- 1 - © 1999 Boston Millennia Partners Millennia Boston Millennia Partners 30 Rowes Wharf Boston,...

- 1 -© 1999 Boston Millennia Partners

Millennia

Boston Millennia Partners30 Rowes WharfBoston, MA 02110Tel. 617 428-5150Fax 617 428-5160

www.millenniapartners.com

Introduction to Venture Capital

Tufts University

A. Dana Callow, Jr.Managing Partner

Boston Millennia Partners

November 3, 2005


Millennia Partners

Agenda

Background

What does a VC do?

What is the Millennia Investment Strategy?

Current Venture Statistics


Millennia Partners

A. Dana Callow, Jr. Background/Timeline

Director of Jobs for Massachusetts

Board of Trustees at Tufts University

Board of Overseers at Tufts University Medical School

Board of The Center for Private Equity and Entrepreneurship at the Amos Tuck School of Business at Dartmouth College

Founded Boston Millennia Partners (1996)

Co-founded Boston Capital Ventures (1982)

Senior Consultant at Braxton Associates (Deloitte Touche) - (1979-1983)

Application Engineer for Tymshare (acquired by McDonnell-Douglas)- (1974-1977)

Graduated from Tufts University

Graduated with MBA from Tuck School at Dartmouth College

1973 200319981993198819831978


Millennia Partners

Boston Millennia Partners Overview Background

A U.S. private equity partnership specializing in healthcare and life sciences, telecommunications, and information technology investments

100+ years of collective experience blending venture capital, operational and strategic consulting experience

Lead 80% of investment opportunities with an emphasis on business building Investment size: $1-15M

Millennia Management Team 15 private equity investment professionals Dedicated executive search partner $700+ million in capital managed 100+ direct private equity transactions completed 170+ acquisitions completed by portfolio company managements

Core Company Strategy and Active Value-Added Style Focus on early-stage companies applying proven technology Identify companies targeting large, fast growing market segments Invest in strong management teams with outstanding track records Support portfolio company growth with strategic merger and acquisition activity Strategic planning and research support


Millennia Partners

MillenniaPartners’

(Sold to Incyte Genomics, 12/00)

(IPO: 1/97)

Healthcare Information Technology Business Services

Portfolio of Investments

(Sold to Oxford Health Plans, 3/02)

(Sold to Cedara Software, 10/04)

(IPO: 2/00)

(IPO: 8/99)

(IPO: 12/99; Sold to GSI Commerce)

(IPO: 5/98)

(PowerFone)

(Brooks Fiber Properties)

Neoworld(Sold to Nextel Communications, 8/02)

(IPO: 2/00; Sold to SPSS)

(IPO: 3/99)


Millennia Partners

Agenda

Background

What does a VC do?




Millennia Partners

What is Venture Capital?

… Investing in high potential, high growth private companies

… Identifying and assisting talented entrepreneurs as they build successful companies

… Helping to drive growth, productivity, and technological innovation

Venture Capital Is...


Millennia Partners

VC Value Chain

(1) Raise Capital

(2) Evaluate Market Segments

(3) Generate Deal Flow

(4) Select Investment Candidates

(5) Negotiate and Structure Investments

(6) Nurture Portfolio Companies

(7) Liquidate / SellPortfolio Companies


Millennia Partners

Venture Capital Investment Path

Boston Millennia Partners Proprietary Research Identification of attractive sectors and investment opportunities

Source deals and initially screen opportunities Meet with management team of potential investment Partner meeting and further screening Due diligence begins Prepare formal Investment Opportunity Summary (IOS) memorandum IOS partners meeting and investment decision Term Sheet submission Legal negotiations Co-investor syndicate selection Due diligence checklist completed Investment closing Active investment management

Ongoing

Week 1

Months 2-4


Millennia Partners

Agenda

Background

What does a VC do?




Millennia Partners

Identify sectors with the following characteristics Large, high-growth market opportunity Competition is made up of many small companies with no dominant market-share leader Undergoing a fundamental shift in the business as a result of economic or technological

change

Identify initial company upon which to grow the business Focus on companies that have meaningful revenues Identify the company best positioned to exploit the market opportunity Select a management team capable of carrying out an aggressive growth plan

Accelerate the company’s growth through acquisition and consolidation of smaller-sized companies

Boston Millennia Partners’ Investment Model

With the goal of building a $750 million market capitalization company

Core Company Strategy


Millennia Partners

Clinical Research Organizations: Growth Rate versus Relative Market Share: 1985-1986

= $10 M in 1986 projected revenue Relative Market Share

Re

ve

nu

e G

row

th R

ate

0%

5%

20%

25%

30%

50%

0.01x0.1x1x2x

Oxford Research International

10%

15%

35%

40%

45%

IBRD

G.H. Besselaar Associates (Covance)

