European venture capital funds have seen stronger performance in recent years compared to US funds. Over the past 24 months, European venture-backed liquidity events totaled $15 billion compared to $30 billion in the US, despite receiving only one-fifth as much venture funding. This outperformance is due to European funds generating higher exit multiples and a disproportionate share of large successful exits over $100 million. Factors driving the turnaround in European venture performance include an entrepreneurial boom, the shakeout of weaker funds post-2000 bubble, and a large imbalance between available venture capital and high-quality deal flow that allows top European funds to be highly selective.

1. Turning Venture Capital
Data into Wisdom:
Why Deal Performance
in Europe is now
Outpacing the US
— July 2011
Hendrik Brandis Jason Whitmire
Managing Partner, Earlybird Venture Capital General Partner, Earlybird Venture Capital

2. Background
The core data-slides in this Report (6, 7, This Report was further endorsed by
8, 11, 15, 17, 18, 23, 24, 25, 26, 27, 28, 30, 31) 24 active venture capital firms in
were created and supported by a broad Europe including Index Ventures,
cross-section of partners at European VC Wellington Partners, Fidelity Growth
firms who are members of the Venture Europe, Prime Technology Ventures,
Council at the European Private Equity Hummingbird Ventures, Open Ocean,
and Venture Capital Association (EVCA). Target Partners, Vodafone Ventures,
These VCs include Sofinnova, Northzone, and many more.
DFJ Esprit, Amadeus Capital, Gimv,
Endeavour Vision, Delta Partners,
Advent Venture Partners, Nauta Capital,
Neuhaus Partners, Finlombarda, and
Earlybird Venture Capital.
02

3. After emerging only in the 1990s, and shaking off
the hangover from the deluge of capital that
flooded the market in 1999–2001,
European Venture Funds have staged a
Comeback
03

4. Venture-
backed
liquidity
events in
the last
24 months:
$15 Billion
*Equal to 50% of the 30Bn in US Venture-backed liquidity events in 2009 & 2010 (Thomson Reuters), yet with only 1/5 of the venture
funding i.e., $25Bn invested in US VCs in 2009 & 2010 compared to $6Bn in Europe, according to NVCA and EVCA data.
*
04

5. In other words, more checks to LPs are
being written in Europe than ever before
t Ex a l
d
To
Publicly
i te
announced
European $4.
4 Venture Venture
venture-backed invested* $Bn Exits*/** $Bn
$3.
trade sales and 9
IPOs over the
past 24 months
(incomplete) $3
$2.
5
ve l
In ota
ed
$1.
st
T
4
$1.
1
$0.
8 $0.
6
Eu he
Eu he
Ge
Fr
rro r))
rm
((O
an
op
Ott
UK
pe
ce
an
e
y
**Source: Earlybird analysis, 2011. ** Remaining Europe includes Scandinavia, Benelux, Italy, Spain, Central & Eastern Europe.
† Exchange rate used for 2010 1€ = $1.3265 05

6. At the same time, real performance shows
European VC driving the best exit multiples
globally
Exits over $ 100M
2005 – Q1/2011
7.2
Median Multiple
of Cash Invested 4.5
Median Multiple
of Cash Invested
Proportionally Europe
is producing higher exit
multiples and, although
average exit values are
ca. 25% smaller, lower
entry valuations and
higher capital efficiency Europe USA
overcompensate for
disadvantages in exit
value. Number 131 596
Valuation
Median Exit Valuation $173M $236M
% with Multiple of Cash ≥ 5 57.26%
5 47.27%
Data based on exhaustive calculation of exit values and cash multiple of all
exits reports in VentureSource database (Dow Jones VentureSource) 06

7. This outperformance is based on
an overproportional share in
41%
successful exits in Europe...
Overview US- vs. European 36%
Share in VC Value 59%
Contribution, since 2004
22% 64%
78%
18%
Eu
ro
e p
its .
ex no
of tal
82%
To
nv x e
. I 10 om
te p
es ca
vs ns: f H
d
o
Ru o.
N
US
A
13
45
10 its
0m
$ ex
US of
> o.
N
07
ed l
st ita
Source: Dow Jones VentureSource
ve ap
in l c
ta
To

8. …Due in part to a higher share of European
VC funds with top US quartile
performance
Active GPs Managing 100%
Funds of Vintage
≥ 2006, Investment nds und
s
Grade Funds 25% rt il e Fu 23% ua rti le F
Qua Q
tom ttom
Bot Bo
25% 17% nd s
Fu nds Q3 Fu
Q3
25% nd s
25% s Q 2 Fu
nd
Q 2 Fu
25% le 35% rtile
arti Qua
Q u Top
Top
% f be ain otal
of nc st t Fun
% s R un
i
Fu art Tot
Qu 37
EU hm he ds
of in ank ds
nd ile al F
ag 69 T
VC ar US
US US in
VC VC gs
fu ked
3
nd
s
Source: Prequin 2010
08

