Timothy E. Taylor

1
Vanderbilt University Biomedical Engineering
10.15.02 Why the Southeast? Medical Device and
H/C Trends Day job or Your Own Company? Timothy
E. Taylor Cofounder- Endius, Inc. Venture
Capitalist-HMC
8.30.02
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Table of Contents
Fact Book Venture Capital Investment Climate in
the Southeastern United States

• I. Economic Overview
• Entrepreneurial Environment
• Overview of Venture Capital Market

3
Economic Overview
4
Economic Overview

• Strong regional economy
• Substantial research support focused on IT and
  Life Sciences
• Blue chip IT and Life Sciences corporate presence
• Region dedicated to entrepreneurial growth
• Leader in innovation

Harbert Venture Partners Locations
Other Harbert Southeastern Locations
Note Southeast includes Alabama, Florida,
Georgia, Mississippi, North Carolina, South
Carolina, Tennessee and Virginia/Washington, D.C.
5
Economic Overview
Strong Regional Economy

• 5th largest economy in the world

2000 Comparative Gross Domestic Product (GDP) (
in trillions)
Source Based upon most recently available data
from the Bureau of Economic Analysis.
6
Economic Overview
Strong Regional Economy
Gross State Product (GSP)

• The Southeastern U.S. economy is expected to
  continue its historical growth at a pace higher
  than the rest of the U.S.

Southeast
U.S. Excluding Southeast
Projected Annual Real Gross State Product (GSP)
Growth 2000 2010 (Highest growth states with
2000 GSP gt 100 billion)

• Five of the ten fastest growing, large (100
  billion GSP) states are located in the Southeast

U.S. GDP Growth 1.8
Source Bureau of Economic Analysis.
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Entrepreneurial Environment
8
Entrepreneurial Environment
Substantial Research Support Focused on IT and
Life Sciences
Virginia / Washington, D.C. University of
Virginia (247M) Virginia Tech (123M) Medical
College of Virginia/Virginia Commonwealth
University (122M) Department of Defense
(48.5B) National Institute of Health
(23.5B) Environmental Protection Agency
(7.3B) National Science Foundation (4.8B) NASA
Langley/Goddard Research Center (1.2B) Virginia
Biotechnology Research Park
Tennessee Vanderbilt University (218M) Dept. of
Energy Oak Ridge Lab (2.1B)
North Carolina / Research Triangle
Park University of North Carolina (510M) Duke
University (478M) North Carolina State
University (413M) Wake Forest University
(187M) North Carolina Biotechnology Center
(9M) North Carolina Tech. Dev. Authority
Alabama University of Alabama (Birmingham)
(296M) Redstone Arsenal (12.0B) Cummings
Research Park (4.2B) NASA Marshall Space Center
(2.2B) Missile Defense Agency (2.1B) Southern
Research Institute
Florida University of Florida (380M) NASA
Kennedy Space Center (1.0B) Bell Labs
Georgia Emory University (248M) Georgia Tech
(101M) Centers for Disease Control
(4.3B) Georgia Adv. Tech. Dev. Ctr. Southeastern
Technology Center
Note Dollar amounts represent annual RD
budgets/actual expenditures, based upon most
recently available data. Sources Company annual
reports, web sites and individual sources.
9
Entrepreneurial Environment
Life Sciences and Blue Chip IT Corporate Presence
in the Southeast
The depiction of the trademarks, service marks
and logos on this page are for informational
purposes only and are not intended to imply any
affiliation with, or endorsement of, Harbert
Venture Partners by their owners. The
trademarks, service marks and logos listed are in
alphabetical order and their placement on the
page is not intended to imply a specific
geographic location or headquarters of any entity.
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Entrepreneurial Environment
Region Dedicated to Entrepreneurial Growth

• Virginia / Washington, D.C.
• 5th largest high-technology center in the nation
• Telecom employment 3rd in nation
• D.C. area has 4,700 high-tech firms and gt 246,000
  high-tech employees
• 50 of the nations Internet traffic flows
  through Fairfax County

• Tennessee
• Home to 30 publicly traded healthcare companies
  with gt 36 billion in revenue
• Nashville high-tech job growth 2nd in nation
• Home to Vanderbilt Medical Center and 16 other
  area universities

• North Carolina / Research Triangle Park
• Academic RD funding 1st in nation
• gt 100 RD facilities
• Concentration of science degrees 1st in nation
• Home of Duke University, University of North
  Carolina and North Carolina State University

• Alabama
• One of the leading centers for AIDS, cancer and
  heart research
• 8 of all anti-cancer therapeutic drugs developed
  at Southern Research Institute
• Cummings Research Park 2nd largest research
  facility in U.S. 4th largest in world

• Florida
• 7.5 million labor force 4th in nation
• 3,149 patents in 2001 1st in Southeast
• 7B and 4B contracts for NASA and Department of
  Defense, respectively
• 2nd in nation in healthcare employment (300,000)
  and number of healthcare firms (2,200)

• Georgia
• Atlanta software job growth 2nd in nation
• Atlanta high-tech employment 7th in nation
• Home of Center for Disease Control, Emory
  University and Georgia Tech

Sources AeANET/Cyberstates, Bureau of Labor
Statistics, Capital IQ, META Group, Metropolitan
New Economy Index, local Chamber of Commerce web
sites and company web sites.
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Best Medical Device Cities

• U.S. Boston, Minneapolis, San Francisco and
  Warsaw, Indiana.
• Southeast Memphis, Atlanta, RTP, NC.
  Jacksonville, Nashville and Birmingham.

