Total U.S. growthink. Third Quarter Venture Capital Report RESEARCH

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1 EXECUTIVE SUMMARY To order a report, please call us at Or click HERE Third Quarter 2002 Total U.S. Venture Capital Report growthink RESEARCH! $4.9 Billion Invested!! 554 Company Profiles!! Over 1,250 Investor Profiles!

2 Growthink s Total U.S. Venture Capital Report Third Quarter 2002 TABLE OF CONTENTS growthink RESEARCH Executive Summary...1 Bay Area...5 Profiles of Funded Ventures...8 East Bay...8 Marin County / Sonoma County Metro San Francisco Metro San Jose Peninsula Investor Profiles...59 Central U.S Profiles of Funded Ventures Colorado Denver/Boulder Colorado Other Kansas Minnesota Missouri Texas Austin Texas Dallas Texas Houston Investor Profiles Great Lakes Profiles of Funded Ventures Illinois Indiana Michigan Ohio Wisconsin Investor Profiles...161

3 growthink RESEARCH Mid-Atlantic Profiles of Funded Ventures Delaware Metro D.C Virginia Non-Metro D.C West Virginia Investor Profiles New England Profiles of Funded Ventures Connecticut Massachusetts - Greater Boston Massachusetts - Metro Boston New Hampshire Rhode Island Investor Profiles Northeast Profiles of Funded Ventures Metro New York City Metro Philadelphia Metro Pittsburgh New Jersey Non-Metro NYC New York Other Pennsylvania Other Investor Profiles Pacific Northwest Profiles of Funded Ventures Oregon Washington Metro Seattle Investor Profiles Southeast Profiles of Funded Ventures Alabama Florida Georgia - Atlanta Georgia Other Kentucky Mississippi

4 growthink RESEARCH North Carolina Charlotte North Carolina Raleigh/Durham/Chapel Hill Tennessee Investor Profiles Southern California Profiles of Funded Ventures Greater Los Angeles Greater San Diego Orange County Ventura County / Santa Barbara Investor Profiles Southwest Profiles of Funded Ventures Arizona Nevada New Mexico Utah Investor Profiles Other Executive Summary California Other Hawaii Business Software & Services Profiles of Funded Ventures Profiles of Funded Ventures ebusiness Consulting/Systems Integration/IT Services e-learning/education Energy Services Financial Services HR/Billing/Payment/Back Office Information & Knowledge Mgt./Market Research/Collaboration Product Development Real Estate/Construction Sales/Marketing/CRM SCM/ERP/Logistics Other Business Applications, Services & Technologies Investor Profiles...495

5 growthink RESEARCH Connectivity Profiles of Funded Ventures Networking - Data Centers/Data Storage Networking - Intranet, Extranet and VPNs Networking - Optical Networking - Performance Management & Optimization Networking - Security Networking - General Semiconductors/Embedded Systems Service Providers - Broadband & Telecommunications Telecommunications - Equipment Vendors Telecommunications - Software/Applications Wireless - Wireless Infrastructure Solutions Wireless - Wireless Software Investor Profiles E-Content and Commerce Profiles of Funded Ventures B2B Content & Commerce B2B Marketplace/Exchange B2C Content & Commerce Destinations Consumer Products & Services Content Infrastructure Convergence Infrastructure Investor Profiles Healthcare Profiles of Funded Ventures Biotechnology/Pharmaceutical Diagnostic/Patient Care Medical Devices Software and Services Investor Profiles About Growthink Funding Report Methodology Growthink Inc.

