Wayne Embree, Reference Capital LLC - Shifting Economies

© 2009-2010 Reference Capital Management, LLC

Oregon Business CouncilCluster Network Briefing

4 March 2010

Wayne Embree, Managing PartnerReference Capital Management12909 SW 68th Parkway, Suite 430Portland, OR 97223503-619-4310 x [email protected]


Overview

Oregon, US economies undergoing a permanent, structural shiftThis is a jobless recoveryNet in migration continuesPolitical economy of “green”It’s a hollow promise, unless…


Wayne Embree

Co-founder / manager of seven seed-stage funds since 1986Our funds have backed over 100 companies, about 60 Oregon basedPioneered Oregon universities taking equityMasters thesis examined venture capital and university tech commercialization - 1983USAF tactical ops officer (Capt) 1975 - 1980


Oregon Has Grown its R&D Base23-Year Change in Federal R&D Funds

Source: Nat’l Science Foundation 1985-2008

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Oregon Competes in Creating Intellectual Property

Patents per Thousand Population

USPTO, May 2009

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US Venture Capital Distribution (2009, $28 Billion)

= ~$1 Bill. Source: NVCA 2010

Source: NVCA 1980 - 2010


Oregon Comparisons

Sources: GDSP, Federal Reserve (2008)Univ R&D, National Science Foundation (2009)Population and Education data, US Census (2008)

Population (Millions)

2008 GDSP (Billions)

HS Grad Rate

Bachelors (PCT)

Univ R&D (Millions) GDSP R&D

Washington 6.4 264.6 62.4 29.9 709 41,344 110.8Oregon 3.7 147.1 74.9 25.9 427 39,757 115.4Utah 2.6 87.7 72.2 30.8 222 33,731 85.4

Per Capita


Over the last six years…

State Average per Year (mm)

Washington $126.2Utah $ 37.5

Oregon $ 17.2

Seed, Startup & Early StageInitial Financings ($millions)



NWTV

Shaw I Shaw II Shaw III

Smart ForestBerkman?

Utah Fund of Funds

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Total venture funds raised by in-state managers (Millions)



Too Little Innovation Capital

Sources: 1985 - 2008 Federal R&D Expenditures. PWCMoneyTree 2009

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23 Year Change Fed R&D VC$ to Fed R&D$ Ratio

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23 Year Change Fed R&D VC$ to Fed R&D$ Ratio

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Oregon Growth Account Oregon Investment Fund

OGA: since 1999, $91 mm to 17 funds– $34 mm to 5 Oregon-based venture

funds

OIF: since 2005, $108 mm to 11 funds– None to Oregon-based venture funds


Comparison:OIF & Utah Fund of Funds

$100 million Allocation Since 2005

Utah FoF Results to Date

27 Funds - 8 Utah venture funds (80% of all in-state managers)

38 Utah companies funded (35 alive)

$1,030 mm total investment$ 204 mm from FoF managers

>2,000 emp, $63,000 avg wage

>60% of investments led by Utah managers

OIF Results to Date

11 Funds - 0 Oregon managers

~13 Oregon companies funded (11 alive)

$250 mm total investment (est)

$100 mm from OIF funds (est)


What are our Options?

Wealth Redistribution?US - Roughly 130 million jobs – 20%, or 26 million, pay >$60,000 per year– 80% average $33,000 per year

Oregon - 1.6mm full-year tax filers 2007– 173,000 with $100,00 - 249,500 (86%)– 32,000 with $250,000 or more (88%)

Sources: Business Week, Oregon Dept. of Revenue


Other Economic Choices…Inflation?Wealth Creation?


Fueling an Entrepreneurial Economy

Every other business grows its base– Startups are a numbers game - volume

matters

Oregon doesn’t need more money - it needs different allocationFree treasury / OIC staff from any perceived local mandate - assign a dedicated managerEngage other capital sources in the discussion


Best Start-Up Climate in 20 Years

Smart, experienced entrepreneursEmbracing capital efficiencyBay-area VCs overly conservativePotential customers actively seeking competitive advantagesMust accelerate the innovation cycle


Why We Might Blow it…

Oregon Opportunity - $200 mm bio-science initiative– No local venture funds focused on life science

startups

ONAMI - ~$50 mm for nano tech– Too little venture capital focused on company

creation

University Venture Fund– Poor timing, poor support and confusion

Green - BETC, Federal funds, etc… – Local money enabling innovation?


Thank You

Questions?


Little Regional Variation in Deal Outcomes(Venture Source Database 1990 - 2008)

© 2009 Robert Wiltbank, PhD, with permission

Share of all Deals 39% 10% 11% 17% 23%

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Died Acquisition IPO

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Establish Oregon Operations 1976

Ateq

Central Point Software

Intellidex

Mentor Graphics

Methus

Cascade Microtech

Hannah Andersson

IMS

KVO

Lattice

nCube

Planar

Sequent

Wieden + Kennedy

Avia

AVI Biopharma

Flight Dynamics

Rentrak

Oregon’s Technology Cluster: Roots in 1980s Recession

Analogy

Epitope

Hanna Carwash

Medica-Logic

OrCad

Protocol Systems

ProTools

Integra Telecom

Logic Automation

Sports, Inc. (Adidas)

Suterra

TriQuint

Widmer Brewing

Cache Scientific

InFocus

Oregon Country Beef

Portland Brewing

RadiSys

Wayne Embree, Reference Capital LLC - Shifting Economies

Economy & Finance

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