9. Forget
the
charts,
where are the outsized venture exits in Europe?
09

10. Its not quite all about Skype…
$1B+ > 10X 5 – 10X
Coding
Technologies
**
…and many more
010
*Includes 14 venture backed $1Bn exits and 30 other deals generating a ≥10x multiple, since 2005; does not include another 30 exits
generating 5x-9x multiples. ** Enterprise value following exit to Groupon.
Source: Dow Jones VentureSource and Earlybird Venture Capital

11. …while European VC–backed IPO performance
matches or exceeds US performance, both pre–
as well as post–IPO
US vs. Europe, post-IPO performance
of all VC-backed IPOs*, 03/04 to 07/11
Europe IPO
200%
- Index Value
150%
100%
U.S. IPO
50% - Index Value
0
2004 2005 2006 2007 2008 2009 2010 2011
*NB excludes Google
Source: CapitalIQ, DFJ Esprit 11

12. On the origin of the
turnaround
An entrepreneurial boom combined with a mature seed/angel/venture ecosystem has led European early-stage companies to scale faster and accrue more value sooner than ever
before. Starting in the year 2004, the fundamentals for a break-out venture decade in Europe have been continuously improving, while venture capital fund commitments have
remained down for last 6 years (positive contra-indicator) leading to a dramatic demand-supply in-equilibrium of available capital. 12

13. Europe today has the largest
inequilibrium of venture Capital
availability on the planet
Supply-Demand Ratio European Venture Capital
Market still
saturated with
Supply of Capital pre-bubble VC
funds
100 65 % of all VC
funds slide to
Current
Immediate
drop in
oblivion
supply
75
venture
deal flow
Droves of
entrepreneurs
Exit boom
starting in 2005
gap
by 50% run for the started to drive Major gap in supply of
woods after up demand venture capital vs.
bubble burst availability of deals
50
Demand
25
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Earlybird
13

14. Supply side: Natural selection
“Almost every bank, large corporation and insurance
company in Europe created its own venture capital fund
in 1999–2000; What has emerged from the post-bubble
struggle for existence is nothing less than some of the
strongest Venture Capital firms in the world.”
—John Holloway, European Investment Fund
14

15. While the supply of venture capital started to dry
out only after 2004 ...
Early-Stage VC
Fundraising Europe*
Investment
cycle
Inve
st
cyc ment
le
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
€ 1260 M € 5063 M € 8624 M € 5586 M € 2177 M € 1548 M € 1345 M € 3542 M € 2927 M € 3585 M € 2265 M € 1465 M € 811 M
15
*1998-2006: Thomson Financial/PWC statistics, High-Tech Early-Stage;
2007-2010: PEREP Analytics, Early-Stage
Source: EVCA

16. …Only the fittest venture capital firms
survived the post-bubble shake out
Number of VC Funds in Germany
Europe 1999 vs. 2011*
UK
1,60
0
- 63%
France
Thereof the
Top 20 VCs
in Europe
Other
711
19
99
20
11
16
*Active Funds = all VC funds, doing ≥ 4 investments per year. Sub-set of so-called “Investment
Grade Funds”: US$ 100M; > 50% non-captive capital; raised successor fund with vintage year ≥ 2006
Source: NVCA; EVCA; Earlybird Estimates

17. The dramatic capital supply imbalance
between the US and Europe
(which receives only one
fifth of VC Investments) …
VC Investments in Proportion
to GDP (2010) U.S.
0.150
x
5.8
Europe
0.026
Scandinavia UK Switzerland France Ireland Germany Benelux Austria Spain CEE Italy Portugal Poland
0.051 0.045 0.042 0.035 0.027 0.026 0.022 0.014 0.011 0.007 0.004 0.003 0.003
Source: EVCA,
Eurostat 2011 17

18. …Has meant that a comparatively small
but mature sub-set of European VCs are able to
now move into fund generations 3 and beyond
VC teams’ maturity by number of funds raised
W. Europe U.S. Ratio
≥ 2 73 334 4.6x
≥ 3 58 202 3.5x
≥ 4 28 132 4.7x
≥ 5 8 94 11.8x
≥ 6 4 65 16.3x
Time since early growth 10–15 50–60 4–5x
of VC industry (years)
Source: Dow Jones VentureSource (cross selection, not all funds included) 18