6 Executive Summary growthink RESEARCH Introduction Over $4.9 billion of venture capital was invested in 554 private U.S.-based companies in the third quarter of While only 25 fewer companies raised funding than the preceding quarter, there was a 35% drop in companies that raised funding rounds of $20 million or more. This drop in high-end deals, coupled with a weakened economy, resulted in a 20% quarter-to-quarter decline in the total capital raised. Geographically, the Bay Area continued to lead the nation, receiving more than thirty percent (30.9%) of the capital invested. The Bay Area was home to the largest number of funded ventures (148) and two of the nation s top ten deals. Following the Bay Area was New England, where 78 companies raised $695 million. Though nearly 80% of New England s funding activity was concentrated in the Boston area, the region s largest investment was a $50 million round raised by a Connecticut-based healthcare staffing firm. Sixty five (65) companies in the Southeast region raised over $560 million, a 24% increase over the second quarter. This improvement, attributable to a flurry of investment activity in North Carolina and Florida, enabled the Southeast to surpass Southern California, the Central U.S., and the Northeast (NY, NJ and PA) to become the third leading region for venture capital funding. The Southeast, Great Lakes and Southwest regions were the only areas that saw quarter-to-quarter increases in total dollars raised. The Great Lakes region, which was home to the nation s two largest investments, experienced its second consecutive quarter of increased funding. Total U.S. Funding by Region 3Q2002 Dollars Invested Pct. of Total No. of Cos. Pct. of Total Average Deal Size Bay Area $1,538,463, % % $10,395,020 New England $694,613, % % $8,905,297 Southeast $561,700, % % $8,641,538 Southern California $474,700, % % $9,687,755 Central US $464,615, % % $7,616,639 Northeast $416,050, % % $7,173,276 Great Lakes $330,700, % % $13,228,000 Mid-Atlantic $274,760, % % $7,632,222 Pacific Northwest $134,650, % % $7,086,842 Southwest $65,000, % % $5,416,667 Other $17,100, % 3 0.5% $5,700,000 Sectors Totals: $4,972,351, % % $8,975,363 Over 37% of the venture capital raised in the third quarter was invested in companies in the Connectivity sector, which includes networking, semiconductor, broadband, telecom and wireless ventures. Optical networking remained the leading segment in the Connectivity sector with an average deal size of $12.8 million, but the number of deals declined for the third consecutive quarter. In contrast, the data storage and network security segments improved significantly from the previous quarter, with each experiencing increases in the number of funded companies and total dollars raised. The largest Connectivity

7 growthink RESEARCH investment was a $78.5 million round raised by NuVox Communications (St. Louis, MO), a facilitiesbased broadband services provider. Of the funding raised by NuVox, $66 million was equity and $12.5 million was debt financing. Hatteras Networks (Research Triangle Park, NC), a developer of last-mile carrier access platforms, raised $45 million, bringing its total funding to date to more than $73 million. Two hundred eight (208) companies in the Business Software & Services sector received over $1.5 billion, over one-quarter of the total venture dollars invested. Within this sector, companies in the ebusiness Consulting/Systems Integration segment raised the most capital ($278 million), which was nearly $30 million more than it had raised in the preceding quarter. This segment was led by a $62 million investment in Exigen Group (San Francisco, CA), which develops software focused on lowering the cost of operations for financial services, insurance, communications and other service firms. The Energy Services segment also fared well, led by a $100 million investment in Insight Energy (Chicago, IL). Insight Energy acquires and develops small and medium sized power projects, primarily under 150 megawatts in capacity. Following five quarters of extraordinary growth, the Healthcare sector experienced a 38% quarter-toquarter decline in the number of companies receiving funding. One hundred one (101) healthcare companies raised venture capital in the third quarter, down from 162 in the preceding quarter. Despite the setback, however, healthcare ventures raised $1.1 billion, which was 23% of the total venture dollars invested nationwide. This sector was led by a $75 million investment in National Surgical Care (Chicago, IL), a recently formed company that will acquire and develop ambulatory surgery centers and short-stay surgical hospitals in markets across the country. Companies in the E-Content and Commerce sector saw a small increase in funding in the third quarter. This sector was led by a $26 million investment in MidStream Technologies (Bellevue, WA). MidStream Technologies has developed a streaming appliance that provides the power to deliver millions of concurrent streams. Canaan Venture Partners led the round, with additional investments from Frazier Technology Ventures, ProVen Private Equity and The University of North Carolina. Total U.S. Funding by Sector 3Q2002 Dollars Invested Pct. of Total No. of Cos. Pct. of Total Average Deal Size Connectivity $1,879,441, % % $10,159,141 Business Software & Services $1,513,750, % % $7,277,644 Healthcare $1,142,450, % % $11,311,388 E-Content & Commerce $264,810, % % $6,305,000 Other $171,900, % % $9,550,000 Totals: $4,972,351, % % $8,975,363 Major Metropolitan Areas Over seventy two percent (72.4%) of the dollars raised in the third quarter went to companies headquartered in the top ten metropolitan areas. The Bay Area ($1.5 billion) led the way with Boston and New York City following. Chicago was the fourth leading metro area despite being home to only nine investments. Among these nine were three of the top ten investments nationwide: Insight Energy ($100 million), National Surgical Care ($75 million), and Arrow Financial Services ($45 million). The Research Triangle area of North Carolina, including Raleigh, Durham, and Chapel Hill, was the fifth leading metropolitan area. Funding for Research Triangle area companies improved dramatically from $123 million in the second quarter to $215.6 million in the third quarter.

