

capital commitments: (1) SEC filings that are regularlymonitored by our research staff, (2) surveys of the indus-try routinely conducted by Thomson Reuters, and (3)industry press and press releases from venture firms. Commitments are stated on either a calendar year basis

New commitments to venture capital funds in the United States decreased in 2008 to $27.9 billion from their post-bubble record levels in 2007. In 2008, 210 funds got investor commitments — a decrease of 15%. The dollar amountof those commitments fell 21%. Most of the successful fundraising during 2008 occurred in the first nine months.That said, overall fundraising (new capital committed by investors) remained in line with the amount of previously-raised capital being deployed or invested by venture capitalists in companies. That is, new commitments of capitaland capital deployed remained pretty much in balance.

The fundraising environment remained difficult for all but the most proven and demonstrably promising firmsthroughout the year, and for virtually all funds as year end neared. Venture firms had raised considerable funds in2007 and the first part of 2008. As the economy worsened toward the end of 2008, many institutional investors (e.g.,pension plans, endowments, money managers) saw the public portion of their portfolios fall and found themselvesover-allocated to alternative asset classes including venture capital. This “denominator” effect made it difficult forinstitutional investors to make any new commitments near year end 2008.

Much of the fundraising was done by established, often larger, firms. Capital was also successfully raised by newfunds in promising sectors, such as clean technology, and those with proprietary deal flow prospects. The topfundraising states remained California, Massachusetts, and New York. The list of top states shifted in 2008 with DCand Texas joining the top 5, replacing Washington state and Pennsylvania. Overall, funds domiciled in the top 5states accounted for 82% of the capital raised and 63% of the funds raising money.

Please note that fund domicile by state is less meaningful than it has been historically viewed. Much of the moneyis managed by large, national funds which tend to be domiciled in any of several states. Some of these firms, forexample, may have their largest concentration of investing partners in California but the firm is actually headquar-tered and administered elsewhere.

Thomson Reuters 19

0

20

40

60

80

100

120

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

($B

illio

ns)

YearVenture

Capital $Mil No. FundsBuyouts and Mezzanine

Capital $Mil No. FundsPrivate Equity

Capital $Mil No. Funds1980 2,025.6 52 183.5 4 2,209.1 561981 1,486.5 75 126.8 4 1,613.3 791982 1,705.4 87 611.3 13 2,316.7 1001983 3,949.2 143 1,351.3 15 5,300.5 1581984 2,964.3 116 3,482.5 22 6,446.8 1381985 3,988.5 121 3,024.5 22 7,013.0 1431986 3,788.4 103 5,001.9 31 8,790.3 1341987 4,376.7 116 15,565.7 41 19,942.4 1571988 4,435.0 104 11,326.4 50 15,761.4 1541989 4,902.6 105 11,966.2 78 16,868.8 1831990 3,229.0 87 7,861.1 62 11,090.1 1491991 2,002.8 42 5,886.6 27 7,889.4 691992 5,215.3 80 11,031.3 58 16,246.6 1381993 3,943.6 88 16,128.9 79 20,072.5 1671994 8,928.0 140 20,415.3 98 29,343.3 2381995 9,859.6 172 26,293.3 102 36,152.9 2741996 11,845.2 162 29,655.2 99 41,500.4 2611997 19,772.5 244 41,055.4 129 60,827.9 3731998 29,692.0 288 61,568.7 160 91,260.7 4481999 55,808.9 451 53,556.5 153 109,365.4 6042000 105,004.6 653 75,254.7 154 180,259.3 8072001 39,056.4 321 49,904.1 120 88,960.5 4412002 9,329.8 206 24,118.2 88 33,448.0 2942003 11,607.8 163 31,040.1 101 42,647.9 2642004 19,845.2 219 50,908.7 137 70,753.9 3562005 28,727.5 235 97,403.2 179 126,130.7 4142006 31,827.6 241 147,989.7 179 179,817.3 4202007 35,398.0 247 205,260.1 208 240,658.1 4552008 27,947.8 210 177,980.1 179 205,927.9 389

Figure 2.01Capital Commitments

To U.S. Venture Funds ($ Billions)1980 to 2008

Figure 2.02Capital Commitments

To Private Equity Funds 1980-2008


20 Thomson Reuters

State 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008CA 380 363 731 913 948 1044 770 1235 934 1501 736 546 1407 1169 2031 3330 3539 5555 7593 21854 41901 13328 2735 4652 9203 14930 10902 14866 15096MA 223 115 438 494 357 559 557 935 788 335 557 242 1051 170 1030 2012 1998 2439 4994 7984 16173 9563 2577 1597 1692 5144 4641 6257 3501NY 228 402 193 1043 424 302 1460 654 363 2242 490 509 470 695 1895 2154 1848 3966 8381 9601 16588 2504 1025 1245 2183 2096 2583 5223 1973DC 0 0 0 0 0 39 0 12 5 0 0 0 0 0 1310 280 820 2338 395 220 1423 1122 315 0 392 566 1413 240 1293TX 12 57 0 240 118 87 61 256 41 162 143 58 382 137 283 194 326 388 1411 1792 4160 2739 186 76 794 652 363 284 1172PA 0 9 0 57 69 54 73 55 12 118 45 167 30 110 182 114 174 609 157 1253 2290 334 86 488 463 349 486 754 1025CT 70 309 44 333 130 316 156 236 288 66 310 150 300 272 388 260 425 1324 1093 3038 3050 3904 60 165 2327 1216 3186 625 886UT 0 0 0 0 6 0 11 1 0 0 0 0 0 0 11 0 0 33 50 40 129 224 29 34 40 24 130 142 559WA 9 37 17 113 0 25 126 37 60 0 0 5 48 40 37 179 204 180 409 640 1195 938 83 1 995 281 590 1882 489MD 0 45 0 0 219 4 182 24 2 74 213 50 0 415 272 21 775 172 1272 1681 4039 521 478 1100 278 833 2868 1377 447MN 2 0 3 168 0 266 110 51 418 20 162 16 946 66 164 19 36 527 585 131 2473 17 276 26 50 295 398 275 325IL 1000 65 48 158 74 57 47 235 158 26 57 94 247 278 183 230 295 360 466 1364 1007 1073 478 702 432 81 465 558 236OH 0 16 30 0 34 3 0 87 75 0 30 0 67 4 86 10 0 366 58 659 662 330 102 5 276 544 125 209 194CO 0 0 40 29 112 32 71 32 70 80 0 0 0 114 0 19 216 253 433 1942 2414 513 140 94 84 69 133 371 157TN 0 0 0 0 30 20 24 73 0 34 0 0 40 0 116 84 151 109 266 267 262 82 22 101 16 84 62 100 129MI 0 0 0 36 0 5 0 97 33 0 0 0 0 3 13 0 26 226 5 329 286 8 11 51 33 101 13 49 106VA 0 0 34 0 2 0 4 10 13 15 2 0 0 3 0 53 20 65 322 996 2345 201 41 238 72 428 555 599 83AL 0 0 0 0 0 150 0 0 0 0 0 0 0 0 0 0 0 5 30 0 80 16 11 7 19 60 19 0 68NJ 41 23 13 96 216 254 61 120 0 125 244 75 110 177 401 363 456 118 1002 720 1206 652 392 561 197 344 1962 235 48MO 0 0 0 0 15 644 0 33 0 0 53 0 0 64 0 11 6 45 25 80 65 286 0 0 80 29 40 220 45FL 60 3 87 39 171 10 0 36 11 29 0 35 0 133 105 106 0 78 250 326 936 26 8 56 1 313 11 109 25AZ 0 0 0 0 19 0 0 0 37 0 0 0 0 10 0 0 0 0 0 29 0 21 42 41 0 19 0 0 20GA 0 0 0 52 0 0 0 15 65 0 14 0 0 56 0 74 34 41 181 30 861 19 0 0 55 104 103 518 19SD 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 0 22 14 131 1 0 0 5 0 0 0 15ND 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13KY 0 17 0 0 0 0 0 0 0 0 0 0 0 14 7 15 0 42 0 0 0 135 8 2 0 5 65 98 12HI 0 0 0 0 2 0 0 0 0 0 0 0 0 0 0 3 0 0 0 10 0 0 3 0 8 0 0 0 6OR 0 0 0 20 0 0 0 30 0 0 0 0 0 0 32 32 0 0 10 0 65 0 14 0 2 0 0 2 5VT 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20 25 0 0 0 0 0 11 3NC 0 0 0 0 0 7 7 32 23 38 1 0 0 0 63 10 164 349 174 209 601 120 72 291 3 101 398 166 1LA 0 0 0 0 0 0 0 0 0 0 0 0 11 14 169 18 24 88 51 375 70 112 52 8 75 4 13 0 0OK 0 0 0 0 0 0 32 0 0 10 0 0 0 0 0 0 24 0 45 0 110 0 0 0 0 12 38 5 0IN 0 0 12 10 2 0 10 0 27 16 5 0 49 0 20 0 116 0 13 20 103 40 10 36 17 6 24 1 0KS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 25 10 20 0 0 0 0 0 0 0 0 0 0 0IA 0 20 0 25 0 11 0 60 0 0 0 0 56 0 0 5 0 12 0 5 21 26 0 0 10 0 43 0 0RI 0 0 5 0 0 17 0 0 25 0 0 0 0 0 0 0 0 0 0 0 0 25 0 0 0 0 64 14 0MS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12 0 0 0 0 30 0 0 0 0 0 1 0 0NH 0 7 4 34 0 49 0 0 40 0 0 15 0 0 0 20 0 50 0 0 0 0 11 9 0 0 5 7 0ME 1 0 0 0 0 0 0 22 948 0 0 0 2 0 59 0 22 0 0 127 0 77 16 3 0 0 46 20 0ID 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 27 0 0 0 0 0 75 0WV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 4 13 2 0 0 0 0 0SC 0 1 0 2 0 0 0 0 0 13 5 0 0 0 0 14 0 0 0 0 70 0 15 0 0 6 0 0 0PR 0 0 0 0 0 0 0 0 0 0 10 0 0 0 0 0 0 0 0 0 0 31 0 0 0 0 0 1 0NV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 50 25 0 0 25 0 0 0 0 0 0 0 0 0NE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 111 36 0 0 0 41 0 0 0 0 0 0 0 0DE 0 0 8 0 0 0 0 0 0 0 0 0 0 0 25 31 65 0 0 28 0 0 22 0 10 0 0 0 0UN 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0WY 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 26 0 0 0 0 0 0 0 0AR 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 7 69 0 0 0 0 0 0 0 0WI 0 0 0 58 0 0 0 0 0 0 0 0 0 0 40 0 0 16 0 17 82 14 0 0 11 0 78 101 0NM 0 0 2 31 17 36 28 0 2 0 155 40 0 0 6 2 0 0 0 0 0 0 0 18 22 34 5 7 0Total 2026 1487 1705 3949 2964 3989 3788 4377 4435 4903 3229 2003 5215 3944 8928 9860 11845 19773 29692 55809 105005 39056 9330 11608 19845 28728 31828 35398 27948

Figure 2.03Venture Capital Fund Commitments

1980 to 2008 ($ Millions)

or a vintage year basis depending on the analysisrequired. The data in this chapter is calendar year andincrementally measures how much capital a fund raisedduring the calendar year. For example, if a venture capi-tal firm announces a $175 million fund in 2007, raises$75 million in 2007, and subsequently raises the remain-ing $100 million in 2008, the fund commitments wouldbe counted in two calendar years at $75 million and$100 million, respectively. Assuming it started investing

and made its first capital call in 2008, the entire fundwould then be considered to be a 2008 vintage year fund. An important note: the fund commitments presented inthis publication do not include those corporate captiveventure capital funds that are provided its financing bythe corporate parent as well as evergreen funds sincethey do not raise capital from outside investors in the tra-ditional sense.

2009 NVCA Yearbook

Thomson Reuters 21

0

20

40

60

80

100

120

140

160

180

200

220

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

($B

illio

ns)

Venture Capital

Buyouts and Mezzanine Capital

Figure 2.05Private Equity

Annual Commitment ($ Billions)1980 to 2008

No. of CommittedState Funds ($Mil)California 89 15095.7Massachusetts 22 3500.6New York 11 1972.8District of Columbia 3 1292.9Texas 7 1172.2Sub-Total 132 23034.2Remaining States 78 4913.6Total 210 27947.8

Figure 2.04Top 5 States

By Venture Capital Committed 2008



22 Thomson Reuters

Investments

MethodologyAs calculated by Thomson Reuters, venture capitalinvestment data are derived from several sources.Primarily, survey information is obtained from thequarterly survey which drives the MoneyTreeReport™ from PricewaterhouseCoopers and theNational Venture Capital Association based on datafrom Thomson Reuters. This is the official industrydatabase of venture capital investment. Secondly,Thomson Reuters obtains data from SEC filings thatare regularly monitored by our research staff.

Finally, publicly available sources such as pressreleases and trade publications are used.

For detailed information on which transactions quali-fy as MoneyTree and are therefore counted in thischapter, please refer to Appendix B.

Venture capital investment in United States portfolio companies decreased 8% from the post-bubble high in2007, but the total was still above 2006 levels. In 2008, venture capitalists invested $28.4 billion dollars in 3,832deals into 3,192 companies. This modest decline follows 4 consecutive years of modest increases. Much of theinvestment attention was focused on new companies, as well as later stage companies already in the portfolioswhich are unable to move onto an initial public offering or acquisition. As the year ended and concerns mount-ed over global economic problems, the investment pace fell in the fourth quarter. It is not clear whether that trendwill continue into 2009.

Despite these global economic concerns, the United States venture capital industry invested in 1,179 firsttime companies in 2008. While this is below the level of the prior two years, it shows that the industry is verymuch open for business.

During 2008, a near-record number of later stage deals were done. This is not surprising because of a largenumber of portfolio companies reaching maturity with no or lousy exit opportunities open to them. Except forthe fourth quarter of 2008 when activity overall fell, this ever-increasing accumulation of companies in need oflater stage financing kept the number of such deals above 300 per quarter – a level unheard of until the sec-ond quarter of 2007. Despite the time and capital commitments to these mature portfolio holdings, venture cap-italists did also invest in companies in the seed and early stage at near post-bubble levels.

Life science investment remained around 30% of all invested capital and investment in California increasedslightly to 50% of the capital deployed nationally. Clean technology investment increased to $4.1 billion, whichis 7.5 times the amount three years earlier.

Investment by corporate venture capital groups remained steady at 8% of total US investment. Approximately19% of all rounds involve at least one corporate venture group. However, both of these statics trended down inthe fourth quarter.

Several factors were in play which will put upward pressure on the amount of venture capital invested in the com-ing quarters: (1) there are a record number of later stage companies which need continued funding but are unableto exit through IPO or acquisition at this time; (2) the emerging sectors such as biotechnology, medical devices, andclean technology tend to be more capital intensive than typical information technology companies;(3) many venturefirms report an increasing number of high-quality opportunities and teams in the marketplace; and (4) increasedgovernment R&D funding will undoubtedly make certain sectors more investible. On the other hand, those factorssuppressing investment levels in the near term are (1) the need for capital efficiency at the portfolio companies –lengthening the runway and reducing the burn rate; (2) possible difficulty in additional fundraising from institution-al investors over the next several quarters because of stretched allocations to this asset class; and (3) a lack of exitsmeans lack of distributions which means a lack of capital which can be recycled for future investment.

Thomson Reuters 23


24 Thomson Reuters

No. of Investment No. of InvestmentIndustry Group Companies Amt ($Bil) Companies Amt ($Bil)Information Technology 1,905 14.0 659 2.9Medical/Health/Life Science 734 8.2 234 1.5Non-High Technology 553 6.2 286 1.8Total 3,192 28.4 1,179 6.2

All Investments Initial Investments

0

20

40

60

80

100

120

($Bi

llions

)

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year


By Industry Group

Figure 3.01Venture Capital Investments ($ Billions)

1980 to 2008

2009 NVCA Yearbook

Thomson Reuters 25

Num of AmtState Cos Invested ($Bil)California 1,292 14.3Massachusetts 346 3.0New York 195 1.3Texas 125 1.3Washington 126 1.0Total* 2,084 20.8

Figure 3.03Venture Capital Investments

Top 5 States in 2008

Telecommunications6%

Software17%

Industrial/Energy16%IT Services

7%Media and Entertainment

7%

Medical Devices and Equipment12%

Retailing/Distribution1%

Networking and Equipment2%

Semiconductors6%

Biotechnology16%

Healthcare Services1%

Financial Services2%

Electronics/Instrumentation2%

Consumer Products and Services2%

Computers and Peripherals1%

Business Products and Services2%


By Industry Sector

Startup-Seed5%

Early19%

Expansion38%

Later38%


By Stage

*Total includes top 5 states only


26 Thomson Reuters

16

NE

24AL

0AR

208AZ

14278CA

817CO

130CT

31DC

63DE

238FL

423GA

0GU

7HI

40IA

12ID

445IL

134IN

45KS 29

KY

8LA

2997MA

461MD

ME

246MI

487MN

86MO

0MS

16MT

459NC

0ND

181NH

695NJ

69NM

13NV

1298NY

258OH

17OK

176OR

701PA

14PR

39RI

34SC

1SD

65TN

1287TX

194UT

486VA

0VI

43VT

962WA

75WI

24WV

2WY

20

Figure 3.06Amount of Capital Invested By State in 2008

($ Millions)

NE

8AL

0AR

19AZ

1292CA

78CO

30CT

8DC

5DE

29FL

59GA

0

GU

6HI

4IA

6ID

57IL

13IN

20KS 10

KY

9LA

346MA

87MD

ME

33MI

43MN

19MO

0MS

2MT

45NC

1ND

23NH

76NJ

16NM

3NV

195NY

44OH

4OK

29OR

152PA

2PR

9RI

10SC

1SD

20TN

125TX

29UT

65VA

0VI

8VT

126WA

18WI

1WV

1WY

2

4

Figure 3.07Number of Companies Invested in By State in 2008

92WA

176OR

16MT

12ID

2WY

817CO

194UT

13NV14278

CA

208AZ

69NM

1287TX

0ND

1SD

16NE

45KS

17OK

487MN

75WI 246

MI

1298NY

43VT

181NH 20

ME

2997 MA

39 RI

130 CT695 NJ

63 DE

461 MD459 NC65 TN

0MS

24AL

423GA

238FL

14PR 0

VI

0GU

40IA

445IL

134IN

258OH

486 VA29KY

86MO

0AR

8LA

7HI

126WA

29OR

2MT

1ND

43MN

6ID

1SD

1292CA

3NV

29UT 78

CO

2NE

20KS

4IA

18WI 33

MI

19MO

57IL

13IN

44OH

10KY

20 TN

152PA

65VA

4ME

23NH

8VT

195NY

8DC

0AR

4OK

125TX

6HI

6LA

0MS

8AL

59GA

29FL

2PR 0

VI

0GU

16NM

19AZ

1WY

24WV

701PA

31DC

34SC

10SC

87MD

5DE

76 NJ30 CT

9 RI

346 MA

1WV

45 NC

2009 NVCA Yearbook

Thomson Reuters 27

Region 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Silicon Valley 131.3 325.8 532.3 1066.6 1044.4 741.6 941.8 825.0 949.1 874.6 863.2 742.8 1073.6 875.2 1080.3 1808.3 3421.9 4703.5 5967.2 18106.0 33335.4 12703.6 7119.0 6568.5 8003.1 8221.3 9636.3 11009.4 10997.4New England 71.2 170.2 242.0 428.3 451.5 434.4 405.5 500.5 488.7 409.3 407.6 277.0 443.1 347.0 460.3 759.8 1155.2 1569.3 2356.9 5506.4 11736.8 5206.8 2867.6 2986.6 3356.3 2814.3 3189.8 3900.5 3283.1LA/Orange County 38.5 112.3 189.4 343.3 261.3 203.3 191.7 273.3 200.2 241.7 182.7 143.6 170.5 186.9 201.0 1021.5 687.3 803.6 1253.4 3587.9 6681.3 2087.1 1296.2 1111.9 951.7 1602.7 1970.7 1619.4 1994.7NY Metro 54.7 67.5 95.4 143.0 160.4 210.7 210.0 259.7 306.3 361.5 196.1 177.5 223.1 196.7 281.6 480.9 726.1 1268.3 1684.6 4534.4 10437.5 3528.6 1492.3 1421.6 1603.9 1983.5 2038.1 1692.7 1867.2Midwest 29.7 68.2 98.0 164.3 209.0 153.0 134.7 201.7 158.9 194.4 163.7 158.0 168.3 310.6 386.4 450.0 737.0 869.1 1624.5 2739.7 5606.2 1966.5 956.7 863.7 655.2 773.5 990.1 1215.8 1368.6Texas 76.3 128.4 119.2 144.1 200.4 241.6 228.3 206.3 237.1 237.6 143.5 161.1 148.4 220.2 284.3 464.4 532.1 830.8 1158.9 3135.6 6003.0 2943.0 1296.0 1246.9 1154.5 1174.9 1389.4 1468.5 1287.3Southeast 23.5 49.8 73.2 134.5 122.8 165.6 229.2 252.0 238.8 200.3 142.4 98.5 319.3 415.0 350.6 820.8 1124.7 1385.9 1634.4 4388.3 8007.4 2742.5 1793.7 1114.3 1301.1 1096.0 1247.1 2038.4 1244.1San Diego 20.3 32.4 14.3 65.8 60.9 95.8 74.8 101.7 149.5 142.1 106.4 105.8 107.1 124.3 222.1 271.2 444.7 496.0 591.5 1208.6 2201.7 1523.5 964.3 823.7 1215.7 1092.3 1203.1 1991.6 1213.0Northwest 6.0 21.5 44.0 129.3 89.2 142.1 128.9 140.5 115.1 115.3 88.6 62.0 219.9 135.9 157.5 380.6 494.4 538.3 813.4 2508.2 3598.4 1382.3 741.6 623.2 1011.3 1012.1 1267.1 1709.6 1167.3DC/Metroplex 24.3 26.5 25.9 80.8 53.6 103.5 58.5 99.8 128.6 140.7 83.9 37.6 50.0 67.2 131.1 415.8 510.1 551.6 1139.4 2104.0 5607.3 2097.0 1096.3 823.0 937.7 1049.3 1150.1 1268.1 1002.1Colorado 30.3 32.1 39.7 82.2 82.6 77.4 112.7 106.8 100.8 159.3 92.3 50.6 128.2 133.9 189.5 327.7 306.5 379.8 725.8 1738.4 4103.7 1222.4 536.5 621.4 408.0 643.7 645.1 609.7 817.4Philadelphia Metro 21.3 27.7 18.9 38.8 72.4 52.3 54.7 78.9 71.5 56.3 104.8 41.6 178.0 425.1 124.0 232.3 352.1 492.7 625.5 1593.7 2566.0 1111.7 584.0 535.6 736.3 559.1 756.5 822.6 758.1North Central 18.2 22.2 30.2 55.1 70.1 32.8 43.0 77.4 41.5 49.4 60.4 46.4 87.6 113.5 89.9 203.4 225.9 350.7 477.0 796.3 1387.0 645.1 486.2 493.0 453.4 353.3 407.6 588.7 619.4SouthWest 9.0 18.7 41.8 31.7 41.8 40.6 79.8 53.9 55.3 49.3 30.1 30.9 90.9 46.6 31.8 111.4 172.0 288.8 356.8 745.9 1348.1 446.6 406.1 223.7 370.1 550.3 495.2 549.1 483.5Upstate NY 7.2 13.1 3.0 10.4 17.7 14.2 10.7 9.7 6.2 7.3 11.1 3.4 9.1 5.1 0.7 35.5 22.4 84.5 179.7 214.5 289.7 159.1 104.5 128.2 105.2 54.1 149.9 136.5 87.4Sacramento/N.Cal 2.4 7.9 19.4 9.2 19.1 16.0 41.3 23.0 34.1 4.2 19.3 15.7 17.7 7.4 16.6 31.4 28.9 21.4 85.8 104.1 350.1 227.0 65.4 32.2 37.9 45.7 34.2 99.9 72.8South Central 12.8 24.0 7.2 31.6 8.2 13.7 11.7 19.8 12.6 24.2 11.6 3.9 15.2 13.3 46.6 48.2 71.6 67.4 186.7 418.1 464.3 160.9 69.4 58.5 119.5 18.3 87.1 106.3 70.9AK/HI/PR 0.0 0.1 4.5 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 1.0 22.0 7.8 24.2 14.0 5.5 17.4 237.6 69.8 4.9 12.9 15.1 13.6 46.4 20.9 21.0Unknown 0.0 0.0 19.1 1.1 0.8 4.5 0.5 0.6 0.8 0.3 0.0 0.0 30.0 0.8 0.2 0.3 2.2 4.4 42.1 2.4 58.8 26.3 0.0 0.0 0.9 57.1 0.0 0.0 0.0Total 576.9 1,148.4 1,617.3 2,960.3 2,966.1 2,742.9 2,958.0 3,230.6 3,295.0 3,267.9 2,707.7 2,156.6 3,480.1 3,625.8 4,076.3 7,871.3 11,039.2 14,720.2 20,909.3 53,449.8 104,020.5 40,250.0 21,880.3 19,688.8 22,436.9 23,115.1 26,703.7 30,847.6 28,355.2

Figure 3.08Venture Capital Investments in 1980 to 2008

By Region ($ Millions)

Region 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Silicon Valley 100 158 270 347 395 324 327 335 338 378 385 329 412 308 334 498 763 870 1,041 1,699 2,158 1,101 806 857 943 985 1,196 1,240 1,179New England 62 132 158 219 251 237 211 249 228 217 212 168 160 145 142 233 331 380 461 652 873 573 440 440 424 417 440 497 465NY Metro 32 69 88 114 86 91 102 118 105 120 88 80 69 69 78 127 152 226 264 474 808 429 221 193 213 183 274 258 309Midwest 30 51 79 95 109 98 111 130 104 128 101 92 86 87 84 130 181 224 239 314 497 269 233 163 155 166 198 248 267LA/Orange County 45 82 91 132 115 99 105 118 106 111 99 93 97 61 55 88 132 159 215 345 513 246 153 144 146 184 219 207 238Northwest 11 26 38 60 45 49 47 56 64 63 48 41 47 41 47 80 104 129 130 259 329 189 136 109 147 161 176 223 208Southeast 28 40 80 69 82 95 117 132 109 108 121 104 104 107 106 163 217 293 299 444 650 393 267 237 231 196 221 246 206DC/Metroplex 13 17 40 57 44 46 42 61 57 50 59 53 45 35 44 72 113 134 160 262 496 253 190 180 178 204 211 211 194Texas 39 53 71 82 90 109 90 103 102 86 82 70 65 65 63 95 133 168 188 301 465 332 172 168 164 168 188 173 147Philadelphia Metro 14 20 20 28 29 38 35 50 43 35 42 41 63 49 43 78 89 134 130 135 222 125 92 83 99 88 108 128 143San Diego 6 15 15 33 37 42 31 49 54 56 47 41 46 47 60 71 106 97 115 146 232 153 110 123 126 131 127 163 126Colorado 15 40 36 41 57 44 57 59 59 51 47 34 50 48 51 57 77 93 122 157 218 106 88 70 71 76 98 97 101SouthWest 18 21 23 19 25 18 28 40 22 27 21 25 34 29 26 37 50 67 83 110 143 84 65 49 56 77 84 94 78North Central 21 21 37 55 66 36 47 52 52 38 43 39 40 40 38 71 71 117 108 115 146 121 73 72 68 66 65 84 77South Central 8 16 9 12 8 11 11 12 7 8 5 3 7 7 10 15 20 25 27 30 51 31 24 17 29 10 22 30 38Upstate NY 5 9 8 13 18 17 10 9 10 12 6 4 9 10 5 8 9 20 31 32 34 29 24 22 28 27 37 32 29Sacramento/N.Cal 2 3 7 11 14 11 17 11 11 6 10 9 13 7 9 10 11 7 16 17 35 25 6 11 7 10 7 16 19AK/HI/PR 0 1 2 1 0 1 0 0 0 0 0 3 3 1 2 4 7 6 5 5 14 10 3 6 5 5 13 8 8Unknown 0 0 25 4 1 14 1 1 2 2 0 0 1 4 2 2 7 7 15 3 17 14 0 0 3 2 0 0 0Total 449 774 1,097 1,392 1,472 1,380 1,389 1,585 1,473 1,496 1,416 1,229 1,351 1,160 1,199 1,839 2,573 3,156 3,649 5,500 7,901 4,483 3,103 2,944 3,093 3,156 3,684 3,955 3,832

Figure 3.08bVenture Capital Investments in 1980 to 2008

By Region (Number of Deals)


28 Thomson Reuters

Stage 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Startup-Seed 113 225 270 361 388 361 382 386 364 354 259 185 249 285 329 430 505 531 661 808 696 274 178 205 209 239 360 450 444Early 180 241 397 454 422 315 327 392 351 328 370 270 282 180 250 507 759 884 1007 1710 2843 1280 851 783 865 822 943 1038 1018Expansion 130 255 320 475 528 537 502 595 595 648 586 527 600 505 426 695 1018 1407 1569 2454 3691 2385 1586 1362 1211 1095 1367 1261 1187Later 26 53 110 102 134 167 178 212 163 166 201 247 220 190 194 207 291 334 412 528 671 544 488 594 808 1000 1014 1206 1183Total 449 774 1097 1392 1472 1380 1389 1585 1473 1496 1416 1229 1351 1160 1199 1839 2573 3156 3649 5500 7901 4483 3103 2944 3093 3156 3684 3955 3832

Figure 3.09bVenture Capital Investments

1980 to 2008 By Stage (Number of Deals)

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Software 39.9 132.5 244.7 588.3 700.5 602.3 563.5 497.6 474.9 454.3 514.6 449.4 605.6 466.9 667.2 1,144.0 2,295.6 3,348.0 4,475.7 10,515.0 24,391.4 10,341.9 5,282.7 4,534.7 5,422.6 4,824.3 4,974.5 5,457.3 4,921.8Telecommunications 8.7 45.2 96.6 137.3 164.6 175.7 173.1 143.0 155.9 114.5 113.3 106.6 152.7 235.1 454.6 951.9 1,197.8 1,594.4 2,860.1 7,935.1 16,635.6 5,303.3 2,346.4 1,803.9 1,911.4 2,362.4 2,657.0 2,283.1 1,675.7Media and Entertainment 19.0 51.3 66.9 100.1 61.8 88.0 110.1 153.2 138.4 163.7 93.4 65.6 150.4 333.0 277.7 914.8 1,077.8 953.0 1,823.7 6,639.0 10,491.3 2,333.4 734.1 890.1 976.0 1,151.3 1,641.0 1,948.9 2,002.5Biotechnology 46.0 105.2 78.8 128.7 94.9 131.9 220.4 260.1 354.0 326.6 291.3 271.1 563.9 453.5 569.9 800.4 1,161.5 1,413.2 1,555.9 2,088.1 4,171.2 3,439.5 3,236.2 3,669.3 4,267.5 3,916.3 4,575.5 5,216.7 4,527.6Medical Devices and Equipment 32.8 48.4 74.3 146.0 204.8 185.8 173.9 257.4 343.5 344.0 326.8 226.0 490.9 423.5 433.7 641.7 658.2 1,022.6 1,169.1 1,529.8 2,435.6 2,022.2 1,839.7 1,649.4 1,928.1 2,213.3 2,921.1 4,063.6 3,481.1Industrial/Energy 156.5 250.8 221.0 229.3 233.0 207.8 199.2 311.1 210.2 330.5 199.2 170.0 302.2 295.2 276.2 542.8 506.5 707.8 1,441.0 1,688.0 2,534.2 1,157.0 748.9 758.8 777.0 850.9 1,955.9 3,273.1 4,674.8Consumer Products and Services 21.8 12.3 46.6 47.3 43.8 70.6 129.8 159.1 149.9 104.0 169.0 130.2 114.1 133.5 186.8 521.5 508.4 748.2 647.1 2,566.5 3,398.7 692.7 244.0 174.7 317.2 372.0 501.3 494.0 434.5Healthcare Services 18.1 12.0 34.7 81.4 90.2 79.3 121.1 130.5 89.8 151.1 84.1 63.4 171.8 154.5 184.2 455.7 682.4 892.3 932.0 1,435.8 1,371.2 501.9 371.2 224.8 358.2 398.4 395.4 268.4 195.1Networking and Equipment 27.7 66.4 65.7 204.0 210.6 218.9 158.7 131.3 140.1 200.4 168.7 138.7 273.3 508.5 243.3 352.5 621.9 946.9 1,451.5 4,375.5 11,513.0 5,595.5 2,665.4 1,754.3 1,519.0 1,457.1 1,059.3 1,294.7 657.1Computers and Peripherals 93.7 227.5 430.2 833.0 662.7 446.2 428.5 386.9 356.5 283.8 233.1 166.6 188.1 158.6 180.0 326.3 395.2 391.6 377.0 909.9 1,655.7 662.7 453.7 369.6 618.4 555.4 548.6 611.7 409.4Retailing/Distribution 27.1 6.8 14.5 82.2 67.6 32.0 82.2 267.3 226.3 218.6 88.7 48.5 96.9 89.4 96.6 317.6 258.1 316.1 628.1 2,841.7 3,143.4 329.7 157.2 68.3 184.4 231.3 214.1 386.4 267.5Semiconductors 25.8 90.4 117.2 232.3 255.0 245.2 278.0 250.0 288.7 159.9 183.6 76.1 148.7 94.5 152.4 202.3 302.4 572.9 625.6 1,307.8 3,626.2 2,450.9 1,546.5 1,794.7 2,174.3 1,915.7 2,158.5 2,070.4 1,650.1Financial Services 13.8 15.5 12.4 26.8 13.7 86.0 102.6 63.2 209.4 221.4 60.2 21.5 107.1 123.0 124.8 193.5 329.4 371.3 820.9 2,232.7 4,229.9 1,446.3 347.8 411.4 523.8 915.5 468.0 567.4 534.5IT Services 3.3 4.9 16.6 28.1 21.2 21.4 31.9 42.8 28.7 36.2 37.8 41.4 28.4 31.3 112.8 184.9 445.6 659.1 1,085.5 4,204.5 8,632.3 2,462.0 1,091.0 772.3 697.5 1,067.6 1,353.2 1,560.9 1,844.0Business Products and Services 8.4 17.1 22.3 31.4 34.6 29.4 60.2 52.3 44.9 43.9 76.9 70.6 34.2 62.7 45.4 176.8 383.3 439.5 693.9 2,809.4 4,975.9 1,065.5 482.0 591.9 398.2 395.4 590.9 758.6 483.9Electronics/Instrumentation 33.4 53.8 68.9 56.5 100.0 119.9 121.8 124.4 78.0 115.0 66.9 78.3 52.0 56.9 64.8 134.6 194.4 286.8 227.0 287.6 770.1 371.4 315.0 220.5 362.3 431.0 681.9 588.8 572.8Other 1.1 8.4 5.9 7.7 7.2 2.5 3.0 0.3 6.0 0.0 0.0 32.7 0.0 5.8 5.8 10.0 20.7 56.3 95.3 83.5 44.7 74.2 18.4 0.0 1.1 57.1 7.5 3.6 22.7Total 576.9 1,148.4 1,617.3 2,960.3 2,966.1 2,742.9 2,958.0 3,230.6 3,295.0 3,267.9 2,707.7 2,156.6 3,480.1 3,625.8 4,076.3 7,871.3 11,039.2 14,720.2 20,909.3 53,449.8 104,020.5 40,250.0 21,880.3 19,688.8 22,436.9 23,115.1 26,703.7 30,847.6 28,355.2


