2004 New Era of Optimism in Software

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2004New Era of Optimism in Software

• Heidi Roizen, Managing Director
• Mobius Venture Capital hroizen_at_mobiusvc.com
• Ann Winblad, Partner
• Hummer Winblad Venture Partners
  awinblad_at_humwin.com

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Hummer Winblad Venture Partners

• First Fund Exclusively for Software Investing
• Founded September 1989
• 1B Under Management
• 9 investment professionals
• Fund V 425M (raised 2001)
• All Stages, focus on early stage including seed
• Usually Part of First Round of Venture Funding
• Usually Lead or Co-Lead
• 90 Investments to Date 16 IPOs, 29 Acquisitions

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Mobius Venture Capital

• Founded in 1996 in conjunction with Softbank
• 2B Under Management
• 13 investment professionals 5 managing directors
• Fund VI 1.25B (raised 2000)
• All Stages, focus on early stage including seed
• Usually Part of First Round of Venture Funding
• Usually Lead or Co-Lead
• 100 Investments to Date

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Entrepreneurs, then VCs
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Software Big Leader in Early Stage

• Software is the Big Leader in Early Stage
• 27 of Early Stage Financings (Q1-Q3) 2003
• 22 of Early Stage Dollars (Q1-Q3) 2003
• Capital Efficient Profile Matches Era
• Early Stage Software Average (2002) Round is
  4.0M
• Average of other sectors is 6.2M Round
• Software Still the Largest Investment Area
• 20 of Overall Investment Dollars (Q1-Q3), all
  stages
• But 28 Decline from 2002

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Drivers for Software Innovation and Investment
Opportunity

• Outsourcing
• Leveraging high caliber 24X7 resources
• Specifically India
• Open Source
• Driving innovation for early stage developers
• Competitive turmoil among the larger players
• Moores Law and Metcalfs Law
• Broadband reaches critical mass deployment
• Storage costs dramatically lower, affordable in
  personal devices
• On demand solutions
• New platforms, new pricing
• MA at the top reopening market segments
• Documentum, Rational, JD Edwards.

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Fast Pace of Technical Innovation Creates New
Leaders and New Laggards
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ConsumerCustomer Demands Driving Innovation

• Digital Lifestyle demands
• Communication and collaboration
• Interactivity across devices
• Immediacy
• Omnipresence
• Always on, anywhere
• Customizable
• My content, my creativity
• Fair prices

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Broadband, Coupled with Cheap Storage Driving
Digital Lifestyle
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EnterpriseCustomer Demands Driving Innovation

• Real Time Connected Enterprise
• Communication and collaboration
• Interactivity and security across enterprise and
  industry partners
• Shift of business value to communications
  platform
• Immediacy
• Real time business performance management
• Confidence, Security, Privacy
• Sarbanes Oxley effect, GLB, HIPPA
• Open architecture
• Solutions and pricing
• Undeniable short term ROI
• Software as a service/utility

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Internet Era Creates New IT Infrastructure
End to end integration of transactions Existing
applications and data leveraged Applications
acting as processes Workload optimized to any
server Massive amounts of information stored
and flowing
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New Set of Software Challenges Expanding the
Software Stack
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2004 Start of Era of Optimism

• Most CIOs are budgeting for new projects
• Cost Reduction and Integration (2001-2003)
• Integration and New Project Expansion (2004 - )
• Will lead new phase of venture capital investing
• Demand improving
• Enterprise
• Consumer
• Small and medium business
• Early Stage Venture Capital at stable bottom
• Best time to start a company
• Best time to invest, especially at seed
• Best time to be an optimist

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Fewer Investors, Better Companies?

• Corporate/Strategic investors have abandoned the
  sector
• 211M in 2003 versus 6B in 2000
• Individual investors have abandoned the sector
• 84M in 2003 versus 2.4B in 2000
• VCs syndicating most deals
• Multiple VCs in most rounds

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Recent Hummer Winblad Investments Focused on
Enterprise Infrastructure

• Security, Reliability
• Voltage
• Cenzic
• Data and Disaster Recovery
• Abhai
• Management
• Scalent
• Jareva (early) (acquired by Veritas)
• Application Integration
• Knowmadic
• Provisioning and Identity Management
• Bridgestream

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Recent Mobius Venture Capital Investments

• Planitax enterprise tax software
• MessageCast Broadcast IM management
• CastBridge user-driven data sharing
• Auctiondrop you drop it off, we sell it on
  eBay
• Perpetual Entertainment MMOG
• Reactrix visual display meets motion sensor

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Closing Advice

• The opportunity window is open now in software
• Make lots of friends with engineers
• Meet customers early
• Customers know what they want and are smart
  technologists
• Focus, Focus, Focus
• Otherwise tough to be Best at anything
• The intellectual capital in your company and
  coaching your company is more important than
  money
• Most companies die of self inflicted wounds

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QA

• Heidi Roizen
• hroizen_at_mobiusvc.com
• Ann Winblad
• awinblad_at_humwin.com