A Golden Age for Technology and Innovation

Jeff BussgangGeneral Partner, Flybridge Capital PartnersJune 10, 2010

2

Envision the future – think big

Source: YouTube, “How not to pitch a Venture Capitalist”

3

Why the optimism?

• The macro perspectiveLingering overhang from scary times and uncertaintyBut, we are in the middle of an unprecedented boom in

technology and innovation – a true “Golden Age”Growth opportunity ahead of us is more rapid, and

global, than ever before

• Massachusetts is very well positioned for the futureDuring an innovation age, we have an innovation economy

that is the envy of the worldMassachusetts Miracle v2.0 ?

4

Context for my (contrarian?) perspective

• General Partner at Flybridge Capital Partners, early-stage VC firm based in Boston, $560M under management

We have 40+ active portfolio companies, 30+ in MA, >1000 employees

• Entrepreneur-in-Residence at Harvard Business School• Former entrepreneur

Cofounder Upromise (acq’d by SallieMae), VP at Open Market (IPO ‘96)

• Author: Mastering the VC Game• Other community activities

Progressive Business Leader Co-Chair MITX Board Member

5

Today are glory days for technology

We have made unprecedented advances in technology over the last 10 years…

…and we ain’t seen nothing yet!

An explosion in computing power, connectivity and entrepreneurship with an outlook for accelerated growth over the next 10 years

• Social media and networking• Completion of the Human

Genome Mapping project• The “i” generation, training “Net

Natives – iPod, iPhone, iPad• ‘Cloud computing’• Nanotechnology • Synthetic Biology• Green consumer• Renewable energy• Broadband penetration

6

Conventional wisdom still clouded by economic crisis…

Source: Iceland's Eyjafjallajokull volcano – Boston.com

PIIGGS

7

…investors have gotten spooked…

VIX = CBOE Volatility Index, also known as the “fear index”

8

..but consumer sentiment is (finally) trending positive

DE

FR

ES

UK

0

20

-20

-40

E.U. Consumer confidence index (EC indicator)

Source: Thomson Datastream

Japan

Japan Confidence Index (National indicator)

+14

U.S. Consumer Sentiment Index (1966 = 100)

+18

Jan2007

Sep2009

Jan2008

Jan2007

Aug2009

Jan2008

Jan 2007

Sep2009

Jan2008

Nov '08–Sep '09

Dec '08–Aug '09

Jan2009

Jan2009

Jan2009

9

Entrepreneurial interest and passion are stronger than ever

Source: Challenger, Gray & Christmas, Inc; Princeton Review top 50 Entrepreneurial Colleges for 2009; Ewing Marion Kauffman Foundation

Annual Average (%)

CAGR67%

Percentage of job seekers starting their own business is

escalating

Percentage of job seekers starting their own business is

escalatingEntrepreneurship is

expanding globallyEntrepreneurship is

expanding globally

2008 – Inaugural year•3 million participants•75 countries

2009•5 million participants•100 countries

Collegiate entrepreneurship is indisputably on the rise

Collegiate entrepreneurship is indisputably on the rise

• 5,000 entrepreneurship college courses in 2009 (250 in 1985)

• 500+ entrepreneurship degree programs in 2009 (~100 1980)

“Today entrepreneurship is the fastest-growing course of study on campuses nationwide.”

- Jerome Katz; professor at St. Louis University

10

More business plan competitions….….with more resources and record submissions

Source: Robert W. Fairlie using Current Population Survey

$50K $200k $225k

$30k$20k

$200k

11

Technology startup incubator programs are multiplying

12

Tech company market caps have grown nicely - Dow flat

Market Cap ($B)Dow

$ 0.9 T

$$1.2 T

Dow flat at 10,000

CAGR34%

Source: Yahoo Finance

13

Tech company balance sheets are strong with tons of cash

Source: Bloomberg BusinessWeek

14

Still huge opportunities for innovation and growthExample: Internet and Mobile consume many eyeballs and little advertising $’s

Source: Morgan Stanley

15

Example: Internet only 5% of all ad spend in the US in 2009

Source: Martin Langeveld at Nieman Journalism Lab; data from NAA, TVB, IAAB, McCann

Internet advertising still only a fraction of

future potential

16

Global opportunity: The world is truly flat

The middle class is explodingThe middle class is exploding

Source: Goldman Sachs: Innovation 2010 BusinessWeek / BCG Survey Results; Telco 2.0 Mobile and Fixed Future Broadband Business Models

+42%

No of companies

Non-US

US now home to less than 40% of the top 50 Most innovative companies

US now home to less than 40% of the top 50 Most innovative companies

20062010

Global broadband access is growing exponentially

Global broadband access is growing exponentially

Million, year-end

Personal/mobileShared/premise

The Expanding World Middle Class

17

Mobile internet technology

Source: Morgan Stanley

18

Ridiculous growth in data traffic….