1980 to 2008 By Industry ($ Millions)

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Telecommunications 11 37 56 69 98 88 77 91 76 75 55 62 59 67 69 140 212 271 331 521 860 493 277 223 227 254 317 299 234Networking and Equipment 12 37 30 68 67 80 73 74 70 73 76 65 86 63 76 79 122 142 214 283 478 327 221 183 180 170 129 132 97Computers and Peripherals 69 124 186 239 244 161 143 124 133 124 101 78 81 67 68 91 97 111 86 101 135 74 54 58 62 63 76 67 66IT Services 3 8 22 27 31 24 24 31 22 27 30 30 19 17 31 60 121 158 206 450 680 322 167 145 137 156 198 226 267Software 40 95 168 304 336 326 318 298 273 292 301 282 298 240 247 415 670 798 952 1,387 2,100 1,235 971 918 926 885 927 944 887Semiconductors 20 42 49 76 96 86 72 87 89 78 75 49 56 41 37 60 68 110 112 138 252 209 168 209 258 226 251 215 180Electronics/Instrumentation 38 49 49 47 82 77 69 70 58 62 54 47 42 29 35 49 43 53 57 53 72 57 58 51 63 82 93 94 87Biotechnology 19 46 59 68 48 71 97 130 145 128 139 135 157 132 137 170 231 247 276 266 348 332 309 340 377 382 450 486 486Medical Devices and Equipment 39 51 70 104 118 135 113 165 149 184 189 154 188 147 128 179 217 264 280 283 286 248 231 243 268 279 352 398 374Healthcare Services 4 2 18 36 48 33 55 57 45 54 41 35 42 45 40 69 128 147 149 159 163 101 67 67 59 66 54 52 52Industrial/Energy 102 164 181 157 161 131 131 158 134 140 143 121 124 93 94 129 152 208 186 188 239 190 125 133 146 137 205 301 346Media and Entertainment 28 45 70 64 41 53 62 83 68 68 57 48 74 76 91 139 174 208 261 690 934 360 157 140 139 195 316 371 406Retailing/Distribution 6 6 14 25 18 19 32 66 80 72 44 38 34 34 26 49 69 90 117 226 271 83 50 34 37 37 43 54 41Consumer Products and Services 23 25 50 42 37 48 51 68 55 48 61 43 49 48 66 115 129 160 161 272 277 117 67 46 65 73 84 101 104Financial Services 16 18 27 25 12 25 30 36 42 41 23 22 22 31 31 43 65 83 113 189 340 147 76 62 71 64 80 85 74Business Products and Services 15 20 34 32 29 21 39 45 33 30 26 18 20 27 21 47 67 98 139 280 456 175 102 92 75 84 107 124 121Other 4 5 14 9 6 2 3 2 1 0 1 2 0 3 2 5 8 8 9 14 10 13 3 0 3 3 2 6 10Total 449 774 1,097 1,392 1,472 1,380 1,389 1,585 1,473 1,496 1,416 1,229 1,351 1,160 1,199 1,839 2,573 3,156 3,649 5,500 7,901 4,483 3,103 2,944 3,093 3,156 3,684 3,955 3,832

Figure 3.10bVenture Capital Investments

1980 to 2008 By Industry (Number of Deals)

Stage 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Startup-Seed 161.4 353.8 347.2 560.1 658.1 527.6 742.1 625.2 663.3 563.9 398.2 232.5 552.0 637.4 791.5 1261.6 1292.1 1332.1 1737.1 3656.9 3197.8 766.7 333.8 357.5 465.5 897.7 1176.8 1279.7 1500.3Early 153.5 302.8 408.6 757.8 710.3 516.5 600.5 721.5 721.0 715.8 692.8 548.8 572.6 620.8 825.9 1724.2 2687.3 3526.9 5552.1 11464.3 25176.2 8545.5 3834.5 3548.0 4004.0 3806.9 4172.9 5476.4 5363.4Expansion 189.2 392.1 627.4 1266.1 1196.4 1238.1 1154.4 1425.5 1521.8 1585.7 1269.9 1040.0 1772.4 1862.5 1535.1 3660.5 5418.9 7608.6 10430.1 29549.2 59334.5 22801.5 12341.3 10028.6 9148.4 8649.3 11533.2 11688.1 10637.1Later 72.7 99.6 234.1 376.3 401.4 460.7 461.0 458.3 388.9 402.5 346.8 335.4 583.2 505.1 923.8 1224.9 1640.9 2252.5 3190.0 8779.5 16312.0 8136.3 5370.7 5754.8 8818.9 9761.2 9820.8 12403.4 10854.3Total 576.9 1148.4 1617.3 2960.3 2966.1 2742.9 2958.0 3230.6 3295.0 3267.9 2707.7 2156.6 3480.1 3625.8 4076.3 7871.3 11039.2 14720.2 20909.3 53449.8 104020.5 40250.0 21880.3 19688.8 22436.9 23115.1 26703.7 30847.6 28355.2


1980 to 2008 By Stage ($ Millions)

2009 NVCA Yearbook

Thomson Reuters 29

Figure 3.11Venture Capital Investments By State 1980 to 2008 ($ Millions)

State 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008CA 192.5 478.4 755.3 1,484.9 1,385.7 1,056.7 1,249.6 1,223.1 1,332.9 1,262.6 1,171.6 1,007.9 1,368.9 1,193.8 1,520.0 3,132.4 4,582.7 6,024.5 7,898.0 23,006.7 42,568.6 16,541.3 9,444.8 8,536.2 10,208.4 10,962.0 12,844.3 14,720.2 14,277.8MA 66.3 163.4 225.3 399.2 416.5 395.3 359.4 424.3 389.1 318.6 337.3 231.0 362.2 310.6 409.6 672.1 1,070.1 1,396.5 1,989.7 4,942.1 10,337.8 4,775.8 2,532.7 2,733.3 3,114.4 2,582.5 2,995.0 3,721.4 2,996.7NY 53.8 46.3 57.5 68.4 78.4 114.4 72.1 88.7 113.3 158.9 48.8 44.5 133.6 104.9 68.1 253.6 299.8 804.8 1,271.6 3,390.6 6,795.6 2,015.9 779.7 658.8 761.6 1,127.4 1,273.2 1,129.7 1,297.8TX 76.3 128.4 119.2 144.1 200.4 241.6 228.3 206.3 237.1 237.6 143.5 161.1 148.4 220.2 284.3 464.4 532.1 830.8 1,158.9 3,135.6 6,003.0 2,943.0 1,296.0 1,246.9 1,154.5 1,174.9 1,389.4 1,468.5 1,287.3WA 3.7 13.4 17.1 58.2 27.4 55.5 52.1 86.1 45.0 74.4 56.3 31.3 159.3 116.9 134.9 327.1 399.7 408.2 729.6 1,929.7 2,773.8 1,124.7 579.8 463.5 863.6 838.3 1,106.3 1,377.2 962.3CO 30.3 32.1 39.7 82.2 82.6 77.4 112.7 106.8 100.8 159.3 92.3 50.6 128.2 133.9 189.5 327.7 306.5 379.8 725.8 1,738.4 4,103.7 1,222.4 536.5 621.4 408.0 643.7 645.1 609.7 817.4PA 25.4 29.8 26.0 40.0 75.2 48.1 34.6 83.5 74.5 48.7 117.1 38.2 163.7 421.5 130.5 140.4 304.0 473.8 557.1 1,619.2 2,853.2 927.1 451.8 498.0 602.3 481.9 854.0 820.2 700.9NJ 9.8 26.1 33.4 70.3 85.8 74.6 116.9 135.8 103.1 156.7 71.1 66.9 101.2 68.6 201.9 260.8 412.8 446.2 473.6 921.3 3,271.6 1,528.4 904.7 870.1 1,004.5 886.4 807.3 607.6 694.8MN 11.5 19.6 28.3 44.0 57.4 24.4 28.5 35.0 25.9 35.7 45.5 39.8 63.8 45.3 53.8 170.0 168.3 260.9 359.7 634.9 1,023.3 455.9 402.7 233.0 386.9 239.6 327.3 488.1 487.0VA 1.9 9.9 7.8 48.9 23.6 31.7 21.0 64.2 65.0 49.7 46.6 9.1 26.4 41.0 77.4 291.7 366.2 339.8 762.2 1,169.5 3,307.0 936.1 423.9 408.2 301.9 525.8 439.6 556.7 486.4MD 19.7 13.4 10.8 26.9 24.4 51.8 20.8 32.5 46.4 88.0 34.8 27.6 18.8 25.2 49.3 123.4 137.2 182.8 328.3 648.2 1,817.7 997.4 636.1 346.0 549.8 486.6 661.9 610.7 460.7NC 2.1 4.7 25.0 26.7 14.6 17.8 18.4 21.2 15.7 14.5 33.9 9.0 44.3 20.1 60.7 211.8 181.8 269.3 324.0 789.2 1,823.7 584.5 562.2 380.7 306.7 392.5 418.8 546.7 459.1IL 10.1 14.9 21.1 54.3 67.9 45.2 30.7 38.5 42.7 93.4 72.0 82.6 75.7 93.3 157.9 199.6 355.1 361.3 418.1 1,412.0 2,350.5 964.2 308.9 374.1 208.9 276.7 403.4 505.4 444.9GA 9.1 26.3 11.2 35.3 31.0 54.5 108.1 62.1 91.8 53.1 19.1 36.0 158.7 150.9 97.1 150.4 244.4 393.2 428.6 1,130.0 2,314.5 890.3 564.7 295.3 501.2 253.1 369.5 474.9 423.4OH 8.3 35.4 21.7 24.0 36.2 30.3 51.0 46.0 71.7 44.4 27.0 15.5 26.3 49.1 62.4 69.7 162.7 213.3 309.2 490.7 973.6 233.6 264.8 179.0 76.6 139.9 78.5 192.8 258.1MI 3.6 7.1 33.4 46.6 43.0 33.3 21.2 56.2 17.7 21.8 26.4 4.2 14.7 58.7 8.6 65.8 85.7 112.0 124.0 250.4 337.2 153.6 107.8 80.2 129.6 80.8 116.9 104.7 245.7FL 7.9 7.7 20.1 58.8 33.9 31.6 34.5 68.4 60.2 31.7 32.5 26.2 79.8 126.8 94.5 221.2 402.5 450.3 551.5 1,685.8 2,682.5 846.5 410.2 308.7 363.7 329.0 387.2 767.5 238.4AZ 5.6 16.4 33.2 25.4 32.7 14.6 37.9 35.1 39.7 36.4 27.5 20.6 57.4 35.6 30.6 96.1 95.3 158.1 208.1 302.2 622.6 196.0 191.1 73.3 70.7 123.4 262.6 202.9 208.0UT 1.4 2.1 7.2 5.0 6.6 4.0 29.5 5.7 11.7 4.4 0.8 3.3 24.4 10.5 0.0 11.2 52.3 94.0 116.7 408.2 673.6 208.1 129.5 106.5 227.8 192.0 180.9 188.3 193.6NH 1.3 3.7 3.8 11.7 13.6 5.3 14.8 12.9 18.8 13.8 16.2 30.1 6.8 23.0 7.9 28.8 42.4 53.3 184.8 235.5 750.6 224.6 207.8 154.3 135.6 92.4 78.7 135.2 181.1OR 2.3 8.1 24.2 56.6 61.8 84.8 76.1 51.7 67.5 40.9 32.3 29.7 55.6 18.8 22.5 38.3 94.6 126.9 53.5 545.7 789.5 230.1 151.1 107.5 143.7 134.4 152.8 312.1 176.0IN 0.0 0.0 0.6 9.0 17.2 13.3 16.7 17.7 6.4 9.7 10.9 8.3 0.0 27.0 56.1 8.3 22.8 25.2 39.0 46.7 269.0 39.7 40.0 24.5 67.8 103.6 70.3 82.8 133.6CT 1.5 15.4 23.9 47.2 54.9 61.6 64.0 94.0 160.9 87.4 133.3 86.1 71.9 37.9 74.8 134.1 147.3 269.3 366.8 924.5 1,509.4 549.8 182.7 212.3 205.1 201.6 269.7 295.9 129.7MO 1.0 0.0 4.1 4.6 8.5 8.8 3.8 10.6 1.6 9.5 7.5 34.9 27.4 50.4 39.1 83.3 50.4 67.9 611.0 168.2 590.3 237.4 76.0 78.4 26.0 56.0 43.7 91.7 86.5WI 0.1 1.7 0.4 7.8 8.3 7.2 13.6 16.4 12.8 11.7 12.4 5.5 22.2 27.5 8.5 8.9 25.1 68.0 90.2 86.4 191.8 93.1 50.8 37.5 57.1 68.5 72.3 90.1 75.2NM 2.0 0.2 0.2 1.1 1.6 22.0 10.0 9.0 3.9 3.0 1.8 4.4 0.0 0.5 0.0 3.6 22.4 27.0 7.7 12.1 21.1 14.2 53.7 3.6 24.0 76.4 32.1 128.5 69.4TN 3.8 7.2 8.5 13.5 31.2 46.3 53.9 66.6 42.8 74.1 42.2 20.8 8.1 46.7 36.6 155.2 146.8 108.0 107.5 493.2 453.3 212.8 115.8 84.4 85.0 88.6 41.5 124.7 65.1DE 0.0 0.0 0.6 0.0 0.0 0.3 0.0 4.5 1.4 4.8 1.4 3.8 9.7 3.0 12.4 4.4 4.7 1.1 0.0 16.8 134.7 164.6 19.4 0.4 2.1 7.2 5.3 6.5 62.7KS 0.0 0.8 0.4 0.7 0.9 2.3 2.2 3.9 5.4 14.9 8.9 0.4 1.9 4.8 1.5 6.6 26.2 9.2 10.4 30.2 264.8 40.3 7.4 24.9 48.7 1.7 21.5 82.1 45.5VT 1.8 0.2 0.0 0.5 1.0 0.0 6.6 8.0 4.5 7.4 7.2 1.5 19.0 0.0 5.3 12.0 2.0 3.2 1.4 0.0 46.4 11.6 3.7 5.2 5.1 35.2 10.1 8.7 42.9IA 6.5 0.2 1.4 2.8 3.1 0.7 0.9 11.9 1.3 2.0 2.5 1.1 1.6 2.8 23.9 14.2 22.1 17.1 8.8 13.9 30.8 6.0 2.0 0.0 5.3 32.1 1.5 6.3 40.2RI 0.0 1.9 4.6 4.8 6.9 12.6 9.9 6.6 14.2 30.9 2.7 0.4 5.1 8.7 0.0 3.4 0.3 11.5 26.0 31.4 74.6 118.7 95.9 61.3 58.0 76.3 82.7 7.0 39.2SC 0.0 0.0 0.0 0.0 0.1 0.9 0.0 12.8 18.1 23.6 7.6 4.0 1.2 11.4 21.8 53.1 91.9 47.7 137.0 135.1 447.6 98.1 79.5 14.3 13.6 2.7 10.3 87.2 34.0DC 2.7 3.3 4.2 1.2 2.8 18.9 14.8 2.9 17.2 0.0 2.5 0.8 4.8 1.1 4.3 0.7 6.7 5.2 46.9 286.3 478.1 162.2 20.3 56.1 80.2 26.4 43.9 90.5 31.0KY 0.2 2.5 1.1 1.5 0.0 2.4 2.3 7.7 2.8 5.8 0.0 8.5 3.9 24.8 18.2 20.7 31.1 35.0 37.5 81.9 201.8 23.9 13.8 4.8 47.2 32.0 27.7 53.4 29.5AL 0.7 1.5 8.2 0.3 9.6 12.3 14.2 20.9 9.6 2.3 2.3 0.1 10.6 57.3 25.0 29.2 46.7 109.4 82.3 64.6 266.3 80.3 56.3 29.9 26.0 20.2 18.9 31.5 24.1WV 0.0 0.0 3.1 3.8 2.9 1.1 2.0 0.1 0.0 3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 23.8 2.0 0.0 4.5 1.4 15.9 12.6 5.8 10.5 4.7 10.2 24.0ME 1.1 0.0 0.3 2.8 6.0 19.0 11.6 15.3 8.7 17.2 4.5 0.8 0.2 3.0 0.0 1.5 1.5 9.7 61.5 57.4 140.2 3.9 15.4 0.9 12.0 4.5 7.6 5.0 20.2OK 5.8 5.6 5.5 13.7 5.9 1.5 4.7 14.1 5.3 9.3 2.6 1.5 0.0 0.0 11.0 6.1 31.8 27.8 101.4 68.0 52.5 29.8 33.0 31.1 63.9 0.0 14.9 8.1 17.3NE 0.0 0.7 0.0 0.5 0.8 0.5 0.0 0.0 1.5 0.0 0.0 0.0 0.0 38.0 3.5 0.5 10.4 3.7 17.9 57.3 134.8 88.6 12.6 204.6 0.2 13.1 6.5 0.0 16.0MT 0.0 0.0 0.0 0.0 0.0 1.5 0.7 2.7 0.4 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.3 16.7 24.8 0.0 0.0 0.0 27.4 0.0 4.0 15.6PR 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 1.0 22.0 7.8 4.1 12.5 1.3 4.6 31.1 32.0 0.5 0.1 1.5 1.7 14.3 16.0 13.8NV 0.0 0.0 1.3 0.2 1.0 0.0 2.4 4.1 0.0 5.5 0.1 2.7 9.1 0.0 1.2 0.6 2.0 9.7 24.2 23.4 30.8 28.2 31.8 40.2 47.6 158.5 19.6 29.4 12.6ID 0.0 0.0 0.7 14.5 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.2 0.1 15.2 0.1 1.2 30.3 16.5 18.5 2.7 10.6 52.2 2.5 8.0 1.5 16.2 11.9LA 6.6 17.6 1.3 17.2 1.4 9.9 3.3 1.9 1.9 0.0 0.0 2.0 3.8 3.8 2.7 30.5 13.7 26.5 68.0 294.0 112.7 80.5 19.3 1.3 3.2 4.1 11.5 15.9 8.2HI 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20.2 1.5 4.2 12.8 203.0 37.8 4.4 12.8 13.7 11.9 32.1 4.9 7.2WY 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 4.1 6.5 0.2 1.5SD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.3 0.5 18.1 3.5 1.9 0.0 0.0 4.0 0.5ND 0.0 0.0 0.0 0.0 0.5 0.0 0.0 14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 9.8 0.0 1.1 0.5 3.0 6.1 1.0 0.0 14.5 2.0 0.0 0.0 0.2 0.4MS 0.0 2.4 0.2 0.0 2.5 2.2 0.0 0.0 0.6 0.9 4.9 2.4 16.7 1.7 15.0 0.0 10.6 8.0 3.5 90.4 19.5 30.0 5.0 0.9 4.9 10.0 1.0 5.9 0.0UN 0.0 0.0 19.1 1.1 0.8 4.5 0.5 0.6 0.8 0.3 0.0 0.0 30.0 0.8 0.2 0.3 2.2 4.4 42.1 2.4 58.8 26.3 0.0 0.0 0.9 57.1 0.0 0.0 0.0AR 0.4 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 9.5 4.7 31.4 5.0 0.0 4.0 6.9 25.9 34.3 10.4 9.7 1.2 3.7 12.6 39.2 0.2 0.0AK 0.0 0.0 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total 576.9 1,148.4 1,617.3 2,960.3 2,966.1 2,742.9 2,958.0 3,230.6 3,295.0 3,267.9 2,707.7 2,156.6 3,480.1 3,625.8 4,076.3 7,871.3 11,039.2 14,720.2 20,909.3 53,449.8 104,020.5 40,250.0 21,880.3 19,688.8 22,436.9 23,115.1 26,703.7 30,847.6 28,355.2


30 Thomson Reuters

Figure 3.11bNumber of Venture Capital Deals by State 1980 to 2008

State 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008CA 153 258 383 523 561 476 480 513 509 551 541 472 568 423 458 667 1,012 1,133 1,387 2,207 2,938 1,525 1,075 1,135 1,222 1,310 1,549 1,626 1,562MA 53 114 142 192 222 216 185 217 195 180 168 134 135 128 123 198 291 332 393 581 768 512 374 381 380 365 395 447 410NY 23 44 54 71 50 48 47 52 46 49 29 22 32 33 35 65 86 152 192 348 605 281 153 118 150 129 209 193 235PA 11 17 20 23 30 35 44 56 55 38 42 36 61 46 37 65 82 127 138 146 254 142 96 97 103 100 136 159 174WA 8 14 20 34 17 23 21 25 23 35 27 26 33 27 34 62 74 84 109 205 254 142 108 83 115 127 143 175 164TX 39 53 71 82 90 109 90 103 102 86 82 70 65 65 63 95 133 168 188 301 465 332 172 168 164 168 188 173 147CO 15 40 36 41 57 44 57 59 59 51 47 34 50 48 51 57 77 93 122 157 218 106 88 70 71 76 98 97 101MD 6 8 16 23 17 20 17 24 28 19 27 27 23 15 20 31 45 48 54 98 175 91 91 87 88 101 111 96 100NJ 18 28 31 42 40 45 45 52 44 55 47 47 41 33 39 56 63 75 76 113 185 152 91 90 90 74 94 92 88VA 5 7 16 26 21 21 19 28 24 29 27 23 19 18 21 40 64 82 102 148 275 136 85 82 79 87 89 94 81GA 9 15 14 17 26 31 43 44 38 29 29 34 34 37 41 46 53 84 98 161 223 138 79 58 77 63 81 76 79IL 13 16 21 33 35 27 27 31 31 62 34 36 33 26 35 43 56 79 70 129 199 126 77 56 50 54 55 69 66OH 8 17 15 9 21 25 20 27 22 18 22 22 21 21 22 37 53 52 63 51 77 43 49 28 35 38 41 56 52NC 6 4 16 17 13 15 21 16 11 16 24 17 18 20 22 35 61 82 82 104 153 89 85 77 53 51 62 69 51MN 18 16 34 44 51 23 29 33 29 29 30 30 27 26 21 51 51 90 79 85 109 84 56 58 50 43 39 57 47MI 2 10 22 29 27 19 22 22 12 16 13 8 5 12 3 13 21 29 32 43 53 21 26 16 17 19 18 22 43CT 7 19 26 36 35 32 32 39 43 43 37 30 30 23 31 44 46 65 74 89 116 70 38 34 33 32 30 37 37FL 10 13 36 21 21 22 20 28 23 20 31 20 27 24 18 48 55 70 62 118 185 113 58 62 61 55 56 65 35OR 3 10 15 23 27 24 24 29 35 28 21 12 12 12 12 17 29 41 18 50 68 43 26 21 29 26 31 42 35UT 5 4 6 1 5 1 12 13 6 5 3 6 10 6 0 6 15 30 33 42 61 43 28 22 30 28 39 33 33NH 3 7 5 7 6 3 9 10 7 11 18 17 11 10 4 10 16 17 26 31 56 30 38 32 23 24 21 23 28MO 1 0 5 5 4 5 5 12 8 11 10 9 9 12 7 15 22 17 19 23 49 17 28 19 8 10 13 17 24KS 0 2 1 2 2 1 2 6 4 4 3 1 5 2 2 3 9 6 3 8 22 10 7 11 14 4 7 16 23TN 1 3 5 13 10 17 23 29 29 28 22 22 10 8 10 19 24 25 24 40 45 29 22 23 25 21 11 20 21AZ 8 15 15 15 15 14 10 19 10 20 14 13 20 21 23 28 28 27 36 54 64 33 24 16 12 25 29 28 20WI 1 3 1 7 11 11 15 16 15 6 11 6 9 7 8 7 9 19 16 18 21 21 11 8 10 16 20 21 19NM 5 2 1 1 4 3 4 6 6 1 3 2 0 2 1 2 5 3 4 6 8 4 7 5 8 15 9 25 19IN 0 0 3 8 7 8 15 15 6 6 12 8 1 8 7 7 8 12 8 11 26 6 11 8 10 10 15 17 17SC 0 0 0 0 2 1 0 4 3 7 5 9 7 7 6 5 13 14 16 9 13 6 7 4 5 1 3 10 12DC 2 2 6 6 5 4 5 7 4 1 5 3 3 2 3 1 4 2 3 16 44 24 6 6 8 11 8 17 12KY 1 1 3 2 1 2 4 7 4 5 0 2 2 2 3 10 7 15 16 16 14 4 3 3 4 3 7 8 10LA 4 9 5 4 2 6 2 2 2 0 0 1 1 4 2 8 4 12 11 10 15 11 8 1 3 4 3 7 10RI 0 4 4 7 10 6 4 7 6 7 7 4 2 3 0 3 1 4 5 10 9 11 14 10 8 13 7 4 10VT 1 3 0 1 1 0 3 3 3 2 3 3 1 0 3 4 1 1 2 1 4 3 6 6 4 5 9 8 9AL 2 2 8 1 8 8 9 11 4 7 7 1 4 9 4 10 8 16 15 10 28 15 13 9 5 3 7 4 8DE 0 0 1 0 0 1 1 1 4 3 1 3 2 1 3 4 4 4 0 2 4 2 2 1 1 3 3 4 6HI 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 2 4 3 3 3 5 2 5 4 4 10 4 6NV 0 0 1 2 1 0 2 2 0 1 1 4 4 0 2 1 2 7 10 8 10 4 6 6 6 9 7 8 6ID 0 0 2 3 1 1 0 1 0 0 0 0 1 2 1 1 1 2 3 2 4 2 2 5 2 2 1 4 6OK 3 5 3 6 4 4 5 4 1 4 2 1 0 0 5 2 7 5 11 7 9 7 4 2 11 0 6 6 5IA 2 1 2 3 2 1 3 2 3 2 2 3 4 2 5 10 6 4 7 3 4 4 1 0 3 4 2 3 5ME 2 1 1 4 4 9 6 5 4 6 6 4 1 2 0 2 5 3 11 13 15 5 4 2 3 2 4 7 4NE 0 1 0 1 1 1 0 0 5 1 0 0 0 5 3 1 5 3 5 7 10 10 3 3 1 3 3 0 3PR 0 0 0 1 0 0 0 0 0 0 0 3 2 1 2 4 5 2 2 2 10 5 1 1 1 1 3 4 2ND 0 0 0 0 1 0 0 1 0 0 0 0 0 0 1 2 0 1 1 1 1 1 0 2 1 0 0 1 2MT 0 1 0 0 0 1 2 1 5 0 0 3 0 0 0 0 0 0 0 2 3 2 0 0 0 2 0 1 2WY 0 1 1 0 0 0 0 0 1 0 0 0 1 0 0 0 0 2 0 0 0 0 0 0 1 4 1 1 1WV 0 0 2 2 1 1 1 2 1 1 0 0 0 0 0 0 0 2 1 0 2 2 8 5 3 5 3 4 1SD 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 2 1 3 0 1 2 1UN 0 0 25 4 1 14 1 1 2 2 0 0 1 4 2 2 7 7 15 3 17 14 0 0 3 2 0 0 0MS 0 3 1 0 2 1 1 0 1 1 3 1 4 2 5 0 3 2 2 2 3 3 3 4 5 2 1 2 0AR 1 0 0 0 0 0 2 0 0 0 0 0 1 1 1 2 0 2 2 5 5 3 5 3 1 2 6 1 0AK 0 0 2 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0Total 449 774 1,097 1,392 1,472 1,380 1,389 1,585 1,473 1,496 1,416 1,229 1,351 1,160 1,199 1,839 2,573 3,156 3,649 5,500 7,901 4,483 3,103 2,944 3,093 3,156 3,684 3,955 3,832

2009 NVCA Yearbook

Thomson Reuters 31

0

20,000

40,000

60,000

80,000

100,000

120,000

'80

'81

'82

'83

'84

'85

'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

Year

($M

illio

ns)

Follow-on

First

Figure 3.12Venture Capital InvestmentsFirst vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

Year First Follow-on Total1980 337.3 239.6 576.91981 629.1 519.2 1,148.41982 614.4 1,003.0 1,617.31983 946.4 2,013.9 2,960.31984 863.5 2,102.6 2,966.11985 738.1 2,004.8 2,742.91986 863.4 2,094.6 2,958.01987 996.2 2,234.4 3,230.61988 1,076.5 2,218.5 3,295.01989 945.4 2,322.5 3,267.91990 845.9 1,861.8 2,707.71991 555.9 1,600.7 2,156.61992 1,307.1 2,173.1 3,480.11993 1,392.0 2,233.7 3,625.81994 1,705.5 2,370.8 4,076.31995 4,003.2 3,868.1 7,871.31996 4,298.3 6,740.9 11,039.21997 4,843.5 9,876.6 14,720.21998 7,125.8 13,783.5 20,909.31999 15,904.0 37,545.8 53,449.82000 28,756.7 75,263.8 104,020.52001 7,391.2 32,858.8 40,250.02002 4,335.4 17,545.0 21,880.32003 3,980.3 15,708.5 19,688.82004 4,869.8 17,567.0 22,436.92005 5,791.1 17,324.0 23,115.12006 6,156.8 20,546.9 26,703.72007 7,492.0 23,355.6 30,847.62008 6,173.2 22,182.0 28,355.2

Figure 3.13Venture Capital InvestmentsFirst vs. Follows-on Rounds

Total Dollars Invested ($ Millions)

# of Cos # of CosReceiving Receiving # of Cos

Initial Round Follow-On ReceivingYear Financing Financing Financing*1980 293 139 4131981 501 235 6951982 578 436 9711983 672 611 1,2171984 586 739 1,2571985 453 769 1,1861986 493 741 1,1951987 563 831 1,3381988 503 766 1,2221989 440 813 1,2031990 340 764 1,0371991 258 691 9081992 387 691 1,0161993 343 625 9131994 417 608 9601995 886 751 1,5391996 1,144 1,130 2,0771997 1,288 1,445 2,5381998 1,412 1,794 2,9761999 2,441 2,393 4,4082000 3,370 3,626 6,3422001 1,216 2,730 3,7862002 832 1,910 2,6332003 763 1,791 2,4562004 922 1,798 2,6172005 1,022 1,793 2,6982006 1,205 2,037 3,0692007 1,301 2,128 3,2742008 1,179 2,179 3,192

Figure 3.15Venture Capital InvestmentsFirst vs. Follows-on Rounds Total Number of Companies

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

'80

'81

'82

'83

'84

'85

'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

Year

(Nu

mb

er

of

Co

mp

an

ies)

Follow-on

First


Number of Companies Receiving

* # of Cos receiving financing can be less than the sum of theprior two columns because a given company can receive initialand follow-on financing in the same year


32 Thomson Reuters

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Industrial/Energy 115.6 162.5 88.4 101.2 82.1 98.1 81.1 130.9 124.1 222.5 100.3 66.4 174.6 169.5 163.1 453.6 289.8 363.5 984.6 1,033.9 1,122.0 471.2 426.1 313.6 277.0 361.1 765.2 1,349.2 1,242.4Software 26.8 68.4 108.8 233.5 203.4 98.5 114.0 90.2 126.2 96.7 164.0 108.9 152.3 130.9 303.1 547.6 902.2 1,023.6 1,205.1 2,820.5 6,105.3 1,568.6 1,180.9 955.3 1,262.1 1,156.3 1,184.9 1,172.2 904.7Biotechnology 13.8 57.2 31.9 22.5 22.1 34.5 54.3 62.4 65.7 51.1 27.2 17.4 165.1 131.3 150.6 148.4 206.8 354.8 359.2 404.7 824.7 785.4 694.8 424.4 698.3 587.7 903.8 937.6 838.9IT Services 3.1 4.9 13.8 9.0 14.2 16.1 9.6 4.5 9.4 20.6 18.3 10.3 8.8 13.1 92.9 56.2 229.5 245.4 360.4 1,539.3 2,501.4 373.6 185.9 145.9 195.6 360.7 358.4 507.4 616.7Medical Devices and Equipment 19.6 22.2 28.8 45.9 72.2 42.6 71.8 83.5 80.0 74.0 60.5 45.3 105.2 153.4 133.1 193.3 237.0 277.7 259.5 310.4 361.8 246.8 270.6 325.9 325.4 396.9 621.0 807.5 593.4Media and Entertainment 8.7 41.4 36.3 42.3 41.9 62.8 43.2 99.5 100.9 94.1 65.1 17.7 101.5 257.7 121.3 735.7 368.5 411.1 773.7 2,229.2 2,970.6 363.6 196.1 427.7 253.8 534.5 581.3 655.9 572.1Financial Services 7.3 13.0 9.9 9.8 7.1 70.2 81.3 43.9 160.6 71.4 34.0 8.7 100.2 110.2 66.9 123.8 259.5 234.7 443.4 872.4 1,584.3 353.6 81.6 84.7 247.6 613.0 152.7 225.0 288.3Telecommunications 3.3 26.2 37.0 41.7 52.9 65.3 45.0 37.9 39.0 43.6 52.8 10.8 92.3 61.2 188.5 407.2 418.0 387.2 997.9 2,003.5 4,819.0 850.2 213.2 218.4 284.8 420.4 499.9 415.4 264.9Consumer Products and Services 9.9 6.5 36.7 22.1 29.1 48.1 60.4 52.7 77.2 50.3 88.4 57.5 79.3 56.5 132.1 317.7 227.6 205.2 241.9 772.8 925.3 127.1 36.6 80.6 128.0 241.9 146.5 215.2 198.2Computers and Peripherals 39.9 86.0 110.1 160.0 115.0 38.7 57.5 84.1 67.4 43.8 52.5 19.2 61.2 43.2 39.3 160.7 143.0 117.2 121.3 250.6 373.3 260.1 25.0 89.8 112.1 119.4 59.4 145.7 143.0Business Products and Services 4.5 7.1 18.7 15.9 9.8 12.6 35.4 25.2 11.3 13.3 40.6 62.4 25.4 54.7 39.5 133.4 258.1 259.7 344.4 976.2 2,026.0 245.1 148.9 254.2 198.0 151.6 207.6 352.6 127.3Semiconductors 24.2 55.2 12.9 54.5 79.3 46.4 22.4 38.1 56.7 14.5 32.5 12.8 51.7 3.1 36.4 64.0 123.8 184.2 163.7 277.6 1,073.3 557.4 336.9 396.7 420.7 257.6 210.7 217.0 127.0Electronics/Instrumentation 22.0 24.8 15.1 32.4 29.2 43.3 28.6 32.4 25.6 19.5 21.4 16.1 14.2 16.0 8.6 55.5 83.6 119.1 43.0 97.2 151.1 94.9 80.8 58.7 89.1 127.7 134.3 160.0 84.3Networking and Equipment 4.5 28.5 22.0 66.6 33.7 24.0 33.9 24.9 45.7 56.4 43.5 19.9 58.8 81.0 37.7 82.1 131.8 222.1 319.2 1,238.1 2,558.9 903.9 232.7 101.8 181.1 104.3 93.6 162.2 69.6Healthcare Services 6.1 12.0 26.0 54.9 43.8 16.5 62.7 59.9 17.1 48.8 31.5 24.4 63.9 81.7 130.7 298.9 253.5 312.7 266.0 333.8 431.9 82.1 162.1 88.6 91.3 164.9 159.2 52.4 47.3Retailing/Distribution 27.1 4.8 13.8 33.0 26.9 19.7 60.3 126.2 63.5 24.7 13.3 25.4 52.7 28.4 61.6 215.1 165.1 110.2 210.5 670.4 884.5 54.0 44.7 13.9 103.8 136.0 70.9 113.0 37.7Other 1.1 8.4 4.2 1.0 0.8 0.5 2.0 0.0 6.0 0.0 0.0 32.7 0.0 0.0 0.2 10.0 0.5 15.3 32.1 73.5 43.5 53.6 18.4 0.0 1.1 57.1 7.5 3.6 17.3Total 337.3 629.1 614.4 946.4 863.5 738.1 863.4 996.2 1,076.5 945.4 845.9 555.9 1,307.1 1,392.0 1,705.5 4,003.2 4,298.3 4,843.5 7,125.8 15,904.0 28,756.7 7,391.2 4,335.4 3,980.3 4,869.8 5,791.1 6,156.8 7,492.0 6,173.2

