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produced by

The St. Louis Capital Alliance

Greater St. Louis 2004Venture Capital Report

June 2005

ChairmanAndrew T. HoynePartnerArmstrong Teasdale LLP

Robert A. Beardsley, Ph.D.President and CEOKereos Inc.

John BodnarMemberLewis, Rice & Fingersh, LC

Andres BonifacioVice PresidentMRM Asset Allocation Group

Jim BrasunasPresident and CEOTechnology Entrepreneur Center

Charles BridgePartnerBrooke Private Equity Advisors

John F. BrookePartnerBrooke Private Equity Advisors

Robert CalcaterraPresident and CEOThe Nidus Center

Gian CalvalliniDirector, Investment BankingA.G. Edwards and Sons Inc.

Pamela F. CampbellDirector of InvestmentsWashington University

Marie N. CarliePrincipalStone Carlie

Robert CoySenior Vice President,Entrepreneurial DevelopmentSt. Louis RCGA

Jeremy R. DegenhartSenior AssociateAdvantage Capital Partners

Chris DornfeldDirector, Entrepreneurial CollaborationWashington University

C. Brendan JohnsonCounselBryan Cave LLP

Bradley R. MorrowCFA, Senior Vice PresidentSummit Strategies Group

Bryan MuehlbergerManager, Data Center ServicesPfizer Inc.

Michelle E. MurrayChief Financial OfficerProlog Ventures LLC

Matthew RobertsDirector of Technology Transferand New VenturesNestle Purina

Donn RubinExecutive DirectorCoalition for Plant and Life Sciences

J. Joseph Schlafly, IIISenior Vice PresidentStifel, Nicolaus & Company Inc.

Joseph SoraghanPartnerDanna McKitrick, PC

Mark StonemanPartnerArmstrong Teasdale LLP

Phil Thomas Vice President Advantage Capital Partners

Christine WalshExecutive Director InvestMidwest

Thomas WalshPartner Sonnenschein, Nath & Rosenthal

The St. Louis Capital Alliance was formed by

the St. Louis Regional Chamber and Growth Association’s Technology

Gateway Council in 2005 to help develop a vibrant venture capital

environment in the St. Louis region through:

• Raising the St. Louis venture capital profile locally, nationally and globally

• Leveraging St. Louis’s financial resources

• Supporting programs and infrastructure that generate compelling investment opportunities

• Encouraging collaboration among organizations supporting the growth of the St. Louis venture capital community

• Gaining public support of venture capital by working with government leaders

• Providing networking opportunities across the St. Louis financial community

• Increasing the awareness and involvement of senior St. Louis financial personnel in St. Louis venture capital matters

The St. Louis Capital AllianceOne Metropolitan SquareSuite 1300St. Louis, Missouri 63102Telephone (314) 444-1130 Fax (314) 206-3222

The St. Louis Capital Alliance 2005 Managing Committee

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Access to venture capital is a key component to creatinga successful entrepreneurial technology industry in aregion. Without venture capital access, companies can-

not attract funding to grow. Without access to venture capital,new ideas that could evolve into companies go elsewhere, prom-ising early-stage companies are forced to move or close downdue to a lack of funding, company growth is slowed due tofinancing delays, and companies lack the funds to reach criticalmilestones. To that end, the St. Louis business and civic leader-ship has undertaken a concerted effort to stimulate venture capitalinvestment in the region. This Annual Venture Capital Reportis designed to benchmark and track venture capital activity inour region over time. As documented in this report, St. Louishas made significant progress over 2004 and into 2005 towardachieving a critical mass of talent, innovation, and capital necessaryfor a vibrant venture capital environment in the St. Louis region.Highlights included:

• Stereotaxis’ $48 million initial public offering led byGoldman, Sachs & Co., with Bear, Stearns & Co. Inc.,Deutsche Bank Securities Inc. and A.G. Edwards & Sons Inc. as co-managers.

• The $81.5 million funding of Vectis, a fund-of-funds, with a strong St. Louis focus.

• Oakwood Medical Venture’s raising of $43 million and theanticipated final closing of Prolog Ventures’ $50 million second fund.

• $120 million of venture investment in nineteen St. Louis companies during 2004.

• Since 2000, over $800 million of venture capital has beeninvested in St. Louis companies.

• Triathlon Medical Venture’s establishment of an office in St. Louis following the closing of its $96 million offering.

• Arch Development’s new presence in St. Louis.

• Continued development of the St. Louis facility infrastructureas CORTEX broke ground on a 165,000-square-foot multi-tenant laboratory in central St. Louis.

• Hosting of BIO MidAmerica and InvestMidwest venturecapital forums. There is clear deal-flow in St. Louis; forexample, of the 60 life sciences selected by the BIO screeningprocess to present, 21 were from St. Louis.

• The launch of Arch Angels, a new St. Louis-based angel network.

Greater St. Louis 2004 Venture Capital Report

Progress is clearly being made and the foundation for furtherventure capital activity in St. Louis continues to strengthen.

