1. - 1 - © 1999 Boston Millennia Partners Millennia Boston Millennia Partners 30 Rowes Wharf Boston, MA 02110 Tel. 617 428-5150 Fax 617 428-5160 www.bmpvc.com Jobs for Massachusetts Venture Capital Update 2008 A. Dana Callow Jr. May 2008

2. - 2 - © 2008 Boston Millennia Partners l Boston Millennia Partners – a venture capital firm that evolved from Boston Capital Ventures in 1997 ▲ 10 investment professionals ▲ 100 years of venture capital experience ▲ $700M+ in assets under management ▲ 100 direct investments and 150 acquisitions completed ▲ Managed 7 separate venture partnerships ▲ New fund is focused on healthcare and life sciences l Investors and Partners from 14 countries worldwide l Strategic and investor relationships with IBM Corp. (Healthcare) and PAREXEL International Corp. (NASDAQ: PRXL) l Located in downtown Boston Millennia Partners BMP Overview

3. - 3 - © 2008 Boston Millennia Partners Millennia Partners’ Sold to Incyte Genomics, 12/00 (IPO: 1/97) Information Technology Massachusetts Portfolio (Sold to Oxford Health Plans, 3/02) HMO (Sold to Cedara Software, 10/04) (IPO: 5/98) (PowerFone) Telecommunications (IPO: 2/00; Sold to SPSS) Internet Technology Healthcare/Life Sciences (IPO, 11/05) (Nasdaq: EPIX) (Sold to TSAI, 9/06) (Sold to Blackboard, 2/06) (Sold to Carrier Corp., 6/06) (Sold to Merck, 6/06) (IPO: 1996) (IPO: 1997) Orthopedic Devices Contract Research Organization Health Care Information Technology Clinical Trial Solutions Wi Fi Communication Retail Sensor Technology Optical Communications Telecommunications Drug Development Pharmaceuticals Drug Development Protein Platform Educational Software Financial Software Services Protein Platform Healthcare Internet Services

4. - 4 - © 2008 Boston Millennia Partners 2003-2010 Historical “Take-off Periods” For Value Creation After initial investment in early stage venture investing 1x 5x 123456789101112 1985-1997 Years Company “Value” to Invested Capital 1997-2003 10x

5. - 5 - © 2008 Boston Millennia Partners Source: VentureSource/Venture One Commitments to U.S. Private Equity/VC Funds Commitments to U.S. Venture Capital & Buyout Funds, 1992-2007 Commitments to Funds ($ Billions) Years US Venture Fund Commitments US Buyout Fund Commitments 1 Year 3 Year* Overall US Buyout Fund Growth 40% 41% Overall US Venture Fund Growth 11% 17% *Compound Annual Growth Rate

6. - 6 - © 2008 Boston Millennia Partners Private Equity Performance Index l Private equity funds continue to outperform the public markets over the long term l In recent 5 year period, Buyouts have outperformed s Increasing capital base and interest rates will likely decrease future returns in the buyout asset class l Over the longer term, Venture Capital has outperformed s Early stage VC is the most attractive investment over the 10 and 20 year periods s The “bubble cycle” has reduced recent venture returns dramatically Source: Thompson Financial/NVCA Source: Thomson NVCA (12/31/07)

7. - 7 - © 2008 Boston Millennia Partners Challenges in the VC Investment Environment

8. - 8 - © 2008 Boston Millennia Partners l A Basic VC Rule: “Discover and innovate close to home,” but – “Scale up where costs are lowest” l High cost of living - expensive to relocate to Massachusetts l High housing and healthcare costs l Labor force outsourcing is increasing in VC as well l IDC Research expects outsourcing to increase at an annual rate of 20% through 2008 It is not possible, in specific skill sets, to compete on the same basis as other low cost international geographies Massachusetts is a Challenging Environment Millennia Partners

9. - 9 - © 2008 Boston Millennia Partners Issues Facing the Venture Capital Industry l Available supply of qualified entrepreneurs l Limited capital available for start-up companies l Inefficient business models requiring large amounts of capital l Incentive programs for entrepreneurs given option expensing l Capital gains tax discussions l Governance issues, Sarbanes-Oxley l Valuation guidelines and consistency l Capital flow to shorter term investment vehicles l Reduced liquidity through IPOs and lower values from M&A

10. - 10 - © 2008 Boston Millennia Partners IPO Companies Older in 2003 Time from Initial Equity Funding to IPO for Venture-backed Companies Mature Companies Going Public Source: VentureOne Years Held To Exit I Increases in time to IPO Illiquidity in the current markets have set the bar higher Sarbanes Oxley has made the IPO process more challenging for younger companies VCs have attempted to rebuild portfolios in post bubble years VCs are becoming more risk averse and looking for later stage deals

11. - 11 - © 2008 Boston Millennia Partners Years to M&A Exits Increases Mean Time From Initial Funding to M&A Exit for Venture-backed Companies Years Held To Exit Source: VentureSource/VentureOne Increases in time to M&A Current financial markets have slowed the M&A process at large corporations VCs have attempted to rebuild portfolios in post bubble years VCs are becoming more risk averse and looking for later stage deals