8 growthink RESEARCH Aside from Chicago and the Research Triangle area, Orange County (CA) and Los Angeles also improved their national ranks from the second quarter of Total U.S. Funding by Top Metropolitan Areas 3Q2002 Dollars Invested Pct. of Total No. of Cos. Pct. of Total Average Deal Size Bay Area $1,538,463, % % $10,395,020 Boston $539,443, % % $9,300,744 New York City 1 $259,250, % % $7,856,061 Chicago $258,150, % 9 1.6% $28,683,333 No. Carolina Research Triangle $215,600, % % $8,624,000 San Diego $212,200, % % $10,104,762 Washington DC $206,450, % % $6,659,677 Orange County, CA $128,800, % % $11,709,091 Los Angeles $121,500, % % $8,100,000 Seattle $119,450, % % $7,465,625 Top Metro Areas $3,599,306, % % $9,807,374 Rest of U.S. $1,373,045, % % $7,342,487 Total U.S. $4,972,351, % % $8,975,363 1 Includes New Jersey-based companies in the Metro NYC area Funding Rounds As shown in the chart to the right, 30% of the companies that raised venture capital in the third quarter were companies that raised their initial round of funding (including Series A rounds and seed funding). Thirty eight percent (38%) of the companies raised a Series C or later round, up from 34% in the second quarter. 21% 17% 32% 30% A Round B Round C Round D, E, F & G Rounds Top Investments Ten companies received equity investments of $45 million or more in the third quarter of The top investments during the quarter were as follows: Company Location Sector Investment Insight Energy Chicago, IL Business Software & Services $100,000,000 National Surgical Care Chicago, IL Healthcare $75,000,000 NuVox Communications Chesterfield, MO Connectivity $66,000,000 Exigen Group San Francisco, CA Business Software & Services $62,000,000 Advanced Disposal Services Jacksonville, FL Other $52,900,000 Juniper Financial Wilmington, DE Business Software & Services $50,000,000 Onward Healthcare Norwalk, CT Healthcare $50,000,000 Arrow Financial Services Niles, IL Business Software & Services $45,000,000 Hatteras Networks Durham, NC Connectivity $45,000,000 Alexza Molecular Delivery Palo Alto, CA Healthcare $45,000,000

9 growthink RESEARCH Investors Over 900 investors participated in the funding of U.S.-based ventures in the third quarter. The following forty one (41) investors funded five or more ventures: 3i Accel Partners Advanced Technology Ventures Alexander Hutton Venture Partners Alloy Ventures Alta Partners Apax Partners Atlas Venture Austin Ventures Battery Ventures Bessemer Venture Partners Canaan Partners CDP Capital - Technology Ventures China Development Industrial Bank ComVentures Crosspoint Venture Partners Domain Associates Draper Fisher Jurvetson Flagship Ventures Grotech Capital Group Intel Capital Intersouth Partners InterWest Partners J.P. Morgan Partners Lucent Venture Partners Mid-Atlantic Venture Funds Morgenthaler Ventures New Enterprise Associates Novus Ventures Pitango Venture Capital Polaris Venture Partners RBC Capital Partners RRE Ventures Sequoia Capital Sevin Rosen Funds Sierra Ventures The Sprout Group TL Ventures U.S. Venture Partners Venrock Associates Warburg Pincus

