Financing and Supporting Innovation | Sidney Chameh

1. Financing and Supporting Innovation • Sidney Chameh • schameh@dgf.com.br May 2007

2. Agenda Innovation and Economic Development Innovation Stages and Financing Sources ABVCAP DGF – Decisão Gestão de Fundos

3. Agenda Innovation and Economic Development Innovation Stages and Financing Sources ABVCAP DGF – Decisão Gestão de Fundos

4. What is innovation? • New products and services • New methods of production, supply and distribution • Changes in management and work organization • Creation of new patterns of use or consumption

5. What is the importance innovation to economic development? • Improve knowledge and competitiveness • Innovation can produce new technologies that increase the productivity; • Higher productivity, higher economic growth;

6. Agenda Innovation and Economic Development Innovation Stages and Financing Sources ABVCAP DGF – Decisão Gestão de Fundos

7. Innovation Stages • Research Stage • At this stage, the R&D activities are the major concerns of the project in order to complete the prototype/application/service. • Finance is used to research, assess and develop an initial concept before a business has reached the start-up phase. • Funding will come, usually in the form of non-reimbursable grants, basically from the Public Sector. Source: European Commission

8. Innovation Stages • Development Stage • As the project reaches the stage where a prototype or pilot plant can be built to demonstrate its feasibility, the situation begins to change. • Relevant Sources of Finance: • Public Sector • Corporate: industrial/commercial companies. • Seed Capital: venture funds prepared to make pre-start-up investments in the technology, followed by further investment if/when the project results in a company formation. • Venture Capital: provides financial support to a company in the form of a participation in its equity or an option to convert a loan to equity. The relatively high risks are compensated by the possibility of high returns. It has a strong risk-bearing character, focusing on industries with high growth potential. Source: European Commission

9. Innovation Stages • Start up Stage • At this stage, a new company is created or exists a pre start-up commercial project. • In some respects this remains the most difficult stage to finance, though much depends on the size and type of project involved. • Relevant Sources of Finance: • Founders and Entrepreneurs: normally put all the finance that they are able to afford, as well as non-financial contributions, e.g., little or no salary, working from home (no rent); • Friends and Family: a "helping hand" rather than a serious investment; • Business Angels: may be able to provide the start-up equity and "hands on" advice and help to the new company. • Venture and Seed Capital Source: European Commission

10. Innovation Stages • Exploitation Stage • At this stage company is in full commercial operation. • Banks and all kinds of venture funds can be interested. • It is also a stage at which the management might wish to consider a stock market flotation as a mean of raising additional capital. • The capital may be used to finance increased production capacity, market or product development and/or to provide additional working capital. • Relevant Sources of Finance: • Venture Capital • Private Equity • Banks • Stock market: companies can gain access to a broad international base of institutional and retail investors. Source: European Commission

11. Financing Sources by Company Size Size of Company Micro Small Medium Big Capital Markets Commercial Banks Financing Sources (Debt and Equity) Promotion Agencies Developing Banks Venture Capital e Private Equity Risk/ Return Very High High Moderate Low

12. Long Term Investment Vehicles and Corporate Stage of Developing Markets / Investment Vehicles Long Term; < liquidity Short Term; > liquidity PIPE Mezzanine Stocks, Bonds, Derivatives Private Equity Venture Capital Seed Capital Corporate Stage Start-up Developing Consolid. Liquid and Competitive Markets Investment Stages

13. Agenda Innovation and Economic Development Innovation Stages and Financing Sources ABVCAP DGF – Decisão Gestão de Fundos

14. ABVCAP ABVCAP is a non-profit institution working for the development, stimulation and promotion of long-term investments in the Brazilian economy, through investment vehicles which invest in companies, company projects and the infra-structure in Brazil. ABVCAP acts a representative institution in Brazil for the private equity and venture capital sector. ABVCAP consists of over 100 different “Members”, participants in the investment community with institutional or individual interest, in either business or services, in the development of market activity in long-term investments in the country – through the model of venture capital and its variations.