In order to build upon and accelerate this venture capitalmomentum, The St. Louis Capital Alliance was formed in early2005 by the Technology Gateway Council of the St. LouisRegional Chamber and Growth Association (RCGA). RCGAis the regional chamber of commerce and economic develop-ment organization for the 16-county, bi-state region. RCGAestablished the Technology Gateway Council in 1998 to addresschallenges facing capital formation, entrepreneurship and businessdevelopment of the St. Louis region’s high tech companies

This dimension of the region’s economic development effort isbringing together representatives of the St. Louis venture capital,finance, corporate, pension, academic and entrepreneurial communities, in order to leverage our collective strengths andresources to attract more venture capital investment to St. Louis.

A number of individuals contributed to this report, including:Bryan Muehlberger (Pfizer), Mark Stoneman (ArmstrongTeasdale), Michelle Murray (Prolog Ventures), CarterWilliams, Mark Lewis (Two Rivers Advisors), Bryan Bezold andMonica Conners (RCGA), Tom Melzer (Rivervest Ventures),Greg Johnson (Prolog Ventures), Joe Schlafy (Stifel, Nicolaus & Co.), James O’Donnell (Bush/O'Donnell) and BrendanJohnson (Bryan Cave). Special thanks to Bob Coy of theRCGA for spearheading this project and to St. Louis CommerceMagazine for their design and publication of this Annual VentureCapital Report.

The Alliance has a number of plans for the upcoming year. Please feel free to contact Bob Coy, Senior Vice Presidentfor Entrepreneurial Development, St. Louis RCGA, at (314) 444-1130, rcoy@stlrcga.org, or any member of theManaging Committee to discuss ideas and your participation.

Sincerely,

William Peck, MD Andrew T. HoyneChairman PartnerRCGA Technology Armstrong Teasdale LLP Gateway Council Chairman

St. Louis Capital Alliance

2004 was a year of continued progresstoward achieving a critical mass of talent,innovation and capital necessary for avibrant venture capital environment in theSt. Louis region. Two established venturecapital funds and a new fund-of-funds raisedclose to $200 million; two out-of-townfunds established a St. Louis presence; venturecapitalists invested over $120 million in nineteen companies; the region enjoyed a$48 million venture-backed IPO; a newangel investor network was organized; and anumber of strategic alliances were estab-lished between venture-backed and largetechnology companies. These developments,on top of the over $816 million of venturecapital invested in technology firms in theSt. Louis region since 2000, are establishingthe St. Louis region as a center of innovationin the Midwest that is attracting the atten-tion of venture capital firms throughout theregion, the United States and Europe.

2004 Venture CapitalInvestment ActivityVenture capital firms invested $119 million in19 regional companies in 2004. The invest-ments were concentrated in two industrysegments that reflect the indigenous strengthof the St. Louis region—biotechnology/medical devices (ten firms) and informationtechnologies (eight firms), which includescomputers, software, semiconductors andtelecommunications. Venture capital fundsfrom California, Colorado, Florida, Illinois,Indiana, Massachusetts, Missouri and Texas,as well as internationally from Canada andthe Netherlands, participated in thesefinancings. There also were a number ofnoteworthy angel investments in regionalbiotechnology and IT companies thatshould provide new opportunities for ven-ture capital firms in 2005.

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The science that has emerged from both Washington University and Saint Louis University is absolutely

remarkable. The venture capital community here in St. Louis reminds me of Boston in the 1970s, in that it’s

comparatively small now; but St. Louis has all of the raw materials to become a great region for venture

capital investment.

Peter Brooke,Chairman and Founder of Brooke Private Equity Advisors and Founder, Boston-based Advent International Corporation and TA Associate

State of the Greater St. Louis Region’s

Venture Capital Industry2004 Annual Report

� Population: 2.7 Million

� Percent of U.S. Population within one day’s drive: 33%

� Percent of population between the ages of 20 and 34: 20%

� Number of engineers, archi-tects, scientists and computerprofessionals: 67,490 or 5.3%of workforce which is abovethe U.S. average.

� Number of persons employed in healthcare: 105,600 or 7% of workforce

ST. LOUIS PEOPLE

� Over $3.0 billion has been invest-ed in the revitalization of theCity of St. Louis in the past fouryears. The new Busch stadiumwill be completed in 2006, anddowntown revitalization projectsinclude new lofts and housing,rehabbed historic buildings andnew shopping and entertainmentdistricts such as Washington Ave.

3

Initial Public Offerings (IPO)In August, 2004, Stereotaxis Inc., the devel-oper of an advanced cardiology instrumentcontrol system for use in a hospital’s inter-ventional surgical suite for the treatment ofcoronary artery disease and arrhythmias,closed a $48 million initial public offering.4

The Stereotaxis system is designed to allowphysicians to more effectively navigate pro-prietary catheters, guidewires and stentdelivery devices through the blood vessels

and chambers of the heart to target sites andthen to effect treatment.

Stereotaxis’ technical and entrepreneurialroots go back to the late 1980s at theUniversity of Virginia Medical School,where two professors, Matthew Howard andSean Grady, did their initial work on mag-netic navigation, in partnership with RogersRitter, a physicist experienced in magneticlevitation and steering. In 1990, Menlo Park,California-based Sanderling Ventures and

Greater St. Louis 2004 Venture Capital Report

1 If a company received both institutional venture capital and angel capital in 2004, the total amount invested includesboth the institutional and angel capital.