19. As a result, it is a
buyer’s market* in Europe:
“European venture capital is a cottage industry
characterised by an insufficient number of private
investors (e.g. lack of pension and endowment funds
which account for roughly 65% of the US VC industry)
with the capacity and willingness to invest in venture
capital, mainly due to past disappointments and the
resulting lack of confidence which still inhibits the
European venture industry today.”
—Egbert Freiherr von Cramm,
Managing Director, Deutsche Bank Private Equity
19
*In the US venture receives substantial funding from university endowments, pension funds and family offices - these three combined are by far the largest contributors
and account collectively for more than two third of the US venture capital. In contrast, university endowments within the EU allocate less than 2% of their assets to
private equity as a whole, compared to over 10% in the US. Also, while there are over 11,000 family offices in the US, there are only 2,500 family offices in the EU.

20. Demand side: Proliferation
“ The scarcity of VC money in
Europe not only has led to low
entry valuations, but also has
driven up capital efficiency
(roughly 70 percent higher
than in the US) and yield (hit
rate) because the scarcity of
money allows the very few
investors to simply be more
selective.”
—Uli Fricke, EVCA Chairwoman 2010-2011
20

21. There has been a surge in both the quality
and quantity of the
entrepreneurial pool
in Europe… 93%
92%
50%
ut
itho t
W ea s
rep eneur
epr
e ntr
5.2%
7.4% 7% 50%
h
Wit at
EB
8%
98
e s
rep eneur
/9
epr
9
e ntr
EB
20
0 0
EB
2006 2009
20
07
Latent entrepreneurs in European No. of portfolio companies with repeat
population between 18 and 64* entrepreneurs in Venture Capital funds**
21
*Not yet involved in entrepreneurial activities, definitions slightly changed from 2006 to 2009 **Earlybird Venture Capital Fund IV as
example (a broader survey of 8 European VCs across 16 funds found an average of 37% serial entrepreneurs in portfolio companies (EVCA, 2011)
Source: Earlybird Analysis, Global Entrepreneurship Report 2006/2009

22. …Resulting in a steadily
1,
87
2
growing high-quality early +17
stage dealflow %
1,6
Earlybird Dealflow Year on Year
00
(No. of New Leads)* +6
%
1,4
011
99
2
+17
%
2010
1,
28
+7
5
%
20 09
1,
20
4
2008
2007 *Does not include all leads screened on “fly-by”; gross dealflow factor of min. 1.3 - 1.5x
**Expected based on dealflow as of May 31, 2011
22
Source: Earlybird Venture Capital Deal Database

23. This means that only a fraction of startups
in europe receive funding, so only
10
92
the very best firms receive
11
14
46
6
venture backing
4
15
98
Number of Midstage
(>$5M) VC Deals
22
14
1
30
20
19
10
1
13
45
26
20
1
90
13
28
30
4
20
80
11
69
24
20
5
07
U.
S.
24
20
4
06
23
20
2
05
20
19
40
2
Source: EVCA,
23
Eu
ro
Venturesource
e p
20
03

24. …while European capital efficiency results
both from low entry valuations…
Early stage entry valuations for Venture Capital investments
€ millions
€8 M
€6M
US
A
€4M
.5
~1o
tx
2.5
Eu
ro
€2M
pe
0
2004 2005 2006 2007 2008 2009
Source: Dow Jones VentureSource
24

25. … and lower cost of growing businesses /tight
control of cash invested…
Median European investments Median U.S. investments
€10 M €10 M
€8 M €8 M
€6 M €6 M
Later
€4 M €4 M
Second
Later
€2 M
Second €2 M First
First
Seed Seed
0 0
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
Source: Dow Jones
VentureSource 25

26. …Which has resulted in Europe matching
the US for successful exit values at around $ 350M...
Average Exit Cap ($ 100M+ Exits) US$M
$700 M China
$600 M
$500 M
Europe
$400 M
$300 M
$200 M
USA
$100 M
0
2004 2005 2006 2007 2008 2009 2010
Source: Dow Jones VentureSource
26

27. … while investing only half
the capital to build winners
Average Capital Invested Prior to $ 100M+ Exit
$100 M USA » xits in the same order of
E
magnitude need only half
the amount of VC in
Europe
$80 M
» S capital efficiency not
U
generally increasing—
$60 M hence lower returns,
Europe higher prices—and the
current shake out
$40 M
» verage in US 1997–2001
A
China
was $ 41M per company at
$ 317M average exit—just
$20 M like Europe now
27
0
Source: Dow Jones VentureSource, 2008 exchange rates
2004 2005 2006 2007 2008 2009 2010