Figure 3.18First Sequence by Industry ($ Millions)

Stage 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Startup-Seed 141.1 305.7 274.4 410.5 437.7 306.8 421.6 346.5 367.5 263.9 181.1 97.2 212.8 367.0 536.9 732.2 681.3 790.2 987.8 2,742.1 2,503.8 608.3 260.9 302.8 363.2 784.8 1,018.1 1,023.6 1,089.2Early 74.6 137.4 169.4 307.0 198.7 128.9 176.7 318.2 300.6 215.6 300.7 214.7 275.3 333.0 410.1 913.8 1,418.2 1,823.8 2,879.0 6,360.6 16,567.5 4,578.1 2,414.0 2,224.3 2,628.9 2,504.8 2,416.0 3,038.8 2,421.9Expansion 61.9 132.4 131.3 180.6 204.2 258.5 214.2 276.4 324.5 354.4 320.3 165.2 648.4 559.6 529.9 1,765.4 1,772.2 1,903.5 2,908.3 6,300.4 9,090.8 1,944.3 1,430.3 1,009.4 1,295.6 1,579.8 2,050.6 2,574.6 1,673.2Later 59.7 53.6 39.4 48.3 22.9 44.0 50.8 55.2 83.9 111.4 43.8 78.9 170.5 132.4 228.6 591.7 426.6 326.0 350.8 500.8 594.6 260.5 230.2 443.8 582.1 921.7 672.1 855.1 988.9Total 337.3 629.1 614.4 946.4 863.5 738.1 863.4 996.2 1,076.5 945.4 845.9 555.9 1,307.1 1,392.0 1,705.5 4,003.2 4,298.3 4,843.5 7,125.8 15,904.0 28,756.7 7,391.2 4,335.4 3,980.3 4,869.8 5,791.1 6,156.8 7,492.0 6,173.2

Figure 3.16First Sequence by Stage of Development ($ Millions)

Stage 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Startup-Seed 101 201 211 291 280 221 242 227 207 204 119 85 117 144 186 254 314 341 450 650 575 215 130 157 160 194 302 375 330Early 117 160 245 247 179 102 116 192 169 100 118 74 127 69 108 283 414 474 496 1112 1928 691 468 429 531 525 558 565 506Expansion 59 109 96 106 112 107 107 118 106 111 89 81 120 104 105 290 358 423 417 640 810 280 203 144 179 243 256 274 211Later 16 31 26 28 15 23 28 26 21 25 14 18 23 26 18 59 58 50 49 39 57 30 31 33 52 60 89 87 132Total 293 501 578 672 586 453 493 563 503 440 340 258 387 343 417 886 1,144 1,288 1,412 2,441 3,370 1,216 832 763 922 1,022 1,205 1,301 1,179

Figure 3.17First Sequence by Stage of Development (No. of Deals)

2009 NVCA Yearbook

Thomson Reuters 33

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Software 24 61 82 164 132 73 72 79 85 67 81 58 68 52 97 214 319 317 321 584 861 295 262 228 245 257 262 258 242Media and Entertainment 20 37 49 33 19 28 32 45 31 33 22 10 28 25 28 71 73 103 117 376 386 75 40 39 53 92 149 176 163Industrial/Energy 76 115 92 72 76 62 58 73 71 73 48 28 31 32 39 81 78 98 90 96 122 78 61 47 58 63 97 143 149Biotechnology 13 31 33 24 17 28 32 54 46 32 26 21 52 46 40 54 69 87 101 80 123 107 108 90 106 112 138 135 128IT Services 2 8 17 12 13 11 8 5 8 11 6 5 4 6 19 27 66 64 90 226 323 77 26 32 47 58 79 89 110Medical Devices and Equipment 19 31 30 49 53 41 51 60 54 60 37 30 43 41 37 55 87 105 93 85 71 55 65 74 73 85 126 118 94Consumer Products and Services 16 16 35 23 20 29 29 31 18 22 24 16 22 17 31 60 51 72 69 136 99 30 22 18 30 42 43 50 55Business Products and Services 10 13 27 18 12 13 23 20 12 9 10 9 10 13 10 30 42 47 74 148 221 53 29 26 33 38 46 63 47Telecommunications 6 23 29 27 42 28 24 23 22 22 7 11 18 26 22 71 91 96 134 233 391 131 48 44 53 78 102 80 45Financial Services 11 13 24 18 6 18 22 24 21 12 7 10 12 19 13 29 40 40 62 101 183 46 26 17 33 29 29 41 30Electronics/Instrumentation 22 30 22 25 32 27 18 24 17 17 10 8 10 5 9 23 19 18 17 17 26 25 16 19 21 31 26 32 27Semiconductors 18 25 11 35 39 25 13 15 21 12 12 8 11 4 10 23 29 54 44 48 116 79 50 62 83 43 43 30 26Computers and Peripherals 38 69 75 85 68 28 32 31 34 27 18 11 28 18 17 42 37 44 30 33 54 23 10 23 19 22 13 21 21Healthcare Services 3 2 14 25 26 9 31 20 11 8 7 10 16 11 18 41 57 52 39 56 58 18 21 20 15 23 20 15 13Retailing/Distribution 6 5 11 18 7 13 25 38 26 13 8 7 12 13 9 31 36 33 43 113 118 18 10 6 17 22 14 21 12Networking and Equipment 5 17 14 38 21 19 21 21 25 22 16 14 22 14 17 29 49 53 83 100 210 97 35 18 33 24 16 23 9Other 4 5 13 6 3 1 2 0 1 0 1 2 0 1 1 5 1 5 5 9 8 9 3 0 3 3 2 6 8Total 293 501 578 672 586 453 493 563 503 440 340 258 387 343 417 886 1,144 1,288 1,412 2,441 3,370 1,216 832 763 922 1,022 1,205 1,301 1,179

Figure 3.19First Sequence by Industry (No. of Deals)


34 Thomson Reuters

Stage Region ($ Millions)Silicon Valley 4,906.3NY Metro 972.5New England 950.1LA/Orange County 740.9DC/Metroplex 516.9Texas 510.2Northwest 435.1Midwest 374.8Southeast 361.1San Diego 240.3Philadelphia Metro 189.7SouthWest 158.7Colorado 151.8North Central 146.0Sacramento/N.Cal 29.9Upstate NY 15.1South Central 7.6AK/HI/PR 6.9TOTAL 10,713.8

Figure 3.222008 Internet-Related Investments

By Regions in 2008

Year No. of Cos ($ Millions)1994 164 720.91995 393 1,822.41996 738 3,958.81997 990 5,961.61998 1,451 11,394.01999 3,018 41,438.22000 4,538 79,140.42001 2,317 25,347.62002 1,377 10,941.62003 1,149 8,744.32004 1,143 9,627.62005 1,193 9,705.02006 1,441 11,332.82007 1,497 12,339.62008 1,482 10,713.8TOTAL 22,891 243,188.8

Figure 3.20Internet-Related Investments

By Year 1994-2008

State ($ Millions)California 5,917.3Massachusetts 898.2New York 768.0Texas 510.2Washington 405.2TOTAL* 8,498.8

Figure 3.21Top Five States by Internet-Related Investments

in 2008

* Total includes above 5 states only

2009 NVCA Yearbook

Thomson Reuters 35

SOURCESTATE AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IND KS KY LA MA MD ME MI MN MO MSAB 0.0 0.0 0.0 0.0 15.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AC 0.0 0.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AL 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0AZ 0.0 0.0 0.0 1.8 3.7 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0BC 0.0 0.0 0.0 0.0 11.7 2.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.4 0.0 0.0 0.0 0.0 0.0 0.0CA 0.0 1.5 0.0 32.8 6,223.5 172.3 24.6 0.0 7.7 19.4 52.2 1.1 0.0 6.3 63.0 14.2 2.4 0.0 0.0 440.3 67.6 2.0 14.7 81.9 4.0 0.0CO 0.0 0.0 0.0 0.0 57.1 59.1 0.0 0.0 0.0 3.5 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 0.0 37.1 0.0 0.0 0.0 5.4 0.0 0.0CT 0.0 0.0 0.0 2.2 452.6 26.3 16.2 0.0 15.3 0.0 9.7 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 87.4 10.3 0.0 0.0 15.0 0.0 0.0DC 0.0 0.0 0.0 0.0 57.4 1.7 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 3.7 0.0 0.9 6.7 0.0 11.0 1.9 0.0 50.0 0.0 0.0 0.0DE 0.0 0.0 0.0 0.0 1.9 0.0 0.6 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.1 0.0 0.0 0.0 0.0 0.0 0.0FF 0.0 0.0 0.0 0.0 799.1 16.7 4.0 0.0 1.0 21.7 42.3 0.2 2.0 0.0 9.1 2.3 0.0 0.0 0.0 191.1 24.2 0.0 20.0 8.9 2.5 0.0FL 0.0 0.0 0.0 2.2 11.5 1.8 0.0 0.0 0.0 17.4 8.0 0.0 0.0 0.0 11.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0 0.0 0.0 0.0 0.0GA 0.0 0.0 0.0 0.0 10.6 7.1 0.0 4.4 0.0 7.8 38.3 0.0 0.0 0.0 0.2 1.2 0.0 0.0 0.0 9.3 0.0 0.0 0.0 4.2 0.0 0.0HI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.1 0.0 0.0 0.0 0.0 0.0IA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7 0.0 0.0ID 0.0 0.0 0.0 0.0 0.0 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0IL 0.0 0.0 0.0 0.0 330.1 9.9 0.2 0.0 2.0 0.0 8.6 0.0 0.0 0.0 53.7 3.9 1.0 4.4 0.0 31.6 0.0 0.0 15.7 4.3 1.0 0.0IN 0.0 0.0 0.0 0.0 5.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 3.2 0.0 0.0 0.0 11.5 0.0 0.0 0.0 2.6 0.0 0.0KS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0KY 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.6 0.0 6.8 5.5 0.0 0.6 0.0 2.0 0.0LA 0.0 0.2 0.0 0.0 0.9 0.9 0.0 0.0 0.0 0.6 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 4.6 1.0 0.0 0.0 0.0 0.0 17.7 0.0MA 0.0 0.0 0.0 5.4 1,001.5 32.4 16.7 0.0 7.7 70.8 52.0 4.5 33.6 0.0 94.3 3.1 0.0 5.3 0.0 1,027.5 31.8 0.0 16.8 102.5 3.0 0.0MB 0.0 0.0 0.0 0.0 66.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0MD 0.0 0.0 0.0 74.2 392.2 6.8 0.0 3.4 0.0 7.3 20.5 0.0 0.0 0.0 37.3 0.0 0.0 0.0 0.0 61.7 60.0 0.0 0.0 23.2 0.0 0.0ME 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6.3 0.0 0.4 0.0 0.0 0.0 0.0MI 0.0 0.0 0.0 0.0 20.0 0.0 0.0 11.0 0.0 0.0 0.0 0.0 0.0 0.0 5.3 1.6 0.0 0.0 0.0 0.6 0.0 0.0 42.0 0.9 2.0 0.0MN 0.0 0.0 0.0 3.0 58.7 6.6 7.0 0.0 0.0 1.0 0.0 0.0 0.1 0.3 2.3 0.1 0.0 0.0 0.0 5.1 0.0 0.0 0.0 54.6 0.0 0.0MO 0.0 0.0 0.0 0.0 20.9 12.5 1.6 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 1.7 0.0 0.0 0.0 4.0 0.0 0.0 0.0 4.5 6.0 0.0NC 0.0 7.8 0.0 0.0 16.5 0.0 0.0 5.0 0.0 6.6 9.7 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 14.2 4.9 0.0 0.0 0.0 0.0 0.0NE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NH 0.0 0.0 0.0 0.0 2.7 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0 0.0 0.0 0.0 0.0NJ 0.0 0.0 0.0 8.3 340.3 20.1 5.0 0.0 1.2 9.0 15.8 0.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 53.0 8.9 0.0 2.6 19.2 0.1 0.0NM 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NW 0.0 0.0 0.0 0.0 14.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0NY 0.0 0.0 0.0 19.6 862.3 81.3 12.1 0.0 0.0 16.2 20.1 0.0 0.0 0.0 13.6 3.0 18.0 2.5 0.0 261.7 67.0 0.0 13.7 23.7 3.3 0.0OH 0.0 0.0 0.0 5.6 20.1 0.4 0.1 0.0 0.0 0.0 4.3 0.0 0.0 0.0 7.2 2.6 0.0 1.4 0.0 2.0 0.8 0.0 2.8 2.6 0.0 0.0OK 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ON 0.0 0.0 0.0 0.0 25.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 11.7 0.0 0.0 0.0 3.2 0.0 0.0OR 0.0 0.0 0.0 0.0 5.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 0.0 0.0 0.0PA 0.0 0.0 0.0 0.0 135.5 4.2 2.7 0.0 1.8 1.2 2.2 0.0 0.0 0.0 0.2 22.0 0.0 0.0 0.0 31.1 9.7 4.4 3.4 0.0 0.0 0.0QL 0.0 0.0 0.0 0.0 6.1 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.2 0.0 0.0 0.0 0.0 0.0 0.0QU 0.0 0.0 0.0 0.0 16.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 4.4 0.0 0.0 0.0 0.0RI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.5 0.0 0.0 0.0 0.0 6.3 0.0 0.0 0.0 0.0 0.0 0.0TN 0.0 0.0 0.0 6.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0TX 0.0 1.5 0.0 0.0 198.0 2.6 0.0 0.0 0.0 8.5 1.2 0.0 0.0 0.0 8.2 0.0 0.0 0.0 0.3 16.3 9.2 0.0 4.7 0.0 0.0 0.0UN 0.0 10.8 0.0 33.5 2,805.7 310.4 27.2 7.2 24.5 44.4 116.1 0.4 2.5 5.4 113.8 71.7 9.2 4.7 2.7 567.2 128.3 8.9 55.9 114.8 44.8 0.0UT 0.0 0.0 0.0 6.0 37.0 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 3.6 0.0 0.0 0.7 0.0 0.0VA 0.0 0.0 0.0 0.0 78.7 5.9 1.7 0.0 0.0 3.1 2.1 0.0 0.0 0.0 8.7 3.1 0.0 0.0 0.0 46.0 21.8 0.0 0.0 0.0 0.0 0.0VC 0.0 0.0 0.0 0.0 25.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.3 0.0 0.0 0.0 0.0 0.0 0.0VT 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0WA 0.0 0.0 0.0 7.5 142.8 24.6 10.0 0.0 0.0 0.0 11.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.0 0.0 0.0 0.0 1.7 0.0 0.0WI 0.0 0.0 0.0 0.0 3.4 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 2.8 7.2 0.0 0.0WY 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 0.0 0.0Total 0.0 24.1 0.0 208.1 14,278.1 817.5 129.7 31.0 62.7 238.5 423.5 7.3 40.3 12.0 445.1 133.6 45.5 29.6 8.3 2,996.7 460.6 20.1 245.7 486.8 86.4 0.0

Target State

Figure 3.23Sources and Targets of Invested Capital Investments 2008

($ Millions)

Source State includes U.S. states, Australian states and Canadian provinces.FF = other foreign UN = undisclosed or unknown.

MT NC ND NE NH NJ NM NV NY OH OK ORE PA PR RI SC SD TN TX UN UT VA VI VT WA WI WV WY TOT0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 3.50.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 4.2 0.0 0.0 0.0 0.0 0.0 11.0 0.0 0.0 0.0 39.61.2 36.2 0.0 16.0 34.9 97.3 19.1 6.1 192.2 50.4 0.0 52.0 164.0 0.0 0.7 7.8 0.0 4.1 267.8 0.0 30.4 95.6 0.0 0.0 249.7 2.2 0.0 0.0 8,559.30.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 13.8 0.0 0.0 0.0 4.9 0.0 0.0 0.0 0.0 0.0 12.9 0.0 0.0 5.6 0.0 0.0 10.3 0.0 0.0 0.0 214.80.0 5.8 0.0 0.0 0.0 14.9 13.5 0.0 22.2 0.0 0.0 7.0 4.1 0.0 1.4 0.0 0.0 0.0 20.8 0.0 0.0 0.0 0.0 0.3 24.1 4.9 0.0 0.0 755.00.0 5.0 0.0 0.0 0.0 10.7 0.0 0.0 4.3 0.0 0.0 4.5 0.0 0.0 0.0 2.0 0.0 3.0 5.5 0.0 0.0 25.9 0.0 0.0 5.0 0.6 0.0 0.0 203.80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.32.5 20.2 0.0 0.0 0.0 60.8 2.5 0.0 52.8 15.9 0.0 4.3 17.0 0.0 0.0 0.0 0.0 0.0 35.3 0.0 1.0 2.7 0.0 0.0 56.4 0.0 0.0 1.5 1,418.20.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.7 0.0 0.0 1.0 7.4 0.0 0.0 0.0 0.0 0.0 6.7 0.0 0.0 0.0 75.30.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 1.0 0.0 0.0 0.9 0.0 0.0 0.0 0.0 4.7 2.1 0.0 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 93.30.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.00.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.00.0 4.3 0.0 0.0 1.5 6.1 0.2 0.0 13.6 11.7 0.0 4.6 5.8 0.0 0.0 0.0 0.0 2.5 35.4 0.0 0.0 5.8 0.0 0.0 27.3 4.0 0.0 0.0 589.10.0 4.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.5 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 0.0 0.0 0.0 34.70.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.00.0 5.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 24.90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.7 10.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 0.0 6.5 0.0 0.0 0.0 0.0 0.0 0.0 8.3 0.0 0.0 61.92.9 40.5 0.0 0.0 33.1 127.2 0.4 0.0 195.4 8.2 0.0 7.6 53.9 10.8 4.1 9.2 0.0 3.1 148.2 0.0 16.2 45.6 0.0 12.8 36.7 8.7 0.0 0.0 3,273.70.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 66.01.2 11.8 0.0 0.0 3.6 19.4 0.0 0.0 41.0 1.0 0.0 7.0 7.5 0.0 0.0 0.0 0.0 1.0 19.9 0.0 11.9 84.2 0.0 0.0 18.2 0.0 0.0 0.0 914.50.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 2.9 0.0 0.0 0.0 4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.9 0.0 0.0 0.0 0.0 17.30.0 6.7 0.0 0.0 0.3 0.0 1.8 0.0 3.0 1.5 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 4.5 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 101.80.0 7.8 0.1 0.0 7.1 1.5 0.0 0.0 13.1 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.3 1.1 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 173.00.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 1.5 0.0 1.1 0.0 2.3 0.0 0.0 0.0 0.0 0.0 3.5 0.0 0.0 0.0 0.0 0.0 0.7 0.5 0.0 0.0 63.00.0 68.2 0.0 0.0 0.1 8.0 0.0 0.0 3.2 0.0 0.0 0.0 1.5 0.0 0.0 5.6 0.0 1.0 0.0 0.0 0.0 6.1 0.0 0.0 1.6 0.0 0.0 0.0 162.00.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.80.0 0.0 0.0 0.0 2.1 0.0 0.0 0.0 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.40.0 35.8 0.0 0.0 10.3 56.6 0.0 0.0 31.5 0.0 0.0 0.2 28.2 0.0 0.0 0.0 0.0 1.5 6.0 0.0 6.5 14.1 0.0 0.0 4.0 0.0 0.0 0.0 679.20.0 0.0 0.0 0.0 0.0 0.0 8.9 0.0 0.0 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.80.0 0.0 0.0 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 17.41.2 37.3 0.0 0.0 18.7 62.9 1.1 6.0 364.3 47.7 0.0 5.7 58.1 0.0 5.3 2.0 0.0 1.0 252.4 0.0 5.4 13.2 0.0 12.8 35.0 1.3 0.0 0.0 2,349.71.2 5.0 0.0 0.0 0.0 0.0 0.2 0.0 12.6 46.6 0.0 0.0 0.3 0.0 0.0 0.5 0.0 6.4 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 123.80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.60.0 1.0 0.0 0.0 6.1 0.0 0.0 0.0 10.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.3 0.0 0.0 61.20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 18.51.2 11.8 0.0 0.0 7.0 34.5 0.0 0.0 36.7 3.4 0.0 5.6 191.0 0.0 1.3 0.0 0.0 0.6 29.9 0.0 0.3 9.7 0.0 0.0 0.0 0.0 0.0 0.0 551.30.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.3 0.0 0.0 0.0 16.10.0 2.1 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 22.70.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.80.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 9.0 0.0 0.0 0.0 0.0 10.5 7.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 37.00.0 5.7 0.0 0.0 0.0 11.1 0.0 0.0 1.2 3.2 0.0 1.2 9.4 0.0 0.0 0.0 0.0 6.7 175.9 0.0 0.9 3.2 0.0 0.0 27.2 0.0 0.0 0.0 496.14.1 124.4 0.3 0.0 52.1 167.8 17.1 0.5 251.8 50.7 14.9 36.4 131.8 3.0 8.1 4.4 0.3 14.2 234.7 0.0 74.8 110.5 0.0 15.0 241.1 30.3 24.0 0.0 6,122.00.0 0.0 0.0 0.0 0.0 2.0 2.4 0.0 2.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 36.4 0.5 0.0 0.0 1.2 0.0 0.0 0.0 98.90.0 15.9 0.0 0.0 4.1 4.5 0.0 0.0 8.8 0.0 0.0 0.0 2.2 0.0 0.0 2.0 0.0 0.0 3.8 0.0 0.3 61.6 0.0 0.0 0.0 0.0 0.0 0.0 274.20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 32.70.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0 1.80.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.3 0.0 0.0 21.1 0.0 0.0 16.0 0.0 0.0 0.0 0.0 0.0 5.0 0.0 0.0 0.0 197.0 0.0 0.0 0.0 459.30.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5.0 2.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 14.1 0.0 0.0 39.40.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.7

15.5 459.3 0.4 16.0 181.2 694.8 69.3 12.6 1,297.8 258.0 17.2 176.0 701.0 13.8 39.2 34.0 0.6 64.9 1,287.4 0.0 193.5 486.5 0.0 42.8 962.2 75.3 24.0 1.5 28,355.2


36 Thomson Reuters

STATEABACALAZBCCACOCTDCDEFFFLGAHIIAIDILINKSKYLAMAMBMDMEMIMNMONCNENHNJNMNWNYOHOKONORPAQLQURITNTXUNUTVAVCVTWAWIWYTotal

Figure 3.23 (continued)Sources and Targets of Invested Capital Investments 2008

($ Millions)

SOURCE Target State

Source State includes U.S. states, Australian states and Canadian provinces.FF = other foreign UN = undisclosed or unknown.

2009 NVCA Yearbook

Thomson Reuters 37

Company Stage ($ Millions)

Startup/Seed 407.7Early Stage 1,950.1Expansion 3,838.5Later Stage 4,517.6TOTAL 10,713.8


By Stage

Industry Group ($ Millions)Software 3,601.5Media and Entertainment 1,863.1IT Services 1,598.4Telecommunications 1,426.3Networking and Equipment 493.9Semiconductors 390.2Business Products and Services 273.5Financial Services 230.2Retailing/Distribution 213.6Computers and Peripherals 170.3Medical Devices and Equipment 166.3Consumer Products and Services 155.4Industrial/Energy 81.7Healthcare Services 22.7Electronics/Instrumentation 19.8Biotechnology 7.0TOTAL 10,713.8


By Industry Sector

Pct. InvestedFund Domicile Within StateCalifornia 73%Washington 43%North Carolina 42%Michigan 41%Georgia 41%

Figure 3.28Top Five States By Percentage Invested

Within State in 2008

Industry Internet Related Non-Internet Related TotalSoftware 526 221 747Media and Entertainment 305 25 330IT Services 207 25 232Telecommunications 168 33 201Networking and Equipment 61 17 78Business Products and Services 43 60 103Consumer Products and Services 40 55 95Retailing/Distribution 27 8 35Financial Services 25 38 63Computers and Peripherals 23 31 54Semiconductors 19 123 142Medical Devices and Equipment 12 301 313Healthcare Services 11 29 40Industrial/Energy 10 277 287Electronics/Instrumentation 3 71 74Biotechnology 2 387 389Other 0 9 9Total 1,482 1,710 3,192

Figure 3.272008 Internet-Related vs Non Internet-Related

Investments By Industry Sector (Number of Companies)

Industry Internet Related Non-Internet Related TotalSoftware 3,601.5 1,320.3 4,921.8Media and Entertainment 1,863.1 139.4 2,002.5IT Services 1,598.4 245.6 1,844.0Telecommunications 1,426.3 249.5 1,675.7Networking and Equipment 493.9 163.2 657.1Semiconductors 390.2 1,259.9 1,650.1Business Products and Services 273.5 210.4 483.9Financial Services 230.2 304.3 534.5Retailing/Distribution 213.6 54.0 267.6Computers and Peripherals 170.3 239.1 409.4Medical Devices and Equipment 166.3 3,314.8 3,481.1Consumer Products and Services 155.4 279.1 434.5Industrial/Energy 81.7 4,593.1 4,674.8Healthcare Services 22.7 172.5 195.1Electronics/Instrumentation 19.8 553.0 572.8Biotechnology 7.0 4,520.6 4,527.6Other NA 22.7 22.7Total 10,713.8 17,641.4 28,355.2

Figure 3.262008 Internet-Related vs Non Internet-Related

Investments By Industry Sector ($ Millions)

*Minimum $20 million invested

Pct. InvestedCompany Location From StateCalifornia 44%Massachusetts 34%New York 28%Pennsylvania 27%Washington 20%

Figure 3.29Top Five States By Portion Received From

In-State Firms 2008

*Minimum $20 million invested


38 Thomson Reuters

Location ofVenture FirmCalifornia 38Massachusetts 36New York 34Illinois 26Pennsylvania 25New Jersey 24Maryland 23Connecticut 21Minnesota 21Ohio 21Texas 21

No. of StatesInvested In

Figure 3.30Number of States Invested Into in 2008

By State of Venture Firm

YYeeaarr11999955 443344..99 66%% 113366 77%%11999966 773344..99 77%% 223377 99%%11999977 997711..33 77%% 333388 1111%%11999988 11,,771177..66 88%% 551177 1144%%11999999 77,,998866..00 1155%% 11,,228888 2233%%22000000 1166,,116666..88 1166%% 22,,110011 2277%%22000011 44,,886633..33 1122%% 999955 2222%%22000022 11,,991144..00 99%% 557700 1188%%22000033 11,,228822..55 77%% 444488 1155%%22000044 11,,553344..99 77%% 555544 1188%%22000055 11,,556688..00 77%% 555544 1188%%22000066 22,,003344..66 88%% 666600 1188%%22000077 22,,559944..33 88%% 880000 2200%%22000088 22,,223333..00 88%% 774422 1199%%

Corpp-BBaacckkeedd

IInnvveessttmmeennttss(($$ MMiilllliioonnss))

NNuumm ooff CCoorrpp--BBaacckkeedd

DDeeaallss

%% ooff OOvveerraallll DDeeaallssWWiitthh aatt LLeeaasstt OOnnee

CCoorrpp VVCC%% ooff OOvveerraallllIInnvveessttmmeennttss

Figure 3.32Corporate Investments By Year

YYeeaarr11999955 7766..77 3366 22..1111999966 115566..99 4466 33..4411999977 114433..66 4466 33..1111999988 110077..33 3366 33..0011999999 220022..99 3377 55..5522000000 557777..88 4466 1122..6622000011 339988..99 6611 66..5522000022 338888..44 6655 66..0022000033 226666..22 5599 44..5522000044 444444..11 7799 55..6622000055 555500..11 9900 66..1122000066 11,,443399..00 113399 1100..4422000077 22,,666666..33 223388 1111..2222000088 44,,111188..99 227777 1144..99

CClleeaannTTeecchhnnoollooggyyIInnvveessttmmeennttss(($$ MMiilllliioonnss))

NNuumm ooffCClleeaann

TTeecchhnnoollooggyyDDeeaallss

AAvveerraaggeeIInnvveessttmmeenntt PPeerr

DDeeaall (($$ MMiilllliioonnss))

Figure 3.33Clean technology Investments By Year

62% 59%50%

9% 9%11%

29% 32% 39%

0%10%20%30%40%50%60%70%80%90%

100%

1998 2000 2008

NoCal

SoCal

Other

Figure 3.34California Investments as a Percentage of

Overall Investments

No. of StatesYear Invested In1988 291998 342008 38

Figure 3.31Number of States California Venture Firms

Invested Into By Year

Portfolio Company Valuations

Venture investment in 2008 was a competing mix of(A) later stage companies receiving large roundsanticipating an acquisition (M&A) or initial publicoffering (IPO), and (B) early investment in compa-nies just getting going. With the activity focused onthe two ends of the spectrum, it is worth looking at acompany’s first financings (Figures 4.02 and 4.05)and subsequent financings separately (Figures 4.03and 4.06). The overall drop in the public markets fortechnology company stocks of more than 30% affect-ed valuations of companies at both ends of the matu-rity spectrum. Early stage fundings had to be struc-

tured to provide for additional rounds and investorslater on. Later stage companies needed cash infu-sions at a time when they would have otherwise gonepublic or been acquired. Depressed public marketsdid not allow for a step up in valuation.

With the door essentially slammed shut in 2008 forinitial public offerings, only six companies wentpublic. In contrast to 2007 which saw record medi-an valuations, those companies which did go publicin 2008 saw IPO valuations consistent with the2002-2006 period.

Round valuations overall appeared to be significantly lower in 2008 (Figure 4.04) than they were overall in theperiod 1995-2008 (Figure 4.01). As round valuations fell, fewer were reported and this pushed some sectorsbelow the analysis threshold. In 2008, the median financing round was at a reported $13.3 million, comparedwith the recent history of $30.0 million. The calculated average (or mean) round valuation, which of course canbe affected by particularly large rounds, was $46.7 million in 2008 versus $72.9 million over the 14-year com-parison period. Of those industries which sufficient reported results, only two reported an increase in medianround valuations: the media and entertainment sector and the medical devices and equipment sector.