2 Metaphore was founded by Garland Marshall, Ph.D., a Professor at Washington University School of Medicine, withtechnology licensed from Monsanto and developed by a team led by Denis Forster, Ph.D. Dr. Forster left Monsantoto become the first CEO of Metaphore. While CEO, he raised $20 million in the A and B rounds organized by a syndicate led by Stifel, Nicolaus & Company Inc. Metaphore has raised $100 million to date. The company’s head-quarters is now in New Jersey and its research operations remain in St. Louis.

3 MetaMatrix was founded in St. Louis. Its CEO and a small sales force are in New York; 85 percent of the employees arein St. Louis.

4 This history of Stereotaxis was provided by Greg Johnson, Ph.D., managing director, Prolog Ventures. Dr. Johnson wasa general partner at Gateway Ventures and played the lead role in organizing local investors in the Series B round thatbrought Stereotaxis to St. Louis.

� 3rd Best Medical School in theNation: Washington Universityin St. Louis

� Number of area graduates or faculty to receive Nobel Prize: 22

� Saint Louis University is theoldest institution of higher edu-cation west of the Mississippi.

� St. Louis engineers played a significant role in the “Race toSpace.” The Mercury andGemini space capsules thatcarried Alan Shepard and JohnGlenn were both designed andmanufactured in St. Louis.

� Higher education studentenrollment: 167,498

� 2nd Best University for Post Doctorates: WashingtonUniversity in St. Louis

COMPANY AMOUNT (M$)1INDUSTRY

Metaphore Pharmaceuticals2 $ 40.2 Biotechnology

AGEIA Technologies Inc. $ 21.8 Semiconductors

Stereotaxis Inc. $ 16.0 Medical devices and equipment

MetaMatrix3 $ 12.0 Data integration software

Centerre Healthcare Corporation $ 5.0 Healthcare services

Divergence $ 4.0 BioTechnology

ISTO Technologies $ 3.5 Tissue Engineering

Appistry Inc. (fka Tsunami Research, Inc.) $ 3.0 Application fabric software

Quick Study Radiology $ 2.3 Health care IT/services

New Century Packaging $ 2.0 Industrial/energy

Everest Biomedical Instruments $ 2.0 Medical device

Vibe Solutions Group $ 2.0 Video communications software

Singulex $ 1.4 Medical device

NetLogic $ 1.1 Telecommunications

Xspedius Holding Corporation $ 1.0 Telecommunications

T3 (Transaction Transport Technologies) $ 1.0 Payment processing

Exegy $ 1.0 High speed data search

APT Therapeutics $ 0.3 Drug discovery

Kereos $ 0.1 Drug delivery

Total $119.7

Source: DowJones Venture Source; PriceWaterhouseCoopers MoneyTree; St. Louis venture capital industry sources.

ST. LOUIS PEOPLE

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an angel investor took an interest in theproject and provided the first seed capital.The company moved to California.

In late 1994, Stereotaxis, with only twoemployees, relocated from California to anoffice at Barnes Jewish Hospital in St. Louisto work with Dr. Ralph Dacey, chief of neurosurgery at the Washington UniversitySchool of Medicine, who was an early supporter of magnetic navigation. The movewas facilitated by a $5 million Series Bfinancing organized by Gateway Associates,a St. Louis-based venture capital firm. Otherparticipants in the financing wereSanderling Ventures and Alafi Capital, bothCalifornia-based, and St. Louis-basedEmerson, Barnes Jewish Hospital andOakwood Medical Investors.

Stereotaxis raised an additional $12 millionin Series C financing in 1998. New St. Louis-based investors were A.G. Edwards, Advan-tage Capital, and BOME Investors. In addition, the financing attracted regionalfunds such as C.I.D. Equity Partners ofIndianapolis and Greystone/Portage Venturesof Chicago. St. Louis-based Prolog Venturesalso participated in later rounds. About thistime, Stereotaxis relocated from BarnesJewish Hospital to larger quarters in theCenter for Emerging Technologies, a tech-nology business incubator located close tothe Hospital and the campus of WashingtonUniversity’s School of Medicine.

Altogether, Stereotaxis raised $130 millionof equity prior to its August 2004 IPO.Much of the later capital came from fundslocated outside the Midwest, such as AdventInternational and Ampersand Ventures ofBoston and E.G.S. Capital of New York, aswell as strategic investments from Siemensand J&J Ventures.

Today, Stereotaxis’ U.S. customers includeBarnes Jewish Hospital, Central BaptistHospital (Lexington, KY), and MassachusettsGeneral Hospital. International customers

include St. George Hospital (Hamburg) andThorax Hospital (Rotterdam).

In 2004, Stereotaxis announced that it willbe moving its headquarters from the Centerfor Emerging Technologies to a new 165,000-square-foot building being con-structed near the Washington UniversitySchool of Medicine by CORTEX, a regionalinitiative to establish additional life sciencescompanies in St. Louis.

The success of Stereotaxis demonstrates thatsignificant new life science companies can bebuilt in the St. Louis region. Key factors werethe technology and senior management,both of which were imported, and $12 mil-lion of critical early-stage financing during1995-98, much of which was provided by St. Louis firms.

