The U.S. economy is improving at a modest but positive pace, and business experts expect that trend to continue into next year and beyond. This was a theme echoed by several speakers Oct. 3 at a McCombs event called “The Economy in 2014: The Year of the Rebound?” See the summary and video: The U.S. economy is improving at a modest but positive pace, and business experts expect that trend to continue into next year and beyond. This was a theme echoed by several speakers Oct. 3 at a McCombs event called “The Economy in 2014: The Year of the Rebound?” - See the summary and video: http://www.texasenterprise.utexas.edu/2013/10/17/finance/2014-year-rebound Highlights Jay Hartzell, professor of finance, University of Texas at Austin McCombs School of Business “There are roughly three ways to get out of the debt problem: You grow your way out, you tax your way out, or you print money,” Hartzell said. “The growth forecast is not very strong for the next few years. It’s not clear we have the political will to tax our way out of it. So that leaves inflation, which many people have concerns about.” Tyson Tuttle, CEO of Silicon Labs Tuttle said a surge in investment in connected smart devices is driving a transformation of the tech industry. He expects low-cost, low-power devices to enable home and industrial automation, development of efficient smart grid and mobile technologies, and the advent of “big data.” “All of this is going to be enabled by new types of devices, chips and applications that people haven’t even thought of before."“This is going to create a lot of opportunities for startups, software creators, infrastructure providers, and certainly in our world.” Daniel Nelson, CEO and founder of Datical “By the end of 2014, there will be a glut of failed startups — and this is a really good thing, because they’re supposed to fail. The real question is, after those startups fail, what do those founders do?” Nelson said. “The virtuous cycle of entrepreneurism starts with failure. It starts with failing, learning, and trying again — and then failing, learning, and trying again. Dennis McWilliams, CEO and founder of Apollo Endosurgery “No other state, even California and New York, can compare to the resources we have in Texas for early-stage investment in new technologies,” McWilliams said. “We really are becoming a global economy of healthcare, and innovation that’s happening here in Texas is moving around the world.”

2. Economic Outlook 2014
Jay C. Hartzell
Chair, Department of Finance, McCombs School of Business
The University of Texas at Austin

3. Economic Forecasts
§ Research Department, Federal Reserve Bank of
Philadelphia
§ “Survey of Professional Forecasters”
§ First quarter (August 16, 2013)
§ Doing this since 1968
§ 42 “Professional Forecasters”
§ Provide advice used by large commercial institutions
§ Members of National Association for Business
Economics (NABE)
§ Use a variety of techniques and assumptions to arrive
at forecasts

4. Real Gross Domestic Product
§ Definition
§ Historic average annual rate of growth
§ ~ 3.0%
§ Median forecasts (annual rate of growth)
2013
2014
2015
2016
2.2%
2.3%
2.7%
2.9%
§ Risk of negative quarter (probability)
2013: Q3
2013: Q4
2014: Q1
2014: Q2
2014: Q3
10.5%
11.2%
11.7%
11.5%
11.8%

5. Unemployment & Workforce Participation
§ Unemployment (natural rate ~ 6.0%)
2013
2014
2015
2016
7.5% (~12.5 million)
7.1%
6.6%
6.1%
§ Under-employed (BLS “Alternatives”)
§ ~ 12%-18%
§ Workforce Participation Rate
2000
2008
2013
67.3% (143 million)
66.3% (154 million)
63.2% (155 million)
§ Okun’s Law
§ ~ 3.0% Real GDP Growth to reduce unemployment

6. Foundations of Low Growth
§ Consumer spending and households
§
§
§
§
Stagnant incomes
High or under employment
Deleveraging
Uncertainty
§ Business investment
§ In aggregate, slim profit prospects
§ Contraction in household and government sectors
§ Uncertainty, particularly in government policy
§ Government spending
§ AAAAGGGGHHH! (debt-to-GDP ratio)
§ Net Export
§ Slowing global growth

7. Inflation (Consumer Price Index)
§ Definition
§ Historical average (annual rate)
§ ~ 4.0%
§ Median forecasts (annual rate)
Headline CPI
Core CPI
2013
1.4%
1.8%
2014
2.0%
2.0%
2015
2.3%
2.1%
§ Long-term forecasts (annual rate)
Headline CPI
2012-2016
2.0%
2012-2021
2.0%
§ Comments of Fed on controlling inflation
§ Managing liquidity (e.g., bank and non-bank reserves)
§ Commitment to inflation