10 Profiles of Funded Ventures growthink RESEARCH This Report contains profiles of 554 companies that received venture capital investments in the third quarter of Profiles contain the following information: Company Name Company Website Company Description Company Address Company Telephone Number Company Fax Number Key Personnel (w/ addresses when available) 3Q2002 Funding Amount Funding Round Names of Investors The reports are organized by geography and by sector. The following are samples of Company Profiles that appear in the Report: Full Degree Homestead.com Zinio Description Full Degree is a provider of enterprise software and services to manage, distribute, and publish product information. 3Q 2002 Investment Funding Amount $2,000,000 Funding Round: A Investors Convergence Partners, Individual Investors Key Personnel Mark Bonham, President mark@fulldegree.com Sandeep Nawathe, CTO sandeep@fulldegree.com Patrick McNenny, CFO patrick@fulldegree.com Ken Leeder, VP Bus. Dev. ken@fulldegree.com Contact Information 833 Emerson St. Palo Alto, CA Tel: (650) Fax: (650) Description Homestead.com integrates and distributes Internet content, services and technologies to enable individuals and small businesses to create feature-rich Web sites. 3Q 2002 Investment Funding Amount $5,400,000 Funding Round: E Investors Institutional Venture Partners, Meritech Capital Partners, Draper Fisher Jurvetson, Undisclosed Investors Key Personnel Justin Kitch, CEO David Wu, SVP Operations Thai Bui, VP Software Dev. Sam Schorr, VP Engineering sschorr@homestead.com Contact Information 3375 Edison Way Menlo Park, CA Tel: (650) Fax: (650) Description Zinio enables magazines to be distributed over the Internet and read in their print-layout form with exactly the same pictures, graphics, articles and ads as the print version, while introducing new levels of interactivity. 3Q 2002 Investment Funding Amount $8,400,000 Funding Round: C Investors Apax Partners, Intel Capital, New Enterprise Associates, Odyssey Capital, IDEO Ventures, NetOyster Key Personnel Mike Edelhart, CEO mike@zinio.com Peter O'Leary, CTO peter@zinio.com Jeff Bruce, SVP Sales & Marketing jeff@zinio.com Contact Information 8000 Marina Blvd. Suite 300 Brisbane, CA Tel: (415) Fax: (415) Growthink s Total U.S. Venture Capital Report 3Q 02

11 Investor Profiles growthink RESEARCH This Report contains profiles of over 1,250 investors that provided funding to private, U.S.-based companies in the third quarter. Investor profiles contain the following information: Investor Name Investor Website Investor Address Investor Telephone Number Investor Fax Number 3Q2002 Investments The following are samples of Investor Profiles that appear in the Report: Atlas Venture 3Q 2002 Investments Alnylam Pharmaceuticals, Anadys Pharmaceuticals, Archemix, Aureon Biosciences, Isilon Systems, Lilliputian Systems Seattle, WA 1201 Third Ave. Suite 5450 Seattle, WA Tel: (206) Fax: (206) Menlo Park, CA 1600 El Camino Real Suite 290 Menlo Park, CA Tel: (650) Fax: (650) Waltham, MA 890 Winter St. Suite 320 Waltham, MA Tel: (781) Fax: (781) Alexander Hutton Venture Partners 3Q 2002 Investments Myrio, NetMotion Wireless, RevX, SLX (d/b/a ShipLogix), Vanson HaloSource Seattle, WA 999 Third Ave. Suite 3700 Seattle, WA Tel: (206) Fax: (206) Essex Woodlands Health Ventures 3Q 2002 Investments American WholeHealth, MicroMed Technology The Woodlands, TX Waterway Plaza Two Woodloch Forest Dr. Suite 175 The Woodlands, TX Tel: (281) Fax: (281) Chicago, IL 190 South LaSalle St. Suite 2800 Chicago, IL Tel: (312) Fax: (312) Irvine, CA MacArthur Blvd. Suite 500 Irvine, CA Tel: (949) Fax: (949) Growthink s Total U.S. Venture Capital Report 3Q 02