Strategic alliances2004 also included establishment of a number of strategic alliances between venture capital-backed and established technology companies. These arrangementsprovide important validation of a startupcompany’s technology, as well as researchsupport, other funding and collaborativetechnology development. A sampling ofthese alliances includes:

• Kereos Inc., which develops targeted therapeutics and molecular imaging agentsthat detect and attack cancer and cardio-vascular disease earlier and more specifi-cally than previously possible, announcedstrategic partnership agreements withBristol-Myers Squibb Medical Imagingand Dow Chemical in 2004. Kereos,which also has a long-standing relationshipwith Philips Molecular Imaging Group,was selected as one of the “Fierce 15” of the top emerging biotechnology compa-nies for 2004 by FierceBiotech, an internationally-recognized publication forthe biotech industry.

� 18th largest city in the U.S.

� 4th largest city in the Midwest

� The Gateway Arch, at 630 feet,is the tallest man-made nation-al monument, standing twiceas tall as the Statue of Liberty.

� Home of one of the top culinary“little Italy” neighborhoods inthe country, “The Hill” is theboyhood home of some ofAmerica’s baseball legendsincluding Yogi Berra, JoeGaragiola and Jack Buck.

� Of the top 20 largest U.S. metropolitan areas, St. Louisranks as the 4th best MSA forhome ownership.

� Forest Park is one of the largesturban parks in the U.S., hometo the nation’s largest outdoortheater, The Muny, and thenationally acclaimed St. LouisZoo. At 1,371 acres, ForestPark is 500 acres larger thanNew York City’s Central Park.

ST. LOUIS FACTS

• Divergence Inc., a world leader in theapplication of genomics to parasitic andinfectious disease in agriculture,announced a collaborative relationshipwith St. Louis-based Monsanto to developnematode-resistant soybeans. As part ofthe collaboration, Monsanto will gainexclusive rights to Divergence’s existingtechnology in this area and provide fundingfor ongoing research. Divergence will alsoreceive milestone payments based onresearch and development success, and roy-alties once products reach the marketplace.

• Chlorogen Inc., which uses a patentedchloroplast technology to manufactureplant-made drugs and vaccines for the treat-ment and prevention of human diseases,signed a joint development and supplyagreement with St. Louis-based Sigma-Aldrich Fine Chemicals. This collaborationis expected to produce the first commercialproducts from chloroplast transformationtechnology. Sigma-Aldrich will fund anundisclosed portion of Chlorogen’s effortsto produce four specific proteins in tobaccoplants. The proteins will be sold to thereagent and cell culture markets and have pre-identified applications as active pharmaceutical ingredients.

New Funds Established in 2004Thirteen venture capital funds with over $925 million of capital under managementare headquartered in St. Louis, with over $400 million of venture capital raised by St. Louis-based venture capital firms since2000. Reflecting the opportunities in theregion, a fund-of-funds was established andtwo venture capital firms raised new funds.In addition, two venture capital firms head-quartered outside the region established apresence in St. Louis.

Vectis Life Sciences Fund I, an $81.5 millionfund-of-funds established to help providefunding for the area’s plant and biomedicalsciences, closed in January 2005. Vectis will

make investments in life science venturecapital funds with ties to Greater St. Louisand Missouri. To date, Vectis has invested inSt. Louis-based Prolog II and OakwoodMedical Investors IV, as well as AdventHealth Care Life Sciences, CMEA VenturesIV, HealthPoint Partnership, AccuitiveMedical Venture Partners I, and ProspectVenture Partners III. The non-St. Louis-based funds have agreed to actively considerinvestment opportunities and syndicationsin St. Louis. Vectis is part of a strategy tobuild the region’s life science industry byattracting the attention of venture capitalfirms on the East and West coasts to the excel-lent investment opportunities in St. Louis.Investors in the fund include The DanforthFoundation, the James S. McDonnell Foun-dation, Washington University, MissouriFoundation for Health, Ameren MasterRetirement Trust, University of MissouriSystem pension fund, Barnes-Jewish Founda-tion, Sheet Metal Workers’ Local 36 pensionfund, and McCarthy Building Companies.

Prolog Ventures, a venture capital firm specializing in life sciences and related infor-mation technologies, closed its first fund in2001 and had the final closing of its secondfund, Prolog II, a $66 million fund, in June2005.

The region surrounding St. Louis is ranked among thehighest in terms of NIH funding (a good proxy for thequality of this technology), yet it ranks among the lowestin venture funding. We see this as a unique opportunity.

Brian Clevinger, Managing Director, Prolog Ventures

Oakwood Medical Investors, a life scienceventure capital fund based in the region,closed Oakwood Medical Investors IV in2004 at $43 million.

Triathlon Medical Ventures, a Cincinnati-based biomedical fund with $96 millionunder management, opened its doors in St. Louis in 2004 so it could be near theregion’s life science opportunities.

Greater St. Louis 2004 Venture Capital Report

� The largest mosaic collection inthe world graces the halls of theCathedral Basilica of St. Louis,with over 41,000 pieces of glass.

� Grant’s Farm, the former homestead of Ulysses S. Grant,is the only house still standingthat was built and occupied bya U.S. president.

� The Missouri Botanical Gardenis among the top three botani-cal gardens in the world.

� The St. Louis area offers morethan 50 hiking, biking and walking trails. A 200 squaremile nature, conservation andrecreation area is being formedaround the confluence of theMissouri and Mississippi Rivers.

