1. The All-Important Ecosystem 1

2. AGENDA Summary of Funding Sources in the EcoSystem Impact on the Economy/Jobs Fund Raising and Resources Exit Scenario Threats and Opportunities Source: Venture Impact 2009 by IHS Global Insight 2

3. Many Options to Choose From Entrepreneur Personal Funds Friends and Family Personal credit card and other borrowings Angel investors/Angel networks/Angel funds Venture capital Corporate direct investment Venture leasing Mezzanine Financing Merger and Acquisition Initial Public Offering Secondary/Follow-on Public Offering Private Placements – Debt & Equity Buyout/Acquisition Financing Corporate Debt 3

4. What is an Angel Investor? Type of CapitalAccredited? Portfolio Company Ownership Experience of Angel ACEF EquityRequiredNot FamilyWide Variety Mason/EBAN Equity?? Management or Entrepreneur Shane/SBA Debt or EquityNot RequiredNot Family or FriendWide Variety Sohl/CVR/UNH Equity??? Individual who puts own private money directly into a private business (different definitions) 4

5. Angel Groups are Small - but Important - Subset of All American Angels 4,200,000 Informal Investors 3 study estimates Investors in Angel Groups Active Angels Center for Venture Research U.S. Millionaires 1,000,000 225,000 12,000 2009 Report from Spectrem: $1 millionaires down in 2008 27%, those with $5 million down 28% World Wealth Report (Capgemini): 19% drop in HNWI and 22.8% drop in wealth in 2008 5

6. Why Angel Networks/Funds Group of individual angel investors that recognize the value in the Power of Mindshare Aggregating investment dollars Aggregating knowledge, experience Aggregating industry connections Collective Due Diligence Mitigate Risk - Diversified portfolio Higher Quality Deal Flow Greater Investment Clout – Strength in numbers Continuity through Portfolio Management 6

7. Growth in Number of American Angel Groups Sources: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04-09 data) 7

8. 8 Funding Gap Investment (one round) Number of Investors $5MM $10MM Seed Venture Capital GAP StagePre-SeedSeed / Start-Up Funding Gap between $1,000,000 and $3,000,000/$5,000,000 (depending on region) Expansion (Launch) Later (Growth) SourceFriends and Family Lone Angels And Incubators Venture Capital Investment $25,000 to $100,000 $100,000 to $1,000,000 $3,000,000 and up Early Stage

9. VC Ecosystem LPs Companies Exits Distrib to LPs, GPs XYZ Ventures (GP, Mgt Co, Manager) XYZ Fund #1 1996 Early Stage IT $200M 5-8+ yrs 9

10. VC Ecosystem – One Venture Firm LPs Companies Exits Distrib to LPs, GPs XYZ Ventures (GP, Mgt Co, Manager) XYZ Fund #1 1996 Early Stage IT $200M 5-8+ yrs LPs Companies Exits Distrib to LPs, GPs XYZ Fund #2 1999 Early Stage IT $400M 5-8+ yrs LPs Companies Exits Distrib to LPs, GPs XYZ Fund #3 2003 Early Stage IT $300M 5-8+ yrs 10

11. US Venture Capital Investment in Perspective Source: AIMA, Investment Company Institute, NYSE.com, Thomson Reuters, NVCA Assets Under Management US GDP is $12.5 Trillion Venture capital = 0.2% of US GDP Billions 11

12. $17.60 billion ~57,000 deals 35% seed/startup 47% early stage ~ 259,500 individuals Angel Investors 2009 US$ 17.69 billion ~2,800 deals 9% seed/startup 65% later/expansion capital Total 794 firms (not all active) Venture Capital 2009 Sources: Center for Venture Research and PwC MoneyTree 12

13. The Economic Impact of Angel and Venture Capital on the US Economy... Its Not Just Deals and Exits! So how do we measure the results? 13

14. Global Insight Study In 2008, venture backed companies: Provided 12.05 million US jobs Had sales of $2.9 trillion Represents 20.5% of GDP Still dominated venture-created sectors 74% of telecommunications jobs 81% of software jobs 55% of semiconductor revenue 67% of electronics/instrumentation revenue Source: Venture Impact 2009 by IHS Global Insight 14

15. Kauffman Foundation Study Companies that benefited from Angel Investors: Alcoa, Home Depot, Google, Amazon (few examples) Such companies are less than 1% of all companies but generated 10% of new jobs 15

16. JOB CREATORS From 1980 to 2005… firms less than five years old accounted for all net job growth in the United States. SBA: Business Dynamics Statistics Briefing 16

17. Job Creators Source: Business Dynamics Statistics Briefing: Jobs Created from Business Startups in the United States. Census Bureau and Kauffman Foundation, January 2009 17

18. Venture Capital Investment is Productive... For VC every dollar invested in 1970-2001, there was $9.88 in US revenue during 2008 For every $24,564 of venture capital invested in 1970- 2001, there was one job in the year 2008 Note these ratios are based on investment through 2001 ($296B) because investment after that time has likely had little effect on jobs and revenues. If investment 1970-2008 ($456.2B) is used, the ratios would be $6.28 and $38,606 respectively Source: Venture Impact 2008 by IHS Global Insight 18

