1.
Early Stage Marketplace Data ©
Slide 2 Life in the Liquidity Food Chain – Problem
Slide 3 Life in the Liquidity Food Chain – Solution
Slide 4 The Liquidity Food Chain
Slide 5 Art of Investing vs. Science of Investing
Slide 6 Members of the Early Stage
Slide 7 Buying & Selling in the Early Stage
Slide 8 VCs Sell to Validation Partners
Slide 9 VCs Buy from Sponsored Sources
Slide 10 Size of Angel Market
Slide 11 - 14 Private Market Providers & the Rise of the Internet
Slide 15– 18 Changing Global Demand – BRIC & Beyond
Elliott Dahan The Growth Group elliott@thegrowthgroup.com 650 814 7644
1

2.
LIFE IN THE LIQUIDITY FOOD CHAIN
THE PROBLEM
All Startups need BOTH
Validation and Funding
2

3.
LIFE IN THE LIQUIDITY FOOD CHAIN
THE SOLUTION
Create a global marketplace that
satisfies the self interests of each
member of the Early Stage
Community
3

4.
The Liquidity Food Chain
BUY EXIT - IPO & Corporate M&A (2) SELL
PRE-IPO - Private Networks (Sharespost/2ndMarket)
GROWTH – Alternative Trading Systems,
Series B +++, Corp Dev /Corp M&A
EXPANSION - Series A/B – VC / Corp Dev
THE EARLY STAGE MARKETPLACE
Early Stage Funders – Angels/VCs/Work-For-Hire
Sponsoring Organizations – Accelerators, Incubators,
Univ. Public & Private Mentoring Organizations
Sponsored Companies – startups
Validation Partners (1) – Corporate Partners / Corp. Dev.
NOTES (1) Validation Partners can provide either funding and or partnership (2) ―venture capitalists
report selling to a public company (49.9%) as the most likely course of action for a liquidity event.
Nearly 24.6% indicate their plans to sell to a private company while 16.8% are planning for an initial
public offering.‖ Pepperdine – ―Private Capital Markets Project‖ – August 2009
BUY 4
SELL

5.
BUYING DECISIONS OF THE LIQUIDITY FOOD CHAIN
Public IPO / Corp. M&A Hardcore Financial Data
Corp M&A
Pre-Exit
PMN – 2ndMkt / Short term / Liquidity
Sharespost /VCs/PE/Corp Corp M&A
M&A
Series B++ Strong Potential
ATS – Xpert Financial/ VC Corp Development
/Corp Dev
Early Stage Marketplace Team / Mkt Size /
Angels/VCs/Corp Dev Solution /. . “GUT”
Seed/Series A
ART of Investing SCIENCE of Investing
5

6.
The Members of the Early Stage
Community (www.earlystagemarketplace.com)
6

7.
EARLY STAGE MEMBERS ARE CONSTANTLY
BUYING AND SELLING FROM EACH OTHER
ESM MEMBER BUY FROM SELL TO
Validation Partner Sponsored Companies Internal Oper. Divisions,
Funders Funders, Corp Spinout VCs
Sponsoring Sponsored Companies Funders, Non Profit Grants,
Corp. Sponsorships,
Organizations Mentors/Advisors/Pro Bono
Sponsored Sponsoring Sponsoring Orgs, Funders,
Organizations Validation Partners, other
Companies Sponsored Companies
Sponsored Companies, Validation Partners,
Funders Tech Transfers, Corp. Upstream Funders, Funders
Spinouts, Funders to syndicate current round
7

8.
VCs & Validation Partners Working Together in
the Early Stage Collaboration Community
Pepperdine – ―Private Capital Markets Project‖ – August 2009
―Regarding exit plans, venture capitalists report selling to a public company (49.9%)
as the most likely course of action for a liquidity event. Nearly 24.6% indicate
their plans to sell to a private company while 16.8% are planning for an initial
public offering.‖
VCs report that 75% of their projected
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Exit/Liquidity will be with Validation Partners

9.
VCs and Deal Flow Sources
Pepperdine – ―Private Capital Markets Project‖ – August 2009
―Deal flow comes from a variety of sources. The largest category is
entrepreneurs themselves (26.6%) followed by members (25.9%)
and word of mouth (13.5%).‖
1) 85% of VC Deal Flow is sourced from a “Sponsor” with 12% sourced
from Other and 4% from Websites
2) “Vouching” is important at all levels – From the Angellist homepage -
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―Who do you trust? Who do you know? -

