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New Atlantic Ventures

New Atlantic Ventures. Sweden-US Entrepreneurial Forum September 2011 # sweus. John Backus john@navfund.com @ jcbackus. NAV “At A Glance”. E arly Stage Venture Capital Modest Fund Size: $117m current fund (NAV III) East Coast Focus Top Decile Post-2000 Performance

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New Atlantic Ventures

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  1. New Atlantic Ventures Sweden-US Entrepreneurial Forum September 2011 #sweus John Backus john@navfund.com @jcbackus

  2. NAV “At A Glance” • Early Stage Venture Capital • Modest Fund Size: • $117m current fund (NAV III) • East Coast Focus • Top Decile Post-2000 Performance • Blue Chip LP Base, 50% from EU • Key Difference: Thesis-Led Investors 19 Companies: Boston (5) New York City (6) VA/DC/MD (3) (CA & WA) NAV Office Portfolio company

  3. Annual US VC fund-raisingVolatility over the past decade ► Fund-raising has declined in the United States since 2007. ► 2009 marks the fewest funds raised in 16 years. ► In dollar terms, 2009 was the low point in terms of dollars raised since 1997, with the exception of 2003. ► 2010 is on pace for another annual decline – only US$6.4 billion raised in 33 funds as of 30 June 2010. Source: Dow Jones VentureSource; Ernst & Young Venture Insights

  4. US VC funds raised by stage focusClear shift in dollars toward multi-stage funds as investors seek greater flexibility, growth equity opportunities 501 289 154 91 161 172 166 170 145 76 33 $83.3 $44.8 $ 19.2 $8.9 $20.7 $27.7 $30.3 $37.1 $26.4 $14.5 $6.4 Source: Dow Jones VentureSource; Ernst & Young Venture Insights Amount of funds closed (US$b) Number of funds closed

  5. Declining number of VC firms actively investing United States Bay Area 750 635 568 546 564 529 546 542 539 473 325 Number of firms making 4 or more investments in year 1338 1240 1122 1053 1040 1018 1013 998 989 885 657 Number of firms making 1-3 investments in year New England 454 377 306 301 340 304 300 302 249 236 150 Source: Dow Jones VentureSource; Ernst & Young Venture Insights

  6. US VC fundraising: median fund size • Median fund size has grown with shift to multi-stage and growth equity funds • LP flight to quality means that fewer small firms are succeeding in raising new funds Source: Dow Jones VentureSource; Ernst & Young Venture Insights

  7. Why the Decline? • Entrepreneurs, LPs & GPs got greedy in the late 1990s • VC fund sizes ballooned • Too many VCs = too many marginal companies funded • Fund sizes drove shift to late stage • Exit market dried up in US: 9/11 & 9/08 • Returns for the decade were flat, on average • BUT, many funds small early stage funds did quite well

  8. Thesis-Led ApproachFinds Winners in Emerging Fields • 5-10 years to “big exits” • Need market evolution insight • A strong thesis targets leaders in the next wave: • Smart entrepreneurs find investors who “get it” • Faster decisions • More value as board members • We sharpen our investment theses over time: • As we explore new markets • As markets and technologies change • “I skate to where the puck is going, not to where it has been” • Wayne Gretzky • NHL Hall of Fame Player

  9. Learning Sharpens Our Thinking • We learn as we go deeper • Markets evolve • Old markets grow stale • New markets emerge NAV III Prior Funds Ad-Tech Social Media Digital Media Mobile e-Commerce Financial Tech Security Customer-Driven Healthcare SAAS/Software

  10. Mobile: Info-Tainment Reinvented “Connected Mobile Devices (tablets, smart phones) will transform & disrupt information & entertainment industries.” • Pandora for News/Info • Benchmark + NEA • > 300,000 Users • 600 min/user/mo* • Software that enables Android tablets • 60m tablets in 2011 • Top-5 seller on Amazon NAV Companies to Watch *After first month.

