1. A Quick Overview of the VC Industry Ann Winblad, Partner Hummer Winblad Venture Partners awinblad@humwin.com awinblad@humwin.com

2. Venture Investments Steady Since Q102 Amount Invested ($B) Number of Deals Source: VentureOne/Ernst &Young

3. Information Technology Leads In Deals % of Total Deal Count 15% 63% 22% 28% 65% 19% 25% 63% 12% Source: VentureOne/Ernst &Young

4. Software Drives IT Investment IT Investment Allocation by Sector % of Dollars Invested 35% 40% 11% 8% 6% Source: VentureOne/Ernst &Young 39% 28% 5% 18% 15% 13% 10% 11% 45% 48%

5. Healthcare’s Share of Dollars Holds Strong % of Dollars Invested 14% 68% 17% Source: VentureOne/Ernst &Young 36% 52% 12% 32% 66% 14%

6. Biopharmaceuticals Drive Healthcare Investment Healthcare Investment Allocation by Sector % of Dollars Invested 6% 10% 35% 49% Source: VentureOne/Ernst &Young 4% 15% 81% 12% 37% 10% 62%

7. 80% of Dollars Directed at 2 nd & Later Rounds Restarts Still a Factor % of Dollars Invested Source: VentureOne/Ernst &Young *Seed and First Rounds Combined *35% 27% 35% 8% *19% 46% 27% 6% 37% 38% *36%

8. Startups Still Competing With Restarts % of Total Deal Count Source: VentureOne/Ernst &Young *Seed and First Rounds Combined *44% 32% 24% 8% *30% 41% 21% 39% 29% *31% 5%

9. Seed and First Round Deals Scarce 5545 183

10. Q1 2004: New Software Companies Funded 49 ‘seed or first round’ –Horizontal Apps:13 –Vertical Apps:10 –Communications/Connectivity:10 –Networking, Systems Mgmt: 7 –Development Tools: 4 –Other: 5 Examples: Strongmail, Ciphertrust, Gluecode, JBoss

11. Fewer Investors, Better Companies? Corporate/Strategic investors have abandoned the sector –$211M in 2003 versus $6B in 2000 Individual investors have abandoned the sector –$84M in 2003 versus $2.4B in 2000 VCs syndicating most deals –Multiple VCs in most rounds

12. Long Term View Required for Early Stage Years Time From Initial Equity Funding to IPO Note: pre 1994: 6.7 years to IPO

13. West Coast Dominates Venture Investment Regional Investment in the United States 1Q’04 Source: VentureOne/Ernst &Young

14. Primary Venture-Backed Liquidity Option: M&A IPOs vs. M & As

15. M&A Activity Returning Transactions and Amount Paid in M & As Amount Paid ($B) Number of Transactions

16. Time to M&A Lengthens Median Time From Initial Equity Funding to M&A Number of Years

17. IPO Market at Historic Lows Deals and Amount Raised Through IPOs Amount Raised ($B) Venture-Backed IPOs

18. A Quick Overview of the VC Industry Ann Winblad, Partner Hummer Winblad Venture Partners awinblad@humwin.com awinblad@humwin.com