Thomson Reuters 39


Biotechnology 64.4 864.0 91.8 42.1 16.0 0.1Business Products and Services 51.6 600.0 52.7 23.5 12.0 0.3Computers and Peripherals 58.1 525.0 70.0 31.4 14.3 1.8Consumer Products and Services 63.3 986.1 63.0 26.0 10.0 0.7Electronics/Instrumentation 44.8 559.5 42.9 16.5 8.5 1.2Financial Services 78.7 904.8 90.0 32.0 10.0 0.2Healthcare Services 49.2 658.5 51.0 27.6 12.5 0.7Industrial/Energy 44.1 700.0 40.8 18.0 6.0 0.1IT Services 64.8 1,400.0 80.1 32.0 13.0 0.3Media and Entertainment 74.4 2,777.8 74.4 28.0 13.0 0.1Medical Devices and Equipment 47.1 484.3 61.9 30.0 13.2 0.1Networking and Equipment 136.6 1,537.2 149.8 56.2 22.2 0.3Other 137.7 495.6 150.0 30.0 8.3 4.8Retailing/Distribution 84.1 3,650.5 76.3 30.4 11.5 0.3Semiconductors 83.8 922.0 89.5 45.5 20.0 1.6Software 57.5 1,353.5 67.9 28.5 12.6 0.0Telecommunications 99.2 2,200.0 112.0 42.0 18.9 0.1Total 72.9 3,650.5 90.0 30.0 10.0 0.0


Figure 4.01Valuations By Company Industry 1995-2008 ($ Millions)


40 Thomson Reuters


Biotechnology 18.9 266.0 20.8 10.0 4.9 0.0Business Products and Services 22.4 345.0 23.0 13.1 6.3 0.3Computers and Peripherals 24.2 297.5 24.8 11.8 7.3 1.3Consumer Products and Services 25.0 500.0 21.3 10.0 5.0 0.1Electronics/Instrumentation 10.2 50.0 14.7 7.8 3.9 1.1Financial Services 35.3 460.0 35.8 13.0 6.0 0.4Healthcare Services 20.4 320.1 23.9 12.3 6.4 0.4Industrial/Energy 26.0 492.6 25.0 8.4 3.5 0.1IT Services 21.4 276.0 25.0 11.9 6.4 0.2Media and Entertainment 30.2 2,777.8 22.8 11.0 6.0 0.3Medical Devices and Equipment 14.6 484.3 14.9 8.5 4.5 0.1Networking and Equipment 25.9 454.0 27.0 15.3 8.0 0.3Other NA NA NA NA NA NARetailing/Distribution 25.8 310.0 28.0 11.0 6.5 0.3Semiconductors 25.0 285.0 25.0 15.0 10.0 0.6Software 18.7 373.3 20.0 10.1 6.0 0.3Telecommunications 32.1 876.0 29.5 14.0 6.4 0.1Total 23.5 2,777.8 25.5 11.4 5.0 0.0


Figure 4.02Valuations By Company Industry 1995-2008 Financings ($ Millions)

First Round Financings


Biotechnology 75.4 864.0 101.0 56.0 23.2 0.5Business Products and Services 72.4 600.0 90.0 40.3 19.5 3.1Computers and Peripherals 68.6 525.0 80.0 43.7 20.0 3.0Consumer Products and Services 79.8 986.1 82.3 40.0 17.6 0.7Electronics/Instrumentation 60.3 559.5 67.4 21.8 15.0 2.0Financial Services 101.0 904.8 124.0 49.9 18.4 0.2Healthcare Services 56.1 658.5 56.0 31.0 13.2 0.7Industrial/Energy 58.0 700.0 59.1 25.0 12.6 0.4IT Services 86.9 1,400.0 112.0 50.0 22.0 0.7Media and Entertainment 88.8 1,000.0 105.3 44.1 18.6 0.1Medical Devices and Equipment 54.0 350.4 70.9 38.4 19.4 0.5Networking and Equipment 167.9 1,537.2 201.4 78.8 35.0 1.7Other NA NA NA NA NA NARetailing/Distribution 114.2 3,650.5 93.6 46.5 20.9 0.8Semiconductors 100.9 922.0 105.0 60.8 31.6 1.0Software 70.4 1,353.5 85.5 37.9 18.5 0.0Telecommunications 122.9 2,200.0 140.9 63.2 27.3 1.8Total 86.1 3,650.5 107.0 43.9 18.2 0.0


Figure 4.03Valuations By Company Industry 1995-2008 Financings ($ Millions)

Additional Round Financings

2009 NVCA Yearbook

Thomson Reuters 41


Biotechnology 44.2 158.2 94.0 14.6 3.1 0.1Business Products and Services 17.0 42.2 23.8 12.0 5.2 2.0Computers and Peripherals NA NA NA NA NA NAConsumer Products and Services 24.8 77.0 27.0 10.2 8.0 2.0Electronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy 33.7 200.0 33.8 5.9 2.2 0.1IT Services 36.5 188.0 33.0 10.1 4.5 0.3Media and Entertainment 161.6 1,000.0 68.7 28.1 17.6 3.0Medical Devices and Equipment 44.5 140.0 63.1 34.1 13.6 1.2Networking and Equipment NA NA NA NA NA NAOther NA NA NA NA NA NARetailing/Distribution NA NA NA NA NA NASemiconductors 38.9 70.0 42.3 37.8 30.0 14.2Software 25.9 113.0 36.9 22.4 7.5 0.5Telecommunications 40.3 141.3 30.0 12.0 9.0 6.0Total 46.7 1,000.0 57.9 13.3 4.7 0.1


Figure 4.04Valuations By Company Industry

2008 Financings ($ Millions)


Biotechnology 7.8 27.4 11.4 2.9 1.3 0.1Business Products and Services NA NA NA NA NA NAComputers and Peripherals NA NA NA NA NA NAConsumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy 18.9 156.0 5.9 4.0 1.1 0.1IT Services NA NA NA NA NA NAMedia and Entertainment NA NA NA NA NA NAMedical Devices and Equipment 13.7 52.1 13.3 5.0 3.6 1.2Networking and Equipment NA NA NA NA NA NAOther NA NA NA NA NA NARetailing/Distribution NA NA NA NA NA NASemiconductors NA NA NA NA NA NASoftware 16.2 40.0 23.6 13.2 3.3 2.5Telecommunications NA NA NA NA NA NATotal 14.1 156.0 15.9 4.5 1.2 0.1


Figure 4.05Valuations By Company Industry 2008 Financings ($ Millions)

First Round Financings


42 Thomson Reuters


1995 154.6 1,026.5 170.9 109.7 71.3 12.21996 208.1 9,911.4 182.8 110.3 66.8 9.51997 160.3 2,139.2 161.0 108.1 63.9 11.41998 221.2 1,220.6 269.6 182.2 106.6 12.51999 499.0 4,827.7 538.8 343.8 222.4 47.02000 504.3 11,965.5 521.1 248.8 134.9 18.02001 439.1 1,719.2 527.3 322.2 205.7 57.32002 361.4 1,083.3 570.7 223.3 141.7 36.82003 284.7 821.9 359.2 227.7 156.2 41.92004 656.2 23,053.7 389.6 255.9 152.8 21.62005 290.5 1,442.1 387.5 201.9 140.1 23.12006 394.4 2,647.5 409.3 256.7 177.6 70.92007 622.7 7,963.7 573.0 346.0 271.5 50.02008 441.1 1,443.1 380.7 257.8 197.6 88.8

MinYear of IPO Max Median

Figure 4.07Venture-Backed IPOs Valuations as of IPO ($ Millions)

By Year of IPO


Biotechnology 54.4 158.2 103.5 27.2 7.4 0.5Business Products and Services NA NA NA NA NA NAComputers and Peripherals NA NA NA NA NA NAConsumer Products and Services NA NA NA NA NA NAElectronics/Instrumentation NA NA NA NA NA NAFinancial Services NA NA NA NA NA NAHealthcare Services NA NA NA NA NA NAIndustrial/Energy 58.4 200.0 56.6 40.5 15.2 0.8IT Services 50.7 188.0 47.8 10.0 5.0 2.9Media and Entertainment 211.4 1,000.0 136.2 33.8 25.8 7.5Medical Devices and Equipment 57.6 140.0 93.1 38.6 24.9 8.0Networking and Equipment NA NA NA NA NA NAOther NA NA NA NA NA NARetailing/Distribution NA NA NA NA NA NASemiconductors 38.9 70.0 42.3 37.8 30.0 14.2Software 30.3 113.0 39.1 30.2 14.0 0.5Telecommunications 46.2 141.3 75.0 9.0 8.5 6.0Total 68.5 1,000.0 95.7 32.0 8.2 0.5


Figure 4.06Valuations By Company Industry 2008 Financings ($ Millions)

Additional Round Financings

Exits: IPOs and Acquisitions

Methodology

Initial and secondary public offerings of companiesthat are venture-backed are followed and analyzed byThomson Reuters. This research is compiled threeways: first, through cross-referencing venture-backed companies with IPOs in registration or thathave begun trading, which is tracked through the newissues online database of Thomson Reuters; second,through daily prospectus research; third, throughindustry surveys. By using this research process, wehave been successful in identifying virtually all com-panies that have gone public that have had venturebacking.

However, the term “venture-backed” has differentmeanings depending on context. There are threedecreasingly stringent classifications that ThomsonReuters uses in classifying public companies as ven-ture-backed. The most rigorous is that a venture cap-italist must be a shareholder at the time of the publicoffering and the investment must be made by a non-buyout venture capital fund. Thus, an investment thatwas exited prior to going public or a companyfinanced by a buyout firm would not be counted asventure-backed in this sense. This is the criterionused in publishing venture-backed IPOs in the

The year 2008 was an awful year for venture-backed companies exiting through initial public offerings or acquisi-tions. Only six venture-backed companies went public and the proceeds from acquisitions dropped by more than50%. This comes at a time when a record number of companies founded during or just after the tech bubble enteredthe “later stage” of maturity and, in more typical times, would have exited.One has to go back to the 1970s to find years with fewer IPOs. The six companies which did go public brought inless than one-half billion dollars in proceeds. The second and fourth quarters had no venture-backed IPOs at all. Ofthe six IPOs, two were Healthcare Services companies and two were in Medical Devices and Equipment. Of the 16MoneyTree™ sectors, 12 had none. At the end of 2007, interestingly, there were 31 venture-backed companies in reg-istration. Five of the six venture-backed IPOs took place in the first quarter. To put this in context, approximately14% of the venture-backed companies first funded in the 1990s eventually went public. In recent years, more than1,000 companies annually are funded for the first time. This suggests an IPO count well above 100 each year forthat ratio to continue.While we have provided the traditional analytical charts and summaries in this chapter, the reader is reminded that2008 results are based on this very small sample of six IPOs. The number of venture-backed companies acquired during 2008 (335) declined from 2007 (378) to a level consis-tent with other post-bubble years. While 2007 was the post-bubble high water mark for strong acquisition exits, in2008 the total disclosed proceeds dropped 59% to $13.3 billion. While M&A exits were at best a mixed picture, 18%of those companies sold for more than ten times the total venture investment (TVI) in those companies.

Thomson Reuters 43

0

50

100

150

200

250

300

'80'81'82'83'84'85'86'87'88'89'90'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08

Year

No.

ofIP

Os

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Offer($

Billions)

No. of IPOsOffer ($ Billions)

Figure 5.01 Venture-Backed IPOs

1999 477 2692000 352 2652001 83 412002 77 222003 67 292004 187 942005 166 572006 167 562007 156 862008 23 6

# of Venture-BackedIPOs# of All IPOsYear

Figure 5.02 Number of Venture-Backed IPOsvs. All IPOs

Venture Capital Journal. The second most strict cate-gory still provides that the investment be made in aventure round of financing, but allows that the invest-ment could have been exited at some point prior tothe IPO. The third and most comprehensive defini-tion of venture-backed includes companies invested

in by either venture capital or buyout funds and theinvestor may or may not have exited prior to the IPO.When the term venture-backed is used in this partic-ular chapter, it usually refers to companies coveredby the second category. The term ‘private equity-backed’ will refer to the third category of company.


44 Thomson Reuters

Year1980 59 664 9 12 3,517 28 62 9 111981 97 1,068 8 11 4,886 26 51 7 101982 39 577 8 16 2,663 35 76 4 71983 196 3,770 12 20 18,787 44 98 5 81984 83 1,005 9 12 4,672 31 57 5 81985 76 1,293 13 17 6,480 38 86 4 91986 153 3,423 14 23 23,902 55 160 6 111987 126 2,318 15 21 9,789 56 91 5 91988 54 846 14 17 3,391 57 68 5 61989 65 1,223 15 21 5,577 55 96 7 81990 70 1,396 20 23 5,274 67 85 6 91991 157 4,923 25 32 20,836 87 136 7 91992 195 7,204 24 39 31,404 77 169 6 81993 219 6,683 22 32 23,194 68 110 7 91994 167 4,671 23 28 18,321 70 111 8 101995 205 8,147 33 41 31,073 110 155 7 91996 272 11,482 32 42 56,399 110 207 5 81997 138 4,826 30 35 22,126 108 160 6 81998 78 3,782 41 48 17,253 182 221 5 71999 269 20,823 63 77 133,727 343 497 4 52000 265 25,618 73 97 133,639 249 504 5 72001 41 3,490 71 85 18,004 322 439 6 112002 22 2,109 71 96 7,950 223 361 7 112003 29 2,023 66 70 8,257 228 285 8 92004 94 11,378 69 121 61,678 256 656 7 82005 57 4,485 65 79 16,558 202 290 6 82006 56 5,075 76 91 22,086 257 394 8 102007 86 10,326 84 120 53,556 346 623 9 92008 6 470 71 78 2,646 258 441 10 10

Mean Age @IPO (yrs)

Num ofIPOs

Offer Amount($Mil)

Med OfferAmt ($Mil)

Mean OfferAmt ($Mil)

Post OfferValue ($Mil)

Med PostValue ($Mil)

Mean PostValue ($Mil)

MedianAge @ IPO

(yrs)

Figure 5.03 Venture-Backed IPOs 1980 to 2008

Value and Age Characteristics

2009 NVCA Yearbook

Thomson Reuters 45

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Computers and Peripherals 209 208 234 820 179 177 361 237 108 165 125 76 277 298 199 398 371 200 53 237 606 0 55 0 84 7 0 108 188Healthcare Services 26 24 0 160 67 83 30 13 0 59 61 390 730 124 245 297 276 185 247 504 192 535 72 52 108 67 0 113 164Software 68 164 43 487 137 47 399 222 130 128 135 394 517 800 360 1,933 1,837 834 731 4,337 4,019 365 155 289 2,050 505 576 1,242 62Medical Devices and Equipment 45 51 40 274 37 74 80 152 20 108 124 498 817 333 476 878 1,492 450 91 48 759 610 300 53 844 327 714 1,241 57Biotechnology 35 143 44 397 45 17 318 173 24 65 63 928 769 485 166 527 856 536 147 328 4,085 335 331 440 1,436 782 855 1,315 0Business Products and Services 10 2 0 191 10 8 51 17 2 0 62 103 61 116 67 78 429 109 90 1,152 683 0 0 97 324 464 0 828 0Consumer Products and Services 3 62 26 198 93 12 102 119 8 174 5 453 401 376 338 285 191 155 515 453 414 185 39 157 250 103 77 202 0Electronics/Instrumentation 31 54 45 165 14 6 33 16 0 64 45 74 78 272 206 216 140 77 72 36 274 41 500 0 0 0 0 0 0Financial Services 25 0 0 39 0 208 271 56 9 85 0 174 281 197 328 442 1,272 245 7 505 104 490 201 322 699 755 197 0 0Industrial/Energy 90 148 8 324 199 264 340 418 242 155 399 358 1,293 787 768 1,022 1,337 333 130 78 1,317 522 158 0 367 21 257 580 0IT Services 0 21 43 66 25 13 21 32 12 0 0 177 848 66 64 284 457 85 262 1,643 1,711 0 90 0 90 122 191 344 0Media and Entertainment 0 49 7 41 12 78 778 196 61 15 40 251 258 666 466 160 485 457 116 2,888 1,499 0 207 65 1,669 352 798 184 0Networking and Equipment 24 76 61 108 34 30 135 113 37 52 71 312 241 356 405 285 567 316 319 2,704 3,361 135 0 0 138 0 427 453 0Other 0 0 0 0 0 0 54 0 0 0 0 0 10 0 0 7 0 141 0 0 0 0 0 0 0 0 0 0 0Retailing/Distribution 0 7 0 120 41 223 336 94 106 34 33 379 257 729 101 67 551 175 309 1,521 275 0 0 65 62 28 139 496 0Semiconductors 87 34 0 278 79 14 41 98 74 79 25 186 132 340 214 669 6 204 0 269 1,591 122 0 332 2,218 594 125 636 0Telecommunications 11 28 27 104 34 39 73 361 15 41 207 170 234 737 269 599 1,215 325 694 4,123 4,730 150 0 152 1,040 358 719 2,583 0Total 664 1,068 577 3,770 1,005 1,293 3,423 2,318 846 1,223 1,396 4,923 7,204 6,682 4,672 8,147 11,482 4,827 3,782 20,823 25,618 3,490 2,109 2,023 11,378 4,485 5,075 10,326 470

Figure 5.04 Venture-Backed IPOs by MoneyTree™ Industry

Total Offering Size ($ Millions)

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Healthcare Services 2 2 0 10 6 4 3 1 0 2 4 13 8 4 7 6 6 6 5 7 3 6 1 1 1 1 0 1 2Medical Devices and Equipment 6 6 6 21 5 5 11 10 4 8 11 22 35 20 21 23 44 14 3 1 15 8 3 1 15 8 9 11 2Computers and Peripherals 12 15 6 30 10 12 16 10 6 4 7 3 14 12 8 8 11 7 3 5 7 0 1 0 1 1 0 1 1Software 4 10 6 25 9 3 23 12 7 9 9 15 18 27 19 55 59 27 19 69 55 5 4 4 8 6 6 12 1Biotechnology 1 5 4 24 4 5 16 13 2 8 4 33 29 24 13 17 31 22 6 6 49 4 4 7 25 14 17 21 0Business Products and Services 2 1 0 9 2 1 6 5 1 0 2 5 3 5 3 3 8 2 2 16 8 0 0 2 3 4 0 3 0Consumer Products and Services 1 7 3 11 6 2 7 5 1 5 1 12 11 12 5 9 7 6 7 7 4 4 1 3 3 1 1 2 0Electronics/Instrumentation 5 8 3 10 4 1 7 4 0 1 2 3 6 12 8 8 8 2 1 1 4 1 1 0 0 0 0 0 0Financial Services 3 0 1 4 0 2 7 7 1 4 0 3 8 5 10 8 14 4 1 8 2 3 2 4 7 3 2 0 0Industrial/Energy 11 21 3 16 12 15 13 29 15 10 15 15 21 25 23 15 22 10 3 1 10 6 1 0 2 1 3 4 0IT Services 0 2 1 5 3 1 2 3 1 1 0 6 3 3 3 7 12 3 5 27 16 0 1 0 2 1 2 4 0Media and Entertainment 0 6 2 4 1 6 15 4 2 1 3 4 8 15 10 5 10 8 3 35 16 0 3 1 10 4 6 2 0Networking and Equipment 2 4 2 6 4 2 4 6 3 3 2 8 12 10 14 10 10 6 7 26 16 1 0 0 2 0 4 5 0Other 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0Retailing/Distribution 0 1 0 7 6 7 10 5 4 2 3 4 7 14 3 2 11 5 6 16 5 0 0 1 1 1 1 3 0Semiconductors 8 5 0 8 5 2 4 4 5 5 1 8 3 16 9 18 1 6 0 5 14 2 0 3 6 8 2 8 0Telecommunications 2 4 2 6 6 8 8 8 2 2 6 3 8 15 11 10 18 9 7 39 41 1 0 2 8 4 3 9 0Totals 59 97 39 196 83 76 153 126 54 65 70 157 195 219 167 205 272 138 78 269 265 41 22 29 94 57 56 86 6

Figure 5.05 Venture-Backed IPOs by MoneyTree™ Industry

Total Number of Companies


46 Thomson Reuters

Number Number ($ Millions)Year Total Known Price Average1980 1 0 0.0 0.01981 1 1 217.5 217.51982 1 0 0.0 0.01983 3 0 0.0 0.01984 5 2 643.5 321.81985 9 4 282.2 70.61986 17 4 214.7 53.71987 21 8 854.4 106.81988 32 16 1579.5 98.71989 35 20 2071.3 103.61990 27 12 595.6 49.61991 33 13 1038.7 79.91992 91 60 4293.4 71.61993 121 76 6141.4 80.81994 136 89 9972.2 112.01995 162 109 16348.4 150.01996 193 146 37023.7 253.61997 270 202 65422.5 323.91998 324 233 91566.8 393.01999 353 259 223150.6 861.62000 376 249 125326.7 503.32001 406 203 39596.8 195.12002 359 187 24018.8 128.42003 326 146 14561.0 99.72004 383 210 25171.1 119.92005 448 223 41470.4 186.02006 502 221 48894.7 221.22007 549 238 76547.0 321.62008 473 155 26018.3 167.9

Figure 5.08Private Equity-Backed

Merger & Acquisitions by Year

Number Number ($ Millions)Year Total Known Price Average1980 1 0 0.0 0.01981 0 0 0.0 0.01982 1 0 0.0 0.01983 2 0 0.0 0.01984 4 1 4.5 4.51985 6 3 271.2 90.41986 11 1 86.8 86.81987 13 4 398.1 99.51988 16 6 481.1 80.21989 16 5 371.8 74.41990 19 9 214.3 23.81991 17 4 200.5 50.11992 75 46 2544.8 55.31993 73 44 1701.2 38.71994 100 64 3407.6 53.21995 97 60 3788.3 63.11996 118 77 8531.0 110.81997 165 117 7535.5 64.41998 209 132 9350.6 70.81999 240 165 41663.4 252.52000 317 206 69089.3 335.42001 354 164 16769.9 102.32002 319 154 7586.7 49.32003 286 120 7465.1 62.22004 347 187 15919.6 85.12005 352 166 17410.5 104.92006 368 160 18693.6 116.82007 378 170 32254.6 189.72008 335 114 13271.9 116.4

Figure 5.07Venture-Backed


Note: Private Equity includes venture capital, buyouts, mezzanine,and other private equity financed companies. Therefore, datafrom fig. 5.07 is included here.

Industry Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean Median Mean MedianTelecommunications 55.3 40.0 18.0 NA NA NA 102.5 102.5 85.6 81.0 68.5 68.5 91.7 57.0 89.4 88.0 127.0 NAComputer Hardware and Services 100.1 53.5 87.0 87.0 243.0 243.0 91.0 NA 77.0 83.0 119.4 77.0 131.0 131.0 106.6 103.0 127.0 NAComputer Software 90.2 67.0 60.0 56.0 120.4 71.0 95.0 89.0 82.1 90.0 73.9 67.0 125.1 109.5 126.6 112.5 110.0 110.0Business/Financial 55.5 47.0 106.0 47.0 111.0 111.0 105.9 108.0 122.2 83.0 94.0 66.0 131.2 136.0 147.6 135.0 NA NASemiconductors and Electronics 135.3 70.0 108.7 118.0 9.0 NA 143.0 141.0 96.2 78.0 106.9 96.0 111.5 111.5 111.1 95.0 NA NABiotechnology 102.0 67.0 67.0 67.0 145.0 145.0 77.5 72.5 83.8 75.0 76.8 72.5 96.1 94.0 89.6 100.0 103.0 NAHealthcare Related 152.1 67.0 125.8 83.5 111.5 95.0 80.0 80.0 119.5 98.0 106.0 93.0 116.2 99.0 109.6 106.0 121.7 157.0Retailing and Media 45.6 40.0 176.0 176.0 204.0 64.5 79.7 64.5 107.9 75.5 136.1 74.0 134.2 122.0 113.3 112.0 NA NAIndustrial/Energy 100.3 82.0 223.0 67.0 40.0 NA NA NA 57.0 55.0 124.0 129.0 109.0 98.0 105.7 113.0 NA NA

20082007200620052000 20042001 2002 2003

Figure 5.06 Average and Median Age in Months

of Companies at IPO 2000 to 2008

2009 NVCA Yearbook

Thomson Reuters 47

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Software 0 0 0 0 0 0 0 5 40 0 104 83 274 186 523 500 1022 2104 2897 10359 15725 3063 1944 2037 4305 4772 4263 5308 3732Telecommunications 0 0 0 0 0 0 0 0 0 0 0 0 4 299 790 334 419 1097 948 2249 10261 1518 1257 326 1748 1241 1420 1543 1693Biotechnology 0 0 0 0 0 0 0 0 0 0 0 68 61 25 39 97 388 426 172 780 1206 430 115 604 713 2637 1765 5513 1659Media and Entertainment 0 0 0 0 0 0 0 0 0 0 0 0 0 119 29 45 2107 1387 210 10341 2518 669 324 285 2260 1379 4470 1767 1429Financial Services 0 0 0 0 0 0 0 0 0 0 0 0 1407 161 109 734 67 34 463 431 701 489 211 99 10 530 938 1040 988Semiconductors 0 0 0 0 0 71 0 0 0 15 0 0 0 38 67 327 0 8 468 1269 5243 1439 563 415 612 214 922 896 677Networking and Equipment 0 0 0 0 0 0 0 0 0 0 0 0 0 347 354 794 1033 213 1206 10518 18902 5525 751 789 526 1468 603 853 609IT Services 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 19 485 80 706 676 2361 533 603 1011 1681 1729 490 2495 538Industrial/Energy 0 0 0 0 5 99 0 0 11 0 20 40 180 231 771 79 1115 245 350 721 2066 1240 113 59 613 499 426 1719 514Medical Devices and Equipment 0 0 0 0 0 101 0 6 4 250 1 0 436 43 295 221 313 652 186 498 398 611 565 525 1145 1156 1408 2086 511Business Products and Services 0 0 0 0 0 0 0 387 0 0 12 0 0 0 0 0 185 207 368 1639 2218 245 142 154 279 252 236 2561 437Consumer Products and Services 0 0 0 0 0 0 87 0 227 0 0 10 1 0 29 23 362 320 404 466 592 171 61 235 439 403 343 1975 284Electronics/Instrumentation 0 0 0 0 0 0 0 0 0 0 0 0 37 13 49 42 14 115 60 47 4162 209 20 21 116 72 3 83 117Computers and Peripherals 0 0 0 0 0 0 0 0 0 47 79 0 16 161 84 69 889 394 674 388 1374 357 59 64 756 270 285 610 49Healthcare Services 0 0 0 0 0 0 0 0 199 60 0 0 94 0 178 475 130 94 166 325 286 262 855 85 706 789 817 642 27Retailing/Distribution 0 0 0 0 0 0 0 0 0 0 0 0 35 80 90 29 2 161 74 955 1077 8 3 757 12 0 305 2968 10Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 195 0Total 0 0 0 0 5 271 87 398 481 372 214 201 2545 1701 3408 3788 8531 7536 9351 41663 69089 16770 7587 7465 15920 17411 18694 32255 13272

Figure 5.09 Venture-Backed Acquisitions by MoneyTree™ Industry

Total Transaction Values 1980 to 2008 ($ Million)

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Software 0 0 0 0 2 0 3 1 3 1 5 2 12 16 30 26 22 45 61 58 98 88 116 105 117 126 135 122 121Media and Entertainment 0 0 0 0 0 0 0 1 0 0 0 1 1 5 2 4 9 14 8 19 32 48 19 13 30 26 26 38 30Networking and Equipment 0 0 0 0 0 0 0 1 0 0 0 0 2 8 10 8 13 5 9 20 21 14 15 18 24 21 24 16 24Semiconductors 0 0 0 0 0 1 0 0 0 1 1 3 1 2 3 5 1 1 9 8 16 12 13 12 14 11 15 15 21Biotechnology 0 0 0 0 0 0 1 0 1 1 1 2 6 3 5 9 11 10 12 13 14 17 11 14 23 25 30 22 20Telecommunications 0 0 0 0 0 0 1 1 0 2 1 1 2 4 5 4 7 12 16 20 30 34 37 30 24 27 29 31 20IT Services 0 0 0 0 0 0 1 0 2 1 0 0 1 0 0 4 6 6 11 15 18 28 33 26 27 22 19 28 20Industrial/Energy 0 0 0 1 2 1 1 2 2 3 3 3 8 6 12 8 6 13 19 19 12 13 10 7 9 12 9 22 18Business Products and Services 0 0 0 0 0 0 0 1 1 0 1 1 1 3 1 0 3 3 7 10 14 21 17 15 13 14 18 27 13Medical Devices and Equipment 0 0 0 0 0 1 1 2 2 2 2 0 12 4 8 9 7 15 10 11 7 15 11 8 22 25 20 22 12Consumer Products and Services 0 0 0 1 0 0 1 0 1 0 0 1 2 3 2 1 8 9 7 11 11 14 4 5 7 7 4 5 9Financial Services 0 0 0 0 0 0 0 0 0 0 0 0 6 3 3 4 5 5 7 11 8 16 11 9 11 7 13 11 6Computers and Peripherals 0 0 1 0 0 2 1 2 1 2 3 1 10 10 6 4 10 10 12 9 7 5 1 9 9 9 7 4 6Healthcare Services 0 0 0 0 0 0 1 1 1 1 1 1 5 0 9 9 4 5 14 6 10 8 12 4 6 14 8 7 5Electronics/Instrumentation 1 0 0 0 0 0 0 1 2 2 0 1 4 3 2 1 4 7 4 2 4 9 3 3 5 3 5 2 5Retailing/Distribution 0 0 0 0 0 1 0 0 0 0 1 0 2 3 2 1 2 5 3 8 13 11 6 8 5 2 6 5 4Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 0 1 1 0 1 1Total 1 0 1 2 4 6 11 13 16 16 19 17 75 73 100 97 118 165 209 240 317 354 319 286 347 352 368 378 335

Figure 5.10 Venture-Backed Acquisitions by MoneyTree™ Industry

Number of Companies 1980 to 2008


48 Thomson Reuters

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Software 0 0 0 0 2 0 3 3 4 4 7 5 14 22 33 30 31 54 73 75 105 91 116 110 120 130 144 135 134Industrial/Energy 0 0 0 2 3 3 3 3 7 4 4 8 11 18 18 24 17 35 42 36 22 25 23 18 18 51 60 70 69Media and Entertainment 0 0 0 0 0 0 1 1 0 1 0 1 1 6 5 6 16 21 20 29 38 52 21 15 30 30 36 53 34Telecommunications 0 0 0 0 0 0 1 1 1 2 1 1 4 4 10 8 10 14 19 25 35 35 41 32 26 27 33 37 26Consumer Products and Services 0 0 0 1 0 0 2 2 3 2 0 2 6 10 3 5 13 20 22 13 16 20 12 9 15 18 20 31 26Networking and Equipment 0 0 0 0 0 0 0 2 0 2 0 0 2 10 11 11 16 7 12 27 21 14 16 19 24 25 27 18 25Semiconductors 0 1 0 0 0 1 0 0 0 1 2 4 1 2 3 5 1 2 12 10 17 13 13 12 14 12 15 17 24Biotechnology 0 0 0 0 0 0 2 0 1 4 1 2 7 6 8 15 14 13 18 23 16 18 13 15 24 28 31 22 22Business Products and Services 0 0 0 0 0 0 0 1 3 0 2 2 1 3 1 3 4 7 10 13 15 23 17 15 16 20 29 41 22IT Services 0 0 0 0 0 0 1 0 3 1 1 0 1 0 0 5 6 8 14 19 22 31 35 29 28 23 22 36 20Medical Devices and Equipment 0 0 0 0 0 2 1 3 2 5 3 0 14 8 12 13 15 23 18 21 11 18 13 10 23 31 24 29 15Healthcare Services 0 0 0 0 0 0 1 1 1 1 1 1 5 1 11 11 8 9 15 9 10 11 13 4 8 17 18 18 12Financial Services 0 0 0 0 0 0 0 1 0 0 0 0 8 11 8 13 18 28 22 21 12 23 13 11 13 12 15 13 11Electronics/Instrumentation 1 0 0 0 0 0 0 1 3 2 1 1 4 3 2 2 7 9 6 3 7 13 4 3 6 4 7 8 11Retailing/Distribution 0 0 0 0 0 1 0 0 1 2 1 5 2 6 2 4 5 10 8 13 18 13 8 13 7 6 12 12 9Computers and Peripherals 0 0 1 0 0 2 2 2 3 4 3 1 10 11 9 7 12 10 13 16 9 5 1 10 9 10 7 4 7Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 1 0 1 2 4 2 5 6Total 1 1 1 3 5 9 17 21 32 35 27 33 91 121 136 162 193 270 324 353 376 406 359 326 383 448 502 549 473

Figure 5.12 Private Equity-Backed Acquisitions by MoneyTree™ Industry

Number of Companies 1980 to 2008

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, data fromfig. 5:10 is included here.

Note: Private Equity includes venture capital, buyouts, mezzanine, and other private equity financed companies. Therefore, data fromfig. 5.09 is included here.

Industry 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008Industrial/Energy 0 0 0 0 644 110 63 25 302 75 20 130 282 953 2012 2625 2438 8075 3788 7844 3022 3116 3809 1634 6014 8614 16866 8318 6517Software 0 0 0 0 0 0 0 24 56 443 104 135 696 625 913 1287 5958 6479 4541 39995 22039 3258 1944 4169 4631 5045 5299 5773 4452Telecommunications 0 0 0 0 0 0 0 0 262 0 0 0 81 299 1376 2299 3155 2976 3884 65791 17540 7670 7116 326 2159 1241 2794 4978 2043Financial Services 0 0 0 0 0 0 0 317 0 0 0 0 1424 732 1733 2968 6561 18410 44588 16882 1505 3566 1538 256 10 1005 938 1370 1813Biotechnology 0 0 0 0 0 0 0 0 0 809 0 68 228 1057 351 794 999 583 1696 4977 1972 540 2540 660 816 4855 1765 5513 1776Media and Entertainment 0 0 0 0 0 0 0 0 0 32 0 0 0 143 123 405 3650 4232 12826 23913 6733 738 1112 285 2260 5259 9239 7902 1650Business Products and Services 0 0 0 0 0 0 0 387 200 0 12 7 0 0 0 1192 370 1383 1999 2201 2258 245 142 154 1269 486 1859 3459 1537Retailing/Distribution 0 0 0 0 0 0 0 0 0 212 0 619 35 357 90 505 1371 8035 5616 3877 5663 2408 178 1636 703 0 690 3894 878Networking and Equipment 0 0 0 0 0 0 0 0 0 15 0 0 0 675 1529 1482 6842 1355 4278 44539 18902 5525 751 877 526 2346 819 947 782Computers and Peripherals 0 0 0 0 0 0 19 0 242 67 79 0 16 161 289 264 951 394 730 1815 2569 357 59 64 756 270 285 610 769Consumer Products and Services 0 0 0 0 0 0 132 95 227 0 0 10 90 618 29 573 1305 2204 2506 549 1375 568 1540 1432 1101 4166 1642 19369 760Semiconductors 0 218 0 0 0 71 0 0 0 15 100 70 0 38 67 327 0 289 792 4705 5243 1564 563 415 612 214 922 896 677Medical Devices and Equipment 0 0 0 0 0 101 0 6 4 344 167 0 1311 368 358 614 1199 4980 2264 3208 481 993 1011 548 1295 3063 2312 4328 643Healthcare Services 0 0 0 0 0 0 0 0 199 60 0 0 94 103 1054 951 1559 5247 789 610 286 602 1020 85 706 1717 2398 1801 614IT Services 0 0 0 0 0 0 0 0 7 0 0 0 0 0 0 19 485 357 1075 2164 31248 866 670 1809 1848 2079 520 2643 538Electronics/Instrumentation 0 0 0 0 0 0 0 0 81 0 115 0 37 13 49 43 181 426 197 81 4491 7582 27 21 221 72 3 3689 472Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 190 245 1039 545 1055 100Total 0 218 0 0 644 282 215 854 1580 2071 596 1039 4293 6141 9972 16348 37024 65423 91567 223151 125327 39597 24019 14561 25171 41470 48895 76547 26018

Figure 5.11 Private Equity-Backed Acquisitions by MoneyTree™ Industry

Total Transaction Values 1980 to 2008 ($ Million)

2009 NVCA Yearbook

Thomson Reuters 49

Year < TVI 1x-4x TVI 4x-10x TVI >10x TVI2003 40% 40% 13% 7%2004 35% 34% 21% 10%2005 28% 40% 20% 12%2006 27% 36% 20% 17%2007 23% 37% 22% 18%2008 29% 28% 25% 18%

Values vs. Cumulative Total Venture InvestmentRelationship Between Transaction

Figure 5.13Venture-Backed


This chart is prepared by analyzing all deals where total venture investment and acquisition priceare confirmed. Each deal is classified as a ratio of company acquisition (exit) price to total ventureinvestment from all rounds. This chart compares the number of deals in each category. An acquisition where deal price is less than the total venture investment (“<TVI”) clearly did resultin a good return. Four times the investment to ten times the investment is usually a good out-come. An acquisition for more than ten times venture investment is usually a very nice outcome.

This page intentionally left blank.


50 Thomson Reuters

Performance

METHODOLOGYIn the past, private equity performance has generallybeen measured in two ways. One way is an annualizedinternal rate of return (IRR) calculated since fundinception on a cumulative basis; the second is meas-uring the rate of return over the last one year, threeyears, five years, etc, otherwise known as the invest-ment horizon. In both cases, returns of funds are cal-culated by Thomson Reuters net to limited partnersafter management fees and general partners’ carriedinterest (that is, the capital gains split). The IRR is cal-culated by Thomson Reuters by treating cash inflowsas negative cash flows and distributions of cash andcommon shares from realized gains to investors aspositive cash flows. In addition, the net asset value of

the fund is used as a terminal positive cash flow. The investment horizon return uses the same invest-ment and distribution cash flow data as above, exceptthat in addition to using the net asset value of thefund at the end of the period being measured as a ter-minal positive cash flow, it also uses the net assetvalue at the beginning of the period being measuredas a negative initial cash flow. Both of these measuresof performance use the net asset value as provided bythe partnership, which is a subjective appraised unre-alized value. However, these values can often be ver-ified by the fund reports provided by general partnersto their investors. For further information on valua-tions, readers should consult Appendix H in this pub-lication on portfolio company valuations.

Over the long-term, venture capital funds have paid out a net 15-20% IRR to their investors. The most recent per-formance statistics confirm this. For the 20 year period ended on September 30, 2008, venture funds overallreturned 17.0% annualized IRR. Among the fund segments, those designating themselves as early stage led the waywith 21.6% annualized IRR. Shorter horizon returns are less significant. For example, the one year returns reflectfalling valuations for public companies which then affect the valuations of private companies. Amplifying this effectin 2008, likely continuing into 2009 is the large number of later stage companies still in portfolios. These compa-nies typically have positive EBITDA. Their portfolio valuations would be influenced by public markets through theuse of ratios and comparables for pricing. Much of this IRR exists in the net asset values of portfolios. A continuedawful exit market will delay exits (timing) and could reduce the values of the companies now awaiting an IPO oracquisition (amount realized). Both suggest lower short-term returns going forward.