12 About Growthink growthink RESEARCH Growthink offers market research, strategic advisory and investment banking services through our three integrated practices: Growthink Research () Growthink Research is a full-service market research firm. Venture Capital Research: Growthink Research publishes venture capital reports on a quarterly and annual basis that analyze financing trends for emerging companies. Growthink Research s reports are recognized as the most comprehensive source of venture funding news. Tony Nash, Director of Red Herring Research, called our reports the most comprehensive and professional sources of venture funding information I've read. Clients include venture capital firms, angel investors, investment banks, emerging ventures/entrepreneurs, established companies and related product and service providers. Strategic Market Research: Growthink Research also performs client-specific market and competitive research projects. As an independent market research firm with a strong strategic orientation, we can often source information and primary competitive intelligence unavailable to direct market participants. To date, we have researched and assessed over 200 markets and micromarkets, and can conduct a wide range of market research projects to meet our clients needs. Growthink Consulting ( Growthink Consulting is a strategic business planning consultancy focused on growing ventures of all sizes. Growthink has completed over 125 strategic business plan development projects for clients who have collectively raised over $500 million in growth capital. Our strategic business plan development process includes conducting research to support our clients businesses; enhancing their business, product, marketing, operational and/or financial strategies; developing/refining their financial models; and preparing investor-quality business plans, executive summaries and slide presentations. Growthink Securities ( Growthink Securities is an NASD broker-dealer investment bank, offering private placement and merger and acquisition advisory services for emerging and middle market companies. Utilizing Growthink Research s proprietary databases of active strategic and financial investors, buyers, and sellers, we identify the most likely and best-suited parties to a transaction. For quality ventures, we are able to quickly generate interest from the right investors/buyers, and then structure and negotiate favorable transaction terms. Sectors in which we have worked include software, healthcare, networking and communications, consumer goods, and entertainment and publishing technologies.

13 Funding Report Methodology growthink RESEARCH Data Collection Growthink identified 554 private U.S.-based companies that received venture capital in the third quarter of These companies were identified through the following sources, among others:! Surveys of Companies! Surveys of Venture Capitalists and other Investors! Growthink s network of regional contacts! Articles in newspapers, magazines, and trade publications! Company Press Releases! Investor Press Releases! Wire Reports Data Verification Companies: Growthink contacted companies directly to verify the information we collected from the above research. This effort verified the companies funding amount, investors involved in the financing, funding round and date of funding. Companies that did not meet Growthink s criteria for appearing in this report were not included herein. Investors: Growthink sent surveys to over 2,000 venture capitalists, angel groups and corporate investors to verify the companies Growthink had identified as being in their portfolios. The surveys also requested the disclosure of other investments. Qualification Criteria Each company that appears in the report meets the following criteria. 1) The funding must be equity funding, not debt financing. For funding rounds that included both equity funding and debt financing, only the equity funding was included. 2) The Company must be a private company. Publicly held (NASDAQ, OTC, etc.) companies are not included. Likewise, wholly owned subsidiaries of public companies are not included. 3) The Company must be headquartered in the United States. 4) The Company must have received at least $300,000 in financing. 5) The Company must have received the financing to invest primarily in itself (new venture funds and incubators were not included). Other Notes! N/A was inserted in Company and investor profiles when the information was unavailable at the time of publication, or if the investor did not have any investments in the quarter.! To derive our total funding amount calculations, Growthink assumed a funding amount of $6.4 million when the funding amount was not available. In the third quarter, $6.4 million was the median funding amount for all ventures for which funding was available.! When listing investors with multiple offices, no attempt was made to determine which office was responsible for each investment.! The regions were broken down as follows: Bay Area, Central U.S. (AR, CO, IA, KS, LA, MN, MO, NE, ND, OK, SD, TX), Great Lakes (IL, IN, MI, OH, WI), Mid-Atlantic (DC, DE, MD, VA, WV), New England (CT, MA, ME, NH, RI, VT), Northeast (NJ, NY, PA), Pacific Northwest (ID, MT, OR, WA, WY), Southeast (AL, FL, GA, KY, MS, NC, SC, TN), Southern California, Southwest (AZ, NM, NV, UT), and Other (AK, California-Metro Sacramento, California-Central, HI)