From: Chuck Hirsch Sent: Thursday, November 30, 2000 9:51 AM To: Subject: Madrona LP Update II: Core Technologies We hope that you all had a wonderful Thanksgiving holiday. As you will recall, we recently launched a series of regular updates featuring information on our portfolio companies. With this second installment, I am proud to be able to introduce you to four more of our companies, each of which feature core technologies that we are most excited about: Appliant.com; Asta Networks; Nimble Technology; and Impinj, Inc. These companies are each developing what we call "disruptive" technologies, meaning that they have the potential to alter dramatically the way business is done in any particular sector. Each also shares two important characteristics: each is Seattle-based and each has a connection to the University of Washington. We are fortunate to have an exceptionally strong relationship with the University's Computer Science & Engineering Department, where each of these opportunities originated. As our investment activity has continued over the first year of the Fund (in excess of $110M invested or committed) and our portfolio has grown (with 47 companies represented in MVF I), we have categorized our investments into four sectors to describe the range of technologies we have invested in. The categories are: Internet & Software Infrastructure Technologies; Business Software and Services; Communications Technologies; and E-Commerce Consumer Services. Of the companies we feature in this email, three (Appliant, Asta and Nimble) fall into the Internet & Software Infrastructure Technologies category, while one (Impinj) is in the Communications Technologies category. For a full listing of our companies as they break out into these categories, please see our website at http://www.madrona.com. Now, for information on the companies: ======== Appliant (http://www.appliant.com) is a Management Service Provider that redefines Internet performance management. The company's origins lie in the vision of three computer scientists, each holding a Ph.D in computer science, and specializing in distributed systems, performance analysis, operating systems and computer architecture. Brian Bershad, Appliant.com.'s Chairman and CEO, was an Associate Professor of Computer Science and Engineering at the University of Washington at the time he started the company. When they began in 1997, the founders saw strong commercial potential for their combined experience in distributed systems and Internet technologies to develop services to monitor and solve complex Web site management problems for e-businesses. A few Web performance statistics illustrate why we believe that Appliant's capabilities are so critical: * 48% of customers leave if Web pages don't render in less than 8 seconds * 57% of these customers never come back * $4.3 billion was in lost sales last year due to poor Web site performance Appliant solves these e-business problem by: * transparently measuring every customers' Web site experience, end-to-end, and * providing actionable information: helping companies identify missed business goals, alerting & reporting in real time, helping analyze to find the root cause of problems, summarizing data over time, representing information to a broad audience Since raising $20M in May of this year, Appliant has secured its position as a key player in this increasingly competitive market, and boasts numerous customers. After a successful beta period with active customer participation, the Company worked aggressively to launch the second version of their service offering, Lateral Line, which occurred in October 2000. Lateral Line is a Web-based, hosted service that correlates real customer data in real time with performance data from back-end systems to provide an end-to-end view of overall Web site health. ======== Asta Networks (http://www.astanetworks.com) was founded by three professors and a Ph.D student from the University of Washington Computer Science and Engineering Department -- all four founders are known leaders in networking, distributed systems and computer security research. Since opening its doors in July 2000, Asta Networks has grown to 33 employees -- 75% of which are engineers. The company is creating network infrastructure solutions that improve the reliability of the Internet, which the company believes is unsustainable for next-generation applications in its current form. Asta Networks uses sophisticated and distributed technology to integrate the capabilities of existing routers and fundamentally transform the way the Internet backbone infrastructure is managed. Asta Networks' initial focus is on solving the intensifying problem of Denial-of-Service (DoS) attacks, which disrupt the operation of networks and Web sites by flooding them with useless traffic. We all know of this problem from recent news of "hackers" disabling many of the major Web sites. Current products offer little defense against such attacks and any response is slow and painstaking, sometimes leaving Web sites off-line for hours at a time. By monitoring network activity at the edge routers of the network, Asta Networks' solution can immediately identify irregularities and patterns that indicate a DoS attack, and respond closer to the attack source, before it can do damage to the Web site and the network. Asta Networks has recently deployed its technology at Exodus Communications and in Internet2's backbone, Abilene, which connects 170 universities across the nation. The