� St. Louis is the birthplace ofmany famous writers includingT.S. Eliot, Maya Angelou,William Gass, TennesseeWilliams, Eugene Field,Jonathon Franzen.

ST. LOUIS FACTS

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St. Louis stood out in our view by having world-classbiomedical research, sophisticated early-stage venturecapitalists locally with whom we could co-invest, twolife science incubators and a life sciences seed fund,BioGenerator. All this makes St. Louis a compellinglocation to create and grow new life science businesses.

John Rice, Managing Director, Triathlon Medical Ventures.

Arch Development Partners, a $4 millionseed stage life sciences fund based inChicago, established a presence in the St. Louis region to tap into early stageopportunities spinning out of the region’sresearch institutions.

Arch is excited about the St. Louis opportunity, becauseit offers a nearly unique Midwestern combination of great science and technology supported both nationally and locally, a sophisticated managementpool, and a civic commitment to creating a successfulentrepreneurial environment.

Tom Churchwell, Managing Partner, Arch Development Partners

St. Louis Angel Investors EmergeIn addition to traditional venture capitalists,angel investors are taking heed of the invest-ment opportunities in St. Louis. Aptlynamed, the St. Louis Arch Angels’ mission isto provide opportunities for members toobtain financial returns by investing inearly-stage companies with high growthpotential in the St. Louis region, and acceler-ate them to market leadership. Organized inlate 2004, the network was launched in thefirst quarter of 2005 and is expected to growto 50 members in the first year. Each memberhas agreed to invest a minimum of $50,000per year in start-up companies. Equallyimportant, the members have agreed to con-tribute in other ways, including helping tosource deals, perform due diligence, serve onboards of directors and provide mentoringassistance to start-up companies. Theinvestment range of the network is expected

to be $200,000 to $2 million per company.Angel-backed companies are expected to bean important source of deal flow for venturecapital firms.

Engines of InnovationThe life science focus of many of the region’sventure capital firms reflects the depth ofthe region’s research and corporate base andan organized business and civic leadershipfocused on developing the region’s life science industry. The region has significantIT and advanced manufacturing assets aswell. Key sources of innovation, talent andentrepreneurial support can be foundthroughout the St. Louis region, and include:

• Saint Louis University and WashingtonUniversity and their schools of medicineare significant sources of technologicalinnovation and talent.

• Washington University’s School of Medicinewas ranked second in the country in NIHawards in 2003. Since 1927, 21 NobelLaureates have been associated withWashington University. In 2004, WashingtonUniversity launched a program with financialsupport from the Kauffman Foundation tomake entrepreneurship education avail-able across campus and transform the way entrepreneurship is viewed, taughtand experienced.

• The Danforth Plant Science Center, onethe largest independent research institutesin the world dedicated to plant genomics,and the Missouri Botanical Garden, one ofthe world’s premier botanical researchinstitutes, are both significant magnets fortalent and innovation in the region.

• Corporations such as Monsanto, Sigma-Aldrich, Pfizer, Nestlé Purina, Centocor andTyco Healthcare/Mallinckrodt generatetechnology and talent that enrich the ecosys-tem for regional life science companies.Advanced manufacturing and IT companiessuch as Boeing, whose defense division is

� Working population: 1.44 million

� Fortune 500 headquarters: nine

� Fortune 1000 company headquarters: 21

� Number of hotel rooms withinone mile of America’s Center, the St. Louis ConventionCenter: 7,600

� Total retail sales: $30.89 billion,of which 10% is attributable tovisitor expenditures

ST. LOUIS BUSINESS

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headquartered in the region, Emerson andSBC also are important sources of technology,management and technical talent.

• The region is now home to 30 early stagelife science companies that together haveraised over $310 million. Evidence of thestrength of these companies was reflectedat BIO’s Mid America Venture Forum,which was held in St. Louis in 2004. Sixtylife science firms from across the Midwestwere selected through rigorous reviewprocess to present their business plans tothe venture capital community, twenty-one of which were from Greater St. Louis.

• The annual Missouri-based InvestMidwestVenture Capital Forum, which is recognizedas one of the Midwest’s premier venturecapital events, has helped participatingfirms raise over $200 million from privateequity investors.

• The region has two world-class life scienceincubators—the Nidus Center for Scien-tific Enterprise, located on the Monsantocorporate headquarters campus near theDanforth Plant Science Center, and theCenter for Emerging Technologies, locatedin close proximity to Washington andSaint Louis University Schools ofMedicine. Technology EntrepreneurCenter (TEC), a new IT incubator,recently opened to serve the needs ofstartup firms in this industry cluster.

St. Louis has made more progress in the implementa-tion of its plant and life sciences strategy than anyregion of the country and is well on the road to becom-ing the leading center for the plant sciences and a majorcenter for the life sciences.

Walt Plosila, Vice President, Technology PartnershipPractice, Battelle Memorial Institute, 2004

Building Businesses in the St. Louis RegionWith twenty-one Fortune 1000 companies,over $1 billion of venture capital under man-

agement, and a strong and growing universityand corporate technology base, the regionhas the talent, technology and capital forventure capital-backed enterprises toemerge and thrive.

While much of the region’s focus since 2000has been on building the financial, physical,and social infrastructure to capitalize on itssignificant base of plant and biomedicalassets, attractive investment opportunitiesare emerging in other industries, includinginformation technology, advanced manufac-turing, and even retail, where St. Louis-based Build-a-Bear Workshop had an initialpublic offering in 2004.