Thomson Reuters 51

Net IRR to Investors For Investment HorizonEnding 09/30/2008 for Private Equity Funds

Fund Type 1YR 3YR 5YR 10YR 20YRSeed/Early Focused -1.5 3.7 5.0 37.1 21.6Balanced Focused -5.6 7.3 11.4 14.9 14.7Later Stage Focused 9.1 11.1 10.1 8.7 14.5All Venture -1.5 6.4 8.5 17.1 17.0Buyout Funds -8.3 7.1 12.2 7.3 11.1Mezzanine Debt 10.8 4.4 4.8 5.4 7.8All Private Equity -7.1 7.6 11.0 9.3 12.9

Figure 6.01Performance of Private Equity Funds

Venture funds were classified into seed/early stage, balanced fund (investing in a variety of stages), or later stage categoriesdepending on their investment focus. Returns information was provided on a time horizon basis, meaning for the one-year,three-year, five-year, 10-year, or 20-year time periods ending September 30, 2008. All returns are annualized and net to the LPinvestors. For example, the correct reading of the five-year all-venture number is: “over the five year period from October 2003through September 2008, the industry as a whole returned a net annualized IRR to its investors of 8.5%.


52 Thomson Reuters

-20

-10

0

10

20

30

40

50

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

*VC

S&P 500

NASDAQ

Figure 6.02 Five Year Rolling Averages

Venture Capital vs. Public Marketsas of 12/31/08

Five-Year PeriodEnding S&P 500 NASDAQ1990 6.5 9.4 2.81991 8.6 11.5 10.91992 8.7 12.0 15.41993 11.7 10.9 15.31994 13.1 5.4 10.61995 20.1 13.8 24.01996 22.4 12.2 17.11997 26.1 17.4 18.31998 26.6 21.4 23.11999 48.2 26.2 40.22000 48.2 16.5 18.62001 36.8 9.2 8.62002 26.9 -1.9 -3.22003 25.0 -2.0 -1.82004 -2.1 -3.8 -11.82005 -6.5 -1.1 -2.22006 1.3 4.5 4.62007 8.6 10.8 14.72008 *8.5 -4.1 -4.7

VentureCapital

Figure 6.03 Five Year Rolling Averages:

Venture Capital vs. Public Markets

*2008 venture is through 9/30/2008

*Data as of 9/30/08

The comparison to major indices on a rolling five-year period basis is intended to smooth the effect of short term fluctuations.Remember that the 5-year statistics reflect significant devaluations and failures of the post-bubble period. Readers should note that a direct assessment of private equity returns with S&P 500 and NASDAQ total returns is misleadingin the sense that the returns presented in this analysis for venture capital funds are IRRs (money-weighted returns), while theS&P 500 and NASDAQ index returns are geometric mean returns (time-weighted). Specifically, money-weighted returns areaffected by the time value of money by application of a discount rate (the IRR), while time-weighted returns are simply the geo-metric mean of various holding period returns. Also remember that the venture capital statistic is for the asset class overall, and the two public-market indices are made up ofselected, generally-successful public companies. A fairer comparison might be between the top quartile venture funds and thepublic indices but those statistics are not available for publication.

*

2009 NVCA Yearbook

Thomson Reuters 53

-300

-250

-200

-150

-100

-50

0

50

100

150

200

2001 2002 2003 2004 2005 2006 2007 2008

($B

illio

ns)

Venture Capital Investment

New Equity Mutual Fund Investment

Figure 6.05Venture Capital Investment

vs. Net New Stock Mutual Fund Inflows

Annualized Realized UnrealizedYear of Fund Pooled Return Return ReturnFormation Since Inception (DPI) (RVPI)

(times) (times)1990 28.50 2.82 0.171995 61.60 3.81 0.332000 1.20 0.43 0.632005 8.00 0.15 0.99All Vintage Years 15.60 1.16 0.48

Figure 6.04 Venture Year Results for Selected Years

Venture Funds as of 9/30/08

Vintage year is defined by the year funds started investing. The vintage years presented are 1990, 1995, 2000, and 2005. Inaddition, combined results for all vintage years are presented as well. These returns are driven by both realized exits in the formof capital gains and unrealized valuations based upon interim valuations provided by the individual venture funds and verifiableby underlying fund reports. The valuations are used for the IRR analysis during the life of a portfolio, but do not reflect the cap-ital distributions to the investors. For all of venture capital on a cumulative basis from inception of the funds through September30, 2008, 1.16 times the original investment was realized and 0.48 times the original investment remained in unrealized portfo-lio valuations. Therefore, for all venture capital, this meant that 71% (1.16/(1.16+0.48)) of the overall gains reflected in the per-formance statistics were realized.

This chart compares venture capital invested each year with new sales of equity mutual funds. The concept is to estimate cap-ital entering public markets which could eventually be used as liquidity (exits) for venture portfolio companies. In 2008, whileventure capital firms invested $28 billion, investors bled $234 billion from stock mutual funds. (Source: Investment CompanyInstitute www.ici.org.) Clearly this bodes ill. Stepping back a year earlier, in 2007 the venture capital industry put $31 billion intocompanies and stock mutual funds attracted $93 billion. This gives a ratio of about 3 to 1. If both 2007 metrics became “runrates” for the next few years, could the US venture capital industry be successful? No one has estimated what the ideal or min-imum multiples should be. But we know that 3 to 1 is probably far short of what is needed. For one thing, venture-backed com-panies represent between 1/3 and 1/4 of total IPOs. Also, for even a modest IRR on a particular portfolio company held for justfour years, the holding would need to appreciate more than 3x. Plus the venture investors typically own half of the company orless. So even at 2007 levels, liquidity falls short.Given that the success of the venture capital ecosystem is dependent upon liquidity directly (IPOs) and indirectly (acquisitionsby public companies) for exits, logic would suggest inflows at a strong multiple of venture investment are needed. Muchthought work needs to be done on what that multiple needs to be. It’s clear that for the level of new liquidity seen in 2007 wasinsufficient. The 2008 outflow explains the lack of exits.


54 Thomson Reuters

Amt ofDistributions

Year ($ Billions)1996 15.61997 17.51998 12.81999 30.22000 84.82001 14.72002 10.72003 7.82004 15.02005 21.02006 15.82007 19.72008 *5.9

Figure 6.06Amount of Distributors

to Limited Partners

*Data through 9/30/08

This chart reflects capital paid out to limited partner investors by venture capital funds net of all fees, capital gains splits, andexpenses.

This chart quantifies the quality of a year’s initial public offerings by comparing the IPO pre-money valuation to the total ventureinvestment in those companies. For example, looking at 2008: “For the offering itself (not the first trade, end of first day, endof first week, etc.), subtracting the IPO amount ($0.5 billion) from the IPO valuation ($2.6 billion) gives the IPO pre-money val-uation ($2.1 billion). The venture-backed companies which went public in 2008 had a cumulative (total) venture investment of$0.4 billion. This gives a ratio of 5.3x which is considerably stronger than the 4.0x ratio in 2006”. But the sample size is smalland the conclusions are of limited use.

Year1995 31.1 8.1 23.0 2.2 10.51996 56.4 11.5 44.9 3.7 12.11997 22.1 4.8 17.3 2.7 6.41998 17.3 3.8 13.5 2.4 5.61999 134.0 20.8 113.2 11.0 10.32000 133.2 25.6 107.6 13.0 8.32001 18.0 3.5 14.5 2.6 5.62002 8.0 2.1 5.9 1.7 3.52003 8.3 2.0 6.3 2.4 2.62004 61.1 11.4 49.7 6.7 7.42005 16.5 4.5 12.0 3.1 3.92006 22.2 5.1 17.1 4.3 4.02007 53.6 10.3 43.3 6.7 6.52008 2.6 0.5 2.1 0.4 5.3

Total Venture Inv.($ Billion) Ratio

Post Offer Value($ Billion)

Offer Amt($ Billion)

IPO PreMoney

Valuation

Figure 6.07Ratio of IPO Pre-Money

Valuation of Amount Invested

Appendix A: Glossary

“A” round – a financing event whereby angel groupsand / or venture capitalists become involved in a fastgrowth company that was previously financed byfounders and their friends and families.

Accredited investor – a person or legal entity, suchas a company or trust fund, that meets certain networth and income qualifications and is considered tobe sufficiently sophisticated to make investmentdecisions in private offerings. Regulation D of theSecurities Act of 1933 exempts accredited investorsfrom protection of the Securities Act. The Securitiesand Exchange Commission has proposed revisions tothe accredited investor qualifying rules, which mayor may not result in changes for venture investors.The current criteria for a natural person are: $1 mil-lion net worth or annual income exceeding $200,000individually or $300,000 with a spouse. Directors,general partners and executive officers of the issuerare considered to be accredited investors.

Alternative asset class – a class of investments thatincludes venture capital, leverage buyouts, hedgefunds, real estate, and oil and gas, but excludes pub-licly traded securities. Pension plans, college endow-ments and other relatively large institutional investorstypically allocate a certain percentage of their invest-ments to alternative assets with an objective to diversi-fy their portfolios.

Alpha – a term derived from statistics and financetheory that is used to describe the return produced bya fund manager in excess of the return of a bench-mark index. Manager returns and benchmark returnsare measured net of the risk-free rate. In addition,manager returns are adjusted for the risk of the man-ager’s portfolio relative to the risk of the benchmarkindex. Alpha is a proxy for manager skill.

Angel – a wealthy individual that invests in compa-nies in relatively early stages of development.Usually angels invest less than $1 million per startup.

Anti-dilution – a contract clause that protects aninvestor from a substantial reduction in percentageownership in a company due to the issuance by the

company of additional shares to other entities. Themechanism for making an adjustment that maintainsthe same percentage ownership is called a FullRatchet. The most commonly used adjustment pro-vides partial protection and is called WeightedAverage.

“B” round – a financing event whereby investorssuch as venture capitalists and organized angelgroups are sufficiently interested in a company toprovide additional funds after the “A” round offinancing. Subsequent rounds are called “C”, “D”and so on.

Basis point (“bp”) – one one-hundredth (1/100) of apercentage unit. For example, 50 basis points equalsone half of one percent. Banks quote variable loanrates in terms of an index plus a margin and the mar-gin is often described in basis points, such as LIBORplus 400 basis points (or, as the experts say, “beeps”).

Beta – a measure of volatility of a public stock rela-tive to an index or a composite of all stocks in a mar-ket or geographical region. A beta of more than oneindicates the stock has higher volatility than theindex (or composite) and a beta of one indicatesvolatility equivalent to the index (or composite). Forexample, the price of a stock with a beta of 1.5 willchange by 1.5% if the index value changes by 1%.Typically, the S&P500 index is used in calculatingthe beta of a stock.

Beta product – a product that is being tested bypotential customers prior to being formally launchedinto the marketplace.

Board of directors – a group of individuals, typical-ly composed of managers, investors and experts whohave a fiduciary responsibility for the well being andproper guidance of a corporation. The board is elect-ed by the shareholders.

Book – see Private placement memorandum.

Bootstrapping – the actions of a startup to minimizeexpenses and build cash flow, thereby reducing or

Thomson Reuters 55

eliminating the need for outside investors.

Bp – see Basis point.

Bridge financing – temporary funding that will even-tually be replaced by permanent capital from equityinvestors or debt lenders. In venture capital, a bridge isusually a short term note (6 to 12 months) that convertsto preferred stock. Typically, the bridge lender has theright to convert the note to preferred stock at a pricethat is a 20% to 25% discount from the price of the pre-ferred stock in the next financing round. SeeMezzanine and Wipeout bridge.

Broad-based weighted average anti-dilution - Aweighted average anti-dilution method adjusts down-ward the price per share of the preferred stock ofinvestor A due to the issuance of new preferredshares to new investor B at a price lower than theprice investor A originally received. Investor A’s pre-ferred stock is repriced to a weighted average ofinvestor A’s price and investor B’s price. A broad-based anti-dilution method uses all common stockoutstanding on a fully diluted basis (including allconvertible securities, warrants and options) in thedenominator of the formula for determining the newweighted average price. See Narrow-based weight-ed average anti-dilution .

Burn rate – the rate at which a startup with little orno revenue uses available cash to cover expenses.Usually expressed on a monthly or weekly basis.

Business Development Company (BDC) – a pub-licly traded company that invests in private compa-nies and is required by law to provide meaningfulsupport and assistance to its portfolio companies.

Business plan – a document that describes a newconcept for a business opportunity. A business plantypically includes the following sections: executivesummary, market need, solution, technology, compe-tition, marketing, management, operations, exit strat-egy, and financials (including cash flow projections).For most venture capital funds fewer than 10 of every100 business plans received eventually receive fund-ing.

Buyout – a sector of the private equity industry. Also,the purchase of a controlling interest of a company

by an outside investor (in a leveraged buyout) or amanagement team (in a management buyout).

Buy-sell agreement – a contract that sets forth theconditions under which a shareholder must first offerhis or her shares for sale to the other shareholdersbefore being allowed to sell to entities outside thecompany.

C Corporation – an ownership structure that allowsany number of individuals or companies to ownshares. A C corporation is a stand-alone legal entityso it offers some protection to its owners, managersand investors from liability resulting from its actions.

Capital Asset Pricing Model (CAPM) – a methodof estimating the cost of equity capital of a company.The cost of equity capital is equal to the return of arisk-free investment plus a premium that reflects therisk of the company’s equity.

Capital call – when a private equity fund manager(usually a “general partner” in a partnership) requeststhat an investor in the fund (a “limited partner”) pro-vide additional capital. Usually a limited partner willagree to a maximum investment amount and the gener-al partner will make a series of capital calls over timeto the limited partner as opportunities arise to financestartups and buyouts.

Capital gap - the difficulty faced by some entrepre-neurs in trying to raise between $2 million and $5million. Friends, family and angel investors are typi-cally good sources for financing rounds of less than$2 million, while many venture capital funds havebecome so large that investments in this size rangeare difficult.

Capitalization table – a table showing the owners ofa company’s shares and their ownership percentagesas well as the debt holders. It also lists the forms ofownership, such as common stock, preferred stock,warrants, options, senior debt, and subordinated debt.

Capital gains – a tax classification of investmentearnings resulting from the purchase and sale ofassets. Typically, a company’s investors and foundershave earnings classified as long term capital gains(held for a year or longer), which are taxed at a lowerrate than ordinary income.


56 Thomson Reuters

Capital stock – a description of stock that applieswhen there is only one class of shares. This class isknown as “common stock”.

Capped participating preferred stock – preferredstock whose participating feature is limited so that aninvestor cannot receive more than a specifiedamount. See Participating preferred stock.

Carried interest — the share in the capital gains ofa venture capital fund which is allocated to theGeneral Partner. Typically, a fund must return thecapital given to it by limited partners plus any prefer-ential rate of return before the general partner canshare in the profits of the fund. The general partnerwill typically receive a 20% carried interest, althoughsome successful firms receive 25%-30%. Alsoknown as “carry” or “promote.”

Clawback – a clause in the agreement between thegeneral partner and the limited partners of a privateequity fund. The clawback gives limited partners theright to reclaim a portion of disbursements to a gen-eral partner for profitable investments based on sig-nificant losses from later investments in a portfolio.

Closing – the conclusion of a financing round where-by all necessary legal documents are signed and cap-ital has been transferred.

Club deal – the act of investing by two or more enti-ties in the same target company, usually involving aleveraged buyout transaction.

Co-investment –the direct investment by a limitedpartner alongside a general partner in a portfoliocompany.

Collateral – hard assets of the borrower, such as realestate or equipment, for which a lender has a legalinterest until a loan obligation is fully paid off.

Commitment – an obligation, typically the maxi-mum amount that a limited partner agrees to invest ina fund. See Capital call.

Common stock – a type of security representing own-ership rights in a company. Usually, company founders,management and employees own common stock whileinvestors own preferred stock. In the event of a liquida-

tion of the company, the claims of secured and unse-cured creditors, bondholders and preferred stockholderstake precedence over common stockholders. SeePreferred stock.

Comparable – a publicly traded company with sim-ilar characteristics to a private company that is beingvalued. For example, a telecommunications equip-ment manufacturer whose market value is 2 timesrevenues can be used to estimate the value of a simi-lar and relatively new company with a new product inthe same industry. See Liquidity discount.

Control – the authority of an individual or entity thatowns more than 50% of equity in a company or ownsthe largest block of shares compared to other share-holders.

Consolidation – see Rollup.

Conversion – the right of an investor or lender toforce a company to replace the investor’s preferredshares or the lender’s debt with common shares at apreset conversion ratio. A conversion feature wasfirst used in railroad bonds in the 1800’s.

Convertible debt – a loan which allows the lender toexchange the debt for common shares in a companyat a preset conversion ratio. Also known as a “con-vertible note.”

Convertible preferred stock – a type of stock thatgives an owner the right to convert to common sharesof stock. Usually, preferred stock has certain rightsthat common stock doesn’t have, such as decision-making management control, a promised return oninvestment (dividend), or senior priority in receivingproceeds from a sale or liquidation of the company.Typically, convertible preferred stock automaticallyconverts to common stock if the company makes aninitial public offering (IPO). Convertible preferred isthe most common tool for private equity funds toinvest in companies.

Co-sale right – a contractual right of an investor tosell some of the investor’s stock along with thefounder’s or majority shareholder’s stock if either thefounder or majority shareholder elects to sell stock toa third-party. Also known as Tag-along right.

2009 NVCA Yearbook

Thomson Reuters 57

Cost of capital – see Weighted average cost of cap-ital.

Cost of revenue – the expenses generated by the coreoperations of a company.

Covenant – a legal promise to do or not do a certainthing. For example, in a financing arrangement, com-pany management may agree to a negative covenant,whereby it promises not to incur additional debt. Thepenalties for violation of a covenant may vary fromrepairing the mistake to losing control of the compa-ny.

Coverage ratio – describes a company’s ability topay debt from cash flow or profits. Typical measuresare EBITDA/Interest, (EBITDA minus CapitalExpenditures)/Interest, and EBIT/Interest.

Cram down round – a financing event upon whichnew investors with substantial capital are able todemand and receive contractual terms that effective-ly cause the issuance of sufficient new shares by thestartup company to significantly reduce (“dilute”)the ownership percentage of previous investors.

Cumulative dividends – the owner of preferredstock with cumulative dividends has the right toreceive accrued (previously unpaid) dividends in fullbefore dividends are paid to any other classes ofstock.

Current ratio – the ratio of current assets to currentliabilities.

Data room – a specific location where potential buy-ers / investors can review confidential informationabout a target company. This information may includedetailed financial statements, client contracts, intellec-tual property, property leases, and compensationagreements.

Deal flow – a measure of the number of potentialinvestments that a fund reviews in any given period.

Defined benefit plan – a company retirement plan inwhich the benefits are typically based on an employ-ee’s salary and number of years worked. Fixed bene-fits are paid after the employee retires. The employerbears the investment risk and is committed to provid-

ing the benefits to the employee. Defined benefitplan managers can invest in private equity funds.

Defined contribution plan – a company retirementplan in which the employee elects to contribute someportion of his or her salary into a retirement plan,such as a 401(k) or 403(b). The employer may alsocontribute to the employee’s plan. With this type ofplan, the employee bears the investment risk. Thebenefits depend solely on the amount of money madefrom investing the employee’s contributions. Definedcontribution plan capital cannot be invested in privateequity funds.

Demand rights – a type of registration right.Demand rights give an investor the right to force astartup to register its shares with the SEC and preparefor a public sale of stock (IPO).

Dilution – the reduction in the ownership percentageof current investors, founders and employees causedby the issuance of new shares to new investors.

Dilution protection – see Anti-dilution and Fullratchet.

Disbursement – an investment by a fund in a compa-ny.

Discount rate – the interest rate used to determinethe present value of a series of future cash flows.

Discounted cash flow (DCF) – a valuation method-ology whereby the present value of all future cashflows expected from a company is calculated.

Distressed debt – the bonds of a company that iseither in or approaching bankruptcy. Some privateequity funds specialize in purchasing such debt atdeep discounts with the expectation of exertinginfluence in the restructuring of the company andthen selling the debt once the company has mean-ingfully recovered.

Distribution – the transfer of cash or securities to alimited partner resulting from the sale, liquidation orIPO of one or more portfolio companies in which ageneral partner chose to invest.

Dividends – payments made by a company to the


58 Thomson Reuters

owners of certain securities. Typically, dividends arepaid quarterly, by approval of the board of directors,to owners of preferred stock.

Down round – a round of financing whereby the val-uation of the company is lower than the value deter-mined by investors in an earlier round.

Drag-along rights – the contractual right of aninvestor in a company to force all other investors toagree to a specific action, such as the sale of the com-pany.

Drawdown schedule – an estimate of the gradualtransfer of committed investment funds from the lim-ited partners of a private equity fund to the generalpartners.

Due diligence – the investigatory process performedby investors to assess the viability of a potentialinvestment and the accuracy of the information pro-vided by the target company.

Dutch auction – a method of conducting an IPOwhereby newly issued shares of stock are committedto the highest bidder, then, if any shares remain, to thenext highest bidder, and so on until all the shares arecommitted. Note that the price per share paid by allbuyers is the price commitment of the buyer of the lastshare.

Early stage – the state of a company after the seed(formation) stage but before middle stage (generatingrevenues). Typically, a company in early stage willhave a core management team and a proven conceptor product, but no positive cash flow.

Earnings before interest and taxes (EBIT) – a meas-urement of the operating profit of a company. One pos-sible valuation methodology is based on a comparisonof private and public companies’ value as a multiple ofEBIT.

Earnings before interest, taxes, depreciation andamortization (EBITDA) – a measurement of thecash flow of a company. One possible valuationmethodology is based on a comparison of private andpublic companies’ value as a multiple of EBITDA.

Earn out – an arrangement in which sellers of a busi-

ness receive additional future payments, usuallybased on financial performance metrics such as rev-enue or net income.

Elevator pitch – a concise presentation, lasting onlya few minutes (an elevator ride), by an entrepreneur toa potential investor about an investment opportunity.

Employee Stock Ownership Program (ESOP) – aplan established by a company to reserve shares foremployees.

Entrepreneur – an individual who starts his or herown business.

Entrepreneurship – the application of innovativeleadership to limited resources in order to createexceptional value.

Enterprise Value (EV) – the sum of the market val-ues of the common stock and long term debt of acompany, minus excess cash.

Equity – the ownership structure of a company rep-resented by common shares, preferred shares or unitinterests. Equity = Assets – Liabilities.

ESOP – see Employee Stock Ownership Program.

Evergreen fund – a fund that reinvests its profits inorder to ensure the availability of capital for futureinvestments.

Exit strategy – the plan for generating profits forowners and investors of a company. Typically, theoptions are to merge, be acquired or make an initialpublic offering (IPO). An alternative is to recapitalize(releverage the company and then pay dividends toshareholders).

Expansion stage – the stage of a company character-ized by a complete management team and a substan-tial increase in revenues.

Fair value – a financial reporting principle for valuingassets and liabilities, for example, portfolio companiesin venture capital fund portfolios. This has receivedmuch recent attention as the Financial AccountingStandards Board (FASB) has issued definitive guid-ance (FAS 157) on this long standing principle.

2009 NVCA Yearbook

Thomson Reuters 59

Fairness opinion – a letter issued by an investmentbank that charges a fee to assess the fairness of anegotiated price for a merger or acquisition.

FAS 157 – an an accounting standard developed bythe Financial Accounting Standards Board (FASB)regarding the application of a fair value principle.

First refusal – the right of a privately owned compa-ny to purchase any shares that employees would liketo sell.

Founders stock – nominally priced common stockissued to founders, officers, employees, directors,and consultants.

Free cash flow to equity (FCFE) – the cash flowavailable after operating expenses, interest paymentson debt, taxes, net principal repayments, preferredstock dividends, reinvestment needs and changes inworking capital. In a discounted cash flow model todetermine the value of the equity of a firm usingFCFE, the discount rate used is the cost of equity.

Free cash flow to the firm (FCFF) – the operatingcash flow available after operating expenses, taxes,reinvestment needs and changes in working capital,but before any interest payments on debt are made. Ina discounted cash flow model to determine the enter-prise value of a firm using FCFF, the discount rateused is the weighted average cost of capital (WACC).

Friends and family financing – capital provided bythe friends and family of founders of an early stagecompany. Founders should be careful not to create anownership structure that may hinder the participationof professional investors once the company begins toachieve success.

Full ratchet – an anti-dilution protection mechanismwhereby the price per share of the preferred stock ofinvestor A is adjusted downward due to the issuanceof new preferred shares to new investor B at a pricelower than the price investor A originally received.Investor A’s preferred stock is repriced to match theprice of investor B’s preferred stock. Usually as aresult of the implementation of a ratchet, companymanagement and employees who own a fixed amountof common shares suffer significant dilution. SeeNarrow-based weighted average anti-dilution and

Broad-based weighted average anti-dilution.

Fully diluted basis – a methodology for calculatingany per share ratios whereby the denominator is thetotal number of shares issued by the company on theassumption that all warrants and options are exer-cised and preferred stock.

Fund-of-funds – a fund created to invest in privateequity funds. Typically, individual investors and rela-tively small institutional investors participate in afund-of-funds to minimize their portfolio manage-ment efforts.

Gatekeepers – intermediaries which endowments,pension funds and other institutional investors use asadvisors regarding private equity investments.

General partner (GP) – a class of partner in a part-nership. The general partner retains liability for theactions of the partnership. Historically, venture capi-tal and buyout funds have been structured as limitedpartnerships, with the venture firm as the GP andlimited partners (LPs) being the institutional andhigh net worth investors that provide most of the cap-ital in the partnership. The GP earns a managementfee and a percentage of gains (see Carried interest).

GP – see General partner.

Going-private transaction – when a public compa-ny chooses to pay off all public investors, delist fromall stock exchanges, and become owned by manage-ment, employees, and select private investors.

Golden handcuffs – financial incentives that dis-courage founders and / or important employees fromleaving a company before a predetermined date orimportant milestone.

Grossing up – an adjustment of an option pool formanagement and employees of a company whichincreases the number of shares available over time.This usually occurs after a financing round wherebyone or more investors receive a relatively large per-centage of the company. Without a grossing up,managers and employees would suffer the financialand emotional consequences of dilution, therebypotentially affecting the overall performance of thecompany.


60 Thomson Reuters

Growth stage – the state of a company when it hasreceived one or more rounds of financing and is gen-erating revenue from its product or service. Alsoknown as “middle stage.”

Hart-Scott-Rodino Act – a law requiring entitiesthat acquire certain amounts of stock or assets of acompany to inform the Federal Trade Commissionand the Department of Justice and to observe a wait-ing period before completing the transaction.

Hedge fund – an investment fund that has the abilityto use leverage, take short positions in securities, oruse a variety of derivative instruments in order toachieve a return that is relatively less correlated to theperformance of typical indices (such as the S&P 500)than traditional long-only funds. Hedge fund man-agers are typically compensated based on assetsunder management as well as fund performance.

High yield debt – debt issued via public offering orpublic placement (Rule 144A) that is rated belowinvestment grade by S&P or Moody’s. This means thatthe debt is rated below the top four rating categories (i.e.S&P BB+, Moody’s Ba2 or below). The lower rating isindicative of higher risk of default, and therefore thedebt carries a higher coupon or yield than investmentgrade debt. Also referred to as Junk bonds or Sub-investment grade debt.

Hockey stick – the general shape and form of a chartshowing revenue, customers, cash or some otherfinancial or operational measure that increases dra-matically at some point in the future. Entrepreneursoften develop business plans with hockey stick chartsto impress potential investors.

Holding period – amount of time an investmentremains in a portfolio.

Hot issue – stock in an initial public offering that isin high demand.

Hot money – capital from investors that have no tol-erance for lack of results by the investment managerand move quickly to withdraw at the first sign oftrouble.

Hurdle rate – a minimum rate of return requiredbefore an investor will make an investment.

Incorporation – the process by which a businessreceives a state charter, allowing it to become a cor-poration. Many corporations choose Delawarebecause its laws are business-friendly and up to date.

Incubator – a company or facility designed to hoststartup companies. Incubators help startups growwhile controlling costs by offering networks of con-tacts and shared backoffice resources.

Indenture – the terms and conditions between abond issuer and bond buyers.

Initial public offering (IPO) – the first offering ofstock by a company to the public. New public offer-ings must be registered with the Securities andExchange Commission. An IPO is one of the methodsthat a startup that has achieved significant success canuse to raise additional capital for further growth. SeeQualified IPO.

In-kind distribution – a distribution to limited part-ners of a private equity fund that is in the form ofpublicly trades shares rather than cash.

Inside round – a round of financing in which theinvestors are the same investors as the previousround. An inside round raises liability issues sincethe valuation of the company has no third party veri-fication in the form of an outside investor. In addi-tion, the terms of the inside round may be consideredself-dealing if they are onerous to any set of share-holders or if the investors give themselves additionalpreferential rights.

Institutional investor – professional entities thatinvest capital on behalf of companies or individuals.Examples are: pension plans, insurance companiesand university endowments.

Intellectual property (IP) – knowledge, techniques,writings and images that are intangible but often pro-tected by law via patents, copyrights, and trademarks.

Interest coverage ratio – earnings before interestand taxes (EBIT) divided by interest expense. This isa key ratio used by lenders to assess the ability of acompany to produce sufficient cash to pay its debtobligation.

2009 NVCA Yearbook

Thomson Reuters 61

Internal rate of return (IRR) – the interest rate atwhich a certain amount of capital today would haveto be invested in order to grow to a specific value ata specific time in the future.

Investment thesis / Investment philosophy – thefundamental ideas which determine the types ofinvestments that an investment fund will choose inorder to achieve its financial goals.

IPO – see Initial public offering.

IRR – see Internal rate of return.

Issuer – the company that chooses to distribute aportion of its stock to the public.

J curve – a concept that during the first few years ofa private equity fund, cash flow or returns are nega-tive due to investments, losses, and expenses, but asinvestments produce results the cash flow or returnstrend upward. A graph of cash flow or returns versustime would then resemble the letter “J”.

Later stage – the state of a company that has provenits concept, achieved significant revenues comparedto its competition, and is approaching cash flowbreak even or positive net income. Typically, a laterstage company is about 6 to 12 months away from aliquidity event such as an IPO or buyout. The rate ofreturn for venture capitalists that invest in later stage,less risky ventures is lower than in earlier stage ven-tures.

LBO – see Leveraged buyout.

Lead investor – the venture capital investor thatmakes the largest investment in a financing round andmanages the documentation and closing of that round.The lead investor sets the price per share of thefinancing round, thereby determining the valuation ofthe company.

Letter of intent – a document confirming the intentof an investor to participate in a round of financingfor a company. By signing this document, the subjectcompany agrees to begin the legal and due diligenceprocess prior to the closing of the transaction. Alsoknown as a “Term Sheet”.

Leverage – the use of debt to acquire assets, buildoperations and increase revenues. By using debt, acompany is attempting to achieve results faster thanif it only used its cash available from pre-leverageoperations. The risk is that the increase in assets andrevenues does not generate sufficient net income andcash flow to pay the interest costs of the debt.

Leveraged buyout (LBO) – the purchase of a com-pany or a business unit of a company by an outsideinvestor using mostly borrowed capital.

Leveraged recapitalization – the reorganization of acompany’s capital structure resulting in more debtadded to the balance sheet. Private equity funds canrecapitalize a portfolio company and then direct thecompany to issue a one-time dividend to equityinvestors. This is often done when the company is per-forming well financially and the debt markets areexpanding.

Leverage ratios – measurements of a company’s debtas a multiple of cash flow. Typical leverage ratiosinclude Total Debt / EBITDA, Total Debt / (EBITDAminus Capital Expenditures), and Seniore Debt /EBITDA.

L.I.B.O.R. – see The London Interbank OfferedRate.

License – a contract in which a patent owner grants toa company the right to make, use or sell an inventionunder certain circumstances and for compensation.

Limited liability company (LLC) – an ownershipstructure designed to limit the founders’ losses to theamount of their investment. An LLC itself does notpay taxes, rather its owners pay taxes on their propor-tion of the LLC profits at their individual tax rates.

Limited partnership – a legal entity composed of ageneral partner and various limited partners. Thegeneral partner manages the investments and is liablefor the actions of the partnership while the limitedpartners are generally protected from legal actionsand any losses beyond their original investment. Thegeneral partner collects a management fee and earnsa percentage of capital gains (see Carried interest),while the limited partners receive income, capitalgains and tax benefits.


62 Thomson Reuters

Limited partner (LP) – an investor in a limited part-nership. The general partner is liable for the actionsof the partnership while the limited partners are gen-erally protected from legal actions and any lossesbeyond their original investment. The limited partnerreceives income, capital gains and tax benefits.

Liquidation – the sale of a company. This may occurin the context of an acquisition by a larger companyor in the context of selling off all assets prior to ces-sation of operations (Chapter 7 bankruptcy). In a liq-uidation, the claims of secured and unsecured credi-tors, bondholders and preferred stockholders takeprecedence over common stockholders.

Liquidation preference – the contractual right of aninvestor to priority in receiving the proceeds from theliquidation of a company. For example, a venturecapital investor with a “2x liquidation preference”has the right to receive two times its original invest-ment upon liquidation.

Liquidity discount – a decrease in the value of a pri-vate company compared to the value of a similar butpublicly traded company. Since an investor in a pri-vate company cannot readily sell his or her invest-ment, the shares in the private company must be val-ued less than a comparable public company.

Liquidity event – a transaction whereby owners of asignificant portion of the shares of a private compa-ny sell their shares in exchange for cash or shares inanother, usually larger company. For example, anIPO is a liquidity event.

Lock-up agreement – investors, management andemployees often agree not to sell their shares for aspecific time period after an IPO, usually 6 to 12months. By avoiding large sales of its stock, the com-pany has time to build interest among potential buy-ers of its shares.

London Interbank Offered Rate (L.I.B.O.R.) – theaverage rate charged by large banks in London forloans to each other. LIBOR is a relatively volatile rateand is typically quoted in maturities of one month,three months, six months and one year.

Management buyout (MBO) – a leveraged buyoutcontrolled by the members of the management team

of a company or a division. Often an MBO is con-ducted in partnership with a buyout fund.

Management fee – a fee charged to the limited part-ners in a fund by the general partner. Managementfees in a private equity fund usually range from0.75% to 3% of capital under management, depend-ing on the type and size of fund. For venture capitalfunds, 2% is typical.

Management rights – the rights often required by aventure capitalist as part of the agreement to invest ina company. The venture capitalist has the right toconsult with management on key operational issues,attend board meetings and review information aboutthe company’s financial situation.

Market capitalization – the value of a publicly trad-ed company as determined by multiplying the num-ber of shares outstanding by the current price pershare.

MBO – see Management buyout.

Mezzanine – a layer of financing that has intermedi-ate priority (seniority) in the capital structure of acompany. For example, mezzanine debt has lowerpriority than senior debt but usually has a higherinterest rate and often includes warrants. In venturecapital, a mezzanine round is generally the round offinancing that is designed to help a company haveenough resources to reach an IPO. See Bridgefinancing.

Multiples – a valuation methodology that comparespublic and private companies in terms of a ratio ofvalue to an operations figure such as revenue or netincome. For example, if several publicly tradedcomputer hardware companies are valued at approx-imately 2 times revenues, then it is reasonable toassume that a startup computer hardware companythat is growing fast has the potential to achieve avaluation of 2 times its revenues. Before the startupissues its IPO, it will likely be valued at less than 2times revenue because of the lack of liquidity of itsshares. See Liquidity discount.

Narrow-based weighted average anti-dilution – atype of anti-dilution mechanism. A weighted averageanti-dilution method adjusts downward the price per

2009 NVCA Yearbook

Thomson Reuters 63

share of the preferred stock of investor A due to theissuance of new preferred shares to new investor B ata price lower than the price investor A originallyreceived. Investor A’s preferred stock is repriced to aweighed average of investor A’s price and investor B’sprice. A narrow-based anti-dilution uses only com-mon stock outstanding in the denominator of the for-mula for determining the new weighted averageprice.