company's first product, which will be sold by ISPs as a value-added service, is expected to be available in Spring of 2001. Please look for an article on Asta Networks in your package accompanying our Third Quarter Report. ======== Impinj, Inc. (http://www.impinj.com) was co-founded by Dr. Chris Diorio, Assistant Professor of Computer Science and Engineering at the University of Washington and legendary Professor Emeritus Carver Mead, the Gordon and Betty Moore Professor of Engineering and Applied Science at the California Institute of Technology. Madrona is teaming with the company's stellar technical team to create what we believe will be a highly successful and influential company. The company develops high-performance CMOS integrated circuits for wireless applications. The founders pioneered and hold 14 patents on the technology and have assembled a strong, senior team (many of whom have experience at TRW) to bring it to market. Their proprietary technology allows for the development of "adaptive communication systems" that will enable higher data rates, lower power usage and greater system capacity for networks of the future. This should be particularly useful in higher speed wireless networks, such as 3G. The company's mission is to capture the market for wireless integrated circuits, enabling higher data rates and greater system capacity in the networks of the future. ======== Nimble Technology (http://www.nimble.com), a leader in the exciting, new XML-based query processing technology, has developed a powerful data integration platform that allows businesses to dynamically access and integrate data from anywhere inside or outside the corporation. The company was launched out of the University of Washington's Department of Computer Science and Engineering in June 1999 by XML expert and Assistant Professor Dr. Alon Halevy and noted technology entrepreneur and Professor Dr. Dan Weld -- along with Linden Rhodes, who has assisted in the founding of numerous of our successful companies. Nimble's mission is to connect people and applications with the information they need, independent of where the data is located or how it is stored. Nimble's XML-based solution provides a flexible integration platform that is data, application and system independent. From a single point of access, users can query, customize and publish real-time views of the information critical to their individual needs. Nimble's enterprise-class solution is helping companies solve their increasingly complex data integration challenges. Simply put, the company gives users the ability to find exactly what they're looking for and display it just the way they want. The problem they see is an explosion of unmanaged data. Current data integration solutions are simply too difficult, too expensive and too inflexible to keep up with the changing pace of business. Research by the Gartner Group shows that: * 80 percent of corporate data is unmanaged; and * By 2004, enterprise data is expected to grow by 30 times over 1999 levels. Nimble's ability to deliver this new level of data integration lies in their suite of high-performance integration and publishing products. These products incorporate an advanced XML query-processing engine that connects a variety of information sources, from relational databases to flat files. In short, they enable people to access any data, any time, anywhere. It was announced in October that Nimble's XML-based product will be used by PACCAR Inc., the Seattle-based $8.0 billion company that is a technological leader in the design, development and manufacture of high quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt, DAF and Foden nameplates. Nimble's product will enable PACCAR to access and query strategic information stored in varied databases and data warehouses throughout the company. ======== We hope that this has been informative and helpful. On a related topic, as you may know, we host conferences for our companies on a regular basis. To date we have held 2 CEO conferences, a CTO conference, a CFO/Business Development conference and a Media Forum for our companies to cross-fertilize based on media needs. In mid-December, to highlight our strong relationship with Microsoft, we will be hosting another CTO conference for our companies specifically to learn about Microsoft's new .Net strategy. Microsoft and we are always pursuing opportunities to stimulate further collaboration between us. In this instance, Microsoft has expressed its eagerness to open the possibilities of out-sourcing elements of the .Net development work to some of our companies. Of course, we will do all that we can to facilitate this opportunity for our companies, and any others like it. When we speak of our "proprietary deal flow" this means that we have a fertile "pipeline" to sources of opportunity in the Region, such as those that emanate from the University, from Microsoft, or from you, our Limited Partners. You are among our finest avenues to find the best technologies, entrepreneurs and management teams. Please do not hesitate to alert us to any such strong investment opportunities you encounter. For more detailed information on our progress we will be mailing our 2000 Third Quarter Report tomorrow. Do not hesitate to contact us with any comments or questions. We hope you have a joyous holiday season. Chuck Hirsch Madrona Venture Group 1000 Second Avenue Suite 3700 Seattle, WA 98104 P 206-674-8713 F 206-674-8703 e Chuck@madrona.com http://www.madrona.com