As Stereotaxis and similar examples demon-strate, the region can attract technology andtalent who recognize a promising environ-ment for building businesses. Top executiveand scientific talent from the East and Westcoasts, who are often unfamiliar with St. Louis, are surprised by the lifestyleamenities they find here, including a worldclass symphony, zoo, science center, botanicalgarden; first class art and history museums; a full range of neighborhood options—urban, older inner-ring suburbs, suburban,and rural; excellent air service and centrallocation for executives who must travel to allregions of the country; professional baseball,football and hockey; excellent public andprivate schools; an impressive base of scien-tific and technological talent; an attractivecost of living; and a business, education andcivic leadership dedicated to continuallyimproving the environment for innovationand entrepreneurship.

As venture capital legend Peter Brooke hasnoted, St. Louis has all the ingredients tobecome a region for great venture capitalinvestment, and is positioning itself well for2005 and beyond. Beyond his good words,Brooke also closed an $81.5 million life sciences fund-of-funds in St. Louis in 2004.

Greater St. Louis 2004 Venture Capital Report

� Percent of households withincome of $100,000 or more: 14%

� Average household income:$59,209

� Total household income: $84.4 billion

� Annual number of visitors: 16.7 million

� Top 20 U.S. location for Plantand Life Sciences; Top 10 U.S.location for Logistics andDistribution, Home to world’slargest brewer, Anheuser-Busch.

� Top three largest St. Louisemployment categories:

1. Transportation/Utilities

2. Education/Health Care

3. Business & ProfessionalServices

ST. LOUIS BUSINESS

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� First U.S. Kindergarten(Founded by Susan Blow, 1873)

� First U.S. brewer to use pasteurization (Anheuser-Busch,early 1870’s)

� First steel truss bridge (Eads Bridge, 1874)

� First American city to host anOlympic Games. (1904)

� First ice-cream cone (World’sFair, 1904)

� First president to fly in a plane(Teddy Roosevelt at Kinloch Field, 1910)

� First non-stop transcontinentalflight (Charles Lindbergh, 1927)

� First Skyscraper (Louis Sullivan’sWainwright Building, 1927)

� First successful lung removal surgery (Barnes Hospital, 1933)

� First U.S. spacecraft to carryman to space was designedand built in St. Louis (ProjectMercury, McDonnell, 1959)

St. Louis-based Venture Capital Funds – 2004

CAPITAL UNDER YEARFUND MANAGER VENTURE FUND MANAGEMENT FORMED

Advantage Capital Partners Advantage Capital Partners St. Louis $ 56.5 1992

Ascension Health Ventures LLC Ascension Health Ventures Fund I $ 125.0 2001

Bush O’Donnell Capital $ 75.0 2003

BioGenerator $ 5.8 2003

Community Investment Community Investment Partners Partners V, L.P. $ 6.5 1990

Gateway Associates Gateway I-III, BOME I-III $ 180.0 1984

Oakwood Medical Investors Oakwood Healthcare Investors IV $ 77.0 1997

Prolog Ventures Prolog Capital I - II $ 85.0 2001

RiverVest Venture Partners RiverVest Venture Fund I, L.P. $ 89.0 2000

Capital for Business Inc. $ 100.0 1959

Stifel, Nicolaus & Company Inc. Stifel CAPCO Funds $ 30.0 1997

Total $829.8

St. Louis-based Fund-of-FundsA.G. Edwards Capital Inc. A.G. Edwards Private Equity Partners $ 228.0 1999

Vectis Fund Vectis Life Sciences Fund I $ 81.5 2004

Total $309.5

Venture Capital Firms with St. Louis Branch OfficesTriathlon Medical Ventures Triathlon Medical (Cincinatti) Ventures Fund I $ 96.0 2004

Venture Capital Invested in St. Louis Region

YEAR TOTAL ($M)

2000 $ 423.9

2001 $ 124.1

2002 $ 72.8

2003 $ 93.2

2004 $ 119.7

Total $ 833.7

ST. LOUIS FIRSTS

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Greater St. Louis 2004 Venture Capital Report

� First U.S. spacecraft to carryman to walk in space wasdesigned and built in St. Louis(Project Gemini, McDonnell,1965)

� First PET scanner (MallinckrodtInstitute, 1980)

� First genetically modified plantcell (Monsanto, 1982)

� First inductee to the Rock andRoll Hall of Fame, St. LouisanChuck Berry (Rock and RollHall of Fame, 1986)

� First successful human lungtransplant (Barnes Hospital,1987)

� First U.S. field trials of plantswith biotech traits (Monsanto,1987)

� First successful nerve transplantsurgery (Barnes Hospital, 1993)

Location of U.S. and European Venture Capital Funds Investing in the St. Louis Region in 2004

