Apresentação do Prof. Cláudio Furtado, diretor do GVCepe, no Open Innovation Seminar 2008

1. Setembro, 2007
•16 de junho de 2008 – São Paulo/SP
Cláudio V. Furtado
GVCepe
Mesa 3 – Empreendedorismo e oportunidades trazidas pelo Open
Innovation
•Pannel 3 – Entrepreneurship and opportunities brought by Open Innovation
•Open Innovation Seminar 2008 – Allagi

2. An overview of the PE/VC market in Brazil
Size and structure
São Paulo – March, 2008
Cláudio V. Furtado
Director - GVcepe

3. Disclaimer Setembro, 2007
 All information regarding the Brazilian PE/VC market was based on a survey of the 89 PE/VC firms
with offices in Brazil, including PIPEs.
 The survey was concluded in July 31 of 2007 with a 100% response rate.
 The categorization of management firms as PE, VC and PIPE organizations was made based on a
self-description of the management firms, as well as an analysis of existing portfolio companies
reported by the firms.
 Before completing the questionnaire, respondents were asked to explicitly certify the truthfulness of
information.

4. GVcepe Overview Setembro, 2007
 First PE/VC research center in Brazil
 Supported the 1st broad study about the Brazilian PE/VC industry (2005 Census)
 2 areas of work
 Research: 2005 Census, Industry Guide, Case Studies, Support to Master’s Candidates Dissertations
 Education: Diploma Program, Forums, Seminars, Workshops, Business Plan Competition, Lectures
 Partnerships with international universities and research centers
 Support to international researchers interested in the Brazilian PE/VC industry
Founding Members Sponsors

5. Industry overview – 2nd cycle Setembro, 2007
Overall Figures – July 2007
Investors •Returns
•Capital  USD 16.7 bn total commitments
 89 fund managers
 153 funds
FUNDS
Funds  117 offices in 13 cities
MANAGERS
 984 professionals (357 partners/managers)
 404 portfolio companies
 194 investments (2004 to 1H/2007)
Portfolio  28 IPOs (2004 to 1H/2007)
Equity
Capital and
Companies  BRL 16.2 bn raised
Stakes
Value Creation

6. Unprecedented investor interest Setembro, 2007
 PE/VC funds raised US$ 11.1 bn since 2005
 US$ 6.2 bn raised by pre-2005 firms and US$ 4.9 bn by new entrants
 Equivalent to 20% of total VC commitments in the US for 2005/2006
 200% increase in 2.5 years
Capital commitments in the industry
18 16,72
16
14
12
3x
10
US$ bn
8
5,58
.
5,02
4,95 4,79
6 4,7
3,71
4
2
0
1999 2000 2001 2002 2003 2004 2005 2006 1H07
Source: 2007: GVcepe mid-year survey. 1999-2004: GVcepe industry census

7. New players in the field Setembro, 2007
 33 new management firms, mostly local, entered the industry in the 2005- July 2007 period
 20 management firms have more than 10 years of experience (a complete investment cycle)
 Diversified investment strategies
Entering firms
Buyout and seed
investors
•pioneers ITC and industry
consolidators
•privatizers
Source: 2007: GVcepe mid-year survey. 1999-2004: GVcepe industry census

8. Big in Brazil Setembro, 2007
 5 managers in the US$ 1 bn club
 10 largest fund managers concentrate 61.4% of all capital
 56 companies in their portfolio
10 largest Private Equity
Commited
Date of Funds Portfolio
Firm State Team capital (US$
inception managed companies
bn)
1. GP Investments SP 56 1993 6 11 $1.85
2. Advent International SP 9 1997 4 5 $1.59
3. UBS Pactual RJ 22 1997 4 11* $1.50
4. BNDESPar PE RJ n/a 1982 1 5 $1.30
5. Gávea Investimentos RJ 15 2006 2 9 $1.07
6. AIG Private Equity SP 9 2000 4 4 $0.80
7. Pátria Investimentos SP 39 1994 5 6 $0.70
8. Actis Capital SP 6 2007 2 0 $0.50
9. Tarpon Investment SP 14 2005 1 2 $0.50
10. ABN AMRO Real SP 6 1999 2 3 $0.45
*Based on CVM data
Source: 2007 - GVcepe mid-year survey.