NDA – see Non-disclosure agreement.

No-shop clause – a section of an agreement to pur-chase a company whereby the seller agrees not tomarket the company to other potential buyers for aspecific time period.

Non-cumulative dividends – dividends that arepayable to owners of preferred stock at a specificpoint in time only if there is sufficient cash flowavailable after all company expenses have been paid.If cash flow is insufficient, the owners of the pre-ferred stock will not receive the dividends owed forthat time period and will have to wait until the boardof directors declares another set of dividends.

Non-interference – an agreement often signed byemployees and management whereby they agree notto interfere with the company’s relationships withemployees, clients, suppliers and sub-contractorswithin a certain time period after termination ofemployment.

Non-solicitation – an agreement often signed byemployees and management whereby they agree notto solicit other employees of the company regardingjob opportunities.

Non-disclosure agreement (NDA) – an agreementissued by entrepreneurs to protect the privacy of theirideas when disclosing those ideas to third parties.

Offering memorandum – a legal document that pro-vides details of an investment to potential investors.See Private placement memorandum.

OID – see Original issue discount.

Operating cash flow – the cash flow produced fromthe operation of a business, not from investing activ-

ities (such as selling assets) or financing activities(such as issuing debt). Calculated as net operatingincome (NOI) plus depreciation.

Option pool – a group of options set aside for longterm, phased compensation to management andemployees.

Outstanding shares – the total amount of commonshares of a company, not including treasury stock,convertible preferred stock, warrants and options.

Pay to play – a clause in a financing agreementwhereby any investor that does not participate in afuture round agrees to suffer significant dilution com-pared to other investors. The most onerous version of“pay to play” is automatic conversion to commonshares, which in essence ends any preferential rightsof an investor, such as the right to influence key man-agement decisions.

Pari passu – a legal term referring to the equal treat-ment of two or more parties in an agreement. Forexample, a venture capitalist may agree to have reg-istration rights that are pari passu with the otherinvestors in a financing round.

Participating dividends – the right of holders of cer-tain preferred stock to receive dividends and participatein additional distributions of cash, stock or other assets.

Participating preferred stock – a unit of ownershipcomposed of preferred stock and common stock. Thepreferred stock entitles the owner to receive a prede-termined sum of cash (usually the original invest-ment plus accrued dividends) if the company is soldor has an IPO. The common stock represents addi-tional continued ownership in the company.Participating preferred stock has been characterizedas “having your cake and eating it too”.

PEIGG – acronym for Private Equity IndustryGuidelines Group, an ad hoc group of individualsand firms involved in the private equity industry forthe purpose of establishing valuation and reportingguidelines.

Piggyback rights – rights of an investor to have hisor her shares included in a registration of a startup’sshares in preparation for an IPO.


64 Thomson Reuters

PIPEs – see Private investment in public equity.

Placement agent – a company that specializes infinding institutional investors that are willing andable to invest in a private equity fund. Sometimes aprivate equity fund will hire a placement agent so thefund partners can focus on making and managinginvestments in companies rather than on raising cap-ital.

Portfolio company – a company that has received aninvestment from a private equity fund.

Post-money valuation – the valuation of a companyincluding the capital provided by the current round offinancing. For example, a venture capitalist may invest$5 million in a company valued at $2 million “pre-money” (before the investment was made). As a result,the startup will have a post-money valuation of $7 mil-lion.

PPM – see Private placement memorandum.

Preemptive rights – the rights of shareholders tomaintain their percentage ownership of a company bybuying shares sold by the company in future financ-ing rounds.

Preference – seniority, usually with respect to divi-dends and proceeds from a sale or dissolution of acompany.

Preferred return – a minimum return per annumthat must be generated for limited partners of a pri-vate equity fund before the general partner can beginreceiving a percentage of profits from investments.

Preferred stock – a type of stock that has certainrights that common stock does not have. These specialrights may include dividends, participation, liquiditypreference, anti-dilution protection and veto provi-sions, among others. Private equity investors usuallypurchase preferred stock when they make investmentsin companies.

Pre-money valuation – the valuation of a companyprior to the current round of financing. For example, aventure capitalist may invest $5 million in a companyvalued at $2 million pre-money. As a result, the start-up will have a “post-money” valuation of $7 million.

Primary shares – shares sold by a corporation (notby individual shareholders).

Private equity – equity investments in non-publiccompanies, usually defined as being made up of ven-ture capital funds and buyout funds. Real estate, oiland gas, and other such partnerships are sometimesincluded in the definition.

Private investment in public equity (PIPEs) –investments by a private equity fund in a publiclytraded company, usually at a discount and in the formof preferred stock.

Private placement – the sale of a security directly toa limited number of institutional and qualified indi-vidual investors. If structured correctly, a privateplacement avoids registration with the Securities andExchange Commission.

Private placement memorandum (PPM) – a docu-ment explaining the details of an investment to poten-tial investors. For example, a private equity fund willissue a PPM when it is raising capital from institution-al investors. Also, a startup may issue a PPM when itneeds growth capital. Also known as “OfferingMemorandum”.

Private securities – securities that are not registeredwith the Securities and Exchange Commission anddo not trade on any exchanges. The price per share isnegotiated between the buyer and the seller (the“issuer”).

Prudent man rule – a fundamental principle for pro-fessional money management which serves as a basisfor the Prudent Investor Act. The principle is basedon a statement by Judge Samuel Putnum in 1830:“Those with the responsibility to invest money forothers should act with prudence, discretion, intelli-gence and regard for the safety of capital as well asincome.” In the 1970s a favorable interpretation ofthis rule enabled pension fund managers to invest inventure capital for the first time.

Qualified IPO – a public offering of securities val-ued at or above a total amount specified in a financ-ing agreement. This amount is usually specified to besufficiently large to guarantee that the IPO shareswill trade in a major exchange (NASDAQ or New

2009 NVCA Yearbook

Thomson Reuters 65

York Stock Exchange). Usually upon a qualified IPOpreferred stock is forced to convert to common stock.

Quartile – one fourth of the data points in a data set.Often, private equity investors are measured by theresults of their investments during a particular periodof time. Institutional investors often prefer to investin private equity funds that demonstrate consistentresults over time, placing in the upper quartile of theinvestment results for all funds.

Ratchet – a mechanism to prevent dilution. An anti-dilution clause in a contract protects an investorfrom a reduction in percentage ownership in a com-pany due to the future issuance by the company ofadditional shares to other entities.

Realization ratio – the ratio of cumulative distribu-tions to paid-in capital. The realization ratio is usedas a measure of the distributions from investmentresults of a private equity partnership compared tothe capital under management.

Recapitalization – the reorganization of a compa-ny’s capital structure.

Red herring – a preliminary prospectus filed withthe Securities and Exchange Commission and con-taining the details of an IPO offering. The namerefers to the disclosure warning printed in red letterson the cover of each preliminary prospectus advisingpotential investors of the risks involved.

Redemption rights – the right of an investor to forcethe startup company to buy back the shares issued asa result of the investment. In effect, the investor hasthe right to take back his/her investment and mayeven negotiate a right to receive an additional sum inexcess of the original investment.

Registration – the process whereby shares of a com-pany are registered with the Securities and ExchangeCommission under the Securities Act of 1933 inpreparation for a sale of the shares to the public.

Regulation D – an SEC regulation that governs privateplacements. Private placements are investment offer-ings for institutional and accredited individual investorsbut not for the general public. There is an exception that35 non-accredited investors can participate.

Restricted shares – shares that cannot be traded inthe public markets.

Return on investment (ROI) – the proceeds from aninvestment, during a specific time period, calculatedas a percentage of the original investment. Also, netprofit after taxes divided by average total assets.

Rights offering – an offering of stock to currentshareholders that entitles them to purchase the newissue, usually at a discount.

Rights of co-sale with founders – a clause in ven-ture capital investment agreements that allows theVC fund to sell shares at the same time that thefounders of a startup chose to sell.

Right of first refusal – a contractual right to partic-ipate in a transaction. For example, a venture capital-ist may participate in a first round of investment in astartup and request a right of first refusal in any fol-lowing rounds of investment.

Risk-free rate – a term used in finance theory todescribe the return from investing in a riskless secu-rity. In practice, this is often taken to be the return onUS Treasury Bills.

Road show – presentations made in several cities topotential investors and other interested parties. Forexample, a company will often make a road show togenerate interest among institutional investors prior toits IPO.

ROI – see Return on investment.

Rollup – the purchase of relatively smaller compa-nies in a sector by a rapidly growing company in thesame sector. The strategy is to create economies ofscale. For example, the movie theater industry under-went significant consolidation in the 1960’s and1970’s.

Round – a financing event usually involving severalprivate equity investors.

Royalties – payments made to patent or copyrightowners in exchange for the use of their intellectualproperty.


66 Thomson Reuters

Rule 144 – a rule of the Securities and ExchangeCommission that specifies the conditions underwhich the holder of shares acquired in a private trans-action may sell those shares in the public markets.

S corporation – an ownership structure that limits itsnumber of owners to 100. An S corporation does notpay taxes, rather its owners pay taxes on their propor-tion of the corporation’s profits at their individual taxrates.

SBIC – see Small Business Investment Company.

Scalability – a characteristic of a new business con-cept that entails the growth of sales and revenueswith a much slower growth of organizational com-plexity and expenses. Venture capitalists look forscalability in the startups they select to finance.

Scale-down – a schedule for phased decreases inmanagement fees for general partners in a limitedpartnership as the fund reduces its investment activi-ties toward the end of its term.

Scale-up – the process of a company growing quick-ly while maintaining operational and financial con-trols in place. Also, a schedule for phased increasesin management fees for general partners in a limitedpartnership as the fund increases its investment activ-ities over time.

Secondary market – a market for the sale of limitedpartnership interests in private equity funds.Sometimes limited partners chose to sell their interestin a partnership, typically to raise cash or because theycannot meet their obligation to invest more capitalaccording to the takedown schedule. Certain invest-ment companies specialize in buying these partnershipinterests at a discount.

Secondary shares – shares sold by a shareholder(not by the corporation).

Securities and Exchange Commission (SEC) – theregulatory body that enforces federal securities lawssuch as the Securities Act of 1933 and the SecuritiesExchange Act of 1934.

Seed capital – investment provided by angels, friendsand family to the founders of a startup in seed stage.

Seed stage – the state of a company when it has justbeen incorporated and its founders are developingtheir product or service.

Senior debt – a loan that has a higher priority in caseof a liquidation of the asset or company.

Seniority – higher priority.

Series A preferred stock – preferred stock issued bya fast growth company in exchange for capital frominvestors in the “A” round of financing. This pre-ferred stock is usually convertible to common sharesupon the IPO or sale of the company.

Sharpe Ratio – a method of calculating the risk-adjusted return of an investment. The Sharpe Ratio iscalculated by subtracting the risk-free rate from thereturn on a specific investment for a time period(usually one year) and then dividing the resulting fig-ure by the standard deviation of the historical (annu-al) returns for that investment. The higher the SharpeRatio, the better.

Small Business Investment Company (SBIC) – acompany licensed by the Small BusinessAdministration to receive government capital in theform of debt or equity in order to use in private equi-ty investing.

Stock option – a right to purchase or sell a share ofstock at a specific price within a specific period oftime. Stock purchase options are commonly used aslong term incentive compensation for employees andmanagement of fast growth companies.

Strategic investor – a relatively large corporationthat agrees to invest in a young or a smaller companyin order to have access to its proprietary technology,product or service.

Subordinated debt – a loan that has a lower prioritythan a senior loan in case of a liquidation of the assetor company. Also known as “junior debt”.

Success rate – the proportion of venture fundedcompanies that are considered successful. A study ofcompanies funded by VCs during the 1990s indicat-ed that 14% of the companies went public and anoth-er 11%were acquired.

2009 NVCA Yearbook

Thomson Reuters 67

Sweat equity – ownership of shares in a companyresulting primarily from work rather than investmentof capital.

Syndicate – a group of investors that agree to partic-ipate in a round of funding for a company.Alternatively, a syndicate can refer to a group ofinvestment banks that agree to participate in the saleof stock to the public as part of an IPO.

Tag-along right – the right of a minority investor toreceive the same benefits as a majority investor.Usually applies to a sale of securities by investors.Also known as Co-sale right.

Takedown – a schedule of the transfer of capital inphases in order to complete a commitment of funds.Typically, a takedown is used by a general partner ofa private equity fund to plan the transfer of capitalfrom the limited partners.

Tender offer – an offer to public shareholders of acompany to purchase their shares.

Term loan – a bank loan for a specific period oftime, usually up to ten years in leveraged buyoutstructures.

Term sheet – a document confirming the intent of aninvestor to participate in a round of financing for acompany. By signing this document, the subject com-pany agrees to begin the legal and due diligenceprocess prior to the closing of the transaction. Alsoknown as “Letter of Intent”.

Tranche – a portion of a set of securities. Eachtranche may have different rights or risk characteris-tics. When venture capital firms finance a company,a round may be disbursed in two or three tranches,each of which is paid when the company attains oneor more milestones.

Turnaround – a process resulting in a substantialincrease in a company’s revenues, profits and reputa-tion.

Under water option – an option is said to be underwater if the current fair market value of a stock is lessthan the option exercise price.

Underwriter – an investment bank that chooses tobe responsible for the process of selling new securi-ties to the public. An underwriter usually chooses towork with a syndicate of investment banks in order tomaximize the distribution of the securities.

Venture capital – a segment of the private equityindustry which focuses on investing in new compa-nies with high growth potential and accompanyinghigh risk.

Venture capital method – a pricing valuationmethod whereby an estimate of the future value ofa company is discounted by a certain interest rateand adjusted for future anticipated dilution in orderto determine the current value. Usually, discountrates for the venture capital method are consider-ably higher than public stock return rates, repre-senting the fact that venture capitalists mustachieve significant returns on investment in orderto compensate for the risks they take in fundingunproven companies.

Vesting – a schedule by which employees gain own-ership over time of a previously agreed upon amountof retirement funding or stock options.

Vintage – the year that a private equity fund stopsaccepting new investors and begins to make invest-ments on behalf of those investors. Venture funds aregenerally benchmarked to funds of the same vintageyear.

Voting rights – the rights of holders of preferred andcommon stock in a company to vote on certain actsaffecting the company. These matters may includepayment of dividends, issuance of a new class ofstock, merger or liquidation.

Warrant – a security which gives the holder the rightto purchase shares in a company at a pre-determinedprice. A warrant is a long term option, usually validfor several years or indefinitely. Typically, warrantsare issued concurrently with preferred stocks orbonds in order to increase the appeal of the stocks orbonds to potential investors.

Washout round – a financing round whereby previ-ous investors, the founders and management suffersignificant dilution. Usually as a result of a washout


68 Thomson Reuters

round, the new investor gains majority ownership andcontrol of the company.

Weighted average cost of capital (WACC) – theaverage of the cost of equity and the after-tax cost ofdebt. This average is determined using weight factorsbased on the ratio of equity to debt plus equity andthe ratio of debt to debt plus equity.

Weighted average anti-dilution – an anti-dilutionprotection mechanism whereby the conversion rateof preferred stock is adjusted in order to reduce aninvestor’s loss due to an increase in the number ofshares in a company. Without anti-dilution protec-tion, an investor would suffer from a reduction ofhis or her percentage ownership. Usually as a resultof the implementation of a weighted average anti-dilution, company management and employees whoown a fixed amount of common shares suffer signif-icant dilution, but not as badly as in the case of afull ratchet.

Write-down – a decrease in the reported value of anasset or a company.

Write-off – a decrease in the reported value of anasset or a company to zero.

Write-up – an increase in the reported value of anasset or a company.

Zombie – a company that has received capital frominvestors but has only generated sufficient revenuesand cash flow to maintain its operations without sig-nificant growth. Sometimes referred to as “walkingdead.” Typically, a venture capitalist has to make adifficult decision as to whether to liquidate a zombieor continue to invest funds in the hopes that the zom-bie will become a winner.

These definitions were graciously provided by theCenter for Private Equity and Entrepreneurship at theTuck School of Business at Dartmouth. Please referto the Center’s website for additional definitions andinformation at http://mba.tuck.dartmouth.edu/pecen-ter/resources/glossary.html. Used by permission.Thomson Reuters and National Venture CapitalAssociation are grateful to the Center for its support.

2009 NVCA Yearbook

Thomson Reuters 69


70 Thomson Reuters


Appendix B: MoneyTree Report Criteria

Summary DescriptionThe MoneyTree™ Report measures cash-for-equityinvestments by the professional venture capital com-munity in private emerging companies in the U.S.

General Definition

The report includes the investment activity of profes-sional venture capital firms with or without a USoffice, SBICs, venture arms of corporations, institu-tions, investment banks and similar entities whoseprimary activity is financial investing. Where thereare other participants such as angels, corporations,and governments in a qualified and verified financ-ing round the entire amount of the round is included.

Qualifying transactions include cash investments bythese entities either directly or by participation invarious forms of private placement. All recipientcompanies are private, and may have been newly-cre-ated or spunout of existing companies.

The report excludes debt, buyouts, recapitalizations,secondary purchases, IPOs, investments in publiccompanies such as PIPES (private investments inpublic entities), investments for which the proceedsare primarily intended for acquisition such as roll-ups, change of ownership, and other forms of privateequity that do not involve cash such as services-in-kind and venture leasing. Investee companies mustbe domiciled in one of the 50 US states or DC evenif substantial portions of their activities are outsidethe United States.

Specific Methodology

The focus of the report is on cash received by thecompany. Therefore, tranches not term sheets are the

determining factor. Drawdowns on commitments arerecognized at the time the company receives themoney rather than recorded as a lump sum amount atthe time the term sheet is executed. Convertible debtand bridge loans are recognized only when convertedto equity. Once a company has received a qualifyingventure capital financing round, all subsequent equi-ty financing rounds are included regardless ofwhether the round involved a venture capital firm aslong as all other investment criteria are met (e.g.cash-for-equity, not buyout or services in kind).

Angel, incubator and similar investments are consid-ered pre-venture financing if the company hasreceived no prior qualifying venture capital invest-ment and are not included in the MoneyTree results.Angel, incubator and similar investments that arepart of a qualifying venture capital round or follow aqualifying venture capital round are included to theextent that such investments can be fully verified asmeeting all other criteria (e.g. cash for equity, notbuyout or services in kind).

Direct investment by corporations (not through a ven-ture capital arm) is excluded unless (a) the investmentis clearly demonstrated to be primarily a financialinvestment rather than outsourced R&D or marketdevelopment, (b) it is co-investment in an otherwisequalifying round, or (c) it follows a qualifying ventureround in a company and meets all other criteria (e.g.cash-for-equity, not buyout or services in kind).

Data is primarily obtained from a quarterly survey ofventure capital practitioners. Information is aug-mented by other research techniques including otherpublic and private sources. All data is subject to ver-ification with the venture capital firms and/or theinvestee companies.

Thomson Reuters 71

TThhee MMoonneeyyTTrreeee™ RReeppoorrtt bbyy PPrriicceewwaatteerrhhoouusseeCCooooppeerrss aanndd tthhee NNaattiioonnaall VVeennttuurreeCCaappiittaall AAssssoocciiaattiioonn bbaasseedd oonn ddaattaa ffrroomm TThhoommssoonn RReeuutteerrss

REPORT CRITERIA

Only professional independent venture capital firms,institutional venture capital groups, and recognizedcorporate venture capital groups are included in ven-ture capital industry rankings.

Disclaimer

PricewaterhouseCoopers, the National VentureCapital Association, and Thomson Reuters havetaken responsible steps to ensure that the informationcontained in the MoneyTree Report has beenobtained from reliable sources. However, none of theparties can warrant the ultimate validity of the dataobtained in this manner. Results are updated periodi-cally. Therefore, all data is subject to change at anytime.


72 Thomson Reuters

Appendix C: MoneyTree Geographical Definitions

The Geographical Regions identified in the MoneyTree™ Report by PricewaterhouseCoopers and the NationalVenture Capital Association based on data provided by Thomson Reuters and used in the 2009 NVCA Yearbookare as follows:

Alaska/Hawaii/Puerto Rico: Alaska, Hawaii, and Puerto Rico

Colorado: The state of Colorado

DC/Metroplex: Washington, D.C., Virginia, West Virginia, and Maryland

LA/Orange County: Los Angeles, Ventura, Orange, and Riverside Counties (i.e., southern California, exceptSan Diego)

Midwest: Illinois, Missouri, Indiana, Kentucky, Ohio, Michigan, and western Pennsylvania

New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and parts of Connecticut(excluding Fairfield county)

New York Metro: Metropolitan NY area, northern New Jersey, and Fairfield County, Connecticut

North Central: Minnesota, Iowa, Wisconsin, North Dakota, South Dakota, and Nebraska

Northwest: Washington, Oregon, Idaho, Montana, and Wyoming

Philadelphia Metro: Eastern Pennsylvania, southern New Jersey, and Delaware

Sacramento/Northern California: Northeastern California

San Diego: San Diego area

Silicon Valley: Northern California, bay area and coastline

South Central: Kansas, Oklahoma, Arkansas, and Louisiana

Southeast: Alabama, Florida, Georgia, Mississippi, Tennessee, South Carolina, and North Carolina

Southwest: Utah, Arizona, New Mexico, and Nevada

Texas: The state of Texas

Upstate New York: Northern New York state, except Metropolitan New York City area

Thomson Reuters 73



74 Thomson Reuters

Appendix D: Industry Codes (VEIC)

1000 COMMUNICATIONS

1100 Commercial Communications1110 Radio & TV Broadcasting Stations1120 CATV & Pay TV Systems1125 Cable Service Providers1130 Radio & TV Broadcasting & Other

Related Equipment1135 Services to Commercial

Communications1199 Other Commercial Communications1200 Telephone Related1210 Long Distance Telephone Services1215 Local Exchange Carriers (LEC)1220 Telephone Interconnect & Other

Equipment1230 Telephone answering and/or

management systems, PBXs1299 Other Telephone Related1300 Wireless Communications1310 Mobile Communications, Cellular,

Pagers1320 Wireless Communications Services1325 Messaging Services1330 Wireless Communications

Components1399 Other Wireless Communications1400 Facsimile Transmission1500 Data Communications1510 Local Area Networks (incl.

voice/data PBX systems)1515 Wide Area Networks1520 Data Communications Components1521 Communications Processors/

Network Management1522 Protocol Converters & Emulators1523 Modems and Multiplexers1524 Other Data Communication

Components1525 Switches/Hubs/Routers/Gateways/

ATM

1530 Network test, monitor and supportequipment

1549 Other Data Communications1550 Internet Communications and

Infrastructure NEC1551 Internet Access Services and Service

Providers1552 Internet Multi-media services (fax,

phone, email, video, television)1553 Internet backbone Infrastructure1559 Other Internet Communications1560 E-Commerce Technology1561 Internet Security and Transactions

services1562 E-Commerce Services1563 E-Commerce Enabling Software1569 Other E-Commerce1600 Satellite Microwave

Communications1610 Satellite Services/Carriers/Operators1620 Satellite Ground (and other)

Equipment1630 Microwave Service Facilities1640 Microwave & Satellite Components1699 Other Satellite & Microwave1700 Media and Entertainment1710 Entertainment1720 Publishing1800 Other Communications Related1810 Defense Communications1825 Communications Services1899 Other Communications Products

(not yet classified)

2000 COMPUTER RELATED

2100 Computers and Hardware2110 Mainframes & Scientific Computers2111 Mainframes2112 Scientific Computers and Super

Computers2119 Other Mainframe and & Scientific

Computers

Thomson Reuters 75

VEIC INDUSTRY DESCRIPTION VEIC INDUSTRY DESCRIPTION

2120 Mini & Micro Computers2121 Fail Safe Computers2122 Mini Computers (small business)2123 Personal Computers (microcomput-

ers/desktop)2124 Other Mini & Micro Computers2125 Portable Computers (notebooks/lap-

tops)2126 HandHeld Computing (PDA)2130 Optical computing2140 Servers & Workstations2141 Servers2142 Web Servers2143 Workstations2144 Thin Client hardware2149 Other Servers & Workstations2200 Computer Graphics & Digital Imaging2210 CAD/CAM, CAE, EDA Systems2220 Graphic Systems2230 Scanning Hardware2234 OCR (Optical Character Recognition)2236 OBR (Optical Bar Recognition)2238 MICR (Magnetic Ink Character

Recognition)2239 Other Scanning Hardware NEC2250 Graphics Printers/Plotters2255 Graphics/Enhanced Video Cards2260 Other Graphics Peripherals2280 Multimedia Graphics NEC2290 Digital Imaging Hardware and

Equipment2295 Digital Imaging Services2299 Other Computer Graphics and

Digital Imaging2300 Integrated Turnkey Systems and

Solutions2311 Business and Office2312 Consumer2313 Retailing2315 Transportation2316 Finance/Insurance/Real Estate2317 Agriculture2318 Recreation/Entertainment2319 Manufacturing/Industrial/

Construction

2320 Medical/Health2321 Computer Related2322 Communications Products/Services2323 Education2324 Reference2325 Scientific2399 Other Integrated Systems and

Solutions2500 Peripherals2510 Terminals2511 Intelligent Terminals2512 Portable Terminals2513 Graphics Terminals2519 Other Terminals2520 Printers2521 Laser Printers2522 Color Printers2523 Inkjet Printers2524 Dot-Matrix printers2529 Other Printers2530 Data I/O Devices2531 Mouse input devices2532 Touch Pad devices2533 Pen based Computing Devising2539 Other Data I/O Devices2540 Disk Related Memory Devices2541 Floppy Disks & Drives2542 Winchester Disks & Drives2543 Optical Disks & Drives, CD-ROM, DVD2546 Disk Drive Components2549 Other Disk Related2550 Tape Related Devices2551 Magnetic Tapes2552 Tape Heads & Drives2553 Continuous Tape Backup Systems2559 Other Tape Related Devices2560 Other Memory Devices and

Peripheral Cards (exc. semiconduc-tors)

2561 PC or PMCIA Cards2562 Memory Cards2563 Sound Cards2564 Communication Cards2569 Other Memory Devices and

Peripherals


76 Thomson Reuters


2590 Other Peripherals (not yet classified)2600 Computer Services2630 Time Sharing Services2640 Computer Leasing & Rentals2650 Computer Training Services2655 Backup and Disaster Recovery2660 Data Processing, Analysis & Input

Services2665 Computer Repair Services2670 Computerized Billing & Accounting

Services2675 Computer Security Services2691 Data Communications Systems

Management2699 Other Computer Services2700 Computer Software2710 Systems Software2711 Database & File Management2712 Operating Systems & Utilities2713 Program Development Tools/

Languages (Including CASE/engi-neering)

2716 Graphics Software and DigitalImaging Software

2719 Other Systems Software NEC2720 Communications/Networking

Software2721 Security/firewalls/encryption

Software2722 Email software2723 GroupWare2724 Multimedia software (video, fax,

television)2729 Other Communications/Networking

Software2730 Applications Software2731 Business and Office Software2732 Home Use Software2733 Educational Software2734 Manufacturing/Industrial Software2735 Medical/Health Software2736 Banks/Financial Institutions

Software2737 Retailing software2738 Integrated Software

2739 ERP Software2740 Recreational Software2741 Scientific Software2743 Agricultural Software2744 Transportation Software2748 Other Industry Specific Software2749 Other Applications Software2750 Artificial Intelligence Related

Software2751 Expert Systems2752 Natural Language2753 Computer-Aided Instruction2754 Artificial Intel Programming Aids2755 Other Artificial Intelligence Related2760 Software Services2761 Programming Services/Systems

Engineering2762 Software Consulting Services2763 Software Distribution/Clearinghouse2765 Internet/Web design and program-

ming Services2766 Internet graphics services2768 Other Internet Software Services2769 Other Software Services2780 Internet Systems Software2781 Site Development and

Administration Software2782 Internet Search software and engines2783 WebServer Software2784 JAVA/ActiveX2785 Web Authoring/Development2798 Other Internet Systems Software2799 Other Software Related2800 Internet and Online Related NEC2810 E-Commerce — Selling Products via

the Internet2811 Business and Office2812 Consumer2813 Retailing2814 Publishing2815 Transportation2816 Finance/Insurance/Real Estate2817 Agriculture2818 Recreation/Entertainment2819 Manufacturing/Industrial/Construction

2009 NVCA Yearbook

Thomson Reuters 77


2820 Medical/Health2821 Computer Related2822 Communications Products/Services2823 Education2824 Reference2825 Scientific2826 Legal2829 Other Ecommerce selling Products2830 Ecommerce — Selling Services via

the Internet2831 Business and Office2832 Consumer2833 Retailing2834 Publishing2835 Transportation2836 Finance/Insurance/Real Estate2837 Agriculture2838 Recreation/Entertainment2839 Manufacturing/Industrial/

Construction2840 Medical/Health2841 Computer Related2842 Communications Products/Services2843 Education2844 Reference2845 Scientific2846 Legal2847 Recreation/Entertainment Services2849 Other E-Commerce selling Services2850 Providing Information via the

Internet (non Ecommerce)2851 Business and Office2852 Consumer2853 Retailing2854 Publishing2855 Transportation2856 Finance/Insurance/Real Estate2857 Agriculture2858 Recreation/Entertainment2859 Manufacturing/Industrial/

Construction2860 Medical/Health2861 Computer Related2862 Communications Products/Services2863 Education

2864 Reference2865 Scientific2866 Legal2869 Other Information via the Internet2870 Internet Services2871 Internet Marketing Services2873 Data warehousing Services2879 Other Internet Services and Online

databases2900 Other Computer Related2910 Voice Synthesis2911 Voice Recognition2990 Other Computer Related (not yet

classified)

3000 OTHER ELECTRONICS RELATED

3100 Electronic Components3110 Semiconductors3111 Customized Semiconductors3112 Standard Semiconductors3113 Other Semiconductors3114 Flash Memory3115 Optoelectronics semiconductors

(incl. laser diodes)3119 Other Semiconductors3120 Microprocessors Controllers and

Sensors3132 Controllers Sensors3139 Other Controllers/Sensors3140 Circuit Boards3160 Display Panels3170 Other Electronics Related (including

keyboards)3200 Batteries3300 Power Supplies3310 Uninterruptible Power Supply (UPS)3400 Electronics Related Equipment3410 Semiconductor Fabrication Equip.