  11. Technology Wealth Creation / Destruction CyclesNew Companies Often Win Big in New Cycles While Incumbents Often Falter Mainframe Computing 1960s Mini Computing 1970s Personal Computing 1980s Desktop Internet Computing 1990s Mobile Internet Computing 2000s NewWinners NewWinners NewWinners NewWinners Google AOL eBay Yahoo! Yahoo! Japan Amazon.com Tencent Alibaba Baidu Rakuten IBM NCR Control Data Sperry Honeywell Burroughs Digital Equipment Data General HP Prime Computervision Wang Labs Microsoft Cisco Intel Apple Oracle EMC Dell Compaq Note: Winners from 1950s to 1980s based on Fortune 500 rankings (revenue-based), desktop Internet winners based on wealth created from 1995 to respective peak market capitalizations. Source: Factset, Fortune, Morgan Stanley Research. 11

  12. New Computing Cycle CharacteristicsReduce Usage Friction Via Better Processing Power + Improved User Interface + Smaller Form Factor + Lower Prices + Expanded Services = 10x More Devices More than Just Phones Computing Growth Drivers Over Time, 1960 – 2020E 1,000,000 iPad Smartphone 100,000 Kindle Tablet MP3 10,000 Cell phone / PDA Increasing Integration 1000 Car Electronics GPS, ABS, A/V 10B+ Units??? 100 Mobile Video 1B+ Units / Users 100MM+ Units Home Entertainment 10 Games 10MM+ Units Wireless Home Appliances 1 1MM+ Units Note: PC installed base reached 100MM in 1993, cellphone / Internet users reached 1B in 2002 / 2005 respectively; Source: ITU, Mark Lipacis, Morgan Stanley Research. 12

  13. Smartphone > PC Shipments Within 2 Years, Global –Implies Very Rapid / Land Grab Evolution of Internet Access Unit Shipments of Desktop PCs + Notebook PCs vs. Smartphones, 2005 – 2013E 2012E: Inflection Point Smartphones > Total PCs Note: Notebook PCs include Netbooks. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Data and Estimates as of 9/10 13

  14. Digital Media: Ad $ Flow to Digital “$50B in advertising will go digital when new companies deliver the measurable results brand managers expect.” • Mobile Lead Generation • $15M+ Revenue • RRE, Greenhill • Brand messages in Captchas, e.g.: • Interaction  retention • $15M+ bookings NAV Companies to Watch

  15. Banner Blindness and Offer Fatigue

  16. Media Time Spent vs. Ad Spend Still Out of Whack Internet / Mobile (upside…) vs. Newspaper / Magazine / TV (downside…) % of Time Spent in Media vs. % of Advertising Spending, USA 2009 ~$50B Global Opportunity Note: Time spent data per NA Technographics (2009), ad spend data per VSS, Internet advertising opportunity assumes online ad spend share matches time spent share, per Yahoo!. Source: Yahoo! Investor Day, 5/10. 16 16

  17. e-Commerce 2.0: Complex Becomes Easy “Complex products can be sold online: custom, expensive, and highly-regulated.” • High end runway fashion • NEA B round • $10M run rate after 6 months • Daily deals 2.0 • Mobile-based • Better value for all • Strong start in 6 markets NAV Companies to Watch

  18. Golden Age ofE-commerce • More consumers buy online (over 70% of internet users) • Cheaper to build e-commerce company • New business models create new experiences (Groupon) • Better marketing tools (social media, e-mail lists, video) • Mobile smartphones

  19. Healthcare Services: Patients Become Customers “Unaffordable costs + healthcare reform drive customers to take control of healthcare spending, causing big change.” • Real time audits of corporate Rx bills • Recurring Revenue • $1M bookings/mo. • Generic Rx drugs for less than insurance co-pays • $15M+ revenue run rate • Growing 40%/quarter NAV Companies to Watch

  20. The Rise of Health Care Consumerism • Consumers seeking lower cost & better care • New ways of practicing medicine emerging • Profit sanctuaries being destroyed Huge waste becomes opportunity when consumers gain control

  21. Policy Conclusions • Build the Ecosystem • Need lots of acquirors • Need lots of business partners • Need big companies to hire from • Great training programs • Domain expertise • Education system focused on entrepreneurs • Entrepreneur must be seen as a successful career • Pension, health, benefits must follow entrepreneur • Encourage Entrepreneurs • Lower tax rates: capital gains • Lower tax rates: stock options • Remove stigma of failure • Locate where partners are • Encourage LPs • Relief from Basel 3 & AIFM • Tax advantage to offset illiquidity • Robust secondary markets • Solve the “bite size” problem

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