Venture capital funds as an alternative financing source for early stage companies

1. Venture capital funds as an alternative financing source for early stage companies

2. Agenda • Development phases of a company • Venture capital characteristics • Investment process • Investment criteria • Value enhancement • Exit strategies • Successful investor pitch

3. My bio • Investment experience • Partner and co-founder of a regional € 38 million private equity fund • Invested in innovative early stage companies (www.gohome.hr, www.solvera-lynx.com, www.oceanorchids.si) • Operational experience • Co-founder and managing director of a boat building start-up www.seascape18.com • Founder of a nano publishing start-up www.serbiadaily.rs • Currently managing director of an M&A advisory firm

4. Company financing sources

5. Venture capital • Is provided by funds looking to invest in fast growing early stage companies • Investors in venture funds are primarily institutions (corporations, banks, insurance companies...) and high net worth individuals • VC funds invest in companies via a capital increase: • Providing fresh equity base for companies • Investment does not burden the company’s cash flows • VC funds are portfolio investors and are an alternative to sources of financing such as commercial banks

6. Equity vs Debt financing

7. Target industries of regional funds IT / SW development Telecommunications VC funds’ investments Internet / e-commerce Biotech Alternative energy Services Media

8. From presentation to investment Management team 100 Consultants Short review Investment committee VC funds invest in ~2% screened companies Financial analysis Business model 50 Tech due diligence Letter of intent Investment memo First meeting Investment Investment process usually lasts from 4 to 9 months

9. What VC funds look for • Founders • Willingness to work with a partner • Aligned interests • Growth potential • Company operating in an industry with a high growth potential • Competitive advantage of product or service • Consolidation play • Exit strategy • Identifiable path to exit • Joint sale after 4-6 years

10. Value creation COMPANY VALUE CREATED VALUE • Preparations for exit – trade sale • Well structured sales process • Value maximization for all stakeholders PRILOŽNOSTI ZA USTVARJANJE VREDNOSTI • New markets • Development of new products • Organic growth of the company • Taking a leading position in referential markets VALUE • Fresh equity base COMPANY VALUE Strategy and management, revenue growth, operational effective Pre-investment value of the company New company value Capital increase Preparation for exit

11. Exit strategies Common strategy in CEE, in most cases the most profitable one Trade sale Stock market listing Not very common, few SME platforms available The least favorable option for a VC fund MBO or secondary

12. Pitching to investor (1) • Team • Short • Relevant accomplishements of key founders • Company overview • Value proposition • Target markets • Current status • Problem / opportunity • What problem are you solving? • Show that you can understand the market segment you are tareting

13. Pitching to investor (2) • Solution • What specifically are you offering? • To whom are you offering? • Do you change the way certain business processes get executed? • Benefits / Value • State the benefits you provide • Competitive advantage • Summarize key reasons why customers prefer your solution to other solutions • Why are you better than competition?

14. Pitching to investor (3) • Sales strategy • A pipeline of customers and strategic partners that have already expressed some interest in your solution • Business model • How will you be making money? • Financial projections and requirements • Show metrics that drive revenues, expenses and growth • Summary • Your value proposition in short

15. Further inquiries Jan Kobler Levana capital management Dositejeva 22, 11000 Belgrade Serbia jan.kobler@levana-capital.com + 381 61 318 55 90 + 386 41 509 278