15. Associação Brasileira de PrivateEquity & Venture Capital ABVCAP Avenida Rio Branco, 123, sl. 806 20040-005 Rio de Janeiro RJ Brasil +55 21 3970 2432 abvcap@abvcap.com.br www.abvcap.com.br Contact information ABVCAP

16. Agenda Innovation and Economic Development Innovation Stages and Financing Sources ABVCAP DGF – Decisão Gestão de Fundos

17. Institutional Presentation May 2007

18. DGF DecisãoGestão de Fundos DGF - Decisão Gestão de Fundos – founded in 2001 with the purpose of managing Venture Capital and Private Equity funds, generating returns to investors over the average of the comparable market. DGF is authorized by Comissão de Valores Mobiliários (CVM) to manage investments funds in Brazil and is a leading&founding member of ABVCAP (Brazilian Association of Private Equity and Venture Capital). and CEPE (Private Equity and Venture Capital Studies Center) from Fundação Getulio Vargas. www.dgf.com.br Fone/Fax: (55) (11) 3884.5827

19. Values

20. Focus DGF focus its action on managing Investment Funds: • Origination, research and selection of projects Projects that fits into the investment policy of their funds; • Market studies and companies analysis Development of studies which are going to be analyzed by the Investment Committee; • Constant Monitoring Studies and analysis update of the investments by the fund; • Corporate Governance Continuous action in the Corporate Governance of the invested companies; • Divestiture - Continuous research of divestiture opportunities.

21. Organizational Structure Partners Sidney Chameh Eduardo Pamplona Frederico Greve CEO/ Funds´Champion Sidney Chameh Financial dep’t. Paulo Ferreira Cristiane Fiori Administrative dep't. Rosana Buoso REIF FIPAC Investment Officers Frederico Greve Investment Officers Frederico Greve, and Celso Nunes Analysis team Daniel Busquets, Luiz Henrique Spinardi, Thiago Pongelli and others (to be hired)

22. Key Personnel Sidney Chameh Sidney is founding partner of DGF, and manages Private Equity funds since 1998. The first fund managed totaled $40mm. Graduated in Business Administration with an MBA in Finance from McGill University (Montreal - Canada) and FGV/SP, Mr. Chameh has more than 22 years of practice in capital markets as investment analyst and prtfolio manager. Has worked for BancoSudameris, Emerging Markets Company; BancoMultiplic, BancoCrefisul and FAR. Eduardo Pamplona Eduardo, partner of DGF since 2003, is graduated in Economics from UFRJ and hold an MBA from University of Michigan. With more than 15 years of professional experience. Eduardo was a vice-president of GE Capital, being responsible for represent GE as board member in a fund with some relevant investments such as TeleNova, LatinTech, Fotoptica, DASA and Atrium. Pamplona has previously worked for Mckinsey&Co and Calyon. Frederico Greve Frederico has been working in private equity for close to 10 years. He started his career working in tech start-ups and soon went on to to work as a private equity analyst at BancoFator, a leader in equity fund management in Brazil. Later he joined local private equity group BPE Investimentos, which managed local and international funds in excess o $100 million. Frederico has been a partner at DGF since late 2003. Celso Nunes Graduated in Computer Engineering from ITA (Aeronautic Institute of Technology) with an MBA from UCLA. Prior to his MBA he worked as manager at Oracle for more than 5 years. As finishing his MBA Mr. Nunes was invited to be an associate at Angel Led Capital a Venture Capital firm from California. Returning to Brazil he worked as a consultant for Pyxis Management Consulting and MGM Partners, prior to join DGF in 2006.

23. Funds Management Partnerships and Associations Funds under Management Corporate Governance / Strategic consultant to invested companies

24. REIF Fund REIF Limited Partners: The Fund started operations in 2002 with committed capital of USD 10 million. The investment period ended in late 2005 with 12 investments

25. Portfolio Companies All current portfolio companies of REIF Investment Fund.

26. New Venture - FIPAC Description: Investment in equity and convertibles of companies that are able to consolidate a niche sectors, or able to be consolidated by larger players (roll-up strategy). Fill a gap in Brazilin private equity offering; Multi-sector but 100,0% of the portfolio in IT, Pharmaceuticals and Services.

27. Fund Structure Institutional Investors IDB/MIF, BNDES, FINEP and Petros Investments Committee: 7 votes, one vote with at least 20,0% of committed capital + 2 representatives of general partners and 1 independent FIPAC USD 50 MM • $ Convertible Debentures • $ Equity EXIT • IPO; • Sell to a strategic buyer • “equity to debt” Multi-Sector IT, Pharmaceutical, Services