FUND MANAGER HEADQUARTERS LOCATION

Advantage Capital Missouri

Advent Partners United Kingdom

Alafi Capital Company California

Apex Venture Partners Illinois

Ascension Health Ventures LLC Missouri

BA Venture Partners California

Baird Venture Partners Illinois

Boeing Co & Consolidated Subsidiaries Illinois

Capital for Business Inc. Missouri

CID Equity Partners Indiana

Gateway Associates L.P. Missouri

ComVentures California

Fletcher Spaght Investors Massachusetts

Granite Global Ventures California

Health Care Ventures Massachusetts

HF Management Indiana

Highland Capital Massachusetts

HIG Capital Management Florida

Life Science Partners BV Netherlands

MDS Capital Canada

Merrill Lynch Ventures New York

Mi3 Venture Partners Massachusetts

Pacesetter Capital Group Texas

Pacific Venture Group California

Portage Venture Partners Illinois

Prolog Ventures LLC Missouri

River Cities Capital Funds Ohio

RiverVest Venture Partners Missouri

Schroder Ventures Life Sciences Massachusetts

Southeastern Technology Fund Alabama

Sterling Partners Illinois

ST. LOUIS FIRSTS

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Ageia Technologies develops technology toenhance interactive media playback. Thecompany develops chips for processing threedimensional visual data for applications suchas computer simulation, gaming, and security.Its product—PhysX — is a physics semicon-ductor chip that can enable realisticvideogame graphics like crumpling fendersin car crashes, exploding buildings with tonsof debris and a wall of lava that flows like thereal thing. Ageia employs 100 people.

Appistry (FKA Tsunami Research) has created a software-based environment providing “fault tolerance” to software applications. Appistry Enterprise ApplicationFabric (“Appistry EAF”) allows applications tobe deployed with absolute dependability with-out requiring premium hardware. AppistryEAF applications are written using a simpli-fied development model, are scalable to hun-dreds of processors and are extremely simpleto operate. Appistry is selling its product inthe telecommunications, financial services andgovernment sectors, and employs 25 people.

APT Therapeutics is a developer of devel-opment stage biotech software and drug discovery technologies. The company main-tains a strategic focus on small molecule drugoptimization (via strategic alliances) whilebuilding infrastructure to develop propri-etary therapeutic proteins.

Centerre Healthcare is a provider of inpa-tient rehabilitation services in partnershipwith general acute care hospitals using eithera joint venture or hospital-within-a-hospitalplatform. The company enables hospitals todevelop or continue to offer high qualityinpatient rehabilitation services that meettheir patient and physician needs, whileminimizing their operational and reimburse-ment risk. Centerre employs 100 people.

Divergence, a world leader in the applicationof genomics to agriculture and infectiousdisease, discovers and develops proprietaryproducts for the safe and effective control ofparasitic diseases. Plant parasitic nematodesare the largest unsolved pest problem inagricultural chemistry. Despite billions ofdollars in annual crop damage, currentmeans of control are limited and environ-mentally damaging. Parasitic nematodes alsopose major health risks to humans and animals, and resistance to current drugs isincreasingly a problem in livestock infections.Breakthroughs at Divergence are demon-strating that comparative and functionalgenomics can revolutionize the future of par-asite control in plants, animals and humans.

Everest Biomedical Instruments developsneurological and brain-state assessmentdevices. The products consist of low costhandheld monitors and a recurring revenuestream of disposable sensors. The initialproduct monitors depth of anesthesia. Thecompany is developing a family of handheldbrain-state assessment devices capable ofturning those data into clinically relevantinformation that objectively detect criticalconditions of the brain at the bedside or atthe first point of care. It’s current product—Snap II—combines electroencephalographand auditory evoked potentials in a portable,hand-held, battery-operated anesthesiamonitoring device enabling the anestheti-cian to know what is happening in the entirebrain while the patient is under anesthesia.Everest employs 20 people.

Exegy integrates search-optimized datastorage systems, data mining and businessintelligence appliances, greatly acceleratingknowledge mining in a data mart environ-ment. Exegy’s technology is especially powerful over very large—multi-hundred

Summary of Companies receiving

Venture Capitalin 2004

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of Terabytes or more—data stores such asthose utilized by financial services and U.S.intelligence agencies.

Isto Technologies is a developer of engi-neered tissues and chemical compounds forthe repair or regeneration of human tissuethat has been injured or destroyed by traumaor disease. The company’s technology isbeing developed to grow human cartilagetissue from chondrocytes derived fromhuman donors. This laboratory-grown carti-lage is intended for surgical implantation torepair or replace injured or diseased cartilagein the knee or other joints. Its product—Neocartilage—is an in vitro cultured carti-lage graft that is intended for use in patientswith early cartilage damage. With earlyintervention, Neocartilage will help preventthe development of osteoarthritis. Istoemploys 25 people.

Kereos is a developer of targeted therapeuticsand molecular imaging agents that detect andattack cancer and cardiovascular earlier andmore specifically than previously possible,and was selected as one of the “Fierce 15” ofthe top emerging biotechnology companiesfor 2004 by FierceBiotech, an internationally-recognized publication for the biotech industry.

Metaphore Pharmaceuticals is a developerof drugs to prevent and treat inflammatoryand autoimmune diseases and disorders, andpain. The company develops small moleculecompounds that mimic the activity of humanenzymes. Its lead compounds mimic thefunction of superoxide dismutase, a benefi-cial enzyme that serves a protective role inthe body by removing superoxide, a toxicfree radical that can damage cells and tissues.The company currently focuses its clinicaldevelopment efforts in the areas of pain,rheumatoid arthritis, and inflammatory dis-orders, and employs 35 people.