9. Big in Brazil Setembro, 2007
 10 largest VCs manage almost US$ 1.0 bn
 126 companies in their portfolio
 Only 1 among 10 of the largest VCs started after 2003
10 largest Venture Capital
Commited
Date of Funds Portfolio
Firm State Team capital
inception managed companies
(US$ mn)
1. Votorantim Novos Negócios SP 17 2000 1 6 $300
2. Ascet Investimentos SP 7 2000 1 4 $150
3. BNDESPar VC RJ 8 1982 1 33 $123
4. FIR Capital Partners MG 32 1999 3 15 $87
5. DGF Investimentos SP 15 2001 2 11 $63
6. Jardim Botânico Partners RJ 13 2003 2 6 $60
7. Intel Capital Corporation SP 5 1999 2 7 $57*
8. Rio Bravo Investimentos SP 10 2000 6 20 $50
9. CRP Cia de Participações RS 10 1981 5 18 $49
10. Franchising Ventures SP 7 2007 1 6 $40
* Estimate based on press information released by Intel
Source: 2007 - GVcepe mid-year survey.

10. Big in Brazil Setembro, 2007
 10 largest manage less than US$ 0.5 bn
 20 companies in their portfolio
 6 of 10 started in the past 3 years or less
10 largest Seed Capital
Commited
Date of Funds Portfolio
Firm State Team capital
inception managed companies
(US$ mn)
1. Verticals Capital RJ 21 1997 2 1 $140
2. Jardim Botânico Partners RJ 13 2003 2 6 $60
3. Fundo Criatec RJ 22 2007 1 0 $40
4. Semeia Brasil SP 7 2005 1 0 $30
5. Mifactory SP 4 2002 1 2 $20
6. Invest Tech SP 16 2003 1 4 $20
7. Monashees Capital SP 5 2006 1 3 $12
8. Ace RJ 13 2005 1 4 $10
9. GC Capital SP 4 2007 1 1 $10
10. Confrapar MG 8 2005 2 1 $9
* Includes fund managers that also invest in Venture Capital
Source: 2007 - GVcepe mid-year survey.

11. A sustainable trend on strong country fundamentals Setembro, 2007
Main factors
•MACROECONOMIC
FINANCIAL &
PE/VC MARKETS
•SOCIAL &
Economic Floating
TECHNOLOGICAL
growth & exchange rate Participation
stability of local
institutional
Demographic investors
Declining Tax shifts
interest rates Reform (education &
consumption Capital market Active IPO
development market
Highly
entrepreneurial
population
•INSTITUTIONAL Ability to
Experienced
complete the
managers
Technological investment
leadership cycle
New Govt. Programs
regulatory Innovation
framework PE/VC great
Competitiveness
Infrastructure success
demand stories
Private
pension plans
- consolidation

12. A sustainable trend on strong country fundamentals Setembro, 2007
Main factors
 Demographic shifts (education & consumption)
Substantial decrease in the illiterate in the past years, but there’s still a long road ahead

 Investment in overall education is 6% of the GDP (Brazil: 10 thousand new PhDs per year)
 Micro-credit initiatives expanded the low/middle classes consumption
 The decrease in the interest rates and inflation boosted the economic growth
Technological leadership
 Ethanol leading edge market and technology
Petrobras’ deep water technology increased the Brazilian oil & gas reserves

 2% of the world scientific production (Could Seed/VC Capital play a key role on this improvement?)
 73% of scientists in the universities vs. 11% in the companies (US: inverse relation)
 Infrastructure demand
Privatization wave in the end of the 90’s

 PPPs (Public-Private Partnership) Law approved
 Logistics, Transportation and Energy Generation needed to support the economic growth
 Buyout funds and Strategic players shall have an important participation in the next steps