8. View from 30,000 Feet (2013-2016)
§ Slow growth
§ Improving private sector balance sheets
§ Deteriorating (dramatically) public sector balance
sheets
§ High unemployment
§ High under-employment
§ Lower workforce participation
§ Low interest rates
§ Low-ish inflation
§ More wealth re-distribution than creation
§ Energy
§ Health care
§ Education

9. Embargoed for release at 2:00 p.m., EDT, September 18, 201
Latest Fed Forecasts
Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, September 2013
Advance release of table 1 of the Summary of Economic Projections to be released with the FOMC minutes
Percent
2013
Change in real GDP . . . . . 2.0 to 2.3
June projection . . . . . . 2.3 to 2.6
Central tendency1
2014
2015
2016
2.9 to 3.1 3.0 to 3.5 2.5 to 3.3
3.0 to 3.5 2.9 to 3.6
n.a.
Unemployment rate. . . . . . 7.1 to 7.3
June projection . . . . . . 7.2 to 7.3
6.4 to 6.8
6.5 to 6.8
5.9 to 6.2
5.8 to 6.2
PCE inflation. . . . . . . . . . . . 1.1 to 1.2
June projection . . . . . . 0.8 to 1.2
1.3 to 1.8
1.4 to 2.0
Core PCE inflation3 . . . . . 1.2 to 1.3
June projection . . . . . . 1.2 to 1.3
1.5 to 1.7
1.5 to 1.8
Variable
Longer run
2.2 to 2.5
2.3 to 2.5
2013
1.8 to 2.4
2.0 to 2.6
2014
2.2 to 3.3
2.2 to 3.6
Range2
2015
2.2 to 3.7
2.3 to 3.8
5.4 to 5.9
n.a.
5.2 to 5.8
5.2 to 6.0
6.9 to 7.3
6.9 to 7.5
6.2 to 6.9
6.2 to 6.9
5.3 to 6.3
5.7 to 6.4
5.2 to 6.0
n.a.
5.2 to 6.0
5.0 to 6.0
1.6 to 2.0
1.6 to 2.0
1.7 to 2.0
n.a.
2.0
2.0
1.0 to 1.3
0.8 to 1.5
1.2 to 2.0
1.4 to 2.0
1.4 to 2.3
1.6 to 2.3
1.5 to 2.3
n.a.
2.0
2.0
1.7 to 2.0
1.7 to 2.0
1.9 to 2.0
n.a.
1.2 to 1.4
1.1 to 1.5
1.4 to 2.0
1.5 to 2.0
1.6 to 2.3
1.7 to 2.3
1.7 to 2.3
n.a.
2016
2.2 to 3.5
n.a.
Longer run
2.1 to 2.5
2.0 to 3.0
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are from the fourth quarter of the previous year to
the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption
expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the
fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each
participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the
economy. The June projections were made in conjunction with the meeting of the Federal Open Market Committee on June 18–19, 2013.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year.
2. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year.
3. Longer-run projections for core PCE inflation are not collected.

10. US Economic Policy Uncertainty Index

11. US Economic Policy Uncertainty Index
Economic Policy Uncertainty Index
Monthly US Economic Policy Uncertainty Index
Zoom 1m 3m 6m YTD 1y
All
200
175
150
125
100
75
Sep '12
Nov '12
1990
Jan '13
Mar '13
2000
May '13
Jul '13
2010
Highcharts.com
9/20/13 11:09 AM

12. Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy
Fed Policy: Growth and Inflation Forecasts
Number of participants
Appropriate timing of policy firming
12
Figure 1. Central tendencies and ranges of economic projections, 2013–16 and over the longer run
12
11
Percent
10
9
Change in real GDP
Central tendency of projections
Range of projections
5
8
4
7
6
5
4
3
3
Actual
2
2
3
2
1
+
0
1
1
2
2014
2008
2009
2010
2011
2012
2013
2015
2014
Appropriate pace of policy firming
2015
2016
2016
Longer
run
3
Percent
Target federal funds rate at year-end
6
Percent
5
Unemployment rate
10
4
9
3
8
2
7
1
6
0
2013
2008
2009
2010
2011
2012
2014
2013
2014
2015
2016
Longer run
2015
2016
Longer
run
5