Source: Morgan Stanley

19

Cloud computing and the data explosion

Worldwide Cloud Services RevenueWorldwide Cloud Services Revenue

Revenue ($B)

Source: Gartner; Morgan Stanley; IDC

“Cloud Computing will be as influential as E-business”-Gartner Research

Cloud computing enabling massive growth in volume of digital data

Cloud computing enabling massive growth in volume of digital data

CAGR28%

Data Volume (ZB)

CAGR43%

20

Personalized medicine and human genome sequencing

Source: Richard Gibbs, director of Baylor's Human Genome Sequencing Center

Human Genome Project1990-2003, $3B cost, 92% coverage

$5,000100% coverage0.1% error rate

The Cost of Sequencing a Human

High resolution scans available at low costs are changing the practice of biomedical research and reshaping the questions that scientists ask

“Moore's law for circuits and Metcalfe's law for networks. These principles are now at play in genetics, he argues,

particularly in DNA sequencing and DNA synthesis”

$1000 holy grail

21

New discovery paths enabled by DNA sequences and technologies: e.g. Synthetic Biology

Source: The Economist

May 2010Dr. Venter and Dr. Smith created new life from lab chemicals. “The result is the first creature since the beginning of creatures that has no ancestor”

The era of synthetic biology is dawning

22

Renewable energy

Economics and climate awareness have driven large growth in the development of renewable energy sources

Source: Best Solar Market Trends, Angel Research, Wikipedia

Wind PowerWind Power Solar PowerSolar Power

Installed Capacity (GW)

Installed Capacity (GW)

Olmedilla Photovoltaic Park; Spain; 60 MWRoscoe Wind Farm; Texas; 780 MW

CAGR20%

CAGR33%

International Energy Agency (IEA) maintains forecast for renewable energy generation to constitute 60 per cent of all electricity produced by 2030

23

Massachusetts is very well positioned for the future

A mecca of intellectual capital – academia, innovation, diverse industries and ideas

Successful tech companies, big and small – to partner, poach and/or sell to

Committed funding sources – venture capital, private equity, angels

24

Mass factoids 1: Local tech companies are thriving

Strong IT IPOs in the last 3 years• A123 – Sept. 2009, $378M• Athena Health – Sept. 2007, $113M• Constant Contact – Oct. 2007, $70M• EnerNOC – Dec. 2007, $98M • Glass House – filed for $100M• LogMeIn – July 2009, $86M• Netezza – July 2007, $108M• TechTarget – May 2007, $100M• Virtusa – Sept. 2007, $62M• ZipCar – filed for $75M

Major MA companies have emerged as leading aggregators and consolidators

Add images

25

Mass factoids 2: Multiple, robust micro-clusters

RoboticsCloud

Computin

g

Online Video

Gaming

E-

CommerceMarketin

g

Technolo

gy

26

Mass factoids 3: Enviable funding and intellectual capital

VC Investment Per Capita 2008VC Investment Per Capita 2008

California: $388/person

New York: $67/person

Boston: $457/person

Source: NVCA 2009 Yearbook; NIH (2008); Center for an Urban Future; United Nations Educational, Scientific and Cultural Organizations (UNESCO) and the National Science Foundation

NIH Funding 2008NIH Funding 2008

Boston is #1

Massachusetts Intellectual Capital• 74 Colleges and Universities• 265,000 students• $1.5 billion per year on R&D

R&D as a % of GDP 2003-2007R&D as a % of GDP 2003-2007

MA is #1

27

• The next 10 years will be a golden age for technology and innovation

• Don’t let the short-term bumps spook you

• Globalization, digitization, expansion and dissemination of human knowledge entering unprecedented levels

• Massachusetts is in great shape to ride this waveOur innovation-driven economy is the envy of the world

during this golden age for innovation

Recap

28

“Anything is Possible!” – Kevin Garnett