13. A sustainable trend on strong country fundamentals Setembro, 2007
Main factors – Highly entrepreneurial population
 The improvement and spread of entrepreneurial and innovation skills in the Brazilian population is a
requirements for sustainable growth
 GVcepe, supported by its academic and corporate partners, is well positioned to continue developing
and improving innovation, venture capital and entrepreneurial capabilities in Brazil
Education and
Research
Partnerships
Case Studies
Partnerships

14. A sustainable trend on strong country fundamentals Setembro, 2007
Main factors – Highly entrepreneurial population
 13.5 million of entrepreneurs in Brazil (20.7 in the US; 2.2 Japan and 2.5 in Germany)
Intel+UC Berkeley winner of 1999; IPO in 2004 (US$ 60 million).
Founded by 2 grad students in 1998; Angel investment followed by VC round; IPO in 2004.
Winner of GV-Intel and 3rd place in Intel+UC Berkeley in 2007; FINEP funding (R$0.75 mn).
Fiscal Printers. Originated from a Master’s Dissertation in 1989; IPO in 2007 (R$ 407 mn).
Website. Founded by 4 undergrad students in 1999; Three VC rounds.
BUSCAPÉ
Biotech. Founded in 2002 by 5 researchers of the genome map project backed by a VC.
Industrial Valves. Founded in 1987; Several VC rounds; IPO in 2006 (US$ 494 mn)..
EPR Software. Founded in 1983 (Microsiga); IPO in 2006 (US$ 436 mn).

15. A truly diversified investment portfolio Setembro, 2007
Number of companies by industry sector (2004)
Industry # % Industry # %
10 3.3
1.Inform Tech. & Electronics. 92 30.3 8.Financial Services
1.1.Software 50 16.4 9.Construction/Real estate 9 3.0
1.2.R&D Outsourcing 14 4.6 10.Entertainment/Travel 9 3.0
1.3.Other 28 9.2 11.Agribusiness 8 2.6
2.General Industries 41 13.5 12.Health & Cosmetics 8 2.6
3.Telecommunications 28 9.2 13.Energy 7 2.3
3.1.Services 21 6.9 14.Textile 7 2.3
3.2.Equipment 7 2.3 15.Communication/Media 7 2.3
4.Retail 21 6.9 16.Logistics/Distribution 7 2.3
5.Food, Beverages and Tobacco 12 3.9 17.Education 3 1.0
6.Transportation 11 3.6 18.Incubator 3 1.0
7.Biotechnology 10 3.3 19.Other 13 4.2
Total 306 100.0
Source: GVcepe industry census

16. An ability to handle all stages of investment Setembro, 2007
Portfolio Companies: Stage of initial capital injection (2004)
Stage Number of Firms %
Venture Capital 204 66.7
Seed capital 36 11.8
Start-Up 72 23.5
Expansion 96 31.4
Private Equity 102 33.3
Late stage 42 13.7
Acquisition finance 5 1.6
Management buyout/in 3 1.0
Bridge finance 1 0.3
Turnaround 6 2.0
Mezzanine 2 0.6
PIPEs 43 14.1
306
Total 100.0
Source: GVcepe industry census

17. PE/VC: a remarkable impact on the Brazilian stock market
Setembro, 2007
 IPOs raised R$ 45.2 bn
 PE/VC-backed IPOs...
... represented 36% of aggregate IPO offer value
... reopened the IPO market in 2004
... predominantly traded in the New Market and generated superior returns to public investors
IPO aggregate offer value Post-IPO total portfolio returns
20
117%
18
16
14 3x
2.5x
12
R$ bn
14,7
9,8
10
46%
8
6 .
2,3
4 1,0 3,5 6,5
4,3
4,2
2 3,5 1,9
0
Non PE/VC- PE/VC-
2004 2005 2006 1H06 1H07
backed backed
Non PE/VC-backed
Source: Economática and Bovespa. Gvcepe analysis. Period: IPO-06/22/2007.