19. Questions & Answers 19

20. Fundraising & Resources 20

21. AUM peaked at $276B, now $179B; # Firms down from 1023 peak to 794 Source: NVCA 2010 Yearbook prepared by Thomson Reuters 21

22. Economic Cycles Impact Both Angel Investments $19.2B in 2008 $26B in 2007 $25.6B in 2006 $21B in 2005 $22.5B in 2004 $18B in 2003 $15B in 2002 UNH Center for Venture Research VC Investments $28.3B in 2008 $29.4B in 2007 $22B in 2006 $21.5B in 2005 $21.5B in 2004 $19.4B in 2003 $21.4B in 2002 PWC Moneytree 22

23. Investment Marches On - Rumors that the Venture Industry has stopped investing are greatly exaggerated 23

24. VC Investment Peaked in 2000; 2008 Was Down 8%; 2009 was $18B Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report, Data: Thomson Reuters $103B $28B $18B 24

25. Industry Investment is in a Smaller Size Band than 2002-mid2008 Period Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report, Data: Thomson Reuters 25

26. First time venture fundings: The Industry is smaller but still funded 755 in 2009 Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report, Data: Thomson Reuters 26

27. Economy Affects ACA Member Investment in 2009 Average Number of Investments Per Group 20077.3 20086.3 20096.3 PRELIMINARY DATA: ACA Confidence Survey, March 2010 Self reported data, not verified, still collecting data 27

28. 28 Range of Performance Increases in valuation (up rounds) dominated until the economic meltdown Equilibrium being restored? Data: Fenwick & West Quaterly Survey

29. The Exit Scene - the importance of acquisitions has become clear over the past several years 29

30. A Capital Crisis? Few IPOS Post-Bubble; Many Good Companies in the Wings Source: Thomson Reuters/National Venture Capital Association 30

31. Whats in the IPO Pipeline? Dismal Short Term… Dont confuse uptick with recovery… Source: Thomson Reuters/National Venture Capital Association – Updated 4/23/2010 31

32. Those Few Acquisitions Which Do Happen Are Generally Awful Source: Thomson Reuters/National Venture Capital Association – Undisclosed txns are prorated 32

33. Why arent portcos being snapped up? Sure we could keep buying small companies and G.E.-ize them. But we've learned that it's better to partner with the #3 company that wants to be #1 than to buy a tiny company or go it alone Jeffrey Immelt CEO of GE quoted in Post- American World 33

34. Venture Exit Counts- IPOs and M&A by Year - 2008 is Dismal! Source: Thomson Reuters/National Venture Capital Association 34

35. Angels are fine with M & A Quarterly PE Exits by Corporate Acquisition, IPO and Secondary Sale Percentage of capital invested by industry 35

36. Performance 36

37. Venture Capital Returns: Still Around 20% over the long haul net to the LPs Through Q3 2009 Source: Cambridge Associates U.S Venture Capital Index®, the performance benchmark of the National Venture Capital Association Period Ending 1 Qtr1 Year10 Year20 Year 09/30/2009 (Current) 2.3%-12.4%8.4%23.1% 03/31/2009 (6 mos ago) -2.9%-17.5%26.2%22.5% 12/31/2008 (Prior) -12.5%-16.5%35.0%22.3% DJIA15.8%-7.4%1.6%9.2% NASDAQ Composite17.7%1.5%-2.5%7.8% S&P 50015.6%-6.9%-0.2%8.0% 37

38. A Word About Return Expectations Angel investing is VERY risky 1 or 2 of every 10 investments brings most of return Hard to tell which companies will return Current return estimates for portfolios: Annual IRR of 27% - 2.6X in 3.5 years* If business gets VC funding later, angel investment is often diluted Some really great angels therefore looking for 10 to 30X potential Wide variety of expectations, depending on mix of motivations to be an angel Correct valuation is critical * Source: Rob Wiltbank, Willamette University, November, 2007 paper 38

39. Threats and Opportunities…. The Crystal Ball? 39

40. Buy low… sell high is easier if you really buy low! Company Total Venture Investment $M Recent Market Cap/ Acq Price $M [1/2009] Cisco389,760 eBay716,460 Amazon.com820,550 Apple971,450 YouTube121,650 Google4090,610 JetBlue1731,710 WebVan4410 Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report, Data: Thomson Reuters 40

41. Key US VC building blocks... Our Ecosystem! Capital formation Prudent man rule – enabled pension investment LP laws Capital gains tax reduction Empowered entrepreneurs Capital gains tax reductions Stock options/team building tools Reasonable bankruptcy laws Protect companies – IP laws Abundant customers willing to do business with SMEs Exit markets – the NASDAQ Face-to-face investing/proximity Cultural acceptance 41

42. Key Policy Issues for Angels – and the Entrepreneurs They Invest in Senate Financial Reform Bill 1,300 page bill with two problem paragraphs Increase accredited investor definition for inflation Repeal Federal preemption of state regulation over accredited investor securities offerings Federal Tax Credits for Angels ACA consulted on two of three bills being drafted Obama Administration Stimulus (Reduce taxes on QSBS) Increase Qualified Small Business Stock exemption to 100% and extend it to more years. 42

43. Questions & Answers 43