28. These market changes have led to significant
european advantages in entry
valuations, capital M
88
efficiency and hit rate $3
Benchmarking of VC M
Performance Drivers, $79 M
100 $ 304
Europe vs. USA, %
2004–2011 ytd
M
$16.1
M
$44
io it
at Ex
n
lu e
Va rag
e
Av
.5 M
it ior l
Ex Pr ita
$5
to ed ap
st C
ve ge
In era
Av
US
A
Eu
n* y
io tr
ro
at En
lu e
p
Va rag
e
e
Av
* Average median pre-money valuations of the years
2004-2010 ytd. Source: EVCA, Earlybird analysis
28

29. Reprehensible
…that you are only now reading about the Comeback,
but then again: Visibility on European VC Funds for
investors is highly limited and prejudiced by the poor
quality of published industry fund statistics in Europe.*
* As a result, recent LP surveys (including most recently from Coller Capital) continue to reflect a dampened VC investment climate in Europe, even though
real performance of European VC – by all indicators including current venture-backed liquidity events – is dramatically better than generally perceived. 29

30. Very small data set in europe – 21% of funds in
database Representing only
15% of the industry 4 7
Da 2,7
do taba
No. of Funds e s
co s note
en ver
ind tire
us
try
In the US, market publication
requirements of endowments oblige most
GPs to publish financial performance. In
contrast, there are no such requirements
42
in Europe, so many of the top-performing 1
1,26
%
European funds are not publishing their 1
financial data in the Thomson Venture 1,17
database. Moreover, in Europe 85% of
EVCA listed funds have disappeared since
the burst of the bubble, and only 10% of
the remaining funds are considered
active, yet the bulk of European venture
fund managers that are still listed are no
21
longer active, resulting in a long non-
%
A
US
To Da
contributing tail of European VC funds 262
ta ta
in
l F ba
un se
ds
listed in the Thomson database.
Fu rfor ata
Pe D
nd m
Source: EVCA, Earlybird Analysis
pe
s w an
ro
ith ce
Eu
Source: Preqin Performance Analyst database
30

31. European Venture statistics are
7 notoriously misleading: Performance
of post bubble vintages
93 22
36
not yet visible
50
65
78
52 Pos
75 t-bu
bbl
84 e vi
64 nta
ges In addition to highly
96
misleading published
Un
re
100
al
historical industry data for
ize
d
50 100
100
% European VC which lead to a
100
negative bias in official
100 statistics, there is almost no
48
Re
reported performance of
al
35
ize
d
post-bubble vintages (which
effectively started only
19
97
2004/2005) – these funds
19
89
25 are significantly better
19
99
performing and, as evidenced
20
00
9 by recent exits across top-
20
01
16 tier funds, are now at the
20
02
inflection point
20
03
Assembly of NAV,
20
4
40
European Venture
20
05
Funds by Vintage
20
06
20
07
20
0
31
8
Source: Cambridge Associates: Global VC & PE
20
09
Index and Benchmark Statistics 2009

32. Just one example: German
venture capital
The dramatic
changes in the
European venture
scene are well illustrated
in Germany, which over the
past 24 months has produced
the highest number of venture–
backed exits in Europe
31

33. In an economy that is not exactly
underperforming...
Thursday, Feb. 03, 2011 Monday, Mar. 07, 2011
Vorsprung durch How Germany Became
Exports the China of Europe
Which G7 economy was the best performer of
the past decade? And can it keep it up?
…”Germany is in a very competitive position today, more than
ever,” proclaims Stéphane Garelli, director of the world
…Berlin beats Bay Area… Competitiveness Center at the Swiss business school IMD…
…Germany grew at its fastest pace for two decades in …German companies poured money into R&D and cut
2010… expenses…
…Germany churns out specialized products of such superior
…Over the past decade Germany had the fastest growth in quality…
GDP per person among the G7 club of rich economies…
…That has kept the country in front of emerging economies
like China’s and helped it benefit from their rapid growth…
…The IMF forecasts that Germany will also have the fastest
growth in GDP per head over the next five years… …Germany “is a road map for the U.S. and other countries”…
33

34. “...increasing numbers of Germans are choosing to
forgo corporate life to create nimble, hungry and
global high-tech ventures; moreover, they realize
that the rapid rise of technology-enabled services
over the past decade is a faster route to success than
the more capital-heavy Mittelstand.”
—
Sven Weber,
President,
Silicon Valley Bank Capital
33
* As a result, the deal flow quantity in Germany is increasingly driven by available entrepreneurs, in contrast to the US, where deal flow is driven by available
innovations. Indeed, the density of available entrepreneurs in Germany has almost doubled from 2006 to 2010 according to the global entrepreneurship report,
increasing from roughly a third of the US figure in 2006 to two-thirds of the respective US figure today.

