T H E T R U T H A B O U T I P O S O F H I G H T E C H C O M PA N I E S

E R I K P. M . V E R M E U L E N

Cash Flow

Time

Valley of Death

Research Commercialization

Years between being founded and

going public1 2 3 4 5 6 7 8

Revenue to Expense Ratio:

111.83%

Revenue to Expense Ratio:

103.46%Revenue to

Expense Ratio: 124.03%

Investors

Portfolio Companies

Exit VC

The Importance of IPOs

V C - B A C K E D E X I T S

Aquisition US IPO US Acquisition EU IPO EU

Internet Bubble Regulatory Period Financial Crisis

Rules-bas

ed - Regu

lated

Market

Principles-based -

Unregulated Market

I P O A LT E R N AT I V E S

0

1500

3000

4500

6000

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

NASDAQ (total listed companies)AIM (total listed companies)

U S I P O A C T I V I T Y I N C R E A S E S

0

5000

10000

15000

20000

25000

0

18

36

54

72

90

2009 2010 2011 2012 2013 2014 (1H)

Deal Count Capital Invested

65

89

58

4843

1212

4348

58

89

65

T H E C O R N E R S T O N E O F T H E J O B S A C T I S T H E C R E AT I O N O F A N I P O O N -

R A M P, W H I C H P R O V I D E S E M E R G I N G G R O W T H C O M PA N I E S W I T H A P H A S E - I N

P E R I O D T O F U L LY C O M P LY W I T H VA R I O U S D I S C L O S U R E A N D A C C O U N T I N G

R E Q U I R E M E N T S

Emerging Growth Companies

A R E W E I N A T E C H B U B B L E ?

Profitable at IPO (ratio >100%)Almost Profitable at IPO (ratio 81-100%)Not Profitable at IPO (ratio 0-80%)

I M PA C T O F T H E J O B S - A C T ?B2B B2C EnergyFinancial Services Healthcare Information TechnologyMaterials & Resources

I M PA C T O F T H E J O B S - A C T ?Deal Size $0-50M Deal Size $51M-100MDeal Size $101M-150M Deal Size $151M-200MDeal Size >$200M

0

5000

10000

15000

20000

25000

0

18

36

54

72

90

2009 2010 2011 2012 2013 2014 (1H)

Deal Count US Capital Invested US

65

89

58

4843

1212

4348

58

89

65

Deal Count EU Capital Invested EU

262017

2214

6614

2217 20

26

A S I M I L A R T R E N D I N E U R O P E

T H E E U R O P E A N I P O L A N D S C A P E

A LT E R N AT I V E M A R K E T S V E R S U S M A I N E Q U I T Y M A R K E T S

AIM Alternext First North EURONEXTLSE Other Regulated Main Markets NASDAQ NYSE

US Markets

Main Markets

Ecosystem France (all-inclusive)

A LT E R N AT I V E M A R K E T S V E R S U S M A I N E Q U I T Y M A R K E T S

VisibilityliquidityTrading Volume

Main Markets

Alternative Markets

Todays stock markets have a casino-type mentality driven by factors like the rise of automated trading and shorter-term average holding periods. People dont take the time to do research and really get to know a company before they invest in it

A Return to Old-Fashioned Investing?

T I M E T O I P O L E N G T H E N S

Source: Dow Jones VentureSource

Years

Median time from initial equity funding to IPO (US)

Employees liquidity needs

0

5000

10000

15000

20000

25000

2009 2010 2011 2012 2013 2014 (1H)

Deal Count US Capital Invested US

65

89

5848

43

1212

4348

58

89

65

MegaRounds US Capital Raised MegaRounds US

10294

64

77

292121

29

77

64

94102

I P O V E R S U S M E G A R O U N D S I N T H E U N I T E D S TAT E S

Remain Private

IPO WHERE? / WHAT?

0

12,5

25

37,5

50

Jan/10 Apr/10 Jul/10 Oct/10 Jan/11 Apr/11 Jul/11 Oct/11 Jan/12 Apr/12 Jul/12 Oct/12

Mutual Funds19%

Hedge Funds8%

Family Officies8%

Issuers2%

Asset Managers45%

Accredited Individuals19%

BuyersQ1 2012

Buyers Sellers

High Tech Companies

1. Checking legal compliance

2. Providing legal assistance

2. Providing transaction procedures and assistance, such as standardized contracts

4. Increasing transparency and information:, e.g., SharesPost Venture-Backed Index and SecondMarkets Trusted Networks

Private Secondary Markets

Ex-employees Employees Founders InvestorsOther

Source: SecondMarket, Private Company Report, Q2-4, 2010

Composition of Sellers

Source: SecondMarket, Private Company Report, Q-4, 2010

Composition of Buyers

Source: SecondMarket, Private Company Report, 2011

Composition of Buyers 2011 (by dollar value)

Source: SecondMarket, Private Company Report, Q-1, 2012

Composition of Buyers 2012 Q1(by dollar value)

G L O B A L T R A N S A C T I O N S I N U N R E G I S T E R E D E Q U I T Y- R E L AT E D S E C U R I T I E S ( $ B )

0

2

4

6

8

10

12

14

16

18

20

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E

19,3

12,4

8,29,3

4,6

2,4

5,7

3

1,30,90,60,50,3

12

3

Lawrence J. Ellison: Tech moguls like Larry Page, Sergey Brin and Mark Zuckerberg run public companies that are essentially private fiefdoms theyve structured their corporate control so theres no

way that investors or board members can unseat them. Thank Steve Jobs for that!

1 8% OF THE OUTSTANDING SHARES /

57% OF THE VOT ING R IGHTS

CEO=CHA IR

1 8% OF THE OUTSTANDING SHARES /

57% OF THE VOT ING R IGHTS

CEO=CHA IR

Accommodate innovations in shareholdings and management

structures - more flexibility

T H E A N S W E R : T H E N E E D F O R PA RT Y A U T O N O M Y

Coordinator Coordinator Coordinator

CEO

Chairman

Management/ Tone-at-the-

top

Corporate Culture

Corporate values/mission

statement

Brand

The Coordinator The Coordinator and InvestorsThe Coordinator and the Group

Communication Conversation

Investor relations

Investor conferences

/meetings

Connection Collaboration Co-Creation

Group companies Third parties

Group center Headquarters

Ownership

e.p.m.vermeulen@tilburguniversity.edu