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Entrepreneurial Environment
Leader in Innovation
Patents Issued 1981-2001 (in thousands) 1
of Worldwide Market Share
49.7
2.8
2.7
5.9
7.1
19.1
2.1
1.6
1.2
Relative Growth of Patents Issued Annually,
Indexed to 1981
1 By state or country of origin, patent is
determined by the residence of the first-named
inventor. Source United States Patent and
Trademark Office.
13
Overview of Venture Capital Market
14
Overview of Venture Capital Market
Venture Funding by Region

• Southeast trails only California and the
  Northeast in demand for venture dollars

Venture Dollars Invested by Region 1995-2001 (
in billions)
41.8
7.5
6.8
8.0
10.7
18.9
6.3
of U.S. Share

• Southeastern companies accounted for
  approximately 12 of total venture deals done
  between 1995 and 2001

Number of Venture Deals by Region 1995-2001
Note Northeast - CT, ME, MA, NH, NY, VT, RI
Southeast AL, DC, FL, GA, MS, NC, SC, TN, VA
West Excluding California AK, CO, ID, HI, MT,
NV, OR, UT, WA, WY Mid-Atlantic DE, MD, NJ,
PA Southwest AR, AZ, LA, NM, OK, TX Midwest
IL, IN, IA, KS, KY, MI, MN, MO, NE, ND, OH, SD,
WV, WI. Source VentureXpert/SDC.
38.2
7.9
7.3
8.3
11.8
19.6
6.9
of U.S. Share
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Overview of Venture Capital Market
Limited In-Region Funding Available

• Between 1995 and 2001, of the 20.8 billion1
  venture capital invested in Southeastern
  companies only 18 has come from Southeastern
  venture firms

Share of Venture Dollars Invested in
Southeast1 1995-2001

• Between 1995 and 2001, 16.9 billion has been
  invested in Southeastern companies by firms
  OUTSIDE of the Southeast

• Between 1995 and 2001, only 3.8 billion has been
  invested in Southeastern companies by LOCAL
  Southeastern firms

82
18
In Region
Out of Region
1 Excludes 6.4 billion of venture capital
invested in Southeastern companies by unknown
sources. Source VentureXpert/SDC.
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Medical Device and H/C Trends

• U.S. spends 1.4 trillion, or 14 of its gross
  domestic product on medical care.
• Could be spending close to 3 trillion, or 17
  of the total national output within ten years.
• Areas of highest growth Cardiology drug
  eluting stents, Atrial Fibrillation, wearable
  devices, Spine, Neurological and Osteobiologics.
  
• Areas of Low growth/upside Dental, hearing,
  diagnostics, Orthopedic Hip and Knee Implants,
  Imaging and Laser Vision.
• Devices are viewed as Defensive Play on Wall
  Street which should continue to drive growth.
• Returning back in favor for Venture Capitalist
  but not as hot as early 80s.
• Fifth largest funded sector by VCs.

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Day Job or Start Up(Which should you
do?)Advantages of having a Day Job1. Good
experience for your resume.2. Opportunity to
learn backoffice operations and proven
procedures.3. Low stress after quitting time.
4. You can have a life outside of work.5.
Fairly stable income.6. Mentoring usually
available.7. H/C benefits and forced 401(k)
savings8. Work 25 years, retire and start a new
life at 50.9. Helps you learn to be a team
player.
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Day JobDisadvantages1. You are not the boss
and corporate America is not a democracy. At
best, the company will be a meritocracy, if you
find the right company.2. Advancement and pay
increases are generally time based not
performance based and can be slower than you
like.3. Usually requires less creativity and
more rule following.4. Your manager may not be
as bright as you but he or she will determine
your future.5. Flex time/Family Friendly is
still mostly lip service so be prepared to punch
a clock and drive the desk.6. Over time you
might get lulled into the low stress routine and
give up on your dreams.7. You are at the mercy
of the company. They own you.8. Being
Politically Correct is the important.9. Leaders
and self starters are often held back.
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Starting a CompanyAdvantages1. Freedom and
flexibility.2. Will help you define who you are
earlier in life.3. Life will be more exciting
and depressing. (more highs and lows)4. Better
opportunity to build real wealth. You normally
dont get rich working for someone else.5.
Builds self esteem.6. Allows you to live a
balanced life once youve made it.7. Serial
Entrepreneurs are highly respected in the
business world.8. Better opportunity to help
others and be a mentor.
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Starting a CompanyDisadvantages 1. You sell
your soul to investors and shareholders unless
you bank roll it yourself.2. You wont have a
life for several years.3. You will think about
your business 100 of the time, even when you
sleep.4. You will drive everyone around you who
are not in the business-crazy.5. You will not
be a good spouse or boy/girlfriend.6. You will
develop the curse of not being able to work for
anyone.7. You will think you are smarter than
you really are if your business succeeds.8. You
will think the world is here just for you and
your business.9. You lose sleep and fall out
of shape.10. Your attitude is determined by the
price of your stock that day.
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My SuggestionCareer Path

• During college, work for a VC or investment firm
  even if you have to work as a free intern.
• Post graduation, work for one or two large
  biomedical firms for no more than five years. Get
  MBA at night and ask them to pay for it. As you
  move up, try not to be forced into a technical
  position unless you want to.
• Join a small company at the executive level.
• Get married but let the spouse know you are
  quitting your day job.
• Start your own company with a partner. (it may
  take three deals to hit one.)
• Start your own company without a partner.
• Start family. (35-41 years of age)
• Semi retire when children are born thru K school.
• Go back to work when kids get in elementary
  school.
• Slow down at 55 working at the 60 level.
• Write book at 65 and consult at the 30 level as
  long as you can.