Medical & Technical Research Associates

Pharmakinetics Labs

Harris Labs

Biometric Research Institute

PAREXEL

PACT

CLINDAR

OTHERS(In-house, Universities,

Hospitals, Mom-and-Pops)

Sector Growth = 15%

Portfolio Company Development: Completed Case

Emerging Industry Stage


Millennia Partners

Portfolio Company Development: Completed Case

Millennia managers developed a Core Company through internal growth and strategic acquisition and consolidation:

Expanded product and service offerings Leveraged value through efficiency gains Built market share and profitability Broadened geographic presence Entered new market segments

PAREXEL International CorporationPAREXEL is a leading contract research organization serving pharmaceutical and drug development companies worldwide.

Research

Publishing

Regulatory

Biostatistics(CSI, Inc.)

Medical Affairs

InformationTechnology

Marketing

Boston

United Kingdom

Germany

France

Italy

California

North Carolina

Objective: FDA Approved Drug

AcquisitionsOriginal Investment Related Functions

Key:

Business Segment

Location

Revenues: Market Capitalization: Employees Worldwide: Number of Acquisitions:

$ 658 M

$ 508 M

5,000

29

$ 0.1 M

$ 1 M

5

0

At Investment Current

Role: Originator & Lead Investment Amount: Realized Value:

$ 2.8 M

$ 38.6 M


Millennia Partners

Agenda

Background

What does a VC do?




Millennia Partners

VC Industry: Where were we in 2002?


Millennia Partners

Venture Capital Activities: 5 Year Summary 1999-2000 investment frenzy in all market segments

IPO expectations and new business models based on internet and Y2K impact

2001-2003 The “hangover” and clean-up/downsizing of many portfolio company investments Negative 1st quartile returns

Late 2003-4 Continued clean-up: The “walking wounded” survive The beginning of new company investing Fresh fundraising attempted on a broader scale

2005 Increasing liquidity with selected IPOs and M&A activity Stable investment activity Capital “overhang” period ended

2006 – Forward Venture returns regain top place in IRRs but with significant variability among managers 1st quartile returns significantly positive and less correlated with public markets Reduced start-up and early stage investment capital


Millennia Partners

VC Industry: Where are we in 2005?VC Industry: Where are we in 2005?


Millennia Partners

Historical “Take-off Periods” For Value CreationAfter initial investment in early stage venture investing

1x

5x

10x

1 2 3 4 5 6 7 8 9 10 11 12

1997-2003

1985-1997 2003-2010

Years

Co

mp

any

“Val

ue”


Millennia Partners

Commitments to U.S. VC funds

$18.8$17.8

$9.2$13.1

$50.5

$82.8

$58.8

$26.9

$17.1$12.7

$7.0$5.4$6.7$2.8

$0

$20

$40

$60

$80

$100

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

To

tal C

om

mit

me

nts

to

VC

Fu

nd

s (

$ B

illio

ns

)

Fundraising is stabilizing

Source: VentureSource/Venture One

* Annualized 3Q 2005

*


Millennia Partners

$4.2$6.4

$9.2$13.1

$17.9

$49.5

$94.6

$36.2

$22.0$19.1

$21.3 $20.2

$0

$20

$40

$60

$80

$100

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005*

Ven

ture

Cap

ital

In

vest

ed (

$ B

illi

on

s)

U.S. Venture Capital Investment Activity

Source: NVCA / Venture Economics

* Annualized 3Q 2005

Investment is stabilizing

IPO Exits as a Percentage of Total Financings are Decreasing

969

1,315

1,912

2,211

2,547

4,586

2,3652,131 2,199

2,024

6,303

3,253

3967222022202250

68120216144115500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Venture Capital Financings

Venture-backed IPOs

372 Venture-backed IPO's between 2000 and 2005 – but only 128 during last 3 years

* (%) is defined as # of IPOs in Year x+4 / No. of Investments in Year x (A rough gauge for how many of Year x’s Venture Capital Financings go on to an IPO in four years.)** Annualized Q3 2004Source: VentureSource/VentureOne, PWC/Venture Economics

**

Nu

mb

er o

f D

eals

(7.0%)*

(19.0%)

(10.6%)

(1.0%)

(0.8%)

(0.5%)(1.1%)

- 21 -Millennia Partners

Confidential

(1.2%)


Millennia Partners

IPO Companies Older in 2003

3.53.2

2.8 2.83.1

4.5

3.6

5.7 5.7 5.7

0

1

2

3

4

5

6

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Yea

rs

Time from Initial Equity Funding to IPO

Older Companies Going Public - Years to IPO Increases

Source: VentureOne

In 2005, the average IPO is for a five and a half-year-old company

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