“Lessons from the MIT $50K Trenches” MIT Sloan Presentation S. Jason Salfen May 4, 2000

1. “Lessons from the MIT $50K Trenches” MIT Sloan Presentation S. Jason Salfen May 4, 2000 395 Oyster Point Blvd, Suite 505 South San Francisco, CA 94080 T: (650) 416-3329 F: (650) 742-6211 C: (650) 208-0592 jsalfen@corp.edentalstore.com www.edentalstore.com

2. Presentation Overview Company Overview Lessons Learned a Funding b Management c Recruiting d Technology e Operations f Marketing g Initial Steps h Silicon Valley / San Francisco i Contact Information

3. Company Overview B2B e-commerce provider and ASP for the professional dental industry • $50K finalist May 5, 1999 • Opened doors June 1, 1999 • Financing: • First round May, 1999 from Bill Porter & family • Second round December, 1999 from multiple angels and strategic investors • Web site launched Oct 15, 1999 • Grown from 5 to 45 employees • Revenue almost doubled 4Q99 to 1Q00, and April ’00 was almost as large as entire 1Q00

4. Funding 1 Choosing the correct investors is critical • Smart, Brand Name, Strategic, Money is Money, Friends & Family • Smart and brand name money is worth a lower valuation 2 Tension between time, valuation, and money • Raising as much as possible immediately – lower valuation, faster progress, more time devoted to execution • Raise minimum necessary initially – give up less equity, prove concept, slower progress, more time devoted to fund raising 3 Meeting with potential investors • Do not e-mail business plans • Mail an executive summary to interested investors. If interested, request an in-person meeting • Acceptable to ask for business plans back after a meeting • Be careful about divulging VCs names to other potential investors • Set limits on what you are willing to discuss during initial conversations • Rejection is part of the game • VCs fund the management team and the plan, not just the idea 4 VCs can help you refine your strategy and business model

5. Management 1 Choosing the right founding team is critical • Trust completely, dynamic, and willing to do whatever necessary to ensure the company’s success 2 Founders deserve extra protections, but their shares should vest • E.g., 2 – 3 years, no cliff, immediate vesting if dismissed without cause, legal protection from liabilities incurred during course of business 3 Stepping down or aside is very difficult • Reducing the role that you play within “your” company is a difficult and emotionally trying experience 4 It’s not fair and it’s not all fun • Delineation of responsibilities is key to rapid execution 5 Motivating employees becomes progressively more difficult 6 Senior management must be both internally and externally focused • Outward CEO – inward President • Outward CEO/President – inward COO

6. Recruiting 1 Hire someone to assist with recruiting • Junior level person for posting job descriptions, screening resumes, etc. 2 Immediate hiring needs: • Office manager / administrative assistant • If business people, a committed technical person • If technical people, several business people 3 Business people hiring technical employees require assistance • Use an independent consultant to evaluate potential employees’ skill-sets 4 Use a top-down approach when building your technical team • Initial hire is a Director of VP of Engineering – manager as a 2nd choice • Build team of junior people lead by a few experienced ($$$) engineers 5 Do not immediately hire an HR manager • Need someone part-time initially until approximately 45 - 50 employees 6 Planning for hires is critical • Must be able to move immediately on a desired candidate, especially engineers

7. Technology 1 Integrate technology managers into business decisions 2 Hire a consultant for package selection and RFP • Do not allow business people to choose company’s technology direction • Use outside consultant to choose initial package and write RFP 3 Overcoming potential problems with consultants: • Better to be a big fish in a small pond • Create an exhaustive functionality list for your RFP • Choose a package that uses open technology and supports Java • Only expect results from the consultant in their area of expertise • Managing the consultant requires a business and a technical person • Co-manage the consultant’s package implementation • Continuously QA the site • Consultant should provide detailed documentation throughout the process • Customizations developed by the consultant should be included in your upgrades • Include system redundancy in the contract • Provide the technical resources necessary to ensure the consultant’s success • Build an in-house technical team while working with the consultant

8. Operations 1 Integrate your back-end • Do not focus solely on marketing • A consultant may provide valuable expertise when developing initial strategy, process and systems 2 Traditional distribution concepts often still apply to .coms • “Click & mortar” • Vertical integration can increase control over customer experience and improve margins 3 A staged approach is often the most successful fulfillment strategy • Distributor – broad product selection, expensive, partner with multiple distributors • Individual suppliers – sign-up on an individual basis, acquire multiple relationships immediately by acquiring a competitor • In-house via 3rd party or company owned warehouse(s) – low fulfillment cost, requires significant forecasting ability, ties up working capital, may dilute “.com message”

9. Marketing 1 Initial marketing needs are likely only part-time • Use consultant initially – can potentially become full-time in future 2 Identify sell out dates, not just registration deadlines, for trade shows and journals 3 Cross functional cooperation is crucial • Develop multi-functional group to analyze and approve marketing promotions 4 Hire the right marketing person for a start-up • Understands the needs of your customer base • Can develop low-cost marketing strategies and promotions

10. Initial Steps 1 Incorporate and sign founder’s agreement • 3 weeks from incorporation to become a founder • Agreement should include vesting schedule, job protection, and indemnification clauses 2 Research and choose your company’s name • Do not tell anyone until registered URL and trademarked if possible 3 Choose law firm 4 Research desired real estate market 5 Hire office manager on first day 6 Research potential packages • E-commerce, accounting, order processing, MRP, etc. 7 Develop operational plans for implementing business plan • Include multiple scenarios based upon funding raised 8 Develop recruiting plan • Key initial hires • Research potential recruiting channels

11. Silicon Valley / San Francisco 1 Strengths • Large pool of workers willing to work for a start-up • VCs prefer to invest in local companies • Great networking opportunities with potential partners 2 Weaknesses • Numerous start-up and technology companies competing for same pool of workers • Recruiting technical talent is extremely difficult • Outrageous rents (may have to give up equity stake)

12. Contact Information S. Jason Salfen Business Director, Business Development eDentalStore, Inc 395 Oyster Point Blvd, Suite 505 South San Francisco, CA 94080 T: (650) 416-3329 F: (650) 742-6211 C: (650) 208-0592 jsalfen@corp.edentalstore.com www.edentalstore.com Personal 357 Hermann San Francisco, CA 94117 (415) 252-8570 sjasonsalfen@yahoo.com