12. - 12 - © 2008 Boston Millennia Partners Venture-backed IPOs vs. M&A Transactions Number of Transactions Source: NVCA = Venture-backed M&A = Venture-backed IPOs IPO vs. M&A Exits Shift in Exit Strategy % IPO 1990-2000: 55% % IPO 2001-2007: 14%

13. - 13 - © 2008 Boston Millennia Partners NVCA Perspective on Trends in Massachusetts VC Observations from Mark Heesen, President, National Venture Capital Association – 4/9/2008 MA has a stable venture industry that has been actively investing in regional innovation since the early days of venture investing in the US (late 1970’s) In 2006, Massachusetts ranked 4 th overall in revenues generated by venture-backed companies headquartered in the state from 2003-2006 with $131 billion and a 13% increase compared to a national average of 12% In 2006, Massachusetts ranked 4 th overall in employment at venture-backed companies headquartered in the state between 2003-06 with 674,000 people and a 3% increase compared to a national average increase of 4% Last year, Massachusetts venture invested $3.5 billion into 356 Massachusetts companies. $1.3B went into Massachusetts Internet related companies New England based venture funds committed most of their capital to life sciences companies

14. - 14 - © 2008 Boston Millennia Partners Venture Capital Investment - By Geography: 2007 California $14.6B Washington $1.3B Texas $1.5B Colorado $0.5B Massachusetts $3.5B Virginia $0.4B New York $1.2B Maryland $0.6B New Jersey $0.6B Pennsylvania $0.8B = $1.4 Billion Georgia $0.5B Source: PWC MoneyTree Millennia Partners $1B + S.C. = Faster VC Investment Growth than MA (2004-2007) = Slower VC Investment Growth than MA (2004-2007)

15. - 15 - © 2008 Boston Millennia Partners Allocation of US Venture Investments by State State % of Total US Capital Invested Source: PWC MoneyTree 2004 2007 Millennia Partners

16. - 16 - © 2008 Boston Millennia Partners Stage: Massachusetts VC Market Environment Capital ($ Billions) Lack of Capital for Early Stage Companies Source: VentureSource 39% Start-up and Early 31% Start-up and Early 20% Start-up and Early In last 5 years, Later Stage investments have become roughly half of all Massachusetts venture investing

17. - 17 - © 2008 Boston Millennia Partners Source: PWC MoneyTree Survey $ Millions Venture Capital Investments in Massachusetts: 2005 – 2007 2007 Funding Sizes Biotech 86 Deals $10M/Deal Software 118 Deals $6M/Deal Medical Devices 41 Deals $8M/Deal Millennia Partners $868M: $708M: $328M: Highlights Biotech overtook software in 2006 Software are telecomm have suffered from foreign competition for VC money Robust growth in the industrial/energy sector

18. - 18 - © 2008 Boston Millennia Partners 2004-2007 International GDP Annualized Growth Rate United States Europe China - $2.28 Trillion Germany United Kingdom France Italy Middle East Canada India Brazil Spain South Korea Mexico Australia Netherlands Taiwan Russia Argentina 0% 2% 4% 6% 8% 10% 12% 0.01x0.1x1x10x Global GDP Growth – 4.2% Individual Country/Region US Healthcare Relative Market Share Millennia Partners Compound Annual GDP Growth Rate = $2 Trillion in 2007 GDP US Healthcare - $2.26 Trillion Source: US Department of Health & Human Services/ US Department of Commerce Japan

19. - 19 - © 2008 Boston Millennia Partners Mass Biotech 25 - 2007 Indicates a venture-backed company Source: Yahoo Finance (# of employees is approximate) 56% of the companies on the Mass Biotech 25 Index are venture-backed and currently employ 68,451 people

20. - 20 - © 2008 Boston Millennia Partners Mass High Tech 25 - 2007 Nearly 52% of the companies on the Mass High Tech 25 Index are venture-backed and currently employ 62,088 people Indicates a venture-backed company Source: Yahoo Finance

21. - 21 - © 2008 Boston Millennia Partners Influence of Massachusetts Leaders on the Future of VC

22. - 22 - © 2008 Boston Millennia Partners NVCA Perspective on Challenges facing Massachusetts VC Observations from Mark Heesen, President, National Venture Capital Association – 4/9/2008 Southern California (San Diego, Los Angeles, Orange County) is quietly becoming the second largest geographic region receiving venture dollars eclipsing the New England region which has held this position since venture capital statistics were kept. An informal survey of the region’s top venture firms indicates that the Massachusetts venture industry is increasingly focused on deals outside New England because of high operating costs & the perceived superiority of opportunities elsewhere The educated youth brain drain combined with a more conservative risk profile of region can discourage young entrepreneurs. Coupled with the high cost of living and infrastructure issues, we continue to export many of our most educated citizens to other states.

23. - 23 - © 2008 Boston Millennia Partners Massachusetts Universities Massachusetts Government Massachusetts Technology/Biotech Companies Increasing cooperation among Massachusetts Government, Universities & Tech/Biotech Companies is essential to future job growth, preservation of talent, and economic development Millennia Partners Massachusetts Technology Development Triangle Job Creation Talent Preservation Long Term Economic Development External FundingInternal Funding Long Term Massachusetts Development Government Initiatives $1B Biotech Proposal Venture Funding Angel Investments Biotech IPO’s