1. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 1 EVC Club: State of the VC Industry 10/29/03

2. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 2 Amount Invested ($B) Number of Deals Source: VentureOne/Ernst & Young Underlying data available in VentureSource 2003 Investment Continues to Fall Deal Flow and Equity into Venture-Backed Companies (annual)

3. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 3 Deal Flow Continues To Stabilize Deal Flow by Round Class % of Deals Source: VentureOne/Ernst & Young Underlying data available in VentureSource

4. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 4 80% of Dollars Directed at 2 nd & Later Rounds Investment by Round Class % of Amount Invested Source: VentureOne/Ernst & Young Underlying data available in VentureSource

5. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 5 Restarts Gain in Popularity Investment by Round Class % of Amount Invested Source: VentureOne/Ernst & Young Underlying data available in VentureSource

6. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 6 Deal Sizes Regress to Overall Median Median Amount Invested by Round Class Median Amount Invested ($M) Source: VentureOne/Ernst & Young Underlying data available in VentureSource

7. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 7 Healthcare Rebounds to 2Q’02 Level Equity Investment by Industry Sector % of Investment Source: VentureOne/Ernst & Young Underlying data available in VentureSource

8. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 8 Within Healthcare, Allocations Are Consistent Healthcare Investment by Sector % of Investment Source: VentureOne/Ernst & Young Underlying data available in VentureSource

9. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 9 Software & Communications Are the Bulk of IT IT Investment by Sector % of Investment Source: VentureOne/Ernst & Young Underlying data available in VentureSource

10. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 10 U.S. Investment: Internet

11. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 11 Internet as % of Overall Investment Percentage of Equity Investment in Internet % of Investment Source: VentureOne/Ernst & Young Underlying data available in VentureSource

12. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 12 Most Rounds Include Multiple Investors Number of Investors Per Round Source: VentureOne/Ernst & Young Underlying data available in VentureSource

13. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 13 Valuations: By Development Stage

14. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 14 Valuations: By Investment Round

15. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 15 Valuation By Round: Early Stages

16. Zell-Lurie Institute for Entrepreneurial Studies October 27, 2003 16 Conclusions Approaching post-bubble “equilibrium.” Still lots of angst among interests. “Smart” money – that which includes “business building” skills in addition to cash, is more important than ever. Not all good businesses need venture money.