MetaMatrix is a provider of enterpriseinformation integration and enterprisemetadata management solutions. The com-pany’s solution acts as a virtual database to

unify and deliver information on demand,across the entire enterprise. The technologyis for model-driven integration componentsfor Service Oriented Architectures. Thecompany enables organizations to turn theirdistributed, disparate, and often cryptic datainto a powerful, comprehensive, and accessi-ble information utility. MetaMatrix employs70 people; its customers include MerrillLynch, U.S. and foreign government, SAPand other Global 1000 companies.

NetLogic is a provider of communicationsservices. The company delivers high-speedInternet, local, and long distance services,web hosting services, and inter-city privateline services. The company is currentlyfocusing operations in the Midwest UnitedStates, employs eight people, and has about500 customers, including UPS, Bobcat,RF/Max, Radioshack, and SSM Healthcare.

Quick Study Radiology is a provider ofintegrated digital image and managementsolutions. The company’s HIPAA compli-ant components in PACS, image and reportstorage and distribution, scheduling, andbilling improve workflow and collections for hospitals, imaging centers, and radi-ology professionals. Quick Study employs 26 people and its target customers includehospitals under 300 beds, initially focused inthe Midwest.

Stereotaxis is a developer of an advanced car-diology instrument control system for use in ahospital’s interventional surgical suite for thetreatment of coronary artery disease andarrhythmias. The Stereotaxis System isdesigned to allow physicians to more effective-ly navigate proprietary catheters, guidewiresand stent delivery devices, through the bloodvessels and chambers of the heart to treatmentsites and then to effect treatment. This isachieved using computer-controlled, external-ly applied magnetic fields that precisely anddirectly govern the motion of the working tipof the catheter, guidewire or stent deliverydevice. The company’s Niobe System is a mag-netic navigation system that digitally navigates

Greater St. Louis 2004 Venture Capital Report

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the catheter and guide wire based devicesalong the paths of the heart and cardiovascu-lature. NAVIGANT Advanced UserInterface-An integrated information andcontrol center that consolidates the key infor-mation sources used by interventional cardi-ologists and electrophysiologists and allowsthese physicians to provide instrument con-trol directions to precisely govern the motionof the working tip of disposable intervention-al devices. CARDIODRIVE AutomatedCatheter Advancer-The CARDIODRIVEautomated catheter advancer is used toadvance and retract the catheter in thepatient’s heart while the NIOBE magnetsprecisely steer the working tip of the device.

The company’s domestic customers includeBarnes Jewish Hospital (St. Louis), CentralBaptist (Lexington, KY), MassachusettsGeneral Hospital, Providence (Waco,Texas), Trinity Mother Francis, Universityof Oklahoma, University of Iowa, and RushPresbyterian. International customersinclude St. George (Hamburg) and Thorax(Rotterdam).

Stereotaxis employs 121 people.

Singulex is a provider of ultrasensitiveinstrumentation, assays, and relatedreagents for infectious disease, bloodscreening, and biodefense. The companyprovides an instrument that differentiatesand counts individual molecules, cells, andmicrospheres, in solution. The company’sinstrument enables the user to count thou-sands of particles in a single test, simultane-ously differentiating multiple molecularspecies of proteins and nucleic acids. It iscapable of detecting nucleic acid hybridiza-tion at the single-molecule level. The tech-nology works in complex and dirty samplessuch as serum or environmental samples.Unlike PCR, it requires no amplification.The company has demonstrated its sensi-tivity is 100 times greater than a commer-cial TSH test and 30 times more sensitivethan a commercial PSA test. Singulexemploys nine people.

Transaction Transport Technologies (T3)allows "brick and mortar" merchants to cyclecustomer credit and debit card transactionsfaster and/or cheaper through the use ofbroadband technology. The T3 technologyalso allows the greater flexibility in sourcingcredit and debit card transaction processingrelative to the dominant prevailing technolo-gies, which is a material cost to many mer-chants. The company has established its coreoperations around a server hosting/mainte-nance arrangement with AT&T that includesthe provision of highly scalable, very lowcost customer facing bandwidth, and high-speed direct connections into the majorcredit and debit card processing companiesT3 is beginning the roll-out of its service tothe market and has already sold the serviceto 526 merchant locations.

Xspedius Communications is a provider ofintegrated communications services to smallto medium-sized enterprises in the south-ern United States. The company offers inte-grated voice and data/Internet services toresidential customers and small and medi-um-sized businesses, and offers Internetservice through SDSL and T1’s. The com-pany delivers a comprehensive suite of serv-ices, including local and long distance voice,data, and dedicated Internet access services,in 46 facilities-based markets located in 20states and the District of Columbia. Thecompany owns, operates, and manages met-ropolitan fiber optic networks with signifi-cant transmission capacity that cover morethan 3,500 route miles and allow the compa-ny to manage its own voice and data traffic.Xspedius employs 950 people.

Vibe Solutions Group offers a state-of-theart video communications platform that isboth robust and modular. Partners can choosefrom the entire Vibe CommunicationsPlatform, or select one of the applicationmodules for deployment. Vibe’s productsinclude Vibe Video Phone, Vibe Video Mail,Vibe Video Mail Pro, Vibe Media Share, andVibe Platform. It customers include Comcast,Charter, Road Runner and Fidelity. �

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