Wafer Products3420 Component Testing Equipment3499 Other Electronics Related

Equipment3500 Laser Related3510 Laser Components (incl. beamsplitters,

excimers) 3599Other Laser Related


78 Thomson Reuters


3600 Fiber Optics3610 Fiber Optic Cables3620 Fiber Optic Couplers and

Connectors3630 Fiber Optic Communication

Systems (see 1510)3699 Other Fiber Optics3700 Analytical & Scientific

Instrumentation3710 Chromatographs & Related

Laboratory Equipment3720 Other Measuring Devices3799 Other Analytical & Scientific

Instrumentation3800 Other Electronics Related3810 Military Electronics (excluding com-

munications)3820 Copiers3830 Calculators3835 Security/Alarm Sensors/Detectors3899 Other Electronics Related3900 Optoelectronics3910 Photo diodes3920 Optoelectronics fabrication equip-

ment3930 Lenses with Optoelectronics appli-

cations3940 Advanced photographic processes

(incl. lithographs)3989 Other Optoelectronics Related3990 Other Electronics and

Semiconductor Related

4000 BIOTECHNOLOGY

4100 Human Biotechnology4110 Medical Diagnostic Biotechnology

Products4111 In Vitro Monoclonal Antibody

Diagnostics4112 In Vivo Monoclonal Antibody

Diagnostics/Imaging4113 DNA/RNA Probes4119 Other Medical Diagnostic

Biotechnology4120 Therapeutic Biotechnology Products

4121 Therapeutic Monoclonal Antibodies4122 Immune Response Effectors (inter-

ferons, vaccines)4123 Other Therapeutic Proteins (incl.

hormones & TPA)4129 Other Therapeutic Biotechnology

Genetic Engineering4200 Agricultural/Animal Biotechnology4210 Genetically Engineered Plants4220 Genetic Eng Microorganisms to

raise plant yield4230 Other Plant Related Biotechnology4240 Biotech Related Animal Health &

Nutrition Products4250 Genetically Engineered Animals4290 Other Animal Related Biotechnology4300 Industrial Biotechnology4310 Biochemical Products4311 Biotech Related Fine Chemicals

(NOT Pharmaceuticals.)4312 Biotech Related Commodity

Chemicals4319 Other Biochemical Products4320 Biotech Processes for Food

Industrial Applications4321 Biotech Related Food Enzymes and

Cultures4322 Biotech Related Food Diagnostics4329 Other Biotech Processes for Food

Industrial Products4330 Biotech Processes for Pollution/Toxic

Waste Control4340 Biotech Processes for Enhanced Oil

Recovery/Mining4390 Other Industrial Biotechnology4400 Biosensors4410 Biosensors for Medical Diagnostic

Applications4420 Biosensors for Industrial

Applications4490 Other Biosensors4500 Biotech Related Research &

Production Equipment4510 Biotech Related Analytical

Instruments & Apparatus

2009 NVCA Yearbook

Thomson Reuters 79


4520 Biotech Related ProductionEquipment

4525 Biotech laser and optronic applications4599 Other Biotech Research &

Production Equipment4600 Biotech Related Research & Other

Services4610 Pure & Contract Biotechnology

Research4699 Other Biotechnology Services4900 Other Biotechnology Related

5000 MEDICAL/HEALTH RELATED

5100 Medical Diagnostics5110 Diagnostic Services5120 Medical Imaging5121 X-Rays5122 CAT Scanning5123 Ultra Sound Imaging5124 Nuclear Imaging5125 Other Medical Imaging5130 Diagnostic Test Products &

Equipment5140 Other Medical Diagnostics5200 Medical Therapeutics5210 Therapeutic Services5220 Surgical Instrumentation &

Equipment5221 Surgical lasers (including laser

delivery fibers)5230 Pacemakers & Artificial Organs5240 Drug Delivery & Other Equipment5299 Other Therapeutic (including defib-

rillators)5300 Medical/Health Products5310 Disposable Medical Products5340 Handicap Aids5350 Medical Monitoring Equipment5380 Health related optics (including

glasses, lenses)5399 Other Medical/Health Products (NEC)5400 Medical Health Services5410 Hospitals/Clinics/Primary Care5412 Long Term Care/Home Care/Elder

Care

5414 Dependent Care (child care, assistedliving)

5420 Managed Care (PPO and other)5429 Other Healthcare Facilities5430 Ambulance and Emergency

Services5440 Hospital/Institutional Management

and Medical Office Management5499 Other Medical/Health Services NEC5500 Pharmaceuticals5510 Pharmaceutical Research5520 Pharmaceutical Production5530 Pharmaceutical Services5540 Pharmaceutical Equipment5550 Pharmaceutical Drugs/Fine

Chemicals (non-biotech)5599 Other Pharmaceuticals

6000 ENERGY RELATED

6100 Oil & Gas Exploration andProduction

6200 Oil & Gas Exploration Services6300 Oil & Gas Drilling & Support

Services6400 Oil & Gas Drilling, Exploration &

Extraction Equipment6410 Oil & Gas Drilling & Extraction

Equipment6420 Oil & Gas Drilling Instrumentation6430 Oil & Gas Exploration Equip

Instrumentation6499 Other Oil & Gas (NEC)6500 Alternative Energy6510 Solar Energy6511 Photovoltaic Solar6512 Other Solar6520 Wind Energy6530 Geothermal Energy6540 Energy Co-Generation6599 Other Alternative Energy (inc.

nuclear energy)6600 Enhanced Oil Recovery/Heavy

Oil/Shale6700 Coal Related6710 Coal Mining


80 Thomson Reuters


6720 Coal Related Equipment6799 Other Coal Related6800 Energy Conservation Related6900 Other Energy Related

7000 CONSUMER RELATED

7100 Leisure & Recreational Products andServices

7110 Movies, Movie Products & TheaterOperations

7120 Amusement & RecreationalFacilities

7125 Casinos and Gaming7130 Toys & Electronic Games7140 Sporting Goods, Hobby Equipment

& Athletic Clothes7150 Sports Facilities (Gyms and Clubs,

Golf Courses)7155 Sports7160 TVs, Radio, Stereo Equipment &

Consumer Electronics7170 Music, Records, Production and

Instruments7199 Other Leisure/Recreational Products

and Services7200 Retailing Related7210 Drug Stores7220 Clothing and Shoe Stores7230 Discount Stores7240 Computer Stores7245 Retail Publishing (Books, Magazines,

newsletters)7246 Office Supply Stores7247 Music and Electronics Stores7248 Specialty Department and Retail

Stores7250 Franchises (NEC)7299 Other Retailing Related7300 Food and Beverages7310 Wine & Liquors7320 Health Food7330 Soft Drinks & Bottling Plants7340 Food Supplements/Vitamins7350 General Food Products/Grocery/

Convenience Stores

7399 Other Food and Beverages7400 Consumer Products7410 Clothing, Shoes & Accessories (incl.

jewelry)7420 Health & Beauty Aids7430 Home Furnishings and Housewares7431 Housewares7432 Furnishings & Furniture7433 Garden and Horticultural Products7434 Other Home Furnishings (NEC)7450 Mobile Homes7499 Other Consumer Products7500 Consumer Services7510 Fast Food Restaurants7520 Other Restaurants7530 Hotels and Resorts7540 Auto Repair Shops7550 Education & Educational Products

and Materials7560 Travel Agencies and Services7599 Other Consumer Services7999 Other Consumer Related (not yet

classified)

8000 INDUSTRIAL PRODUCTS

8100 Chemical & Materials8110 Plastic Fabricators8111 Homogeneous Injections/Extrusions8112 Non-Homogeneous Injections/

Extrusions8113 Fiber-Reinforced (Plastic)

Composites8114 Other Fabricated Plastics8115 Processor for Working with Plastics8119 Other Plastic Fabrication8120 Coating & Adhesive Manufacturers8121 Optical coatings8129 Other Coating and Adhesive8130 Membrane & Membrane-Based

Products8140 Specialty/Performance Materials8141 Semiconductor Material(e.g.. silicon

wafers)8142 III/V Semiconductor Mater(e.g. galli-

um arsenide)

2009 NVCA Yearbook

Thomson Reuters 81


8143 Specialty Metal(s) incl. coatings,alloys, clad

8144 Ceramics8145 Lubricant & Functional Fluids8146 Other Specialty Materials8147 Specialty material for laser genera-

tion8148 Superconducting materials8149 Other Specialty/Performance

Materials8150 Commodity Chemical & Polymers8151 Industrial Chemicals8152 Polymer (Plastics) Materials8160 Specialty/Performance Chemicals8161 Electronic Chemicals8162 Other Industrial Chemicals8170 Agricultural Chemicals8189 Other Commodity Chemical and

Polymers8199 Other Chemical & Material(not yet

classified)8200 Industrial Automation8210 Energy Management8220 Industrial Measurement & Sensing

Equipment8221 Laser related measuring & sensing

equipment8230 Process Control Equipment &

Systems8240 Robotics8250 Machine Vision Software & Systems8260 Numeric & Computerized Control of

Machine Tools8299 Other Industrial Automation (NEC)8300 Industrial Equipment and Machinery8310 Machine Tools, Other Metalworking

Equipment8320 Hoists, Crane & Conveyors8330 Pumps, Ball Bearings, Compressors,

Industrial Hardware8340 Mining Machinery8350 Industrial Truck and Tractors8360 Other Industrial Process Machinery8370 Power Transmission Equipment

(generator & motors)

8399 Other Industrial Equipment &Machinery

8500 Pollution and Recycling Related8510 Air Filter & Air Purification &

Monitoring Equip.8520 Chemical and Solid Material

Recycling8530 Water Treatment Equipment & Waste

Disposal Systems8599 Other Pollution & Recycling Related8600 Other Industrial Product (not yet

classified)8700 Industrial Services

9000 OTHER SERVICES AND MANUFACTURING

9100 Transportation9110 Airlines and aviation related9120

Trucking9125 Railway Related9130 Leasing of Railcars, Buses and Cars9140 Mail and Package Shipment9150 Motor Vehicles, Transportation

Equipment & Parts9160 Airfield and Other Transportation

Services9180 Advanced Aircraft/Aerospace9199 Other Transportation9200 Finance, Insurance, Real Estate9210 Insurance Related9220 Real Estate9230 Banking9235 Non Bank Credit9240 Securities & Commodities Brokers

and Services9250 Investment Groups9254 Venture Capital and Private Equity

Investors9255 Financial Transaction Services9299 Other Financial, Insurance & Real

Estate9300 Business Services9310 Engineering Services9320 Advertising and Public Relations9330 Leasing (not elsewhere classified)


82 Thomson Reuters


9340 Distributors, Importers andWholesalers

9350 Consulting Services9360 Media Related Services9399 Other Services (not elsewhere clas-

sified)9400 Manufacturing9410 Business Products and Supplies9415 Office Automation Equipment9420 Office Furniture & Other

Professional Furnishings9430 Textiles (Synthetic & Natural)9440 Hardware, Plumbing Supplies9450 Books, Cards and Other Publishings9460 Packaging Products & Systems9470 Printing & Binding9499 Other Manufacturing (not elsewhere

classified)9500 Agriculture, Forestry, Fishing9510 Agriculture related9520 Forestry related9530 Fishing related9540 Animal husbandry9599 Other Agriculture, Forestry, Fishing9600 Mining (non-energy related)

9700 Construction and Building Products9710 Construction9720 Manufacturer of Building Products9730 Manufacturer of Pre-Fabricated

Buildings & Systems9740 Distribution of Building Products &

Systems9750 Construction Services9799 Other Construction & Building

Products Related9800 Utilities9810 Electric Companies9820 Water, Sewage, Chem & Solid Waste

Treatment Plants9830 Gas Transmission & Distribution9899 Other Utilities & Related Firms9900 Other Products NEC9910 Conglomerates9912 Socially Responsible9914 Environmentally Responsible9915 Women-Owned9918 Minority-Owned9920 Holding Companies9999 Other2008 NVCA Yearbook

2009 NVCA Yearbook

Thomson Reuters 83



84 Thomson Reuters

The page is intentionally left blank.

Appendix E: Industry Sector VEIC Ranges

Biotechnology 4000, 4100, 4110, 4111, 4112, 4113, 4119, 4120, 4121, 4122, 4123, 4129, 4130, 4200, 4210,4220, 4230, 4240, 4250, 4290, 4300, 4310, 4311, 4312, 4319, 4320, 4321, 4322, 4329, 4330, 4340, 4390,4400, 4410, 4420, 4490, 4500, 4510, 4520, 4525, 4599, 4600, 4610, 4699, 4900, 5500, 5510, 5520, 5530,5540, 5550, 5599

Business Products and Services 2811, 2824, 2831, 2844, 9300, 9310, 9320, 9330, 9340, 9350, 9360, 9399

Computers and Peripherals 2000, 2100, 2110, 2111, 2112, 2119, 2120, 2121, 2122, 2123, 2124, 2125, 2126,2130, 2140, 2141, 2142, 2143, 2144, 2149, 2220, 2230, 2234, 2236, 2238, 2239, 2250, 2255, 2260, 2280,2290, 2295, 2299, 2500, 2510, 2511, 2512, 2513, 2519, 2520, 2521, 2522, 2523, 2524, 2529, 2530, 2531,2532, 2533, 2539, 2540, 2541, 2542, 2543, 2546, 2549, 2550, 2551, 2552, 2553, 2559, 2560, 2561, 25622563 2564 2569 2590 3170

Consumer Products and Services 2812, 2832, 7000, 7300, 7310, 7320, 7330, 7340, 7399, 7400, 7410, 7420,7430, 7431, 7432, 7433, 7434, 7450, 7499, 7500, 7510, 7520, 7530, 7540, 7550, 7560, 7599, 7999

Computer Software 1563, 2200, 2210, 2300, 2311, 2312, 2313, 2315, 2316, 2317, 2318, 2319, 2320, 2321,2322, 2323, 2324, 2325, 2399, 2700, 2710, 2711, 2712, 2713, 2716, 2719, 2720, 2721, 2722, 2723, 2724,2729, 2730, 2731, 2732, 2733, 2734, 2735, 2736, 2737, 2738, 2739, 2740, 2741, 2743, 2744, 2748, 2749,2750, 2751, 2752, 2753, 2754, 2755, 2780, 2781, 2782, 2783, 2784, 2785, 2798, 2799, 2900, 2910, 2911,2990, 8250

Electronics/Instrumentation 3000, 3100, 3160, 3200, 3300, 3310, 3400, 3420, 3499, 3500, 3510, 3599, 3700,3710, 3720, 3799, 3800, 3810, 3820, 3830, 3835, 3899

Financial Services 2816, 2836, 9200, 9210, 9220, 9230, 9235, 9240, 9250, 9254, 9255, 9299

Healthcare Services 2820, 2840, 5400, 5410, 5412, 5414, 5420, 5429, 5430, 5440, 5499

Industrial/Energy 2819, 2837, 2839, 6000, 6100, 6200, 6300, 6400, 6410, 6420, 6430, 6499, 6500, 6510,6511, 6512, 6520, 6530, 6540, 6599, 6600, 6700, 6710, 6720, 6799, 6800, 6900, 8000, 8100, 8110, 8111,8112, 8113, 8114, 8115, 8119, 8120, 8121, 8129, 8130, 8140, 8143, 8144, 8145, 8146, 8147, 8148, 8149,8150, 8151, 8152, 8160, 8161, 8162, 8170, 8189, 8199, 8200, 8210, 8220, 8221, 8230, 8240, 8260, 8299,8300, 8310, 8320, 8330, 8340, 8350, 8360, 8370, 8399, 8500, 8510, 8520, 8530, 8599, 8600, 8700, 9000,9100, 9110, 9120, 9125, 9130, 9140, 9150, 9160, 9180, 9199, 9400, 9410, 9415, 9420, 9430, 9440, 9460,9470, 9499, 9500, 9510, 9520, 9530, 9540, 9599, 9600, 9700, 9710, 9720, 9730, 9740, 9750, 9799, 9800,

Thomson Reuters 85

Industry analysis is based upon the following industry sectors: Biotechnology, Business Products and Services,Computers and Peripherals, Consumer Products and Services, Computer Software,Electronics/Instrumentation, Financial Services, Healthcare Services, Industrial/Energy, IT Services, Mediaand Entertainment, Medical Devices and Equipment, Networking and Equipment, Retailing/Distribution,Semiconductors, Telecommunications and Other. These sectors are based on the 17 industry classifications ofthe MoneyTree™ Report by PricewaterhouseCoopers and the National Venture Capital Association based ondata from Thomson Reuters.

9810, 9820, 9830, 9899

IT Services 1560, 1561, 1562, 1569, 2600, 2630, 2640, 2650, 2655, 2660, 2665, 2670, 2675, 2691, 2699,2760, 2761, 2762, 2763, 2765, 2766, 2768, 2769, 2800, 2870, 2871, 2873, 2879

Media and Entertainment 1110, 1120, 1125, 1130, 1135, 1199, 1700, 1720, 2814, 2818, 2834, 2838, 2843,2848, 2850, 2851, 2852, 2853, 2854, 2855, 2856, 2857, 2858, 2859, 2860, 2861, 2862, 2863, 2864, 2865,2866, 2869, 7100, 7110, 7120, 7125, 7130, 7140, 7150, 7155, 7160, 7170, 7199, 9450

Medical Devices and Equipment 5000, 5100, 5110, 5120, 5121, 5122, 5123, 5124, 5125, 5130, 5140, 5200,5210, 5220, 5221, 5230, 5240, 5299, 5300, 5310, 5340, 5350, 5380, 5399

Networking and Equipment 1400, 1500, 1510, 1515, 1520, 1521, 1522, 1523, 1524, 1525, 1530, 1549, 3600,3610, 3620, 3630, 3699

Retailing/Distribution 2810, 2813, 2815, 2817, 2821, 2823, 2825, 2826, 2829, 2830, 2833, 2835, 2841,2845, 2846, 2849, 7200, 7210, 7220, 7230, 7240, 7245, 7246, 7247, 7248, 7250, 7299, 7350

Semiconductors 3110, 3111, 3112, 3114, 3115, 3119, 3120, 3130, 3132, 3135, 3139, 3140, 3410, 3900,3910, 3920, 3930, 3940, 3989, 3990, 8141, 8142

Telecommunications 1000, 1100, 1200, 1210, 1215, 1220, 1230, 1299, 1300, 1310, 1320, 1325, 1330, 1399,1550, 1551, 1552, 1553, 1559, 1600, 1610, 1620, 1630, 1640, 1699, 1710, 1800, 1810, 1825, 1899, 2822,2842

Other 9900, 9910, 9912, 9914, 9915, 9918, 9920, 9999


86 Thomson Reuters

Appendix F: Stage Definitions

SEED/START-UP STAGE FINANCING

This stage is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept.This involves product development and market research as well as building a management team and develop-ing a business plan, if the initial steps are successful. This is a pre-marketing stage.

EARLY STAGE FINANCING

This stage provides financing to companies completing development where products are mostly in testing orpilot production. In some cases, product may have just been made commercially available. Companies may bein the process of organizing or they may already be in business for three years or less. Usually such firms willhave made market studies, assembled the key management, developed a business plan, and are ready or havealready started conducting business.

EXPANSION STAGE FINANCING

This stage involves working capital for the initial expansion of a company that is producing and shipping andhas growing accounts receivables and inventories. It may or may not be showing a profit. Some of the uses ofcapital may include further plant expansion, marketing, working capital, or development of an improved prod-uct. More institutional investors are more likely to be included along with initial investors from previousrounds. The venture capitalist’s role in this stage evolves from a supportive role to a more strategic role.

LATER STAGE

Capital in this stage is provided for companies that have reached a fairly stable growth rate; that is, not grow-ing as fast as the rates attained in the expansion stages. Again, these companies may or may not be profitable,but are more likely to be than in previous stages of development. Other financial characteristics of these com-panies include positive cash flow. This also includes companies considering IPO.

ACQUISITION FINANCING

An acquisition of 49% stake or less. Firm acquires minority shares of a company. Thomson Reuters includesthese deals in standard venture capital disbursement data when calculating venture capital disbursementswhere the funding is by a venture capital firm.

ACQUISITION FOR EXPANSION

Funds provided to a company to finance its acquisition of other companies or assets. A consolidator of com-panies in specific industries.

MANAGEMENT/LEVERAGED BUYOUT

These funds enable an operating management group to acquire a product line or business, at any stage of devel-opment, from either a public or private company. Often these companies are closely held or family owned.Management/leveraged buyouts usually involve revitalizing an operation, with entrepreneurial managementacquiring a significant equity interest.

Thomson Reuters 87

RECAP/ TURNAROUNDFinancing provided to a company at a time of operational or financial difficulty with the intention of improv-ing the company’s performance.

SECONDARY BUYOUT

A buyout deal on top of a buyout deal. Secondary buyouts are distinguished when the initial firm investor isdifferent from the current investing firm.


88 Thomson Reuters

Appendix G: Data Sources and Resources

MoneyTree™ DataPricewaterhouseCoopers, Thomson Reuters, and theNational Venture Capital Association joined forces inDecember 2001 to produce what was then known asthe PricewaterhouseCoopers/Thomson VentureEconomics/National Venture Capital AssociationMoneyTree™ Survey. Conducted on a quarterlybasis, the designated PwC/NVCA MoneyTreeReport allows Thomson Reuters unparalleled accessto primary sources of information from general part-ners.

Sources of DataThe online database of Thomson Reuters isThomsonONE.com (VentureXpert), the foremostinformation provider for private equity professionalsworldwide. The private equity portion of ThomsonReuters offers an incomparable range of productsfrom directories to conferences, journals, newslet-ters, research reports, and the ThomsonONE.comPrivate Equity database. As of February 2009, thedatabase included over 77,400 portfolio companies,250,900 executives, 13,580 private equity firms,28,700 private equity funds, and 138,800 financingrounds. By establishing working relationships withprivate equity and venture capital firms, institutionalinvestors, and industry associations such as theNVCA, PricewaterhouseCoopers and other suchentities around the world, Thomson Reuters has beenable to gather, on a timely basis, complete and accu-rate information.

Timeliness of DataMany of the tables and charts presented in this reportcan be produced by using ThomsonONE.com. Oneof advantages of using ThomsonONE.com is that thereader can customize a report to better fit the needsof what they are seeking. In addition, because theonline database is continuously updated, the informa-tion available is more up-to-date than what can bepresented in this report. Readers should note thattimely industry information on details concerningventure capital investment is available from othersources such as PricewaterhouseCoopers atwww.pwcmoneytree.com, the ‘Industry Stats &News’ section of the NVCA website, www.nvca.org,and the ‘Financial Press Releases’ segment of the pri-vate equity section of Thomson Reuters found atht tp : / / f inancia l . thomsonreuters .com/thom-sononecom_pevc. Also, additional information ondata such as fund raising and fund performance areavailable on both the NVCA website and the privateequity portion of the Thomson Reuters website.

Verification and Updating of DataCollectively, PricewaterhouseCoopers, ThomsonReuters, and the NVCA have the utmost commitmentto provide an accurate historical record of venturecapital activity. On a daily basis, the database is con-stantly analyzed for consistency, crosschecked withother data sources, and updated as new informationcomes in. On a quarterly basis, we have worked withmany venture firms to ensure that that their currentand past data is correct. Primarily for this reason, theprivate equity news releases of Thomson Reuters willoften restate statistics from prior news releases. With

Thomson Reuters 89

For this publication, the main source for data was ThomsonONE.com (VentureXpert), the online research data-base of Thomson Reuters.ThomsonONE.com is endorsed by the NVCA as the official United States venture cap-ital activity database. By using data gathered through the MoneyTree™ Report by PricewaterhouseCoopersand the National Venture Capital Association based on data from Thomson Reuters, ThomsonONE.com con-tains investment, fund raising, portfolio company information, Deals Insight and Reuters News along with otherstatistical data. Other information contained in this database is gathered through a variety of public and pro-prietary sources including, but not limited to, the Thomson Reuters performance surveys. This publication isproduced on an annual basis primarily using year-end data; however, the underlying databases can beaccessed online to provide the most up-to-date and comprehensive global private equity statistics and profileinformation available.

the availability of the online data access, users areencouraged to always use the most current numberseven regarding historical activity so as to maintainaccuracy and comparability.

Reporting Functionality ofThomsonONE.comUsers can access information in terms of profiles onprivate equity companies, funds, firms, executives,IPOs, and limited partners. In addition, users canaccess the analytics portion of the database, whichcontains investment, valuation, IPO analytic, mergeranalytic, fund performance, fund raising, and fundstatistic information along with venture capital infor-mation such as aggregate fund raising, investments,and IPOs broken out into state and nation profiles.

Comprehensiveness ofThomsonONE.comBoth the breadth and depth of ThomsonONE.comcan perhaps best be shown in that it, among othertypes of information, the user can find the answers tothe following questions:

• What is the performance at quarter end for privateequity funds that were formed from 1998 to 2008?

• Which venture firms are most active in fundingonline financial services companies in the OhioValley?

• How much money was raised by each fund stagein 2008?

• What was a particular venture-backed IPO’s one-year return at the end of 2008?

• As of December 2008, was the 10-year return tosmall buyout funds larger than that of large buyoutfunds?

• How much money was committed to mezzaninefunds from 1997 to 2008?

• How much money was invested in the venture cap-ital industry from 1987 to 2008?

• In 2008, how much money was invested at eachdevelopment stage in Research TrianglePharmaceutical companies?

In addition, there are also advantages of using thedatabase for a general partner as well. Although thisis not an inclusive list, utilizing the database by gen-eral partners can be helpful to them for among thefollowing reasons:

• Plan your companies’ exits with data on both ven-ture-backed IPOs and mergers and acquisitions

• Aid in recruiting talented executives from otherventure-backed companies

• Quickly spot venture-backed companies in com-petition with your own portfolio companies

• Create industry analyses to benchmark both per-formance and portfolio investments

• Find other venture capitalists likely to support fol-low-on rounds

• Provide clarity to investment decisions by compar-ing them to current market conditions

• Compile valuation reports for comparable portfo-lio companies

• Identify prospective investors and their investmenthistories

• Benchmark valuations among recent transactionsand obtain valuation comparables

• Analyze investment trends by industry• Utilize returns information to limited partners

using appropriate benchmarks• Tailor your pitch to investor focus size and limited

partner type

Reporting Functionality of LPXpertAnother database is available to users: LPXpert, anonline portfolio monitoring system that allows insti-tutional investors to analyze their portfolio activity inboth a cost-effective and timely manner. Over 100different types of reports can be produced detailingfirm, fund, portfolio company, executive, IPO pro-files and fund performance analysis. A description ofthe features provided include portfolio highlights thatshow changes in portfolio activity between reportingperiods. These changes can include the number offunds invested in, committed capital, the amount ofcapital called, and percent overlap of investments, aparticularly valuable tool for large institutionalinvestors investing in various funds.

Comprehensiveness of Data of LPXpertThe extent to how comprehensive LPXpert is can beshown by providing the following examples of thetypes of queries that could be researched using thisproduct:

• What other funds have co-invested alongside thefunds I have invested in?

• What are the other funds managed by the firms I


90 Thomson Reuters

have invested with, but that I am not currentlyinvested in?

• How have my funds performed over the last 10years ending December 31, 2008?

• Of the amount that I have invested in my portfolioof funds, what is the industry distribution by per-centage?

• Of the funds I have invested in, how has theamount of dollars invested changed betweenreporting periods?

Accessing ThomsonONE.com, LPXpert,and Other ServicesFor more information on ThomsonONE.com orLPXpert, please visit http://financial.thomson-reuters.com/thomsononecom_pevc or by phone at 1-

800-782-5555. For information on NVCA member-ship, which can include a free trial, certain freereports for participating members, and discounts onan annual subscription, please contact JaniceMawson at the NVCA. You may contact her onlinethrough the link on the member benefits section ofthe NVCA website or at 703-524-2549. For informa-tion on services PricewaterhouseCoopers providesfor venture capital firms as well as emerging compa-nies, please visit their website at www.pwc-moneytree.com or contact them at 1-877-PwC-TICE.

2008 NVCA Yearbook

2009 NVCA Yearbook

Thomson Reuters 91



92 Thomson Reuters

Appendix H: Portfolio Company Valuation Guidelines

Guidelines fall into two categories. The first is port-folio performance presentation formats, calculations,and disclosure. An example of the former is thePrivate Equity Provisions of the Global InvestmentPerformance Standards (GIPS). This was developedby the CFA Institute. While many of the specifica-tions and terminology line up with current practice inthe United States, the NVCA has not endorsed orotherwise commented on these standards. NeitherNVCA nor Thomson Financial has determined howwidespread the adoption of those standards is or willlikely be. This document and accompanying guid-ance can be currently found at http://www.cfainsti-tute.org/centre/codes/gips/.

Much more attention is being paid to the other cat-egory: portfolio company valuation guidelines.The chronology and sections below refer to thiscategory. Suffice it to say for now that portfoliovaluation guidelines developed by the PrivateEquity Industry Guidelines Group (PEIGG,www.peigg.org/home.html > Valuations), mostrecently revised in March 2007, are the most com-monly referred to in the US. An unrelatedEuropean consortium has created “international”guidelines which they intend to conform to IASBrules. That version has received little attention inthe US.

Why Valuation Guidelines Matter

What ultimately matters to the investors and privateequity practitioners is the cash which has been dis-tributed to the investors during the life of the fundcompared with the original money put in. However,

the life of a typical venture fund is at least 10 years,longer in the life sciences arena. During that periodthe venture capital fund reports progress to the limit-ed partners. In many cases, this means quarterly port-folio updates and a complete audited annual financialstatement. For a typical venture fund, very littlemoney is paid out in the first four or five years. Also,while every portfolio company receives funding withhigh expectations, it can take several years to deter-mine if a particular company is a likely winner.Therefore, understanding progress in the portfoliorequires some estimate of the success of the investeecompanies by the venture capital or private equityfirm. While many investors and fund managers agreethat financial measurements mean little for the firstthree or so years of a fund, after that the fund wantsto communicate progress to the investors. This iswhere specific valuation rules and processes becomeimportant. The agreed valuation procedures for indi-vidual portfolio companies become the basis forprogress assessment as the fund matures and ulti-mately distributes cash to the investors.

So while portfolio company valuations are more ofan art than a science, especially for pre-revenue oreven pre-EBITDA companies, most limited partneragreements (LPAs) establishing a venture capitalfund require the venture firm to provide quarterlyand annual financial statements using GenerallyAccepted Accounting Principles (GAAP). GAAPrequires fair value measurement for portfolio posi-tions. Therefore, most GPs must issue financial state-ments using fair value.

Thomson Reuters 93

In the United States, a venture capital fund is usually organized as a limited partnership. The institutionalinvestors providing capital to a fund typically become limited partners (LPs). The venture firm becomes a gen-eral partner (GP) in the limited partnership. In most of the limited partnership agreements defining GP-LPrelationship, the GPs are required to provide financial reports quarterly (unaudited) and annually (audited)prepared according to United States Generally Accepted Accounting Principles (“GAAP”). GAAP generallyrequires the use of investment company accounting which mandates that a fair value to be assigned to the indi-vidual portfolio companies. This is consistent with the LPs need for fair values of their investments as well as3rd party or regulatory requirements, e.g., ERISA-regulation.

The Evolution of Valuation Guidelines:1989 to 2008

This section reviews the various efforts to createcomprehensive portfolio company valuation guide-lines for US private equity.

1989-1990 – A group of investors, private equityfund managers, and fund-of-fund managers formed agroup to develop a set of portfolio company valua-tion guidelines. Contrary to a very persistent rumor,the NVCA did not endorse, adopt, bless, publish, orotherwise opine on the guidelines.

Decade of the 1990s – Two noteworthy developmentsoccurred in the 1990s. Despite no endorsement by theNVCA these guidelines became accepted practice bymuch of the US industry, especially in the venturecapital side of private equity. These guidelines werereferred to by many as being issued by the NVCA butin fact they were not. The second development isinternational venture associations creating localizedguidelines based heavily on these guidelines. Thesewere created in Europe and other internationalregions. In fact, by 2005, there had been multiple iter-ations of the European and British guidelines.

2003 – A self-appointed group of private equity prac-titioners, fund managers, fund-of-fund managers andothers formed the Private Equity Industry GuidelinesGroups (PEIGG). The overall constitution of thisgroup is not hugely different from the 1989-1990group. The PEIGG group announced that it was con-templating taking on four initiatives, of which portfo-lio company valuation guidelines was the first one.

December 2003 – After an extensive input phase andreview by various industry groups and serviceproviders, the first version of the PEIGG guidelineswere issued. Throughout the process PEIGG hadbeen actively soliciting feedback and input from anumber of industry groups including the NVCA.

March 2004 – NVCA board issued statement of sup-port, but not endorsement as some pundits hadhoped. NVCA position was widely consistent withinput provided by members of the NVCA CFO TaskForce, members at large, and the NVCA Board ofDirectors. The text of NVCA’s statement is printedbelow.

March/April 2004 – The Institutional LimitedPartners Association (ILPA) hails NVCA support aswelcome support – especially as it relates to the GPand LPs mutually agreeing to the valuation process.PEIGG also hails the NVCA support.

July 2004 – After consulting quietly with variousindustry groups, PEIGG issues guidance on contro-versial paragraph 30 which was the most discussedand debated provision in the guidelines.

September 2004 – Based on input from ILPA andothers, PEIGG agrees to minor wording changes intwo paragraphs. This becomes PEIGG guidelinesversion 2. These two wording changes were consis-tent with, and in part inspired by, language theNVCA board used in its March 2004 statement ofsupport.

October 2004 – ILPA endorses the PEIGG guide-lines.

December 2004 – As most fund accounting year’send, GPs prepare for their first audits since the effec-tive date of AICPA’s SAS 101 rule. Essentially thatrule says that if a reporting entity claims to be report-ing “fair value” – which is required by GAAP – thenthe auditors must document and test that this is, infact, true. It was not clear to what extent thisincreased scrutiny would affect valuation expectationand practices.

March 2005 – NVCA board issues an updated state-ment, which now refers to the September 2004 ver-sion of the PEIGG guidelines. The NVCA also decid-ed to make the PEIGG document widely available toits members. The text of that statement is below.

April 2006 – Guidelines issued by a consortium ofthree Europe-based venture capital associations(AFIC, BVCA, EVCA) are released. The authors citecompliance with IASB rules. Informal feedbackfrom US venture capital professionals reviewing thisdocument was that the document was more formula-ic than PEIGG’s counterpart and only partially com-pliant with US GAAP as defined at that time.Subsequently, 30 non-US private equity and venturecapital associations endorsed this document. Go tohttp://www.privateequityvaluation.com. The mostrecent edition is October 2006. These guidelines have


94 Thomson Reuters

gotten little traction in the US and expected to beupdated in 2009.

September 2006 – Financial Accounting StandardsBoard (FASB) issues its long-awaited and long-antic-ipated fair value measurement standard as FAS 157.Only a few of its 145 pages relate directly to typicalventure capital and private equity funds. BecauseFASB maintains that this is a clarification and furtherdefinition of fair value which was already requiredfor portfolio accounting, some auditors began requir-ing selective compliance in advance of the 2008effective date.

March 2007 – PEIGG issues a revised portfolio com-pany valuation guidelines document to reflect theFair Value Measurement standard (FAS 157). September 2007 – NVCA board reaffirms its priorposition on the PEIGG guidelines to refer to the mostrecent version.

March 2008 – the International Private EquityValuation & Venture Capital Valuation (IPEV) Boardreconstitutes and re-launches itself, expanded to

include 5 practitioners from the United States. Theinitial focus of the group is on convergence of USPEIGG and IPEV valuation guidelines. Details atwww.privateequityvaluation.com.

August 2008 – SEC proposes a roadmap towardglobal accounting standards and publishes for publiccomment the concept of adoption of InternationalFinancial Reporting Standards. Details are athttp://www.sec.gov/news/press/2008/2008-184.htm.

September 2008 – At this point, visible signs of a val-uation whirlpool are hard to miss. This changed whatappeared a couple of months earlier to be a generallypainless implementation of FAS 157 to a fluid envi-ronment with no precedent and little guidance.

December 2008 - The decreases in public market val-uations accelerate. This makes valuation of even on-track, pre-revenue companies tricky. The NVCAissues a one page information letter to its members toshed light on applying FAS 157 in a valuationmicroburst/whirlpool. (Text below)

2009 NVCA Yearbook

Thomson Reuters 95

OVERVIEW

Introduction1. As the U.S. private equity industry (defined asventure, buyout, mezzanine, and other investmentsin private companies) has grown and matured, itsparticipants have become increasingly interested inthe appropriate reporting of fund values. The inter-est stems from a number of sources, such as aninvestor’s desire to measure interim performance,

investor’s need for fair value data to report invest-ments in their own financial statements, a manager’sneed to report and measure valuations in accordancewith fund agreements, and the need to determine theallocation of distributions of fund realizations. Thishas led to increased scrutiny of portfolio companyvalues and the need for greater consistency of valu-ation methodologies employed by managers of pri-vate equity funds. However, by its very nature pri-vate equity is an asset class in which judgment playsa significant role. Accordingly, investors in thesame company may have different, but supportable,views on valuation.

2. The objective of the Updated U.S. Private EquityValuation Guidelines (“Guidelines”) is to providemanagers a framework for valuing investments inportfolio companies at fair value and to providegreater consistency within the private equity indus-try with regard to valuations. Historically therewere few authoritative guidelines compliant withU.S. generally accepted accounting principles(GAAP) that required specific procedures for esti-

The PEIGG Guidelines

While the NVCA has not specifically endorsed thePEIGG portfolio company valuation guidelines (seestatement in next section below), it believes that theguidelines document should be readily accessible to itsmembers for reference and use. Be sure to refer towww.peigg.org for the latest version and guidance onthe document. The NVCA thanks the members ofPEIGG for their efforts and for their permission toreprint the guidelines here. The guidelines as updatedin March 2007 to reflect FAS 157 are printed below.

mating fair value of investments in portfolio compa-nies held by private equity investors. In September,2006, the Financial Accounting Standards Boardreleased Statement of Financial AccountingStandards No. 157, Fair Value Measurements. TheUpdated U.S. Private Equity Valuation Guidelinesare intended to assist managers in their estimationof fair value and are intended to be consistent withGAAP (FASB Statement No. 157) and the AICPAAudit and Accounting Guide - Audits of InvestmentCompanies. The AICPA Guide’s definition ofInvestment Companies includes Private EquityInvestors (paragraph 1.03) and requires investmentsto be reported at fair value (paragraph 1.32).

3. These Guidelines were created jointly by managers(i.e., general partners) and investors (i.e., limited part-ners) incorporating feedback from a wide number ofindustry participants. The Guidelines are not intend-ed to be all encompassing, nor are they intended toeliminate all subjectivity. Rather, they are to be aguide to assist managers and investors in agreeing toa valuation framework while allowing a manager toexercise its best judgment in applying the Guidelines.

4. Included in these Guidelines are terms that are sub-jective in nature, such as materiality, and could havedifferent meanings in various factual situations.While it is outside the scope of these Guidelines toforce specific definitions upon its users, the manager,in consultation with the Valuation Policy Committee(as discussed below) may develop and documentappropriate definitions of these subjective terms.

5. The Guidelines are not intended in any way tomodify the provisions of the fund agreement relat-ing to the subject matter hereof. To the extent theGuidelines are adopted by a manager and aValuation Policy Committee and in one or morerespects the Guidelines are inconsistent with thefund agreement, the fund agreement would govern(absent a specific amendment thereto).

Fair Value Concept6. The Guidelines seek to have all investments inportfolio companies reported at fair value on a con-sistent, transparent and prudent basis. Fair value asdefined in accordance with GAAP is “the price thatwould be received to sell an asset or paid to transfer

a liability in an orderly transaction between marketparticipants at the measurement date” (FASBStatement No. 157, paragraph 5). The objective isto estimate the exchange price at which hypotheticalwilling marketplace participants would agree totransact in the principal market, or lacking a princi-pal market, the most advantageous market. No mat-ter which market is deemed most appropriate, fairvalue is the estimated “exit price” in that market.

