Wayne Embree discusses the fundamental shifts in Oregon and the nation's economy at the OBC Access to Capital Meeting March 4, 2010

1. © 2009-2010 Reference Capital Management, LLC Oregon Business CouncilCluster Network Briefing4 March 2010 Wayne Embree, Managing Partner Reference Capital Management 12909 SW 68th Parkway, Suite 430 Portland, OR 97223 503-619-4310 x 202 wle@refcapllc.com

2. © 2009-2010 Reference Capital Management, LLC Overview Oregon, US economies undergoing a permanent, structural shift This is a jobless recovery Net in migration continues Political economy of “green” It’s a hollow promise, unless…

3. © 2009-2010 Reference Capital Management, LLC Wayne Embree Co-founder / manager of seven seed-stage funds since 1986 Our funds have backed over 100 companies, about 60 Oregon based Pioneered Oregon universities taking equity Masters thesis examined venture capital and university tech commercialization - 1983 USAF tactical ops officer (Capt) 1975 - 1980

4. © 2009-2010 Reference Capital Management, LLC Oregon Has Grown its R&D Base23-Year Change in Federal R&D Funds Source: Nat’l Science Foundation 1985-2008

5. © 2009-2010 Reference Capital Management, LLC Oregon Competes in Creating Intellectual PropertyPatents per Thousand Population USPTO, May 2009

6. © 2009-2010 Reference Capital Management, LLC = ~$1 Bill. Source: NVCA 2010 Source: NVCA 1980 - 2010 US Venture Capital Distribution (2009, $28 Billion)

7. © 2009-2010 Reference Capital Management, LLC Oregon Comparisons Sources: GDSP, Federal Reserve (2008) Univ R&D, National Science Foundation (2009) Population and Education data, US Census (2008)

8. © 2009-2010 Reference Capital Management, LLC Over the last six years… State Average per Year (mm) Washington $126.2 Utah $ 37.5 Oregon $ 17.2 Seed, Startup & Early StageInitial Financings ($millions) Source: NVCA 1980 - 2008

9. © 2009-2010 Reference Capital Management, LLC Utah Fund of Funds Smart Forest Shaw I Shaw III Berkman? Shaw II Total venture funds raised by in-state managers (Millions) NWTV Source: NVCA 1980 - 2008

10. © 2009-2010 Reference Capital Management, LLC Too Little Innovation Capital Sources: 1985 - 2008 Federal R&D Expenditures. PWCMoneyTree 2009

11. © 2009-2010 Reference Capital Management, LLC 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

12. © 2009-2010 Reference Capital Management, LLC Comparison:OIF & Utah Fund of Funds$100 million Allocation Since 2005 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) 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

13. © 2009-2010 Reference Capital Management, LLC 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

14. © 2009-2010 Reference Capital Management, LLC Other Economic Choices… Inflation? Wealth Creation?

15. © 2009-2010 Reference Capital Management, LLC 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 allocation Free treasury / OIC staff from any perceived local mandate - assign a dedicated manager Engage other capital sources in the discussion

16. © 2009-2010 Reference Capital Management, LLC Best Start-Up Climate in 20 Years Smart, experienced entrepreneurs Embracing capital efficiency Bay-area VCs overly conservative Potential customers actively seeking competitive advantages Must accelerate the innovation cycle

17. © 2009-2010 Reference Capital Management, LLC 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?

18. © 2009-2010 Reference Capital Management, LLC Thank You Questions?

19. © 2009-2010 Reference Capital Management, LLC Little Regional Variation in Deal Outcomes(Venture Source Database 1990 - 2008) Share of all Deals 39% 10% 11% 17% 23% © 2009 Robert Wiltbank, PhD, with permission

20. © 2009-2010 Reference Capital Management, LLC Oregon’s Technology Cluster: Roots in 1980s Recession Establish Oregon Operations 1976