35. This has resulted in over $ 4.4 BN
in venture-backed exits in Germany
during the last 24 months
Venture-Backed Exits Germany past 24 Months (as of March 2011)
Company Acquirer 0 $200 M $400 M $600 M
Big Point* Summit & TA Associates $600 M
Invatec Medtronic $500 M
City Deal* Groupon $500 M
RIB Software IPO $500 M
Brahms Thermo Fisher $470 M
Zouk SiCProcessing $280 M
MTM Roche $267 M
Netviewer Citrix Systems $240 M
Brands for Friends eBay $200 M
Redcoon Media Markt $130 M
Endoart Allergan $97 M
eCircle TA Associates $85 M
Inge AG BASF $70 M
Nugg.ad Deutsche Post $70 M
BridgeCo (SMSC) SMSC $68 M
Aloca Motorola $50 M
KaufDa Axel Springer $40 M
Netzathleten Bertelsmann $25 M
35
* Enterprise Value
Ubitexx RIM NA Not including omitted and smaller exits
Source: BVK, Earlybird analysis

36. Yet in an economy
that is 25% of US GDP…
…Germany has only
4 independent VC funds
of Investment-Grade
size > € 100M
(Vs. in the US >227 funds)
35

37. A multi-localized venture model
“Germany has a unique model where, in a different twist
to the hugely successful VC-funded start-up ecosystem
of Silicon Valley, the industry is not as much reliant on
a handful of blockbusters or even a closely networked
startup environment, but rather one where a high number
of regionally diversified quality opportunities correspond
to increasing levels of entrepreneurial activity.”
—
Andreas Ritter, ARICO Private Investments
Advisory and former Head of Private equity Duke
University’s endowment
37

38. This environment Is producing best-in-class
funds with attractive market fundamentals...
Inside-out German VC fund view confirms Median Pre-Money Valuation
unparalleled current environment – Initial Round in €M
1 (4 1 (6 3 (1
5 (1 %) 6 (3 )
% 6%
8% ) €9.
) 5% 8M
)
ge
14 (
ta
74%
-s
id
21 (
M
78% )
) €5.
3M
10 (
59%
)
e
ag
st
ly
r
Ea
€3.
19
98
8M
Fu
n d
2 (1
20
0%
0 0
)
Fu
n
20
20
19
d
9
0
07
d
8
0
e
Se
20
Fu
Fu
Fu
n
n
07
n
d
d
d
Fu
n d
Source: Earlybird Venture Capital example
38

39. …while many VCs are now investing beyond
the J-curve and generating early liquidity
€3
6.
due to strong accelerated traction
6
Revenue Traction per Fund Generation (Year 1-5)* in €M
These trends suggest that German VC has plenty of headroom, with accelerating exit activity
further improving performance in post-bubble vintages (2005/2006 et seq.)
und und und
8F 0F 07
F
€1
199 200
3.
20
4
€1
4.
5
€6
€1
0.
.6
5
€7
.6
€7
.1
€3
€2
.2
.8
FC
€3
€3
5
5
5
.7
.4
Yr
Yr
Yr
4
4
4
Yr
Yr
Yr
€0
.2
3
3
3
€0
Yr
Yr
Yr
€0
.9
.8
0
2
2
2
Yr
Yr
Yr
1
1
1
Yr
Yr
Yr
*Aggregate shareholding weighted revenue contribution of portfolio companies
Source: Earlybird Venture Capital Example 39

40. Summary:
The Sky is the Limit
» he structure and performance of European
T
venture capital illustrates the unparalleled
potential of a matured industry.
» number of funds based in Europe
A
have achieved US top quartile
performance in post-bubble era.
» he imbalance between VC funding (supply)
T
and investment opportunities (demand) is
driving a unparalleled competitive landscape.
» uropean VC has finally emerged with strong
E
fundamentals within the context of an
inefficient market while benefitting from a
higher capital efficiency than the US.
39

41. Presented By:
Hendrik Brandis Jason Whitmire
Managing Partner General Partner
Earlybird Venture Capital Earlybird Venture Capital
With Assistance From:
Amit Kumar Jain,
Summer Associate, INSEAD
Designed by Arno Ghelfi, l’atelier starno.
Photos for illustrative purposes only. 41