13. www.silabs.com
How the Internet of Things Is
Transforming Our Economy
Tyson Tuttle, CEO, Silicon Labs
October 3, 2013

14. Silicon Labs Background
Ø Austin’s largest home-grown semiconductor company
§ Founded in 1996; Public since 2000 (NASDAQ: SLAB)
§ Strong track record of diversification, revenue growth and profitability
§ Fabless model with >1,000 employees and 10 R&D locations worldwide
Ø Focused on mixed-signal innovation
§ Broad portfolio addressing consumer, industrial and communications markets
§ Serve >10,000 customers with >5 billion devices shipped
§ >1,300 patents issued or pending
14

15. Key Industry Trends
Green Technology
Internet of Things
Drive
to
improve
energy
efficiency
and
reduce
power
consump5on
creates
new
markets
for
mixed-­‐signal
ICs
15
Bandwidth Expansion
Demand
for
data
drives
infrastructure
investment
in
telecommunica5ons,
cloud
compu5ng
and
wireless
infrastructure
The
connec5on
of
low-­‐cost,
low-­‐power
devices
to
enable
home
and
industrial
automa5on,
smart
grid
and
more

16. More Connected Devices Than People
Source: Silicon Labs, Thomson Reuters, Morgan Stanley
16

17. The Internet of Things Is a Game Changer
Smart
Grid
Safety
Security
Connected
Home
Building
Automation
Lighting
Control
Smart
Devices
Health
Fitness
Broad range of technologies and applications creates
opportunities for new products and entrants
17

18. Convergence of Technologies
Multiple technologies converging simultaneously
– all enabled by semiconductors and software –
+
Massive data centers
for cloud computing
18
Mobile computing and
connected devices
Internet of Things

19. The Internet of Things Is Here Today
Ø Availability of low-cost, integrated end devices
§
§
§
§
Embedded processors and microcontrollers (ARM)
Wireless connectivity (Wi-Fi, Bluetooth, ZigBee)
Sensors and actuators
Long battery life or energy harvesting
Ø Big Data / Analytics + Internet of Things
§ Increased asset utilization
§ Improved energy efficiency and reduced
environmental impact
§ Increased employee productivity
§ Elimination of waste in supply chain and logistics
§ Improved customer experience
§ Reduced time to market across all industries
Ø Economic impact across all industries estimated to be $14.4 trillion
over the next decade (Source: Cisco)
19

20. www.silabs.com
Thank You
www.silabs.com

21. Austin Start-Up Forecast 2014
October 3, 2013

22. Austin Start-Up Forecast
" Austin Start Up Demographics
" Local Investment Environment
" Talent Pool
" 2014 Forecast

23. Austin Start-up Demographics
" It’s getting bigger…fast
•
But we are still pretty small, comparatively
" More start-ups
•
More resources
-
•
More talent
-
•
Incubators, UT programs, Angel & VC
Home grown and transplants
Cultural shift
-
Entrepreneurism more part of the local ethos
" Founders are tending to be:
•
•
Less experienced
Focused on solving market problems rather than “hard” business
problems (except Big Data).

24. Local Investment Environment
" More firms doing deals
•
•
But smaller size funds
Both local and outside Austin
" More angels
•
And more sophisticated, networked, and organized and funded
" Smaller deal sizes
•
•
•
More “activity”
More shut downs
Higher expectations

25. Talent
" Austin has great engineers
•
Which is why Google, Apple, IBM, Facebook, BMC, HP, etc., all
opened offices here
" Small companies have to be competitive on wages and benefits
•
And differentiate on environment, responsibility, excitement and
upside
" More startups then there are good managers
•
Founders vs Operators
" Certain specialties are very hard to find:
•
Mobile, UIX, Data Analytics/Scientist

26. 2014 Start Up Forecast
" Talent “crunch” will hurt growth
" More deals, but increasingly small in size
•
•
Venture investment will remain the same or decline slightly
More “micro-VC” and angel deals
" By the end of 2014 there will be a glut of failed start-ups
•
Big Question: Do those founders leave town or start fresh?

