Secrets of Funding Success Workshop: Vcapital Insights

1. Startup Workshop Presentation to Vcapital Confidential

2. Agenda • Secrets of Getting Funding (Top 7 steps) • The 4M’s of the Executive Summary Vcapital Confidential

3. “Best Time To Be A VC & An Entrepreneur!” • 5,000 + Venture Capital Providers • Private Management Firms • Corporate Venture Groups • Financial Institutions Venture Groups • Family Funds • Capital Managed, Raised and Invested has skyrocketed • Venture Wire tells it all..millions daily Vcapital Confidential

4. Secrets of Getting Financed Steps 1 – 7 “The Essentials” Vcapital Confidential

5. Secrets of Getting Financed 1 “Venture firms invest in the Jockey – not the horse” Vcapital Confidential

6. Secrets of Getting Financed 2 Don’t be paranoid Vcapital Confidential

7. Secrets of Getting Financed 3 Less is more Vcapital Confidential

8. Secrets of Getting Financed 4 Acknowledge your Enemies Vcapital Confidential

9. Secrets of Getting Financed 5 Look for Value, not Valuation Vcapital Confidential

10. Secrets of Getting Financed 6 Due diligence is not something only the venture firms do Vcapital Confidential

11. Secrets of Getting Financed 7 Listen to the experts Vcapital Confidential

12. The 4 “M”s – What VCs really want to see • Management (Founders, Senior Managers, Directors & Investors) • Magic (Products/Services, Competitive Advantages, Operational Plan) • Market (Large Markets, Target Customers, Marketing/Sales Plan) • Money (Business Model, Financials, “The Deal”, “The Exit”) Vcapital Confidential

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14. Venture Capital Has Changed The World Vcapital Confidential

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16. VCapital Key Customers • High quality Entrepreneurs • All rounds of financing, across all industries and all geographies • Venture Capitalists, corporate investors and organized groups of angel investors • Invest in variety of stages, industries and geographies • Must have deal funding history • Best of Breed Professional Service Providers • History serving the entrepreneurial market • Quality reputation in discipline of services provided Vcapital Confidential

17. Value Proposition - Entrepreneurs • Decrease front end of capital raising process from an average of 4-6 months to 4-6 weeks. • Increases chances of getting funded (currently by 8 times over the industry average) by providing expert advice, personalized service and targeted referrals to pre-qualified network of investors. • Ensures entrepreneurs maintain control over who sees their opportunity. Vcapital Confidential

18. The “Right Touch” Approach • Not a listing service • Deals are screened at various points • Entrepreneur is in control • Deals are referred based on investment preferences • Not a hands-off approach • Full services available • Not only a tech company • Venture and finance professionals leveraging cutting edge Internet and communications technology Vcapital Confidential

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20. Valuation • How much to raise? • What percent of Company to give up? = Depends on the value (valuation) of the company Vcapital Confidential

21. Elements affecting Valuation • Total Growth Opportunity • A company that can reach $5 billion in revenue should command a higher valuation than a similar opportunity that can reach $500 million • Risk Profile • The higher the risk, the lower the valuation • Technology Risk • Completeness of Management team • Number of Competitors • Investment Stage (consider in isolation) • The earlier the stage, the lower the valuation • As you grow, you decrease the risk, and increase valuation Vcapital Confidential

22. How do I value my Company? • Valuation is… is the present value of all future cash flows discounted back at the required rate of return, usually called a discounted cash flow analysis = valuation methodology is technically CORRECT = USELESS in raising your first couple of rounds of venture capital = There is NO CORRECT answer Vcapital Confidential

23. How do I value my Company? • Comparing your business to a comparable business with similar elements can give you insight into your valuation. • Find companies with similar growth opportunities, risk profiles, and investment stage. • Talk to professional service providers such as lawyers and accountants who have assisted entrepreneurs in raising venture capital. • Talk to entrepreneurs in venture-backed companies. Vcapital Confidential

24. Valuation – VC Methodology • Venture capitalists are concerned with getting above average returns to compensate them for the risk they are willing to take • Seed and early stage investors expect a return of 10 X original investment • later stage investors target 3 to 5 X original investment • Venture capitalists focus on pre-money valuations, or the valuation of the company prior to a new round of venture funding. • This allows for better comparability across companies without regard for the amount of capital being raised. Vcapital Confidential

25. Choose Value over Valuation Vcapital Confidential

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27. Sources of Capital • Angels • Friends, Family and Fools • Sophisticated Angel Investors • Family Venture Funds • Private Management Firms • Financial Institution Venture Funds • Corporate Venture Funds Vcapital Confidential

28. Seed Stage (Pre-Venture) Financing • Company Development: Up to 1 year • Capital Range: Up to $1M • Primary Sources: FF&F, Angels, Seed-Stage VC Firms Vcapital Confidential

29. Early Stage Financing • Company Development: 1-3 Years • Capital Range: $1Million - $5 Million (1-2 Rounds) • Primary Sources: Private Management Firms, Corporations Vcapital Confidential

30. Expansion Stage Financing • Company Development: 3-5 Years • Capital Range: $5 Million - $20 million (1-2 Rounds) • Primary Sources: Private Management Firms, Financial Institutions, Corporations Vcapital Confidential

31. Mezzanine Stage Financing • Company Stage: 12-18 Months Prior to IPO • Capital Range: $3 - 10 Million • Primary Sources: Private Management Firms, Financial Institutions, Corporations Vcapital Confidential