10.
SIZE OF ANGEL MARKET
• Angel investors are estimated to provide 90 percent of the seed and start-up
capital in this country— for 30,000 to 50,000 companies per year. Angels
invest $15 to $30 billion per year in U.S. start-up companies
William H. Payne Entrepreneur, Angel Investor, and Kauffman Foundation Entrepreneur-
in-Residence 2010 Ewing Marion Kauffman Foundation
• SBA estimates that there are at least 250,000 angels active in the country,
funding about 30,000 small companies a year. The total investment from
angels has been estimated at anywhere from $20 billion to $50 billion as
compared to the $3 to $5 billion per year that the formal venture capital
community invests. http://www.smallbusinessnotes.com/ 2010
• EBAN estimates that the number of business angels in Europe is around
75,000, a small number in comparison to the US, which has an estimated
250,000. The European angel market represents circa 25% of the
American angel market. EBAN (European Business Angel Network) White Paper 2010
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11.
Private Market Providers
COMPANY LICENSE STAGE TRANSACTION TYPE
NEEDED LINEAR OR COMMUNITY
MicroVest No Seed Linear - aggregates to invest in global micro for profit
funds
Angel List No Seed-Series A Linear - startup to Angel - good example of Vouching
Angelsoft No Seed-Series A Linear - startup to Angel - application driven - deal flow
tools - no Vouching
Angel Pool No Seed-Series A Linear - Angel to Angel syndication
Angel Bridge No Seed-Series A Linear - Angel to Angel syndication
Xpert Financial Yes Mid Growth Linear - Private Offerings, Secondary Markets -
Broker/Dealer to Investor
Axial Market Yes Mid Growth Linear - Private Placements - Broker/Dealer to Investor
Sharespost Yes Late Growth Linear - Pre IPO companies NOTE 1
Second Market Yes Late Growth Linear - Pre IPO companies
ESM NO Seed-Series A Collaborate Community -
(1) has its own special-purpose funds to buy up private-company shares and charge participants a 5
percent fee to manage them. Sharespost has raised three such funds — two for Facebook shares and one
for shares in LinkedIn, which is in registration for IPO. 11

12.
―The New Financial Matchmakers‖
Bob Rice Booz & Com Summer 2011
― a new generation of private securities platforms that has
begun to emerge over the past few years provides much
more (than traditional platforms): opportunity discovery
and recommendation engines; analytics and evaluation
tools; secure virtual diligence rooms with tiered access
rights; industry benchmarks and comparables; deal
and deal flow management systems.
These platforms also offer the reach equal to that of the
Internet itself.‖
The Early Stage platform is not Linear – it is a Community
where all members are both Buyers and Sellers –
constant transactions between Members
12

13.
SEC may let startups use social
networks to raise money April 9, 2011 | Dean Takahashi
Federal securities regulators are weighing demands to make it easier for fast-growing
companies to use social networks such as Facebook and Twitter to raise money by
tapping thousands of investors for very small amounts of shares.
The Securities and Exchange Commission is looking at adapting its rules to encourage
Internet-age techniques for small companies raising capital. The issue is part of a
wider review by the agency into whether to ease decades-old constraints on share
issues by closely held companies.
Crowd funding could be a cheap source of cash, competing with angel investors who
specialize in giving seed rounds to start-ups. Since the amounts of money are small,
the downside risk isn’t too bad for investors. But the trick will be in protecting the
public from scammers who have no intention of following through on promises.
REGISTERED SPONSORING ORGANIZATIONS AND
FUNDERS ELIMINATE THE “SCAMMING” ELEMENT
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14.
Cantor Fitzgerald Bets On An Expanding
Private-Stock Market VentureWire October 10, 2011
• Cantor Fitzgerald is looking to cash in on a growing secondary market for shares in hot
private companies such as Facebook and Twitter. The financial services firm is creating
a private markets group to afford clients opportunities to invest in private company
stock ―For us this is an opportunity to be the dominant player in a very fragmented
market,‖ Shawn Matthews, the firm’s chief executive, told VentureWire.
• The market has also drawn interest lately from J.P. Morgan Chase, which raised $1.2
billion for a digital growth fund, and Goldman Sachs Group, which raised $1 billion
from its foreign clients to invest in Facebook.
• Matthews also said his firm doesn’t plan to rely on existing secondary market players to find
deals. ―We come already with a significant investment bank behind us,‖ he said. “We’ll be
sourcing our own deals. I think that’s where our competitive advantage lies.”
• Based in New York, Cantor Fitzgerald has more than 5,000 institutional clients and
1,400 employees in 30 offices worldwide, the firm said.
14

15.
½ of US VCs will invest outside
of US in 2011
15

16.
Number of venture firms expected to
decline in traditional markets; expected to
grow in emerging markets
Increase Increase Remain Decrease Decrease
+30% 1% - 30% the Same 1% - 30% +30%
Brazil 30% 68% 3% NA NA
China 48% 51% NA 1% NA
India 21% 73% NA 9% 9%
US NA 4% 4% 68% 24%
the team (Yuri Milner and DST) is studying opportunities across Asia,
including China, India, Indonesia and South Korea. Over the next five years,
DST expects to devote 40 percent of its capital to the region. NYT, 9/28/2011
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Deloitte 2010 Venture Capital Global Report

17.
Limited Partners inclination to invest in
VC home country –Next 5 yrs
More No Change Less
Inclined Inclined
Brazil 92% 8% NA
China 91% 6% 3%
India 76% 18% 6%
US 15% 29% 56%
Deloitte 2010 Venture Capital Global Report
17

18.
Venture Capitalists Chase Seed-Stage Deals
DEALS INDIA OCTOBER 25, 2011
• Large investment funds in India such as Sequoia Capital India, Norwest
Venture Partners India, Nexus Venture Partners and Draper Fisher
Jurvetson have started focusing strongly on their India "seed" initiatives.
Over the last one year, Sequoia has made at least nine such
investments.
• Helion Venture Partners, SAIF Partners and a few others also incubate
start-ups, and back them in their next rounds of funding.
• Norwest, Nexus and Draper Fisher have started their own seed capital
programs. Blume Venture Advisors, which is still in the midst of raising
money for its fund, has completed more than a dozen deals, including its
$300,000 investment in Adepto Solutions Pvt. Ltd, a Mumbai-based
developer of social commerce platform Trol.ly.
• Other recent seed-stage deals include My First Cheque's investment of
an undisclosed amount in MeriCAR Workshops, which runs
MeriCAR.com, India's first dedicated car-servicing portal.
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