27. apollo
endosurgery
Life
Science
LiCoff
In
Texas
Dennis
McWilliams
CEO
/
Founder
Apollo
Endosurgery

28. Healthcare
Innova4on
Ma5ers
apollo
endosurgery
apollo
endosurgery

29. Health
Care
Spend
as
%
of
GDP
9.6%
6.3%
11.3%
11.4%
11.7%
17.7%
9.6%
3.9%
5.8%
apollo
endosurgery
apollo
endosurgery
8.9%

30. apollo
endosurgery
apollo
endosurgery

31. For
notes
only
on
previous
slide
For
notes
only
on
previous
slide:
Healthcare
spend
as
%
of
GDP
(Avg
2009-­‐2012)
Country
Name
United
States
France
Germany
Spain
Sweden
Brazil
Swaziland
Russian
Federa5on
Nigeria
apollo
endosurgery
China
India
apollo
endosurgery
Avg
17.7
11.7
11.4
9.6
9.6
8.9
8.2
6.3
5.8
5.1
3.9

32. Life
Science
Impact
in
Texas
$75
Billion
es5mated
economic
impact
of
biotech
in
Texas
(2009)
89,000+
Number
of
biotech
workers
in
Texas
apollo
endosurgery
apollo
endosurgery
#2
in
Clinical
Trials
in
the
US

33. Public
Investment
Venture
Capital
apollo
endosurgery
apollo
endosurgery
Industry
Investment

34. Top
Ten
Texas
Ins4tu4ons
for
Biomedical
R&D
FY
2012
Expenditures
Ins4tu4on
$2.6
Billion
invested
by
Texas
Public
Ins3tu3ons
in
life
science
R&D
Total
R&D
(Millions)
Univ.
of
Texas
(UT)
M.D.
Anderson
Cancer
$528.1
Baylor
College
of
Medicine-­‐Houston
$450.6
UT
Southwestern
Medical
Center
$389.0
UT
Health
Science
Center
at
Houston
$226.7
Texas
A&M
University
$189.3
UT
Health
Science
Center
at
San
Antonio
$163.8
UT
Medical
Branch
(UTMB)
at
Galveston
$139.4
endosurgery
$82.5
Texas
A&M
Health
Science
Center
apollo
The
University
of
Texas
at
Aus5n
$77.5
Texas
Tech
University
Health
Science
Ctr.
Total
$60.6
$2,361.4
Source:
Texas
Higher
Educa3on
Coordina3ng
Board
apollo
endosurgery

35. Number
of
Biotechnology-­‐Related
Degrees
Awarded,
2009-­‐2012
All
Texas
Public
Universi5es,
All
Degree
Levels
Biological
and
Biomedical
Sciences
26,084
Healthcare
Professionals
and
Technicians
14,413
Plant
and
Agricultural
Sciences
6,842
Animal
Sciences
3,318
apollo
endosurgery
Total
apollo
endosurgery
50,657
Source:
Texas
Higher
Educa3on
Coordina3ng
Board

36. apollo
endosurgery
apollo
endosurgery

37. Life
Science
Investment
in
Aus4n
Economy
apollo
endosurgery
apollo
endosurgery

38. Public
Investment
in
Healthcare
Innova4on
Texas
Enterprise
Fund
$277.9M
apollo
endosurgery
apollo
endosurgery
$98.1M
$3B

39. Venture
Investment
in
Innova4on
$1.4
billion
Peripheral
stents
invested
by
VC
firms
(2007-­‐2012)
in
Texas
biotech
&
medical
device
apollo
Less
invasive
AV
fistulas
endosurgery
apollo
endosurgery
Heart
valves
Cancer
Therapies

40. Apollo
Endo-­‐
Impor5ng
Technology…
apollo
endosurgery
apollo
endosurgery

41. Endoscopy
apollo
endosurgery
apollo
endosurgery
Endoscopic
Surgery
Laparoscopy

42. Global
innova5on
chain
apollo
endosurgery
apollo
endosurgery