18. PE/VC funds brought new sectors into the public markets
Setembro, 2007
Cases
Education Car rental
Credit card
management Online media and
ISP
E-commerce
Dental care
Cosmetics
Software
Medical diagnosis
(ERP)
Source: Bovespa. GVcepe analysis.

19. Successful exits Setembro, 2007
Selected deals
Net revenues in Time to
Investment Estimated IRR
Company Sector 2005 exit
(US$ mn) (% in US$)
(US$ mn) (years)
Equatorial Energia Energy $ 273 $ 11 2 481%
GOL Airline $ 1,100 $ 26 1 242%
Totvs Software $ 90 $ 16 <1 199%
DASA Medical diagnosis $ 217 $ 100 5 40%
Submarino E-commerce $ 172 $ 83 6 38%
Gafisa Real estate $ 202 $ 78 9 36%
TAM Airline $ 2,317 $ 77 8 26%
ALL Logistics $ 70 $ 202 7 22%
Localiza Car rental $ 350 $ 49 8 9%
Akwan IT n/a n/a 4 130%
Autotrac Logistics IT $ 137 $ 2.5 7 32%
Atrium Telecom $ 35 $ 20.5 4 20%
Microsiga Software $ 30 $7 6 12%
Source: HBS Brazilian Capital Markets and Private Equity Survey – March/April 2006- Passoni, P. & Freitas, R.

20. New opportunities Setembro, 2007
Survey of GP’s investment focus in Brazil
Source: HBS Brazilian Capital Markets and Private Equity Survey – March/April 2006- Passoni, P. & Freitas, R.

21. Local managers + international skills = partnerships Setembro, 2007
 Local managers increase capital commitments to 70% and their number increases by 32%
 Arrival of Europeans (UK, NL and Portugal)
 US firms establish partnerships with local firms (FIR-Draper Fischer Juvertson, Pátria Investimentos-
Blackstone, Stratus-Darby, Rio Bravo-GEF)
Capital commitments by origin of fund managers
•July 2007
•Dec 2004
USA
USA
19%
32%
11
10
53 70 5
EU EU
Brazil
4 2% 8%
4 3
70%
Brazil Other
Other
63% 3%
3%
Source: 2007: GVcepe mid-year survey. 1999-2004: GVcepe industry census

22. Setembro, 2007
Evolution: Industry intellectual capital
 Two-fold increase in high talent human capital with fund managers
 53% increase in number of managers
 ¾ posses graduate education
PE/VC professionals and education (2004)
Number
Accum.
•984 Schooling of %
%
Managers
PhD 8 3.5 3.5
MSc/MBA/LLM 128 55.3 58.1
627
•498 Graduate
34 14.7 73.5
Specialization
Undergraduate 57 24.7 98.2
265
Secondary 4 1.8 100.0
357
233
Unspecified 2 - -
Total 233 100.0 100.0
2004 2007
Source: 2007 - GVcepe mid-year survey. 1999-2004 - GVcepe industry census

23. A highly concentrated industry tapping opportunities Setembro, 2007
in the South and Southeast of Brazil
Geographic location of fund managers
•RIO DE JANEIRO
•SAO PAULO
•62
•19
•17
•47
•2004 •2007
•2004 •2007
•OTHER
•BELO HORIZONTE
•4
•6
•4
•1
•2004
•2004 •2007 •2007
Source: 2007 - GVcepe mid-year survey. 1999-2004 - GVcepe industry census

24. Surge in investment activity Setembro, 2007
 Over 100 deals expected in 2007
 Predominance of late VC and PE deals in 2006 and 2007
Number of investments
87
66 63
33
23
44
13
40
14
25
9 41
6 26
17 13
2004 2005 2006 1H07
PE PIPE VC
Source: 2007 - GVcepe mid-year survey.

25. Brazil: Land of diversity and opportunity Setembro, 2007

26. Thank you!
for more, visit
www.cepe.fgvsp.br