Feb 2008

Why Venture in Europe?

DFJ Esprit LLP 14 Buckingham Gate London SW1E 6LD Telephone +44 (0)20 7931 8800 www.dfjesprit.com
Authorised and regulated by the Financial Services Authority.
1
Venture – why bother at all?

“[US] Venture Capital has changed forever, and when the

shakeout is over, it won’t return to the good old days.” 1. Venture is a cyclical business.
But cycles always repeat.
“[US] Returns…to LPs do not match the 20% to 50% they have
come to expect”.
Venture Capital at the Crossroads, Bygrave & Timmons, 1992
2. Venture’s about investing in
small private companies in NEW
“The business press and others are reporting that ‘the game
markets. Much harder to see but
is over’…’mourning the end of an era’…such pessimism is all
more rewards when found than
wrong…several significant trends will create opportunities for
small existing markets with
billion companies in the next decade…human gene
leveraged returns.
screening, drugs for an aging population, pen based
computing, designer chemicals”
John Doerr, Kleiner Perkins, Venture Forum 1990 3. The new markets are global,
“The near monopoly that the US has enjoyed in the not US dominated.
development of fresh and new technology companies is
ending…the US isn’t bad…but we need to have an
expanded view of investment possibilities.”
Michael Moritz, Sequoia Capital, E&Y Venture Insights 2007
2
Silicon Valley’s # 1 Export Last Decade?

3
Entrepreneurial Spirit and US VC Model

4
Global VC Activity 2004 - 2006

Venture is a $30-35 billion a year global industry

3%
VC invested $m VC funds raised $m Total exits by number
5% 5% 3%
5% 9%
10%
3%
USA 3% USA USA
10%
Europe Europe Europe
Israel (1) 10% Israel (1) Israel (1)
53%
China (3) China (3) China (3)
32%
India (2) India (2) India (2)
72%
77%

USA Europe Israel (1) China (3) India (2)

IPOs by number 3 years VC invested $m 71944 9442 4464 4219 3000
5% 2004 - 2006 VC funds raised $m 67650 9875 3000 9300 5000
Number of rounds 7204 3321 1208 806 560
15%
Average round $m 10.0 2.8 3.7 5.2 5.4
34% USA Total exits 1448 860 81 232 84
Europe Exits per $100m invested 2.0 9.1 1.8 5.5 2.8
4%
Israel (1) IPOs 167 204 20 75 26
% of exits as IPO 12% 24% 25% 32% 31%
China (3) Exits over $100m 292 86 10 ? ?
India (2) Homeruns over 5x 108 45 4 ? ?
Billion $ companies (post IPO) 18 7 ? 7 ?
(1) Israel exit data skewed as maybe logged as US exits
42%
(2) Indian data extrapolated from latest Q so may be misleading
(3) China and India maybe incorrect as most reports mix Private Equity and Venture
Source: Venturesource / ICVJ / Zero2IPO / Ventureintelligence

5
What Are US VC International Strategies?

Multiple models,
Fly-in, offices, JV, Fund

Multiple geographies,
China/Asia, India, Europe, Israel

A few global leaders emerging

In all markets local VCs are important

represent ½ of the players
Eg. China
it’s a hands-on job

many local VCs forming partnerships or US firms hiring

Blurring between venture and growth in many emerging markets

6
US Venture Funds Active Outside US

US VC China India Israel Europe

Sequoia F F F I
Snapshot of Doll O I I
NEA JV+O F I
30 example DFJ F O F F
GPs Oak
Benchmark
I F
F
I
F
Accel JV F F
Atlas O O
Polaris I I
Venrock O I
Greylock JV I O I
Interwest I I
WI Harper O I
Highland O I O
Northbridge I
Foundation I
Mayfield JV I I
Bessemer O O I I
Granite Global O I
Lightspeed O O I
Battery I I O I
Kleiner Perkins O I I
Redpoint O I
Sutter Hill JV
Ignition JV
Walden International O O
Matrix F
Sierra I I
Norwest I I
Canaan O O
73% 47% 53% 70%
F=Fund,
F=Fund, O=Office, I=Indirect, JV=Joint Venture O=Office, I=Indirect, JV=Joint Venture

7
US VCs Expected Global Focus

Today 10 years from today

Other
Israel 2% Canada
5% 1%

Europe
19% US
30%
US Outside US
90% 10%

India
20% China
23%
Silicon Valley Bank Survey: DRAFT DATA