7. Securities of private companies, by definition,will not have quoted market prices available.However, private companies at times engage inarm’s-length transactions for issuances of their equi-ty or debt securities. The value of these transactionscould serve as an observable market price similar toa quoted market price if the transaction is bothrecent and between willing parties for the samesecurities as those for which the fair value determi-nation is being made (deemed a level 2 input byFASB Statement No. 157), and could therefore beused as an estimate of the theoretical exit price.

8. When quoted market prices or arm’s-length trans-action prices as described above are not available,the estimate of fair value should incorporate all rea-sonably available information about the business andutilize assumptions that market participants wouldnormally use in their estimates of value. The esti-mate of fair value should seek to best replicate theamount at which the investment could be sold in acurrent transaction between willing parties.

9. In determining the fair value of individual invest-ments using these Guidelines, managers are expectedto use their judgment. In utilizing judgment, sub-stance takes precedence over form. For example,when a manager’s past experience indicates that liq-uidation preferences will likely be renegotiated ormay not be fully enforced at the time of liquidation,the manager is strongly encouraged to use the expect-ed results rather than the form of the agreement.

10. Valuations should be updated on each measure-ment date, generally on a quarterly basis. Ofcourse, valuations used for annual and quarterlyperformance reporting should be used in privateplacement memorandums and other marketingmaterials.


96 Thomson Reuters

Valuation Policy Committee

11. These Guidelines acknowledge the perceptionthat bias exists or has the potential to exist in a non-independent (versus independent) valuation per-formed by a fund’s manager. As a result, it is recom-mended that the manager of each private equity fundestablish a Valuation Policy Committee consisting ofa subset of the fund’s investor representatives. TheValuation Policy Committee could be all of, or a por-tion of, a fund’s advisory committee, if such a com-mittee exists. (Neither these Guidelines nor GAAPrequire managers to obtain independent valuations).

12. The fund manager, in consultation with theValuation Policy Committee, should establish thewritten valuation parameters to be consistently fol-lowed by the fund’s manager using these Guidelines.The agreed upon valuation policy and deviationsfrom that policy should be communicated to theValuation Policy Committee and the limited part-ners by the manager. Private equity fund managersare solely responsible for establishing and docu-menting valuation policy, practices, procedures andmethodologies as well as valuing their investmentsin portfolio companies The Valuation PolicyCommittee should not set, formulate or approve thevaluations, except as required by the fund agree-ment. The Valuation Policy Committee should peri-odically discuss the level of the manager’s adher-ence to the fund’s valuation policy parameters.

II. PRIVATE COMPANY VALUATIONMETHODOLOGIES

General Guidelines

13. Managers are to fairly value the investments intheir portfolio companies on a consistent, transpar-ent and prudent basis. Since value is often realizedthrough a liquidity event of the entire company, thevalue of the company as a whole at the reportingdate will often provide the best evidence of thevalue of the investment in that company. As a result,the methodologies discussed in this section involveestimating the value of the company as a whole asan initial step for valuing the company’s privatelyissued securities. The manager will then need todetermine how the total enterprise value is distrib-uted among the various securities of the company.

14. Managers of funds should, without undue costand effort, contact other sophisticated investors todiscuss the valuations of common investments andthe factors considered in their valuations. However,managers are not required to use other investors’valuations since the estimate of fair value is theresponsibility of the managers.

15. To value an investment, managers should placethe most weight on valuation methodologies that areclearly objective and timely. On each valuation datemanagers need to take into account available infor-mation from market participants, the relevant mar-ketplace and the global economy along with specif-ic facts and circumstances in determining the fairvalue of their investments.

16. Historically, the Private Equity Industry usedcost or the value of the latest round of financing asan approximation of fair value; often without takinginto account other facts and circumstances. Such anapproach is incompatible with the concept of fairvalue described above. At each valuation date amanager must make a determination of fair valuefor each investment. As further outlined below,these Guidelines provide a consistent and transpar-ent methodology for determining fair value.However, a manager may conclude, after consider-ing the facts and circumstances as outlined below,that the best indication of fair value is provided bycost or the value of the latest round of financing.

17. FASB Statement No. 157 allows managers toutilize three valuation techniques, either alone or incombination. These Guidelines encourage managersto use the “market approach” in most situations (seeFASB Statement No. 157, paragraph 18a) utilizingComparable Company Transactions or PerformanceMultiple inputs, as the primary technique to esti-mate the fair value of equity securities in privatecompanies. For Private Equity, the market approachusually is the most appropriate.

18. In addition to the market approach techniquediscussed above, there are other valuation method-ologies, some of which are discussed in paragraphs41 and 42. These other methodologies or tech-niques may be appropriate in certain circumstances,and include discounting cash flows, valuing net

2009 NVCA Yearbook

Thomson Reuters 97

assets, and industry-specific benchmarking(described in FASB Statement No.157 as theincome and cost approaches).

19. Other valuation matters, including valuinginterest bearing securities, PIK dividends, warrants,liquidation preferences, convertible securities,escrows, and other rights, privileges and preferencesof preferred securities are discussed in paragraph47.

20. Determination of valuation adjustments shouldtypically be based upon actual positive and negativeevents, not upon expected accomplishments andperformance.

21. Regardless of the valuation methodology used,once used, it should continue to be used until a newmethodology will provide a better approximation ofthe investment’s current fair value. It is expectedthat there would not be frequent changes in valua-tion methodology.

Cost / Latest Round of Financing22. While entry prices and exit prices are differentconceptually, for the Private Equity Industry theseGuidelines presume the manager at the time of theinitial investment has considered near term compa-ny performance in determining investment valua-tion. Therefore, cost (the transaction price) may befair value (the exit price) upon purchase. The trans-action price may not represent fair value upon pur-chase when:

a) The transaction is between related parties;b) The transaction occurs under duress;c) The transaction price includes transaction costs(transaction costs are expensed under GAAP);d) The market in which the initial transaction takesplace is different than the principal or most advanta-geous market in which the exit transaction wouldtake place.

23. Managers should reconsider a company’s fairvalue in connection with each material equityfinancing, regardless of the manager’s participation.The value of the last round of financing is a factorin determining fair value, but it is not necessarilythe only factor.

24. A subsequent equity financing that includessubstantially the same group of investors as theprior financing is an appropriate factor to considerin valuing prior investments unless it can be demon-strated that the financing no longer represents fairvalue. This approach may be different from historicpractice, where, typically the value of prior invest-ments was not increased in a subsequent higherpriced financing round unless a new investor ‘vali-dated’ the new pricing.

25. If a private financing will be completed with ahigh degree of certainty in the near future, and thepricing of the transaction has been substantiallyagreed, to establish the value of a previous invest-ment, a manager should consider their best estimateof the upcoming new financing if it can be objec-tively determined that the prospective financing isat fair value.

26. Occasionally a round of financing includes asignificant investment from a strategic investor pay-ing a premium due to benefits accruing uniquely toitself. The manager must evaluate whether such apremium is representative of what the most likelybuyers of the company would also pay upon exit,and therefore, whether the price paid by the strate-gic investor is deemed to be the exit price (fairvalue) expected from market participants.

Deviations from Cost / Latest Round of Financing27. After some period of time, cost or the latestround of financing becomes less reliable as anapproximation of fair value. Therefore, the manag-er must assess whether fair value has changed eventhough there has not been a new round of financing.Examples of changes in circumstances which indi-cate a change in fair value may include, but are notlimited to, the following:

a) The current performance of the company is sig-nificantly above or below the expectations at thetime of the original investment. Potential indicatorsof this situation will include evaluation of the com-pany’s success or failure in attaining certain mile-stones, achieving technology breakthroughs, devel-oping proprietary technology, progressing throughclinical trials or significantly exceeding or failing tomeet budgets.


98 Thomson Reuters

b) Market, economic or company specific condi-tions have significantly improved or deterioratedsince the time of the original investment. Potentialindicators of this situation will include evaluation ofbroad changes in the economic climate, changes inthe financing markets, changes in the legal or regu-latory environment in which the company operates,changes in the company’s cost structure, increased ordecreased risk factors faced by the company, or sig-nificant fluctuations in share prices of quoted com-panies operating in the same or a related industry.

c) Substantial decreases in the value of quoted,more senior securities of the company (e.g., publicdebt), defaults on any obligations of the company, abankruptcy filing, significant ownership dilutioncaused by recapitalization of the company, or liquid-ity concerns that are expected to be more than shortterm in nature are circumstances which may indi-cate a potential impairment in value.

28. Estimating the extent of a change in fair value,if any, may not easily lend itself to an analyticalprocess. As a result, the manager will be required toexercise prudent judgment and carefully consider thebroad indicators of potential changes to fair value(such as market conditions, relevant stock marketindices, and other factors as discussed above).

29. The result of such consideration will provideindications whether the carrying value of the invest-ment should be increased or decreased to representfair value. The longer that fair value has been esti-mated using cost or the price paid at the most recentround of financing, the more consideration shouldbe given to reviewing changed circumstances andpotentially determining fair value utilizing otherinputs. Managers may consider historic cost or theprice paid at the most recent round of financing inmaking their fair value determination, but shouldnot use cost or the most recent financing price as thesole determinate of fair value.

30. These Guidelines recognize that building long-term value in a private equity backed business is notan easy task. Usually, many positive events need tohappen in order for portfolio companies to succeed.However, managers often become aware that certainof their investments are likely to fail given their

insight into the company. Even private companiesthat have significant manager involvement face adaunting task to create value for investors. Thus, itis natural that decreases in value may be more easi-ly identified and justified than increases in value.However, both decreases and increases in invest-ment fair value should be recognized when warrant-ed. Because of the difficultly in building sustain-able, long-term value in a private equity backedbusiness, increases in value should only be madewhere the manager can support the increase usingthe methodologies discussed in these guidelines orusing other techniques common to the marketplace,remembering that fair value is defined as the exitprice on the measurement date in a hypotheticaltransaction. Diligence, prudence and cautionshould be applied when valuing private companies,and in particular when considering the valuationwrite-up of early-stage companies, in the absence ofmarket-based financing events. All such changesand the factors upon which the changes are madeshould be reviewed with the Valuation PolicyCommittee. However, managers must recognizethat there should be no bias toward either increasingor decreasing carrying value to record fair value.

31. When valuation adjustments are necessary, themethodology used should be based on relevant com-parable data wherever possible (“relevant compara-ble data” as used in these Guidelines is intended tobe consistent with the input hierarchy discussed inparagraphs 22-31 of FASB Statement No. 157).Recommended methodologies are discussed below.

Comparable Company Transactions32. This methodology involves deriving the valueof a company through examination of third-partyinvestments in comparable equity securities of thecompany, examination of transactions in equitysecurities of comparable companies and direct com-parisons to similar companies. These comparisonsshould be appropriately adjusted for any controlpremiums, synergistic benefits or other excess ben-efits or detriments that accrue to the owner whendetermining a proper comparable valuation.

33. These Guidelines acknowledge that until a com-pany achieves marketplace acceptance for its prod-uct or service, it is unlikely that truly comparable

2009 NVCA Yearbook

Thomson Reuters 99

companies with determinable fair values will bereadily identifiable.

34. To the extent comparable transactions cannot beascertained and fair value cannot be reasonablyassessed and reliably measured using comparabletransactions, the following Performance Multiplemethodology should be used, if applicable.

Performance Multiple35. The performance multiple methodology appliesa relevant multiple to the performance of the com-pany being valued in order to derive the value of thecompany. This approach is most applicable to com-panies that have achieved positive and sustainableoperating performance.

36. The valuation determined using this methodolo-gy is calculated by applying the most appropriate andreasonable multiple derived from reference to marketbased conditions of quoted companies or recent pri-vate transactions. The multiple to be used, whichmay need to be adjusted for differences in terms ofgrowth prospects and risk attributes (depending onthe size of the comparison sample, among other fac-tors), should be one of the following:

a) Current average comparable public companymultiple for similar companies in the industry;

b) Current average multiples for recent private trans-actions of similar companies in the industry; and

c) The original acquisition multiple when no othersimilar public or private multiples can be ascertained.

The most appropriate and reasonable multiple asdetermined above will be applied to the relevantoperating performance metrics of the company toestimate fair value.

37. The manager should be confident that reason-able, relevant and sustainable performance metricsare utilized, which may necessitate the adjustmentfor one-time and non-recurring items.

38. There may be significant changes in the financial, reg-ulatory, economic or legal climate in which the companyoperates which harm or enhance the prospects of the com-

pany, but these changes may not yet have affected perform-ance. The manager needs to consider these changes in eval-uating a company’s sustainable performance. Managersshould share with the Valuation Policy Committee the fac-tual data and their assumptions that support the sustainableperformance used in the valuation determination.

39. The multiples used should be those that are usedregularly and routinely to value companies in theindustry in which the subject company is operating.If the multiples used are derived from public compa-ny comparables, a discount to a private company’sequity value may be appropriate. Discounts appliedto private securities may be higher than those appliedto restricted public securities, which are discussed inparagraph 46. Managers should share with theValuation Policy Committee the factual data thatgenerates the multiples used in the valuation process.

40. To the extent fair value cannot be reasonablyassessed and reliably measured using performancemultiples, the following methodologies may be con-sidered.

Other Valuation Methodologies41. A few other valuation methodologies, which maybe appropriate in certain circumstances, are as follows:

a) Because of the need to use significant estimatesand forward-looking information, discounted cashflow (DCF) methodologies should only be used inlimited situations using a discount rate commensu-rate with the risks involved. These situations wouldinvolve instances where the methodologies previ-ously discussed in these Guidelines prove incapableof addressing the specific circumstances.

b) Net asset valuation methodologies should beused for valuing investments in businesses whosevalue is derived primarily from the underlying valueof their tangible assets rather than their performance.

c) Industry-specific benchmarks, which are customar-ily and routinely used in specific industries such asprice per subscriber or other industry norms, shouldonly be used in estimating fair value where appropriate.

42. In those circumstances where there are indica-tions that a change in carrying value is appropriate


100 Thomson Reuters

based on paragraph 27, but the methodologiesdescribed in paragraphs 32-41 are not applicable,the manager should exercise prudent judgment inconsidering assumptions that marketplace partici-pants would utilize in their estimate of fair value.

III. VALUATION OF PUBLICLY TRADEDSECURITIES

Unrestricted

43. Actively traded public equity and public debtsecurities are required to be valued at the closingprice or bid price, except as discussed below. Activemarkets are defined as a market in which transactionsoccur with sufficient frequency (daily) and sufficientvolume to provide pricing information on an ongoingbasis, regardless of the size of the position held.

44. Discount (blockage) factors for unrestrictedsecurities that trade in an active market are prohib-ited by GAAP (FASB Statement No. 157).

Restricted45. A discount from values of actively traded securi-ties should be taken for holdings of securities whenthere is a formal restriction that limits sale of thesecurities. Examples of restrictions that may warranta discount include rule 144 holding periods andunderwriter’s lock-ups. Discounts for restricted equi-ty securities from their market price typically rangefrom 0% to 30%. When determining a discount toactively traded restricted securities, factors thatshould be taken into consideration include the com-pany’s trading characteristics (the extent to which themarket for the security is active), the investor’s abili-ty to sell its position when the restriction expires, andthe term of the restriction. The adjustment of the dis-count will vary depending on the duration of therestriction. As the remaining length of the restrictiondecreases, the amount of the discount should alsodecrease. Limitations on sale based on rule 144’svolume tests or based on a closed trading window forboard members do not qualify as formal restrictionsrelated to the security itself. Therefore discounts arenot allowed by GAAP in these situations.

Inactive46. A quoted price is not readily available for secu-

rities which trade in inactive markets, where trans-actions do not occur with sufficient frequency andvolume to provide ongoing pricing data. Therefore,the last transacted price may not provide the bestindication of fair value. In such situations, anadjustment to the last transacted price may beappropriate or other valuation techniques may beutilized based on all relevant factors.

IV. OTHER MATTERS

47. There are a wide variety of securities and capi-tal structures used in the private equity industry.Such securities should be valued consistent with theGuidelines set forth above. Some examples and val-uation guidance for securities and structures whichhave not been specifically addressed by theseGuidelines include:

a) The carrying value of private interest bearingsecurities should be based on the underlying compa-ny’s ability to service and repay debt.

b) PIK dividends should be accrued in accordancewith the terms of the underlying security. A valua-tion discount may be necessary depending on thehealth of the company and the realizability of theunderlying securities.

c) Valuations of securities denominated in currenciesother than the base currency of the fund should beadjusted for changes in the spot prices of the currency.

d) Warrants should be carried at their fair value.

e) The rights associated with preferred stock aregenerally divided into two broad categories—eco-nomic rights and control rights. Once the enterprisevalue of the company is determined in accordancewith these Guidelines, fair value should be deter-mined by allocating value to shares of preferred andcommon stock based on their relative economic andcontrol rights.

In addition, when making their fair value determina-tion managers should recognize that liquidationpreferences are often granted to investors as aninducement to invest in a company. When a manag-

2009 NVCA Yearbook

Thomson Reuters 101

er’s past experience indicates that liquidation prefer-ences will be renegotiated or will not be fullyenforced at the time of liquidation, the manager isstrongly encouraged to use the expected results indetermining the valuation of a security which has aliquidation preference.

f) Currently convertible securities should be valuedat the excess of the value of the underlying securityover the conversion price as if the security was con-verted when the conversion feature is “in themoney” (appropriately discounted if restricted). Ifthe security is not currently convertible, the use ofan appropriate discount in valuing the underlyingsecurity should be considered. If the value of theunderlying security is less than the conversion price,the carrying value of the convertible security shouldbe based on the underlying company’s ability toservice and repay the security.

g) If deemed determinable beyond a reasonabledoubt (virtually certain) escrows from the sale of aportfolio company should be valued at an amountthat the manager, using its best estimate, ultimatelyexpects to receive from the buyer in light of theescrow’s various conditions.

h) Because of the inefficiencies of the secondarymarket, purchase and sale transactions of partner-ship interests in and of themselves may not beappropriate in determining the value of portfoliocompany valuations or positions in funds.

48. FASB’s Statement No. 157 Fair ValueMeasurements utilizes a hierarchy described asLevel 1, 2 and 3 inputs (Statement No. 157 para-graphs 21-31). The FASB valuation hierarchy hasnot been restated in these Guidelines. The conceptsoutlined in these Guidelines are intended to be con-sistent with Level 1, 2 and 3 inputs as defined. Theinput level is a required GAAP disclosure and pro-vides users of financial statements with additionalclarity in how a manager made their determinationof fair value.

V. CONCLUSION

49. As the private equity industry has matured inthe United States, there is a need for greater consis-

tency of valuation standards/methodologies by bothmanagers of, and investors in, private equity funds.These Guidelines are designed to provide a frame-work for addressing the majority of the private equi-ty industry’s valuation questions on a consistent,transparent and prudent basis. It is recommendedthat managers and investors collaborate to shareexperiences and best practices across relationships.This collaboration will narrow the range of specificdefinitions of subjective terms and will enhance theconsistent application of these Guidelines.

50. The key goals of these Guidelines are as fol-lows:

• Encourage managers to approach valuation froma consistent, transparent and prudent basis.

• Focus the private equity industry on the need todetermine fair value for each of their investments ina manner that is consistent with these Guidelines.

• Provide greater transparency into valuation resultsthrough the use of the Valuation Policy Committeeas described in the Guidelines.

51. The Guidelines are not intended to be allencompassing, nor are they intended to eliminate allsubjectivity. Rather, they are to be a guide to assistmanagers and investors in agreeing to a valuationframework while allowing a manager to exercise itsbest judgment in applying the Guidelines.

52. The Private Equity Industry Guidelines Groupacknowledges that the application of these guide-lines may result in a departure from past valuationpractices. It is recommended that managers andinvestors work jointly to develop a timetable toimplement these guidelines. It is expected that overtime the broad use of these Guidelines will becomeindustry practice

53. These Guidelines are consistent with USGenerally Accepted Accounting Principles. If man-agers adopt these Guidelines it is expected that theirdetermination of fair value will be GAAP compli-ant. However, it is also understood that a managermay be GAAP compliant without utilizing theseGuidelines.


102 Thomson Reuters

NVCA Position on Portfolio CompanyValuation Guidelines (March 2007Version)

The NVCA Board of Directors reaffirmed its supportfor the latest iteration (March 2007) of the PEIGGGuidelines on September 18, 2007. While the NVCAhas not specifically endorsed the PEIGG or other valu-ation guidelines, the NVCA board statement of supportis below:

The NVCA recommends that its members create, fol-low and communicate clearly the specific proceduresand methodologies used for valuing their portfolios.These methodologies should be agreed to by the firm’sinvestors (LPs), and conform, when required, toGenerally Accepted Accounting Principles and fairvalue measurement standards, recognizing that the ulti-mate responsibility for valuations remains with the gen-eral partner. When evaluating current valuation proce-dures or developing new approaches, the NVCA sug-gests its members include a review of the Private EquityIndustry Guidelines Group (PEIGG) December 2003“Private Equity Valuations Guidelines” document, asreissued in March 2007 (found at www.peigg.org). Wecommend the fine efforts of PEIGG, an independentgroup which sought and reflected input from the NVCAand other industry stakeholders. The NVCA encour-ages diligence, prudence, and caution when implement-ing the specific elements of any guideline, such as val-uation changes to early-stage companies in the absenceof market-based financing events.

NVCA Member Alert – Fair ValueConsiderations for Venture Capitalists -December 2008

The following alert was sent to the NVCA member-ship to highlight certain issues and considerations tobe explored in the application of FAS 157, the fairvalue measurement standard. The NVCA thanksDavid Larsen of Duff and Phelps and several mem-bers of the NVCA CFO Task Force for their role indrafting this document:

“We are operating in a severely distressed investmentenvironment that has deteriorated rapidly in the pastfew months. What does this mean for venture capital

investors as they attempt to value privately-heldinvestments at December 31, 2008? The short answeris: despite the current very challenging economicenvironment, Fund managers must continue to exer-cise their sound judgment in estimating the FairValue of each portfolio company after consideringthe relevant facts, including current market condi-tions. The valuation process does not change, butmuch more judgment is required when we are in aperiod of economic discontinuity.

Virtually all LP agreements require GPs to use USGAAP for financial reporting. US GAAP requiresFair Value reporting for virtually all VC firmsbecause they are “investment companies.” US GAAPcontinues to define Fair Value as: “the price thatwould be received to sell an asset…in an orderlytransaction between market participants at the meas-urement date.”

Fund managers need to establish Fair Values eventhough they may not currently need to sell, or cannotsell, their private investments in this market. GPsmust use their judgment in estimating the current FairValues of their investments, even though “exit mar-kets” may have few buyers, IPO markets appearclosed, and there are few, if any, relevant comparabletransactions. Such judgment should take into accountall relevant information, including a financinground’s specific terms and conditions.

There are no easy outs, rules of thumb or safe harborsfor establishing Fair Value.

As always, best considerations for Fair Value deter-mination include the following: • The Fair Value of an investment portfolio is the sum

of the Fair Value determined for each portfoliocompany using a “bottoms up” approach. Applyinga “top-down” overall percentage adjustment to theaggregate portfolio’s value is not compliant withUS GAAP.

• Valuations should reflect specific factors in abuy/sell context. For example, a GP could ask:“Given my portfolio company’s current cash posi-tion, cash burn rate, performance compared to plan,probability of meeting forecasts, the projected envi-ronment for its product or technology, etc., as aboard member, what is the lowest price that I would

2009 NVCA Yearbook

Thomson Reuters 103

sell the company’s stock today in an orderly salewith a willing buyer?” [Footnote: A fund managershould not assume a “fire sale” of the stock, butshould assume “exposure to the market for a periodprior to the measurement date to allow for market-ing activities that are usual and customary…” -SFAS 157, Paragraph 7].

• The valuations set by the most recent financinground – perhaps even one in the third quarter of2008 – may be stale and inappropriate for determin-ing Fair Value, especially given current market con-ditions.

• The Fair Value at December 31 in many cases willlikely be different from the value at September 30,given the deterioration of the macro economic envi-ronment.

• Each valuation should reflect a company’s degreeof progress from the prior reporting date to the cur-rent one.

• To determine a portfolio company’s Fair Value, GPsshould apply their judgment in a consistent mannerand evaluate the same data they use for monitoringa company’s performance and progress. There is nomagic formula or weighting of factors.

In summary, determining Fair Value continues torequire the exercise of judgment based on objectiveevidence, such as calibrating the original investmentdecision with the current performance of the compa-ny and the current economic environment. The factthat the macro market is distressed probably adverse-ly impacts the value of most companies. This nega-tive impact may be compounded by disappointingcompany performance or mitigated by tangible andsustainable company progress.

If you need more details about Fair Value, you mightconsider the 18-page PEIGG Valuation Guidelines atwww.peigg.org, or you can download the 158-pageSFAS 157 at www.fasb.org.”


104 Thomson Reuters

Appendix I: International Convergence

A GP’s Primer on Global AccountingStandards Convergence

A recent flurry of media coverage has focused on thepossible upcoming convergence of US and interna-tional accounting standards. Much of this coveragediscusses which accounting system casts which pub-lic companies in the most favorable light. While thatparticular matter seems distant from the US venturecapital industry, there are two key aspects of conver-gence that it appears we need to focus on:• Determining which system (current US GAAP vs.

International vs neither) is the best system overallfor the US business community going forward. Wewould expect this dialogue to center on transparen-cy, reliability, relevance, comparability, and ongo-ing costs in addition to any conversion costs, whichmight not be insignificant.

• Addressing matters which specifically affect ourfunds. One area already identified is the financialstatements provided by GPs to LPs under interna-tional rules, should the international rules becomethe new US rules.

As a first step towards understanding and engagingin constructive dialogue in both of these areas, theNVCA CFO Task Force has appointed a subgroup tobegin gathering facts, analysis, and expert opinion onwhat all of this means to our industry.

Why Has The Convergence Issue Cometo the Surface at This Time?

For years, the United States has been developing gen-eralized accounting principles referred to as GenerallyAccepted Accounting Principles (“GAAP”). Thekeeper/arbiter/decider of GAAP is the FinancialAccounting Standards Board (“FASB”). FASB devel-ops and updates GAAP and the SEC has adopted theseaccounting rules for public company reporting andother situations over which the SEC has jurisdiction.

In recent years, on a parallel track, a separate set ofrules emerged from the International Accounting

Standards Board (“IASB”) which was Europe-cen-tric. These rules became known as the InternationalFinancial Reporting Standards (“IFRS,” pronounced“IFF-ers” or “EYE-fers”).

Over recent years, the large number of multinationalcorporations complained that they had to endure keep-ing two sets of books and this prompted the concept ofconvergence. In early September 2008, the SEC andthe FASB announced steps to pave the way for USpublic companies to convert from US GAAP to IFRS.The SEC “roadmap” provides for a three-year run-upto an SEC “go-no go” decision in 2011. 2011 is alsothe year that major US trading partners, Canada,Japan, Korea and India have indicated plans to adoptIFRS. At about the same time, the FASB and the IASBmet to review and re-orient their convergence plan tobe consistent with the SEC’s proposed schedule. Theupdated FASB-IASB memorandum of understandingis at http://www.fasb.org/intl/MOU_09-11-08.pdf. As2008 drew to a close and much Washington attentionwas focused on rescuing troubled assets and econom-ic stimulus, it was not clear what the direction or pri-ority for this would be going forward. Please check thewww.nvca.org website for updates.

Nothing in the SEC proposal or the FASB-IASBmemorandum says that the US will conclusively“converge” to or switch over to IFRS. This all con-templates a well-thought-out and informed decisionin three years. But large processes are being set inmotion that may be difficult to stop. It is worth point-ing out that the SEC roadmap refers to public compa-ny reporting; however we should logically expectalignment of private and public company rules.

What is not clear at this time is what the current glob-al economic turmoil will do the priority of this proj-ect or its timetable.

US GAAP vs IFRS – Never Generalize

Even viewed from 30,000 feet, it is difficult to gen-eralize on how the two systems compare. First, whilethe IASB produces plain vanilla IFRS standards,

Thomson Reuters 105

there is no one flavor of IFRS in use. Much like theoriginal UNIX kernel, each country/jurisdiction hasbeen able to create its own version of IFRS. Butunlike UNIX, sometimes the differences among thelocalized IFRS versions are large. So an apples-to-apples comparison of “IFRS-compliant” financialsfrom different jurisdictions can be difficult. Second,it is true that IRFS itself is a very thin documentcompared to GAAP, which has grown to roughly a 2-foot stack of written rules. However, to implementIFRS, you need the implementation guide whichcombines with the original document to create itsown 2-foot stack. Again, much of the surface com-parisons are not useful.

Until this point, US venture capital firms have beenusing exclusively US GAAP accounting standards.However, in early November, we received a reportfrom a member firm with international intermedi-aries for overseas investment where the local auditorsraised the question of whether those financial state-ments need to be IFRS-compliant.

GP-to-LP Reporting

One area already identified as a possible problem areais GP to LP reporting. Virtually all LP agreements (oraccompanying documents) require GPs to provideGAAP-compliant financial reports to LPs. Annualaudits of these reports are GAAP-based. UnderGAAP, the US venture capital industry provides fair-value portfolio reports under the special rules of“investment company reporting”. Our early analysisof IFRS shows special investment company rules forportfolios of publicly-traded companies but no suchprovisions for portfolios of private companies.

Most of the SEC and FASB efforts to date havefocused on public company reporting. We are veryearly on in verifying and creating awareness of thelack of private portfolio provisions. The initial read-ing is that, under IFRS, the financial statements for anumber of the portfolio companies would have to beconsolidated into the operating financials of the ven-ture capital fund itself. This would create a mish-mash report, essentially unusable to the LPs in deter-mining the value of their own portfolio holdings.This would mean an end to fair value reporting as wehave known it. A potential further complication couldarise if DOL ERISA fair value rules remain in place

for the plan sponsors while accounting rules abandonthe current fair value reporting requirements.

How International GPs Now Handle LPReportingA logical question arising from the above paragraph ishow venture capital firms operating in IFRS jurisdic-tions are currently reporting to LPs, including thosesubject to Department of Labor ERISA fair-valuereporting rules. The initial, and somewhat limited,review by the NVCA CFO Task Force subgroup is thatthey simply are not doing so. Many of internationalGPs continue to produce financial statements in accor-dance with US GAAP for both their US and interna-tional LPs. Those reporting under IFRS are incurringthe additional effort and expense of also providing aseparate US GAAP-type fair value schedule.

Recent Events

A full chronology of events is posted under ValuationGuidelines on the NVCA website www.nvca.org. Thisdocument is updated from the chronology in AppendixH of the NVCA 2008 Yearbook prepared by ThomsonReuters. Even as the US industry works toward com-pliance with the FASB’s Statement 157 on fair valuemeasurement starting with 2008 financials, dialoguehas begun on convergence. In March 2008, theInternational Private Equity & Venture CapitalValuation (IPEV) board reconstituted and re-launcheditself. IPEV was expanded to include five practitionersfrom the United States who are familiar with the ven-ture industry. The initial focus of the group is on con-vergence of US Private Equity Industry GuidelinesGroup (“PEIGG”) and IPEV fair value guidelines.Details are online at www.privateequityvaluation.com.

Going Forward

With the international and domestic attention onother economic matters, it is not clear how quicklyany accounting standard convergence activities willmove. However, the NVCA CFO Task Force hasbegun the process of preparing for the future dia-logue and the NVCA has several efforts underway tounderstand the implications. For more information,please contact NVCA Vice President of Research,John Taylor, [email protected].


106 Thomson Reuters

Appendix J: Non-US Private Equity

IntroductionThis appendix highlights various aspects of privateequity activity outside of the United States and pro-vides valuable information for comparison to theUnited States private equity environment. However,this appendix is not directly comparable to domesticdata found in this Yearbook due to differences in def-initions between the regions and variations in the cur-rencies of each region. Additionally, this appendixprovides a brief overview of non-US private equity;data herein is not as comprehensive as the UnitedStates data presented elsewhere in this publication.Despite this, the reader can use this appendix to ana-lyze trends in private equity outside of the UnitedStates. All data is provided by Thomson Reuters.

As mentioned previously, readers should note thedifferences in methodology and definitions of pri-vate equity between United States and other regionsbefore analyzing the data. For example, privateequity outside of the United States provides equitycapital for entities not publicly traded and consistsof buyouts and venture capital. The category of buy-outs includes management buyouts (managementfrom inside the company investing with privateequity investors), leveraged buyouts (the target tak-ing on a high level of debt secured by assets), insti-tutional buyouts (outside investors buying a busi-ness from existing shareholders), and managementbuy-ins (management from outside the companyinvesting with private equity investors). On theother hand, venture capital describes the process offinancing companies at the seed, start-up, or expan-sion stages. The United States places more empha-sis on the early stages of development than do otherregions, based on historical analysis of investmentsby stage. Like in the United States, non-US venturecapital is considered a subset of private equity. Forease of analysis and to avoid differences in defini-tions between venture capital and buyouts inside

and outside of the United States, it is perhaps mostcomparable to analyze aggregate private equity inthe two regions as opposed to any classificationscontained within.

**Special Note: The methodology used to generatethe data within this appendix differs slightly from themethodology used in previous years, causing data tovary slightly from previous Yearbook issues.However, trends reported in the past remain intact.Additionally, most data is now replicable on ThomsonONE Banker Private Equity and VentureXpert.

Commitments

Private equity commitment levels, outside of theUnited States, increased in 2008 from the record lev-els previously set in 2006. During 2008 commit-ments totaled $150.8 billion, a 7% increase from theprevious year. 2008 represents the biggest year forcommitments outside of the United States on record.Buyouts funds accounted for a vast majority of thefunds, 76%, of committed funds, a 1.8 percentagepoint increase from 2007. Balanced stage financingaccounted for 12%, a decline from 17% in the previ-ous year, while early stage financing accounted for3.4%, a slight increase from 2006 when early stagefinancing account for 2.9% of commitments. Itshould be noted that these totals reflect not only theamount raised by independent funds, but also includecapital gains and the amount raised by both captivefunds and funds of funds, as well.

Investments

Private equity investing outside of the United Statesreached $43.3 billion in 2008, a 12.5% decrease from$49.5 billion invested in the previous year. Buyoutstage financing, which typically garners the largestpercentage of investment dollars due the large trans-

Thomson Reuters 107

As interest in globalization increases with each year, private equity investors have continued to broaden theirinvestment criteria to include overseas ventures so as to increase portfolio diversification and search for high-er returns. As such, Appendix J is produced for readers to analyze non-US private equity data. All data isreported in US dollars.

action size associated with these deals, led activity in2007, accounting for 63.3% of total investments.Leading all activity outside of the United States,investments in the United Kingdom totaled $6.6 bil-lion during 2008, a 21% decrease from 2007 levels.Investments in German totaled $5.7 billion, a 21%increase compared to year-earlier levels. In theemerging markets, private equity investments inIndia reached $4.4 billion, a 2% increase from 2007and investments in China totaled $4.1 billion a 24%increase from a year ago.


108 Thomson Reuters

PREPARED BY3 Times Square18th Floor

New York, NY 10036www.thomsonreuters.com

1655 Fort Myer DriveSuite 850

Arlington, VA 22209www.nvca.org

INCLUDING STATISTICS FROM THEPricewaterhouseCoopers/National Venture Capital Association

MoneyTree™ Report based on data from Thomson Reuters


PREPARED BY

NATIO

NA

LVEN

TURE

CA

PITAL

ASSO

CIATIO

NYEA

RBOO

K2009


YEARBOOK 2009

NVCA2009Yearbook[1]

Documents